Introduction: The connotation of 'Internet+' is the transformation and upgrading of traditional industries using the Internet. But why transform? What is the direction? How exactly? The core question is: for the same traditional industry transformation, what is the difference with and without the Internet? The following are some perspectives proposed by AliResearch.

1. The key to transformation is achieving rapid flow of value streams 'Liquidity' is a key to understanding the secrets of the business world, and the rapid flow of the 'Value Stream' is the essence of business. A value stream refers to all the steps and processes from raw materials to final delivery to the customer for a specific product or service. Value stream theory applies to both physical goods and service provision analysis. Taking clothing as an example, the value stream includes the entire process from cotton planting, cotton circulation, spinning and weaving, fabric and accessory circulation, pattern design, cutting, sewing, distribution and retail, to customer purchase. Similarly, for a service like Uber, its value stream is the entire process from the driver accepting the order, driving to the destination, picking up the passenger, following the route to the final destination, and ending the fare. The Internet economy also follows value stream analysis. For example, the value stream of an e-commerce platform refers to the entire process from traffic to transaction.

Sadly, for almost all industries, in the entire process of value creation, more than 90% of the steps and time do not create value. For example, raw materials piled up in warehouses, semi-finished products waiting for processing on production lines, finished products moved from one warehouse to another, large quantities of goods prepared for promotions in warehouses, and complex shopping paths on e-commerce platforms. If a company can effectively manage value streams to make value flow faster, its business performance will be excellent; otherwise, it will be poor. From this perspective, liquidity is the rate of making money. Liquidity is the rate of making money, which can be directly reflected in indicators such as inventory turnover and capital turnover. Zara's average price per garment is only one-fifth of LV's, but its pre-tax profit margin is higher than LV's, thanks to Zara's 12 inventory turnovers per year, while LV has fewer than 2. The domestic underwear brand 'Cosmo Lady' achieved an inventory turnover of 78 days (the industry average is about 200 days), allowing it to grow against the trend despite the overall downturn in the apparel industry. All companies dream of high gross margins, but truly achieving that requires deep accumulation, while high turnover is a matter of changing mindset. To use a stock market phrase: high gross margin + high turnover is a 'double hit,' while low gross margin + low turnover is a 'double kill.' Under conditions of high turnover, if a company can achieve a premium above the industry average, that is even better.

In the industrial economy era, Ford took only 120 hours from steelmaking to finished car assembly, while European car factories at the same time took 300 hours. In the IT era, Zara took less than 2 weeks from product design to market launch. Dell took only 36 hours from a customer's phone call to the computer being loaded onto a truck. The rapid flow of value streams helped these companies reach the top of their industries. How did these companies achieve this without the Internet? Value streams can be divided into three forms: information flow, material flow, and capital flow. Among them, information (data) flow plays a key role; information flow drives material flow, which in turn drives capital flow. In managing information, Ford used manual transmission, Toyota used kanban, and Dell and Zara achieved it through heavy investment in SAP systems. It is conceivable that in the Internet era, data can be connected at low cost across the entire chain, which will inevitably accelerate the flow and monetization of value streams, and a large number of enterprises are expected to stand out.

2. The starting point of the value stream is customer-defined value, not enterprise-defined Great companies in the industrial era were mostly 'rocket launch' companies, where companies hired many smart minds, conducted closed-door secret R&D, and then suddenly launched a new product or service. This is a typical enterprise-defined value approach. But the value of products and services only exists if they meet specific user needs; value can only be determined by the end user. Although previous companies claimed to be consumer-centric, they were more 'willing but unable' because there was no technical means to achieve this. However, the Internet, social networks, and big data provide tools and platforms for dialogue and communication with customers.

Customer-defined value first requires dialogue with customers, which is easier to achieve in the Internet era, for example, by establishing 'consumer communities' where customers can provide feedback and even be encouraged to participate in product R&D, design, manufacturing, and brand communication. Second, it requires analyzing which values customers are willing to pay for and which they are not. Customers will not pay for costs caused by stagnation and waste in the value stream. For example, customers do not need the R&D and production costs of unnecessary product features, or the marketing costs for promoting slow-moving products. Customers are only willing to pay for continuously flowing value because it is not only necessary but also creates actual value.

