Since the launch of our first product in October 2015, we have embarked on a commercial journey in the ToB industry. Since then, through our annual technology summits, we regularly share the latest industry perceptions and deep insights. We have interviewed numerous business leaders, recorded their footprints in innovation and entrepreneurship, met developers in cities across the country, and exchanged thoughts with them at various city forums. Our live streaming rooms have become the places where every tiny detail of our product evolution is reproduced.
The technology summits, cross-sector interviews, city forums, and live streams are like a continuous stream that has reached over a million viewers. By 2017, we turned these streams into a solid and vibrant technology event brand—MCtalk, which signifies gathering deep thinking (Mind), inspiring top creativity (Creativity), and sustaining to this day.
To further expand the meaning of MCtalk by 2024, we are proud to present the “MCtalk • CEO Dialogue” series. Ruang Liang, NetEase Vice President and General Manager of NetEase Intelligent Data, as the main MC of the program, will communicate with ToB industry operators, PE/VC investors, corporate decision-makers, and others. They will engage in conversations centered on core issues of interest to the ToB industry, exploring hot topics in global technology and venture capital, as well as issues such as technological innovation, industry transformation and era change, thereby revealing the laws of business development and voicing opinions from NetEase’s perspective.
This is the fourth edition of “MCtalk · CEO Dialogue”: During the summer of 1956 at Dartmouth College, computer scientist John McCarthy and his colleagues discussed how to make machines simulate human intelligence and proposed the term “artificial intelligence” for the first time. Since then, AI has been a repeatedly explored and discussed topic in the tech community. After more than half a century, AI has gained widespread attention and become a gem in the field of technology as much as it has been neglected during its low tides.
In recent years, with AlphaGo’s feat of defeating the world Go champion Lee Sedol, ChatGPT’s fluent responses to complex questions, and Sora’s realistic virtual videos coming into public view, people marvel at the incredible heights AI technology has reached. Thus, AI has once again sparked a global craze, igniting passion and anticipation.
SaaS is seen as one of the areas where AI is most likely to land first and produce actual benefits, currently undergoing a transformation from traditional tools to intelligent services. On one hand, SaaS is intended to simplify and optimize business processes from the start; AI can automate many repetitive tasks. On the other hand, thanks to the high flexibility and scalability of the SaaS model, SaaS in itself is naturally capable of quickly integrating AI technologies.
Despite some people seeing traditional SaaS software as complex as a densely packed wheat field, the infusion of Artificial Intelligence (AI) technology has catapulted the capabilities of SaaS, much like highly advanced agricultural machinery emerging on the central plains of America, forging a close symbiosis with humanity, and sparking a revolution at the forefront of enhancing productivity. This evolution not only greatly enhances corporate productivity but also heralds a significant transformation in the industry.
The outstanding company Youzan in the retail tech SaaS sector helps merchants focus on products and services while facilitating their robust growth. Bai Ya, the founder and CEO of Youzan, leads the company with profound insight into the implementation of SaaS services. Meanwhile, Bai Ya is actively exploring the extensive applications of AI technology in SaaS.
Considering the current demand for digitalization in China, we believe that the SaaS industry is far from declining; on the contrary, its spring might have just begun. With the reverence for business discipline and understanding that the customer is the core ability of an enterprise, the role of AI in accelerating the connection between CEOs and consumers is becoming increasingly significant. The intervention of AI can transform SaaS software from a low-value production tool into high-value production material, thus offering a significant competitive advantage in the market.
The value of large AI models is mainly reflected in two aspects: first, providing unlimited creativity, and second, replacing standardized and repetitive labor. The core of SaaS lies in delivering practical results through workflows, and with AI, the efficiency improvements that SaaS can bring can reach hundreds of times or more.
Whether customers are willing to pay for your SaaS software is an important criterion for measuring the software’s value. Under the wave of AI, embracing AI technology initially requires a few committed individuals to take the first step, driving and encouraging the participation of many more through actual results.
In the AI era, enterprises especially need talents with “broad abilities” who can better adapt to the changes and challenges brought about by technological developments.
In the broader context, although the development of the SaaS industry faces many opinions and discussions, it is undeniable that the industry is indeed experiencing structural financial adjustments. Data shows a downward trend in both the number of financing transactions and the amount of financing in the SaaS market. Indeed, this market move reflects investors’ cautious attitude towards investments in the SaaS sector and may also signify the retreat of a market bubble.
Meanwhile, a closer look at financing rounds and structures shows that the frequency of angel rounds, strategic investments, and Series A financing seems to be rising, indicating that the market still maintains enthusiasm and confidence in early-stage SaaS projects. Moreover, with the acceleration of corporate digital transformation, various SaaS solutions demonstrate their value in improving work efficiency and reducing operating costs. Their applications are becoming more varied, covering retail, live streaming, e-commerce, marketing, finance, taxation, human resources, and other scenarios. This indicates that SaaS’s penetration into various vertical fields is deepening, and its value is receiving wider recognition.
In the current journey of the domestic SaaS industry, Youzan has been deeply cultivating for several years. In the face of various opinions in the industry, Bai Ya shared his unique insights. Bai Ya said that in the past two years of observation, he does not agree with the so-called industry winter. Especially from the perspective of the US market, this period is, in fact, the opposite from a business level.
It is during this phase of economic recovery that many companies have begun to realize the importance of cash flow and budget management. This has led them to reduce their efforts in developing customized solutions and instead opt for purchasing SaaS products that better fit their needs and are available with an annual payment. At the same time, the growing online consumption behavior of people and the online lifestyle habits accelerated by the pandemic have also boosted companies’ demand for SaaS software procurement, especially for online communication management and online business activities.
Bai Ya further pointed out that although there may have been a cooling off for some time from the perspective of the capital market, such cooling is relative to the previous overheated capital environment. In the past, the market was in a state of capital flooding, lacking consideration for the long-term development of enterprises, whereas now there is a return to rationality, focusing more on the sustainability of commercialization and investment returns.
Ruan Liang also expressed agreement with this rational return. He believes it to be not just a business discipline but also a positive and favorable development for the industry. Taking NetEase as an example, he pointed out that as a pioneer among domestic Internet companies, NetEase relies on strict business discipline, focuses on profits and cash flows, controls costs, and manages product expansion reasonably, allowing it to create a new high income in 2023 and restore its market value to the forefront among Chinese concept stocks.
Following Ruan Liang’s remarks, Bai Ya emphasized Youzan’s role as a merchant service provider. Youzan has offered SaaS products and solutions to customers from social E-commerce, new retail, education, and other fields, supporting merchants in the areas of promotion, customer acquisition, conversion, retention, repurchasing, and sharing fission. Bai Ya noted that in the past three years, two significant changes in quality merchants are: they no longer solely pursue the growth of turnover but consider profit as the core goal. This reflects a return to basic business practices in the industry and places higher demands on SaaS service providers.
Merchants are increasingly focusing on the repurchase rate of existing customers, realizing that the return rate of attracting new customers is gradually decreasing. Therefore, outstanding merchants have started to focus on the ratio of long-term value and customer acquisition cost (LTV/CAC) and put emphasis on improving the repurchase rate of existing customers. It has been proven that increasing the repurchase rate of existing customers can effectively increase profits, whereas doubling performance sometimes may lead to a decrease in profits.
Experts point out that when the repurchase times of old customers double, there are no additional front-end marketing expenses for the enterprise, and profits naturally increase accordingly. Some offline chain supermarkets have also chosen to activate silent members, improve the repurchase rate of old customers, and would rather close some stores to pursue the activeness of members.
Understanding customer needs has become a key ability for enterprises, and the emergence of Artificial Intelligence (AI) has made the connection between CEOs and consumers more direct and simple. Particularly, since the popularity of large AI models, many companies have integrated them into product development and operational management.
For instance, Qiyu’s smart customer service uses AI technologies such as Natural Language Processing (NLP) and Automatic Speech Recognition (ASR) to help merchants improve customer service efficiency and optimize customer experience. With the introduction of large models, AI can play a greater role in areas where previous processing was not profound enough. For example, customer service teams can now automatically summarize and abstract conversations from the day through AI, and directly submit them to the customer service system, reducing the workload of customer service personnel.
