Alibaba's gongfu commerce

INSPIRED BY MARTIAL ARTS: The sign outside's headquarters in China's Zhejiang province.


    Jun 09, 2014

    Alibaba's gongfu commerce


    WHEN co-founder Jack Ma and his colleagues sat down in 2001 to lay out Alibaba's defining values, they named them after a martial arts technique drawn from Mr Ma's love of gongfu novels and their heroic themes.

    But the corporate culture of China's biggest e-commerce company also draws heavily from Western values in a mix of East and West that Mr Ma dubbed "Hupan culture" after the apartment block in Hangzhou where he set up his business.

    These core values, now named the "Six Vein Spirit Sword" - customer first, teamwork, embrace change, integrity, passion and commitment - shaped Alibaba Group Holding, which began as an online bulletin board for companies in Mr Ma's Hupan Huayuan apartment complex in eastern China.

    Alibaba's aspirations helped it grow from just 18 employees to more than 20,000. Along the way, it knocked eBay out of China and is now preparing for a United States stock listing that could be the biggest tech IPO to date.

    "Alibaba is not like a Chinese company, it's a blend of the good parts of East and West," said Andrew Teoh, a former Alibaba executive, and founder and managing partner at Ameba Capital. "It's grown huge, but they maintain a start-up culture. Alibaba is a flat structure, bureaucracy is a pet hate there."

    Crucial to this was Savio Kwan, a former General Electric executive, who lifted from the US conglomerate's playbook to introduce a reward system that was new to China at the time.

    Half an employee's annual appraisal was to be based on his performance. The other half depended on how well he embodied Alibaba's core "gongfu" values.

    "We wanted to make sure that even in a company of 10,000 people it had this Hupan culture, a start-up culture," said Porter Erisman, a former vice-president at Alibaba.

    From day one, Alibaba lacked nothing in ambition.

    "Our core mission was, and is still, to make it easy to do business anywhere," Joe Tsai, Alibaba's executive vice-chairman, said in March. "The mission ... is our religion."

    Alibaba grew from a simple business-to-business website hooking up overseas companies with their Chinese suppliers.

    By 2003, Alibaba began work on its first major departure from business-to-business e-commerce. Mr Ma summoned a small group of employees, giving them the option to carry on with their normal work or sign a document and begin a secret project, said Shou Yuan, a former employee who took the second option.

    The group gathered in the original Alibaba apartment to create Taobao, the consumer-to-consumer e-commerce site that was launched in 2003 and faced off against eBay, which that year bought rival Chinese site EachNet for US$180 million.

    At 4pm every day, the Taobao project group would break from work to swim, do handstands and play video games.

    "We were just a group of country bumpkins and our competitor was eBay," Mr Shou recalled.

    By 2006, eBay effectively conceded defeat, shutting down its EachNet site.

    Today, Alibaba dwarfs its US rival, with the Chinese group's estimated value of US$150 billion (S$188 billion) more than double that of eBay, and the goods traded over its sites worth more than eBay's and's combined.

    Yet Alibaba's romanticised notion of itself and its aspirations have sometimes worked against it.

    The company was denied entry to the Hong Kong Stock Exchange after Mr Ma refused to budge on Alibaba's controversial partnership structure that would see an unelected group of 28 people nominate board members.

    The authorities insisted this violated its one-share-one-vote policy, and kept its doors closed to an IPO.

    Alibaba's weighty US listing prospectus mentioned the company's culture and values more than 30 times. It worked.