Yet the truth is not quite so simple. There exists a whole new way of thinking about enterprise technology that is rapidly taking root in the world’s fastest growing economy — China. And it remains almost totally opaque to Western minds. Indeed, so unfathomable is this paradigm, that it’s almost impossible to Google it.
Welcome to the surprising world of the middle end. Welcome to Zhong Tai.
At its core, Zhong Tai is an approach to delivering encapsulated business models.
It’s an approach that’s helping a new breed of small businesses deliver first-rate services without the costs of traditional enterprise infrastructure and enabling existing organizations to bring innovative services to market at breakneck speeds.To understand Zhong Tai, it helps to understand its history, how it emerged and the critical role played by Alibaba.
To those outside of China, Alibaba is often seen as somewhat akin to Amazon: an ecommerce heavyweight that has branched out a bit. To those in China, Alibaba is much more than that: it’s the exemplar of how to do business in the digital world.
Alibaba’s Tmall platform has for the past decade been a significant route to market for many local and international businesses to reach customers in mainland China. By 2013, Tmall had more than a 50% share of Chinese B2C online product sales share. But while many businesses are content to piggyback off Alibaba’s undoubted expertise in reaching digital consumers, not all of them have wanted to operate under Alibaba’s umbrella, preferring to establish their own online identity.
To attract those businesses, five years ago, Alibaba set up a new business unit. This unit was founded on the principle that in the digital world, the most important thing is not your internal systems but the digital channel you use to connect to your customers. This was Alibaba Zhong Tai, not a front-end system for ecommerce site, not back-end settlement system that you buy and install on your own machine; but a business platform in a box that encapsulated all the best practice Alibaba had established through its years of ecommerce for approaching customers, managing customer relationships and fulfilling orders.
The concept proved remarkably powerful, especially for those businesses who wanted to grow but didn’t want to make the commitment to a full-blown ERP system. Instead, here was a path towards world-class go-to-market capabilities, with the business flows and underpinning tech to support them.
But the story of Zhong Tai doesn’t begin and end with Alibaba. Perhaps the more interesting tale is how others in China took the ideas behind Zhong Tai and ran with it.
Didi Chuxing is perhaps best known as the Chinese ride-hailing company that went toe-to-toe with Uber and won. After a fierce price war between the two, Uber announced in August 2016 that it was exiting the China market and swapping its business in the region for a stake in Didi.
At the time it acquired Uber’s China operations, Didi was left with two separate ride-hailing systems. At first, it opted against merging them, preferring to maintain Uber’s independence, so that visitors to China could simply use Uber to order a ride.
But in having those two systems and with the emergence of ZhongTai, the execs at Didi began to spot an opportunity. They realized that it was possible to build an Uber-like service with only a handful of basic capabilities: some form of resource management, a location-based user request system, a matching engine, a payment platform and some form of membership management.
Didi realized they could build a ride-hailing Zhong Tai — an encapsulated system, that would enable it to create innovative niche products, and quickly exploit opportunities that would otherwise have not been viable.
One example of this is Didi’s shuttle bus service. Typically, establishing a shuttle bus service is time-consuming and requires significant investment in fleet. But Didi knew there was an opportunity to exploit.
It’s been able to expand into public transport-like services by using Zhong Tai principles to create a shuttle bus offering connecting major bus and subway stations in selected areas in Beijing and Chengdu. Didi leases the seven-seater vehicles and uses them to help groups of commuters travelling in the same direction.
Would Zhong Tai work elsewhere? Perhaps. But undoubtedly, China’s sheer scale makes it an attractive approach.
Take the example of mobile phone services. A regional service provider may cover a huge variety of customers — from those in Tier One cities, such as Beijing, Shanghai and Shenzhen to those in Tier Four cities. A traditional product team approach might try to serve the citizens of all those cities with the same offerings, which from a software perspective gets super complicated.
But through Zhong Tai, you can divide your products up while still retaining the same encapsulated business models.
While Zhong Tai has taken hold in China, the tech that underpins it are readily familiar to Western organizations: cloud, microservices, APIs. And the approach is now also being used by traditional Chinese enterprises — not just the digital powerhouses. Chinese firms are using Zhong Tai as a lever for digital transformation, enabling them to build autonomous product teams within their organization.
Most Chinese businesses recognize the benefits of building product teams rather than project teams — because team members feel more responsibility for delivery and tend to be more innovative in developing solutions. But for enterprises, it’s really difficult to do a large scale transformation, to build a single product team.
By taking a Zhong Tai approach, these organizations have a stepping stone for transformation. By definition Zhong Tai is encapsulated and includes business models that can be replicated, done in a self-service SaaS manner. If they build a Zhong Tai, they have to have a long-term entity, that can provide a clear contract between Zhong Tai team and product team. The entity that leases the capability is not the product team, which may not be around next year.
So while Zhong Tai currently remains a Chinese phenomena, it needn’t stay that way: it just needs the rest of the world to wake up to the idea!