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Under the logic of enterprise digital transformation of "dismantling and building", the characteristics of multi-dimensional and two-way dynamic transformation between physical resources and digital resources have been formed, forming four key contents of digital transformation that have evolved in a spiral manner. To this end, enterprises need to lay out two types of internal and external platform-based vertical integration strategies, so as to integrate the professional division of labor logic of the traditional industrial chain into the platform "co-operation" logic through digital integration. Digital transformation has given birth to more sub-platform enterprises, shaping the unique competition and cooperation relationship between platform enterprises, and the formation of a stable continuous innovation mechanism will become an important symbol of the formation of the "super-platform effect".
Text / Li Yu, Wang Tiexun
In China, although embracing digitalization has become a development direction unanimously recognized by market players, governments and theoretical researchers, according to the 2021 China Enterprise Digital Transformation Report released by Accenture, only 16% of enterprises have successfully "jumped through the dragon gate" in the wave of digital transformation, and the transformation of many enterprises is not satisfactory.
In most cases of transformation failure, enterprises not only find it difficult to gain digital awareness of new value in a short period of time, but also feel at a loss in the new process of transforming digital resources into physical resources. In fact, the transformation and allocation of resources are the direct products of organizational functions. Compared with latecomer transformation enterprises, those leading enterprises may understand a truth better: the digital transformation of enterprises is a kind of self-cultivation organizational change, and the key point is not the business dumping between enterprises, but the evolution of the resource ecology within the enterprise.
The logic of digital transformation from the perspective of resource transformation
There are two important aspects to the digital transformation of enterprises: "demolishing old non-digital buildings" and "building new digital buildings". Regarding the relationship between the two, there is still a limitation of linear understanding, that is, after the enterprise dismantles the "non-digital old building" into flat ground, and then starts the "digital new building" from the flat ground. In fact, the digital transformation of enterprises should be a collaborative logic of "building while dismantling", that is, "demolition" and "construction" should be carried out in coordination and at the same pace.
In practice, looking at these two processes in isolation can easily lead to the dilemma of "resource disconnection", that is, the rapid depreciation of traditional resources and the slow replenishment of digital resources, resulting in the depletion of available resources of enterprises. The lack of digital resources available to enterprises makes it difficult for them to cook without rice in a digital innovation environment (see Figure 1 (1)). The logic of "demolishing and building" can enable enterprises to seek resources for "building new buildings" in "non-digital old buildings", and reduce the problem of "resource disconnection" caused by "gap periods" when the two are alternated.
The digital transformation method of "demolition and construction" emphasizes "demolition and construction collaboration". In the case of not being able to effectively deal with traditional redundant resources, if enterprises quickly "build" digital resources, they will encounter the dilemma of "resource conflict" in operation, that is, the large number of traditional resources remaining within the enterprise and the newly introduced large number of digital resources are "incompatible", which increases the difficulty of enterprise operation (see Figure 1 (2)).
Only by adopting the collaborative development logic of "building while demolishing" in the digital transformation of enterprises can the tragedy of transformation failure be avoided. The synergistic rate of "demolition" and "construction" depends on the overall strategic layout of the enterprise (see platform-based vertical integration strategy below). In the case of the depreciation of traditional resources and the slow replenishment of digital resources, enterprises are prone to fall into a situation of "transformation stagnation" (see Figure 1 (3)). Ideally, traditional resources should depreciate rapidly and digital resources can be replenished rapidly, so that enterprises can quickly overcome the "labor pain" and achieve digital transformation (see Figure 1(4)).
Digital transformation from the perspective of resource transformation
In the enterprise, the collaborative transformation logic of "building while demolishing" is reflected in the synchronous transformation between traditional physical resources and digital resources. The transformation of enterprises from industrialization to digitalization is a cross-system transformation, and the attributes and forms of resources will also change with the leap of the system, from the relatively scarce and static physical resources (PR) under the traditional industrial system to the relatively abundant and dynamic digital resources (DR) under the digital system.
In fact, digital transformation is not just a one-way process of transforming resources from physical to digital. Emerging digital technologies have built a "cloud-network-end" channel between the physical world and the digital space, and the generation of digital resources and the driving role of digital resources on physical resources have added a new dimension to resource transformation. Under the new concept of resource transformation, the digital transformation of enterprises shows the dynamic transformation content as shown in Figure 2.
Dataization: Transformation of physical resources into digital resources
Digitization refers to the transformation of resources from physical form to digital format, which is divided into physical infrastructure and physical elements.
