The 'Jack Ma dummy test' and other stories from Alibaba

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There's a lot that entrepreneurs can learn from Chinese e-commerce leader Allibaba Group, and its very versatile Founder Jack Ma.

Alibaba started at a time when Founder Jack Ma had nothing but a vision – to bring businesses together through the internet. In 1999, that was not even a remote possibility, but Jack dreamt of the impossible, and worked towards making his dream a reality.

Today, his venture is a model that millions of entrepreneurs look up to, and Jack himself has become a role model with versatility.

This English teacher from Hang Zhou went on to become not just one of the world’s most prominent entrepreneurs, but also the greatest visionary of our times. Needless to say, at a net worth of $48 billion, he is also among the richest people in Asia.

The journey of Alibaba is as interesting as was Jack’s, and the lessons from both are valuable for anyone looking to start up. Below are a few that India’s aspiring entrepreneurs could take note of:

  1. Focus on the solution, not the problem: It is easy to complain about poor infrastructure, strict regulations, government apathy… Alibaba grew despite strict government controls, not because of them. Entrepreneurs are problem solvers. In a democracy like India, it is possible to grow and make a mark despite regulatory drawbacks in investment and expansion – one doesn’t have the luxury to wait for government regulators to make their position 100 percent clear.
Giving the example of eBay’s failure in China, Porter Erisman, former vice president of Alibaba, writes in his memoir ‘Alibaba’s World’ - “It’s a delicate navigation, but in certain situations, entrepreneurs have to move first and seek for 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.”
  1. Team work matters: Startups often tend to be caught in the glamour of revered educational institutes when it comes to recruitment. But Alibaba’s history shows it is better to hire people for different layers– a bunch of stars hired from Ivy League universities in 2000, when planning for the IPO then made the company's prospectus look great, but they could not work well together.

Erisman writes, “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.”

  1. Make your employees your best asset: While hiring new people, especially freshers and youngsters, make sure they are introduced to the company’s long-term vision through proper orientation and videos. Alibaba is famous for its all-hands meet at the beginning of every year, in which its worldwide team is assembled in one large stadium for several days of speeches and team building exercises that also built healthy relationships between employees.
  2. Also, providing stock options makes employees more loyal and dedicated. Erisman writes, “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 co-founders, Jack continued to make sure that staff at all levels of the company were granted, or were at least eligible to earn through performance, stock options. In fact, when Alibaba 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.”
  3. Dummy test: Jack calls himself a ‘tech dummy’. With no educational background in technology, his IT knowledge is famously minimal. According to him, Alibaba survived because he knows nothing about technology. Any new tech product is first run by him, and if Jack can’t understand it, the common man can’t either. Erisman calls this a ‘Jack Ma dummy test.’ For a consumer internet startup, nothing is as important as keeping it simple, especially in e-commerce. Because, most people are, well, tech dummies.
Resilience and amnesia: They say the team is only as good as the captain. For Jack, it was essential not to dwell on mistakes but learn from them and move on. He said that if he ever writes a book on his journey, it would be named ‘Alibaba and the 1001 mistakes’.Jack often says, “Today is tough, tomorrow is tougher, and the day after tomorrow is beautiful. But most companies die tomorrow evening, and can’t see the sunshine on the day after tomorrow.”
  1. Be the best, not the first: When Alibaba was blooming in China, eBay and Amazon had already established themselves in the West. In fact, when eBay entered China in 2004, it was widely expected to be a blow to Alibaba which was yet to grow deep roots. But, Taobao proved that somebody else doing a similar business does not restrict you from reinventing and succeeding in it.eBay was a peer-to-peer platform, and in China, small sellers could easily prefer this one over Alibaba’s model. Soon, Alibaba made its platform free for sellers. The advantage that eBay should have had as the first mover was taken over by Alibaba which did not dare to overestimate the competition. More importantly, as Jack was particular, Alibaba managed to do so without copying the enemy’s moves.
  2. Brave the rain to enjoy the rainbow: Three years after Alibaba was founded, the company had to be downsized due to the financial crunch. Erisman recollects that Jack kept postponing the inevitable till the company nearly went out of business. But, post downsizing, the company stabilised in course of time, and went on to re-hire many of the employees who were fired.Likewise, around 2008, Alibaba had one of its worst phases when the team found 100 sales managers had approved more than 2,000 sellers who did not meet their quality standards, and defrauded Alibaba’s international buyers. Board director and ex-COO of Alibaba, Savio Kwan who investigated into the scandal found that the company was at the risk of developing a culture of pursuing short-term financial gain.

Erisman writes, “Once he knew the full scope of the problem, Jack called for Alibaba.com’s CEO David Wei and COO Elvis Lee to resign. Although they weren’t personally implicated in the crime, Jack felt he had to send a strong signal to the market because the company had built its reputation on trust, and because he believed that the top executives had to take responsibility for allowing an environment in which this could occur.”

Jack Ma

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