NOTES
Introduction
1. Conversions from RMB to dollars in this book use a standardized rate of 6.5 RMB to 1 USD.
2. “Inside VISA,” https://usa.visa.com/dam/VCOM/download/corporate/media/visanet-technology/aboutvisafactsheet.pdf, accessed March 24, 2018.
3. Beginning in 2016, the popular business press seemed to wake up en masse (if maybe five years too late) to the idea that the Chinese technology sector can, in fact, innovate. For a small smattering of articles on the topic, see Paul Mozer, “China, Not Silicon Valley, Is Cutting Edge in Mobile Tech,” New York Times, August 2, 2016; Jonathan Woetzel et al., “China’s Digital Economy: A Leading Global Force,” McKinsey Global Institute, August 2017; Louise Lucas, “China vs. US: Who Is Copying Whom?” Financial Times, September 17, 2017; and Christina Larson, “From Imitation to Innovation: How China Became a Tech Superpower,” Wired, February 13, 2018.
4. Out of sixty-four companies, Alibaba was voted the top ten-year “buy-and-hold” company by clients and followers of CB Insight, an investment tools and research site. Alibaba captured 63 percent of the tally, beating out second-place finisher, Amazon. CB Insights, “What Is the Best Company to Invest In and Hold for Ten Years?” CB Insights, n.d., accessed March 10, 2018, www.cbinsights.com/research-company-investment-bracket.
5. Jack’s creativity with coming up with titles within Alibaba is an important part of our company’s culture. Zong canmouzhang literally translates to “general chief of staff,” and indeed, the word canmouzhang is used in the Chinese translation of the Pentagon’s “joint chiefs.” The reason why Jack did not directly dub me chief strategy officer is because, in his opinion, the chief executive officer must serve as the firm’s chief strategy officer.
6. Sun Tzu, The Art of War, trans. Lionel Giles (Blacksburg, VA: Thrifty Books, 2007).
7. The Chinese term wang hong is an abbreviation of wangluo hongren, literally “internet celebrity,” and is sometimes translated that way in the Western tech media. This book prefers the pithier translation “web celeb.” The term wang hong dates back to 2013, when social media influencers first emerged as a phenomenon on Weibo and other Chinese social media websites. Wang hong has since become a common moniker for young women who ply an image of stereotypical feminine beauty (often with the help of plastic surgery and photo editing software) in their quest for fame and fortune online. Not surprisingly, in common parlance, wang hong carries a slightly pejorative connotation. This book uses “web celeb” neutrally, restricting discussion to wang hong in China’s e-commerce space with a focus on the innovation of the underlying business model.
8. Taobao takes no cut from businesses like LIN Edition, which normally operate on Taobao as opposed to Tmall. Taobao’s revenue is based on an advertising model, where businesses can pay for placement and better-quality traffic within the marketplace. Tmall, Alibaba’s marketplace for branded merchants, operates on commission, generally taking a 0.4 to 5.0 percent commission on transactions depending on industry and product category. Foreign merchants operating through Tmall Global are further assessed a 1 percent transaction fee to cover the currency exchange handled through Alipay. For more information on Alibaba’s different platforms and businesses, see appendix A.
Chapter 1
1. The term network coordination is the translation of a similar Chinese term (wangluo xietong) that I coined for internal strategic work within Alibaba in June 2007. The concept draws on theories from classical economic disciplines such as industrial organization, as well as newer interdisciplinary fields such as network science. For more background on network-based business models, see David Easley and Jon Kleinberg, Networks, Crowds, and Markets: Reasoning About a Highly Connected World (Cambridge: Cambridge University Press, 2010).
2. The seminal paper on this structuring of businesses was Ronald H. Coase, “The Nature of the Firm,” Economica New Series, 4, no. 16 (1937): 386–405 (Blackwell Publishing). Subsequently, he published another very influential article: Ronald H. Coase, “The Problem of Social Cost,” Journal of Law and Economics 3 (October 1960): 1–44. Significant additional work in the field of organizational economics has been done by many economists, including the Nobel laureate Oliver E. Williamson.