Moreover, when building a knowledge base for intelligent customer service for brand enterprises, what previously required AI trainers to invest a lot of effort in establishing a similar Q&A knowledge base, can now be achieved quickly and efficiently through AI models. This is particularly advantageous for large supermarkets with a variety of products that need to master more knowledge to quickly solve problems: increased answer speed reduces operational costs, and AI can also process customers’ emotional needs during inquiries, providing higher quality responses.
One of the most significant advantages of AI is that it enables the voices of senior leaders and consumers to interface directly. In the context of expanding business scale and increasing customer numbers, the “Voice of Customer” service, realized through AI, captures and conveys consumers’ opinions and feedback, breaking the barrier of lengthy information transmission chains. Although sales teams regularly conduct project retrospectives, they are often too busy and tend only to observe individual customer cases, leading to a one-sided perspective. Fortunately, since sales and service activities are completed online, the datafication of customer interactions provides the possibility to apply AI.
We actively employ artificial intelligence and system data processing functions to gain insight into comprehensive information: Which issues are customers currently focusing on? Which features are frequently asked about? What do customers like and dislike about our products? What are the main reasons for customer churn? This core information, based on customer feedback, is the basis for the continuous evolution of product services, thereby improving product quality. The application of artificial intelligence in this process allows us to understand customers in a shorter cycle, to know and connect the relationships between management and customers in real-time, rather than relying solely on traditional methods of gathering information through reports and reiterations.
In fact, understanding customer needs and feedback is a core competency of our organization. Internally, we proposed a plan two years ago requiring all managers to regularly engage in sales work, personally visit customers, and get closer to customers, which has become an organizational habit. We believe this is a key organizational habit many companies need to cultivate.
In terms of the value of artificial intelligence applications, I think it mainly reflects in two aspects: one is to provide unlimited creative support, and the other is to replace standardized repetitive tasks. When we have a preliminary idea about certain issues and want to concretize it into actual creativity, artificial intelligence can offer a variety of creative options. We can select the appropriate direction and guide AI to optimize creativity along this path, eventually polishing it into a mature product. On the other hand, in standardized and repetitive tasks, such as customer service scenarios, we might have previously needed to manually respond to customer Q&As, but AI can now handle these issues well. For example, in UI design, once the product’s UI style is determined, each interface design becomes repetitive work under that style, which AI can also efficiently complete.
Many times, repetitive tasks not only consume a lot of time but also prevent the effective utilization of professionals’ talents. Some might worry that the application of AI would eliminate jobs, but that’s not the case. On the contrary, we are able to free up valuable human resources to engage them in more valuable, more creative work. For example, sales team members need to report project progress to customers, and while the project data is readily available in the system, it used to take time to compile it into PPT. Now, with the use of automation tools, PPTs can be generated quickly, leaving the final optimization to be done by humans, thus saving a significant amount of time.
With the aid of artificial intelligence tools to increase our capability for systematic thinking, we can greatly enhance human performance in creative work. Properly leveraging AI-generated content (AIGC) tools can help us think about issues systematically and enable us to contribute more in innovative tasks. To achieve this goal, a four-step strategy is proposed:
The first step, ignite yourself: This is a fundamental condition. Only by continuously feeling a genuine passion for an idea and showing the courage to solve problems and face challenges can we stimulate endless energy and drive. The love for one’s work and a grand vision can keep us motivated on the path to achieving our goals.
The second step, systematically organize information: At this stage, the focus is on sorting out one’s thinking and the relevant information collected. During the organization process, do not rush to find tools but think deeply about the inherent connections between pieces of information and string them together through logical reasoning. This thinking process is crucial for cognitive improvement. Afterwards, we might consider using AIGC tools, such as GPT, which, with its vast database and succinct algorithms, can narrow down the search using precise prompts, thereby providing us with more accurate answers.
The third step, verify the validity of ideas: After establishing a preliminary framework of thought, we need to verify the content that is still at the hypothesis stage. This may require more detailed document searches, field research, and other methods to confirm every uncertain assumption.
The fourth step, form a feasible plan: After validating ideas, the next step is to transform this information into a coherent, executable plan. A good plan must be realistic and clearly identify the key elements that determine the success or failure of the plan. Although there might still be assumptions in these key elements, we must ensure that most of the content is certain to minimize the number of uncertainties in these critical parts. However, tools are always just aids and cannot directly deliver results; the creative work ultimately needs to be completed by humans.