3. Transformation and upgrading is a 'trinity' transformation of new technology application, business model, and organizational form As a general-purpose major technological revolution, it will trigger a revolution in business models and organizational forms, not just the application of new technology. The electricity revolution more than 100 years ago made mechanical power no longer scarce, allowing factories to operate 24 hours a day, first bringing about changes in production methods. Handicraft workshops began to be replaced by mass production assembly lines of Fordism, and correspondingly, Taylorist organizational forms (pyramidal organizational structure, corporate system) and B2C business models characterized by manufacturer-driven approaches emerged. The B2C business model can be summarized as mass production + mass marketing (Procter & Gamble has long been the world's largest advertiser) + mass sales (such as commercial chain operations).

The popularization and application of the Internet as infrastructure is causing a similar business revolution. Traditional pyramidal organizational structures are loosening, and new organizational models of 'platform + individual' (makers, small groups) are rising. The functions of organizations are also changing: management is shifting to service, control to collaboration, and incentives to empowerment. In terms of business models, B2C is shifting to C2B, a customer-driven business model. To date, most traditional enterprises' Internet transformation is still in its infancy, with more of a 'selling goods' mindset, viewing the Internet as a new 'channel,' and their organizational forms and business models have not fundamentally changed.

4. Transformation and upgrading is also an integrated transformation of production, supply, and sales, leading to the re-emergence of 'new vertically integrated enterprises' Michael Dell, CEO of Dell, once lamented: 'The reason competitors find it hard to compete with Dell... is that information from customers flows through manufacturing and processing back to customers in various ways. This coordination of information can only be applied in vertically integrated enterprises.' A complete value stream involves all aspects of production, distribution, and sales. Applying value stream methods must go beyond enterprise boundaries; otherwise, it will ultimately be constrained by upstream and downstream. For example, e-commerce clothing sellers trying to learn Zara's 'fast fashion' model will be constrained by factories' flexibility and quick response capabilities; whether factories can deliver quickly is constrained by fabric and accessory suppliers; and fabric and accessory manufacturers are constrained by the production cycle and batch sizes of dyeing and printing plants. Therefore, preventing value streams from stagnating requires cooperation across the entire industry chain.

The integrated transformation of production, supply, and sales means that all upstream and downstream links in the industry chain must change to adapt to the Internet. Imagine a traditional clothing company that only sells online, but its production model is still single-style mass production, its production cycle is still tens of days to months, and its distribution model is still the 'ordering meeting' model. How can it adapt to market demand changes? How can transformation succeed? Conversely, changes at the retail end will also force changes in the distribution system and manufacturing model. Indeed, we see more and more brands changing their four-times-a-year ordering meetings and supplementing with a replenishment system. Brands like offline stores Cosmo Lady and Kuaiyu have even directly replaced the ordering system with a replenishment system.

The premise of integrated production, supply, and sales transformation is the full connectivity and high coordination of sales data, inventory data, and production data. The retail end uses multi-variety, small-batch (shallow inventory), and fast delivery to capture market demand. The supply chain end performs flexible production based on actual demand for different SKUs (single items) that are best-selling, average-selling, or slow-moving, with continuous replenishment. Even when a hot product is discovered, it is produced in multiple small batches with continuous replenishment (we see the emergence of a 'flow' state), ensuring no stockouts throughout the product lifecycle and no excess inventory. At the same time, the geographic layout of warehouses should also aim to complete the value stream in one go. For example, it is entirely possible to ship directly from the factory's origin warehouse to the final customer, rather than sending from the factory to the brand's warehouse and then shipping again. To achieve the above, the first step is to change mindsets and be willing to share data with each other. However, it is precisely due to mindset issues that the cost of communication and education is high, leading to advanced models being pioneered only by enterprises with innovative awareness and control over upstream and downstream. New 'vertically integrated' enterprises will re-emerge. In today's era of widespread external collaboration and service outsourcing, this approach may be seen as a step backward. But this is the result of the conflict between advanced models and backward mindsets. At the same time, the purpose of this model is to achieve true supply chain coordination, which is fundamentally different from the monopoly operation of the previous wave of vertical integration.

