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The Alibaba Case.
Translated by MarketingDigital.blog
Original article: Greg Jenkins
Would it be nice if an algorithm tells you when to develop a new business model or if you should enter a new market?
We would be lying if we said that there is such an algorithm. Not so, and we do not imagine a moment in the foreseeable future when algorithms (or other forms of artificial intelligence) can answer such difficult strategic questions. But we believe that something is as interesting is emerging: a way in which organizations can apply algorithmic principles to make frequent and calibrated adjustments in their business models, allocation processes of resources and structures, without a direction from the top.
It is a provocative claim, but it is based on real developments that we have observed in Internet companies such as Google, Netflix, Amazon and Alibaba. These companies have become extraordinarily good in the automatic reorganization of their offers for millions of individual customers, taking advantage of real-time data on their behavior. These constant updates are, in fact, driven by algorithms, but the processes and technologies that underlie the algorithms are not magical: it is possible to separate them, see how they work and use that knowledge in other environments. And that is precisely what some of those same companies have begun to do.
In this article we will first see how self-tuning algorithms can learn and adjust so effectively in complex and dynamic environments. Then, we will examine how some organizations are applying self-adjustments in their companies, using as a case example the Chinese giant of e-commerce Alibaba.
As pioneering companies in self-adjusting algorithms grow and mature, they increasingly face the challenge of running versus reinventing themselves, and not just in the marketing department. It is not surprising, then, that some are introducing new management practices that extend the principles of self-adjustment throughout the company.
To understand how this works, think of the company as a nested set of strategic processes. At the highest level, the vision articulates the direction and ambition of the company as a whole. As a means to achieve the vision, a company implements business models and strategies that gather skills and assets to create advantageous positions. And it uses the organizational structure, the information systems and the culture to facilitate the effective operation of those commercial models and strategies.
In the vast majority of organizations, the vision and the business model are fixed around which the entire company revolves. They are often prepared by the founders of the company and, once their success is proven, they are rarely modified. Consequently, the structure, systems, processes and culture that support them remain static for long periods. Experimentation and innovation focus mainly on offers of products or services within the existing model, as the company relies on its established recipe for success in other areas.