by Yuchuan Wang

Cao Peng is vice president and head of AI technology and robotics at JD Digits. His team is committed to promoting the full integration of a range of cutting-edge technologies including AI, big data, and blockchain with finance, retail and other businesses.

With the effects of demographic and data dividends gradually waning, internet giants are rushing to the “2B” service battlefield, also known as the “Industrial Internet.”. Internet companies have sought to increase their market share by providing business-to-business technology solutions. At the same time, under the influence of COVID-19, companies in traditional industries have increased urgency for digitized solutions.

JD Digits has been at the forefront of this trend toward digitization for almost a decade. Established under JD.com in 2013, JD Digits has moved from focusing exclusively on consumer services to delivering business solutions—allowing it to become one of the world’s leading digital technology providers. Currently, the company is focused on core businesses, including AI technology, intelligent robotics, intelligent cities, digital marketing, and Fintech solutions.

Cao Peng, vice president and head of AI technology and robotics at JD Digits

From multinational corporation to Richard’s little shop

Cao Peng met Richard Liu, Founder and CEO of JD.com in the early 2000s. At the time, Liu ran an offline store in Zhongguancun (known as the “Silicon Valley of China”) that sold authentic-only laser technology products such as compact discs and CD burners. He happened to meet Richard on an internet forum when he was browsing information regarding how to identify fake CDs.

“Twenty years ago, there was significant fraudulent business activity in Zhongguancun. It was quite rare that Richard chose to sell only authentic ones.” Said Cao.

After graduating from college with a degree in computer science, Cao went to work for a leading multinational consulting firm. Not long after, Liu sought Cao’s help to build website for his Zhongguancun store. In January 2004, Cao successfully helped launch the website “jdlaser.com”, the predecessor of JD.com, in his spare time. Liu gave him two CD burners as a reward for his effort. “I still have one of them under my bed,” said Cao.

Pioneering a new journey

In 2007, JD received over $10 million in its first round of funding. The fast-growing e-commerce company urgently needed professional managers. Again, Liu went to Cao—this time to recruit him for technology research.

There is a Chinese saying: “A man should be independent by the age of 30.” That year, Cao was 29.

“I wanted to be a programmer who impresses others.” Cao remembered. Although enjoying a successful and stable career, he was tired of the same routine. A doorstep away from 30, he wanted to challenge himself.

“Richard is a reliable man. He keeps his promises and never disappoints his customers.” Cao said. What surprised him the most was that he had never seen a company that could survive in Zhongguancun for five years—most go bankrupt in just one year. Even former employees who handled Cao’s disc orders continued to follow Liu. “‘He must treat his employees very well,’ I thought.”

Since then, JD.com has gradually become China’s largest retailer by revenue, while Cao has fulfilled his dream of becoming a leading technology professional. From transactions and supply chain to accounting and human resources, Cao has been heavily involved in all phases of JD’s technical infrastructure. He has spearheaded countless technological innovations to help build the company into a giant up from the ground.

When JD.com was preparing for its initial public offering on Nasdaq in 2013, Shengqiang Chen, the company’s former CFO, established JD Finance, the predecessor of JD Digits.

Cao, who had planned to retire, soon decided to join Chen to establish the new financial empire.

“I really enjoy starting new businesses from scratch. The process is a lot of fun, and seeing something built through my own efforts is deeply fulfilling.” Leveraging his expertise in technology, Cao first helped Chen build the JD Finance website and then helped JD Digits build the fundamental technology system.

From financial to digital

“We decided to move towards fintech in 2015 because we realized that focusing exclusively on financial products wouldn’t maximize our market share considering the number of players from both traditional and internet industries,” Cao said, “By expanding into fintech, we discovered that not only can we empower the financial sector, but our AI and big data capabilities were advanced enough to be replicated in other industries. That’s why we further adjusted our strategy in 2018 to become a digital technology company.”

JD Digits is determined to become the partner of industrial digitization.

Companies that focus exclusively on technology typically invest a significant amount when entering new spaces, not to mention the high cognitive barriers traditional sectors face with new technologies. Compared to tech-only providers who have no application scenarios, JD Digits has its clear strengths. “Take computer vision technology as an example, in both JD’s retail and payment businesses, there is a great demand to ensure the technology can be verified through reliable applications.”

