ENTREPRENEURIAL INNOVATION AND CREATIVITY

Entrepreneurial aspects of innovation and creativity have been found to be a major factor in the growth and overall success of a company. This is more dependent on the leadership of the company and their willingness to adapt to change and other trends in the market so as to keep par with their competitors. Analytical,analogical, intuitive, and imaginary types of thinking are involved in the creative process. Creativity involves the process of coming up with new ideas or alternatives to solve problems or looking for other opportunities. Innovation, on the other hand, is the ability to use creativity to come up with solutions to problems and opportunities to boost a business’s relevance or importance in society.

Creativity is the precursor to innovation as it helps the entrepreneur come up with ideas. It mostly involves coming up with ideas that are unique in a way that no one else has come up with them. Creativity involves three components essential in the formulation of good ideas. One component involves the use of creative thinking skills where the entrepreneur approaches a problem differently and formulates solutions. They use logic and reasoning, together with their imagination, to come up with solutions. After coming up with an idea, the entrepreneur is then required to use knowledge of the business to make the idea bear fruit.This knowledge encompasses one acquired through formal education,training, and overall work experience. After all these processes, the entrepreneur needs the motivation to implement the idea. This involves the passion one has for the business and love to see it grow and succeed,

Innovation can be classified into four types, which include invention, extension, duplication, or synthesis. The invention involves the introduction of a new commodity,service, or process in the business.The extension involves the expansion of a service, process, or product.Duplication is the use of an already existing commodity,process, or service in the company. Synthesis, on the other hand, incorporates the already established concepts and factors into new processes or ways of doing things. Innovations in companies in this era where technology has made the world a global market place companies are coming up with ways of incorporating technology in their companies or even services in order to survive in the market.

The use of creativity and innovation is essential in a business. It helps a company remain relevant and competitive in its respective field as there is always a possibility of companies producing a better product. Therefore an entrepreneur has to find a way to add value to their commodity or service in order to please their customers.In our case, we will look at how entrepreneurial creativity and innovation have been utilized by Alibaba to make them a global giant in the e-commerce industry.

Literature Review

Normative theories in the past have found a correlation between organizational growth and innovation. In research published by Cook in 1998, he termed creativity as an element of competitive advantage for organizations.Thus the profitability of a new commodity will be dependent on the fulfillment of customer’s needs more effectively compared to the competitor’s commodity (Mc Adam and McClelland,2000). He stressed that companies with creativity and innovativeness get other benefits beyond sales and profits in the fact that it had social benefits that arise from teams working together and the motivation of employees.

Majaro (1998) defined creation as an idea generation process that was later transformed for implementation in the company’s products or services. He also termed creativity as a precursor for the innovation process, which occurred in four stages, namely idea generation, screening, feasibility, and implementation.

Gurteen (1998) defined creativity as the generation of ideas, whereas innovation was putting those ideas into actions by refining them and implementing them, He theorized that creativity was a divergent thinking process, whereas innovation was a convergent thinking one.

A research paper based on Resource-Based View (RBV) by Hamel and Prahalad in 1994 stated that innovation was an important key factor difference in a company’s performance. Innovation to them differentiated firms in terms of their products, services, and resource utilization.

Case Study:Alibaba

In this essay, we shall look into the case of Alibaba and how creativity and innovations led to the founding of Alibaba but also how they have led to the growth and success of Alibaba, making it one of the global giants in the e-commerce industry.The founder of Alibaba Jack Ma, was born in 1964 in Zhejiang Province. He was a teacher now turned in to a self-made billionaire through entrepreneurship. As a young man, Ma volunteered to guide foreigners through the city just to get an opportunity to listen to spoken grammar and practice his grammar (Deresky&Christopher,2011). He failed to pass his university degree three times. He kept trying until he graduated with a degree in English.He also faced rejections throughout his life, including interviewing for a job at KFC and being the only one to fail the interview in a pool of twenty-four interviewees.

