Business and society are being transformed by new technology. We have entered the era of digital civilization
As digital technology has evolved over recent years, the digital economy has become increasingly crucial to global economic growth. From a macroeconomic perspective, we have entered a new digital economic era, distinct from the industrial age.
Enterprises are the primary drivers of business innovation, and data has emerged as their most valuable asset. That makes the accumulation of data assets the ultimate goal of digital transformation for many enterprises. This process has led to revolutionary changes in our ways of thinking. Innovations in technology architecture are disrupting traditional understanding, leading to profound changes in business models, and transforming management approaches.
These three driving forces – business model, management approach and technology architecture – are the growth flywheels of the digital era. As they turn, interacting and evolving all the while, they are pushing enterprises to build a new engine for the digital era while leveraging their inherent capabilities. And some of the leading players can be found thousands of miles from Silicon Valley: in China.
The evolution of business models through history
For centuries, the most prominent and iconic buildings in European cities were churches. The squares around these churches often served as marketplaces where people exchanged goods. However, this activity differed from our modern notions of trade: the purpose wasn’t commercial exchange, but rather facilitating mutual assistance within self-sufficient economic systems.
The emergence of transaction marks the first step in business’s evolution. In A Treatise of Human Nature, published in 1739, David Hume noted that God endows each person with different gifts, whether wealth, beauty, wisdom, physical strength, or special skills – our unique natural endowments. Building on Hume’s observations in 1776, Adam Smith’s Wealth of Nations revealed the principles governing free markets and the underlying logic of the “invisible hand” – it is precisely because of people’s different natural endowments that exchange and transaction become necessary in society. Thus, while commercial transactions ostensibly involve manufactured goods or artificially defined value, their essence lies in people’s natural endowments and their inherent value.
Since then, business models have evolved continuously as technology has advanced. From early manual workshops to mechanization, electrification, informatization, and now digitalization, technological progress has consistently expanded or enhanced humanity’s natural capabilities, while driving the evolution of both operational and consumption patterns.
During the first Industrial Revolution, the invention of the Spinning Jenny and the application of steam power replaced scattered household workshops with machine-centered large-scale factories. Machine rhythms began dominating work patterns. Enterprise operations evolved from human management to human-machine coexistence.
Later, as productivity increased, markets shifted from scarcity to surplus. Henry Ford’s assembly line enabled specialized division of labor, dramatically reducing costs until cars became affordable for ordinary workers with just three months’ wages. This further drove enterprises to study consumption and market patterns, adjust their business model and management approach, and achieve full coordination between production capacity and market demand. Thus, how to produce more economically and effectively became the key focus of enterprise management during this period.
Meanwhile, technological progress transformed markets from regional to global, greatly compressing market information exchange times from years to seconds or even milliseconds. Enterprises have had to continuously innovate to create new supply and rapidly capture new markets. And in turn, business innovation placed new demands on technological development – because improving management approaches required technological support.
Datafication: a catalyst of revolutionary change
This long historical journey has reached its current apogee over recent decades. Steps along the way included the building of electrical systems and the widespread adoption of information transmission technologies like telegraphs and telephones in the 19th century, profoundly transforming human life and production methods. Fast forward to the mid-20th century, and the contours of the information age were starting to emerge: the world’s first electronic computer, the Electronic Numerical Integrator and Computer (Eniac), was introduced in 1946, marking the advent of a binary world formed by 0s and 1s. The universal digitalization of information was under way.
Then in the 1960s, F Warren McFarlan proposed the concept of Management Information Systems. In his view, the connection between management and business systems relied on information. As information technology shifted from scientific to business computing, digital technology architecture became the glue connecting management approach and business model.
Computing technology advanced rapidly in following decades – yet it was the introduction of the iPhone in 2007 that marked a real turning point. Almost everybody has a smartphone today. We constantly consume and produce data, thanks to countless cloud-based apps. It makes digital consumption this era’s most distinctive characteristic.
We have entered the era of the digital economy. Joseph Schumpeter said that all innovation is the recombination of products and services – and in the digital era, data has become both a new factor of production and a core asset. Enterprise services and products ultimately transform into expressions of data assets, driving continuous business model innovation. That makes digital transformation a critical corporate strategy. Enterprise innovation and development are essentially the accumulation and recombination of data assets, which become the manifestation of enterprise wealth. An enterprise’s value and competitiveness are no longer solely reflected in traditional capital scale, but rather in achieving higher market valuations and profits through efficient utilization of data assets. In this process, enterprises will increasingly rely on data governance tools to integrate and process their data.
The value of data assets
What exactly are these crucial data assets? Traditionally, they fall into two categories. The first is system-generated data, such as that from manufacturers’ ERP systems, or banks’ core systems. These represent every enterprise’s most precious wealth, embodying their management experience and capabilities. The second category is alternative data, including externally purchased data, credit data, third-party data, and vast amounts of market data not automatically generated by systems.
Previously, enterprises combined alternative and system data for arrangement and application. However, with digital technologies – including generative AI – producing new productivity tools, organizations can now automatically generate new knowledge and data based on enterprises’ systems and alternative data. This is ushering in a ‘perpetual motion machine’ era for enterprise data asset accumulation.