In the first stage, enterprises need to transform from the bottom "stage" of operation, which is manifested in the digitalization of two types of different functional infrastructure. First, the traditional facilities that support the day-to-day operations within the enterprise are transformed into digital facilities, such as moving from traditional warehousing to centralized control. Second, the physical facilities connected to external entities (such as suppliers) will be transformed into digital facilities, such as the physical trading platform will be transformed into a digital virtual space. Use digital infrastructure to break down the "data silos" between different modules, and break through the time and space limitations between enterprises and stakeholders.
In the second stage, the transformation of the attributes of the company's operating facilities will trigger the leap to digitalization of physical elements such as raw materials and products. At this stage, enterprises need to realize the matching and close coupling of the attributes of various physical elements and the underlying data infrastructure business facilities. Enterprises can scan and perceive various physical elements such as raw materials, and use the permutations and combinations of binary digits 0 and 1 to assign value to the basic information of physical elements or establish virtual models. For example, supermarkets digitize information such as the shelf life of items through barcodes, freeing employees from the manual inventory of traditional warehousing and significantly improving the management efficiency of enterprises.
Scenario-based: Transformation of digital resources into digital resources
Scenario-based refers to the dynamic evolution process of digital resources from low-order to high-order in specific scenarios. The effectiveness of digital resources depends not only on how they are acquired and used, but also on how they are further designed and processed. Enterprises need to move away from the static perception of "sticking to the rules" of existing digital resources. The fixed source and singular use of data can reduce a company's competitive advantage because the experience gained from it cannot be generalized to a diverse consumer group. Therefore, the diversified use of digital resources and the stimulation of the dynamic evolution of digital resources are the core essence of realizing digital value.
Scenario-based includes the gradual improvement, enrichment, and development of digital resources. First of all, enterprises need to interact with different users in heterogeneous scenarios, and gradually adjust digital resources according to the user's needs, such as "Sugar Xiaobei" insurance, which can dynamically adjust the insurance amount according to the user's blood sugar value. In the process of interaction, enterprises should pay attention to the matching of digital strategy with organizational strategy. The same digital resource may have differentiated value because it is given different meanings. For example, the domestic short video market uses similar digital technologies but has formed hundreds of apps with different styles. Therefore, enterprises should focus on the deep integration of flexible elements such as digital resources and enterprise value propositions in different scenarios, so as to create value that meets organizational positioning and user expectations.
Second, enterprises need to store the procedures and methods for processing existing digital resources as data to enrich the existing digital resource system. For example, Baidu Maps and other methods will determine the optimal route based on real-time traffic data, and the methods of mining and analyzing these real-time data will also be stored as a special type of digital resource to facilitate enterprises to mine the value of real-time data in the shortest possible time.
Finally, enterprises need to develop new digital resources under the existing digital resource system to cope with new application scenarios. This requires enterprises to make efforts in the development of digital applications and digital algorithms to develop hidden business value. Rushukun Technology has pioneered artificial intelligence-assisted diagnosis by using AI digital technology during the new crown pneumonia epidemic. Massive digital resources enable enterprises to remain agile in a volatile market environment and deliver innovative solutions quickly.
Molding: Transformation of digital resources into physical resources
Molding refers to the efficient and accurate transformation of digital resources into physical resources. Technological progress needs to have a socio-economic impact in the form of products, and physical products are one of the important forms. Therefore, it has become an important part of digital transformation to transform the value of digital resources into the value of enterprise management through the carrier of physical resources. The above process is essentially to drive the whole process of embedding digital resources into the development and allocation of physical resources, and use the empowerment of digital resources to improve the value conversion rate of physical resources.
First of all, enterprises can build user portraits by analyzing digital resources such as users' online search data and consumption preference data, so as to achieve accurate customization of personalized items and be close to the needs of consumers. For example, Red Star Macalline provides users with precise solutions by capturing a full range of elements such as user ID and consumption data.
In addition, enterprises can also use digital twins, 3D printing and other technologies to calculate accurate technical parameters in the digital world, accurately design and repeatedly optimize the digital model of the product, and produce physical objects in real life to reduce fault-tolerant costs. In the above process, enterprises should pay attention to the collaboration of two different resources, such as the process of 3D printing, which involves the precise collaboration between digital design software and physical printers. If the two cannot be coordinated, it is easy to cause the problem of printing staggering, which will cause the cost to soar.
