Innovation the Alibaba Way

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So by now, you would have known that China’s Alibaba raised about US$25 billion in their IPO last week, making it one of the biggest tech companies in the world. And why not? With 1.3billion customers in their homeland China, there is no way that Alibaba, China’s equivalent to Amazon, cannot replicate what Amazon did for the US, and then more. Yet, many detractors have dismissed Alibaba as a me-too company, borrowing ideas from the likes of Amazon and eBay in its rise to stardom. We disagree. In this article, we look at 3 reasons why Jack Ma was able to beat the Western juggernauts in their game, rising from obscurity in 1999 to stardom in 2014.

1. Copying is the highest form of flattery

Many people decry Alibaba’s me-too tactics as being more copy-cat than innovative. While it is true that Alibaba did use Amazon and eBay as a benchmark for innovation, they didn’t simply copy wholesale. While eBay tried to enter the China market with their payment gateway, Paypal, Alibaba went a different route. Seeing that the China market had little faith in eBay – and the Internet at large – to protect their credit card details, Alibaba came in with their own secured payment gateway that assuaged the nation’s fears. So while copying is the highest form of flattery, and eBay and Amazon should feel immensely flattered, Alibaba took that one step further by applying local knowledge on globally accepted norms, thereby slicing a uniquely unassailable position for itself.

2. Continuous improvement, rather than a big bang!

Many people view innovation as a Big Bang, where one day the solution didn’t exist and another, it is carpet bombed to the whole world. Western thinking is still very much of this kind. Yet in China, innovation is viewed as a tweak here and a tweak there. They have regiments of scientists focusing on making one thing a little better. While some corporations focus on disruptive change to make innovation work, in China, a string of incremental changes can lead to a big leap. So, maybe it is time to rethink continuous improvement as a means of innovation – it is cheaper and has a better chance for success!

3. DIFM rather than DIY

With China’s growing affluence (and one might suspect it applies in Singapore too), the populace is expecting a “Do-It-For-Me” (DIFM) solution rather than a Do-It-Yourself (DIY) one. Which is why Western companies like Home Depot, Best Buy or Tesco suffered badly in China. With their DIY philosophy flying in the face of the DIFM expectations in China, it was no surprise that they stumbled in what is one of the most lucrative markets in the world. Again, with Alibaba pandering to their nouveaux riche, offering a culturally-expected service, they were able to “cream” the competition. Cultural norms are very strong resistors to big ideas; they should be heeded on pain of failure!

Conclusion

Alibaba has been successful because they did things in the most pragmatic way. They may not be the ways that Western companies and professors might propose, but, at $25billion valuation, one cannot dismiss the Alibaba-way: copying, incremental improvement and culturally-expected.

Hang on! Didn’t Japan do just that 50 years ago?

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