3. The term data intelligence is the translation of a similar Chinese term (shuju zhineng) that I coined for internal strategic work within Alibaba in 2014. It describes a certain strategic approach to applying machine-learning technologies. As I will explain in chapter 3, unlike related terms such as machine intelligence, data science, and big data, data intelligence focuses more on the practical use of data and algorithms to produce adaptive business results. For good background on machine learning and data science, see Pedro Domingos, The Master Algorithm: How the Quest for the Ultimate Learning Machine Will Remake Our World (New York: Basic Books, 2015).
Chapter 2
1. For more background on the Chinese economy in 2003 and the rise of e-commerce, see Porter Erisman, Alibaba’s World: How a Remarkable Chinese Company Is Changing the Face of Global Business (New York: St. Martin’s Press, 2015).
2. The evolution of Taobao was a classic exercise in building a platform through network externalities, catering to both buyers and sellers as the two sides of the market built off one another. More sellers brought more buyers, bigger sellers needed more services, and so on. In economics, the spillover effects of an action are called “externalities.” These externalities are unrelated or are tangential to the goal of the action, and can be positive or negative. Alibaba’s experience has taught us that fostering and harnessing externalities is the key job of a platform business—see appendix C for more detail. In the case of Taobao’s incubation, these waves of externalities were very positive, successfully incubating the platform. These externalities even spilled over off the platform, as sellers created informal offline organizations to improve Taobao’s business environment.
3. The new focus within economics and management on platform strategy represents the rethinking of strategy in a network context. Alibaba operates at the forefront of these disciplines, and this book, especially chapter 6, reflects many ideas within that body of research. For an excellent treatment of the topic, see Geoffrey G. Parker, Marshall W. Van Alstyne, and Sangeet Paul Choudary, Platform Revolution: How Networked Markets Are Transforming the Economy and How to Make Them Work for You (New York: W. W. Norton & Company, 2016).
4. There are many origin stories for APIs, but an important contributor was computer scientist Roy Fielding (“Architectural Styles and the Design of Network-Based Software Architectures” [PhD diss., University of California, Irvine, 2000]) and his subsequent work.
5. In the field of sociology, these gaps are called “structural holes.” In his book Structural Holes: The Social Structure of Competition (Cambridge: Harvard University Press, 1995), Ronald S. Burt analyzes the importance of these gaps in competitive networks, and analyzes the strategies of entrepreneurs that occupy these holes to create new forms of value. At Taobao, we have found that the evolution of the network amounts to a continuous cycle of new structural holes emerging, after which the platform helps entrepreneurs to “plug” the holes effectively.
6. The Wikimedia Foundation (www.wikimediafoundation.org) has considerable information about Wikipedia, including its history and operations. The Linux Foundation (www.linuxfoundation.org) maintains the open-source Linux environment, chronicles the history of Linux, explains how the operating system works, and provides training. Netscape was sold to AOL in 1999. Netscape’s browser and other open-source tools were later spun off into a separate company, the Mozilla organization, in 1998, and then the Mozilla Foundation in 2003, when ties to AOL were cut. The foundation has a wholly owned subsidiary, the Mozilla Corporation. Information about the foundation and its other tools can be found at www.mozillafoundation.org.
Chapter 3
1. Data-mining startup Scrapehero indicates Amazon and Walmart offer over 500 million products and nearly 17 million products respectively. As nonofficial statistics, these should be understood as lower bounds. See “Number of Products sold on Amazon vs. Walmart—January 2017,” January 26, 2017, https://www.scrapehero.com/number-of-products-sold-on-amazon-vs-walmart-january-2017/; and “How Many Products Does Amazon Sell?—January 2018,” January 11, 2018, https://www.scrapehero.com/many-products-amazon-sell-january-2018/.
2. These applications of machine learning to business questions involve more technology and domain knowledge than computer science. Machine learning relies on recognizing hidden patterns through statistical analysis of big data, which is not always a cost-effective approach to solving business problems. Most modern machine-learning methods should have limited constraints on finding patterns: this lack of constraints allows computers to find deeply hidden patterns invisible to human experts. But the lack of constraints greatly enlarges the algorithm’s search space, making the computational and data costs of finding patterns very large.