5. In business model transformation, the biggest misunderstanding of C2B lies in customization and pre-sale C2B as the mainstream business model in the Internet era is becoming increasingly clear. But the current industry's biggest misunderstanding of C2B is limiting it to customization and pre-sale models. C2B, a customer-driven business model, focuses on 'customer-driven': customers decide what to sell, what to produce, how much to produce, how much to stock, and how much to sell. C2B can be simply summarized as 'customer-defined value + SNS marketing + pull-based distribution system + flexible production.' Mass customization fully complies with the above four points and is highly regarded as an extreme form of C2B. That's correct. But it is not the whole story and does not represent the majority of business scenarios.

From Dell to Qingdao Redcollar, Shangpin Home Collection, and Suofeiya Home, the working principles of all companies that can implement mass customization are the same: standardization and modularization of internal components, using limited combinations to respond to external demand personalization. However, not all goods and services can be internally modularized, such as fashion in the apparel sector, solid wood furniture in the home furnishing sector, and more industries that do not require direct customer participation in design. Most of the time, consumers only express likes and dislikes and are not capable of directly participating in design and R&D, nor do they need customized production. In more general business scenarios, consumer demand presents a long-tail market. Let's draw a spectrum of business demand: Ford's Model T as one end of demand (or the iPhone), and fully personalized customized goods at the other end. Except for the extreme case on the far left, most demand requires multi-variety, multi-style goods to satisfy. For example, a few dozen people may like one style, while tens of thousands or hundreds of thousands may like another style. Here, distinguishing B2C from C2B is not based on batch size or number of categories, but on business logic. As long as it is centered on consumer demand and driven by actual demand, it is a C2B model. Furthermore, even for a 'hot product' with final sales of hundreds of thousands or millions of units, if it adopts customer-defined value, with a pull-based distribution system and flexible production, it is also a perfect C2B model. Therefore, for traditional enterprises, in addition to reshaping the marketing end, the more important thing is to transform the supply chain system from a 'push supply chain' to a 'pull supply chain.' That is, use more product varieties to test the market, and then based on actual market demand, decide what to produce, how much to produce, how much to replenish, and who to sell to. The result of supply-demand matching is that every individual's specific needs can be met.

6. Regarding future organizations, 'big platform + small front-end' has taken initial shape Whether at the societal level or the individual enterprise level, the organizational form of 'big platform + small front-end' has taken shape. At the societal level, the world's top ten Internet companies are all platform-based or have open platform characteristics. For example, companies like Taobao and eBay provide a series of infrastructure services such as information, payment, credit, cloud computing, and logistics in a platform manner, supporting millions of small and micro enterprises and individual entrepreneurs, pioneering the 'giant platform + small micro enterprise' model. In local life services, Internet service platforms like Uber, Didi Chuxing, Helijia, Haochushi, and Lanren Housekeeping 'de-organize' each driver, manicurist, chef, and nanny, stimulating them into autonomous business entities, while the platform provides supporting services such as information matching, credit evaluation, payment settlement, logistics support, and education and training.

More importantly, changes within enterprises are moving in the direction proposed by Haier: 'enterprise platformization, employee entrepreneurship.' Haier's enterprise platformization means breaking the original hierarchical system, changing the model of superiors managing subordinates, and transforming into an incubator that 'provides entrepreneurial services to employees,' with 80,000 employees transformed into more than 2,000 small autonomous business entities. Another Internet clothing brand, Handu Yishe, has established more than 200 highly flexible 'small group systems' to respond to the complexity of external demand. There is nothing new under the sun; whether it is the small group system or employee makers, they can be seen as originating from Drucker's 'federal decentralization' or Inamori's 'Amoeba.' But the truly valuable thinking is: what is different about these changes under Internet conditions? The answer is still the lower-cost transmission and sharing of data and information, making it easier for various resources to empower front-end organizations, thereby promoting the 'platform + individual' organizational model to prevail. A more fundamental question: what is the purpose of this organizational change? Let's return to value stream analysis. It is conceivable that different types of goods such as clothing, furniture, fresh food, and jewelry have vastly different value streams (from raw materials to final customer purchase); under the same product, different varieties also have different value streams (for example, sofas and bookshelves). The traditional departmental functional system has hindered the flow of value, while the small group system under the Amoeba form is responsible for the entire process from design, production, logistics to sales, ensuring that the value flow of each style is smoother and faster.

