Sunday, September 9, 2018

Zeng, Smart Business

Ming Zeng’s Smart Business: What Alibaba’s Success Reveals about the Future of Strategy (Harvard Business Review Press, 2018) is a thought-provoking book. Written by the chief strategy officer at the Alibaba Group, it challenges traditional business models and offers an alternative based on data intelligence and network coordination.

As with all books about China, I’m always stunned by the magnitude of the numbers. For instance, 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.

Zeng 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 revolutionize 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.

As I pondered Zeng’s thesis, a couple of obvious questions came to mind. First, is this a model that, with modifications, can extend beyond the digital retail space? Second, is it essentially a monopolistic framework? My best guesses: yes, and probably. And so, I believe that everyone who wants to make a mark in the business world should read Zeng’s book. They might want government regulators to skip it.

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