Alibaba's Innovation

What is innovation? The definition has changed a lot in recent years. Thanks to technology and modern sharp minds. Innovation is now seen as to be seeking something new. It may be new from existing product or service or platform. It is often referred as being disruptive.

Alibaba is no doubt an innovative company in above terms. It was defined as “FOR HELPING CONSUMERS SAVE, SPEND, AND BE ENTERTAINED” in the list of most innovative companies in 2014 of fastcompany.com. I think this is what Alibaba does. They are trying to rethink the customer at its core and their experience and their pain points. This also reflects in Jack Ma’s mission

 – “Clients first, employees second  and Shareholders third”.

There are always benefits with being the largest, the richest, the first and now-a-days most disruptive. With extra equity at hand, Alibaba is exploring many new areas such as mobile handsets with its own Yun OS. Alibaba has got a great potential to be disruptive in this area. Let us examine how they can do it and what impact will have.

To set the tone, let me list a few disruptions Alibaba has already done:

-          Alibaba.com (along with Taobao and Tmall) in retail

-          Alipay in payment

-          Aliwangwang in instant messaging

Alibaba has been able to break the image of Chinese innovation so far and they will continue to do so. Aliyun OS (Yun OS) is different in its technology in the way that it uses its own virtual machine. Although it uses some frameworks and tools of Android but these are mostly to patch users with android apps.

It will definitely have a great impact on players and industry as whole.

For Google:

-          With Google getting a lot of traction from Chinese android developers, this action of Alibaba can become a huge roadblock. Yun OS will attract and poach a lot of google minds in China.

-          Google was being very restrictive to warn Acer of alienation, if they use Yun OS for developing phones. This shows how much Google is concerned about Alibaba. However, I believe this will not stop Alibaba. They can definitely partner with other companies such as Meizu or if not anything else, come up with their own high end mobile handsets (eventually disrupting that industry as well)

-          Alibaba has all the huge platform to advertise its offering through its own products, without incurring much cost, a big plus for them.

-          Xiaomi, one of the major Google’s android partner has already started embedding Yun OS, a word of caution for Google.

For Amazon, Ebay and other retail giants:

-          Although both players are in different countries, as Alibaba has defeated ebay in China, it can be a caution sign to Amazon. 

-          I see Amazon has an advantage of better GUI as compared to Alibaba and if they continue (this is very crucial) their services to customers in same way they are doing, I see no motivation for their users to go to Alibaba.

-          Another important factor is the relations with suppliers. This actually accounts for gaining market share.

Alibaba being such a tough challenger, will it sustain in international market?

International market presents an equal ground for Alibaba and others. There are some observations (for future) and facts here:

-          It will be interesting to see how Amazon (and likes) or Alibaba manage to establish (by adapting to local community) in new geographies.-          If we see the revenue numbers, Amazon earns 40% of its revenue from outside North America while Alibaba earns approximately 85% from China.

Recent News:

An interesting phenomenon happened last month, which can also provide us some cues on where Alibaba is heading or wants to head.

-          Alibaba decided to sell 11main.com, in order on focus on China (Please refer to the last few links). It will continue to sell foreign brand on its platform, Tmall in international market.

-          Alibaba  is planning to increase its stake in Paytm in Indian Market – another huge market. They would like to leverage India’s growing ecommerce.

To conclude, I must say that future will depend on what you do now. Be updated, be on top and be disruptive. If any of these existing companies (or even a new startup) can follow this, it will succeed.

Sources:

http://www.fastcompany.com/3039571/most-innovative-companies-2015/alibaba

http://www.alibaba.com/

http://www.wsj.com/articles/behind-alibaba-ipo-innovation-chinese-style-1410850438

http://techcrunch.com/2014/05/06/alibaba-asia-innovation/           

http://www.forbes.com/fdc/welcome_mjx.shtml

http://www.forbes.com/sites/anaswanson/2014/11/30/eight-innovative-industries-china-does-better-than-anywhere-else/

https://en.wikipedia.org/wiki/Alibaba_Group

http://www.zdnet.com/article/alibabas-aliyun-os-hopes-to-be-android-of-china/

http://www.fiercewireless.com/story/googles-pichai-china-huge-opportunity-android/2015-02-27

http://www.theverge.com/2013/8/29/4672668/what-is-xiaomi-china-smartphone-hugo-barra-android

http://seekingalpha.com/article/2472525-is-alibaba-a-threat-to-amazon

http://www.forbes.com/sites/walterloeb/2013/07/24/alibaba-a-threat-to-amazon-ebay-walmart-and-everyone-else/

http://www.businessinsider.com/why-alibaba-is-becoming-a-huge-threat-to-amazon-and-ebay-2014-8

http://finance.yahoo.com/news/alibaba-sells-us-online-marketplace-150620957.html

http://marketrealist.com/2015/07/alibaba-increase-stake-indian-e-tailer-paytm/

http://marketrealist.com/2014/09/alibaba-started-increase-presence-cloud-market/

Impact of Google’s Project Fi on Telefonica

To understand and answer these questions, we must first analyse what is MVNO market and its relationship to mobile network market. The need for MVNO was provoked by poor quality of service provided by the existing companies. While both markets are in communications, MVNO aims at providing only a data service and mobile networks provides voice, text as well as data services. MVNO market is not something new. Many players are already existing in this market. Then why such a big fuss with Google.