By opening up its technologies, JD Digits hopes to help traditional sectors become digitized and intelligent, ultimately reducing costs and improving efficiency.

This vision has been repeatedly verified in Cao Peng’s business lines.

Taking his blockchain business as an example. As of June this year, it has collaborated with over 1,000 brand owners and helped track more than 90,000 SKUs (stock-keeping units) on JD ranging from fresh produce, baby and maternal products, liquors, beauty products, medicine, and luxury and cross-border products. The system has had more than 7 million inquiries by consumers.

The blockchain technology, which was originally designed to ensure a transparent supply chain of authentic products to online consumers, now also serves clients for purposes well beyond retail, such as guaranteeing e-contract signing and trade secret protection.

Robotics

Unlike other departments, intelligent robotics is the only first-level department of Cao’s team. He and his team believe the development of IoT, cloud computing, and AI technology will accelerate the application of robotics in various scenarios and help upgrade traditional industries.

Starting from serving the financial industry, Cao’s team spent nearly a year researching their first robot, the “Intelligent Inspection Robot,” for bank data centers (IDCs). Powered by AI technology and multiple sensors, the robot is designed for environment and equipment checks in IDC. It has the ability to check a single server’s status in 30 seconds and help banks reduce IDC operating costs by up to 50%.

Cao’s robotics business has expanded beyond the banking industry to other industries such as medical and railways.

To help medical staff on the frontlines fighting COVID-19, Cao and his team helped launch the “Indoor Delivery Robot” earlier this year in a Shanghai hospital treating coronavirus patients. The robot helps transport medical supplies to contaminated areas, thereby reducing the risk for medical personnel from being exposed to the highly contagious virus.

Inspection robots are also used to inspect railways. According to JD Digits, the technology has helped reduce the human resource and time costs by 50%. Data collected by the robot may also be useful for future railway planning.

“We don’t plan on manufacturing robots. Our strategy is to establish the technology infrastructure and platform so third parties can build their own robots as quickly as possible.” Cao explains, “An IT company looking for robotics solutions for bank clients should be able to quickly create robots on our platform that fully meet the demand.”

The versatility of technology allows JD Digits to expand its offerings in everything from financial technology to digital technology, just like computer vision technology can be used to identify tea and also inspect data centers.

“Like most people who explore in the dark, we have encountered numerous challenges. Our ideals convince us to persevere, and the results are proving strong. AI is indeed helping people in their work and personal lives.”

 

(yuchuan.wang@jd.com)

by Vivian Yang

Dr. Jianguang Shen is vice president of JD.com and Chief Economist of JD Digits, the digital technology subsidiary of JD.com. He joined JD.com in 2018. Being the first and now the only chief economist in China’s internet industry, his views and work present unique value.

In Dr. Shen’s view, digital transformation is an irresistible trend in China and around the world, and the coronavirus outbreak is only accelerating this process. In the post-coronavirus era, the next wave of the country’s economic growth will rely on the implementation of industrial digitalization and the development of the digital economy.

A veteran macro-economist

Dr. Shen focused his career on mainstream economic institutions before his path crossed with the Internet world. After obtaining his Ph.D in Finland, he was the chief economist of Mizuho Securities Asia, and before that, he worked as a senior economist of the IMF, the Central Bank of Finland and China International Capital Corporation Limited (CICC), respectively.

He met Shengqiang Chen, JD Digits’ CEO  two years ago, and over a conversation, he became intrigued by the idea of combining his economics expertise with deep-mining of the big data on JD Digits, the fintech and digital powerhouse of the country’s largest retailer. Dr. Shen joined JD in2018.

At JD, Dr. Shen also heads JD’s Research Institute, a think tank that provides cutting-edge research, data, and industry analysis for all sectors. The team is composed of over 20 full-time research staff, half of whom hold doctorate degrees. Their research areas include macro-economics and analysis on industry policy and regulations. At the same time, there is a dedicated research team focusing on industrial digitalization. Their work provides valuable insights for JD’s strategy and has positioned the company as a thought leader in the industry and beyond. Over time, Dr. Shen and his institute’s work have received increased attention from policymakers, industry experts, international organizations, and the media.