Thus the technology industry’s most cutting-edge applications of data intelligence, including many mentioned in this chapter, do not just use machine learning. They combine computer science with two other academic disciplines: economics and optimization. Economics provides the basic mathematical models of human behavior, which greatly restricts the search space of hidden patterns. Machine-learning methods can then be used to obtain and clean the relevant data, and calculate the correct parameters for the model with respect to the business problem in question. Optimization methods (also called mathematical programming) can be applied to ensure that the models and methods of calculation are efficient given time and budgetary constraints. Entrepreneurs must remember that though the probabilistic methods of machine learning represent a revolutionary change to tactical decision making, machine learning in and of itself is not a golden bullet.
3. Data available from Amazon’s SEC filings, http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-sec&control_selectgroup=Annual%20Filings.
4. For background on Augury, see Klint Finley, “Augury’s Gadget Lets Machines Hear When They’re About to Die,” Wired, November 4, 2015, www.wired.com/2015/11/augury-lets-machines-hear-when-theyre-about-to-break-down; and Ethan Parker, “Augury Secures $17 Million Series B Funding Round to Power the Future of IIoT,” Business Wire, June 19, 2017, www.businesswire.com/news/home/20170619005161/en/Augury-Secures-17-Million-Series-Funding-Power.
5. For background on the state of financing for China’s private enterprises (nonlisted, nonstate), see Franklin Allen, Jun Qian, and Meijun Qian, “Law, Finance, and Economic Growth in China,” Journal of Financial Economics 77 (2005): 57–116; and Meghana Ayyagari, Asli Demirgüç-Kunt, and Vojislav Maksimovic, “Formal versus Informal Finance: Evidence from China,” Review of Financial Studies 23, no. 8 (2010): 3,048–3,097. Together, these papers indicate that financing methods other than banks could account for up to 80 percent of firm financing, of which a significant portion comes from informal or underground channels. Ayyagari et al. in particular suggest that China’s smallest firms rely the least on bank financing. I am grateful to Tang Ya, assistant professor of finance at Peking University, and PhD student Li Huixuan for their advice and for providing information on SME financing in China.
6. According to the State Council Leading Group Office of Poverty Alleviation and Development, China’s “key counties for poverty alleviation and development work” (previously, “counties suffering from extreme poverty”) are selected based on numbers of impoverished residents, income levels of farmer population, standard of living, and status of poverty alleviation and development work, with appropriate weight given to GDP and fiscal revenue per capita. Key counties are reassessed each decade: in both the periods from 2001–2010 and 2011–2020, 592 counties (out of nearly 3,000 county-level administrative units) across China qualified as key counties. (“Regulations on national poverty alleviation and development work regarding key counties,” February 23, 2010, http://www.cpad.gov.cn/art/2010/2/23/art_46_72441.html).
7. Information on MYbank comes from the bank’s website, mybank.cn, and from MYbank’s 2016 operating statement (in Chinese): MYbank, “2016 Annual Report,” May 2017, https://gw.alipayobjects.com/os/rmsportal/FzRFwOIBDOvSAeMuZewN.pdf.
8. These three building blocks—data, algorithms, and adaptable products—are my own formulation. For more background on machine learning and algorithms, see Pedro Domingos, The Master Algorithm: How the Quest for the Ultimate Learning Machine Will Remake Our World (New York: Basic Books, 2015); and John MacCormick, Nine Algorithms That Changed the Future: The Ingenious Ideas That Drive Today’s Computers (Princeton, NJ: Princeton University Press, 2011).
9. I first read about Shigeomi Koshimizu’s work in Victor Mayer-Schönberger and Kenneth Cukier, Big Data: A Revolution That Will Transform How We Live, Work, and Think (Boston: Houghton Mifflin Harcourt, 2013). Additional information is available at the website of the Advanced Institute of Industrial Technology (www.aait.ac.jp).
Chapter 4
1. For more background on the history of China’s bike-sharing boom, see “Chinese Startups Saddle Up for Bike-Sharing Battle,” Wall Street Journal, October 25, 2016, www.wsj.com/articles/chinese-startups-saddle-up-for-bike-sharing-battle-1477392508; Didi Kirsten Tatlow, “In Beijing, Two Wheels Are Only a Smartphone Away,” New York Times, March 19, 2017, www.nytimes.com/2017/03/19/world/asia/beijing-bike-sharing.html; and John Lipton, “Bike-Sharing Boom in China Pedals to New Heights,” CNBC, July 18, 2017, www.cnbc.com/2017/07/18/bike-sharing-boom-in-china-pedals-to-new-heights.html.
