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Zhuiyi Technology: Develop or Diversify?
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Reference: IVEY-W31059-E
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Year: 2021
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Number of pages: 14
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Geographic Setting: China
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Publication Date: Sep 15, 2023
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Source: Ivey Business School (Canada)
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Type of Document: Case
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Industry Setting: Information, Media & TeleKnowledge and Communication
Description
The case describes how Zhuiyi, a leading conversational artificial intelligence (AI) start-up in China, developed its growth strategy and made transitions in the face of product commercialization challenges. The crux lies in the low customer satisfaction rate of AI products, which could be endogenously attributed to mismatched expectations among customers and the founding team in the product development process as well as to the lack of vertical industry knowledge among executives and employees. Zhuiyi needs to make a strategic choice between: a) developing new AI products by making large and risky research-and-development investments or b) devoting more resources to product customization and expanding the market through client diversification.
Learning Objective
The case is well suited for a variety of courses in the undergraduate and graduate curriculum as well as in executive education. It can be used to support discussion in courses devoted to entrepreneurship and innovation strategy as well as those focused on digital transformation, AI, or strategies in emerging markets. The case demonstrates the challenges faced by an AI start-up working to develop new products to meet customer demand. After working through the case and assignment questions, students should be able to do the following:Use Porter’s five forces model to identify the sources of the opportunities and threats in the competitive environment of the conversational AI industry and how they affect the growth of AI start-ups.Recognize the essential resources for AI start-ups in their early stage and discuss how founding conditions shape their strategy (i.e., a lean strategy), including the selection of market and customer focus and business model development.Understand how AI start-ups create value and expand scope through product and process innovations.Identify the growth bottlenecks for AI start-ups in an institutionally underdeveloped context and develop transition strategies to overcome these bottlenecks.