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Smart Business SMART BUSINESS WHAT ALIBABA’S SUCCESS REVEALS ABOUT THE FUTURE OF STRATEGY BY MING ZENG Contents Figure I-1 3 Figure I-2 4 Table 1-1 5 Table 2-1 6 Figure 3-1 7 Table 4-1 8 Table 6-1 9 Table 8-1 10 Table A-1 11 Figure C-1 12 FIGURE I- 1 Alibaba’s e-commerce processing capabilities, compared with Visa’s, 2009–2017 Payments processed (per second) Transactions processed (per second) Visa payment processing capability (per second) 350,000 325,000 300,000 256,000 250,000 200,000 175,000 150,000 140,000 120,000 100,000 80,000 85,900 50,000 42,000 38,000 400 1,000 3,200 14,000 75,000 0 15,000 200 500 1,200 3,850 2009 2010 2011 2012 2013 2014 2015 2016 2017 3 251858_00b_001-014_r2.indd 3 18/06/18 9:41 AM FIGURE I- 2 Singles Day, 2009–2017, Alibaba’s yearly gross merchandise volume (GMV) 180 168.2 135 120.7 91.2 90 57.1 GMV (billion RMB) 45 35 19.1 5.2 0.05 0.96 0 09 10 11 12 13 14 15 16 17 Year 4 251858_00b_001-014_r2.indd 5 18/06/18 9:41 AM TABLE 1-1 Alibaba at a glance China retail marketplaces • Taobao Marketplace • Tmall.com • Rural Taobao Cross-border and global marketplaces • AliExpress • Tmall Global • Lazada Wholesale commerce • 1688.com (China wholesale) • Alibaba.com (global wholesale) Digital media and entertainment* • Youku Tudou (online video) • Alibaba Pictures • Alibaba Music • Alibaba Sports • UC Browser (mobile browser) Local services* • AutoNavi (mapping and navigation) • Koubei (local services) • Ele.me (food delivery) Finance: Ant Financial, MYbank* Logistics: Cainiao Network* Cloud computing: Alibaba Cloud* *Major investee companies and cooperative partners of Alibaba Group. 5 251858_01_015-028_r2.indd 21 18/06/18 5:04 PM TABLE 2-1 The building blocks of a coordinated network Step Examples from Taobao Direct connection and Taobao created the Wangwang instant messenger to con- interaction nect buyers and sellers and created the Taobaoke affi liate marketing platform to connect sellers and small websites. Role evolution Experienced sellers became Taobao University lecturers; Taobao partners (TPs) emerged as offl ine brands joined the network. Investment in infrastructure Alipay lowered barriers to trust; the Taobao application programming interface (API) allowed independent service vendors (ISVs) to work with merchants. Putting business activities Taobao’s product database (see chapter 4) allowed for any online SKU imaginable to be bought or sold; the web celebs coordi- nated marketing and manufacturing online. 6 251858_02_029-050_r2.indd 44 18/06/18 9:51 AM FI GURE 3 -1 Data intelligence feedback loop Data Adaptable User Algorithm Firm product Data 7 251858_03_051-068_r2.indd 62 18/06/18 10:08 AM TABLE 4-1 The fi ve steps for automating decisions Step Key action Datafy the physical world Put capabilities and assets online Software the business Encode decision-making chains Get data fl owing Institute application programming interfaces (APIs) to allow data connections Record data in full Record “live data” in its entirety Apply machine-learning algorithms Coordinate and optimize 8 251858_04_069-088_r2.indd 74 18/06/18 10:07 AM TABLE 6-1 The three strategic positions in a business ecosystem STRATEGIC POSITION Feature Point Line Plane Value proposition Selling a function or Creating a product Connecting related capability or service parties Competitive Expertise Value, cost, and Matching effi ciency advantage effi ciency Organizational Simple; no complex Streamlining Designing systems and capabilities operations and optimizing institutions to mediate workfl ows relationships Core strategy Advance into the next Use the resources Enable the growth of rising plane and fi nd of robust planes to points and lines one’s niche in a fast- incorporate strong growing line points Web- celeb Factories, clothing Ruhan Taobao, Weibo analogy designers 9 251858_06_113-132_r1.indd 116 18/06/18 10:21 AM TABLE 8-1 Comparison of traditional, management-focused organizations and enabling organizations Traditional organization Smart organization (focused on management) (focused on enabling) Structure Tree or hierarchy Platform, networked Information Integrated from the bottom up, Fully connected, synced, and movement and diffused from the top coordinated in real time (internal) down Information A single dedicated communication Fully connected, synced, and movement channel coordinated in real time (external) Decision Centralized, executed from the top Centrally coordinated by a global process down metrics evaluation system, locally self-adaptive Resource Centralized, hierarchical Locally self-suffi cient, elastic, appropriation breakdown and allocation based on external environment, provided by common infrastructure Collaboration Specifi c job defi nitions, diffi cult Self-organized collaborative mechanism interdepartmental collaboration, networks based on a platform, ineffi cient information sharing transparent and sharable, collaborative competition, globally optimized to work across the network, iterative and evolving Value Profi t driven Innovation driven, focused on orientation growth Risk perception Focused on minimizing risks, Focused on transparency, avoiding mistakes; information and effi ciency, and freedom of data strictly controlled, not shared innovations; trial-and-error approaches; inability to innovate is the biggest risk 10 251858_08_157-182_r2.indd 181 18/06/18 10:33 AM TABLE A- 1 Alibaba’s timeline Chinese internet Year Milestone users (millions) 1999 Alibaba.com founded 9 2003 Taobao launched 80 2004 Wangwang and Alipay launched 94 2007 Alimama launched; Alibaba.com lists in Hong Kong 210 2008 Taobao Mall launched (name later changed to Tmall) 298 2009 Alibaba Cloud founded 384 2010 AliExpress launched 457 2013 Cainiao Network and Small and Micro Financial Servic- 618 es Group (later Ant Financial) set up 2014 Alibaba goes public in the United States 649 11 251858_99a_195-208_r1.indd 197 18/06/18 10:54 AM FIGURE C-1 Strategic positioning of businesses Smart ecosystems Data intelligence Network coordination 12 251858_99c_249-262_r2.indd 256 18/06/18 11:05 AM.
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