Can This Chinese E-Commerce Site Take Over the World?

What's to come?
Nov. 18 2013 4:09 PM

Who’s Afraid of the Big Bad Alibaba?

The Chinese e-commerce site wants to take over the world, but there’s one big problem.

Jack Ma
Charismatic Alibaba Group founder Jack Ma gives a thumbs up after speaking at a company event in Hangzhou, China, on May 10, 2013.

Photo by Peter Parks/AFP/Getty Images

This article originally appeared in the New America Foundation’s Weekly Wonk.

The impending initial public offering of Alibaba Group, China’s largest e-commerce conglomerate, reads like another scary story of China Inc. The IPO could value the group at as much as $120 billion, making it the third largest Internet company behind Google and Amazon. In 2012, gross transactions over two of Alibaba’s subsidiary websites—Taobao and Tmall—alone reached $160 billion, more than eBay and Amazon combined. Forbes called the company “a threat to Amazon, eBay, Walmart and everyone else” because it can undercut global retailing by selling cheap Chinese merchandise online and worldwide. On Nov. 11, on China’s equivalent of our Black Friday retailing D-Day, Alibaba processed more than $5.75 billion in transactions, the most ever recorded in a single day by an online commerce site anywhere.

As an ex-employee of Alibaba, an Aliren (Ali-person, as Alibaba calls its employees and alumni), I am proud of the company’s achievements. But could the Alibaba I know go beyond its home market to become a global consumer behemoth, or is all this talk yet another exaggerated fear of China taking over the world?

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At my first management meeting in early 2007, I heard founder and CEO Jack Ma say that Alibaba is a great company, not because it has the best product or technology (it doesn’t, Jack openly admitted) but because it has the best culture and people. He spoke for more than an hour without any notes, and he charmed (“You must have extraordinary aesthetics if you consider me handsome”), cajoled (“We will invest 200 million [yuan] in this new strategy”), threatened (“You are a counter-revolutionary if you don’t want to start a revolution”), and trumpeted (“If not now, when? If not me, who?”). He moved the room from laughter to awe and back like a master orchestra conductor.

In China, Jackis idolized as much as Steve Jobs was in the United States. Jack’s pithy, witty, and audacious quotes are widely circulated, discussed, and memorized. Book after book has been published on his remarkable rags-to-riches story, starting as an English teacher. And he is probably the only businessman in China whose presence on a TV program can lift the show’s rating.

Meanwhile, his employees, the Alirens, are famous for their hard work and loyalty. They don’t jump ship like others in the Internet industry. They revere their leader and frequently quote his words for inspiration. And whatever wild targets Jack throws at them, they figure out ways to meet them.

I joined Alibaba partly out of curiosity. Most Chinese Internet companies copy successful American models as well as what they consider to be the requisite freewheeling, egalitarian Internet culture. But Jack, on the other hand, has built a seemingly Chinese (i.e., patriarchal) company with full Internet potential. How did he do it?

Up close with Jack at that manager meeting, I realized he had done it because he is Jack the rock star and Jack the helmsman—his eloquence and utter conviction galvanized everyone in the room to join him in redefining China’s commerce. And for a brief moment, I thought I understood why so many before me had followed Mao Zedong, the great helmsman, in the communist revolution. Some people you just want to follow, even if they are marching to their own tune.

The building of the helmsman’s loyal army started with recruiting. In its early days, Alibaba preferred to hire fresh grads from second-tier schools. Unlike their peers from top schools, these humble kids, eager to prove themselves, did not have the haughty attitude or the audacity to assert their conventionally naïve ideas. The company then drilled its six values into these new hires—“Customer First,” “Teamwork,” “Embrace Change,” “Integrity,” “Passion,” and “Commitment.” Every business group was assigned a dedicated HR liaison, known as its “political commissar” (I kid you not), who monitored employees’ performances. Every quarter, performance reviews were mandated, with 50 percent based on the employees’ adherence to the company’s values. Those with bad value scores, even top performers, got fired.

Those who survived these reviews were treated like family. Everyone was given a nickname, their unique and exclusive Alibaba identity, after a character in martial arts fantasy novels—which Jack loved. Alirens were encouraged to treat one another as brothers and sisters, and Jack periodically officiated group weddings. Even those who had left were invited to “come home” for special company events.

I enjoyed working at Alibaba because of the Alirens. What they lacked in experience, they made up in humility, enthusiasm, and friendliness. And they worked hard—constant overtime was assumed, and nobody complained about missing a date night or not tucking in their kids to bed at night. Sometimes I wondered whether Alibaba truly resembled the idealized legend of the Red Army, where cadres and soldiers formed a close surrogate family and together ushered in a new era by sacrificing everything personal for the collective.

But even in 2007, that harmony was showing cracks. Later that year, one of Alibaba Group’s subsidiaries, Alibaba.com, went public in Hong Kong, which made many long-term employees there millionaires. Some of them grew complacent or tired. After eight years in the trenches, they wanted to enjoy the fruit of their battles on their own time, with their own families.

And more experienced professionals were coming to Alibaba. The company, having conquered business-to-business and business-to-consumer e-commerce and online payment, was expanding into software services and online advertising. It needed to hire and integrate expertise from the outside.

I was one such employee, having started at the Yahoo China unit, which Alibaba acquired in 2005. Jack found it challenging to turn us into a top-notch search engine and transform Yahoo China’s culture into the Alibaba mold. A new president was assigned and a new strategy was designed at the top and then announced solemnly at an all-hands meeting. The problem was very few Yahoo China employees bought into that strategy, despite a rallying speech from Jack that made everyone laugh.

So meetings at various levels were convened at Yahoo China to “solicit feedback.” The meetings’ purpose, it soon turned out, was to convince the opposition that they were wrong, that they were on the wrong side of the next wave of Internet revolution, and that they should “embrace change” as dictated by the Alibaba culture. It reminded me of Mao’s rectification campaigns to weed out those unwilling to bend to his vision of what China should be.

Gradually naysayers shut up and reluctantly joined the revolution. A year later and after much repeated fanfare, the revolution fizzled out. Two more revolutions later, Yahoo China was dead. (It was shut down by Alibaba earlier this year.)

Experienced professionals, feeling culturally alienated and professionally sidelined, started leaving. Many of those left behind were asked to relocate to the Alibaba HQ and were further indoctrinated, with, for example, pilgrimages to the townhouse where Alibaba first started, not unlike pilgrimages to the founding sites of the Communist Party.

In the end, I left, too, for another opportunity that promised more career freedom and growth. Still, having witnessed the dramatic failures of Yahoo, eBay, and Google in China, I often wonder whether the Alibaba way is the only way to win there. To this day, Alibaba’s culture, training, and performance evaluation have remained the same as the group has grown to more than 20,000 employees worldwide. Proving naysayers wrong, it has become the largest Internet company in China and is quickly expanding further into cloud computing, logistics, and online finance. And Jack, having won his revolution with his ragtag army, is now undeniably the godfather of China’s homegrown entrepreneurialism.

Americans, too, are familiar with tales of visionary, overbearing dotcom titans like Jobs and Jeff Bezos. But these are more the exception than the norm. In China, while Jack’s charisma may be unique, his emphasis on culture and values as management tools is not. Businesses large and small in China enjoy controlling their employees, expecting unflinching loyalty and obedience. Confucians advocated such a model for societal organization for thousands of years, and Mao successfully incorporated it into the communist rule. And it endures: Today, in Beijing, military-style drills of restaurant employees are a frequent sight on the street.

As China’s society and economy become increasingly complex, it is hard to fathom either the country or its corporate sector thriving in the future with such fanatical adherence to control. Already, Alibaba is finding newer crops of hired grads—more individualistic and more vocal about their opinions—far harder to manage. And young revolutionaries have grown older and tired, eagerly awaiting the windfall from the upcoming IPO of the entire Alibaba Group.

To me, that’s the crack in the legendary Alibaba armor—culture can’t remain static. Both Alibaba and China have benefited tremendously from the hard work of the population and the vast market opportunities opened up by Deng Xiaoping’s reform. But China’s current growth model is running out of steam. The government knows it needs more innovation from its people to ensure growth and stability, yet it is not willing to let go of control. Neither, it appears, is Alibaba of its employees.

So Western consumer brands can rest a little easier for now. Until and unless the next Jack Ma comes along to infuse a sense of individual creativity and freedom in China Inc., Chinese brands like Alibaba will likely have a hard time taking on the world.

Originally trained as a molecular biologist, Hao Wu is now a New America Foundation fellow and the director of Beijing or Bust and The Road to Fame.

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