On the 19th of September 2014, Alibaba went public and claimed the biggest IPO in history by raising $25 billion. Its founder, Jack Ma, is considered a rock star in Asia, but up until the IPO he was relatively unknown to the rest of the world. Even nowadays, people still know very little about him, his company and his philosophy.
Who is Jack Ma
Jack Ma was born in a poor family in Hangzhou, China. His youth was filled with bad grades and rejections by universities and employers. Today, he is the 33rd richest person in the world according to Forbes Billionaires list. Clearly he did something right: not giving up.
After previously failing 2 Internet businesses, Jack founded Alibaba in 1999, in his apartment together with 17 friends. Their belief was that the Internet would level the playing field by enabling small companies to use technology and innovation to grow and compete more effectively on a global scale.
Here is his original sales pitch in 1999 before his friends:
What is Alibaba
In 15 years time, Alibaba grew into the biggest marketplace in the world, with Jack as its visionary. He stepped down as CEO in 2013 under the motto: “The Internet belongs to young people”, but still steers the company strategy and is executive chairman.
To give you an idea of how big Alibaba is exactly; it has over 100M customers per day, 35K employees and it created 14M jobs in China either directly or indirectly. Check out this great page on the Wall Street Journal for more facts and statistics.
Along with its $25 billion IPO, you’d think Alibaba is constantly reeling in big contracts, but in reality it is entirely focused on small businesses. Over 10 million SME’s sell through its platform per year to be precise.
Alibaba’s vision is “To solve the challenges of small business in procurement, sales and marketing, management and financing through information technology.”
It is all about unburdening businesses from stuff like marketing and tools, so they can focus on what they do best.
Alibaba is not a Chinese Amazon or Wal-Mart
Amazon is a hypermarket with 155K employees, lots of warehouses, equipment and inventory, while Alibaba uses an entirely different business model: the virtual marketplace. It provides the platform where people do business with each other on a global scale and takes a small percentage of the transactions on it. Because of that, Alibaba can keep its costs very low.
Disruption vs. opportunity
Alibaba has become the gatekeeper of e-commerce, which gives it power over unimaginable amounts of data and allows it to completely dominate the market. So why would companies join it? Isn’t that scary?
The reason is simple: the business model is already as lightweight as possible. The costs to start replacing businesses on its platform would never be worth the return. Alibaba needs its customers to provide the products and services and is going to do whatever it takes to keep them happy and attract them. This means very little risk of by-passing for companies that join the platform, so the benefits vastly outweigh the risk.
Alibaba’s business model is one of the 10 Hyper Disruptive Business Models we described before. We’ll definitely be hearing more from Jack and Alibaba over the coming years as one of the biggest disruptors for retail.
Keep a close watch on players like Alibaba and understand how to deal with them. Our book on Digital Transformation can help you to get started.
Here are some great stories by this charismatic and witty storyteller Jack Ma, well worth the watch: