Innovation at Amazon and Alibaba

Innovation at Amazon and Alibaba

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Executive Summary

Amazon and Alibaba are two highly-innovative multinational corporations domiciled in the United States and China, respectively. They have elaborate innovation management systems that leverage experimentation with new ideas. Their founders have created innovation cultures in their organisations, which has resulted into the transformation of the two companies into technology giants. This is because they deploy product, process, positioning and paradigm innovations, albeit at different intensities and levels. The analysis of their innovation processes using Tidd and Bessant’s four-step innovation process revealed the similarities and differences in the innovation management. From the innovation gaps identified, it is recommended that Amazon and Alibaba incentivize innovation teams and develop innovation ecosystems that can help them upscale their innovation scope.

Table of Contents

Contents                                                                                                                     Page

Executive Summary. 2

Introduction. 4

Background of the Organisations. 5

Main Innovative End Results. 6

Innovation Space. 9

Product Innovation. 10

Process Innovation. 11

Position Innovation. 12

Paradigm Innovation. 13

Analysis of Innovation Processes. 14

Recommendations. 16

Conclusion. 17

References. 18

Innovation at Amazon and Alibaba


In the contemporary highly-competitive business environment, innovation is seen to be critical for survival. Business entities grow and survive due to their ability to innovate new processes and products that keep them ahead of their competitors and entice new customers domestically and globally. With customer-centricity being the new focus of contemporary organisations, meeting and exceeding the customers’ expectations is now what drives many successful firms to become great innovators. The operative definitions of innovation and related terms are provided by Granstrand and Holgersson (2020). In this regard, innovation is the level of newness of a change within an organization or the level of usefulness of the application of novelty. Granstrand and Holgersson (2020) also note that innovativeness in an organization is based on the concept of innovation systems. In this case, an innovation system is a collection of mechanisms and related factors that influence generating and using innovations and achieving an innovative performance. They introduce the concept of innovation ecosystems to describe the innovative culture in organizations. In this regard, an innovation ecosystem comprises the interaction between actors, artifacts and institutions that work collaboratively, complementarily, and competitively to generate and utilize novel ideas and items. 

In the ensuing report, Amazon and Alibaba are selected as the two corporations that can showcase the innovation process management and the innovation ecosystem because they are enjoying their current success by being continuously innovative. These companies make for good comparison of innovation strategies because while they are based in the opposite ends of the world and their business models are different despite operating in the same industry, they has sustained innovative performance since their inception. Besides, while they have several similar offerings, their innovation processes are fundamentally different. These similarities and differences justify the selection of these two companies, which have become established as global brands and corporate masters of innovation.

Background of the Organisations, Inc. (Amazon) is based in Seattle, in the United States, while Alibaba Group Holding Limited (Alibaba) is headquartered in Hangzhou, China. Both are registered as multinational technology companies whose initial focus on the retail industry has expanded to offering other technology-based services to enhance and diversity the experiences of their customers. Amazon now focuses on electronic commerce, artificial intelligence, cloud computing, and digital streaming, while Alibaba specializes in electronic commerce, artificial intelligence and cloud computing as well. In these regard, both companies have similar business focus. Both companies were founded by visionary and highly-innovative individuals who have become multibillionaires from their businesses. Specifically, Amazon was founded by Jeff Bezos in 1994 as an online bookselling outlet (although he called it Cadabra first before changing the name to Amazon a few months later), while Jack Ma founded Alibaba as a B2B online market place, back in 1999. Interestingly, both companies began at start-ups located at their founders’ apartments. In addition, both companies are public entities with alibaba issuing its initial public offering at the NASDAQ stock exchange in 1997 and Alibaba entering the New York Stock Exchange (NYSE) through an initial public offering in 2014. Currently, Bezos is the executive chairperson of Amazon resigning as the chief executive officer while Ma has retired from Alibaba following a regulatory crackdown by the Chinese authorities (Wu & Zhu, 2021). Nonetheless, while amazon and Alibaba each have distinct features that make them purely electronic commerce companies, their respective business models differ greatly. Amazon is a massive retailer of new and used goods, while Alibaba operates and an intermediary between buyers and sellers.

