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Alibaba and the Chinese dream

| Aditya Sehgal

2014-09-10 at 22.49.15

With the Alibaba IPO, there has been an explosion of interest in the company.

Speculation has reached fever pitch in the media – ‘There will be a battle of dominance between Amazon and Alibaba for the global e-commerce market’; ‘With $160 Bn in valuation at IPO, Alibaba may, at some point, challenge Apple as the most valuable company in the world’; ‘Alibaba is just another Chinese copycat – when it meets ‘real’ competition as it expands globally, it will fail’.

There is a desire to understand more about Alibaba and its business model.

Is it really bigger than Amazon and eBay put together on GMV (Gross merchandise value) ?
How is it so profitable when Amazon makes so little money ?
How did Taobao become the second largest ‘retailer’ in the world so quickly, just in China ?
When will Taobao overtake Walmart globally on GMV ?
Is Taobao like eBay or Amazon, is Alipay anything like Paypal, What is Taobao and Tmall ?
Is Alibaba a China focused operation, or does it have its sights wider ?
Why is Alibaba making investments/ acquisitions/partnerships in the video space (Youku/Tudou) and in social (Sina Weibo) ?
Whats behind the spate of global acquisitions ?
Why has Jack Ma stepped down as CEO ?
Why is he investing in logistics chains and brick and mortar businesses in China ?

In this post, I am not going to address any of these questions. Enough has been written about these issues and I attach some links at the bottom of this post for those who are interested to read more.

I will focus instead on the core philosophy behind Alibaba and what has most fascinated me about Alibaba – its power and mission to harness the Chinese dream, and thereby change the world.

One of my core learnings in 6+years working in China is that, if you want to have sustainable success, it is critical to build true partnerships and structure your business for success. This means that you create a way for your partners to make money, but you tie in a mechanism so that as they make money, you make money as well. Once you have done this, to scale your business, all you need to do is find more partners, and focus all your efforts into helping them make money, secure in the knowledge that you end up driving your own business as well !

This is the core of Alibaba’s philosophy and the key driver of its success.
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Jack Ma built “a company that can serve millions of small businesses”. Alibaba’s mission is “to make it easy to do business anywhere“. Jack Ma says “At Alibaba, we fight for the little guy – our role is simple – through our ecosystem we help merchants and businesses find each other to conduct business – on their terms. We help merchants to grow, create jobs and open new markets in ways that were never before possible“.

Alibaba/Taobao has lived this philosophy for 15 years. To illustrate how successful they have been, consider that there are now more stores on Taobao (6 Million) than in the real world in all China (4 Million)!!

When comparing Alibaba with Amazon or any other western commerce business the core difference is the philosophy.
Alibaba ‘serves’ ‘small businesses and entrepreneurs’, it does not ‘sell to consumers’.
Alibaba ‘provides an ecosystem’, it does not see itself as a retailer.
Alibaba ‘fights for the little guy’, it is not a mechanism for big companies to sell to small consumers.

Alibaba is not about the short term. Jack Ma said “We want to be a company that last 102 years. We have 87 years to go“. With this scale of vision and the mindset to emancipate millions, Alibaba has the potential to change the world, not just more than any retailer, but perhaps more than any other company.

This difference in philosophy explains why Alibaba’s revenue model is so unique and why their business model is more virtuous. It explains their focus on enabling payment solutions and faster logistics. At heart Alibaba is a company that serves and hence, their focus is on things that can improve their service KPIs.

It explains why they have every chance of becoming the dominant retail platform in the world of tomorrow – their competitors can compete with other companies, but how can anyone compete with the focused, harnessed, entrepreneurial drive of an entire nation of 1.3 billion people ?

While Amazon and other companies have now got a significant proportion of their business going through a ‘marketplace’, unlike Alibaba, their aim is to benefit the end consumer through lower prices, and if their suppliers get squeezed, so be it.

For those who doubt Alibaba’s ability to win outside China, they should consider that Alibaba is likely to apply the same enabling philosophy wherever they go. Jack Ma says “We have become a household name in China and soon we will be ready for the world to know us.”

In India – a country with 4 Million retailers, Alibaba’s system be an inclusive way to connect them to the global marketplace, without the loss of jobs that organised retail could create.

