Name: Artificial Intelligence, Real Opportunities
Uploaded: 2019-11-08
Duration: 24 min 16 s
Description: In the AI world, data is the new currency and analytics competency a crucial competitive differentiator across business lines

Welcome to Jack Jing, Executive Vice President, of Sunning Technology, and Martin Reeves, Chairman of the BCG Henderson Institute. Martin, let me start with you, please. This is gonna be a conversation that I'd like to think of it as being applied technology. We're gonna go deep with you two about how businesses Are using the technology that we've been discussing for the past two days, both in China and around the world. You recently completed a major study on AI with MIT, I believe. Tell everyone about it, please. Yeah, so the aim was to survey the reality of what's in all of AI in the context of business. So we surveyed about 3, 000 companies globally And that will so what they would do with the I. we look to which ones were actually extracting card valley from may I and we looked at the the characteristics of a successful company as I think of some of the main conclusions why that time everybody's doing it so 80 % the companies that we we separate investing in a I. About the same number expected to be transformation within five years but only 30 % are actually extracting current value. And some of the things that those companies do, actually mostly of the organizations interestingly, are, they don't run a little controversial, but they don't run their projects out of the it department. That's a failure factor. they have a variety of projects. They have a portfolio, not just one big bet. They're actually focused on the revenue side and not the cost side. The covers [ UNKNOWN ] on the cost, a generally not successful. Okay, I'm gonna pause you because you just made 17 great points. And I wanna come back to the first one which is that almost everyone's doing it. What is that mean to do AI? And I will let Jack be very specific about what his company is doing in a moment. But generally what does that mean? How do I do AI? Well, most of the companies are actually investing in AI projects. But the ones that are merely doing that rather than interpreting the business, generally running as a technology project. Other the technology function focused on improving the efficiency or the cost effectiveness of existing processes, and that isn't enough to generate current value in general, generally speaking. Whereas the successful companies are really treating it as an integrated part of their strategies. So tell me if my paraphrases is fair that an unsuccessful company will buy an API product and run it for some purpose for some discrete purpose. A successful company is investing in incorporating AI into its business. That's right. And this telltale language that the successful companies >> Used actually. So if companies talking about AI strategy, one should generally be suspicious. That's a bad sign because obviously there's no such thing as AI strategy that isn't driving the general business strategy, and also to make AI successful, it needs to be connected to data, it needs to be connected to cloud, it needs to be connected to business strategy. So it's kind of a talk about And A I driven, an A I first business strategy, generally the successful ones, but an A I project, an A I strategy generally buys towards failure. And it's like thinking of a company that would say they have an electricity stratergy. [ CROSSTALK ] Okay, I'm going to come back to you Martin, and I'd like you to. I would want you to talk about the same thing, how Suning is doing AI. But first let's just make sure that especially our non Chinese audience, has a good grounding of Suning. Which is a very large multi- fascinated Chinese retailer. Yeah. May be you could give a quick over view, please. Okay. Thanks to have me today, is quite an excellent conversation for this topic. Recently I have been asked about AI cloud and big data. Most of the people talk about AI, they come back to technology. In my mind AI, Big data, kind of the digitalization, not only for technology but mostly important means of strategy, for company, for organisation, strategy based on the strategy we have different operational model, different talent required And then come back to the technology. So today the digitalization included AI big data and cloud. We define the new business model. We define the new product. We define the new services. That's Suning We practice the transformation, digital transformation in the past 10 years Before you get one that's sitting began as an electronics appliances, retailer but you're now far more than that. You're a supermarket retailer, you own your department store retailer. And talk about the journey of going from physical you're still a very large physical media retailer to digital. Yeah, come back to shooting Suning. We are the biggest omni channel retailer type in China right now. In 20. net nine years ago. We come from a chain store for electronic only. In 2011, our sales revenue almost hundred billion. I'm being in China. We made a decision means we go digitalization transformation. Today This year, I believe will reach almost 600 billion revenue, sales volume, including globe, how we did kind of six times growth in the past eight years because we do kind of the digitalization transformation The transformation, I personally think, we come from three different dimensions. The first dimension means, we do electronic in the beginning. The electronic is all our type of the retail business. But, today We have whole product category included GIFs 16 different type of store. And we have total 13, 000 retail store alone China included Sunni online, and apps. So today's assuming we have a digital metrics In the Y Eric's we have online store, supermarket, convenience store, sports store. Almost every retail type we have. Let me interrupt you. I'm sorry. I'm curious. You have all these different kinds of retail stores and online stores and brands. Yes. Is there one technology group serving them or are there several? Single platform? And yeah, please tell us about that. Why we we do this kind of transformation from three different dimensions. I just mentioned first dimension. We come from different kind of store. We have lightning China. And in the XY dimension means we have six different diverse logistical in China. We can pick up in the store immediately. We provide half hour, 1 hour, 4 hour, 8 hour and 24 hour. The mazing say means Delivery. Delivery? Yeah. Six. I'm sorry, you said half hour. Yeah, half hour. I will mention later about we have a new accounts that means while our lifecycle. Yeah. I mention later. So today in China. More than 95 % of the city around China, we cna deliver it to doorways in 24 hours. Most all of the first teir, second teir cities, we can deliver it to doorways in four hours. And then the second dimension. The third dimension means We provide from electronic to odd category, especially we acquired car for China two months ago. Need will be increased and improve our supply chain for the consumer products come back to technology. Okay, no before I wanna go to Martin in a moment, give us one example of how you're using artificial intelligence. [ UNKNOWN ] Okay let me make example including online totally we have to 15 tools building products online. 