What Jack Ma's Alibaba can do for you?

Jack Ma had the ability to recognize the direction of technology and the determination to  force its pace and in doing so became a global missionary of e-commerce and a champion of small and medium-sized companies (SMEs), particularly in his homeland China. While describing himself as a "technological dummy", his company Alibaba Group (39% owned by Yahoo!) by 2004 had grown its flagship Alibaba.com to be the world’s largest B2B e-commerce web site, and currently has 12,000 employees with plans to hire 4,500 more and has about 2 billion dollars in cash reserves. Its C2C (consumer-to-consumer)-sister company and Chinese-market-focused Taobao has overtaken eBay in China with almost US$ 15 billion worth of transactions made on the platform in 2007. Jack Ma said recently that Alibaba Group's pageviews "are already bigger than eBay and Amazon globally". All this has not gone unnoticed by the media and the FT (video), Barron's "Top 30 CEOs", Business Week ("25 Most Influential People on the web" and Asia Top50), CNN Business 2.0, NYT, at Davos etc. have all shown their high esteem for Jack Ma in one way or another. Last month's book release, Alibaba, The Inside Story Behind Jack Ma and the Creation of the World's Biggest Online Marketplace (ebook), has provided more insights.

Not only did Jack Ma not have his success handed to him in a platter, his circumstances had it such that almost at every turn he had to overcome many obstacles and handicaps to scramble through against all the odds. On this road he expected problems as par for the course and was pleasantly surprised to have a day without any. Of the 18 original employees working off a capital of 60,000 US dollars, squeezed together in one room, a few of them still hold positions of high responsibility in a company whose IPO in November 2007 was the second biggest in Internet history, valuing the company at US$ 36 billion, it's IPO being second only to Google's. His statement in January 2009 that Taobao sales in ten years will beat Wal-Mart's world sales cannot be seen as preposterous. He focuses on ways information technology can make small companies more competitive and profitable. Since four-fifths of business in China is done by some thirty-two million small companies, the leveraging effects are substantial. However three quarters of Alibaba’s earnings derives from its international English-language based market made up of 8 to 9 million SMEs, i.e. only one quarter from the domestic market. Almost everything can be bought and sold on Alibaba, though this is not reflected in its top ranking of popular goods, and most importantly, buying and selling is completely free! Alibaba makes its money from the add-on features and services that facilitate more the professional seller.

Jack Ma has enabled millions of small companies around the world to use the Internet as a primary business tool. From his base in Hangzhou, near Shanghai, he has had the biggest impact of anyone on the development of the Chinese Internet culture promoting and nurturing Internet functions inside China to evolve to what they are in the West, if not beyond. Through his provision of several Internet tools, he has effectively leveraged China’s ability to trade; over the past several years, this has changed the weighting of China on the world’s stage.

In these tough times and with great prescience, especially given that Chinese exports fell dramatically in February 2009,  Jack Ma  last October initiated a Mohamed-Yunus-like loan scheme allowing over 600,000 small Chinese companies to access a credit fund of up to US$ 800 million that otherwise would not have been available to them. His innovative payment system Alipay that has been key in his success had provided credit previously on a smaller scale.

Jack Ma draws often on stories and incidents from Chinese history to illustrate the values and ideals he wants to encourage. His somewhat atypical approach can be seen in one speech that was paraphrased as “Laziness is not, of course, stupid-lazy. If you want to be able to work less, you have to think of ways to do it, clever ways to be allowed to be lazy. You have to have a lazy style, a lazy state of mind”. It must be noted that he tries to create a dynamic, open and flat-hierarchical company culture, which may not be the typical culture of his environs. For Ma results, execution and performance are key, even more so than having a good idea, though he has had many good ideas along the way.

Jack Ma has attracted key investors in the network include Softbank’s Masayoshi Son and Jerry Yang of Yahoo! in the United States. The founders of those companies have been central to Jack Ma’s vision of creating a global company—but one that is owned by and managed by Chinese nationals. Jack Ma also has been able to manage intricate interrelationships with government, e.g. Alipay enjoyed the full support of a China first regulatory policy in the area of payment Government supported systems. This was a factor in their victory over eBay. Furthermore, he has been able to create strategic alliances with companies such as Sohu.

Ma realizes that Chinese companies exist in a society that must benefit from their activities and by nature he pays attention to cultivating that society. Jack Ma has made several television appearances on CCTV's Winning in China as a judge, China’s equivalent of Trump’s The Apprentice. His initiated a series of conferences called “West Lake Swordplay Conference”™ that were defining debates in the creation and maturing of the Chinese Internet ecosystem, featuring one year former U.S. President Bill Clinton as keynote speaker. The Chinese language on the Internet, according to the China Internet Network Information Center (CNNIC) is the second-biggest and fasted growing Internet culture in the world with currently 321 million users. His entrepreneur's summit, Alifest, held in Hangzhou, attracts up to 10,000 visitors.