Specialization: Transformation of physical resources into physical resources
Specialization refers to the updating and upgrading of physical resources in an industrialized system by embedding digital features. Digital transformation does not mean that enterprises should part ways with traditional physical resources, but should adapt to the digital environment on the basis of the original resource advantages. The process of adapting traditional physical resources to the digital environment follows the logic of "survival of the fittest". Under digital operation, in order to adapt to new digital needs, traditional physical resources will also be transformed into intelligent physical resources, and physical resources that do not have the conditions for conversion will face obsolescence. For example, digital operations call for digitally literate employees, human resources who cannot master digital technology will be replaced by digital talents, and traditional physical machinery will be transformed into intelligent machinery through the embedding of digital components, such as smart homes.
Specialization covers the process of digital resources and physical resources from "game" to "integration". When enterprises try to integrate digital features into physical resources, because digital characteristics will change or even break through the existing operation process of physical resources, the treatment of physical resources under the industrialization system will hinder the embedding of digital features and intensify the game between the two. For example, Hosa's transition to a smart gym ended in failure due to the constraints of convention. With the in-depth running-in of the two, the two resources will show a state of integration, which is manifested in the traditional physical resources endowed with digital characteristics that are more in line with the innovation requirements of enterprises and users in the digital environment.
Table 1 summarizes the resource transformation process of the above four types of digital transformation.
Strategic reinvention of digital transformation: from traditional vertical integration to platform-based vertical integration
Business platform enterprises are the first to enjoy the digital dividend, but with the maturity and popularization of digital technology, the key points of enterprise competition have gradually extended to more subdivided areas of the consumer market. Leading traditional e-commerce platform companies have begun to launch a digital in-depth strategy to respond to the signal of industry saturation under the traditional business model. The focus of this strategy is to reshape the upstream and downstream industrial chain of e-commerce platform enterprises, on the one hand, to get rid of the limitation that can only integrate "front-end" customer data, and on the other hand, to continuously explore the three-dimensional advantages of digital integration, and forge vertical capabilities that make ecological enterprises and customers on the platform re-dependent, such as JD.com's opening of its vertical supply chain to partners.
Whether it is the expansion of vertical integration capabilities of platform enterprises or the open integration of vertically integrated enterprises with platforms as the carrier, a new trend of digital strategy is presented: the "platform operation of the industrial chain" model based on digitalization, that is, the "platform-based vertical integration strategy" (see Figure 3).
Platform-based vertical integration between enterprises
According to the collaborative logic of digital transformation, the multi-dimensional transformation of physical resources and digital resources has brought major challenges to non-native digital organizations. In this context, digital empowerment platform enterprises came into being, making the "industrial chain platform" through open source collaboration, building a platform ecology, transplanting leading practical experience to late-developing transformation enterprises, and providing them with transformation and solutions. A prime example of this is the interconnection of tree roots.
With the help of the in-depth industrial experience accumulated by Sany Heavy Industry, ROOTCLOUD has been built by multiple small platforms (such as IIoT platforms, etc.), and its core general capabilities are modularized to connect and empower industrial chain enterprises through various modules. The root cloud platform has formed three core general capability templates, such as large-scale connection capabilities for industrial equipment, multi-source data and AI analysis capabilities, and development and collaboration capabilities for diversified industrial applications.
The platform provides solutions to industrial equipment by collecting and analyzing the data of industrial equipment, and provides platform capabilities to various developers to support industry chain enterprises to quickly develop industry tools and applications to solve business problems in their fields. The tree root interconnection plays a role in the link of each layer, collecting the dynamic data of the device downwards and outputting the control data in the reverse upwards. The bidirectional nature of the connection ensures the stability of this vertically integrated platform structure.
The logic of platform-based vertical integration similar to Root Connect is "P2P2B", that is, Root Connect provides a platform to support and serve partners in the upstream and downstream of its supply chain, and helps partners build solutions and service capabilities to serve terminal customers (Business), so as to achieve complete end-to-end services.
In addition, this new type of vertical integration can also "feed" the platform enterprises by integrating common capabilities and solutions. By connecting industrial enterprises in various vertical fields, platform enterprises help them open up the upstream and downstream of the industrial chain with common digital capabilities, absorb the needs of various industrial enterprises, precipitate more configurable modules and services in the platform, and continuously make the platform bigger and stronger, so as to support more ecological partners who know how to subdivide the track to develop into towering trees, and finally form a platform ecological forest.
