CASE 2 alibaba-using-ai-for-creativity-in-customer-experiences (2).pdf

Alibaba: Using AI for Creativity in Customer
Experiences
For the most optimal reading experience we recommend using our website.
A free-to-view version of this content is available by clicking on this link, which
includes an easy-to-navigate-and-search-entry, and may also include videos,
embedded datasets, downloadable datasets, interactive questions, audio
content, and downloadable tables and resources.
Author: Renata Thiébaut
Pub. Date: 2024
Product: Sage Business Cases

DOI: https://doi.org/10.4135/9781071926932
Keywords: creativity, customers
Disciplines: Consumer Economics, Economics, Business & Management, E-business Economics, Creativity
& Innovation in Business, Entrepreneurship
Access Date: February 15, 2024
Publishing Company: SAGE Publications: SAGE Business Cases Originals
City: London
Online ISBN: 9781071926932
© 2024 SAGE Publications: SAGE Business Cases Originals All Rights Reserved.
Sage
© 2024 Renata Thiébaut
Sage Business Cases
Page 2 of 17 Alibaba: Using AI for Creativity in Customer Experiences

This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom dis-
cussion or self-study, and is not meant to illustrate either effective or ineffective management styles.
Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educa-
tional, or personal use only within your university, and cannot be forwarded outside the university or
used for other commercial purposes.
The case studies on SAGE Business Cases are designed and optimized for online learning. Please re-
fer to the online version of this case to fully experience any video, data embeds, spreadsheets, slides,
or other resources that may be included.
This content may only be distributed for use within GALGOTIA'S UNIVERSITY.
2024 Sage Publications, Inc. All Rights Reserved
Abstract
The application of artificial intelligence in e-commerce has revolutionized the retail industry, giving con-
sumers more interactive and personalized experiences.
This business case introduces recent developments in the e-commerce industry to understand how
Alibaba’s managerial style and department structuring have contributed to optimizing business strate-
gies that drive innovation.
By examining Alibaba’s “employee-centric” approach, students can learn how to leverage the power of
AI to not only enhance the customer experience but also foster employee creativity to drive business
growth.
Case
Learning Outcomes
By the end of this case, students will be able to:
Sage
Sage Business Cases

• discuss the impact of a company adopting an AI system on business creativity at the level of new
product launch and new features for enhanced consumer experience;
• demonstrate the correlation between corporate culture and creative labor;
• understand Alibaba’s structure and the contributions of DAMO Academy and Tmall Innovation Center
to supporting the company’s technological disruption;
• analyze the latest technologies implemented by the company on its main marketplace, Tmall, to
achieve higher sales; and
• explore the “idea-to-shelf” concept of product innovation by using machine learning and advanced
data analysis methods.
Introduction
China’s journey to becoming the largest online market in the world, with nearly half of all global online trans-
actions, started in the 1990s, with the first Internet-based company China Yellow Pages, launched by Jack
Ma. Because of Ma’s English-teaching background, the business model addressed a gap in the market by
catering to foreign companies’ needs. The company’s main scope was to offer website development for for-
eign companies to export to China via the B2B model.
Despite the eventual failure of China Yellow Pages, Jack Ma envisioned that the Internet would be the foun-
dation of the future of modern business. Back then, there were already a few players in the e-commerce in-
dustry in the country, such as 360buy.com, a B2C marketplace selling electronics founded in 1998. Less than
one year later, Jack Ma founded Alibaba Group and its C2C Taobao marketplace. Nearly 25 years later, these
two companies are not only the main e-commerce companies in China, but in the world: 360buy.com became
JD.com and Alibaba, Alibaba Group Holding.
Background: The Role of Competition in Alibaba’s Leader-
ship
When Alibaba was founded in 1999, the e-commerce industry in China was still in its infancy, and Taobao, the
company’s eBay-like marketplace, was one of the first platforms to offer unique opportunities to small busi-
Sage
Sage Business Cases