2. Marc Andreessen, “Why Software Is Eating the World,” Wall Street Journal, August 20, 2011, www.wsj.com/articles/SB10001424053111903480904576512250915629460.
3. This chapter’s discussion of softwaring and APIs brushes an enormous quantity of technical detail under the rug. Structuring a business’s technical stack to support on-demand operations (modularizing the core processes of the firm and ensuring that information flowing between them is coordinated through network calls as opposed to local calls) is a considerable technical challenge. I am not an engineer, and this is not a book for a technical audience, but readers interested in the technical aspects of softwaring business are encouraged to consult the ample literature on microservices and service-oriented architectures.
4. The story of Jeff Bezos’s decision to mandate internal API use has not been formally told publicly, though it is obliquely foreshadowed in Brad Stone, The Everything Store: Jeff Bezos and the Age of Amazon (New York: Little, Brown and Company 2013), 209–210. The account comes from former Amazon employee Steve Yegge’s rant about current employer Google, but Yegge’s comment has since been deleted after its original posting on Google+. (An archived version can be found at Rip Rowan, blog on Google+, October 12, 2011, https://plus.google.com/+RipRowan/posts/eVeouesvaVX.) For the pertinent excerpts, see Staci D. Kramer, “The Biggest Thing Amazon Got Right: The Platform,” GigaOm, October 12, 2011, https://gigaom.com/2011/10/12/419-the-biggest-thing-amazon-got-right-the-platform.
Chapter 5
1. C2B stands for Customer-to-Business, not Consumer-to-Business. Due to Alibaba’s background in the retail industry, I often use the term “consumer” in this and other chapters, but the reader should understand that a C2B mindset applies equally to all businesses, whether or not they are consumer facing. Any business that creates value in service of a client (i.e., all businesses) would benefit from this C2B theory. Indeed, this is why internet firms often prefer the neutral term “user,” which covers the full breadth of possible beneficiaries of the firm’s services. Readers less familiar with the lingo of the tech sector can view “customer,” “user,” and “client” as synonymous.
2. Nicole Shen, interview with author’s team, Hangzhou, China, July 14, 2016.
3. KPMG, “Seeking Customer Centricity: The Omni Business Model,” KPMG International, June 2016, https://home.kpmg.com/be/en/home/insights/2016/06/seeking-customer-centricity-the-omni-business-model.html.
4. Big-E’s strategy for establishing multiple touch points to gauge consumer demand and fine-tuning production schedules in an iterative fashion is an excellent example of the contributions of game theory frameworks to business operations. By turning a “single-shot game” (i.e., a business’s guess about consumer demand) into a “repeated game” (a series of incremental decisions), the production choices of the supplier are mathematically much more likely to converge on consumer demand. Game theory tells us that, in the presence of incomplete or hidden information (e.g., consumer demand), repeated games are more likely to result in an optimal outcome for all players involved.
5. For an English-language article on the company, see Jane Ho, “China’s Suit Maker Red Collar Blazes Trail for Mass Made-to-Measure,” Forbes, August 15, 2016, www.forbes.com/sites/janeho/2016/08/15/chinas-suit-maker-redcollar-blazes-trail-for-mass-made-to-measure/#2e87a4fb5470.
6. Information on Shangpin comes from Ming Zeng and Song Fei, “C2B: Hulianwang shidai de xin shangye moshi” (C2B: The new business model for an internet age), Harvard Business Review China, February 2012.
7. Figures come from “Shangpin Home Collection’s Sales in First Half of 2017 Break Two Billion, Net Profits 65.8701 Million RMB,” Yiou Wang, August 29, 2017, baijiahao.baidu.com/s?id=1577030207271487167; and “Custom Furniture C2B Exemplar Shangpin Home Collection’s Market Cap to Double by 2020,” ifenxi, from ifenxi.com/archives/1745.
Chapter 6
1. Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press), 1980.
