Inside Alibaba – Jack Ma's Digital Innovation Factory

Better Business FocusFocus JuneJuly 20182015

Rowan Gibson Inside Alibaba – Jack Ma’s digital innovation factory

combined), and a market cap that has visited websites. One of its main exceeded US $500 billion. attractions for brands (including names like Apple, Coca-Cola, Nike, The clue to understanding Alibaba is Zara, and L’Oreal) is the way Tmall to look at it not as a company but as a leverages and integrates smart complex, fully integrated, and ever- technologies like big data analytics, growing ecosystem of digital services, virtual reality and augmented reality to Artificial intelligence. Augmented reality. entrepreneurial merchants, and create personal engagement with innovative new technologies, offering consumers as part of their digital Facial recognition. Connected “internet” customers a seamless and lifestyle. Another is the seemingly vehicles. Global virtual marketplaces. continuously evolving digital never-ending online consumer events App-based digital payment systems. immersion experience across multiple that Tmall hosts throughout the year Pharmaceutical e-commerce. Humanoid channels and online platforms. to generate online traffic. robots. Giant vending machines for cars. Over 500 million Chinese customers When you take the runaway success This is not just the magical stuff of have made Alibaba’s Taobao platform of Taobao and Tmall and then add today’s digital-driven, transformation part of their daily shopping habits, Alipay digital payment, and Weibo economy. It’s a snapshot of the cutting- making it by far China’s largest (which is like a Chinese version of edge innovation work currently consumer-to-consumer online Twitter), Laiwang social messaging, marketplace. More than 150 million Alibaba Cloud, which serves underway at one of the world’s most daily visitors browse the platform’s businesses with e-commerce data exciting and admired companies: the virtual shops every day, where over a processing, data customization and e- Chinese tech titan, Alibaba Group. billion products are listed, and easily commerce data mining (and that has buy what they want using Alibaba’s outperformed major cloud computing In many ways, Alibaba could be now-ubiquitous digital payment players including Amazon, Microsoft described as a digital innovation system, Alipay. Taobao is so popular – and Google in revenue growth), digital factory – a powerhouse that seems to and offers such a broad range of video services (and Chinese be as efficient at pumping out and products that cater to every need – distribution of Hollywood blockbuster rapidly commercializing new that it has achieved an amazing 95 franchises like Mission Impossible and technology ideas, services, and percent penetration rate in China’s Star Trek) as well as its own movie ventures as other Chinese factories consumer-to-consumer online retail production via Alibaba Pictures, might be at producing sports shoes, market. According to Deborah location-based mapping (like Google syringes, or electrical appliances. Weinswig, Managing Director of Maps, enabled by the acquisition of research company Fung Global Retail Auto Navi), Ant financial services, Unfortunately, in the western world, Tech, Taobao is now making a “shift Alimama data-based online advertising, the vague notion persists that Alibaba from a traditional online transactions a logistics system that can deliver is merely a Chinese mash-up of platform to a lifestyle destination products to consumers within two Amazon and eBay – an e-commerce platform.” hours, a media portfolio that includes giant with a formidable lock on its the South China Morning Post, and so own local market and big ambitions to Another major part of Alibaba’s much more, you begin to grasp the expand globally. But the reality is that ecosystem is Tmall – formerly known immense and growing scope of the company has long been far more as Taobao Mall – which is China’s Alibaba’s “digital lifestyle” ecosystem. than that. largest business-to-consumer (B2C) Fast Company calls it “one of the platform, giving both global and local most sophisticated and lucrative Alibaba’s “Digital Lifestyle” Chinese brands and retailers online retail ecosystems in the world.” Ecosystem frictionless access to the Chinese Starting out in 1999 as a B2B web market. In July 2016, Alibaba Group and SAIC portal for connecting local Chinese (Shanghai Automotive Industry manufacturers with potential The platform, which now features Corporation), one of the largest auto customers overseas, Alibaba today has over 70,000 international and Chinese manufacturers in China, teamed up to the distinction of being the largest e- brands, has an almost 60 percent launch the Roewe RX5, a brand new commerce company in the world, share of the Chinese B2C online retail SUV that incorporated Alibaba’s with $430 billion in gross merchandise market (more than double that of its ALIOS operating system and that was volume (surpassing all US retailers, closest competitor, JD.com), and over dubbed “The world’s first mass- including Amazon, Walmart, and eBay 500 million monthly active users. It is produced internet car.” Just one year also one of the world’s top 20 most later, in July 2017, the Roewe RX5

