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The Secret to Alibaba’s Culture Is Jack Ma’s Apartment

The Secret to Alibaba’s Culture Is Jack Ma’s Apartment

by Walter Frick  |   9:00 AM June 19, 2014

In 2002, the year Alibaba.com first became profitable, founder Jack Ma gathered a handful of employees in his office and told them there was a secret project that they had the opportunity to join. But to do so, they would need to resign from Alibaba, work from a secret location, and refrain from telling friends or family or Alibaba staff about this new start-up they would be building.

This decision — to bet the company on a new and distinct business — was the first such move by Ma, but it would become the cornerstone of Alibaba’s strategy. Today, Alibaba looks more like a conglomerate than a typical tech company, with a diverse set of businesses operating largely independently. That transformation began with Ma’s decision to launch Taobao, the consumer commerce site that would dash eBay’s hopes in China and propel the Alibaba Group to even greater success.

The employees agreed to the secret project, and Ma revealed the location from which they’d be working: his old apartment, where years earlier he and 17 co-founders had launched the original Alibaba site.

Jack Ma’s First Day Speech in Alibaba Apartment from Taluswood Films on Vimeo.

That choice cuts to the heart of Alibaba, according to Porter Erisman, who served as a vice president at the company from 2000 to 2008, and whose documentary on his time there debuted in 2012. By launching Taobao out of the same apartment from which he had launched Alibaba.com, Ma was able to imbue the new project with the same culture of his existing company, while keeping it totally separate.

“They went off to the original apartment that Alibaba was founded in and that’s where they worked with the same kind of spirit as Alibaba in those early days,” said Erisman. “Alibaba was started in Hupan Garden. That was the name of the apartment complex. Over time we realized that this Hupan culture was important to preserve even as we grew to a big company.”

It’s clear from the documentary, Crocodile in the Yangtze, that Alibaba sees a strong corporate culture as critical to its success. Preserving culture while scaling is difficult in general, but for Alibaba the task was complicated by its decentralized approach to decision-making, where separate businesses are largely allowed to chart their own course.

Ma’s insight was that a shared founding space could unite a new project with its predecessor, even while maintaining secrecy and complete separation.

The decision to launch Taobao out of the apartment that spawned Alibaba worked so well that Ma took the same approach with Alipay, the company’s digital payment business, which launched in 2004 also out of the apartment.

Of course, this only works for skunkworks projects. As the company grew, it had to devise more traditional ways to extend a unified culture across increasingly diversified business units. To do so, Alibaba had to articulate the values it believed comprised this “Hupan culture” — principles like “embrace change” and “teach and learn” — and instill them through more traditional methods, like new employee orientations and Outward Bound-style trips.

Though Ma’s apartment no longer serves as a rite of passage for Alibaba’s innovators, the culture it created lives on. And while not practical in many circumstances, it’s worth asking whether such a strategy could work elsewhere. Imagine one of Apple’s secretive new product initiatives working out of Steve Jobs’ old garage, or a Google team working out of the Menlo Park garage where the company first located.

Erisman believes Alibaba’s core strength is growing new enterprises “from apartment phase” to national or global scale. Most companies that succeed in making that transition never think to go back to working out of a cramped apartment or garage. But in Alibaba’s case, it seems to have paid off.

 

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About bambooinnovator
KB Kee is the Managing Editor of the Moat Report Asia (www.moatreport.com), a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing. KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund. Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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