Read Alibaba's World Online

Authors: Porter Erisman

Tags: #Business & Money

Alibaba's World (23 page)

BOOK: Alibaba's World
13.76Mb size Format: txt, pdf, ePub
ads

Learn from Competitors but Never Copy Them

I found it interesting that Jack often refused to read books about competitors. But in some ways, it made sense. Cutting and pasting a business model from one market to another
is never innovative. One can learn from competitors, but it’s always more important to focus on your customers and build a product and service for them than it is to simply copy your
competition. And once you’ve seen exactly how someone else does it, it’s bound to creep into your thinking. As Jack viewed it: “Learn from competitors but never copy them. Copy
them and you will die.”

Don’t Change Rabbits

Another of Jack’s favorite sayings is, “If you are a wolf chasing rabbits, focus on one rabbit. Change yourself to catch the rabbit, but don’t change
rabbits.” Companies quickly lose their way when they lose track of their central mission. Despite changing business models and expanding into entirely new areas, Alibaba never lost its focus
on its central mission—to make doing business easy.

Be as Fast as a Rabbit but Patient as a Turtle

Entrepreneurs need to work on two different tracks at the same time. On the one hand, they should orient their vision to the long term, like Jack’s 102-year company. But
on the other hand,
they need to move aggressively and quickly day-to-day. The two tracks help keep the company balanced between long-term vision and short-term
action.

It’s More Important to Be Best than First

Entrepreneurs often come up with an idea but are scared off when they learn that “somebody is already doing that.” But being first doesn’t always matter as
much as people think. Being first to market is not as important as being the best in the market. eBay was first to the market in China, and its managers assumed their first-mover advantage would
lead them to victory. But Taobao simply built a better product and prevailed in the long run.

Free Is, Sometimes, a Business Model

When Taobao announced it would be free, eBay was quick to publicly deride the move, arguing that “free is not a business model.” But it is sometimes essential to
first give your services away for free, especially in the Internet world. This allows businesses to build a critical mass of customers while allowing the management team of the sponsoring company
to learn from, and adjust a business model to, the needs of its customers. Think of the great Internet companies of today—almost all started as a free service. Google searches are free. Using
Facebook is free. Both companies resisted getting weighed down by gold pieces at the base of the mountain and were rewarded for the decision later, once they reached the peak.

Buy an Umbrella When It’s Not Raining

It’s the best time, according to Jack. That was why he decided to raise an additional round of financing from Softbank in 2000, before he needed the money. A couple
months after he did so, the market crashed and investment for start-ups dried up. Sometimes it’s important to prepare for a storm before it comes.

Find Opportunity in Crisis

One of the clichés that litter the expat speaking circuit is that the Chinese word for
crisis
combines the two characters that mean danger and opportunity. But
Alibaba’s example demonstrates the truth to this concept.

When SARS hit China in 2003, it threatened the company’s very survival. When an Alibaba colleague was diagnosed with SARS, 500 employees at company headquarters were sent into quarantine
and forced to work remotely from home to operate the company.

But from this danger emerged an opportunity. Alibaba wasn’t the only company that had difficulty doing business face to face during that period. Our customers did too. E-commerce was the
only way for commerce to continue. We had long worked hard to highlight e-commerce’s benefits, but the SARS epidemic greatly accelerated the adoption of e-commerce by China’s
businesses, and our website traffic reached a new level.

Time and time again we found opportunity in crisis. Rather than being paralyzed by fear of the situation, remaining calm and looking for the opportunity was key.

Use Your Competitor’s Strength against It

When eBay announced it was committing $100 million to the China market to compete with us, some within the company, including me, were fearful. Fortunately Jack faced it with a
great deal of calm. Channeling his inner martial artist, he realized that a competitor’s strength could be used against it. By engaging eBay in a public war of words, we ensured that for each
dollar eBay spent in the China market, Chinese consumers and businesses were also learning about Taobao, from the buzz generated by our PR campaign.

Leapfrog

In the past, people observed that China’s consumers were leapfrogging from devices such as a landline phone straight to a mobile telephone without having to build out the
costly infrastructure of landlines.

Alibaba’s experience has shown that entire economic systems can leapfrog ahead, especially in developing countries. Whereas the US and Western Europe spent the last several hundred years
developing a retail infrastructure, China’s commercial infrastructure was able to leapfrog directly online without retailers first building out an extensive offline retail infrastructure.

In the Spring Prepare for Winter

Alibaba’s history is one of bursts of euphoria followed by crisis. Whether it was raising $25 million in financing before the
Internet bubble
burst, doing a billion-dollar deal with Yahoo!, or having its IPO in Hong Kong, each new milestone precipitated a crisis.

Alibaba’s story arc is not singular—the same thing happened to Google, Facebook, Apple, and Microsoft. David is always a hero until he becomes a Goliath. The time to mentally prepare
for the winter is when you are still in the spring.

Resist the Temptation to Go Public

An IPO is a milestone but it should never be the main goal. In 1999, on the day Alibaba was founded, Jack told his team, “The goal is to go public by 2002. If we
don’t go public by then, then we should forget about it.” At the time three years seemed like a long-term goal. But as we got closer to having an IPO, Jack would always resist, telling
the staff, “We could go public now, but we should only go public when we are strong enough, otherwise the company will simply fall apart.” As Jack put it, “An IPO is like going to
the gas station to fill up on gas for a long road ahead.”

Put Yourself in Position for Luck

From time to time I encountered people who said that Jack’s success was simply due to luck. But more than any of his contemporaries, Jack put himself in the position for
luck to find him. Seeing the impact that the Internet could have on China in the long run, Jack decided to dedicate his business career to e-commerce before China was even connected to the
Internet. Seeing this trend before others did helped him move his career
into position. Despite missing the shot on goal with his first attempt, ChinaPages, he was still
standing in front of the goal when the Internet finally took off in China four years later. And when the ball was passed to him the next time, in the form of Alibaba, he kicked it in and
scored.