2. In this discussion of point, line, and plane strategies, I often refer to “firms” as a basic analytical unit, with the implication that each firm needs to choose a singular strategic position. For smaller firms, this is a reasonable assumption, but speaking more rigorously, it is more accurate to say that these strategies apply on the level of an individual product or service. It is perfectly reasonable for a single firm to work on two different businesses, one of which operates like a line and one operates like a plane. (A simple example is Amazon. Products sourced and sold by the company reflect a line strategy, while the third-party Amazon Marketplace exhibits a plane strategy.) Alibaba is a rare example of a company for which a majority of our products and services are positioned as planes from day one.
3. Inman is a casual women’s apparel brand founded on Taobao in 2007. The brand’s natural colors and fabrics like cotton and linen very quickly gained a strong following among young urban women. In 2008, founder Fang Jianhua became one of the first merchants to open a flagship store on Tmall. Since then, Inman has become one of the most popular female apparel brands on Tmall, ranking in the top 10 as measured by GMV in multiple years of Singles Day sales. On Singles Day, 2017, Inman’s parent company, the Huimei Group, did 210 million RMB (US$33 million) in gross merchandise volume (GMV). As of November 2017, it has begun to expand from its online roots into offline retail, operating over four hundred brick-and-mortar retail stores in over 150 cities across China and planning to continue its expansion.
HSTYLE is a fast fashion online brand founded in 2006, operated by the Handu Group. Handu began as an online buyer for South Korean women’s apparel, and in 2008 incubated the brand HSTYLE. Handu then continued to evolve into an online brand operator, incubating and managing over seventy apparel brands, including womenswear, menswear, childrenswear, and sportswear. HSTYLE is one of the largest women’s apparel brands on Alibaba’s platforms. On Singles Day 2012 to 2017, the Handu Group ranked (respectively) 3rd, 2nd, 1st, 2nd, 4th, and 5th in the women’s apparel category. On Singles Day 2017, all of the Handu Group’s brands did a cumulative 516 million RMB (US$ 2.5 million) in GMV. As of February 2018, the Handu Group is planning a public listing on the Shanghai Stock Exchange.
4. The past few years have seen an explosion of interest in platform strategy in popular business literature. See, for example, Ming Zeng, “Three Paradoxes of Building Platforms,” Communications of the ACM 58, no. 2 (2015): 27–29. For more reading on the topic, see Geoffrey G. Parker, Marshall W. Van Alstyne, and Sangeet Paul Choudary, Platform Revolution: How Networked Markets Are Transforming the Economy and How to Make Them Work for You (New York: W. W. Norton & Company, 2016); David S. Evans and Richard Schmalensee, Matchmakers: The New Economics of Multisided Platforms (Boston: Harvard Business Review Press, 2016); and Andrew McAfee and Erik Brynjolfsson, Machine, Platform, Crowd: Harnessing Our Digital Future (New York: W. W. Norton & Company, 2017).
5. In the years since Baozun’s IPO, the stock has consistently delivered exceptional growth in the small cap category. For background in English, see Aparna Narayanan, “Small E-Commerce Firm Sizzles As It Brings Western Brands to China,” Investor’s Business Daily, July 2, 2017, https://www.investors.com/research/the-new-america/this-small-e-commerce-gem-sizzles-as-it-brings-big-western-brands-to-china/.
6. For details on the WhatsApp acquisition, see Reed Albergotti, Douglas MacMillan, and Evelyn M. Rusli, “Facebook to Pay $19 Billion for WhatsApp,” Wall Street Journal, February 19, 2014, www.wsj.com/articles/facebook-to-buy-whatsapp-for-16-billion-1392847766.
Chapter 7
1. This chapter draws heavily on concepts and frameworks from Martin Reeves, Ming Zeng, and Amin Venjara, “The Self-Tuning Enterprise,” Harvard Business Review, June 2015. I am grateful for Reeves’s lead in developing that article and helping me reflect on and refine my experience at Alibaba.
