Overview
Jack Ma put customers first and leveraged new technology to build Alibaba into a world-class company. Follow his example to thrive in the internet era.
So what?
The business strategy that made Alibaba successful is different from a successful business model of the last century. Success relies on customer satisfaction, new technology, experimentation, and data analysis.
Introduction:
Apple started in a garage. Facebook started in a dorm room. And Alibaba began in Jack Ma’s shared apartment in Hangzhou, a city that had no internet connection at the time.
In the 22 years since its founding in 1999, Alibaba has become one of the world’s most valuable companies, currently worth 400 billion dollars. What’s the secret?
Jack Ma operated Alibaba with a handful of key principles:
- Customer-first thinking
- Embracing digital network technology
- Constant experimentation with new ideas
- Smart use of large amounts of data
The value of customer-first thinking
All revenue comes from your customers. It should be a no-brainer that customers are important, but not all businesses recognize this. Popular brands like Amazon and Apple are also highly customer-centric. The design of their products entices customers to return again and again. This makes recurring revenue a near guarantee.
A positive customer experience can lead to:
- returning customers
- positive word of mouth exposure
- streamlined conversions
Customer experience lies at the heart of everything that Alibaba does.
Alibaba has branched out into dozens of industries. Much of its efforts can be understood by asking the question: what else do their customers do? If Alibaba’a customers used a product or service, then Alibaba sought to supply it.
To that end, Alibaba now offers goods and services in areas as diverse as:
- shopping
- utilities payments
- car hailing
- food delivery
- air and train tickets
- loans
- bike rentals
In every case, Alibaba’s north star was the needs of its customers. Ma sums up this strategy in a talk at the World Economic Forum: “You’re supposed to spend money on your people!”
Embracing digital technology
Alibaba succeeded because it embraced technology when no one else would. When it was launched, Jack Ma’s hometown of Hangzhou didn’t have a single internet connection. He had to convince business leaders in his community to help set up an internet connection to help sell the company’s products.
Since then, Alibaba has rapidly adopted new technologies as soon as they become available. The company pioneered the use of QR codes and contactless payment systems, now ubiquitous across China. They combined that same technology with the internet of things to make QR code-sensitive bike locks for rental bikes. And they used GPS to create ride-hailing services.
In every case, the question was: how can we use this new technology to help customers? And in every case, Alibaba found a need and filled it.
Constant experimentation with new ideas
Jack Ma had trouble pitching to many early investors. He did not have a single, clear picture of Alibaba’s business model. Like a living thing, it has branched out and evolved in many different ways to meet customer needs.
This ceaseless branching and evolving has driven Alibaba’s success for decades. Not every project of the company has worked. But by trying many new things, quite a few worked.
Alibaba is not a company that provides service X or good Y. It is an organization that seeks to apply new technologies to improve the lives of its customers. This strategy works incredibly well in the new, unpredictable era of the internet. Similar strategies drive American tech companies, like Facebook, Amazon, Apple, and Google. These companies are driven more by creative innovation than by efficient production.
While efficient production was the name of the game for last-century business, creative innovation is the winner today. Companies that innovate to meet the needs of their customers will succeed.
Smart use of large amounts of data
Home to over 1.5 billion people, China is the world’s most populous country. Most Chinese adults use a smartphone regularly. That adds up to an incredible amount of data produced every year. This is a major reason why China’s big data and machine learning technologies are some of the most advanced in the world.
Alibaba’s gamble on multiple industries really paid off once they found out how to make data useful. By leveraging all the data at its disposal, the company can make smart decisions that less versatile companies cannot make.
Alibaba’s financial affiliate Ant makes microloans at smaller sizes than traditional banks. They can do this because their wealth of data allows them to make good guesses as to who will pay back their loans and who won’t. Remarkably, only about 1% of these microloans default, compared to about 4% of traditional loans.
Alibaba also uses its data to intelligently promote goods and services on Taobao, its main eCommerce app. Machine learning algorithms make reasonable guesses as to what products a consumer will buy based on everything else known about them. They even developed sophisticated chatbots to help handle customer inquiries.
How to build your company into a $400 billion brand the Jack Ma way
The real key is to focus on what your customers want. If you can fulfill a need, they will pay for you to take care of it. Then you can leverage the data from that transaction to help make more transactions.
A full plan might look something like this:
- Identify what people want to buy
- Use new technologies to sell
- Experiment with as many different ideas as possible
- Leverage the data to reinforce your existing business
Of course, Jack Ma is an exceptional man who saw the value of the internet at precisely the right time. But if you follow these steps, you may find yourself reaping a similar kind of success.
To figure out how your business can leverage the numbers to grow to a $400 billion brand, download our Marketing ROI Spreadsheet.
