Alibaba's World
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Honor and Respect the Work of People Who Came Before You
In 2003 I was put in charge of Alibaba.com’s international English-language website. It was the first time that a native English speaker was in charge of the site, and it wasn’t hard to find several mistakes and features on the site that were not Westerner friendly.
My first move as a manager was to revamp the site’s look and feel. I unveiled the new site at a meeting and put it up against the old site to show off what I had done and subtly point out what I viewed as the shabbiness of the site I had inherited. While my boss liked the presentation, I later realized that I should have done more to honor the work my colleagues had put into the previous site.
A start-up company is like a relay race: you carry the baton for a while and hand it off to the next person to improve it even more. There’s no need to belittle the work that got the team this far. It’s fun to look back on how far you’ve come and know that you carried the baton for a while.
On Doing Business in China
Recognize That Innovation Is Alive and Well in China
There seems to be a running narrative about tech entrepreneurs in China: the Chinese are great imitators but not great innovators. I’ve even heard it said that Alibaba is simply a copy of eBay. But that’s like saying Steve Jobs copied the idea for the iPhone from Alexander Graham Bell. Alibaba’s ecosystem in many ways bears no resemblance to that of eBay or Amazon.
While it is true that some sectors in China’s economy are led by imitators, in many ways I found my colleagues and industry peers in China to be even more entrepreneurial than our counterparts in Silicon Valley. China’s rapidly changing and dynamic market leads to a more nimble breed of entrepreneur. The Chinese also have a tremendous hunger for knowledge, education, and self-improvement—the result of so much human potential held in deep freeze for so long.
Channel Your Inner Taoist
It took eight years at Alibaba for me to fully appreciate the deep cultural differences that shape the management styles of Chinese entrepreneurs and their Western counterparts. In business school I was taught to approach a decision by gathering all relevant data and submitting them to rigorous frameworks and analysis before making a long-term plan. But at Alibaba I often found that this style was at odds with the approach of my colleagues, and I had to adjust to fit in. Over time I developed instincts for anticipating and smoothly adjusting to the company’s frequent strategic changes and simply going with the flow.
When I joined Alibaba, Jack was criticized for publicly claiming, “At Alibaba we don’t plan.” And over time I realized that the majority of Jack’s decisions were borne of gut instinct rather than deep analysis. Such an instinct-driven management style would drive just about any MBA crazy. And judging by the high turnover rate of my early Western colleagues, it often did.
Only upon reflection, after I left Alibaba, did I realize there were deeper cultural forces at work, namely, the influence of Taoist thinking on the culture of my colleagues and the company. According to the Taoist concept of Wu Wei, action should not involve excessive struggle that goes against the flow of nature. For example, water has a natural flow as it passes over rigid rocks and should not be diverted.
When Chinese and Western management styles come together, the Chinese management style resembles flowing water, whereas the Western management style resembles the rocks. Alibaba operated at the confluence of two dynamic forces—China and the Internet. Because of this we had to move and adapt quickly to changes in the industry and changes in China. In such an entrepreneurial market, going with the flow like water was much more important than sitting standing in the water’s way like a rock.
Move First, Ask for Forgiveness Later
China is a rapidly changing market whose rules and regulations are constantly evolving. The leading companies don’t sit on the sidelines and wait for the government regulators to make their position 100 percent clear. It’s a delicate navigation, but in certain situations entrepreneurs have to move first and seek forgiveness later.
eBay sat on the sidelines as Alibaba introduced AliPay and therefore fell behind on online payments. Had eBay come up with a creative structure for its business, as Alibaba did, eBay could have found a way to enter the market.
Moving into a regulatory gray area should of course be constrained by moral, legal, and ethical considerations. But laws and regulations are made by humans and often were written before the era of the Internet. So at times companies need to push the regulatory frontier in order to deliver a service that has social benefits.
Love the Government but Don’t Marry It
Government relations can be tricky, especially in environments with high levels of corruption, such as China. In such environments companies all too often think that the only way to motivate government officials is with bribes or kickbacks. But government officials can be motivated by a number of things, one of which is demonstrating to their constituents or bureaucratic superiors that they have done a positive thing for their city, province, or country.
Alibaba recognized this, and we set out to make our home city, Hangzhou, the center of e-commerce innovation in China. To this end we organized high-level conferences of world leaders and business people that put Hangzhou on the map as a sort of Silicon Valley in Paradise. The media attention became a self-fulfilling prophesy, and before long Alibaba was seen as a model company in the city. This had the dual benefit of making government officials happy while protecting us from bureaucrats looking for kickbacks.
Loving the government doesn’t mean you have to love all the government’s policies. And in today’s tricky environment it’s hard to imagine that Western businesses will love and embrace the Chinese government’s policies every step of the way. The more important point is don’t marry the government—getting too close to the government is a risk for any company. The best approach to government relations is simply to do the right thing for your customers, employees, and community and make sure people are aware of your good deeds.