ness owners and entrepreneurs to sell online.
With Taobao, Alibaba invested in the development of an ecosystem through a foundation or partial acquisition
of companies that would offer complementary services, including Alipay from Ant Financial (now Ant Group),
which became the largest online payment gateway in China; Cainiao Smart Logistics Network Limited, which
was responsible for fulfillment services; Alibaba Cloud, a subsidiary of Alibaba Group for cloud computing;
and Alimama, the company’s marketing technology platform.
Chinese players were quick to use e-commerce as both a medium for shopping and to solve the bottlenecks
of traditional retail in all corners of the country, and e-commerce gained more popularity. Now many com-
panies have started competing to provide the best services, which in turn revamped not only retail but also
logistics, payment sectors, and technology.
Figure 1. Top 6 Companies in China, Ranked by Retail Ecommerce Sales Share, 2021.
Source: Author, based on data from Insider Intelligence (2021).
Today, the e-commerce market in China is highly fragmented and competitive. Taobao and TMall (both part of
Alibaba Group) and JD.com (Jingdong) are the market leaders, but other platforms, like Pinduoduo, Suning,
have also become significant players. In social commerce other platforms have emerged, such as Douyin (the
Chinese version of TikTok) and Xiaohongshu (Figure 1).
The growing competition led Alibaba to expand its offerings beyond e-commerce, become a multinational
technology company, and differentiate itself from other competitors.
Sage
Sage Business Cases

Alibaba’s Approach to Management
Chinese culture has played an important role in defining Alibaba’s managerial approach: Jack Ma’s adoption
of “father figure” and “leader to follow” personas reflects traditional perceptions of leadership in Chinese soci-
ety. In management, paternalism emphasizes the role of a leader to be charismatic and inspirational, provid-
ing guidance to a main mission to be achieved rather than a top-down authoritarian approach.
From his own scholastic and job application failures to achievement of a successful career, Jack Ma con-
structed the company’s narrative on internal cultural values to give employees a sense of belonging, in a nar-
rative where success comes after hardship and hard work.
When Jack Ma stepped down as the CEO of the company in 2013, the management style shifted to be agile
under Daniel Zhang’s leadership (Ackroyd, 2023). The agile management approach is inspired by the Agile
Manifesto, which seeks to implement interactive and incremental approaches to managing software projects,
but its main principles were adapted to provide cutting-edge customer-centric services and products, fitting
Alibaba’s existing culture and management contexts. These main principles are as follows.
• Female management: out of the 18 founders of Alibaba, three were women. Since then, the company
has prioritized gender diversity. In 2022, Alibaba achieved 50% women representation in top leader-
ship roles in the company, according to Globaldata (n.d.).
• Team collaboration: the company fosters cross-functional teamwork and promotes cooperation be-
tween departments. This allows the company to deploy digital technologies across key branches, in-
cluding cloud and e-commerce solutions, logistics and fintech. The organizational structure, centered
on a digital middle-office under the management of the Chief Technology Officer, is the main enabler
of innovation in the company (Greeven et al., 2023).
• Test-driven approach: innovative projects are often first implemented on a small scale to verify the
results and implications in the industry. Alibaba’s launch of high-demand merchandising in collabo-
ration with brands, for instance, is the result of an in-depth investigation of consumer behavior and
cutting-edge technologies that analyze different data sets.
Finally, management has contributed to fostering employee participation in the company through cross-func-
tional collaboration and creativity instigation.
Sage
Sage Business Cases