Amazon and Alibaba have enjoyed tremendous success globally, and more specifically, in their domestic markets; the United States and China, since they were founded. As of November 2021, Amazon has a market capitalisation of $1.779 trillion, making it the most valuable technology company by capitalisation in the world, while Alibaba’s is $438.31 billion, ranking it 14th globally, which is a drop from a high of $837.84 in the previous year, with the drop largely attributed to the coronavirus pandemic and the regulatory clampdown (CompaniesMarketCap, 2021). In 2020, Amazon’s stock price hikes by over 100 % at the NASDAQ stock exchange, while that it Alibaba at the New York Stock Exchange (NYSE) went up by 26%. Contrastingly, between 2017 and 2019, Alibaba’s revenue increased by a whopping 144% compared to Amazon’s 58% (Trefis Team, 2020). However, Amazon was experiencing more growth and success compared to Alibaba. For instance, the price/earnings ratio (P/E) of amazon’s shares at the NASDAQ stock exchange increased by 107 times compared to 50 times registered by Alibaba’s shares. In contrast, in 2019, Alibaba generated $13.1 billion in profit compared to Amazon’s $11.6 billion (Trefis Team, 2020). Altogether, despite this large difference in the increase in stock prices and revenues for the two companies, it is evident that both companies were enjoying tremendous market confidence and significant growth compared to their rivals.

Main Innovative End Results

Amazon and Alibaba have a stellar history of innovativeness that has placed them at their current industry leadership position. Their innovation strategies have delivered several visible outcomes to date. For instance, Alibaba obtained close to 8,000 patents in China and had 14,000 patent applications awaiting approval in 2020. It also had 4,000 patent awaiting approvals outside China. Alibaba’s innovative products are mainly technological and include the Apara System, which is a cloud computing service that Alibaba offer for research and development globally. It also has an operating system that has internet-of-things (IoT) capabilities using its own servers and terminals. Alibaba also has a database open to  

Amazon is a fast mover in innovation, and its innovativeness has left memorable footprints in the business environment, causing many other retailers to reconsider their business models. For instance, Amazon has revolutionized the retail industry by introducing Amazon Prime, a subscription services that provides online shoppers with fast delivery times. Amazon customers have come to expect deliveries at the doorsteps two hours after placing their orders. This innovation has been escalated with the introduction of Prime Now, which delivers selected amazon products for free and within an hour of placing an order for $7.99, and Prime Air, which intends to deploy drones to deliver orders at customers’ doorsteps within 30 minute. Prime Now is active in more than 50 cities located in 9 countries. However, Prime Air is at its latest stages of development once it gets regulatory approval. Once implemented, this service will eliminate the need for customers to physically collect their shopping from pick up points. It also introduced Amazon’s Web Services (AWS), a cloud computing service that provides on-demand cloud computing service that is charged based on a pay-as-you-go pricing model. Although this service was initiated in 2002, the protracted development saw the launch of the service in 2006 through the introduction of the Simple Storage Service (S3). Since then, Amazon has continued upgrading this service and expanding its capabilities, thus making it the largest contributor to Amazon’s revenues currently. Similarly, Alibaba also has its fair share of innovations. For instance it created a mobile application that blends virtual and physical shaping experiences, and supports several functions to make the shopping experience more convenient. The app is notable for its innovative shipping experiences for groceries and meals, in which consumers can order fresh groceries and have them delivered provided they are located 3 kilometers from the store. The app can also be used to pre-order meals and have them picked up or consumed inside the food store. The app also hosts a payment facility, with customers having the option of making payments using facial recognition. The data collected by this application enables Alibaba to understand their customers’ purchasing behaviour to improve ordering efficiency and reduce wastage. In addition, this application that is commonly used in Hema stores in China is available to other companies, such as Starbucks and Sun Art, enabling them to utilise Alibaba’s delivery network to reach customers. Similarly, Alibba has Alipay, which is a payment platform that can be used by consumers to pay for goods and services from registered companies. Consumers enjoy large discounts for using this application. The form has also ventured into areas beyond the retail industry. For instance, it has Alibaba Cloud Linus, which is an open source operating system suitable for cloud computing. It also has aliOS which is an on-terminal operating system for internet-of-things interconnectivity. This operating system has been installed in vehicles manufactured by Dongfeng Citroen and Ford, enabling interconnectivity between smartphones, tables, televisions and the vehicles. The operating system is also used in medical apparatus, industrial control, intelligent hardware, and smart home devices.

