This week, as Luohan Academy celebrated its first anniversary, Alibaba Group CEO Daniel Zhang took to the stage in Hangzhou to share his visions on platform economy and how it could make global commerce more inclusive.
The panel proceeded with the participation of members of the Luohan Academy advisory committee, renowned academics, and a highly engaged audience.
Question: What’s special about a “platform” in the digital age?
Daniel Zhang: First of all, the notion of “platform” is not new. It has been here for many years. But why are people talking about platform now? It is because the world is changing, thanks to data technology, the internet and data. As a platform empowered by technology, you get a chance to be more scalable. You can cover more areas, more markets.
Technology makes all things happen. The advantage of digital technology is that it is transparent and has no boundaries. Before this, in the industrial age, or even in ancient times, people might have thought about trading without boundaries, but they couldn’t make it happen…so they focused on certain markets and certain countries and built their local platforms. Now, platforms have become more globalized, and that’s is a fundamental change. Because of technology, we get a chance to redefine the platform, make it even bigger, stronger and more impactful.
Question: Nowadays, when we talk about platforms, we refer to them as a company. From your perspective, how should we define a platform? Who owns the platform? Who benefits the most from it?
Zhang: Today if you look at trading platforms, they are far more than about just information-sharing. That’s what we refer to in Alibaba’s history as “Phase I – Meet @Alibaba.” You come and learn information about China and what can be sourced from China. Whether or not you can get a real deal depends on the effort you put into it.
That’s why for ‘Phase II which we called “Trade @Alibaba,” it was all about our retail commerce platforms. When we built the Taobao and Tmall platforms, we saw that just providing information wasn’t enough. People weren’t coming for information, but for real products. They wanted quality products and services, therefore it was important to have a good team to provide that kind of experience.
And then, it wasn’t just about products on our platforms. It was about efficiency in payments and logistics. So we asked, “how can we make it work?” The answer was– through marketplace infrastructure. That’s what Alibaba has built up over the past 15 years.
Today, we realize that even that’s not enough. That’s why we are working on cloud and big data. Because we believe online is not a separate world, we cannot only empower people to have one more web store online and deals for customers. We need to help them transform their entire business into a digital operation. That is what we are doing right now. We are trying to redefine the platform economy. That’s what we do as a platform and how we create value for our customers.
Question: If platforms grow bigger and bigger, what responsibilities does the platform operator bear in terms of governance and responsibilities?
Zhang: At Alibaba, I always tell my team we are not the owner of the platform. We are operating the platform. And we’re but one participant on the platform. And we, together with our buyers, sellers and service providers, form this ecosystem. We form this platform.That’s why we need to understand their concerns, the opportunities and how to facilitate so that large numbers of people can pursue this opportunity.
The key is to provide the efficiency to facilitate trading, facilitate consumption on a platform. If we pull that off, people would think this is a good platform and will stay with us. If buyers or sellers find it difficult to locate what they want, or if buyers only see the same things they bought before and don’t have the fun of discovery, they might leave.
This efficiency is not only created by the platform operator, but together with all other players on the platform. For example, the seller needs to innovate its products to ensure there are new products available for fans. They need full supply-chain management, to equip themselves with good technological support via their CRM, to make the whole sales and marketing process more efficient.
Question: What should be the governance approach for a platform ecosystem, if it doesn’t belong to the platform company?
Zhang: A key governance mechanism for a platform is to listen to as many platform participants’ voices as possible. You listen, but do not act on everything. If you do, you’ll go nowhere. We have 700 million consumers…so it’s not possible to listen to everyone. But we must find a way to represent the vast majority’s interest. On the platform, we believe the vast majority are good consumers, good business people.
Question: Do you anticipate that certain platforms will eventually go beyond geography or country? And what’s the distinction between a financial platform and other platforms?
Zhang: For your first question, my answer is yes, and we certainly will see that. There is a real opportunity to create global and digital platforms. Trading is all market-driven. If you can help people trade more efficiently, you have an opportunity to build a global cross-border platform.
That’s why we announced our eWTP initiative, the Electronic World Trading Platform. Buyers and sellers have the chance to trade. And they are not only in China, but all over the world. This is one of the areas where we see opportunity.
The financial sector is a quite sensitive sector. We have to think about it more, specifically about financial governance and monitoring financial risks by market and by country. That may be the challenge financial platforms have to face, but at the end of the day, if one country throws full support behind this technology, building up a digital or financial ecosystem, and others don’t, those other countries will fall behind in the digital transformation of the whole world.
Featured photo credit to Alibaba