2. Aside from military and political strategies, the concept of business strategy didn’t really get started until the twentieth century with the advent of Frederick Winslow Taylor and the science of management. It was at this time that most MBA programs were started and management began to be a role that was trained and professionalized. Corporate executives accepted that strategy was their domain shortly thereafter, as demonstrated by Alfred P. Sloan Jr., the CEO of General Motors, and his classic book, My Years with General Motors (New York: Doubleday, 1963; reprint Currency, 1990). Business strategy as a discipline took shape and produced powerful new insights and tools, such as the experience curve effects and growth share matrix pioneered by Boston Consulting Group’s founder Bruce Henderson, and Michael Porter’s five forces analysis outlined in Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1985). Since then, refinements and elaborations have been many and powerful. For developments in technology, see Andrew S. Grove, High Output Management (New York: Random House, 1993); and Clayton Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail (Boston: Harvard Business School Press, 1997).
3. Jack Ma and eight other leading Chinese entrepreneurs and scholars founded Hupan (“Lakeside”) School of Entrepreneurship in 2015. Their goal in establishing Hupan was to draw on Alibaba’s experience with innovative business models and organizational strategies and to identify and train entrepreneurs who will shape the Chinese economy and even play a key role in the global business arena. Ma serves as president, and I act as dean, overseeing curriculum and teaching.
Chapter 8
1. Eric Schmidt and Jonathan Rosenberg’s book Google: How Google Works (New York: Grand Central Publishing, 2014) calls this kind of worker a “smart creative” and details such a person’s qualifications and mindset. Though I do not explicitly use Schmidt and Rosenberg’s terminology in this chapter, Google’s lessons on people and hiring are very consonant with my experience at Alibaba.
2. Paraphrase from Elon Musk, interview with Kara Swisher and Walt Mossberg, at the Recode Conference, June 2, 2016.
3. As of early 2018, Anna Holmwood has translated the first of these wildly popular books by Hong Kong author Jin Yong. The iconic series has been called “the Chinese Lord of the Rings,” inspired a nearly infinite assortment of television and movie adaptations, and remains beloved by hundreds of millions of Chinese readers of all ages. Jin Yong and Anna Holmwood, A Hero Born: Volume I of The Legend of the Condor Heroes (London: Quercus Publishing, 2018).
4. Alibaba’s huaming (literally, “flower name,” but here translated as “martial-arts name”) is a unique and enduring element of our culture. Though the practice began as a silly custom meant to inspire the imagination of early employees at Taobao, to this day the martial-arts nicknames help foster an egalitarian culture that is markedly different from that of most Chinese firms. Like most Asian languages, Chinese uses an elaborate informal system of terms for strangers and colleagues. These terms differ depending on the age, gender, and relationship of speaker and listener. Alibaba dispenses with these deeply ingrained cultural habits to give every employee—from the rank-and-file up to senior vice presidents—a unique and baggage-less moniker, which all colleagues are encouraged to use directly. (Of course, these nicknames can result in some humorous situations. There are many stories of Alibaba employees accidentally booking hotel reservations for colleagues under their martial-arts nicknames, only to cause profound confusion at check-in. And for employees who also use English names and regular Chinese nicknames, team members might well need to memorize four if not more designations for the same person.)
5. Infrastructure is another of those easily dismissed buzzwords that is indispensable to strategy discussions at Alibaba. My definition in this chapter appears to differ slightly from that of other places in the book, notably in chapter 2, when it refers to the tools and mechanisms that undergird a business network. Yet these tools and mechanisms too are basic services. The goal of technological infrastructure is merely to provide public capabilities across the platform (“infrastructural” services). Therefore, different uses of the same term in the platform and organizational contexts reflect the same core idea.
6. Zhang later served as CEO of Taobao and is now the chief technology officer of Alibaba Group.
7. All users on Alibaba’s online forum, called “AliWay,” accumulate “sesame seeds” as a way to reward activity. Users gain sesame seeds by engaging with colleagues on the forum, e.g., through commenting, and a user’s total stock of seeds is displayed every time they make a post. Any post by any employee, up to and including management, can be rewarded with sesame seeds depending on the user’s rank within the forum (not within the company). More amusingly, users can dock posts that they do not like, subtracting sesame seeds from the poster’s total stash and sharing the reason for their dislike. Thus it is common to see users with negative sesame seed scores, often as a result of highly visible public discussions. For more examples of these mechanisms, see Tony Hsieh’s excellent book on building company culture and a consumer-driven business at Zappos, Delivering Happiness: A Path to Profits, Passion, and Purpose (New York: Grand Central Publishing, 2010).