 

The “B2B2C” model

Digitalization is a key part of Dr. Shen’s research. He has been an advocate for industrial digitalization as he believes that it will be the main driving force for China’s future economic growth.

“Most digital companies today focus on consumer services, known as the ‘2C (to C)’ business, whereas growth in the future will depend on the development of ‘2B (to B)’ business, which means there will be more business opportunities in providing digital services to enterprises,” said Dr. Shen.

According to him, real fintech should be developed in accordance with the basics of finance.  The role of technology is to enhance financial institutions’ ability and efficiency. Emerging technologies like big data, AI, cloud computing, blockchain and IoT have proven their effectiveness in improving some essential functions of financial services such as application scenarios development, customer acquisition and operations, risk control, R&D, and more.

This explains why JD Finance has changed its name to JD Digits, which implied to change its positioning from a tech-driven finance services provider in competition with other banks to a fintech provider in support of traditional financial institutions. Through providing technologies, JD can help banks improve their services, which will then benefit their customers. This is referred to as the B2B2C model.

JD Digits’ new logo with colors representing JD elements (red) and  innovative technology (blue)

 

Seeding technologies into more industry soils

In November 2018, JD Finance officially rebranded as JD Digits. With fintech at its core, the company hopes to leverage its digital capabilities to connect more with the real economy.

Fintech and mobile payments are among the technological areas where China is leading the world. In addition to the finance sector, these technologies have great potential to be used in many industries to help enterprises improve operational efficiency, Dr. Shen explained.

“JD has vast data, traffic, and a client base accumulated through running its retail operation. The big data and AI convergence powered by JD Digits will create more growth opportunities in new territories.” So far, JD Digits’ technologies has found its footing in smart cities, AI robots, digital marketing, and other areas.

“If you think of the second curve growth or even explosive growth, all the technologies we are building now are laying the foundation for the future,” said Dr. Shen.

The Chinese government has been promoting the construction of “new infrastructure”, which is expected to become a new driver for the economy.  This initiative highlighted seven construction fields covering 5G, data centers, cloud computing and more. Dr. Shen believes that fields should actually be more expansive.

“All the infrastructure, construction and investment that work on transforming traditional manufacturing and service sectors online should constitute the new development goal, and the construction of new infrastructure is an impetus for the digital economy. ”

JD Digits’ intelligent city project in Nantong of Jiangsu province

Making digital economy fairer and more inclusive

China’s digital economy has been rising at an over 20% growth rate annually in the past four years. “From a national strategic view, data has become so important to the extent that the Chinese government has listed it as a production factor, juxtaposed with labor, capital, land, and more,” said Dr. Shen.

Given the favorable policies from the government, the highly competitive market environment, and the high acceptance level by the people, China is advancing fast in developing the digital economy.

Dr. Shen called for supports on low-income people amid COVID-19 on the WEF’s  briefing with global economists 

At the same time, Dr. Shen puts emphasis on the role of the digital economy in driving China’s high-quality economic growth, especially in promoting environmental sustainability and social inclusiveness. Creating a fair and inclusive process for more real economies in their digital transformation are key values JD Digits can bring to society.

Take small loans for small businesses and farmers as an example. In the past, traditional banks could not provide this service as the cost for manual audit was not cost-effective to make it a viable business. But nowadays, with big data and risk control technology, banks can manage operational costs at a low level regardless of the size of the loans, so they are able to expand their lending businesses, and more people who need small loans can benefit.

Digital technology also plays a unique role in poverty alleviation. The internet, big data and AI technologies make products from impoverished areas more accessible to customers. This not only develops more income for people in underdeveloped areas but also helps local businesses to better understand market needs. Based on this direct and precise information, they can be smarter in developing their production plan, brand proposition and industrial structure.

Dr. Shen pointed out that JD’s large business scale and advanced digital capabilities empower it to make greater contributions in many ways. Through providing cutting-edge digital technologies and services to its business clients and individual customers, JD Digits is transforming its role as a trusted partner in the rising tide of the digital economy that promises more inclusiveness and quality growth. This is the logic and vision for JD Digits’ future development.

 

(vivian.yang@jd.com)