ON LEADERSHIP

Entrepreneurs Don’t Complain About Problems—They Solve Them

There are two types of people—those who complain about problems and those who solve them. Sure, we all complain from time to time to vent some steam. But in building a
team, it’s important to weed out habitual complainers. Habitual complainers fail to realize that they have the power to solve the very problems they are complaining about. At Alibaba,
habitual complainers who managed to slip through the interview process didn’t last long. Problem solving is the core of entrepreneurship. Problem solving is what entrepreneurial businesses
do.

Don’t Dwell on Mistakes

Jack used to joke that if he ever wrote a book about his experience, he would call it
Alibaba and the 1,001 Mistakes.
From watching Jack in action, I realized that two
great traits every entrepreneur should possess are resilience and amnesia. In the face of setbacks Jack was incredibly resilient. And while I sometimes stewed over mistakes, Jack was so forward
looking that he often
forgot about the mistakes altogether. Mistakes are a by-product of success, to be learned from but not dwelled upon.

Embrace—Don’t Run Away from—Tough Decisions

As a leader, it’s impossible to please everyone. And even the most popular CEOs are not without their controversies. But leaders pioneering a business on a large scale
are bound to face tough decisions, and it’s important to face them head on and with conviction. This is something Jack had to learn over time, as he transitioned from being an English teacher
to being a CEO. In 2000, as our company grew out of control, Jack was slow to make the layoffs necessary to save the company, choosing baby steps instead. It only worsened the problem and the
company nearly went out of business which would have ended the employment of everyone in the company. After postponing the inevitable, we finally made the layoffs, stabilized the company, and grew
on to hire many of the laid-off employees back. “I finally learned that sometimes I need to say ‘no,’” Jack told me.

Have the Team Work for the Goal, Not for the Boss

Many traditional managers, especially in Asia, have top-down management styles. The boss issues directives and the employees focus their energies on pleasing the boss. And
usually the boss is quite happy with that. But in Alibaba’s case Jack set a high goal and then encouraged his team to chase the goal.
It helped keep everyone
focused while minimizing the political infighting that often comes when employees spend most of their energy trying to please the boss.

Don’t Disregard the “Tech Dummies”

Many people find it strange that an English teacher with no technical background could create the world’s largest e-commerce company, especially when so many Internet
startups are created by engineers. When I left Alibaba in 2008, Jack Ma could use a computer only for email and to use a browser. “Alibaba survived because I know nothing about
technology,” Jack would often say.

Jack’s experience showed that being a self-professed “tech dummy” can be an asset for a manager in a consumer-oriented technology company. Whenever Alibaba’s engineering
team would prepare to introduce a new product, Jack would sit down for a sort of “Jack Ma dummy test.” If Jack couldn’t use it, he assumed the customer couldn’t understand
it. The approach worked. By keeping our websites simple, we stayed close to our customers, many of whom were using the Internet for the first time.

Don’t Let It Get Personal

Meg Whitman made the mistake of letting eBay’s competition with Alibaba get too personal. Once we got under her skin, eBay focused too much on the competition, and she
and her team lost sight of the real goal—creating a great website for
China’s consumers. Jack made the same mistake in our battle with former Yahoo! China
head, Zhou Hongyi, and Yahoo! China’s strategy veered off course.

ON BUILDING A SUCCESSFUL TEAM

Assemble a Team, Not a Collection of All-Stars

In 2000, in preparation for eventually having an IPO, Alibaba. com assembled a dream team of managers with pedigrees from Ivy League schools and leading multinationals and
consulting firms. Their resumes would have looked great on a company prospectus, but the individuals didn’t work well together. Their egos got in the way, and soon the company was adrift,
headed dangerously close to bankruptcy. When this dream team was laid off, management reverted to the original founders. Although there were no all-stars among this team, they worked well together,
achieving more together than someone might have predicted from their individual resumes.

Gather the Entire Team Once a Year

Alibaba is somewhat known in China for the massive all-hands meetings it held for its employees at the start of every year. Starting with a small party for the entire staff in
2000, the company continued to bring together all of its employees every year for an annual kick-off event, until it eventually required a stadium to seat the entire staff. As the company grew from
100 employees to 10,000, we gathered together staff from all around the world
in Hangzhou for several days of speeches, activities, and team building exercises.

Bringing the entire team to Hangzhou was an expensive proposition for the company. But aligning everyone to the company’s annual goals proved to be an important key to success for our
fast-growing company. Company speeches and videos reminded everyone of where we’d come from in the previous year and set out a vision for where we’d be headed in the year ahead. And
team building activities allowed staff members to catch up with old friends while building relationships across the organization.

Spread the Wealth

One of the key things that sets Alibaba apart from many of the start-ups I’ve come across is just how broadly Jack Ma shared Alibaba’s ownership with employees
through equity and stock options. The natural tendency for investors and company founders is to want to reserve stock incentives for only those in senior management positions. But starting with how
he shared the equity broadly with his 17 cofounders, Jack continued to make sure that staff at all levels of the company were granted, or at least were eligible to earn through performance, stock
options. In fact, when Alibaba.com went public in 2007, the company had to rent an arena to gather all of the staff holding stock options to walk them through the process for exercising their stock
shares.

BOOK: Alibaba's World
13.76Mb size Format: txt, pdf, ePub
ads

Other books

The Debutante by Kathleen Tessaro
Broken Promise by Linwood Barclay
The Truth by Jeffry W. Johnston
Most of Me by Mark Lumby
Tied to the Tycoon by Chloe Cox