After a life of rejections and failures, Jack Ma visited the U.S in 1995, where he was introduced to computers and the internet. He searched ‘beer’ on the Mosaic browser and noticed that the search results he got were from different countries and not China. He went on to search ‘China,’ but nothing popped out.This led to him coming with an idea to create a company based on online marketing,online advertising,sales, and online purchase (Shiying& Avery,2009).On 4 April 1999, Jack Ma and a group of friends founded Alibaba .com, which was a china based B2B market place site in his Hangzhou apartment.He faced competition from other Chinese B2B web portals. Later the same year, Alibaba got funding from the SoftBank and Goldman Sachs, which made Alibaba financially stable to help them expand and innovate.

During the founding of Alibaba, the main thought was local; however, in 2000, Jack Ma decided the company had to be expanded globally. As China had little experience in managing a company on the scale that Ma envisioned, he sought help outside the country(Walraven,2009). He employed Porter Erisman to help him expand Alibaba internationally. This gave Alibaba a large competitive advantage compared to local companies at the time. Jack Ma was determined to seek markets globally and begin talks with potential future markets.

As Alibaba ventured into online trading, they based their transactions on trust. This didn’t work out well as it was predisposed to fraud and online scams. To raise customers’ trust and improve efficiency when transacting, they created Trustpass a reliable credit affirmation system (Fannin,2008). This arrangement made customer purchases appear trustworthy, which also generated more profits for the company. This opened and expanded Alibaba market to international clients who made profits from low-cost products(Walraven,2009).

Alibaba then founded Taobao, an online shopping website equivalent to eBay. This facilitated consumer to consumer (C2C)  by providing a platform where individual entrepreneurs and small businesses would meet and transact. Taobao had a real-time chat function which observed the Chinese culture real-time discussed trading. It also catered for Chinese speaking regions and abroad.Taobao led to virtual trade, which led to lawsuits from unsatisfied clients who were conned at the firm. Due to their engagement in high-risk trade with limited security globally, this has led to large profit margins compared to more secure platforms.

Alibaba’s expansion from business to business eCommerce platform was a game-changer in helping diversify the companies source of income. This was due to the idea by founder and executive chairman Jack Ma to offer e-commerce services to all consumers and suppliers of different scales. This involved the introduction of a C2C and B2B portal. This offered separate sources of revenue while at the same time providing three areas of growth. The introduction of a C2C portal was an innovative idea to offer a solution to clients that eBay was not able to provide, which proved efficient in the competition with eBay for the Chinese market.Also, the introduction of AliExpress an online retail service that enabled customers to buy a single commodity at a wholesale price hence targeting each and every one. It facilitates small businesses to sell across the world.Due to this, it is available in different languages.

Alibaba also has a unique pricing system and an unusual profit gain system. In its entry to the market, it created a competitive advantage by allowing free membership. This was unlike its competitors who charged a membership fee for one to access their services. Alibaba guaranteed free membership since it was founded. (Teo,2005).This helped Alibaba gain popularity over Eachnet due to their free membership difference. This caused a 65% fall in Eachnet’s market share in a time span of 4 years from 2003 to 2007 (Smith,2014). Though Alibaba charges a mediocre membership fee nowadays, most of their profit comes from value-added and advertising. They have implemented competition pricing strategies to gain benefits over other companies in the market. This enables them to deliver both quality and cost-effective goods hence attracting a lot of buyers.They also have product line pricing, which directs the attention to promotional products on the lower or upper end of the line.They also gain profit from value added services at the end stages of transactions. This has enabled Alibaba to seem cheaper and more cost-efficient due to its unusual profit-making ways.