AI for Creativity in Customer Experiences at Alibaba
Group
E-commerce is gaining importance in China; projections estimate it will make up 56.8% of the total retail sales
in the country in 2025. New solutions have therefore become necessary to positively impact customer sat-
isfaction and overall experience compared to physical retail (Cramer-Flood, 2021). Artificial intelligence has
played an important role in filling this gap through the deployment of technologies to enhance understanding
of consumers’ needs.
However, personalized and interactive customer experiences in e-commerce are limited compared to physical
retail, often impacting the overall sales performance of online stores, so technology plays an important role
in improving overall experience. Some of the metrics used to evaluate these limitations are the add-to-basket
rate, checkout completion rate, and return rate. The fashion industry is perhaps the most susceptible to re-
turns due to the lack of standardization of sizes and product fitting. As a result, there is a negative impact on
revenue growth and competitiveness in the online market.
The relationship between creativity and AI approaches impacted the e-commerce industry in China in recent
years, as innovation became the most crucial factor for bridging consumers, merchants, and marketplaces.
Structural changes to managerial processes were thus paramount for supporting employee contributions to
companies’ digitalization (Gobet & Giovanni, 2019).
Alibaba’s path to innovative leadership has taken three distinct forms: (1) process creativity, (2) organizational
collaboration creativity, and (3) product and service creativity.
Process Creativity
Alibaba’s company culture is known to have unique characteristics that encourage employees to be innov-
ative and entrepreneurial: employees are the ones responsible for technology disruption. The inspirational
leadership, happiness, and purpose-driven approaches—implemented by founder Jack Ma—were important
aspects for fostering employees’ skills and creativity.
Under Daniel Zhang, more emphasis was put on a flat and agile management organizational structure aiming
Sage
Sage Business Cases

for more innovation and creativity based on the employee’s autonomy to take risks (Alizila Staff, 2021). Con-
sumer-centrism is still the focal point of the company, but now so is an employee-centric culture.
Machine learning is poised to transform the business to be innovative as algorithms contribute to a better
decision-making process, which, within its marketplaces, includes investigating consumers’ interactions and
behavior on image and voice search bars, chatbots, and paid advertising channels developed and managed
by Alibaba’s marketing technology and intelligent algorithm platform, Alimama.
Organizational Collaboration Creativity
To further accelerate its technological capabilities, two divisions were established in 2017, DAMO Academy
and Tmall’s Retail Innovation Center (TMIC), to develop machine intelligence, computing, robotics, and finan-
cial technology, integrating mechanisms for technology disruption and AI for value creation.
Below is the summary of DAMO Academy and TMIC’s structures and how they contribute to Alibaba’s lead-
ership.
DAMO Academy
The adoption of a consumer-centric approach in R&D at DAMO Academy has resulted in the development
of several functionalities to increase sales conversions within Alibaba’s marketplaces, including 3D, AR, VR,
NFT, and the metaverse. DAMO Academy has five different laboratories that are responsible for developing
and improving AI applications, being the most important department of the group for scientific and technolog-
ical research and innovation (see Figure 2).
Sage
Sage Business Cases

Figure 2. DAMO Academy’s Laboratories
Sage
Sage Business Cases

Sage
Sage Business Cases

Source: Author, based on info from DAMO Academy (n.d.).
This organizational structure supports Alibaba’s ecosystem vision, where it controls the employment of tech-
nologies in all operational sectors related to e-commerce, including logistics, online payment, marketplaces,
and online advertisement.
• Machine Intelligence: Alibaba DAMO Academy’s Machine Intelligence Research Lab develops ad-
vanced applications such as generative AI, image search, and recognition technologies to improve
efficiency in retailing and transportation. The Vision Lab uses computer vision technologies to ana-
lyze offline algorithms to prevent shoplifting at the company’s Hema brick-and-mortar stores.
• Data Computing: DAMO’s Data Computing Lab provides solutions for an agile computing ecosystem,
being the core Lab for data application to further understand consumer behavior.
• Financial Technology: This lab is of particular importance for Ant Group, because it provides research
and support to improve security and provide new solutions for the company’s online payment gate-
way. For instance, blockchain cross-border remittance is currently being developed for increased
transparency and reduced potential risks.
• Robotics: The Alibaba DAMO Academy’s Robotics Lab is responsible for the development of au-
tonomous driving technologies, which are paramount to automating logistics through drone and self-
driving trucks for order delivery.
• X Lab: The X Lab is dedicated to exploring new technologies, particularly to increase consumer ex-
perience. Immersive technologies, such as 3D, AR, VR, and the metaverse for better shopping ex-
periences, are ideal for implementation on the marketplaces.
DAMO Academy’s integrative mechanism provides specific research and development to Alibaba’s market-
places, AliCloud, Alipay, and Cainiao, aiming to provide new solutions for current consumer experience chal-
lenges. It also promotes the use of shared tools such as the AliOS operating system, which is an OS solution
for the mobile, industrial, and IoT (Internet of things) devices used by Alibaba’s departments.
Tmall Innovation Center
TMIC is Tmall’s retail innovation arm, with incubating brands as its main goal, and a narrower scope and
Sage
Sage Business Cases