Better Business FocusFocus JuneJuly 20182015

was already the 6th best-selling SUV in • Trusted Financial Model: forward to grab new opportunities. its category in China. And, most Alibaba understood from the very This is one of the principles that importantly, when asked about their beginning that in the sometimes describes daily life at Alibaba Group. buying decision 75% of customers said murky world of online There is always a sense of urgency in they purchased the RX5 because of its transactions, trust, transparency the air, based on the understanding connectivity. In other words, what and fairness had to be paramount. that the digital technology world is they valued most of all was not the This founding principle has rapidly developing and that today’s car’s design or its comfort, its engine enabled the company to establish solutions can become obsolete faster performance, or its safety standards, itself as the leading and most than ever before. So, complacency is but the fact that it gave them the trusted player in Asia’s online never an option. At Alibaba, everyone connected mobility that would peer-to-peer marketplaces. is always striving to leap to the next integrate them seamlessly with the • Unconventional Profit Model: thing, and the next thing, and the next rest of Alibaba’s ecosystem, where Many customers believe that thing. smartphones, shopping sites, payment Alibaba’s rapid rise to the top is systems, video services, IOT-enabled thanks to its menu-styled pricing This explains why the company has home appliances, wearable devices, method rather than charging put such strong emphasis in recent and – yes – cars, are all linked subscriptions or admission fees. years on the emerging automotive and together as part of one urban transportation landscape, • Support Services: Before any of comprehensive digital immersion viewing the car as “a smartphone on Alibaba’s competitors in the experience. wheels” or as the next mobile industry seem to have had an idea appliance. According to Jeff Zhang, about how important support The fact is that, if we want to make an Alibaba’s Chief Technology Officer, services were, Alibaba realized analogy, Alibaba is more like Google, “Smart operating systems become the that ensuring and maintaining a Amazon, Facebook, Twitter, eBay, and second engine of cars, while data is positive customer experience was Paypal, plus a whole lot more, all the new fuel.” As he puts it, “E- vital for growth. The company’s rolled into one. That combination has commerce, financial payments, comprehensive structure for put the company in a unique and very logistics, entertainment—all of these service and support ensures the powerful position to drive and lead different application scenarios exist satisfaction of its customers digital innovation and transformation within the Alibaba ecosystem. And the everywhere. not just in China, but all around the company has algorithm-based, real- world. • Target Audience Sensitivity: time updating based on all of the data Every business decision that collected from its products, from the Unpacking the Success Story Alibaba takes, and every commerce on its platforms, and Combine all the various areas of innovation it introduces, is around its users.” It is exactly this kind expertise mentioned above and you precisely designed with the target of user-centered data that becomes have a conglomerate big enough to audience in mind. The company the new fuel in a world of connected provide stiff competition to all of its focuses on understanding the mobility. direct and indirect competitors, evolving needs of its customers whether they are large international and then designing digital solutions With the data Alibaba gathers from its companies or local players. from the customer backward. customers, the company is now Considering that it’s not every day Owning so much data about the applying the techniques of AI – you see a relatively small ecommerce buying preferences of so many including Deep Learning and Machine startup establish itself at the very top millions of customers, Alibaba can Learning – to generate high-quality of the ladder, let’s take a look at some use the latest technology to insights into user needs, preferences, of the factors that drove Alibaba’s effectively innovate based on the and behaviours, and to respond with success in the market. most grounded and important products and services that are customer insights. • Flexible Business Model: perfectly matched to these users. Alibaba has never made the • Integrated Platform Alibaba’s expertise at handling mistake of developing an overly Ecosystem: As mentioned excessive web traffic and huge narrow self-image that above, Alibaba is not just one amounts of data is no secret. During pigeonholes the firm in just one platform. It is an integration of last year’s Singles Day, the biggest particular market sector. Instead, numerous platforms, all of which retail event in the world (far bigger the company’s expanding are correlated and interactive, than Black Friday and Cyber Monday ecosystem has allowed it to that serve a wide and growing combined), which generated a record provide many kinds of services to audience. This correlation $25.3 billion (168.2 billion yuan) in many kinds of businesses in streamlines the user experience sales in just 24 hours, the company’s numerous industries and and helps the company provide a processors were able to handle countries, as well as to millions of seamless digital lifestyle across 256,000 transactions per second, or customers with a broad range of multiple channels and platforms. well over 15 million transactions per interests and needs, both inside minute, without a single hiccup. and outside China. This flexible Driving Digital Innovation and Interestingly, about 90 percent of view of the business model has Transformation those transactions were done via enabled Alibaba to stretch into a One thing is clear about Alibaba. The mobile phone. wide diversity of new business company never stands still. The opportunities. Chinese have a saying that roughly translates into “walking with wings”, which is all about moving swiftly