This report is structured thematically to cover several aspects related to the innovation strategies employed by Amazon and Alibaba. A review of the innovation space explains the current innovations undertaken by the two companies in their organsational settings. This is followed by a comprehensive analysis of the companies’ innovation processes. Innovational aspects, and innovation capabilities and strategies for both corporations are detailed. Specifically, the innovation processes of both companies are analyzed using the Tidd and Bessant’s four-step innovation process. After that, recommendations on how Amazon and Alibaba can enhance their innovational processes are presented before concluding this report. 

Innovation Space

The innovation space is characterised by the different types of innovation that an organisation undertakes. In this regards, amazon and Alibaba engage in different types of innovation, some of which may be similar and others dissimilar. Nonetheless, from the innovation outcomes identified in the two companies, it is evident that they have a rigorous innovation program ongoing to date. Mapping innovation as part of innovation management involves identifying the four different types of innovation, also known as the 4P’s of innovation; product innovation, process innovation, position innovation, and paradigm innovation. Innovation mapping is critical because it helps identify the innovation areas that an organisation focuses on and the innovative opportunities that await it (Alabbas & Abdel-Razek, 2016). According to the one dimensional innovation type perspective, product innovation involves changing performance capabilities, improving performance e characteristics or adding new features to an existing product or service already being provided by an organisation. In turn, process innovation involves the changing of production methods or using new equipment to produce goods and services already being produced by the organisation. Position innovation involves changing the availability of a product or services being offered by an organisation and entering into new market segments to offer products and services. Lastly, paradigm innovation involves the changing or reframing the image of the organisation or the way it offers its goods and services to the market. However, innovation can also be viewed from a multidimensional perspective. Classifying and explaining innovation types using this perspectives yield several combinations of the 4P’s. In the same vein, innovations can cut across and combine two or more dimensions. Some examples of innovations comprising two dimensions include product-process in which a firm may produce new products to utilise in its production process or product-position in which a firm improves its existing products or services to enable it enter a new market to meet the new market’s requirements and standards (Alabbas & Abdel-Razek, 2016). Besides, the type of market targeted by the business enterprise will dictate the type of innovation undertaken. Markets can be categorised as government markets, international markets, business markets, reseller markets and consumer markets, depending on the primary focus (Tidd & Bessant, 2020). Therefore, the innovation map of Amazon and Alibaba can be viewed from the 4Ps based on their market focus. To analyse amazon and Alibaba well, it is pertinent to understand the markets they target. In this regard, Amazon is a retailer that targets the consumer and international markets while Alibaba is a vender targeting the business and reseller markets, which influence their innovation strategies significantly.

Both Amazon and Alibaba have engaged in the four types of innovations, albeit at different levels and intensities. Nonetheless, both companies leverage technology, and especially digital technologies, to spur their innovativeness.

Product Innovation

Amazon has created several new products and services to targeting its customers and markets. For instance, amazon has several proprietary branded products under its private label. It also hosts third party brands that can only be purchased over amazon. This means that these products are not available in any other platform, and target Amazon customers and particularly the subscribed members exclusively.  In the same vein, Amazon has introduced several disruptive services to improve the shopping experience of its customers. However, Alibaba is a vendor and therefore does not create products for the market. However, it has introduced new services to capture new markets and expand existing ones. However, Alibaba provides its vendors with multiple online platforms other than AliExpress, such as Taobao and Tmall to expand its market reach. Therefore, although Alibaba initially targeted the B2B market using AliExpress, it has since entered the C2C and B2C market through Taobao and Tmall respectively. In addition, Alibaba has website that allows shoppers to compare sellers and items and an online platform offering flash sales (figure 1) during special days like Single’s Day and Black Friday, called Juhuasuan, thus granulating the vendor platform to target specific customer segments.

