Smart Business: What Alibaba's Success Reveals about the Future of Strategy Hardcover – September 4, 2018

It’s a really good book about Alibaba’s rise and interesting overview about the Chinese e-commerce situation and its turbulent development.

This Harvard Business School book will make you wealthy !!! Put $20,000 in BABA now and maybe end up with $20 million in 20 years !!!

Smart Business digs down into the way Alibaba thinks and executes its businesses. Several ideas are very eye opening and give us the idea of how things will change.

Amazing company, great book, incredible simplicity: points, lines and plane; network coordination; data intelligence.

Ming Zeng received a Ph.D. in international business and strategy at the University of Illinois. His first role was Assistant Professor at INSEAD, one of Europe’s top business schools. China’s technology company Alibaba’s founder Jack Ma invited Ming to become Chief Strategy Officer of the firm. Ming Zeng thus has solid footing in Western and Chinese ways of doing business.Zeng's book SMART BUSINESS (2018) has the following objective:“I do not want to increase Western apprehension about China, especially when so much anxiety is already unwarranted. Instead I want to shine a light on China’s extremely relevant and enlightening experience. “B:B;B:C; and C:BMost Western leaders understand the difference between a Business-to-Business (B:B) revenue model versus a Business-to-Consumer (B:C) model.The real world is more complex. For example, Is health care delivery in the United States B:C or B:B? The answer, of course, is “Yes.”Ming introduces us to a third business model. He calls it Customer-to-Business or C:B. DELL Computer had an early version of C:B:Thirty years ago a customer could go to dell.com and select the specific components she wanted in her next personal computer. She designed the computer she wanted to purchase form a list of online specifications.Once the “Send” button was pressed a complex information system went to work to insure supplies were ordered, manufacturing time was scheduled, delivery systems established, and payments received.Ming calls this C:B because the customer was the prime mover. Each DELL PC was made to order and yet it was also a mass production system.In this early version of C:B, DELL owned or tried to own as many of the key components of the production-delivery system as possible. Amazon is a modern U.S. version of the C:B model. The customer is the prime mover. Every order is unique and yet it is a mass production. Amazon seeks to own as many of the key components of the delivery-production system as possible or wants customers to work through Amazon.A Modern Chinese version of C:B:Twenty-five-year-old entrepreneur Zhang Linchao is the face of China’s online clothing brand, LIN Edition. She is a social media influencer, a model, and a fashion designer.At 3:00PM on a Spring day, Zhang’s company placed fifteen new clothing pieces designed by her on sale. Customers have seen previews of today’s sale on social media.By 3:45PM, 10,000 items were sold at an average price of $US150 per order.Like DELL, each order will go through a complex supply chain to ensure that customers receive the item specified. Each order is unique to the customer and yet it also is mass produced.Unlike DELL or AMAZON, Zhang's company does not own the supply chain or even control it.Zhang provides the creativity and the social media presence.In the first four months of 2015 her company earned U.S. $11 Million in sales with a profit margin of 30%.Alibaba provided Zhang with the the front-end customer facing system and then coordinated all the order information to a network of small businesses manufacturing companies and delivery systems.Unlike Dell or Amazon, Zhang does not control the delivery system. Alibaba does not control the system. Everything works through information sharing and social coordination.How has this C:B system worked for Alibaba?Alibaba is the largest retail commerce company in the world. More than ten million merchants run their businesses on Alibaba’s platforms and most of these operations are small. Alibaba connects these small businesses to a network of four hundred million active buyers. Each year, Alibaba’s Chinese retail marketplace generates gross merchandise volume of more than U.S.$0.5 trillion.This C:B model is a network of buyers, sellers, and service providers coming together and coordinating with each other through real-time data. The Alibaba model is all about using machine-learning and social networking to achieve scale and to manage complexity in a C:B world.This is a different model from the U.S.-centered framework. That model views scaling-up through command/control of as many components of the customer delivery system as possible.The author states:“Alibaba does not by any means have everything figured out. Its notions of strategy and organization have diverged dramatically from traditional models and are producing previously unthinkable levels of growth. I have written this book to summarize the lessons we have learned at Alibaba and to guide businesses around the world through the new strategic landscape of smart businesses.”

Not a big fan of this book. It’s seems like a synthesis of some of the common best practices for technology businesses wrapped as a big case study and delivered as a “strategic framework.”I could be a bit biased as I work for one of the companies mentioned in the book and I’ve also been steeped in many of these concepts for sometime. If you’ve read anything about big data, machine learning, and platform/multi-sided businesses, you’ll probably only get a summarization from this book. For me, the best thing I received were some of the case studies and the appendices.The author also uses new names to define old terms. For example, he uses C2B to describe what most would know as the pull model. Later in the book he actually refers to it as the pull model. There are a few new ideas I’ve been able to garner from this book, but at the end of the day this is a book pushing Alibaba group of companies as innovative smart businesses. Kudos.

In a previously published book, Dragons at Your Door: How Chinese Cost Innovation Is Disrupting Global Competition (2007), Ming Zeng and Peter Williamson explain how and why managers will need to go beyond merely equating innovation with providing more functionality and greater sophistication, and start creating business models aimed to deliver high technology at low cost, and variety and customisation without a hefty price premium, and to unlock latent demand by offering the kind of value for money that turns today’s cosy niche segment into tomorrow’s mass markets.In Smart Business, Zeng shifts his attention to lessons to be learned from Akibaba's success in terms of the "three faces" of cost innovation: how offering high technology at low cost, a near-impossible range of choice, and "speciality products" at volume prices have created impressive inroads to markets long assumed impenetrable. He carefully organizes valuable information, insights, and counsel within three Parts. First, he introduces what he characterizes as the two core pillars of smart companies: "Network coordination enables large-scale business networks, while data intelligence ensures efficient operations and decisions across the network." He describes in detail the transformation of the business landscape "through the duel forces of network coordination and data intelligence...The transformation of the business landscape is best understood -- and achieved -- in terms of network coordination and data intelligence."Then in Part 2, Zeng lays out the principles and practices as well as strategic implications of the process by which companies become smart businesses. "For smart businesses, the game is now one of coordination among interconnected players, where data intelligence makes all the players smarter...In Part 3, I turn to organizational implications of the new strategic environment...operating as a smart business requires a different process of formulating and executing strategy. These changes in turn mandate a different kind of organization, with different processes, systems, and roles for managers."I highly recommend Smart Business as well as Dragons at Your Door.