Alibaba has the potential to create an Indian dream, an African dream, A European dream – where ordinary people could be given a platform to become entrepreneurs, and drag Alibaba along with them on the road to riches. The desire to be rich and successful is universal, and Alibaba’s philosophy can find traction everywhere.

In 1992, Deng Xiaoping encapsulated the Chinese dream when he said “to be rich is glorious“. The Chinese are a people with tremendous work ethic and a huge entrepreneurial drive. China, since it started opening up in 1979, created an environment which allowed this ‘Chinese dream’ to take root. While the 1900’s were driven by the American dream, there is every likelihood that the 2000’s will be driven by the power of the Chinese dream.

Alibaba is at the fulcrum of the Chinese dream. What’s more, Alibaba could be poised to ignite the Indian dream, the ASEAN dream and the African dream as well. In so doing, Alibaba could become a force for good – for positive change and the economic democratisation of the world order.

Jack Ma said “today is difficult, tomorrow is even more difficult, but the day after tomorrow is beautiful“. His dream for the day after tomorrow could just end up changing the world as we know it.

Jack Ma explains his philosophy in this video which was uploaded to youku.com

For more on Alibaba, click the links below :
https://www.linkedin.com/pulse/article/20140908065624-13518874-who-s-on-warpath-to-overtake-apple-as-the-world-s-most-valuable-company?trk=prof-post
https://www.linkedin.com/pulse/article/20140610130310-8549453-alibaba-rise-crocodile-in-the-yangtze?trkInfo=VSRPsearchId%3A91382241410365998607%2CVSRPtargetId%3A5882109807384629248%2CVSRPcmpt%3Aprimary&trk=vsrp_influencer_content_res_name
https://www.linkedin.com/pulse/article/20140509180346-8183750-alibaba-a-fruity-perspective?trkInfo=VSRPsearchId%3A91382241410365955747%2CVSRPtargetId%3A5870593710290399232%2CVSRPcmpt%3Aprimary&trk=vsrp_influencer_content_res_name
https://www.linkedin.com/pulse/article/20140909000839-115522836-the-alluring-tale-of-alibaba?trkInfo=VSRPsearchId%3A91382241410365955747%2CVSRPtargetId%3A5914880539386458112%2CVSRPcmpt%3Aprimary&trk=vsrp_influencer_content_res_name
https://www.linkedin.com/pulse/article/20140808235938-174887856-alibaba-is-here-to-change-logistics?trkInfo=VSRPsearchId%3A91382241410365998607%2CVSRPtargetId%3A5903660507373518848%2CVSRPcmpt%3Aprimary&trk=vsrp_influencer_content_res_name
https://www.linkedin.com/pulse/article/20140611105836-107304053-lessons-learnt-from-alibaba-and-jack-ma?trkInfo=VSRPsearchId%3A91382241410366018255%2CVSRPtargetId%3A5882438004588429312%2CVSRPcmpt%3Aprimary&trk=vsrp_influencer_content_res_name

My seven lenses for solving problems

| Aditya Sehgal

Six years ago, as a newcomer to China, I struggled to understand the culture. Very often, I needed to find non obvious solutions to non obvious problems.

Over time, I was fortunate to work with many Chinese friends and colleagues who widened my perspective. They taught me there are many hidden helpers to help solve my problems. This led me to develop one of my problem solving systems – my seven lenses for solving problems.

Put simply, the lenses are a bit like Edward De Bono’s thinking hats.

When I have a difficult problem to solve, before applying the lenses the first step is to understand what the problem really is. Almost every time, this simple step results in changing the problem definition – solving a very different problem than what I started with.

Once I have identified what is the ‘non obvious problem’, its time to find the ‘non obvious solution’.

I close my eyes, and with my minds eye, I apply all seven lenses, first one by one, and then in combinations to the problem till I find possible solutions to further explore and polish.

My most productive Lenses are :

1. The Partnership Lens

Is there a partner who can help ? Whose interests can be served by solving this problem ? How can I partner with them and create a win-win situation.

2. The Technology Lens

Can I apply technology to solve this problem ? Can it be automated ? Can it be turned into a ‘machine solution’ by being outsourced to someone who can solve it better ? Can a computer solve it faster/better/cheaper/easier than I can ? Is there a way to program a solution so it becomes repeatable ?

