My 3 Rules for Digital Transformation and Disruption in China / Asia


I do a lot of talks to non-tech businesses (insurance companies, hospitals, chemical companies, express delivery companies) that are facing some degree of digitization. About how digitization is playing out in China/Asia. And, for all the concepts and frameworks for taking about the chaos of digitization activity, I’ve sort of boiled my message down to the following three rules. I find it to be a solid, first pass framework for all this in China / Asia.

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Rule 1: Give customers EXACTLY what they want – or someone else will.

Steve Jobs disrupted the music business by letting consumers buy just the one song they wanted on iTunes, instead of buying the entire CD. And you also didn’t have to go to the store to get it. And you could listen to it on your phone, your PC, your iPod, wherever you liked. Plus, a song only cost 99 cents.

Basically, he used software and other new digital tools to let consumers buy exactly what they wanted and listen to it when, how and where they wanted. It was an attack based on increased convenience (plus low price). And this was fairly devastating for music retail stores and publishers, long used to forcing consumers to buy entire CDs, at a store and that could only be played on CD players.

Convenience plus low price is a very common digital attack. You can see lots of examples of this “purification of demand”.

  • Netflix did the same thing to cable companies. Suddenly consumers didn’t need to buy a $110 cable package, with hundreds of channels, lots of advertisements and set viewing times. With a Netflix subscription, they could watch the shows they wanted, when they wanted, on any device you wanted, without ads and they could cancel at any time. Plus, it only cost $6 per month (well my subscription is through Colombia, which is cheaper).
  • Another example is Spotify, which later disrupted iTunes with the same approach. They offered consumers tons of streaming music. It turns out being able to access a massive catalog of music at will is more convenient than buying song by song. Steve Jobs unbundled music on the production side (i.e., DVDs). Spotify re-bundled on the demand side.

Digital transformation in China / Asia is basically a faster, more powerful version of this “give the customers exactly what they want” approach.

Mobike and Ofo came along and suddenly you didn’t have to buy a bicycle, store it at your house, lock it up and so on. You could just hop on a bicycle whenever and wherever you wanted. You could ride as little or as much as your wanted and then hop off and forget about it. It was a disruption based on convenience and low price (like 1Rmb for a half hour). And the more bikes they put on the streets, the greater the convenience of the service. It all happened very quickly and the bike manufacturers were left stunned.

So this is rule #1 for China / Asia digital strategy. Give customers EXACTLY what they want – or someone else will.

Any company not doing this is probably at risk. Such as:

  • Any service or product with a lag between when you buy it and when you get it.
  • Any product you have to go and physically get.
  • Any business where one customer group is subsidizing another customer group.
  • Any product where you have to own and cannot just access it when you want.

And really you should also keep a look out for these characteristics as well.

  • Any physical product with a high grow margin. As Jeff Bezos says “your margin is my opportunity”.
  • Any product that is not connected.
  • Any product or service that can be embedded with social media.

Rule #2: Digitize and Re-Imagine Your Operations ASAP.

Bike-sharing companies don’t have retail space. They don’t have shelf-space. And they don’t have sales staff. That’s the first thing that jumps out about these companies. They just don’t have much of the cost structure of traditional bike retailers and rental companies. Their bikes just sit in the public spaces. Note: they also mostly don’t have many marketing expenses as the bikes market themselves.

They do however have lots of software engineers. They are great at the intricacies of mobile apps. And the market leaders are currently building out their AI and big data capabilities. They also have operations and maintenance staff that cruise around the cities to maintain and re-balance their bike fleets. You don’t see any of these types of skills and capabilities in traditional bike companies.

What these companies have done is digitize and completely re-imagine the operations of bicycle manufacturing, sales and rentals. They didn’t just take the existing business and digitize the processes. They re-imagined the operations entirely. And that is rule #2.

And when you start with the idea of digitizing and re-imagining your operations, things can start to look very different very quickly.

  • In retail, it might be mean integrating AI into your marketing and your logistics – and the getting rid of your real estate.
  • In agriculture, it might mean putting sensors in all your fields to measure fertilizer needs.
  • In insurance, it might mean getting rid of all your brokers and selling directly – and only online (i.e., Zhong An).

And what you can do operationally is often about the increasing the intelligence of the product itself. Bike-sharing is basically about creating “smart bikes” that can live on their own on the streets. Tesla is building smart cars that drive themselves. Appliance makers are now building smart toasters, refrigerator and just about everything else (check out any Xiaomi store).

Rule #3: Get ready for super-platforms – and for industry barriers to move and fall.

New retail is one of the big things happening in digital China / Asia right now. Physical assets (stores, logistics, delivery) are being integrated with online assets (marketplaces, captured customer and merchants, data) into one seamless, data-driven consumer experience. The ecosystems of online leaders like Alibaba, JD and Meituan are being extended into the physical world.

One consequence of this merging of the online and physical worlds is that traditional industry barriers are starting to move and fall. This has long been a characteristic of online competition (Amazon can easily sell candy bars and digital media on one site), but it is now increasingly happening in the physical world.

This has a lot to do with the fact that industry barriers have largely been created by tangible fixed assets and their economics. You go to one building for healthcare and another for groceries. In the real world, you don’t go to one massive store in town for everything you might need to buy.

But in the online world things can more easily be combined in a single webpage. You can buy your dinner, music, shampoo, pharmaceuticals all in the same app – and all while chatting with friends and watching a video.

There are other factors at work here (the de-materialization of assets, the power of digital conglomerates, etc). But the main point is we are starting to see the emergence of super-platforms that combine lots of related products and services. This is a consequence of the economics of industries becoming more digital.

In China, things seem to be moving rapidly towards a system where you go to the massive B2C marketplace app to get every product you need. You go to a mobility super-app to get all your transportation needs. And maybe soon we will go to a healthcare super-app? And to a financial services app? And so on. This seems to be the general trend.

One consequence of industry barriers moving and falling is suddenly your competitors are not who you thought they were. Bike companies are suddenly realizing they are fighting software and mobile app companies. Car companies are now fighting Apple and Google. And so on.


So those are three three rules. There are tons of other factors of course. And most of this is very industry-specific, but I find these three rules to be pretty helpful.

Thanks for reading, – jeff


I write, speak and consult about how to win (and not lose) in digital strategy and transformation.

I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.

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