Alibaba : The House That Jack Ma Built - Duncan Clark

Alibaba : The House That Jack Ma Built - Duncan Clark

The three competitive edges that make Alibaba stand out

When it was launched by Jack Ma and a few other partners 20 years ago, nobody could imagine that Alibaba would grow to become a household name in just a few short years.

The founder, Jack Ma had a dream. From the onset, he kept saying to whoever cares to listen that his company would take the world. But there were no resources at the time to substantiate this dream. He just had a dream and a plan which he kept improving upon as he gained wisdom through books and personal experiences.

But isn't that how all great empires are built? No one starts out knowing how one plus one equals two. One thing highly successful people do is dream big, start small no matter the lack of resources, and then keep improving over time. A great mark of success is that you never stop learning.

Learning will make you distill time tested principles that, if applied properly will produce desired outcomes.

Alibaba may be enjoying success in the eyes of the world, but they didn't just jump into success — after all, they are not the only conglomerate in the world. So what makes Alibaba stand out this much? Three things, and these are what Jack calls the iron triangle. They are: ecommerce, logistics and finance.

Let's take a closer look at this one after the other.

The ecommerce edge

Alibaba group holdings have severally websites, but the most popular ones used for ecommerce are Taobao and Tmall. The two sites are similar, but there is a little difference between them.

Firstly, Taobao is accessible to all. Any merchant can sign up, and get a space to sell their product or service — and it's absolutely free. However, you may have to pay for ads if you want more visibility, especially if you're new and your brand is unknown.

Unlike Taobao, Tmall is more like an exotic mall. This site consists mostly of popular luxury local and international brands. Even Amazon has a space on Tmall where they sell imported materials.

One thing that makes ecommerce work so well in China as against other parts of the world is the fact that real estate is expensive. Lands are the major way the Chinese government generate revenue, hence the high cost of land and buildings. This makes it difficult for retailers to own retail shops and among those that do, only a few have the resources to settle land taxes and still invest massively in marketing and customer acquisition.

Consequently, many shop owners prefer online retail.

Alibaba took advantage of this. Their excellent customer service makes them irresponsible to the Chinese market. *

The logistics edge

Nothing makes e-commerce more reliable than a quick and efficient delivery system. Alibaba knows this well. Initially, the conglomerate partnered with top delivery companies in the country, but over time, Alibaba and the top three delivery companies in China — Shentong (STO Express), Yuantong (YTO Express), Zhongtong (ZTO Express), and Yunda — alongside a few others, partnered to invest in a firm called China Smart Logistics or Cainiao.

Together, these companies are a force to be reckoned with.

Presently, they handle more than 30 million packages a day and employ more than 1.5 million people across six hundred cities. And they have a goal of turning that number to 100 million packages a day by 2020. More interesting is the fact that the delivery companies under this firm stand as individual companies, only that they integrate their delivery data so that each member company can improve on their services by analyzing orders, delivery status and customer feedbacks.

Indeed, this logistics system makes Alibaba's product delivery to stand out of the crowd.

The financial edge

Trust is a big deal in online transactions. You will soon start losing customers when people know that you don't handle their money with utmost priority.

The financial edge is the last in Jack's iron triangle. He came up with Alipay, a PayPal substitute handled directly by him. Alipay is now by far the most popular online payment tool in China. It's not only used by customers buying from Alibaba, but just like PayPal, the tool can be used for just about any online transaction you can think of. When buying from Alibaba, there's a form of escrow developed to earn the trust of customers: when you find a product you like and pay for it, your money goes straight to Alibaba account and will only be released to the merchant when the product is delivered to you and you like it. If you don't, you reject the product and get your money back.

“China changed because of us in the past fifteen years. We hope in the next fifteen years, the world changes because of us.” - Jack Ma

The journey to building a global empire

Jack Ma's experience growing up has a tremendous impact on his life and career even to this day.

Jack grew up as a poor Chinese boy who had a hard time understanding maths. Because of this, he had to write the pre-college examination severally, but his persistence later won; he passed considerably on the third attempt. The score he got wasn't enough to get him to elite schools, so Jack had to settle for a teachers' college where he learned the English language.

It's not a surprise that Jack did incredibly well in his studies, he was always fascinated with English. As a child, he regularly volunteered himself as a tour guide for tourists from English speaking countries just so he'd test his English skills on them and also get to learn some new words and phrases.

Jack concluded his studies and began his teaching career. In the beginning, he lectured in high institutions alone, then later began creating a business out of his skill. He was organizing English classes for locals interested in upping their English language. It's from this little business that his first agency, Hope Translation was born. The agency's focus was on helping local companies find customers overseas by solving the language barrier through translation.

His experience with Hope translation coupled with his childhood experiences and other lessons he learned from people contributed to the philosophy for running Alibaba.