structure than DAMO Academy. TMIC is the department responsible for translating market insights and co-
ordinating with merchants the development of new and innovative products, which are highly appealing to
Chinese consumers.
While DAMO Academy works with different departments and aligns with them in achieving Alibaba’s innova-
tion goals, Tmall Innovation Center is the bridge between research consulting companies such as Nielsen,
Kantar TNS, and Euromonitor International, to name just a few, and uses their data to leverage research mod-
eling expertise and existing datasets. The combination of diverse datasets, particularly outside of the Alibaba
ecosystem, is paramount to having an enhanced understanding of consumer behavior in the Chinese popu-
lation of 1.4 billion (Kantar, n.d.).
This triangular approach involves a combination of analytical methods to transform consumer behavior data
into product and service creativity.
Product and Service Creativity
Since the establishment of DAMO Academy and TMIC, several innovative technologies have been imple-
mented, including drone delivery and warehouse robotization, e-yuan payment, and other features on Tmall,
the main marketplace used by Chinese online consumers.
The 3D Virtual Showroom with VR technology for product display increased the merchant’s performance by
200% in Gross Merchandise Value (GMV) in 2021 (Fan, 2021). Consumers can visualize a product in the
environment of a mimic home within the marketplace and within the store’s live-streaming channel. The Tmall
Luxury Pavilion, launched in September 2022 with the support of DAMO Academy, is the first metaverse e-
commerce platform in the country, promising to drastically increase sales revenues (Ackroyd & Yu, 2022).
JD.com launched a similar platform two months later, underlining at the same time Alibaba’s pioneering spirit
and the competition’s continuous technological advancements in the e-commerce field.
TMIC inaugurated concept-testing based on the “idea-to-shelf” approach, which focuses on the consumer-
to-business (C2B) business model. It includes the combination of consumer data analysis, surveys, and the
analysis of marketing initiative methods to identify and predict consumer trends, through a data-powered trend
Sage
Sage Business Cases

analysis tool with precise data analysis and real-time consumer insights. Consumer data asset management
helps brands maximize consumer understanding. TMIC cooperates with a certain brand to analyze a defined
industry and the key characteristics of over 800 million consumers of a certain product, then utilize predictive
analysis models to develop new product flavors and package designs, a process that takes six months (Kan-
tar, n.d.).
Nescafé partnered with TMIC to develop Fruity Ice Coffee in green apple, peach, lime, strawberry, coconut,
and passion-fruit flavors to be brewed with ice or sparkling water. This solution was implemented after analyz-
ing different sets of data to understand consumer behavior, particularly the behavior of consumers who do not
enjoy the bitter flavor of coffee. Data revealed that 70% of users were keen to try multiflavor coffee products
(Ackroyd, 2022).
Givaudan, a global fragrance and beauty company, partnered with TMIC in 2021 in one of the most innovative
projects developed by the department, for AI-powered fragrance co-creation using behavioral data. Alibaba
and Givaudan founded the T-Lab Source Innovation Laboratory to speed up the product development process
to four weeks, utilizing joint efforts in data sharing, technologies, and an olfactive culture map (Givaudan,
2021).
These are only two examples of how brands cooperate with TMIC to determine market trends.
Alibaba’s Organization Restructuring
In March 2023, Alibaba announced a company organizational restructuring, with the aim of implementing a
new management approach that will be “more agile, enhance decision-making, and enable faster responses
to market changes,” according to the company’s CEO, Daniel Zhang.
The six units, the Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao
Smart Logistics, Global Digital Commerce Group, and Digital Media and Entertainment Group, will operate
independently, having their own chief executive and board of directors; however, the units can still cultivate
synergies with other units within Alibaba’s ecosystem (Ackroyd, 2023). It is expected that DAMO Academy
will continue to play an important role in introducing new technologies in the group.
Sage
Sage Business Cases

