What Alibaba can teach us about digital transformation
Alibaba Group has more businesses than you can count. It's a massive ecommerce platform. It's a cloud infrastructure player. Alibaba also has payment and financial services, logistics, marketing services and even digital media.
What's the glue? Data.
Daniel Zhang, CEO of Alibaba, referred to Alibaba as a data manufacturing company. He outlined what he called the Alibaba economy and said the glue between all of its businesses is "consumer insight and data."
"Alibaba is an economy and if you look at the components of this economy you see a clear synergy between each business," said Zhang. "The common thing is that we use data to drive the business. Alibaba is a data company."
According to Zhang, Alibaba absorbs data, manufactures more, and then delivers insights for customers, buyers, sellers, and partners.
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Obviously, this approach to data and the Alibaba stack is working well. Alibaba CFO Maggie Wu said revenue is expected to grow between 45 percent and 48 percent in fiscal 2018. The outlook was cheered at Alibaba's investor meeting in Hangzhou as well as on Wall Street.
Alibaba's annual investor meeting is worth a look for any company that's trying to become a data-first company. If you boil down all of banter about digital transformation and its components -- cloud, artificial intelligence, Internet of Things, analytics, etc., -- the technology and business shift boils down to one word: Data.
Use data well and you thrive. Data is your currency and the fuel of your business. Here's a look at a few lessons from Alibaba's strategy session:
Think of your business and customer base as an economy. Alibaba's economy analogy works because it's a commerce player. However, the guiding vision is to make it easier to do vision. The vision, coupled with the monetization model, can connect what appears to be a series of portfolio businesses. "We are crossing the entire customer lifecycle," said Zhang.
These two slides illustrate the Alibaba economy:
Move up the stack. Alibaba has a strong cloud infrastructure business following the commerce to cloud services path pioneered by Amazon. What makes Alibaba a bit different is how quickly it is moving into software as a service. Alibaba will be providing everything from supply chain to marketing tools to customers. It's almost as if AWS merged with Salesforce, which then merged with Adobe, Microsoft, and SAP. For what it's worth, Alibaba will continue to invest heavily in its cloud business, which is close to break even.
One customer and multiple channels. Listening to Zhang outline Alibaba's move into media was interesting since the overall aim is to leverage China's growing middle class and help its customers conduct business offline and online. Zhang added that following customers across the lifecycle is all about data.
Continually invest, but don't do anything crazy. What's notable about Alibaba's investment plans is that there's nothing that's outright wacky. Alibaba isn't dabbling in autonomous vehicles or building drones or blimps to deliver internet access and entering health care. Your investments in new businesses should look similar.