Page 55 - How China Is Winning the Tech Race

in the company, a process that
identified staff members who were “It couldn’t have been done without the
true believers in the long-term visionary and spiritual leadership of Jack Ma.
Everyone in Alibaba believed in him.”
vision.
Alibaba cut the burn rate (the Tina Ju,
monthly operating expenses above managing and founding partner,
incoming cash) by 75 percent in TDF Capital, and managing partner,
just one quarter. The board was Kleiner Perkins Caufield & Byers China
impressed, but what next? Alibaba
was still using up $500,000 per
month and at that rate had 18 months to live.
During board meetings, the investor Ju recalls, presentations were very
informative and transparent. “Very few companies do that in China, but here
they tell us the worst-case scenario: Here’s what we will do if we can’t survive;
this is what we will do; this is what we will liquidate. We realized they had
done everything they possibly could. And the board became extremely sup-
portive even though they didn’t know what the answer was,” recalls Ju, who
served on the board’s audit finance committee.
To come out of the depths, the goal was to focus on generating revenues.
As a start, Kwan spent three days talking to management about building the
company culture, finding the right business model, and building the best sales
force. Five or six business areas were identified, with the number one
objective being to avoid getting into a business in which bribery was rampant.
That eliminated most of the ideas Alibaba was considering, says Ju. Finally,
with the goal of generating sustainable revenues and cash flow, Alibaba estab-
lished an offline catalog of Chinese suppliers with goods to trade, backing off
its original online strategy.
In a follow-up mobile phone call with Kwan, he filled me in on more
details of the turnaround. Relying on his GE training, Kwan established a man-
agement development program in April 2001 to weed out nonperformers and
reward the best sales producers. Staffers in the lowest 10 percent of the
pyramid were axed. The rest were categorized as rabbits, those who do
whatever someone tells them to do; wild dogs, individualists who can perform;
or bulls, those who succeed through hard work. Only the bulls were kept.
Kwan also formed a Million Dollar Club for top performers. The
membership requirement was RMB 1 million ($132,000). When the first

Alibaba—The Wizardry of Jack Ma 29