2018 is again a record-breaking year for Alibaba’s Singles Day Shopping Festival, with GMV (Gross Merchandise Volume) reaching $30.8 billion in 24 hours, up from $25.4 billion in 2017 . It is an incredible number, more than doubled the combined GMV of the two largest US shopping sprees, $5 billion for Black Friday and $6.6 billion for Cyber Monday in 2017 . While the shopping festival turns into a New Year like celebration with a star-studded concert and the sales number leaves the world in awe, it is a test bed for company’s services and technologies that have been growing in scale every year. It is the final presentation of the company’s open innovation efforts, internally and externally.
(2018 Single’s Day, The News Minute)
Open innovation is essential to Alibaba’s growth and survival, enhancing the firm’s industry knowledge and technology capabilities, while consumer demands are ever growing and competition is increasingly heavy. On the front end, customers are looking for a wider range of products, refreshing ways of marketing and real-time services. It requires the company to expand partnerships with domestic and foreign brands, establish platforms to encourage content generation and keep improving its customer service efforts. On the back end, to handle the volume – this year more than a billion delivery orders were placed over the course of the 24 hours  – the company has to leverage nouveau technology solutions such as cloud management and artificial intelligence, to fulfill the hundreds of thousands of orders that were being made per second. According to Joe Tsai, the company’s co-founder, “[the company does] things out of necessity and out of fear.” Alibaba is building an ecosystem, using internal and external innovative power, in order to not fail its mission of “making it easy to do business anywhere.”
The company has laid out open innovation strategies in many ways, for example, through external resource integration . Alibaba and Tencent both had long negotiations with Starbucks, which had resisted interacting with neither of the tech giants who competed to install electronic payment solutions into the coffee shop chain. Despite Tencent getting a head start, Alibaba eventually won over by developing a full partnership integrating Starbucks with different key businesses of the ecosystem, namely Tmall, Alipay, Ele.me (food delivery platform) and Hema (Fresh delivery), opening “Starbucks Delivery Kitchens” and creating an unprecedented version of virtual online stores to offer its customers an even more personalized experience .
(Starbucks’ 30,000 sq ft store opens in Shanghai, Bloomberg)
Another significant open innovation move is through outward content generation. As customers grow more sophisticated, hard-sell advertising is replaced by more personal and creative content marketing, namely Taobao Top News and Live Streaming. Through Taobao Top News, KOLs in vertical sectors receive tasks to generate content with a commission. With Taobao Live Streaming, brands hire models and develop own content, while Taobao provides technological add-on solutions, for example, virtual coupons.
As the company expands globally, it looks to solve more complex problems through innovation centers. In 2017, the company launched an innovative global research program, “Alibaba DAMO Academy”, expecting to invest more than $15 billion in R&D over the next three years. The program will first focus on opening 7 labs in China, United States (San Mateo and Bellevue), Russia, Israel and Singapore. These labs are set to collaborate with leaders in tech space and top academia to explore tech breakthroughs. For example, the Academy is set up to work with RISE Lab at UC Berkley on topics such as secured real-time computing . In a longer term, the company is putting forward strategies such as eWTPs to build hubs in major cities globally (first one scheduled in Malaysia) to collaborate with local agents on online shopping, logistics, payments and AI, etc.
There are still steps the company can take to combine internal and external intelligence. One recommendation is to utilize more inward ecosystem interaction. At its rival company Tencent, employees come up with ideas, form teams and compete heavily to win over big R&D and marketing budgets to launch products. Wechat is in fact a result of that. Alibaba employees should be encouraged to think like entrepreneurs in residence and incentivized to use their close understanding of the customers to build better products. Another recommendation is to integrate acquisitions more thoroughly. The company is looking for synergy while making vertical or horizontal strategic investments; however, poorly planned and executed integration could lead to failing businesses and loss of enterprise value.
My open question on the topic would be: what do you think of Alibaba using more contests to stir up the start-up world? The company’s cloud arm, AliCloud, has hosted Create@Alibaba contest in the past few years, calling for ideas in AI, IoT, AR/VR, big data and cyber security. How about contests outside of the frontier technologies? Would you be interested in being a part of it?
(Create@Alibaba 2018 at Istanbul, webrazzi)
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 Arjun Kharpal, Alibaba sets new Singles Day record with more than $30.8 billion in sales in 24 hours, https://www.cnbc.com/2018/11/11/alibaba-singles-day-2018-record-sales-on-largest-shopping-event-day.html, 11 Nov 2018
 Kate Taylor, Alibaba just had the biggest online shopping day of all time, nearly tripling every company’s 2017 Black Friday and Cyber Monday sales combined, https://www.businessinsider.com/alibaba-singles-day-2018-biggest-online-shopping-day-2018-11, 11 Nov 2018
 Allison, Open Innovation: Transforming your Business in China, http://daxueconsulting.com/open-innovation-in-china/, 16 Oct 2018
 Saheli Roy Choudhury, Alibaba says it will invest more than $15 billion over three years in global research program, https://www.cnbc.com/2017/10/11/alibaba-says-will-pour-15-billion-into-global-research-program.html, 11 Oct 2017
 Zach Emmanuel, Alibaba Cloud looks to drive its technology ecosystem with startup innovation contest, https://www.computerweekly.com/news/252444214/Alibaba-Cloud-looks-to-drive-its-technology-ecosystem-with-startup-innovation-contest,
04 July, 2018