What China gets right in AI and digital transformation

August 2, 2019

Beijing skyline

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In China, the use of facial recognition technology powered by artificial intelligence is changing lives. It’s literally giving subway users in Jinan in Shandong province something to smile about – they need to do just that while looking at a screen to pass through the gates, without a ticket or a smartphone.

This innovation in public transport is emblematic of the strides China is making in the field of AI, with the country now home to more than half of the world’s top AI unicorns, start-ups valued at US$1 billion or more.

Apart from investing more than US$30 billion in AI in the coming years, China is also revamping its education system to give youngsters a head start in the technology. To nurture AI talent in Guangzhou, a traditional commercial hub, about 100 primary and middle schools in the southern Chinese city will soon start offering AI courses, with all such schools to feature AI in their curriculum by 2022.

China’s prescient focus on people and skills is putting the country on a strong footing for digital transformation success. This is reflected in studies such as Telstra’s recent research with The Economist Intelligence Unit which found mainland China, alongside Japan and South Korea, were leading the way in Asia for AI development.

Investigating digital transformation in China and across the world

As vital as people are to digital transformation, there are also other variables at play that contribute to the overall success. To uncover them and benchmark how China and other global economies perform, we polled more than 3,800 senior executives in 14 markets around the world to compare the relative strengths of digital transformation across countries and industries. Our Disruptive Decision-Making study also sought to find out how digital decision-making influences transformation success.

The findings were highly encouraging for China, with the research showing that mainland organisations scored themselves ahead of the rest of the world in several digital areas. Thirty-nine per cent of Chinese businesses believe they are extremely digitally mature – ranking first in the world, compared with a global average of 23 per cent – and 41 per cent rate their digital transformation decision-making as ‘extremely good or very good’. When it comes to their perception of implementing whole-of-company digital transformation strategies, China also ranks first.

That perception of maturity and decision-making strength is driving positive results. Thirty-one per cent of businesses in China consider the impact of their digital transformation decisions as ‘extremely good or very good’.

Digital transformation powered by people

When we consider digital decision-making, we found there are four key factors that contribute to a company’s digital transformation decision-making ability –  people, processes, technology understanding, and partnerships.

Globally, it is hardly surprising to note that technology understanding was considered the strongest element of digital decision-making. People languished in last place.

Yet, Chinese organisations offer a different perspective.

Respondents in China rated their digital decision-making for people as their strongest area, while ‘technology understanding’ achieved the lowest score.

This focus on people and employees – and higher weighting of multiple elements of digital transformation, including processes and partnerships – offers an enormous opportunity for China’s organisations.

That’s because globally, we found organisations that focus on multiple elements of digital transformation decision-making, including people and processes, are significantly more likely to be digitally mature (34%), make excellent decisions (40%), and have strong digital transformation integration (47%). By comparison, companies focusing on technology alone show less progress in digital maturity and integration.

The opportunity to create business outcomes

There remain opportunities for Chinese digital transformation, despite its apparent success.

In particular, there are significant upsides for Chinese organisations when it comes to achieving financial outcomes resulting from digital transformation.

Of eight benefits of digital transformation, Chinese organisations saw the best results in areas like ‘delivering business efficiencies’ and ‘increasing customer experience’. Yet, financial results were harder to come by - they achieved the least success ‘streamlining business costs’ and ‘increasing profit margins’. Of the four elements of digital decision-making contributing to these financial benefits, people ranked the lowest each time.

China’s focus on people is closing the digital gap

While financial outcomes remain elusive, our research underlines the burgeoning Chinese digital success story that is blazing a trail in new and emerging technologies.

China’s focus on people is representative of a rounded transformation strategy, as seen in the Guangzhou drive to promote AI education.

Our research shows that those organisations that focus on empowering their people, building effective partnerships and strengthening their processes to support good decision-making through all the phases of decision-making will enjoy better outcomes than those that focus on technology understanding alone.

China’s organisations believe they are leading the world when it comes to understanding that lesson – and acting on it.