Another invention that led to the tremendous success of Alibaba was the introduction of a payment system called Alipay. This ensured the introduction of safe credit card online payments. This approach was revolutionary as it increased e-commerce by tackling the main threat of deceitful and complicated payment process, which discouraged customers and suppliers. This significantly lowered delivery failure and risky payments(Yuan,2016).An evolution process was put in place to enhance communication between clients and producers. This ensured both sides gave their feedback concerning the business transaction they participated in so as to create a safe online community. So as to enhance the use of that system by Alibaba users, members are encouraged with discount coupons that depend on the reviews one has. This has led to Alipay been one of the best in terms of active mobile subscriptions

Creativity is depicted in the use of synergy among its products. All their services are interlinked in one way or another.A good example is the use of its e-payment app Alipay. By this linkage, one can access other services offered by Alibaba from the main menu, including the likes of Koubei, Alitrip, Taobao, Didi Kuaidi, etc. These apps all rely on Alipay for payment. Linking these services together helps increase the number of users, therefore, making it easier for a newly added service to reach the members. This is very efficient in the growth and success of Alibaba as they offer extensive, diverse services from various diverse industries. Due to this, one member can use various Alibaba services and products easily while paying with the Alipay platform. This helps Alibaba reach a critical number of users to attract both sides(buyers and sellers on Tmall and Taobao, for example).

Alibaba’s other invention is Yu LE Bao, which means entertainment treasure in English. It enables people to deposit money directly from their smartphones. Each person can only deposit a minimum of 100 Yuan and a maximum of 1000 Yuan.These funds are then invested in online game projects, films, and television programs.This investment program is better as it offers an annual interest rate of 7 percent, which is more than twice that offered by banks, which is a 3.3 percent rate. In a bid to encourage more investors, they are accorded privileges such as meeting the actors, deciding who directs and the leading man and lady. Another fund introduced was the Yu’e Bao or leftover treasure. It is a wealth management platform that has attracted over 500 billion Yuan, making it one of the biggest money market funds in the world.

Alibaba announced in 2016 a retail model that integrates offline,online,data, and logistics across one value chain.This was achieved by Alibaba opening physical stores and acquiring departmental stores across china at the cost of $2.6 billion (Peppard &Ward,2016). They also partnered with Ballian Group of companies that own supermarkets, departmental stores, and malls meant to improve on the total sales through offline shopping.

Alibaba also launched Alibaba group of schools in a bid to increase innovation. They nature young talent of innovators who are employed by the company to come up hen join the market. These innovators are mostly hired by the company to come up with ideas and integrate them into the business. This ensures the company is always looking for innovations to better its services across its subsidiaries.

Alibaba is establishing itself as a global innovator by blending of digital into the real world shopping experience creating the best of both worlds. Hema Xiansheng grocery stores use app-based services to offer fresh produce for their customers. Clients can order fresh produce to be delivered locally normally within a 3km radius of the stores. The payment of the products is made via the app. The app is advanced as one can opt to pay via facial recognition. Through its customer’s data, Alibaba is able to learn about its customers’ buying habits, which they use to estimate the demands of each commodity to reduce wastage. Hema stores are also being used by Alibaba as a platform with the stores making a deal with Starbucks in the summer of 2018 to use Hema kitchens and also offer its delivery network to deliver coffee.

In a bid to make e-commerce easier, Alibaba is refining the Pallitao image search app, which is a feature on Mobile Taobao and the Tmall app. It allows a user to capture a photo of an item while the app searches in real-time for products that look the same in their site and displays them. It works by detecting specific features on each product so as to increase the accuracy of the search. This innovation makes it easy for customers to order products even if they do not know the name of the commodity.

Alibaba is also working on e-ink, which is a digital shelf price tag that connects wirelessly to a physical store’s data system, which allows merchants to change prices according to demand while also tracking inventory and sales trends. This will make merchants get real-life experience as they will be in control of their products directly from the comfort of their locations. This will improve the quality of services offered by Alibaba. It is also working on technology that will enable smart products to connect with each other and respond to voice commands in an area called distributed voice recognition, which can be applied in homes and various environments like hotels, education, and entertainment.

In July 2016Alibaba group partnered with SAIC (Shanghai Automotive Industry Corporation) to manufacture the Roewe RX5, a new SUV which used the Alibaba’s ALIOS  operating system. It was dubbed the “The world’s first mass-produced internet car.” After just a year, it became one of the best-selling SUVs in China. Many customers valued the carbecause of their connectivity, which integrated them well while on mobility with Alibaba’s ecosystem. This involved the linking together of smartphones, shopping sites, video services, payment systems, IOT-enabled home appliances, wearable devices, and cars all interlinked to enhance one digital immersion experience.