7. Enterprises in the Internet era must engage in 'systems thinking,' not local optimization The world has never been as interconnected as it is now. Whether it is the integrated transformation of production, supply, and sales, or the 'trinity' transformation of technology, organization, and business model, enterprises must think systematically during transformation. An enterprise is a system with multiple components such as R&D, procurement, production, and marketing. Systems thinking requires abandoning the idea of 'local optimization.' Performance improvement in all aspects of an enterprise must be the result of systemic changes, but not all changes can drive systemic improvement. For example, in recent years, some traditional enterprises, in pursuit of low labor costs, have relocated production capacity to Southeast Asia or central and western China, far from domestic consumption areas, leading to longer delivery cycles; factories have adopted automation equipment, greatly increasing production capacity, but insufficient market demand has led to increased inventory. At the same time, systems thinking also requires breaking through enterprise boundaries and thinking in terms of the entire product. If each enterprise only considers its own perspective, it is easy to go astray and cause value stream blockage.

Systems thinking requires enterprises to examine weak links in the value chain and focus on links that can improve overall output and have a 'one move affects the whole' effect. For most traditional enterprises, the Internet as a wide-area connection tool has a greater transformation role in cross-enterprise supply chains. The supply chain not only ensures the flow of value streams but also plays an important role in increasing customer attraction at the marketing end and reducing traffic costs.

8. Rapid response is more important than trying to predict the market Many traditional enterprises' business models are based on predicting the market. They develop new products, arrange production capacity, and plan warehouse layouts based on predictions of market demand. However, market demand is unpredictable, and business models based on market prediction carry great risk. Even with big data, accurately predicting the market is very unreliable; the law of large numbers always appears, especially in a local market. For example, what will be the demand for silk floral dresses in Hangzhou next month? The only product with the most stable demand in the world is salt. Although demand for large appliances and other products is relatively stable, the accuracy of big data predictions can only reach about 70%. For the vast majority of goods and services, demand fluctuates. The consequences of business models based on demand prediction are often insufficient or excess production capacity, unsold products, or stockouts. Therefore, it is crucial for enterprises to establish a flexible capability to quickly meet market demand. For example, for most consumer goods companies, it is better to test the market than to predict it, and based on real market demand, produce quickly, distribute quickly, and sell quickly. At this point, slightly higher production costs and slightly higher logistics and distribution costs are not very important; selling goods at a higher discount range can fully cover these costs. Therefore, it is not difficult to understand why Zara still deploys 50% of its production capacity in Spain, where monthly wages are 1,800 euros, and does not hesitate to use airplanes to transport goods to stores around the world.

9. Business relationships evolve from value chains to value networks Traditional enterprises are accustomed to talking about value chains and like to be the leader of the value chain, which implies a 'control' mindset, maximizing their own interests by squeezing profits from upstream and downstream enterprises in the value chain. But under Internet conditions, value chains will evolve into value networks. Partners form networked connections through data and information sharing. The only role at the center of business and holding the dominant power is the customer.

In the e-commerce field, more and more enterprises are choosing third-party partners. For example, the emergence of third-party warehousing service providers requires brand owners to share product, order, and customer data with warehousing service providers so they can better coordinate. An agricultural e-commerce company in Hangzhou has transferred the assessment authority for suppliers, logistics service providers, and customer service levels to customers: customers directly assess these service providers through evaluations of product quality, delivery speed, packaging damage, and dispute resolution. In this model, business relationships have already undergone fundamental changes.

The transformation of enterprises in the Internet era is a grand proposition under a once-in-a-century technological revolution. This process has just begun, and related thinking and discussions need to be continuously iterated and updated. In this regard, great entrepreneurs are the trendsetters of the transformation wave. All successful enterprises have shining points worth learning from. We believe that whether online or offline, the essence of business is the same. What needs to be considered is what profound changes the new round of technological revolution represented by the Internet, cloud computing, and big data will bring. We are also willing to work with industry friends to explore the transformation path of traditional industries.

-END-

Content Selection Click on the title below to read directly: [Line Sales Representative Practical Operation Guide (with full PPT download attached)