Very few companies carry the personalities of their founders, and Alibaba is one of them. From it's six value system to it's work culture, it's evident that Alibaba is a reflection of Jack's personality and beliefs. Jack is a jovial person who believes in the power of commitment and persistence. He also abhors complains but celebrates teamwork any day any time. And this is evident in the work culture obtainable in Alibaba. The conglomerate operate by six value systems called the Six Vein Spirit Sword. They are: customer first, teamwork, embrace change, integrity, passion, and commitment.

The lesson to learn: If you're the founder or executive of a company, it will be difficult to separate your personality from the company's culture. You will always shape and influence the work culture your employees will find themselves because you're the major decision maker — everything you say stands. As such, it's necessary to be a person of character. Be inspiring, exciting, positive and motivating. It will reflect on your company.

Generating awareness is your number one key to success when venturing into a new market

When you venture into a business that is not very common, you will have difficulty making progress, because people can seldom tell the value of your product or service.

If you find yourself in such a situation, the only way out is to invest massively in awareness campaigns. Use any medium and strategy that seem best to you, but be sure to create massive awareness. That's the only way out.

For example, when digital currencies like bitcoin were first introduced, its evangelists had to put in a lot of effort in making sure the public understood the value of what they were bringing on board. Whether you like the idea of digital currencies or not is not the case here, bottom line is, people will never do business with you when they can't see how it will positively affect their lives.

When Jack ventured into China Pages, there was literally no internet access in his locality, which made it difficult to attract customers since the potential ones couldn't see how his online company could project their visibility to the outside world.

He resorted to creating massive awareness, and though it difficult at first, opportunities began to open up — especially when China started catching up with the information age.

Jack had to leave China Pages after some time due to internal problems, he learnt major lessons from co – running that business — lessons he would later apply in running Alibaba.

Here is one quote he made years later when talking to an interviewer about China Pages.

“With good strategies, you will definitely survive.” ~ Jack Ma

Three vital business lessons about dreaming big

Aside being a relentless man with excellent work ethics, Jack is a visionary. He never dreams small, and he has developed the skills of following through with his dreams till they become a reality. This is demonstrated all through his journey of building the great Alibaba business empire.

The first thing to learn from Jack about dreams is you can never go beyond your dreams. If you dream small, you will indefinitely put in a small effort and that will lead to small achievements. But big dreams will inspire you to break limits. All things being equal, your big dreams will make you committed and persistent, and these qualities will make you achieve great success, despite any odds.

The second lesson is to start where you are, with the experience and resources that you've got. When he started Alibaba, Jack's competitors in Silicon Valley were focusing on large businesses, but he knew he couldn't do the same thing because he lacked experience in that area, his experience was in running small businesses, so Jack stuck to his business model of servicing small businesses. The third lesson is similar to the second, it is:

“Do not copy your competitors because you don't know the whole story. Find what works for you and stick to it.” 

Don't be afraid to change your business model or fight a big competitor

In the beginning, Alibaba was an ecommerce platform for B2B transactions, but after a while, Jack realized there as something wrong with that business model.

The business stopped bringing in much profit like before. On the basis of that and a few other reasons, Jack decided it was time to branch into consumer ecommerce. That will be a relatively new business model in China. At the time, only one company was known for running that model.

But soon, EBay would enter the Chineese market (through EachNet) and become Alibaba's biggest competitor.

Consistent with his ambitious nature, Jack's goal right before branching out was to dominate the market, and that meant beating EBay. For someone observing from outside, it would be an impossible task. How can a new company possibly beat a global organization?

But Jack had his strategies and he was patient. You need those two qualities, among others, to win any market.

We can learn a couple of things from Jack's strategy. The first is the element of surprise. Jack started the plan for Taobao, his consumer ecommerce business, underground. He picked a few trusted and experienced Alibaba employees and explained his plan to them then asked then to begin work on creating Taobao.

It was only two months after the site was up and running when Jack publicly declared that Taobao was a part of Alibaba.

The second lesson from Jack about beating a strong competitor is doing things differently. No one will patronize your new business when they don't see how it is different from the existing brand that they love and trust.

Two things that made Taobao different from EBay are: pricing and communication. EBay charged merchants some amount for product listing, whereas Taobao made it free for anyone to put up their product or service on the site.

Second, Taobao discovered there was weak communication between buyers and sellers on EBay — it took advantage of this, too. Jack ensured the systems were in place to facilitate smooth and easy communication between customers and merchants.

With these added advantages, it was only a matter of time and circumstance before Taobao kicked EBay out of China and dominated the market.

“You should learn from your competitor but never copy. Copy and you die. ~ Jack Ma

Conclusion

It takes persistence and grit to found and run a successful company. You will encounter challenges along the way, no doubt, but commitment to your initial dream is what will keep you going during tough times.

There are two ways to deal with competitors: use the element of surprise, and develop a solid business strategy that includes essential customer needs that your competitors are neglecting.

Just like Jack Ma, you don't need grand resources or a complete plan to launch out. Far too many people who set these as priority have failed to start their business venture because the reality is, you will never have enough money or have a complete business blueprint. Start where you are, make mistakes, but quickly learn from them.