Customer-centric and easy-to-use is the new business model (The Alibaba story)

May 18, 2014 — Gerry McGovern

Truly customer-centric companies will dominate the Internet Age.

Alibaba, a Chinese Internet company, is about to go public in the US. It is expected to raise more than the Facebook share sale.

According to the BBC, “The total value of merchandise sold on its platforms last year was more than that sold on Amazon and eBay combined.” Alibaba has 72% of mobile commerce in China.

So, what has helped make Alibaba so successful? According to founder Jack Ma, “We know well we haven’t survived because our strategies are farsighted and brilliant, or because our execution is perfect, but because for 15 years we have persevered in our mission of “making it easier to do business across the world,” because we have insisted on a “customer first” value system.” The motto of Alibaba is “Customer first, employee second, shareholder third.” (Amazon’s motto is essentially the same: “We seek to be Earth’s most customer-centric company for four primary customer sets: consumers, sellers, enterprises, and content creators.)

This attitude is extraordinary for a number of reasons. Firstly, it argues that developing useful strategy is extremely difficult in a complex, fast-changing world. Secondly, it argues that what you really need is a clear mission, and the Alibaba mission is about making things easy.

Thirdly, it has a motto that actually means something. If you want to put the customer first then you must put the organization second. If you put everyone first then there is no first, just a mess. To put the shareholder third is heresy, but it is a heresy that will increasingly become the norm.

Why? The customer today is more powerful, in control, sceptical, cynical, less deferent, more brand disloyal. Customers today look far more to other customers like themselves than they do to advertising or marketing, or CEOs or other figureheads. There has been a collapse in trust in organizations and traditional power structures. And it is richly deserved.

Far too many traditional organizations have become drunk on their ego, their vanity, and their delusional sense that they are the center of the universe. It’s time to wake up. Forget monarchy. The customer isn’t king anymore. The customer is dictator. Highly demanding and ruthless, unsparing in their criticism. They give loyalty only when it has been earned by consistent, high quality service.

The Alibaba story has an interesting link with Yahoo, who invested in Alibaba in 2005. Yahoo has long taken an advertiser first, content second, customer third approach. It has been all about the pages: how do we create more pages and get more people to look at those pages so that we can sell more ads.

This sort of model of business worked well in the past when the customer was much more passive. But today, Yahoo and other traditional publishers struggle to generate revenue based on such a classic organization-centric model.

While Alibaba’s customer first, easy-to-use approach is delivering exceptional profits and is driving it towards a potentially record-breaking stock flotation, some analysts estimate that if you take away Yahoo’s Alibaba shareholding, its stock value would be negligible. In other words, without its investment in Alibaba Yahoo’s business model is seen as having not much value to the market.

Easy to use is the new winning business model.