3. The Mobile/Context Lens

Does the solution lie in context/location ? Is it about where I am or what else I am doing at the moment ? Can my smartphone help me solve it with any of its capabilities ?

4. The Question Lens

Very useful when I am trying to get/negotiate something from someone. If the answer to my question is ‘No’, how can I change my question so that the answer is ‘Yes’ ? Can it be a series of questions which lead to ‘Yes’ answers and eventually to a ‘Yes’ answer to my question ?

5. The Government Lens

How can the government help me ? Is what I am doing aligned with the aims of the country ? Is it furthering Civic interest ? If it is in line with where the Government wants to go, there is usually a massive tailwind. If it is not in line, can I nudge my problem so my solution coincides with a Government focus ?

6. The Future Lens

What will be the answer to my question 2 years from now ? 10 years ? 50 years ? 100 years ago ? Do any of these answers inspire me to think how I can a) accelerate a desirable future b) bring back a desirable past ?

7. The Speed Lens

How would the solution look like if I was to do it in half the time ? 10 times faster ? 100 times faster ? How could I do it in 1 second ? What would I add to the solution if I had a year to fix it ? What if I had a century ??

Combination lenses

What if I combined the lenses in various orders ? I could have 21 possible double lens combinations (eg. speed + govt, mobile + partnership), 15 triple lens combinations, 4 quadruple lens combinations, 3 5 lens combinations, 2 6 lens combinations and 1 7 lens combinations. [Though I struggle to conceptualise any more than 3-4 lens combinations at a time]

Of course, there can be many more lenses ! This is not a MECE list (Mutually Exclusive; Collectively Exhaustive). Feel free to add on what works for you.

I suspect that in different countries you may want to add or subtract lenses from your camera. In India, a Jugaad lens works great – ‘What is the Jugaad solution’.

Of course, a lens that often is very valuable is a ‘Google lens’ – sometimes its best to use this even before the other 7 lenses. When you have a problem to solve, just google it to begin – you may be surprised !

I would love to hear about the lenses you would like to add to the toolkit ? Is there a problem solving approach or lens that works well for you ? Please do share in comments below, by communicating with me or by connecting on my Linked in account cn.linkedin.com/pub/aditya-sehgal/3/88/3a8/

Photo credit : Photojojo.com who sell Holga lenses with the multiple lens selector –  for photography, not problem solving !

Colliding trends create mountains of opportunity

| Aditya Sehgal

There are three ways that mountains grow

1. Through an igneous, explosive process, which is sudden and short lived

2. Through a sedimentary process which is slow and takes long to achieve progress

3. The truly giant mountains are created by a clash of tectonic plates in addition to the above.

We spend a lot of time looking at trends to understand how these impact our lives and businesses. To my mind, a better way of looking for opportunities coming out of trends is to search for discontinuities and consumer needs at the confluence of two or more trends.

Like the grinding together of tectonic plates cause monster mountains to rise,  it is the clash of two (or more) trends that unlocks monster potential.

Look at two titanic trends – the ageing population and the progression of technology.  The interaction between these is already creating multiple new opportunities and business models.

As society ages, more people come into early middle age. With this comes increased health and fitness consciousness, and a new opportunity, one example of which is the new wearables industry that addresses this demographic.

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Wearables like the Jawbone®, Nike® band and the Fitbit® have multiple sensors and link to apps running on smartphones. They measure and record activity, exercise, sleep (quantity and quality), calories, nutrition and interface with devices like the withings scale to automatically overlay weight, body mass index, body composition data, blood pressure and mood. This links to back end data systems and social networks which can help us feel better and share this well being or compete with friends.

From personal experience I can say that these can change deep set habits relating to exercise, sleep and eating and are already having significant disruptive downstream influence on other businesses.  [Imagine what Pepsi® would pay to know precisely when and where women, ages 25-35, had the lowest energy levels and highest sugar cravings? – source : http://jawbonestrategy.wordpress.com/valuation/]

For societies like Japan, the ‘silver generation’ is driving a super-fast growth pocket in a slow growth economy. Older people have significantly higher disposable incomes than the average – fuelled by years of saving  and  smaller live-in families/fewer responsibilities.

