Strategy

Alibaba and the Future of Business

Lessons from China’s innovative digital giant

by

Ming Zeng

by

Ming Zeng

From the Magazine (September–October 2018) · Long read

Harry Campbell

Summary.

Alibaba is not a retailer in the traditional sense. It doesn’t source or keep stock, and logistics services are carried out by third-party providers. Instead, Alibaba is what you get if you take all the functions associated with retail and coordinate them online into a sprawling, data-driven network of sellers, marketers, service providers, logistics companies, and manufacturers. Indeed, Alibaba does what Amazon, eBay, PayPal, Google, FedEx, all of the wholesalers, and a good portion of manufacturers in the U.S. do, with a healthy helping of financial services for garnish.

Alibaba achieves this by leveraging the new technologies of network coordination and data intelligence. It harnesses the efforts of thousands of Chinese businesses to create an ecosystem that is faster, smarter, and more efficient than traditional business infrastructures.

This is an emerging business model that Ming Zeng, the chair of Alibaba’s Academic Council, calls smart business. Players in the ecosystem share data and apply machine-learning technology to identify and better fulfill consumer needs. This article provides a framework for transforming a company into a smart business.

Idea in Brief

A New Business Model

Alibaba is an example of tomorrow’s “smart business”: a tech-enabled platform that coordinates multiple business players in an ecosystem.

How It Works

Players in the ecosystem share data and apply machine-learning technology to identify and better fulfill consumer needs.

How to Build It

Automate decision making by:

• making sure every interaction yields as much data as possible

• ensuring that all business activities are mediated by software

• using APIs and other interface protocols to ensure smooth interaction among software systems

• applying machine learning to make sense of data in real time

Alibaba hit the headlines with the world’s biggest IPO in September 2014. Today, the company has a market cap among the global top 10, has surpassed Walmart in global sales, and has expanded into all the major markets in the world. Founder Jack Ma has become a household name.

A version of this article appeared in the September–October 2018 issue (pp.88–96) of Harvard Business Review.

Ming Zeng is the chairman of the Academic Council of the Alibaba Group, an e-commerce, retail, and technology conglomerate, based in Hangzhou, China, and the author of Smart Business: What Alibaba’s Success Reveals About the Future of Strategy (Harvard Business Review Press, September 2018). He is also the dean of Hupan School of Entrepreneurship, a private business school founded by Alibaba chairman Jack Ma and other leading Chinese entrepreneurs in Hangzhou.

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Alibaba and the Future of Business

Idea in Brief

A New Business Model

How It Works

How to Build It

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