[Book review & summary] Smart Business: What Alibaba’s success reveals about the future of strategy (Ming Zeng)
So compelling, thought-provoking, and helpful to me, a young professional in Ecommerce. It is recommended as the first book to read by my line manager in my 1st week at Shopee. The book, written by Ming Zheng- Alibaba’s Chief Strategy Officer, gave a comprehensive view into Taobao’s successful business model and how other businesses could learn from that to thrive in this era. It could be a little bit too “technical” and “dry” to people with non-Ecommerce background.
“Smart Business” is divided into 3 parts: the definition of “smart business” model, strategic principles in executing that models and the implications on organizations. I believe that every audience need to read from the first page till the end to understand the concept and enjoy fully all the stories of successful players in Taobao’s ecosystem. In this review, I will mention only three most helpful points to me:
· The concept of network coordination and data intelligence through Taobao’s model
· Customer-to-Business model
· Strategic positions in platform strategies
Network Coordination and Data Intelligence
· Network coordination: “autonomous coordination with almost unlimited scale and a boundless number of partners over the internet.” As a typical example, Taobao does not hold any inventory, but it coordinates millions of parties, from sellers, transaction processing, distribution, designers, models… to sell a variety of products, provide innovative marketing strategies and deliver the best shopping experience to consumer.
· Data intelligence: “business capability of effectively iterating products and services according to consumer activity and response”. By investing resource into this area, Taobao was able to make every business activity in its platform smarter, especially in data processing (In 11.11 2017, Taobao facilitated 325,000 orders and 256,000 payments every second) and personalized user experience (Ex: every user would see a personalized landing page, product collection,… in the app)
Taobao’s model is built year by year with network coordination and data intelligence, to the level that human effort only cannot reach, then that’s it is called Smart Business.
Customer-to-Business model
Network Coordination and Data Intelligence is the base for businesses to transform its traditional model such as B2C or B2B into the Customer-to-Business model. This is illustrated in the book by the story of Runan, a web-celeb business incubator. It has coordinated firms to produce trendy collection based on customer demands. The simple process could be described as below:
· First, after having a draft idea, Runan makes some samples, then let the KOLs to wear and show them to social media (Weibo) to get customer reactions and pre-order.
· Next, the data team measures all the reactions, shares, comments… of the KOL’s fan to decide on which collection to launch and how much stock they need to produce
· Finally, they put the design into their B2B platform for lots of manufacturers and deliver partner around China to pitch for production capacity, then pick 3–5 among them to produce and deliver. Clothes made in 3–7 days, compared to the industry-standard time frames of 20 days.
All the stages of this process move through a system which is visible from desktop or mobile interfaces. Thus, every department could coordinate better. For example, marketing teams can supervise social media content when they know exactly how much stock is available and how long it takes to produce a new lot of clothes and ship them. With this model, “Customer first” is no longer a slogan, but the starting point of business operation and the entire customer experience will operate on demand.
Strategic positions in platform strategies
Traditional businesses choose their positioning as “cost leadership, differentiation or niche” as in the textbook of Michael Porter. Smart Business competes by defining and developing their roles in the ecosystem. This table from the book summarizes all the necessary contents in this chapter
For anyone starting to explore Ecommerce, I highly recommended this book. It would help you understand from the smallest thing like the difference between Alibaba and Amazon, to a larger view on how other Ecommerce platform in SEA could become in the future.
Here is the link to buy the book
