In this edition of Swire News, we focus on how Swire's various businesses are harnessing innovation to seize opportunities in China.

Senior directors, Tim Blackburn, Karen So, Derrick Chan and Ronald Lam discussed how digital technology is shaping the way the Property, Beverages, Trading & Industrial and Aviation divisions are doing business, during a panel discussion chaired by John Swire & Sons (HK) Limited Director Public Affairs, James Tong (far left).

Digital technology has led to phenomenal changes in society and in people's lifestyles. And within a dynamic global landscape of digital innovation, China is one of the fastest emerging technology powerhouses. For leading corporations doing business here, the question at the top of the agenda is how to evolve and stay relevant in an increasingly competitive market through digital transformation. "Innovate Into the Future" was the theme of the Swire China Conference 2018, setting the stage for the group to address and evaluate its innovation strategies.

The Swire China Conference has been held every second year since 2008 in various Mainland Chinese cities. Most fittingly, in 2018, the venue was Shenzhen; just 30km north of Hong Kong and one of the success-stories of modern Chinese economic reform, the city is widely recognised as a global centre for technology and innovation.

In his opening remarks to the conference, Swire Pacific Chairman, Merlin Swire, tackled the Swire group's current status in relation to burgeoning Chinese markets head-on: "For most of our 150-year history we were a big fish in a small pond. But we should recognise that we are now a small fish in a big pond that contains some huge and fast-growing Chinese companies that will come to dominate the sectors in which we play," he said.

By world standards, China's markets are vast and also hugely diversified, and advances in technology have made competition among corporations and retailers especially keen. It is therefore essential that Swire innovates across its businesses in order to remain competitive. During the China Conference, senior executives from Swire's property, aviation, beverages and trading & industrial divisions joined a panel discussion focusing on how Swire companies are responding to this imperative.

Driving sustainable growth 

Karen So, Executive Director – China Operations, Swire Beverages, identified innovation as being central to the company's entire growth strategy: "In 2018, innovation contributed to 50% of our total incremental revenue growth," she explained to conference delegates. "The China beverages market is extremely competitive and fragmented, and consumers' brand loyalty is relatively low. In order to capture and grow a bigger market share, we must innovate to maintain growth and success.

"We need to attract consumers' attention with innovative packaging designs and creative new products," she said. "For example, we recently launched the "Fibre Series" in China. These beverages contain no sugar and provide 30% of people's daily dietary fibre requirements. This expansion in our product portfolio will help us capture a share in the health and wellness market. We also use innovative packaging to help drive revenue. An example is the launch of a new bottle for our Georgia Coffee brand. Consumers are offered coffee-cup like packaging, which gives them a coffee-shop style experience."

Swire Beverages is also investing in digital initiatives to help stimulate productivity and increase revenue. By 2019, over 700,000 of its soft-drink coolers will have been installed with sensor beacons known as "smart tags", creating one of the largest networks of connected coolers in the world. These smart tags will collect important operational data, including temperature, lighting and how many times a cooler door has been opened – knowledge that will influence the way the company manages its cold-drink assets. "By harnessing technology in this way, front-line staff are able to spend more time on business development activities, instead of administrative and logistical tasks, because decisions traditionally requiring their input are instead driven by collected data," said Ms So.
She told the conference that Swire Beverages has implemented Intelligent Revenue Growth Management ("iRGM"), a big data analytics initiative, at two of its China bottlers. iRGM uses data- driven intelligence to determine the factors influencing sales performance at specific outlets, allowing the bottler to make optimal decisions around packaging, pricing, product assortment planning and commercial activities to be implemented at designated retail stores. "The data generated will provide valuable insights to determine sales strategy undertaken at each retail store. This will help drive significant revenue growth."

New retail technology

In China, the emergence of new retail platforms has changed shopping patterns and ushered in more competition amongst retailers. This has prompted businesses to look for new ways to create opportunities by offering consumers a seamless online-to-offline shopping experience.

Tim Blackburn, Swire Properties Chief Executive Officer, Mainland China, explained this concept to conference delegates: "Shoppers nowadays do not function in separate offline-versus-online worlds. They switch between the two and there is a growing movement towards enabling seamless omni-channel customer journeys. The benefits for physical retail are clear: using digital channels to drive customers into our malls to see and touch the products before they buy; harnessing the vast amounts of customer data generated online to create targeted, personalised experiences, and seizing the opportunity to continue the conversation with potential customers after they have visited our malls."

Interactive digital technology creates a unique retail experience for customers at Swire Properties' shopping malls.

