The last few years have seen Alibaba, the Chinese tech and e-commerce juggernaut, go from being a shaky, unknown start-up to something of a household name from Detroit to Delhi. At some point along its path to success, the company has also become one of the world’s favourite success stories. It’s a rags-to-riches tale of sorts, and it doesn’t hurt that the lead character in the story, CEO Jack Ma, is widely considered “one of China’s most unlikely tech founders”. After all, everyone loves an underdog.
A former English teacher in a sleepy southern Chinese city, Ma reportedly failed China’s college entrance exams twice, but it’s these very experiences that have helped him get where he is today. Not being deterred by failure is at the very heart of Jack Ma and Alibaba’s philosophy, and is also one of 40 business platitudes that appear in a recently-published memoir by former Alibaba vice president, Porter Erisman, Alibaba’s World: How a Remarkable Chinese Company is Changing the Face of Global Business.
The book takes us behind the scenes of the early Alibaba days and shares several esoteric “Jack Ma-isms”, with “Don’t change rabbits” perhaps the most off-the-wall among them. But the most valuable aspect of the book for entrepreneurs is undoubtedly the concluding section of “lessons” that can be applied by start-ups in any sector.
Ma’s failures didn’t end with academia. His first internet start-up, ChinaPages, failed miserably before the concept behind Alibaba was born. He also tried unsuccessfully to get into the search market a couple of times. His optimism is widely-known and without this trait – and sheer tenacity – it’s doubtful that he would have lasted long enough to see Alibaba become the largest global IPO ever, in September 2014.
Another of the 40 lessons that China-watcher Charlie Custer considers most valuable relates to the way in which Alibaba handled its biggest competitor, eBay. Alibaba’s marketing budget was far too small to bear comparison with eBay’s when the start-up first began trying to compete head-on with one of the internet’s oldest e-commerce giants. Instead, by engaging eBay in a “PR war of words”, every time eBay mentioned crushing would-be competitors like Alibaba, the growing company’s brand recognition grew too. It all goes back to the popular maxim, “There’s no such thing as bad press.” And, for most start-ups, free press of any sort also has substantial value.
Unsurprisingly, perhaps, finance is central to the next Alibaba lesson. Putting money away for a rainy day may be good advice for anyone, but in Alibaba’s case it saved their skin. When the internet boom was at its peak in 2000, Alibaba was already sitting on some funding, but Ma decided to err on the side of caution and raise another round of investment. Within a few months, the dot-com bubble burst, and start-up funding all but came to a halt. Without his financial prudence, Ma’s company may not have survived the years to come.
He may have been financially prudent in certain situations, but Ma was not miserly when it came to dishing out equity. By 2007, the year of Alibaba.com’s first IPO, the company had so many shareholders, writes Erisman, that the company had to rent out an arena in order to fit all of them into a single room. As with some of the other lessons or business platitudes that Erisman outlines, motivating people with a financial stake of their own is not a new concept. But the sheer extent to which it seems to have propelled Alibaba to success made Custer consider it worth emphasising.
Jack Ma was generous with the company’s equity because he knew that in the long run, if people had (or could at least work towards) a stake in its success, they would work harder. And with everyone incentivized to work hard, the company became such a success that everyone got rich. Ultimately Ma’s generosity with the company’s equity probably made him more, not less, wealthy. Hopefully, you’ve hired a team that believes in what your company is doing, but let’s be honest – employees having a financial stake in the company’s success never hurts. And given that working at a start-up often requires accepting grueling hours and sometimes lower-than-average pay, giving your team an equity stake in the company’s success can be one way to help retain talent and keep everyone motivated through the lean times.
Featured image by Tech in Asia
This post was originally published on The Future’s Muse.