Ming Zeng, Alibaba’s Chief Strategy Officer … how to frame strategies in a broader context
September 1, 2018
On Single’s Day on November 11, 2017, Alibaba processed 1.5 billion transactions, totaling about $25 billion. At its peak during that day, Alibaba’s technology platforms processed 325,000 orders and 256,000 payments every second. By comparison, Visa’s stated capacity at about that time was 65,000 payments per second globally.
Ming Zeng is Alibaba’s zong canmouzhang, the Chief Strategy Officer. He was a professor at INSEAD, president for Yahoo in China, and also has a PhD from Illinois.
In his new book Smart Businesss he dispels the common notion that Alibaba is the Amazon of China.
“Unlike Amazon, Alibaba is not even a retailer in the traditional sense—we don’t source or keep stock, and logistics services are carried out by third-party service providers. Instead, Alibaba is what you get if you take every function associated with retail and coordinate them online into a sprawling, data-driven network of sellers, marketers, service providers, logistics companies, and manufacturers. Alibaba’s mandate is to apply cutting-edge technologies—from machine learning to the mobile internet and cloud computing—to revolutionise how business is done.”
The business model that Zeng describes stands in sharp contrast to that of traditional business. It’s a C2B model that demands constant innovation. And a lot of work for all of its participants. But, as the title says, it’s “smart,” and the rewards are sometimes staggering.
Zeng argues that companies must move to a customer-to-business model driven by direct interaction with customers. C2B presages a future where an increasing number of products and services can be produced on demand at acceptable cost, enabled by enhanced network coordination and data.
To use data intelligence and operate as a smart business, you need a tight digital feedback loop between your firm and the customer. However, as pioneering firms have realized, and I have witnessed up close with many Chinese entrepreneurs, centering your business around direct interaction with your customers sets into motion a striking reorientation of all business activities. I call this change the customer-to-business (C2B) model. The C2B mindset turns the traditional business-to-consumer (B2C) concept of business on its head in profound ways.
Instead of long-range planning, smart business reacts immediately to consumer needs in real time.
When business decisions are driven by machine learning through feedback loops, the firm’s actions are signally dictated by the customer. “Customer first” is no longer just a slogan, but the starting point of the business operation. The entire customer experience should operate on demand. But for the experience, including the products and services themselves, to be truly dictated by the customer, the company and the network in which it operates must be agile and responsive. In practice, every function in the business must work on demand.
Making any one function of the business operate on demand is difficult. How do you economically prepare for the potential span of demand? When a firm starts with any given activity, it has to subsequently retool every aspect of its operations, from branding to product design to manufacturing. Once processes are functionally independent but smoothly and automatically integrated, firms can then create products and services in concert with users, with key production and design decisions informed by this interaction. In doing so, the entire firm’s operating model runs on network coordination and data intelligence.
Completely retooling one’s entire business and making all functions coordinate dynamically is a daunting prospect for any company. Nevertheless, a C2B company has immense competitive advantage. Those who manage to start down this difficult path will find that their efficiency and responsiveness begin to increase exponentially, while cost does not. I cannot give a specific action plan for how to reorganize a firm, as the process differs greatly from industry to industry and even from firm to firm, but I can share some advice on the principles of C2B.
Revealing the revolutionary practices that he and his team have developed at Alibaba, Zeng shows how to:
- Automate decisions through machine learning
- Create products informed by real-time data from customers
- Determine the right strategic positioning to maximize value from platforms and suppliers
- Repurpose your organization to further human insight and enable creativity
- Lead your company’s transformation into a smart business
With insights into the strategies and tools used by leaders at Alibaba and other companies such as Ruhan and Red Collar, in a variety of industries from furniture making to banking to custom tailoring, Smart Business outlines a radically new approach to strategy that can be applied everywhere.