Solution
Alibaba’s company culture allows an environment where employees take risks and adopt an entrepreneurial
mindset. This “employee-centric” approach was crucial to leveraging AI, which makes it possible to enhance
customer experience through new technologies and algorithms mostly developed in-house. The role of Tmall
Innovation Center and particularly DAMO Academy in supporting other units allowed Alibaba to continue be-
ing one of the most innovative companies in China.
As a result, the improved customer engagement and increased employee satisfaction, creativity, and sense of
contribution enhance business growth. The company’s investments in R&D have contributed to the improve-
ment of the digital environment for Chinese netizens, and have reached nearly all of China’s total number of
householders; for example, nearly 94% of adult Internet users use Alipay, the company’s payment gateway
(Osio, 2019).
Alibaba illustrates that, through the analysis of different data sets created with the intention of deeply under-
standing consumer needs, it is possible to improve experience, develop new products, and innovate at the
company-level.
Dilemma
Alibaba’s case study reveals that both company structure and management approaches have an impact on
innovation. Should companies adopt Alibaba’s “employee-centric” approach and leverage in-house AI to im-
prove customer experience, or should they stick to traditional methods and use third-party tools and service
providers?
Several industries, particularly the retail industry, have been transformed by the application of immersive and
artificial technologies, so it is paramount for companies to understand the intersection between automatiza-
tion and operations efficiency. In e-commerce, more interactive and personalized experiences have drastical-
ly impacted the way consumers shop online, increasing both loyalty and overall sales. Alibaba, one of the
world’s largest e-commerce companies, has been at the forefront of this revolution, transforming its business
from e-commerce-oriented to technology-oriented not only in China but globally.
Sage
Sage Business Cases

However, the question arises as to whether Western companies should take Alibaba as an example to follow.
This reasoning is presented with a set of challenges, such as the need for significant investment in technolo-
gy, including R&D, and cloud infrastructure. Relying on third-party tools and service providers may be a more
cost-effective option, yet limit a company’s ability to innovate, remain competitive, and scale their businesses,
not to mention the potential risks of relying on information from outsiders to make an informed decision.
On the other hand, adopting an agile management style that allows employees to exercise creativity is more
feasible within companies of all sizes, but the company needs to have a clear strategy to first hire necessary
experts and have an overall strategy with actionable targets and missions in terms of innovations.
Implementation
It is known that the cost of technology development limits smaller companies from being as innovative as the
larger ones. But the Alibaba case has two messages.
First, artificial intelligence can serve as a tool for employees to increase their creativity, but it needs to be
incentivized to support the company’s missions and path to innovation.
Second, an ecosystem company allows different units to support each other, diminishing the reliance on third-
party tools, systems, and technologies. This is a lesson more suited to larger e-commerce corporations, but
the potential results can be significant growth and competitive advantage.
Evaluation
For companies to evaluate the possible results of organizational changes, they must identify current needs
and focus on remaining adaptable to constantly changing consumer preferences. Employees should be con-
sidered as a crucial part of these changes, so investment in training is necessary.
Sage
Sage Business Cases