Remember: The Most Important Guanxi Is with Your Customer
Back in the 1980s the talk among all foreign business people operating in China was about how to establish the best guanxi—relationships—with local government officials who could help businesses enter China’s highly regulated market. But as China opened, the economy became much more of a meritocracy.
Early foreign entrants in China’s Internet industry would boast about their relationships with high-level government officials. And when eBay handed over its local business to a relative of the Hong Kong tycoon Li Ka-shing, it made the mistake of thinking that guanxi alone could solve its problems. Getting the door open is important, but it no longer ensures success.
In China’s highly competitive market—just like everywhere else—the guanxi that matters most to a company’s future is its relationships with customers.
Notes
Crocodile in the Yangtze
1.“EBAY—eBay 2005 Analyst Day,” transcript by Thomson StreetEvents, February 10, 2005.
The eBay-Alibaba Hotline
1.Ina Steiner, “eBay Live 2005 Conference Wrap-Up,” EcommerceBytes.com, July 10, 2005.
The Deal Heard ’Round the World
1.Crocodile in the Yangtze: The Alibaba Story (documentary film), directed by Porter Erisman, Taluswood Films, 2012.
2.Peter S. Goodman, “Yahoo Says It Gave China Internet Data,” Washington Post, September 11, 2005.
Winter
1.Gady Epstein, “Alibaba’s Jack Ma Fights to Win Back Trust,” Forbes, March 23, 2011.
Alibaba’s World
1.Liu Yi and Sophie Yu, “Alibaba’s Founder Jack Ma Turns to Pursuing Cultural Endeavours,” South China Morning Post, July 13, 2013.
Index
The index that appeared in the print version of t
his title does not match the pages in your e-book. Please use the search function on your e-reading device to search for terms of interest. For your reference, the terms that appear in the print index are listed below.
Alibaba Group
consumer marketplaces, 193–98
customer retention, 206–7
expansion into new industry frontiers, 204–5
future, 202
geographic expansion, 205–6
government regulation, 209–11
growth of core businesses, 202–3
growth of ecosystem, 203
legacy and global impact, 211–13
logistics, 199–200
media and entertainment, 200–1
other support services, 201–2
outside competition, 208–9
overview, 189–90
support services provided by ecosystem participants, 198–99
wholesale marketplaces, 190–92
see also AliExpress; AliPay; Ant Financial Services Group
AliExpress, 197–98
AliPay
Alibaba and, 191, 198, 203, 207
Ant Financial Services Group and, 198
creation, 91–92, 234
eBay and, 234
Juhuasuan and, 197
mobile service, 198–99
spin-off from Alibaba, 180–81, 185
Taobao and, 194–95
see also Alibaba Group
Amazon
Alibaba and, 3, 187, 189, 203, 206, 233
Bezos and, 1–2
China and, 5
e-commerce and, 5, 45, 212
Internet boom and, 15
Jingdong and, 208
Ant Financial Services Group, 198–99
Apple, 48, 223
Baidu, 128, 155–58, 160
Ballmer, Steve, 73
Band, Doug, 143, 148
Battelle, John, 158
Bezos, Jeff, 1–2
Brin, Sergey, 93, 95, 98–100, 149
Canton Fair, 74–77
Castro, Christine, 132, 134–35
China, doing business in
channeling inner Taoist, 233–34
customers, 236
government, 235–36
moving first, asking forgiveness later, 234–35
recognizing innovation, 232–33
China Banking Regulatory Commission, 204
Clinton, Bill, 142–46, 148
Communist Party, 81, 113, 145, 150, 209
Crocodile in the Yangtze: The Alibaba Story (film), ix, 5, 183, 212
Cultural Revolution, 9, 89, 171
dreams, chasing
build for longevity, 217
dream big, 215–16
have a great idea, 217
never overestimate your competitor, 216
never underestimate yourself, 216
opportunity and, 217–18
Eachnet, 84–86, 107–9, 128
eBay
Alibaba and, 3, 5, 83–84, 121–23, 127–28, 132–33, 135, 138–40, 170, 173, 187
China and, 106–11, 173
Clinton and, 143–45
drop in stock price, 164
Eachnet and, 107–9
earnings reports, 161–62
Internet boom and, 15
pricing pressures, 162–64
Taobao and, 85–91, 104–6, 114–19, 121, 155–56, 161–68, 182, 185, 193–95
Yahoo and, 125, 127
see also Whitman, Meg
Facebook, 207, 220, 223
fees, 88, 90, 163, 166, 191, 195–96, 198
Filo, David, 131