Figure 1. Highly discounted flash sales on AliExpress website

Source: AutoDS

Process Innovation

Amazon and Alibaba are great at process innovation. They have used technology to device new ways of doing their business, which has improved their service delivery significantly. For instance, amazon has automated is warehouse to manage the order fulfilling process. It uses about 200,000 robots that operate in its smart warehouses in the United States and across the world, which the realization of an innovation journey that began in 2012, when amazon acquired Kiva Systems (Edwards, 2020). Similarly, it plans to introduce unmanned aerial vehicles to deliver packages to customers’ doorsteps, provided they are within 30 minutes from an order fulfilment center. Similarly, Amazon have ventured into autonomous vehicles with a view of automating its transportation fleet, in this regard, Amazon bought 1000 self-driving trucks from Plus to kick-start its driverless fleet and has test-drive others developed by Embark (Waters, 2021). Besides, Amazon created a supply chain ecosystem comprising distribution centers, warehouses, truck fleets, and a global transportation network to push the frontiers of supply chain activities and management on a global scale. Similarly, Alibaba has used technology to automate shopping and enhance the shopping experience of customers, as illustrated in figure 2. This self-service delivery kiosk is located in Poland where Alibaba has expanded into, as one of the fast-growing e-commerce market (Xinhua, 2021).

Figure 2. A self-service delivery kiosk by Alibaba

Source: Xinhua (2021)

Position Innovation

Amazon and Alibaba are engaged in position innovation to enhance the availability of their goods and services while targeting new markets. For instance, both companies has venture beyond their domestic borders and have developed systems to facilitate the participation on international customers and businesses respectively. However, Alibaba has a unique approach to the wares sold on its website and online outlets. Since it is a vendor’s platform, Alibaba helps to position the merchandises of the vendors favourably in the Chinese market. In this regard, Alibaba helps it vendor community to innovate by supplying them with market intelligence. It also partners with the vendors to improve their products based on the market feedback gathered, thus assisting the building of vendor brands. This is a unique approach that Amazon does not use as it has proprietary brands on offer alongside those of other producers.

Paradigm Innovation

Amazon and Alibaba have engaged in some paradigm innovation by seeking to change or disrupt the retail marketplace. It has diversified its services, to include financial and web services through Amazon Web Services, which has become the most profitable segment in the corporation. Notably, Amazon Web Service, provides cloud computing services to developers, institutions and individuals that do not have computing equipment, and connects financial institutions, like banks, stock exchanges, and insurance firms. Similarly, Alibaba has also ventured into non-traditional sectors, like web and financial services, and automation of financial processes though Ant Financial, which started as Alipay in 2004. This innovation was inspired by the lack of a strong regulatory framework and security in financial transactions in China by promising to facilitate transactions seamlessly and securely. Altogether, Amazon and Alibaba had remodelled their business models radically to become technology firms that look considerably different from when they were founded as start-ups.

In summary, although Amazon and Alibaba have demonstrated innovation in the four domains, they focus more on process innovation to make their offerings more convenient and therefore, attractive to their clients compared to those of competitors. Similarly, they also have significant paradigm innovation activities, which are responsible to the business model enhancement witness in the two companies. Nonetheless, Amazon has a slight edge over Alibaba in the intensity, frequency, breadth, and scope of innovation.

Analysis of Innovation Processes

The innovation process should be methodical, procedural and systematic if it is to yield profitable outcomes. The innovative process of an organization can be assessed and evaluated using Tidd and Bessant’s 4 step model.  According Tidd and Bessant (2020), in managing innovation, the innovation process of an organization should comprise of district and sequential activities, which are searching, selecting, implementing, and capturing, and illustrated in figure 3.


Figure 3. Tidd and Bessant’s 4 step model of the innovation process

Using this model, an investigation of Amazon and Alibaba seeking to understand how they search for innovation opportunities, select the innovations to undertake, implement the innovation outcomes, and capture value from the implemented innovation (Dal Molin, eta l., 2017). Although Amazon and Alibaba employ diverse innovation strategies, they have distinct differences, based on the innovation culture entrenched in their workplaces. In the first step of searching for new opportunities, Amazon prefers allowing every member to be free to think of anything that the company could do to impress the customer and make money. Therefore, employees have to create a six-page memo outlining their innovation, which is then pitched to a multidisciplinary team that brainstorms on it and provide immediate feedback (Satell, 2018). In this regard, employees are encouraged to identify the customers’ pain points and develop viable solutions. In contrast, Alibaba employs an open innovation approach in which stakeholders within and outside the company, contribute their innovative ideas (Schmuck & Benke, 2020). This is a form of crowdsourcing that consolidates the feedback obtained from various stakeholders. Specifically, Alibaba launches contests to source for innovative ideas.