5 point 0 like this individual store almost a 3000. So how to match around China, 13, 000 retail store. Each is store. To pick up 3, 000 floorings that 52 million products on line totally. Basically, if we have just a single store we can base on the human brain right, which means the, the by experienced person, but today including when you will use AI and big data. Firstly, we will analysis what kind of a customer around the single Real store. And based on the characteristic of the consumer datas we get AI analysis. What kind of a product can match for this store. And the server serves the consumer around the store, like this. So the AI has become your buyer? Yes. In a very meaningful way. Martin, you said something I think controversial a moment ago, which is that this successful companies investing in AI think about revenue, not cost. Would you elaborate on that? Yeah. So it's interesting I think I'm not surprised that assuming was in the fortune future 50. Which is this list of companies with the highest predicted growth actually using AI driven analytics. Because. The features that you described of your use of AI, I think, are precisely the success factors. You're revenue growth oriented, Yes. You're not running it out of the IT function, you have multiple applications and fundementally you're using it in service of an integrated business strategy. You're not Not as a technology project. I think it's a perfect real world example. Yeah. But now in the United States, and I think to some extent in China as well, companies focusing on revenue to the exclusion of profits is becoming very unpopular. Is your advice Does your advice conflict with the trend? Well, it's, it's long been the case that value ultimately in the long term has to come from growth. You can't cut your way to value in the long term. But we do see that the polarization of the economy College while research into primarily companies which are , you know, very high growth, high p ratio but low profitability and ones that are quite profitable and have good cash flow but a low growth incumbent companies and of course the trick is to have both to actually be generating cash flow now. To pay for future growth. There are few companies that can do that. We got that strategic company exterity, but that's the goal. You are suggesting by the way that companies that don't have a good business model or who have poor margins, almost by definition will not be able to invest in artificial intelligence and big data. Yes, I mean it's a scale driven business strategy to requires a lot of investment to actually have the biggest data set and the biggest proprietary ecosystem driving the biggest learning machine with AI. So have to afford that investment on a sustainable basis indeed one needs, a path to to positive cash flow. So This year is a fortunate future 50 index that we did together we actually included that as one of the criteria which is, a path to cash in anticipation of, possible slowdown in the global economy. I think that becomes very important. Great. Jack Alibaba is a major investor in Suning. Yes. They do a lot of their own artificial intelligence Data research. Can you explain how your two companies work together on technology? Yep. Sunning, we have independent IT department, around 12, 000 IT specialists around China, including [ UNKNOWN ], we have a lab in there. Suning and Alibaba way long different business models. Alibaba is IT commerce platform. Suning way long term business [ BLANK_AUDIO ] It means one hour working cycle. Previously, when you came to China, the model was like this. Today I make order online and then delivered to door tomorrow. But most of the city around China fast most of the cities areas, they're not satisfied. This model means one day buy and the next day to delivery. They want to buy and get the product right now. So in this model soon we have advantage means, we have a store, real store around the people, around the areas. So we use AI and ability to do analysis. For example, we already have this business in Shanghai and Nanjing. We not only provide the product from store, but also we provided the product based on the AI analysis from the regional warehouse and that the customer will predict what kind of product the customer will be interested then we per Transfer the product from our central warehouse to the regional warehouse. When the customer make order online, the regional delivery team, just the delivery the product to the to the door with our not only for electronic but also for the consumer products, even fresh food. So this kind of model why we can do this kind of model because we have AI technology to take a technology not only for the e commerce but also very deeply to understand the consumer offline around our store in our area. [ UNKNOWN ] What I think is so illuminating listening to you talk about an offline company going online is your emphasis on the backend technology that is so important, given your physical nature. You're obviously interested in serving consumers as well. Talk a little bit about things like Facial recognition and virtual reality how important is that for Suning? Yeah. In the past 10 years, internet plus the retail is really in means the push the retail business growth in China, right? So in the internet The all of the behaviors for customer can be record from the first page to second the page and what kind of picture you have your state how many times like this, but in offline, the traditional technology cannot solve lightly this kind of the information Today in Sunni, we cost matter retail, especially for the real store. We use the AI camera to mourn it, the consumer two income our store. And what kind of the trends from the first layer to second layer to third layer and how many store you just a visit. And for example, you