Chapter 9
1. Joseph Schumpeter’s well-known book in which he fully develops his theory of creative destruction is Capitalism, Socialism and Democracy (London: Routledge, 1942).
2. There are many books on the market that talk about ecosystems, but not many that really get the strategy right. Despite its prolix style, Kevin Kelly, Out of Control: The New Biology of Machines, Social Systems, and the Economic World (New York: Basic Books, 2009), remains to this day one of the best resources for deep reflection about the strategic mindset needed to shepherd (rather than plan) the growth of a business ecosystem.
3. I use the term creativity revolution in reference and homage to Peter Drucker and his masterpiece of understanding changes in the business world, Management Challenges for the 21st Century (London: Routledge, 2015). Drucker first described the knowledge worker in his Landmarks of Tomorrow (New York: Harper & Row, 1959).
Appendix A
1. For more background on the Chinese economy in 2003 and the rise of e-commerce, see Porter Erisman, Alibaba’s World: How a Remarkable Chinese Company Is Changing the Face of Global Business (New York: St. Martin’s Press, 2015).
2. Henry Chin and Alan Chow, “The Case for China Retail: Issues and Opportunities,” Prudential Real Estate Investors, March 2012, p. 14, http://dragonreport.com/Dragon_Report/Corp_China_files/PRU_China_Retail_0312.pdf. Readers should know that 2011 numbers have most certainly increased significantly since 2003, when Taobao entered the market. As of this book’s publication, China’s infrastructure has improved immensely, but many per capita statistics still lag (well) behind developed nations.
3. Information on MYbank comes from Alibaba Group’s press release “Official Launch of Ant Financial Services Group Brings New Financial Ecosystem to China,” October 16, 2014; MYbank’s website mybank.cn; MYbank’s 2016 operating statement (in Chinese): MYbank, “2016 Annual Report,” May 2017, https://gw.alipayobjects.com/os/rmsportal/FzRFwOIBDOvSAeMuZewN.pdf; and also from Shu Zhang and Ryan Woo, “Alibaba-backed Online Lendor MYbank Owes Cost-Saving to Home-Made Tech,” Reuters, January 31, 2018, https://www.reuters.com/article/us-china-banking-mybank/alibaba-backed-online-lender-mybank-owes-cost-savings-to-home-made-tech-idUSKBN1FL3S6.
Appendix B
1. The transaction process on Taobao, and by extension all Chinese e-commerce platforms, requires the buyer to explicitly confirm physical receipt of product through the platform. In this way, transactions on Taobao are different from those on US e-commerce platforms. Before the buyer confirms they have received what they bought (and that their product matches the seller’s original description), the order is not considered final. Not only is payment from the transaction held in escrow; from the platform’s perspective, the merchant has not even made a sale. (Only when the consumer asserts receipt of goods, money changes hands, and the transaction finishes does the sale count toward the merchant’s sales history.) This small change in logic affects many complicated aspects of Taobao’s operations and platform rules, most of whose complexity is beyond the scope of this book. To give one example, in Taobao’s arbitration department, orders contested after payment but before buyer confirmation (midsale) are handled differently from orders for which payment has not been posted (presale) or from orders where the buyer has already confirmed receipt (postsale.) Each of these three types of arbitrations follow a completely different set of rules and regulations.
Appendix C
1. Michael E. Porter and James E. Heppelmann, “How Smart Connected Products Are Transforming Competition,” Harvard Business Review, November 2014.
2. Thomas Jefferson to Isaac McPherson, August 13, 1813, in The Founders’ Constitution, ed. Philip B. Kurland and Ralph Lerner (Chicago: University of Chicago Press, 1987), writings 13:333–335, available at http://presspubs.uchicago.edu/founders/documents/a1_8_8s12.html.
3. Alex Pentland, Social Physics: How Social Networks Can Make Us Smarter (New York: Penguin, 2014).
4. Eric Schmidt and Jonathan Rosenburg, Google: How Google Works (New York: Grand Central Publishing, 2014).