Alibaba's World (24 page)

I strongly believe that Alibaba’s team was driven by the idealistic goal of creating a platform that created opportunities for small businesses and entrepreneurs. But there can be no
doubt that the shared sense of ownership helped unify the team to weather some tough storms together. We always knew that, if
we did well for our customers we’d
also share in the economic rewards. Having a broad-based sense of shared ownership helped unify the team.

It’s one thing to paste company values on a wall. It’s another thing to codify the values into performance reviews. By tying 50 percent of an employee’s bonus
and advancement to values and 50 percent to performance, Alibaba was able to preserve its “Hupan culture” as it outgrew its apartment in Hupan Gardens and became a company with more
than 25,000 employees.

As an MBA working in a Chinese start-up, I had to unlearn a lot of big-company tendencies, which favor analysis over action. At times I was bogged down in analyzing a strategy,
and Jack would push me into action, chiding me by saying, “I won’t fault you for making a mistake, but I will fault you for doing nothing.” Getting into the game and trying
something is more important than risking analysis paralysis.

One of the toughest tasks for a manager in a start-up is to integrate new employees coming in from larger, more mature companies. The natural instinct for any new employee who
has
never worked in a start-up is to notice all the problems at the start-up that didn’t exist at his former employer. One new employee with this attitude can be a
challenge, as he often has buyer’s remorse and privately begins to doubt his decision to join the company. But a group of new employees joining at the same time and having the same complaints
can create a toxic environment.

It’s important for new employees to understand that if someone were to take a snapshot from one day in the company, they would find a lot of problems. But if they stack those snapshots
together over time and flip through them, they can see a trend of constant improvement.

Over time Alibaba recognized the importance of providing one to two weeks of orientation for new employees. They watched videos and attended speeches by the company managers that told the
history of the company. This helped put an often messy one-day snapshot into its proper context and perspective.

A big problem in start-up companies is burnout. Staffers often work long hours and set aside personal interests for several years out of dedication to the cause. But companies
should recognize that employees need time to recharge. And fast-growing companies need employees who have been a part of their early days to recharge and return to the company refreshed. I was
fortunate that Jack was flexible and allowed me take a year off to pursue my dream of traveling around the world. When
I came back, I was fully recharged and determined
to take on the world.

It’s a cultural dilemma nearly every start-up faces—“When do we bring in the professional managers?” The risk-loving, fast-moving employee working out
of an apartment is often a very different type of person than a seasoned manager working in a multinational. Both personalities are necessary in the life of a 102-year company, but when the two
personalities collide, the result often is conflict and resentment.

In 2000 when Alibaba hired a team of senior international experts to manage the company, the resulting organizational disaster created a huge rift in the company. It was like plugging a Rolls
Royce jet engine into a small hang glider. At the time we failed to recognize that a start-up needs people to serve as cultural bridges.

One bridge is a layer of people who can help carry the company from start-up to maturity. These are people who are flexible enough to work in an apartment but skilled enough to manage companies
on a larger scale as they grow.

Alibaba needed an additional bridge, one that would help us “go global” and close the cultural gap between China and the West. In those early days the staff members who had
Chinese-language skills and cultural understanding turned out to be a better fit than the staff members who had deep industry experience but little experience in China.

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.

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.

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.

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.

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.

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.

CROCODILE IN THE YANGTZE