For every new Google employee in China, he/she is usually overwhelmed by all what Google has to offer: free snacks, gadgets, a world-class cafeteria with a renown chef, annual trips to Google headquarters in the Silicon Valley, and a nice 20% carve out of their work time allocated for anything that interests them as it relates to Google’s business (often referred to as ‘self-projects’). Some would argue that Google is the ‘best environment for nurturing and managing innovations’. However, 3 years after its office opening, Google’s market share in China is less than 30% (in 2009) and only exemplifies a 3% increase from 3 years ago.

On the flip side, let’s take Taobao as an example – China’s version of eBay. For every new Taobao employee in China, he/she needs to learn the proper way to do a handstand against the wall. No toys, no gadgets, no world-class cafeteria – just the ability to perform a physical handstand. Some would argue that Taobao is possibly the most bizarre environment for any Chinese company; however, with a market share of 86% (in 2009) and a +10% year over year growth rate since 2005 – you have to wonder what Taobao might be doing right.

I don’t personally know of any scientific or in-depth correlation between a luxury kitchen versus a handstand has to do with a company’s market share growth in China, but comparing the fact both Google and Taobao launched relatively at the same time in China, one has to ask if there is an effective way to how management plays a role in the success. Google’s slow growth in China is not an anomaly in China – in fact, many global companies face similar challenges. A closer look at Taobao’s corporate ideologies and management style may reveal some interesting insight.

ANIMAL OF EXECUTION

Jakie Ma, CEO of Taobao, has an interesting philosophy in conducting business in China. For him, an ‘execution-oriented’ style is the most effective way to grow a company in China. In his words, ‘to sacrifice the best ideas for the sake of execution is necessary.’

There is no question the fact the Chinese market is one of the most dynamic and fragmented markets in the world. Ma’s philosophy is that a reasoning / analyzing based management system is simply too slow to react in a market like China. Good ideas are only that – good ideas. Our VP of Business Development, Gordon Chu, likes to refer it as, ‘analysis to paralysis’.

In Ma’s management style, good ideas are important and innovation will definitely be the driving force to grow any company; however, it should only play second role to that of execution first. For Ma, the company itself should move from being managed as an ‘organization’ to being trained as an ‘animal of execution’.

IDEOLOGY VERSUS VALUE

It’s not uncommon for companies to have a set of corporate values that are shared by all the employees and resonated every so often by upper management. Everyone understands the common goal and works towards meeting them. Yes – perfectly legitimate and perfectly fine. Ma makes it more than just a ‘value’ but wants to transform the company’s process into an ‘ideology’.

At the core, value is a set of ideas communicated to employees through education. Thus the upper management speeches and occasional staff meetings to hammer home the point. An ideology is built on a transformation of the way of thinking. At Taobao, employees are required to learn a handstand to enforce the idea of ‘thinking differently’. As part of their initiation, they are often given a mythical name taken from famous Kung Fu novels (Ma is an avid fan of the Chinese martial arts) to illustrate their specialty and personality. Rooms and offices are also appropriately tagged with fictional Kung Fu-inspired names to remind everyone just the importance of their mission at-hand.

Perhaps the naming convention is only a novel part of Ma’s ultimate management style; however, it resonates the idea of an alternative way of thinking – an ideology of uniting his employees to focus on execution. Recently, surveys show that the Taobao employees have the highest loyalty to the company with below-the-average salary (IT industry). 

THE TAI-CHI OF MANAGEMENT

There is a method to the chaos Ma has implemented in Taobao. Kung Fu names is not simply a reflection of Ma’s personal interest, but is a deliberate way to quickly and effectively communicate his ‘ideology’ to run a business.

For most Chinese, there is a long-lasting tie to the Kung Fu culture ever since as kids. It’s part of every kid’s imagination growing up and is extremely prevalent in the culture of the youth. For Ma, implementing processes around the ideas of Kung Fu is a seamless way for his employees to understand how decisions are made.

As for decisions that are made, it’s been proven that there is a direct correlation with how long and difficult it is to implement decision with the sheer size of a company. That makes logical sense – the larger the company, the more decisions need to be examined and implemented. However, using terms from Kung Fu novels to stand for different ‘decisions’ or how decisions are made, employees can easily be understood and embraced by the employees. To put in Tai-Chi terms, controlling the body through breathing is faster than manipulating different muscles. In other words, speak the language of the employees and execution because all of a sudden a whole lot easier.

FOUR OUNCES TO YIELD 1000 CATTIES

In Tai-Chi, there is a Chinese phrase that translate to ‘Four ounces to yield 1000 catties’. While I don’t necessarily know what ‘catties’ particularly means, the thought is about leverage. An opponent strikes, use his blow to redirect back towards him. In this particular case, ‘leverage’ is a reaction and requires as much observation and listening as it takes to act.

For many global companies entering China, the business reaction is carefully based on analysis and understanding of the market. This often limits companies to base decisions on current market conditions and taking facts as-is. However, in China where the dynamics of the market changes within a blink of an eye, the ability to react quickly and to leverage your position is an important skill set to have when dealing in China.

For Ma, Taobao takes every opportunity to their business advantage – both from a relevant culture and political standpoint o help build their corporate and brand image. For example, in 2008, amidst a bad global economy that resulted in many lay-offs for Internet companies in China, Ma invited all his employees and their respective family to visit the company and inform there would be no downsizing and that everyone should be considered as family. Not only is this a media gem, but is a great example of how Taobao leverages the current conditions to better their corporate branding with their employees and amongst other Internet companies.

CONCLUSION

For Taobao, how does this all relate to that of business and business sense. A Tai-Chi style management does not necessarily translate well to investors on Wall Street. For the last five years, Taobao has expressed no plans for going public. For starters, Ma claims they have enough cash, but more importantly, he doesn’t want his management to be affected by the stock market at this ‘early’ stage of Taobao.

Sure Ma has to contend to investor scrutiny and, at the end of the day, results and numbers speaks volumes. However, despite the business end of Taobao, there is an admiration for Ma’s management philosophy and how it’ll play a role in transforming management for all of China.