Discussion Questions
1. How does the company culture at Alibaba foster employees’ skills and creativity?
2. Why is the use of technology by marketplaces so important?
3. What is the “idea-to-shelf” approach?
4. Why is the use of data important for launching new products?
5. Why are companies that utilize an ecosystem business model in the best position to drive innovation?
Further Reading
Insights by GreyB. (n.d.). Alibaba patents – Key insights and stats. https://insights.greyb.com/alibaba-patents
Kerr, W. R., O’Connor, D., & Palano, J. (2020). Agile consumer product innovation with Alibaba’s Tmall Inno-
vation Center. Harvard Business School. www.hbs.edu/faculty/Pages/item.aspx?num=58091
Zeng, M. (2018). Alibaba and the future of business. Harvard Business Review. https://hbr.org/2018/09/aliba-
ba-and-the-future-of-business
References
Ackroyd, A. T. (2022). Nestlé, Nivea and Philips see innovation in China going global. Alizila. www.alizila.com/
nestle-nivea-and-philips-see-innovation-in-china-going-global
Ackroyd, A. T. (2023). Alibaba’s CFO sees multiple ways to boost shareholder value beyond share buybacks.
Alizila. www.alizila.com/alibabas-cfo-sees-multiple-ways-to-boost-shareholder-value-beyond-share-buy-
backs/
Ackroyd, A. T., & Yu, I. (2022). Alibaba rolls out deeper immersive luxury shopping experience in the meta-
verse. Alizila. www.alizila.com/alibaba-rolls-out-immersive-luxury-shopping-metaverse/
Alizila Staff. (2021). Alibaba introduces more agile organizational structure to accelerate domestic and in-
ternational growth. Alizila. www.alizila.com/alibaba-introduces-more-agile-organizational-structure-to-acceler-
Sage
Sage Business Cases

ate-domestic-and-international-growth/
Cramer-Flood, E. (2021). China ecommerce forecast 2021: Alibaba is losing share, social is booming, and
everyone is livestreaming. Insider Intelligence. www.insiderintelligence.com/content/china-ecommerce-fore-
cast-2021
DAMO Academy. (n.d.). Reshape the world through technology. https://damo.alibaba.com/labs/
Fan, J. (2021). Investor day. China retail marketplaces – An ecosystem with high-quality and sustainable
growth. https://data.alibabagroup.com/ecms-files/1532295521/b20593c0-7c3b-4877-910b-172fb3493418.pdf
Givaudan. (2021). Givaudan leads fine fragrance digital innovation through first-of-its-kind partnership with
Tmall in China. www.givaudan.com/media/media-releases/2021/givaudan-leads-fine-fragrance-digital-inno-
vation-through-first-its-kind
Globaldata. (n.d.). Alibaba group: Women in the workforce in 2022. www.globaldata.com/data-insights/retail-
amp-wholesale/alibaba-group-women-in-the-workforce-2125960/
Gobet, F., & Giovanni, S. (2019). How artificial intelligence can help us understand human creativity. LSE Re-
search Online. http://eprints.lse.ac.uk/102166/
Greeven, M. J., Xin, K., & Yip, G. S. (2023). How Chinese companies are reinventing management. Harvard
Business Review. https://hbr.org/2023/03/how-chinese-companies-are-reinventing-management
Insider Intelligence. (2021). Top 6 companies in China, Ranked by Retail Ecommerce Sales Share,
2021.https://www.insiderintelligence.com/chart/247782/top-6-companies-china-ranked-by-retail-ecommerce-
sales-share-2021-of-total
Kantar. (n.d.). TMIC Solution Suite. www.kantar.com/en-cn/expertise/research-services/research-capabilities-
and-technology/kantar-tmic-solution-suite
Osio, J. (2019). Who uses China’s mobile payment systems?S&P Global Market Intelligence. www.spglob-
al.com/marketintelligence/en/documents/julber-osio-who-uses-chinas-mobile-payment-systems.pdf
https://doi.org/10.4135/9781071926932
Sage
Sage Business Cases

CASE 2 alibaba-using-ai-for-creativity-in-customer-experiences (2).pdf

Recommended

Recommended

More Related Content

Similar to CASE 2 alibaba-using-ai-for-creativity-in-customer-experiences (2).pdf

Similar to CASE 2 alibaba-using-ai-for-creativity-in-customer-experiences (2).pdf (20)

Recently uploaded

Recently uploaded (20)

CASE 2 alibaba-using-ai-for-creativity-in-customer-experiences (2).pdf