Ming Zeng, chief strategy officer, Alibaba Group
To use data intelligence and operate as a smart business, you need a tight digital feedback loop between your firm and the customer. However, as pioneering firms have realized, and I have witnessed up close with many Chinese entrepreneurs, centering your business around direct interaction with your customers sets into motion a striking reorientation of all business activities. I call this change the customer-to-business (C2B) model. The C2B mindset turns the traditional business-to-consumer (B2C) concept of business on its head in profound ways
When business decisions are driven by machine learning through feedback loops, the firm’s actions are signally dictated by the customer. “Customer first” is no longer just a slogan, but the starting point of the business operation. The entire customer experience should operate on demand. But for the experience, including the products and services themselves, to be truly dictated by the customer, the company and the network in which it operates must be agile and responsive. In practice, every function in the business must work on demand.
Making any one function of the business operate on demand is difficult. How do you economically prepare for the potential span of demand? When a firm starts with any given activity, it has to subsequently retool every aspect of its operations, from branding to product design to manufacturing. Once processes are functionally independent but smoothly and automatically integrated, firms can then create products and services in concert with users, with key production and design decisions informed by this interaction. In doing so, the entire firm’s operating model runs on network coordination and data intelligence.
Completely retooling one’s entire business and making all functions coordinate dynamically is a daunting prospect for any company. Nevertheless, a C2B company has immense competitive advantage. Those who manage to start down this difficult path will find that their efficiency and responsiveness begin to increase exponentially, while cost does not. I cannot give a specific action plan for how to reorganize a firm, as the process differs greatly from industry to industry and even from firm to firm, but I can share some advice on the principles of C2B.
Principles Behind C2B
C2B already defines the operational mindset of most internet companies, which focus laser-like on the users and their experiences. Yet we may forget that the simplest and oldest version of the C2B model is “made to order.” Dell did it with computers more than thirty years ago. Moving this model to more industries was insurmountable until the internet provided the right infrastructure. C2B presages a future where an increasing number of products and services can be produced on demand at acceptable cost. Network coordination and data intelligence allow information and decisions to flow throughout the network simultaneously, coordinating every aspect of the business in real time and dramatically reducing the cost of coordination and transactions.
The C2B model means much more than selling customized products. It overhauls the very concept of business itself. Despite traditional companies’ slogans and sincere intentions of customer first, most such businesses are company first by design. Through various means of customer and market research, a company tries to guess what its customers need. It next comes up with a product and convinces customers, through advertising and marketing, that the product is what they want, and then pushes the merchandise through distribution channels. In this model, customers are passive. Now, businesses can and do truly respond to the customer.
I have watched emerging companies in rather traditional industries in China configuring themselves into C2B models over the past decade. Every industry and firm’s approach to C2B will differ, because every firm needs to ply different capabilities to cater to different customers. However, from my research and by observing how Alibaba operates under a C2B mindset, I can offer four general principles for implementing C2B-aligned operations.
Develop a Smart Network
C2B firms consistently use two familiar strategies: network coordination and data intelligence. For this reason, the C2B model is almost synonymous with smart business. In my strategic work at Alibaba, I often return to a paradoxical but profound insight. If you want to fulfill the needs of any one consumer, you need the capabilities to fulfill the needs of every consumer. Today’s consumers demand cost, speed, quality, and personalization—all at the same time. In previous formulations of business strategy, these goals were opposing and often mutually exclusive. Now, they are indispensable and reconcilable.
Only a network can dynamically adjust the supply and quality of service offerings by balancing load capacity globally. Linear supply chains cannot respond effectively to peaks and troughs of demand, much less to changing and complex consumer needs. To create a globally optimized network of productive capabilities that can adapt to any consumer requires network coordination, data intelligence, and no small measure of live data. Everyone in the network is a partner providing an on-demand service, linked by SaaS solutions delivered online and informed by data flowing through frictionless APIs. Your service is being requested when it is needed; it is not being managed through a prearranged order.
Instead of long-range planning, smart business reacts immediately to consumer needs in real time. As a result, previous questions of local tactics, such as branding, marketing, and design, now concern the entire supply chain and, indeed, the entire network and can be seen as a global strategy. Only such a comprehensive strategic mind- set will be sufficient for competition in the future.
Design the Right Internet Interface
C2B follows a pull logic rather than a push one. Because business operations and decisions grow out of interactions with customers, C2B firms must have an interface where customers can articulate their needs and responses. Internet-native companies intuitively understand this point and often design their products to reflect a C2B mindset. Google doesn’t push its service to you; it responds to your query in its minimalistic box. Adaptable products are ideal, because they also generate the feedback loops necessary for creating data intelligence, as discussed earlier.
Building an internet interface does not necessarily entail making your own customer-facing mobile application; businesses should choose the right online interface based on the touchpoints of interaction with their clients, and the devices they use. Using marketing to solicit consumer feedback at several key junctures can be helpful. From social media previews to flash sales to comments and pictures posted after a customer buys an item, consumers are constantly giving a brand their feedback. The value in establishing an effective medium for direct interaction with customers cannot be underestimated, even for companies in industries traditionally far from tech. Using the internet’s huge business advantage of simultaneously interacting with masses of people and getting their real-time feedback at very low cost is almost a no-brainer.
The internet interface provides often-overlooked but important benefits to firms in the upper reaches of the value chain. Manufacturing firms don’t have to bend over backward to establish contact with end users. Rather, they need to design interfaces with their partners so that feedback flows to those who need it, ideally in an automated fashion. These interfaces must be embedded in all the parties’ work-flows to ensure effective coordination. It aims to move further up the value chain to sourcing with its online quality-control platform for fabric.
Build a C2B Beachhead
Most C2B businesses evolve over time. The C2B model is a complicated coordination network. The good news is that once you build the first module and create a beachhead, its competitive advantage will create momentum to pull in all of the related functions. The firm will experience enormous pressure to reconfigure step after step of its value chain. .In a relatively short time, in business development terms, the network can grow to simultaneously coordinate marketing, product design, manufacturing, and sales. Building an entire network may seem overwhelming, but as soon as you begin directly interacting with customers online, the snowball will start rolling downhill, picking up more and more functions of the value network on its course. Go with the flow, or don’t start at all.
Utilize the Capabilities of Platform
Using three platforms can help you to stay agile and resource-light: social media marketing, e-commerce, and the growing networks of flexible manufacturers. The same strategy portends how other companies that create products or services should operate and structure themselves in the future. Without these platforms, you would have to find potential customers on your own. You would have to create e-commerce mechanisms for transactions, payment, and dispute resolution. And you would need to manage an enormous factory in-house. With these platforms, you can deliver affordable, high-quality products nimbly and adaptably.
Adapted from Smart Business: What Alibaba’s Success Reveals about the Future of Strategy by Ming Zeng. Copyright 2018 Harvard Business Review Publishing Corporation. All rights reserved.
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