Take China Merchants Bank (CMB) as an example. While smaller than some of its competitors, it has enjoyed a high market capitalization – largely due to its extensive accumulation of data assets, particularly concerning high net worth (HNW) clients, for whom it has developed over 2,000 application scenarios. These applications have not only amassed data on consumers and HNW clients, but evolved into premium services products, which provide effective support for their market capitalization.
At Digital China, our own Smart Vision Marketing Assistant application, built on our self-developed GenAI product Smart Vision, now covers the entire marketing cycle internally. It helps the sales team generate customer profiles and sales scripts when visiting new clients, suggests solutions and references similar successful cases in a follow-up, and in a bidding process, automatically extracts key information from bid documents, providing suitable legal options, qualifications, and case studies. Leveraging Smart Vision’s capabilities enabled us to help a multinational medical equipment company significantly accelerate the US Food and Drug Administration (FDA) approval process, from 10 months to one month, bringing revolutionary changes to their business.
Datafication accelerates the transformation of enterprise management
Another key consequence of the evolution of technology and business has been the evolution of the very idea of management. At its core, management aims to navigate the complex web of production relationships, including those between individuals and machinery, people and their work environment.
Management philosophy has passed through various shifts. The “economic man” concept focused on material incentives to drive productivity. This evolved into the “social man” perspective, recognizing the importance of social needs and interpersonal relationships in the workplace. Finally, the “decision maker” model came along, emphasizing the role of rational decision-making by individuals within organizations, with an emphasis on the quality of decisions. Herbert Simon’s theories of rational and irrational decision-making, developed from the 1950s on, underlined that managers were demanding more and more from data and information. Information technology became increasingly crucial in business activities, directly reflected in significantly reduced management costs when enterprises could drive work through data and devices.
For example, daily enterprise operations and report preparation were extremely tedious before computerization became widespread. Later, single computer applications emerged, but proved insufficient. In the early management information system phase, financial or ERP systems were established, breaking down daily operations and management into functional modules to build complete application systems. This was known as “one CPU driving one application,” with each system functioning like an independent silo.
But in the cloud computing era, open-source platforms including Kubernetes (K8S) have revolutionized infrastructure management, enabling cloud platforms to transform physical servers into dynamic, virtualized computing environments. Such platforms are able to efficiently expand and reorganize data: they mark the transformation of technology from passively supporting business and management efficiency into a direct production factor, creating new scenarios and business models – thereby driving enterprise value innovation and enhancement.
In one Chinese automotive manufacturer, for example, Digital China helped develop a Vehicle-to-Everything platform. From an overwhelming, disparate and unconnected sea of data, this cloud platform enabled unified collection and management of vehicle and user information, enhancing the collection of real-time application logs, real-time analysis, and real-time monitoring of operational status. It has helped the company’s technology breakthrough, from datafication of the business to business-creation from data, providing more imaginative room for carrying out product iteration.
The energy unleashed by the collision of cloud and data is far beyond our imagination. The prospects of digital transformation brought by cloud-native technology are equally astonishing. As a consequence, enterprises must find a new balance between their business model and management approach. Technology’s acceleration continuously spawns new business models, blurring boundaries between enterprises, products and services, presenting new challenges at every step.
China’s transformation
In the face of these challenges, enterprises in China have undergone a profound transformation. As the AI-driven digitalization wave has gathered strength, they have continuously pushed boundaries, creating numerous exemplary cases that offer unique perspectives and insights. These efforts not only showcase their distinct value, but have also caught the attention of global business and research institutions. Chinese solutions and innovative ideas in technology are increasingly taking center stage on the global platform, providing fresh approaches and pathways for digital transformation worldwide.
China’s mobile payment evolution illustrates this transformation. While credit card adoption took decades, mobile payments achieved widespread adoption in just seven years, with cloud applications being a significant support. This rapid transformation, spearheaded by the ubiquitous WeChat Pay, succeeded because mobile payment systems avoided complicated aspects of credit card models: they required neither transaction systems between banks and credit card institutions, nor merchant investment in point-of-sale (POS)terminals. Users only needed a smartphone and QR code for instant payments. WeChat Pay is common in supermarkets, convenience stores, restaurants, barber shops, and even street stalls – while cash payments have become increasingly rare.
Mobile payment is just one facet of China’s digital transformation. Digital marketing and operations are now central to enterprise management. AI applications have shifted traditional linear processes into networked structures. Through effective data collection and utilization, Chinese enterprises are leveraging AI-accelerated data-cloud integration to evolve their business model and management approach, contributing significantly to global digital economic development.
Reducing distance
Peter Drucker believed that the internet’s greatest contribution lies in eliminating distance. The associated values of equality, openness, collaboration and sharing, enable enterprises and their varied ecosystem partners to achieve closer cooperation and collaboration, to use resources more effectively, and to develop new models of value creation – fueling business growth and even socio-economic development.
The continuous evolution of business models, management approaches, and technology architecture inspires us to rethink the fundamental logic of business and economic development. Humanity has experienced agricultural and industrial civilizations; now, we are becoming a digital civilization. The intelligence of human beings is being integrated with the physical world, creating an even more brilliant civilization, at unprecedented speed. The future is here.
Guo Wei is chairman of Digital China and author of The Power of Datafication: Disruption, Reconstruction and the Rise of New Business Engines (LID Publishing)