Today Japan has a median age of 46 years compared to 36 in China and 27 in India. What is happening in Japan today will happen in China in the next decade and in India the decade after. Given that it takes us 5-10 years to build capabilities to ride the wave of a new business model, companies in China should already be addressing these discontinuities to ensure continuing growth for 2020 and beyond.

Let’s add a third trend into the mix – smaller, nuclear families with ageing parents living far away.

What would be the needs of these people which could be addressed through technology ? How could this impact their health and mental peace and that of their loved ones ?

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There are multiple, massive opportunities for new business models that exist in just this one crack between three trends. A few examples :

1. Companionship : apps and services that allow like minded elders to self organise and congregate. This could range from dating apps for elder singles to real (and virtual) chess and bridge clubs to online spiritual services.

2. Family : each grandparent could have a ‘one button’ video link to their grandchildren and children – the grandchildren could grow up listening to their grandparents stories and imbibe their values. The grandparents could be part of the grandchildren’s lives – even from afar.

3. Security : One touch SOS services for emergencies – be it medical or financial or emotional : someone to help at the end of a button.

4. Health : Wearables for the elderly. These will monitor key parameters like sleep, respiration, pulse, temperature, blood pressure, movement, perhaps blood sugar levels. These can prompt for medication, and can keep concerned family members aware of their loved one’s. Where needed they will be able to call local medical aid automatically. They will maintain a full medical record for the doctor – medicine will be more preventative. In time, this device could also dispense medication.

5. Entertainment : Bots to aggregate relevant content. Since many elder people may not be very tech savvy, there will be much more work done on the interfaces for these bots and services to make them as close to automatic as possible

6. Accessibility : all of the above devices and services will be designed with accessibility at the core. Font sizes will be large and easily scalable, software will auto update with very little fuss, sound will be appropriate for those who have lost some hearing, typing will be forgiving of butterfingers, configuration will be simple, there will be less options, with bigger, bolder buttons.

Multiple trend thinking should be adopted to create bigger, more innovative and own able ideas. Strategists, marketers, designers and innovators should practise thinking about the opportunities at the cusp of multiple trends, rather than along a unidimensional trend.

Chinese Trains and Indian Cars

| Aditya Sehgal

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As an Indian who has worked in China for over five years, I am often asked about similarities and differences in managing business in the two countries.

In-spite of it’s extremely talented managers, why is India unable to match China ?

I believe part of the answer is that Chinese teams function like trains and Indian teams work like cars.

The train :
1. The train needs an engine. One engine can pull a long line of wagons – once coupled, there is very low resistance.
2. The train runs on a track – it’s course is predetermined.
3. The train turns slowly but surely. Too fast a turn can derail a train.
4. A train wreck is normally very serious

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The car/truck :
1. The car works best alone. Attaching other cars is not a good idea.
2. The car can turn much faster and more often than a train.
3. The car’s direction is decided by the driver, not by the road.

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In general, the train is the more efficient system – while each wagon may not be as mobile as a car or truck, the system collectively is much faster, can carry much more load and is more energy efficient. For the same load, it requires fewer drivers. On the other hand, it needs a powerful engine, good infrastructure, a good signalling system and more discipline. It is more expensive to set up, but easier to maintain.

The car is much more flexible – but it lacks pulling power. To illustrate the point, just imagine using a car as a train engine ! Even fast cars generally reach their destination slower than trains – this is because of the other cars they have to share the road with, and the resultant chaos.

For a train, only the driver needs to be alert, and sometimes the system can be automated and driver-less. For an equivalent population travelling by cars, hundreds of drivers need to be awake !

While the chances of a train accident are much lower than a car accident, the consequences are generally much worse – so the quality of the driver is much more important in the train.

To succeed in China, it helps to follow the ‘train’ mentality – strong leadership, personal ownership from the leader, a defined path, consistency in direction and outlook, slow and steady changes, collective success, strong infrastructure, focus on setting up systems and simplifying business so tasks are few and clear for each person.

Managers need to know which they are driving – a car or a train. They need to adjust their leadership style accordingly, else the journey may not be fast, efficient and accident free.