In the selection step, Amazon uses a small multidisciplinary team to select the ideas that appear to be viable. This team meets for about an hour to listen to the innovator’s pitch before deciding whether it is worth attempting or not. After approval, a small multidisciplinary team is constituted to refine the idea and produce a minimum viable product or service that can be commercialized promptly (Kaplan, 2018). Contrastingly, Alibaba employs a structured approach comprising of research and development laboratories that are funded generously to come up with new products, services, and processes.

In the implementation step, Amazon selects to scale up the most viable solutions presented by the most viable product or service. The prototype product or service is tested with a small market to determine its acceptability by the customers and money-making potential at a small scale. Therefore, this means that Amazon has embraced experimentation as part of its innovation strategy because it reveals what can work and what cannot (Tucker, 2018). Following serial experimentation used at Amazon, the company has a protracted history of having come up with so many innovations that it did not actually implement and ended up abandoning them altogether. The founder is said to embrace such experimentation despite consuming huge amounts of finances (Green & Meisenzahl, 2021). For instance, the company abandoned a smartphone project called Amazon Fire Phone, a computer game called Crucible, a visual online shopping platform resembling Instagram called Amazon Spark, Amazon Restaurant, and Amazon Storywriter, among many others. Some of these inventions were actually implemented but have since proved to be unprofitable or unviable. This is the fate that befell Amazon Restaurants and Amazon Storywriter after having been available since 2015 (Green & Meisenzahl, 2021). Alibaba has also experienced disappointments with its innovations with its founder, Jack Ma revealing that the company had failed in more than 1900 projects before reaching its current position and enjoying success. Its failed innovations include cloud blogs, online retail platform, and a software interconnection platform, among many others.  

In the capturing step, Amazon focuses on the utility of the product or service based on the revenues earned. It also collects customer sentiments about their experiences with the new product or service. This information forms the lessons learned and is used help Amazon decide whether to scale up the innovation or abandon it altogether. Alibaba employs a similar strategy of utilizing feedback from customers to improve or abandon the new service.


The innovation processes at Amazon and Alibaba can be improved to facilitate enhanced innovation and ensure that more viable goods and services are introduced or improved. Although amazon and Alibaba have an impressive innovation culture, it can be revamped to ensure that failures are minimized. In this regard, it is recommended that the companies engage in internal competitiveness of the innovation process by rewarding teams that produce viable inventions and improvements of existing products and services (Usher, Dyson, and Gorst, 2020). Such incentives can motivate innovation teams to focus on projects that exhibit the most promise of success in the marketplace.

Similarly, to ensure that the innovative processes gain most from the knowledge and innovative resources available in the marketplace, it is recommended that the companies scale up their innovation partnerships with companies that have expertise in the area of interest. In this regard, the two companies should aim at developing an innovation ecosystem that would ensure that the best knowledge and minds are engaged in the innovation process to avoid wastage of resources and enhance business sustainability (Granstrand & Holgersson, 2020). This would elevate the innovation process to include broader business-related issue, such as those that address the environmental impact of businesses.


Amazon and Alibaba have curved a unique niche for themselves as some of the most innovative companies today across the world. Much of their current success can be attributed to the numerous innovations in products, processes, positions, and paradigms. Although many of their innovations have focused on business processes, Amazon and Alibaba have transformed their business models to become the large technology firms they are today because of leveraging paradigm innovation. In this regard, their most successful and memorable innovations have been based on using technology to disrupt their industries. Although they have engaged radical innovation by introducing disruptive applications of technology in the businesses, Amazon and Alibaba have also undertaken incremental innovations that are focused on improving their existing goods, services, and processes.

After analyzing their application of the 4-step model for the innovation process, some fundamental differences were noted despite the companies having a similar innovation mindset and culture. Amazon preferred using internal innovators that were responding to external issues affecting their customers, while Alibaba preferred crowdsourcing innovative ideas. Therefore, to bolster their innovation management practices, it was recommended that they introduce a reward system for the most successful innovation teams and create innovation ecosystems by engaging knowledgeable partners.  


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