Fortune Global Forum, 113
Gates, Bill, 73, 143
Goldman Sachs, 15, 17, 21
Gomez, Henry, 114–20, 141, 161, 164
Goodman, Peter, 146, 148
Google, 80, 93–101, 128, 149, 155–58, 170, 207, 220, 223
Groupon, 197
guanxi, 236
Hangzhou Hope Translation Agency, 11
Hangzhou Telecom, 12
Hu Jintao, 113
Huayi Brothers Media Corporation, 201
human rights, 145
“Hupan culture,” 229
Internet access, 12, 100, 150
Jingdong, 200, 208–9
Jobs, Steve, 232–33
Juhuasuan, 197
keywords, 80, 191, 195
Kwan, Allan, 137
Kwan, Savio, 55–62, 68–69, 72, 75, 86, 180
leadership
decision-making, 225
dwelling on mistakes, 224–25
getting personal, 226–27
problem-solving, 224
“tech dummies” and, 226
working toward goals, 225–26
Lee, Elvis, 180
Li Ka-shing, 167, 236
Liqi, 72–77, 80, 150
Liu Wei, 139
Lu Qi, 138
Mangalindan, Mylene, 132
Mao Linsheng, 150
Mao Zedong, 9, 89, 113
Masayoshi, Son, 86, 133
Mayer, Marissa, 184–85
Microsoft, 223
Nasdaq, 15, 23
Oliver, David, 26, 28
Omidiyar, Pierre, 144
Osako, Mary, 146
Page, Larry, 93, 95–98
PayPal, 91, 128, 165, 189, 199
Qihoo, 159–60
Reporters Without Borders, 145
Rosensweig, Dan, 133, 137–38, 141–42
rural markets, 66, 211–12
SARS, 75–80, 83, 221
Search, The (Battelle), 158
Shao Yibo, 128
Shi Tao, 145–48, 150–51
Simon, Marcy, 142–45, 148
Softbank, 15, 17, 86, 118, 127, 133, 221
Song, Kitty, 76, 78–81
Sonoma International Film Festival, 5
Steiner, Ina, 123
strategy
“changing rabbits,” 219
competitors and, 219, 222
financing and, 221–23
focus on customer, 218–19
“free” as business model, 220
IPOs and, 223
leapfrog, 222
luck and, 223–24
opportunity in crisis, 221
patience and, 219–20
quality and, 220
take rate, 195
Taobao
Alibaba and, 118, 119, 127–28, 156, 203
anti-Japanese sentiment and, 118–120
background, 85–87
eBay and, 85–91, 104–6, 114–19, 121, 155–56, 161–68, 182, 185, 193–95
free service, 87–90
growth, 103–6, 161, 207–8, 216, 220, 222
international market and, 206
Juhuasuan and, 197
launch, 87
overview, 193–95
rural markets and, 211
Tmall and, 195–97
see also Tmall
team-building
actions speak louder than words, 229
allowing for sabbaticals, 230–31
assembling a team, 227
gathering entire team once a year, 227–28
hiring, 231
honoring and respecting work of predecessors, 232
integrating values into HR systems, 229
looking at overall trends, 229–30
spreading the wealth, 228–29
Tiana
nmen Square massacre, 145
Tmall
Alibaba and, 185, 195, 203
competition, 208
customer retention and, 207
growth, 182, 193
international market and, 206
overview, 195–97
policy changes, 180
rural markets and, 211
Taobao and, 182, 193
see also Taobao
Tsai, Joe, 21, 48, 55, 58, 68, 86, 94–95, 97–98, 114, 130–31, 133–35, 143, 145, 174
Walmart, 175, 187
Wang Guoping, 150–53
Wang Wang, 90, 194
Wei, David, 180
West Lake Summit, 142, 144, 150–52
Whitman, Meg, 107–8, 113–15, 118, 120, 123, 128, 133, 139, 140, 160, 163, 226–27
Wong, Brian 26–27, 33, 37, 139–40
Wu, John, 45–46, 156
Wu Wei, 234
Xie, Simon, 180
Yahoo!
Alibaba and, 46, 125–35, 137–43
China and, 15–16, 27
Google and, 97–98
growth, 15–16, 48
Yu’e Bao, 199, 204
Zhou Hongyi, 126–27, 133, 138–40, 158–60, 227
About the Author
From 2000–2008, Porter Erisman worked as a vice president at Alibaba.com and Alibaba Group, at various times leading the company’s international website operations, international marketing, and corporate affairs as one of the company’s first American employees. He is the writer/director of Crocodile in the Yangtze, an award-winning documentary about the rise of Alibaba and its famous founder, Jack Ma. An expert on e-commerce in emerging markets, he has consulted to e-commerce companies in Africa, Asia, and Latin America. He lives in Shanghai, China.
ALIBABA’S WORLD. Copyright © 2015 by Porter Erisman. All rights reserved. For information, address Palgrave Macmillan Trade, 175 Fifth Avenue, New York, N.Y. 10010.
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The Library of Congress has cataloged the print edition as follows:
Erisman, Porter.
Alibaba’s world : how a remarkable Chinese company is changing the face of global business / Porter Erisman.