At the same time, this vertical integration provides opportunities for cross-border and scale. The difficulty of platform enterprises in cross-border lies in the lack of understanding of subdivided enterprises, and this method provides common capabilities to empower enterprises in various industries through the deployment of "public cloud" of platform enterprises, and then they provide application services in various vertical fields, so as to achieve cross-regional and cross-business fields. To build the above-mentioned vertical integration strategy, in addition to the requirements for the common capabilities of the platform, the access capability is also very important, which is the basis for achieving scale. The communication protocols and industrial protocols that can be covered by platform enterprises should be sufficiently extensive, and relatively standardized standards need to be formed. The value of data base standardization lies in the fact that it can promote the continuous precipitation of industrial mechanisms and the sustainable iterative reuse of data, and promote scale.
By playing the role of operating systems such as Windows, platform-based vertical integration has successfully achieved horizontal cross-industry and vertical end-to-end, forming an "integrated and open" situation in the industrial chain. This "open sharing" vertical integration model breaks through the closed limitations of traditional vertical integration of "monopolizing channels or resources to gain competitive advantage". In addition, traditional vertical integration does not directly point to innovation, but emphasizes relying on capital capacity to achieve economies of scale, which leads to the inability to balance the advantages of "product novelty" and "low-cost supply" at the same time. Under this open-source vertical integration, "fish and bear's paw" can be both.
From an innovation perspective, the platform bridges the gap between manufacturing and new technologies by integrating new technologies and turning them directly into easy-to-use applications. In addition, the strategy can also promote iterative innovation of business models. For example, after connecting to the root cloud platform, the user portrait of the express brother was obtained, so as to go deep into the upstream of express logistics, start the financial leasing service of the logistics industry, and open up the upstream and downstream of the industrial chain where it is located.
From the perspective of cost, the more enterprises that access the platform, the more knowledge reserves (such as solutions) of the platform enterprises, the lower the threshold for small and medium-sized enterprises to access the platform. Enterprises do not need to buy all the intellectual property rights of the platform, but pay as much as the technology is used, which allows more enterprises to introduce a new generation of digital technology at a lower cost. For example, after Youli Electric Drive is connected to the root cloud platform, the cost of a single transaction has dropped from more than 10,000 yuan to hundreds of yuan.
Platform companies incorporate the expansion of the network effect of both supply and demand into their strategic decision-making. On the supply side, the originally closed vertical integration has been opened by the platform mechanism, forming a large-scale industrial chain symbiosis model. There is a network effect on the supply side of platform enterprises, which transforms the "economies of scale" of closed vertical integration into the "economies of scope" of open vertical integration, and drives access enterprises to obtain the advantage of "product novelty" in collaborative innovation with platform enterprises.
On the demand side, the scale of users on platform enterprises can bring obvious network effects. With the support of digital capabilities, platform enterprises can continuously extend the manufacturing value chain to the service industry, vertically integrate design capabilities and manufacturing capabilities, and increase user stickiness and scale with service and product experience. For example, Tree Root Internet has helped Jack Group extend its services downstream, realizing the transformation from selling sewing machines to providing intelligent manufacturing solutions for garment factories. With the expansion of the core business, the marginal cost will continue to decrease, so that the advantage of "product availability" can be obtained.
Platform-based vertical integration within the enterprise
Relying on the above-mentioned platform-based vertical integration for digital transformation requires extremely high capabilities of platform enterprises. Large-scale rollout is bound to go through a highly customized phase. Only long-term investment can exert network effects and output platform value. It is a "fantasy" for latecomers to build their own platforms from 0 to 1, and the best transformation strategy is to directly integrate into this structure.
In fact, regardless of whether it is a self-built platform or an access platform, enterprises in transition should learn to call the common capabilities of the platform, extend the platform resources according to the needs of the enterprise, form the functional components required by the enterprise, and integrate the internal platform structure of the enterprise to promote the integration of the organizational operation model and digital. For example, Alibaba launched the middle office strategy, thereby shaping the platform-based vertical integration strategy within the enterprise, so that various departments can form a vertical integration relationship as if they were enterprises.
In the past enterprise practice, the front office is the interface that directly interacts with the end user, and the role of the back office is to store the core data of the enterprise (such as warehouse logistics management, etc.) to improve the security of the back-end data and the management efficiency of the system. When the needs of front-end users change, the back-end needs to change accordingly to quickly meet the needs of the front-end, and for the purpose of protecting data value and maintaining system stability, the back-end needs to maintain a stable state, resulting in the contradiction between "dynamic" and "static". In the digital age, the changes in user needs will be more dynamic and diverse, and higher requirements will be put forward for the change response of the front desk, and the contradiction between "dynamic" and "static" will be more intense.