Off course ! There has to be one with Google always.. J

Let’s first see what is offered as a differentiating factors (affect its adoption rate as well) :--

-       For the first time, a company is engaging with more than one company to provide MVNO services. It’s competitors such as Republic wireless rely only on one service provider.

-       Pay as per usage pricing

-       As Google (and others) have done often, it will provide a feel good factor to its users and another opportunity to brag about being updated “Whats up my friend Tom..!! See… I can stream a video from anywhere.. Project Fi.. I love it.. !!”

-       Google’s financial backup (very much needed by MVNOs now)

Given these factors, there are also some factors which can put the whole show down. Google if wants to disrupt the mobile network market can do it through a more forceful way with support from its ad-supported plans. The things to watch out for Google will be how to provide maintenance support. Also it is said for every successful venture from Google, there are more than 10 failed. Fi has to cross through this acid test.

 So why is Google here? What’s its agenda?

1.      Providing it through Nexus 6, making the pride factor even intense.

2.      Forcing telecom operators to offer competitive prices and better service (including data service, which will indirectly help Google in many ways)

3.      As a strategic move (Google Fibre, Google Loon and now Project Fi). It is fitting in another piece in the whole puzzle may be to move towards a Google Mundo.

So the disruption. Hmm.. !! Yes the disruption will happen but it will happen in a much slower way then speculated and on a much larger scale (Google Mundo).

It definitely does not pose a threat to existing mobile network providers, however it will definitely tighten their pricing policies. Also it will be critical for mobile network service providers to find a place in the new ecosystem. Good news for us (consumers) .. J

Now lets us see how project fi can impact Telefonica.

Telefonica is a Europe telecom giant with presence in more than 21 countries (not in US though). The recent launch will definitely not have a direct impact in Telefonica but it can be seen as a warning or even better, as an indicator for taping same opportunity in Europe and Latin America. Telefonica needs to adopt or it will die. Be unicorn or be extinct as dinosaurs. Telefonica, if understands that they are not a Mobile network provider but a network provider, can take an early mover advantage in its well established territory.

There can be a few ways to grab this place:

Partner with Google: if Google decides to enter these territories, Telefonica can think of partnering with Google. This will definitely boost the brand recognition. People are very happy and PROUD with Google and the biggest reason they will move to project fi is the trust they have in Google’s services over other network service providers. The merger will not only hedge any potential financial and market share threat but also provide them an opportunity to improve their existing service problems through technological expertise of Google.

Focus on own strengths: I believe Telefonica must start investing in improving its data services. Remember project fi will impact individual household customers more than corporations and big institutes. After all, if they can provide a more robust data service to their clients, why would they move to any MVNO’s.

Establish a subsidiary combining synergies and best of both the above (My recommendation): If Telefonica establishes another brand under its own umbrella, focusing on MVNO solutions, it can be a major step to grab this place.

-       Not only is this a futuristic step but also is a great way to increase existing customer base. This will help Telefonica to retain its advantage in its strong markets and intrude in other markets under the name of MVNO service provider.

-       A good replica of what project fi is doing right now, by partnering with more than one service providers can add to its value.

-       The proposition will act like reserving a place for Telefonica for future, in advance. It’s important to adopt and not remain dinosaurs to get extinct after all. 

-       It can also provide opportunities to collaborate with Google or may be Facebook for its technical capabilities to provide a data network (not a mobile network).

-       Solutions offered by Telefonica right now definitely state that they have potential to be a leader in this market. Project Fi provides a great advantage to travellers, while a product from Telefonica already does it, proving its capabilities.

Invest in technology, it will always help but make sure your technology is new as well.

The key is to act now and act differently…!!

Sources (in addition to those provided in assignment description PDF)

http://www.mvnodynamics.com/tag/market-share/

http://blogs.forrester.com/dan_bieler/15-04-24-google_will_not_crack_the_wireless_market_by_following_others_into_the_mvno_arena

http://www.amgoo.com/blog/how-will-googles-new-nova-mvno-disrupt-the-mvno-in-usa-scene

https://medium.com/@puhala/why-google-fi-will-disrupt-the-us-carrier-market-9d4d4865ddc5

https://en.wikipedia.org/wiki/Mobile_virtual_network_operator

http://www.statista.com/statistics/221386/revenue-of-top-20-european-telecommunication-operators/

http://www.telefonica.com/en/business_solutions/html/multinational/home.shtml