Five years of teaching English at a Chinese university honed the skills instilled in him by his parents, i.e. that of performing and entertaining and the ability to transmit his own enthusiasm and belief. He stayed teaching there that long to keep a promise he made to a mentor on entering there. During his student years he was elected president of the entire League of Student Unions of Hangzhou, which for a student from the lower tier of colleges who had struggled to get in, was a major feat in itself. Indeed, he was the only one among five hundred graduates of his university program to be placed as a teacher in a higher institution, while the others were placed in lesser ones.

While those that had studied abroad knew well the overseas buyers perspective, Ma who had stayed at home and learnt much of Western culture through contact with those foreigners visiting and living in Hangzhou, had the advantage of fully understanding the changes in his own homeland. From the young age of 12 he practiced English with visiting tourists, curious to know more about life outside China. Many years later after leaving his teaching position, the Hangzhou authorities, recognising his high-level of English, sent him to the US to negotiate with a late-paying investor who kept him hostage for a few days in a Las Vegas hotel while refusing to pay. This journey had the end result of bringing him into contact with the Internet which he recognized as a future way of doing business, though shortly afterwards many in China thought of him as a trickster as he tried to sell them the idea of the then inaccessible Internet.

Business Model

Jack Ma sees as one of Alibaba's strengths, its corporate cohesion and degree of secrecy unknown to most organisations. He considers organizational structure to be a part of the company’s technology and its reason for success. Employees are required to maintain strict confidentiality about organizational structure. “Our structure is our core competitiveness. It has been hammered out over the course of many mistakes,” says Ma.

Monetizing transactions via Alipay is one of Alibaba’s best opportunities for evolving its business. It has well over a 100 million users and over 160,000 websites besides Taobao are using it as an online payment system. The banking field estimates that Alipay facilitated more than $4.5 billion dollars of transactions involving individual consumers in 2007 and towards the end of 2008 daily payments of about one million dollars were being made. If members of Alibaba pay each other using it, then the parent group gets 60 to 85% of the consequent fees. This effectively monetizes transactions. Alipay is beginning to offer loans to clients based on their credit rating, tying up with Visa, which in turn is partly based on their volume of online transactions. Furthermore the ability to take out loans with certain Chinese banks based on the volume of your transactions on Alibaba will certainly increase its use.

Ma’s reorganised before the IPO to allow the lesser-margin businesses be kept outside the financials of the list company allowing them to look long-term without the need to worry about upcoming quarterly earnings reports and be more innovative and capture market share.

Another example of Jack Ma's innovation and concern for SMEs was the establishment of Alisoft which develops, markets and delivers Internet-based business management solutions targeting small businesses across China ("Cloud Computing"). Through its Software as a Service (SaaS) model, Alisoft provides small businesses with low-cost, user-friendly enterprise and financial management tools. It commands more than 40 percent of the Chinese SaaS market.

Philosophy

Jack Ma admits to having had an overly-ambitious international expansion in 2000, which necessitated a retrenchment back to China. However the bursting of the dot-com bubble didn't make things any easier. Guan Mingsheng, who became COO in January 2001, was brought in to do this after sixteen years of experience at General Electric. With Guan’s assistance, Jack Ma was able to turn the company around.  Cai Chongxin role as CFO was also critical in the eyes of Jack Ma and Alibaba.

"You just had to be able to carry on, and in fact each setback makes you stronger. I generally assume that something terrible is going to happen tomorrow, and so I prepare for it mentally. When it happens, it doesn’t seem so bad. I’m able to deal with it. I begin to say, ‘Come on, what else can you do to me?’ Ma is known for his appreciation of Winston Churchill. He particularly likes Churchill’s famous words in his address of 1941: “Never give in—never, never, never, in nothing great or small, large or petty.”

A number of the senior management team at Alibaba have been with Ma for the whole length of Alibaba’s history. Li Qi is the current COO, Sun Danyu is general manager of Taobao, and Jin Jianhang is deputy vice president of Alibaba. They were among the original eighteen that founded the company. “Like me,” Ma has said, “they are not necessarily the most absolutely intelligent people, but we have all matured over these years.”

Future

In the past six months Alibaba has made a big push with a programme called Export to China, which offers non-Chinese SME sellers virtual Chinese-language storefronts. Jack Ma hopes to strike multiple partnerships with major US companies in the next few months. Taobao, will also go global. Beyond Japan, where the platform already has a venture, he is targeting markets such as India or Mexico. With any international expansion there is care to think globally and act locally, as well as a willingness to go into partnerships with local companies.

So, what can Jack Ma's Alibaba do for you? If you are a SME don't think twice about it and set up a free account and publish your product information. As whether the TrustPass or paying services are worth it, you should decide that for yourself.