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October 28, 2018

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Develop Shanghai as a hub for digital services to advance the city’s growth

A 2017 study by Economic Intelligence Unit (EIU) ranked Shanghai seventh in their Global Digital Transformation Index, higher than cities like London at ninth and New York at eleventh. In innovation and entrepreneurship, Shanghai was placed 9th among the 45 cities ranked in the study.

However, the study also brings to light some underlying concerns about Shanghai.

Talent: four in 10 executives believe that the talent-skill shortage is the toughest digital challenge businesses face. In fact, Shanghai fell to the 20th position for availability of people and skills.

Skills: Only 17 percent of the respondents believed that Shanghai is doing an effective job of equipping people with the right skills. This phenomenon is also observed globally — 40 percent of respondents believe their city’s educational institutions are only partly effective in training people with the digital skills needed to implement their digital transformation initiatives.

New technologies: On the parameter of developing new technologies, Shanghai was ranked 17th. Locally available accelerators, incubators, studios, and a vibrant startup ecosystem are critical to increase awareness, adoption and acceptance of newer technologies. Large firms also depend on niche skills and expertise available from these avenues to accelerate their innovation initiatives.

Financial environment: Shanghai was ranked 14th on the axis of financial environment. 50 percent of organizations in Shanghai rely on banks and other financial institutions as the main source of financial assistance followed by government programs and investors (41 percent).

Shanghai has a rich history of high-quality education that continues even today. It is home to renowned universities like Fudan University and Shanghai Jiaotong University that are recognized for their world-class engineering programs. However, there is need to recalibrate the curricula to equip today’s students with an understanding of tomorrow’s technology. Technologies like AI, ML, RPA, cloud, blockchain, and IoT along with new methodologies like Design Thinking, agile, and etc, must become an integral part of early collegiate education. Thus, Shanghai must broaden its partnerships with global enterprises that are leaders in innovation. Through stronger collaboration, Shanghai will be able to create a pool of expert, certified and skilled resources that attract companies and accelerate the city’s journey to becoming a hub of global talent.

Successful digital transformation is not just about the technology; it happens at the intersection of business, creative and technology. Creating and implementing solutions that transform the way companies do business requires a deep understanding of existing business models. Further, design elements must be practically adapted to the contextualized needs of customers. Design studios bring these elements together to accelerate digital transformation journeys. Global companies operating in China, like Starbucks, have been quick to realize the competitive advantage a design studio “in China, for China” provides in terms of agility. It enables them to quickly respond to customer needs. In fact, the co-founders of Alibaba, Visual China and Xiaomi — Chinese companies with a combined market capitalization of US$300 billion — were all designers. Thus, cities that incentivize establishing such design studios will surely benefit from increased innovation.

Shanghai should continue to be an active consumer of technology and create a market for frontier technologies like 5G and AI. While China ranked 65 out of 193 countries on the United Nations’ 2018 e-government index, Shanghai must lead the way in further digitizing its government operations. It should also continue making investments to expand the basic digital infrastructure and overcome the digital divide to increase internet penetration in rural areas (at 33 percent) of China.

One in two of top 50 Chinese startups are associated with Baidu, Alibaba, and Tencent (known as BAT), China’s top three tech giants. In 2016, these three companies contributed 42 percent of the total venture capital investment in China. Their American counterparts Facebook, Amazon, Netflix and Google (known as FANG) contributed only 5 percent of venture capital investment in the United States that year. Thus, policies that encourage healthy competition instead of monopoly between various ecosystem players will foster innovative ideas. Further, investor-friendly policies that lower entry barriers will encourage healthy competition between growing companies and incumbents to deliver the best digital solutions for consumers. Finally, government incentives for setting up dedicated innovation labs and financial stimulus for fostering a vibrant startup ecosystem will help Shanghai accelerate its journey to becoming a global hub of digital services.


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