As for Software as a Service (SaaS), it must deliver practical results to customers through workflows. SaaS combined with artificial intelligence can lead to significant efficiency improvements. Correctly implementing SaaS means extracting the best practices from customers’ experiences, transforming them into standardized products and solutions, so that more customers can realize them, thereby enhancing overall societal efficiency. In other words, the task of SaaS companies is to provide customers with practical outcomes through workflows.
In the past, many SaaS tools became more powerful with successive version upgrades and feature enhancements, but also became increasingly difficult to operate, failing to effectively deliver results to customers. However, once combined with AI technology, these issues can be effectively resolved.
During the promotional season, the capabilities of Artificial Intelligence (AI) can be deeply harnessed. AI can not only understand the details of promotional planning but can also autonomously capture data from digital systems. Such technology can tailor reasonable promotional plans for merchants, starting from the inventory status and actual needs of the merchant, and intelligently recommend the most suitable discounts and promotions. Furthermore, AI can also propose precise marketing strategies based on different customer preferences and formulate corresponding operational plans. Once the marketing plan is confirmed by the merchant, AI can then propose specific implementation methods and is responsible for tracking the entire execution process, greatly improving work efficiency. It can be said that combining SaaS and AI technology could lead to a hundredfold increase in efficiency.
In the initial stages of embracing AI, what we need is a group of committed people to dive in first. In NetEase’s experience, there was indeed resistance during the preliminary promotion of AI. Some colleagues were worried that the intervention of AI might replace their jobs or devalue their work. As an engineer-led group, NetEase initially attracted those engineers with a positive attitude and willingness to participate in AI projects. After participating in the projects, these engineers realized the value of AI, recognized that it could significantly improve work efficiency, and began to accept and embrace AI. At the same time, we regularly hold AI technology training and courses and ensure the continuous improvement of engineers’ technical abilities through examinations.
Admittedly, the AI era is bringing significant changes to the talent requirements of enterprises. However, employees often stick to their original ways of thinking and working patterns, reluctant to leave their comfort zones, fearing that changes may affect their vested interests. According to Harvard University’s social engineering “3.5% Rule,” only 3.5% of genuine participation is required for the successful launch of a social movement. Therefore, to get an organization to embrace AI, it is unnecessary for too many people to take immediate action; only a few devoted individuals need to take the initiative to participate. Conversely, too much participation might bring greater resistance, as there is often a subset of people within an organization who resist innovation, worrying that the arrival of AI may affect their job security. Thus, when innovating with AI within an enterprise, it is possible to opt for establishing temporary and flexible organizational structures.
For instance, Youzan established a department called “Youzan AI,” which initially had only a very small number of full-time staff, including myself. We found an office that could accommodate dozens of people where different product research teams would take turns working on AI-specific projects. Each project was organized as a temporary team, and after one project ended, a new group of people would join to form a new AI project team. Although there were some resistances and challenges, as AI projects gradually produced results, more and more people were willing to join. Nonetheless, it is only those few individuals who have driven the progress of the projects from start to finish, clearly showing that in the initial stages of AI transformation, what is really needed is for those few devoted individuals to take the first step.
As artificial intelligence technology continues to develop, our expectations for talents are transforming, constantly pursuing the so-called “broad capabilities.” Broad capabilities refer to the ability of an individual to understand the responsibilities of upstream and downstream positions in their job and be able to collaborate across fields when necessary to assist in completing related tasks, using appropriate AI tools to improve work efficiency and streamline processes.
For example, when some backend engineers face new frontend page requirements, relying on limited project resources and schedules may require a long wait. In such cases, with the help of AI tools, they can transcend traditional role boundaries and complete frontend work simply and efficiently. Similarly, product managers may also need to cover some design work to reduce dependence on designer resources.
This expansion of capabilities not only improves individual work efficiency but also enriches work outcomes. In the AI era, talents with broad capabilities will be rarer and possess strong competitiveness. Looking forward to the future, with the help of artificial intelligence, it is hoped that the SaaS industry can welcome more changes and achieve more efficient work patterns and outputs.