Alibaba has specialized in facial recognition, which they use for an automatic payment service called “Smile to Pay,” which has been used by KFC in the eastern Chinese city of Hangzhou. This technology uses a sophisticated 3-D camera that scans the customer’s face to verify his or her identity. This allows the customers to register with Alipay to pay for their food by smiling at the restaurant’s self-service screen to authorize the transaction. Also, Alibaba has invested over $100 million in peppers manufacturer, Softbank Robotics owning a 20% stake where humanoid robots are used to take orders and make payment. Investment in technological innovations is a big step, and a look into the future as technology is evolving every day through the use of artificial intelligence.

Alibaba teamed up with Ford to build a giant, five storey completely automated car vending machine in China’s southern city of Guangzhou, which holds over 40 new cars. Tmall and Taobao users simply select a car on their mobile app, verify their identity, and confirm the payment using facial recognition. The car is then dispensed using robots from the vending machine. The whole process takes place fully unmanned and in a matter of minutes.

Alibaba also partnered with Intel to work on broadcast technology during the  Tokyo 2020 Olympic games. They agreed on a strategic memorandum of understanding under which they would work on four pieces of technology.

  • Use of a 360 degree 8k VR which would provide a good video experience for the fans. The 8K image definition quality would be delivered over 5G mobile networks, which would eliminate dizziness for VR headset users, whereas increasing the bandwidth efficiency by more than five times.
  • Introduction of 3D Digital twinning, which provided VR simulation of tracks,deployments of cameras,stadium navigation, and stadium seating services.
  • Cloud Broadcasting was launched in partnership with the Olympic Broadcasting Services. This was to be provided by the Alibaba cloud, which would boost efficiencies lost through offline and labor-based production while also cutting costs.
  • Implementation of the 3D Athlete Tracking (‘3DAT’) system, which uses deep learning algorithms to extract and analyze data about athletes during both training or in the competition by using standard cameras.

According to Alibaba, their support at the Olympic games was meant to support their globalization strategy. It was essential for showcasing their innovations and technological advancements to the world through the games. It also doubled as an opportunity to show how digital technology makes a difference in engaging young consumers in the modern world.

Conclusion

Alibaba’s innovativeness has been found to be unique hence giving it a competitive advantage with its competitors. They have made inventions that have made the cost of doing business to be lower while also ensuring quality and transparency in the process. As depicted in this essay, we learn that most of the inventions by Alibaba are customer-oriented. This has made their products and services more appealing to the masses compared to that of their competitors. This has made Alibaba into a global giant which has made many investments in the field of technology wanting to be a step ahead all through.Been on the process of innovating each and every time will not only make Alibaba a global giant but will also make sure that it remains among the top best companies in the world.

 

Bibliography

Cook, P. (1998), Best Practice Creativity, Gower, Aldershot

Gurteen, D. (1998). Knowledge, Creativity, and Innovation. Journal of Knowledge Management2(1), 5–13. doi: 10.1108/13673279810800744

Peppard, J., & Ward, J. (2016). The strategic management of information systems: Building a digital strategy. John Wiley & Sons.

Prahalad, C. K., & Hamel, G. (1994). The Core Competence of the Corporation. StrategischeUnternehmungsplanung / StrategischeUnternehmungsführung, 969–987. doi: 10.1007/978-3-662-41482-8_46

Shiying.L.,& Avery ,M.(2009).alibaba:The Inside Story Behind Jack Ma and the Creation of the World’s Biggest Online Marketplkace.HarperCollins.

Tan, B., Pan, S. L., Lu, X., & Huang, L. (2015). The role of is capabilities in the development of multi-sided platforms: The digital ecosystem strategy of Alibaba. Com. Journal of the Association for Information Systems, 16(4), 248.

Walraven, P. (2009) A Brief History (and Future) of Alibaba.com – TechNode. TechNode.

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