Mr Blackburn is optimistic about the effect the convergence of digital and physical retail can have on Swire Properties: "There is a growing body of evidence which suggests that well-managed, online-to-offline retail businesses significantly outperform single-channel retailers. Many brands have already made major leaps forward on this front. It can also be seen globally, with giant players like Amazon making major moves into offline – not to mention the plethora of online-only brands who are now looking to expand into physical spaces, including ours. Handled correctly, this represents a significant opportunity for us in terms of both knowledge-building and commercial value."

Swire Properties' recent partnership with Alibaba's Tmall is an example of how this has been put into practice. The partnership harnesses the latest in digital technology and big data to create a distinct online-to-offline shopping experience for customers at Swire Properties' five shopping malls in Mainland China.

Driving customer experience to new heights

Swire's aviation division is introducing a range of innovations to enhance operations and enrich customer experience. Ronald Lam, Cathay Pacific's Director Commercial and Cargo also took part in the panel discussion. He told the audience: "Cathay Pacific is undergoing a three-year transformation journey, and digital is a central part of this. With today's world so highly digitised, this is an important element in making innovation possible, so we can improve customer experience, revenue generation and cost efficiency."

Cathay Pacific has put new technologies to use across various areas of the airline's business. For example, Block Chain has been introduced to track cargo containers and pallets, as well as to record and reconcile Asia Miles points with customers and restaurant partners.

Thanks to WI-FI connectivity being rolled out across Cathay Pacific's fleet, the airline has been able to make its in-flight environment a digitally connected one, using Mesh Network. Mobile apps tailored to the in-flight environment and providing real-time connectivity to the ground will soon be available for passengers and for airline crew. Chatbots have also been adopted to handle flight disruptions and provide guidance to customers in rescheduling their onward journeys in the event of delays or missed connections. This technology brings greater convenience to customers by making planning easier and also leads to greater peace of mind.

Derrick Chan, Swire Pacific Director Trading & Industrial, agrees that digital innovation is a vital tool for making the most of new business opportunities. Speaking during the panel discussion, he cited ways in which the automotive industry is making use of technology to better serve its customers. "Taikoo Motors has revolutionised how it offers services to customers," he said. "These days, customers are a lot less loyal, because they can easily walk away if you can't offer new things. You can only capture new opportunities if you continue to offer them new experiences." Traditionally, the automotive industry has provided its customers with a basic suite of retail services and after-sales servicing of vehicles. However, Taikoo Motors has created an app called Carguru, which has pioneered the cross-selling of services such as car insurance, and also puts customers directly in touch with one another, so helping to stimulate the second-hand car market.

Embracing change for future success

An overarching theme of the panel discussion was that if organisations are to use innovation effectively, they must ensure it becomes a central tenet of their business culture. One challenge to this is the likelihood that not every innovative idea or initiative will be immediately successful. The way to overcome this challenge is to ensure that innovation is something businesses embrace over the long-term. This was a point Karen So was keen to stress: "Innovation is an integral part of our business. People should not see it as a single project. Innovation is related to people's mindsets and in order to win and succeed, we have to position ourselves as a learning organisation. Employees need to adapt to the changing environment, to take a lead in these changes, and to be ready to learn from what's going on outside the organisation."

Meanwhile, Ronald Lam felt that an important message delegates should take away was that being an innovator means stepping out of your comfort zone and being willing to take risks: "This sometimes means we see failures before successes. A key challenge is how we can encourage experimentation with new ideas, while ensuring we continue to generate a reasonable return on investment. The way we overcome this is to be agile in the way we do things. We have learnt to use small-scale Proof of Technology and Proof of Concept initiatives to test out ideas early on. We then either scale up if successful or fail fast if not," he explained.

The future of innovation at Swire

A crucial factor is that these innovation strategies remain fluid and are continually evolving. Taikoo Motors' Carguru will soon launch additional services, including a 24-hour carwash which is bookable online, and "Drive-thru" refuelling, where payments are made in seconds. And while Swire Properties has partnered with big digital names to drive retail, Swire Beverages is also joining forces with tech companies such as Tencent and Jing Dong: "We should not shy away from working with tech giants," Karen So told delegates. "This is a choice that every business will inevitably face. And if you are not part of the trend, you will be left out." Partnerships like this not only help reduce the challenge digital platforms pose to potential customers, they also increase key brand awareness among consumers in China. 

Tim Blackburn said he was confident about the future of partnerships like Swire Properties' recent link-up with Tmall: "These partners may come in the form of platforms, but may equally be online retailers, portals, digital entertainment developers and online brands. We have a robust pipeline of interested parties and are excited about the possibilities they present," he told the conference.

For Swire to thrive in the future, it is essential that it embraces innovation to make the most of opportunities in Mainland China. The group is already working on ushering in major digital transformation across its businesses, and is well positioned to make even further advances. The key is to keep up the momentum.