just [ UNKNOWN ] TV, and how many times [ UNKNOWN ] front of the TV. So this kind of information will base on AI Camel, and we can pick data. It's just is so interesting, you say, you're doing exactly the same thing that e- commerce companies measured, in terms of how long someone stays on a website. You're measuring how long they stand in front of the television. Are you doing this in every store, or some are only, some stores? Most of the all of store we can trace the consumer behaviors offline. And most of fantastic see means. Two months ago, we just opened the first wave of the automotive store in China. The ultimate store not only kind of the free shopping and open shopping but also we included Facebook nation your previous you don't need to take a wallet right as a mobile phone but today including uk just experiencing in Nanjing you just use your face Just walk in the store, pick up your product if you want and just leave. Okay, so this is a limited beta experiment for Suning in Nanjing. In Nanjing. How's it going? Yeah, where we are [ UNKNOWN ] our ultimate store. Along China from next year. How many stores? We have a plan in the next 3 years, around 1, 000 autonomous store will be open in the next 3 years in China. These are new stores, not existing stores? New stores. Fascinating. Martin, an interesting part of your study. You reach conclusions about the United States and China being ahead on artificial intelligence compared with Europe in other parts of the world. Let me play devil's advocate with you. I'm curious to your response. Why does that matter? Isn't this technology available for purchase by anyone who can afford to pay for it? One of the algorithms, of course, are public domain, open source. The data isn't. The data is proprietary. So it's a race for data and the business systems that actually [ BLANK_AUDIO ] Will be driven, its own national security will be driven by AI. So it is a very relevant question, who's winning? So we looked at that question very closely and our conclusion is that absolutely America and China collectively are in the lead. They're getting between 75- 90 % of any metric that you wanna measure, whether it's [ BLANK_AUDIO ] So unicorns or venture capital funding. So what does Europe do is a huge question. And then in terms of is American leaders trying to lead the truth is are in the lead on different things. So the, the the statistically looking at across the 3000 companies, Chinese companies are extremely application oriented and The number of competitors per area application is huge. The number of applications per company is huge. So, you could say it's a very competitive and fast learning application poll. The Chinese actually, at this point have more academic papers. But the Americans still have more citations per paper more, high quality papers. So I think the Americans still lead on next generations of AI technology, but huge policy question for Europe is what is Europe doing in that scenario? And can you make a generalization based on your research on how American corporates compared with Chinese corporates in artificial intelligence. Well, it's basically the same game but there are some nuances. So Chinese companies are more revenue oriented. So the revenue orientation was very important. They tend to have a bias towards more multiple applications. The average number of applications per company is higher. Also one one hallmark of the maturity of the technology but a lot of companies out there that are playing with pilots and studies and some that were is really driving the business. The ones that are still playing tend to tend to be focused on the opportunity of AI the moment it becomes real It also becomes a competitive threat and Chinese culture. I think I definitely we mentioned this acutely aware of the competitive threat. There's a competitive race in the areas. Jack, I want to end with you on a different competitive threat of in the previous panel, there was a conversation about many apps and how well they work inside of the 10 cent We Chat system. How does a company like Sony, which is allied with Alibaba deal with that ecosystem? Yeah, I'd like to have a opinion based on the markets. Just talking about the ability for the AI for company. My opinion like this In the past five years, or five or 10 years, the biggest company, they invested resource to AI to cloud right they own the ability to close their business. But today, mostly important means how be more attention about the middle or small size of a business. Because they are limited resource. They have short of IT staff in inside their organization. So as a bigger company, we already got beneficial from the AI, from big data, right? So today we are thinking about how to enable Based on our result, our ability how to enable how to support them work together to help them to close together. Because retail always domestic capacity diversity means we not only do business alone when we need to do business together so soon as a team we have mission means. We're open for all of panel, even the wrong retail business. We want to export our solution, three and then we can. Support our ability, what can we numb together to help them especially for the middle or small piece. I think you've done the right job. Yeah. I am. Yeah. I think you touched on a couple of issues that will be worrying about in the future that one of them is AI ethics, the acceptability of the way that we use AI and the other one is. Justifying the existence of the sort of monopoly power that accrues to AI to use that responsibly two big issues. Since we're out of time I'll just ask you, yes or no is Suning at a disadvantage because of the the mini app system that operates within the WeChat environment. Yeah, we definitely will be one of the best channel for retail business and, and the kind of online traffic's. So we have this kind of collaboration with We Chat by honest Today, as a retail company, we always more attention means we are bridge between the consumer, and the brand, and the manufacturing. So later, based on the AI and the big data, we are working on restructure the relationship Between the consumer platform brand and manufacturing, I believe will be lot of the benefits will be India Gentlemen >>is a huge. Very stimulating conversation. Thank you very much. Thank you. Thank you. [ MUSIC ] [ BLANK_AUDIO ]

Artificial Intelligence, Real Opportunities

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In the AI world, data is the new currency and analytics competency a crucial competitive differentiator across business lines