At this time, the "middle office" acts as a lubricant to alleviate the contradiction between the two, and becomes the cornerstone of integrating the front-end market capabilities and back-office management capabilities. Among them, the data middle platform is the core, which processes and analyzes the obtained data, and outputs effective solutions in multiple and complex business scenarios based on powerful analysis results, opening up the originally loose enterprise value chain. Secondly, the data middle platform emphasizes the precipitation, sharing and operation of reusable data assets and data capabilities. As a result, the middle office completes the connection to the enterprise information island by integrating reusable data capabilities, and promotes the smooth progress of enterprise digital transformation.
Platform Competition and the "Supra-Platform Effect" under the Digital Strategy
In the "P2P2B" mode of tree root interconnection, the improvement of operational efficiency and the reduction of costs of access enterprises depend on the common capabilities of platform enterprises, and are related to whether platform enterprises can effectively complete the collection and analysis of various data. When the platform enterprise cannot ensure the security and timeliness of data, making it difficult for the accessing enterprise to provide solutions for end users quickly and efficiently, the accessing enterprise may choose to leave the platform and access other platforms. Therefore, platform companies must continue to upgrade in order to maintain their core competitive position in the market. In the final analysis, while digital-based platform-based vertical integration promotes efficiency on both the supply and demand sides, it also intensifies competition among platform companies.
In addition to improving their own strength, ecological synergy also helps platform companies stand out from the fierce competition. Taking Tree Root Connect as an example, Tree Root Connect provides an underlying capability platform for access enterprises in various industries, and charges service fees according to the number of access devices and the amount of platform resources occupied. Access enterprises develop industry application service customers based on platform capabilities, and charge enterprise customers. The more enterprise customers are connected, the more service fees the platform enterprise will charge. Therefore, if platform enterprises want to develop in the long run, they need to attract more enterprises to access and form a network effect. The network effect means that these subjects have become a "community of destiny", sharing weal and woe.
This requires core platform companies to have a broad mind, and even help access enterprises that may become new core platforms and build a new platform ecology for them, after all, "flourishing" can maximize the overall benefits. Combined with the industry experience and application scenarios of access enterprises, Tree Root Interconnection has formed an industrial chain platform covering 20 industries such as foundry. A typical case is Ningxia Sharing Group. Connected to the root cloud platform, Ningxia Sharing Group has built a "cloud factory" industrial chain platform for mold printing to help enterprises open up the upstream and downstream of the industrial chain, with 1,500+ settled enterprises and nearly 29,000+ annual orders.
As the parent platform in the original platform ecosystem, Tree Root Internet empowers the sub-platforms of Ningxia Sharing Group to access enterprises, builds the sub-platform into the core parent platform in the new platform ecology, and then empowers the new sub-platform by the new core parent platform. This gives rise to the interesting phenomenon of "meta-platform", i.e. the platform of platforms. For the parent platform in the original ecology, this structure can effectively resist the impact of other platforms and maintain super profitability. For the sub-platforms in the original ecosystem, the open and innovative platform ecology can effectively reduce the excessive dependence on the original platform ecology, rely on its own accumulated industry experience, complement and co-create with the parent platform, and improve its bargaining power.
The super-platform effect once again elevates the competition in the industrial chain where the enterprise is located to the competition between the platform ecosystems, and the focus of the competition is continuous innovation, which requires the joint support of multiple dimensions. Each dimension has formed a single type of platform, such as the market dimension of the consumer platform, the manufacturing dimension of the manufacturing platform, etc., but the comprehensive platform must be an enabling platform enterprise that has mastered the dimension of digital technology.
The super-platform effect is a product of the continuous development of platform-based vertical integration in the digital age. There will be some subtleties in the relationship between the sub-platform and the original parent platform that forms the new platform ecology, and it will not always present a scene of "complementary co-creation". For example, after Mushroom Street was connected to Taobao as a diversion website, it quickly brought high value to the platform ecology led by Taobao and Mushroom Street, but it was "blocked" by the Taobao platform. The reason may be that the self-built diversion community of Mushroom Street has attracted huge traffic, and there is the possibility of threatening or even subverting Taobao. Therefore, after the super-platform effect occurs, the sub-parent platform needs a new coopetition relationship to balance the relationship between "complementarity" and "substitution", so that the relationship between the sub-parent platform is in a more balanced state.
About the Author | Li Yu: Professor and Doctoral Supervisor of School of Business Administration, Dongbei University of Finance and Economics, Liaoning (Dalian) Free Trade Zone Research Institute;
Wang Tiexun (Corresponding author): Master student, School of Business Administration, Dongbei University of Finance and Economics.
Editor-in-Charge | Liu Yongxuan ([email protected])
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