Better Business FocusFocus JuneJuly 20182015

Driving digital innovation and the richest person in Asia, presiding U.S., China, Japan and the EU). Only transformation also means exploring over a $300 billion empire. time will tell. But one thing we know completely new fields. As an example, right now is that Alibaba Group is a Alibaba has recently invested in two of According to the Washington Post, Jack company we should all be watching the three leading start-ups in China Ma is “a larger-than-life figure who has very closely and learning from, that specialize exclusively in facial been likened to the godfather of especially as an outstanding example recognition. One application of this Chinese entrepreneurship and has of how to drive digital innovation and technology is an automatic payment attracted the loyalty of employees and transformation. service called “Smile to Pay” which has customers alike with a showmanship been debuted at KFC in the eastern that exudes elegance.” On numerous With that goal in mind, why not join Chinese city of Hangzhou. Based on occasions, he has expressed his me in China at our next exclusive 3- the use of a sophisticated 3-D camera inspiring view of the future and of the day TLN masterclass in association that scans a customer’s face to verify motivation that he believes must with Alibaba Group, called “Leading his or her identity, the new service accompany and drive all technological Digital Transformation”. You’ll gain allows customers who are registered progress: insights into exactly how Alibaba is to the Alipay app to pay for their food pushing the frontiers of digital order just by smiling at one of the “Just as the internet is revolutionizing technology across their entire restaurant’s self-service screens to retail, we at Alibaba believe it will ecosystem, and you’ll learn how to authorize the purchase. On a similar eventually do the same to fundamentally apply these lessons in practical ways note, customers of Pizza Hut may information-driven industries such as inside your own organization to drive have come across the humanoid finance, education and healthcare. Once digital innovation and transformation. robot, Pepper, helping them place this change happens – once we are all Don’t miss this unique opportunity to their order and make the payment. It connected – I believe the spirit of equality find out how you can radically rethink turns out that Alibaba has invested and transparency at the heart of the and reinvent your own products, over $100 million in Pepper’s internet will make it possible for Chinese services, strategies, processes, and manufacturer, Softbank Robotics in society to leapfrog in its development of a business models to compete Japan, representing a 20% stake in the stronger institutional and social successfully in an age of digital company. infrastructure. Our water has become disruption. undrinkable, our food inedible, our milk This year, Alibaba also teamed up with poisonous and worst of all the air in our © Copyright, Rowan Gibson Ford to unveil a giant, 5-storey fully cities is so polluted that we often cannot automated car vending machine in see the sun. Twenty years ago, people in About the Author: China’s southern city of Guangzhou, China were focusing on economic survival. Rowan Gibson is recognized as one of that contains over 40 new cars and is Now, people have better living conditions the world’s foremost thought leaders completely unmanned. Users of Tmall and big dreams for the future. But these on innovation. He is the and Taobao can simply select a car on dreams will be hollow if we cannot see internationally bestselling author of 3 the mobile app, verify their identity the sun.” major books, an award-winning and authorize the payment via facial keynote speaker in 60 countries, and a recognition, and the car will be As Alibaba pursues a strategy of cofounder of Innovation Excellence. dispensed from the vending machine aggressive global growth and using robots. The whole process takes technological innovation, Jack Ma also Rowan is also a prolific writer. In less than 10 minutes. reminds his employees that “we have addition to his bestselling books, he the responsibility to have a good has authored dozens of business Visionary Ambitions heart, and to do something good. articles, columns and blogs which have Of course, it’s impossible to Make sure that everything you do is been read all around the globe. He has understand Alibaba without for the future.” He believes that been interviewed frequently on considering its visionary founder, Jack technology “should support human television and radio, as well as online Ma, and his ambitions not just for the beings. Technology should always do and in the international press. His company but for China and the world. something that enables people, not media appearances include Forbes, disables people.” And he warns that CNN, BusinessWeek, Harvard “Global trade must be simple and Business Review, and BBC World modernized; it must be inclusive, so Service. He has also appeared in everyone has the same opportunity. several business documentaries. The next generation of globalization must be inclusive.” Co-ordinates

Email: [email protected] Will Jack Ma achieve his big ambition Twitter: twitter.com/rowangibson of making China and the world a Web: www.rowangibson.com and better place while expanding Alibaba’s www.innovationexcellence.com global business to $1 trillion in gross

merchandise value by 2020, and Indeed, it is precisely these visionary serving two billion customers by ambitions that drove a once-penniless 2036? (As Forbes points out, that English teacher to eventually become would effectively make Alibaba the the Chinese kingpin of technology and world’s fifth largest economy, with sales eclipsed only by the GDP of the

Better Business FocusFocus JuneJuly 20182015

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Publication issued on 1 July 2018