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Op-Ed Contributor

Small Is Beautiful

HONG KONG — The headlines of the past year about storied global corporations all but collapsing in the wake of the global economic downturn were not signs of the times, but rather a foreshadowing that a long-awaited business revolution is actually beginning. Many of these large enterprises are relics of the last century and the financial crisis was the last straw in exposing their inherent weaknesses.

We are at the beginning of a revolution where Internet-based technologies will forever shift the power dynamics between customers and businesses. Entrepreneurial small and medium companies around the world that take advantage of these new developments and emerging trends will be the ones that come out ahead.

Look at the example of big-box retailers who took control of the system and forced manufacturers, not just here in China but around the world, into mass runs of identical merchandise with only the narrowest of margins. In the coming decades, this will change dramatically, bringing potentially life-altering consequences for those who ignore the lessons of the past year.

In the coming decade, the Internet will make the long-awaited transition from a marketing channel into a virtual infrastructure that will allow smaller companies, which are really the major engines of innovation, to compete effectively with major corporations.

The ability to identify or create new business opportunities around the world will be limitless. For example, a business that starts in China or India will have ability to compete with one in Indiana. More importantly, the Indiana business that has the right attitude and global outlook will not only be able to compete with India and China, but also with bigger American and European corporations.

Three trends will power this change: new Web-based technologies, a shift toward consumer control over product design, and the global distribution of capital. As a result of technological advancements, smaller companies now have access to tools and techniques once only afforded by major corporations. Customers, who in recent years have chafed at limited selection in big-box stores, will take advantage of the Internet’s long-tail effect to demand personally tailored products and services. And capital, once concentrated only in a few countries and accessible mainly by major corporations, is now flowing toward more and more small companies across the world to fuel growth.

People talk a lot today about fixing things, but it is not the system that needs fixing. The problem is with so-called “conventional wisdom.” Those who believe in carrying on with business as usual might as well suggest powering cars with a troika of horses.

For example, more than 1.1 million direct jobs have been created in China alone in the past three years by companies doing e-commerce across Alibaba’s platforms, and we expect that this trend of company and job creation will accelerate globally in the next decade. The coming years will see an exponential global rise of Internet entrepreneurs, or Netrepreneurs, who do business only through the Internet, make products only for sale on the Internet and adhere to a set of principles that include the utmost respect for customers, work partners, the community and the environment, and a willingness to embrace and optimize new ideas. They will be at the forefront of this new revolution. These businesspeople will be able to respond rapidly to changing consumer tastes using innovation and creativity.

They will work with technologies once available and affordable only to major multinational corporations — video conferencing, inventory and customer relations management, logistics and supply chain management — that all interact seamlessly and are integrated into small business online platforms. The entire Internet will be their marketplace, and the platform will be their office or shop.

These Netrepreneurs will operate with minimal overhead, allowing for both lower prices and lucrative margins, as well as fair compensation for employees, suppliers, partners and themselves. Their primary task: focus on making customers happy and treating partners and other stakeholders fairly while the technologies of the platform take care of the rest.

By 2019, a mere 10 years from now, I believe that more than 1 billion people around the world will turn to these small online businesses for their everyday goods and services. Netrepreneurs will be the major engine of global job creation — the livelihoods of literally hundreds of millions of people around the world will depend almost exclusively on being a part of these virtual business organizations.

But there is a missing ingredient that can help realize this vision. While it’s common for people to focus on big brand names, it’s important to note that more than 70 percent of the world’s innovations have come from once small and medium-sized companies. That’s why it’s critical that policymakers and leaders devote more time toward encouraging the development of this sector of the economy. It needs greater support through financing, training programs, tax policy and technology advancement.

Somewhere in the world right now, in a garage or an apartment, is the planet’s next exciting company or game-changing technology that will bring real long-term improvement to people’s lives, and with the proper support, new entrepreneurial dreams will be realized.

It’s time to stop talking about supporting small businesses and take action to do so.

Small is beautiful.

Jack Ma is founder and chief executive of the Alibaba Group.

A version of this article appears in print on   in The International Herald Tribune. Order Reprints | Today’s Paper | Subscribe

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