Page 56 - How China Is Winning the Tech Race

salesperson hit the target, he or she won a prize. Since money was tight, the
prize was a poem written by Kwan. The poem idea took off and became part
of Alibaba’s culture.
The rewards system worked. By 2002, the team had met its goal of eking
out a tiny $1 in profits. However, the managers deferred taking a bonus they
were supposed to get because revenues missed the mark at only $3.7 million
for 2002. But revenues climbed to $30 million in 2003 and then reached $67
million in 2004 and $125 million in 2005, according to Kwan. Today the
master plan has hatched an expansive e-commerce business, auction site, and
portal with revenues exceeding $200 million.
“The headquarters in Hangzhou outside the central cities of Beijing and
Shanghai gave us a chance to put our heads down with minimum interference
and minimum interruption,” says Kwan. Then in his early to middle fifties,
Kwan says he stayed in a $17-a-night hotel for four years to stage the
turnaround. Today, Kwan has been pulled out of retirement to help Ma
integrate Yahoo! China into Alibaba as “chief people officer” and “chief edu-
cation officer.”
But there is a lot of work to do. Online commerce in China is growing
fast but is still tiny. China’s e-commerce market was worth $6.5 billion in
2007, 7 nearly a sixfold increase over 2004. Business-to-business
e-commerce is the fastest-growing segment, but only about 3 percent of
China’s 42 million small and medium-sized companies—which make up the
vast majority of businesses in the Middle Kingdom—made deals over the
8
Internet in 2006. In the United States, by comparison, nearly all businesses
use the Internet to purchase some materials and services. 9
Only about 15 percent of the Chinese population made a purchase online
in 2006, according to iResearch, compared with about 66 percent in the
United States. Chinese Internet users do not buy more online because of
concerns about security, poor customer service, delivery delays, and privacy.
Limited use of credit cards is another deterrent.

Ma’ s next act
After being at the helm of Alibaba for nearly 10 years, Ma is looking to his
next act. As with Alibaba, he wants to do something that will have a positive
influence on China’s development, “not through war, gas, or bloodshed but

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