because most, if not all, companies aspire today to be customer-
centric. Yet many fall well short of that ambition. At Haier, prac-
tically all the employees are in contact in one way or another
with the customer. Haier thinks of itself as a service company,
and service is best provided when, as its chief executive insists,
there is “zero distance with the customer.”7
This is the other reason for Zhang to decentralize his company
to such an unheard-of extent. Without this type of organization,
he would not have been able to achieve his goal of zero distance.
Every unit, every employee is connected to the consumer through
what he calls “a market chain.” To quote Bill Fischer:
Employees form a chain of internal customers at each suc-
cessive downstream activity as well. The design department,
for example, is a customer of the environmental testing
laboratory, product divisions are customers of the techni-
cal facilities department, and managers and employees are
the customers of Haier University for staff training. These
internal transactions work as in a marketplace.8
Zhang Ruimin
43
This profound decentralization, combined with the will to
annihilate the distance between employees and their customers,
has made Haier the most innovative company in its sector. Its
list of innovations is staggering. In addition to washing machines
that also rinse vegetables, Haier has produced shrunken fridges
for students, an anti-shock water heater, a deep freezer that works
without power for 100 hours, a wash basin–mirror unit that
custom warms water via facial recognition, and a TV monitor
integrated into headphones that allows a user to program the
television through brain waves. Zhang wants Haier to become “a
giant incubator of innovations.”9
As for the machine that rinses potatoes, it inspired the tech-
nology for a washer that does laundry without soap, launched
by Haier in 2009. This truly disruptive technology has enabled
Haier to progressively become the leading supplier to laundries
in China before moving on to the rest of the world.
Forbes published an article about Zhang called “Wisdom
from the Oracle of Qingdao.”10 His prophecy has been fulfilled.
The Chinese authorities, his fellow leaders, his staff, and jour-
nalists all believe Zhang is the model to follow. He has made his
dream come true; Haier is really a worldwide brand—the first to
emerge from China.
Chapter 6
Jack Ma
ON CHINESE BUSINESS MODELS AND
DISRUPTIVE MANAGEMENT
In China, November 11 is Singles’ Day. Originally called
Bachelors’ Day, it began in the late nineties when students
invented a special day for singles. The date, written as 11–11, is
very popular among young Chinese. It has become an opportunity
for them to meet and party with friends.
In 2009, Chinese e-commerce giant Alibaba turned this party
day into a mammoth annual “Global Shopping Festival.” Calling
it an “anti-Valentine’s Day,” the company renamed it Double
11, a term1 it invented and trademarked.
The festival has since become the world’s largest 24-hour
shopping event, supported by Alibaba’s unique global cloud,
logistics, and payment infrastructure. In 2018, 180,000 brands
participated in Double 11, including thousands of foreign ones.
Hundreds of millions of consumers made purchases through
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Alibaba’s platform. The online retailer sold $30.8 billion
worth of merchandise, making the event bigger than Black
Friday and Cyber Monday combined. At one point, more than
350,000 orders per second2 were being registered. An Alibaba
spokesman commented, “It’s like the Olympics or the Super
Bowl of e-commerce.”3
This event bears testimony to the extraordinary rise of
Alibaba and its founder and chief executive, Jack Ma. His success
story fascinates media outlets across the world. There is certainly
a lot to be learned from this former English teacher, who claims
to know nothing about technology. In spite of, or perhaps thanks
to, this background, Ma has built a huge technology empire.
Nothing seems impossible to “Crazy Jack,”4 as he is affectionately
known in the Internet world.
Alibaba and its subsidiaries account for approximately
80 percent of all of China’s e-commerce business. Fortune
magazine described it as “the equivalent of Amazon, eBay, and
PayPal combined.”5 Its global revenue has seen exponential
year-over-year growth and totaled $39.9 billion in 2017.
a Contrarian Model
Jack Ma has shown great resilience. He is at the head of a com-
pany that, like Haier, has reinvented itself on several occasions.
He often quotes the founder of Intel, Andy Grove, who said
“only the paranoid survive.”6 Jack Ma is well positioned to know.
Maintaining a healthy level of paranoia is essential in the tech
world, where a new idea, business model, or app can provoke
an industry shift that renders current business models instantly
obsolete, from one day to the next.
Alibaba started out as a business-to-business service provider,
created to help Chinese companies find export channels online. It
Jack Ma
47
then progressively began to connect entrepreneurs with global mar-
kets, wherever they were. The concept allowed, say, a mid-sized
Norwegian company to sell more effectively in Brazil. But faced
with the threat of the arrival of eBay in the Chinese market, Jack Ma
launched Taobao. This entry into the consumer world was initially a
defensive move. With 666 million monthly active users, this online
shopping website now dominates e-commerce in China. Other
initiatives soon followed, beginning with the launch of Alipay, the
online payment app. Processing more than 175 million daily trans-
actions7 and 54 percent of all electronic payments in China, it is by
far the biggest online payment service provider in the world.
Alibaba owes its unheard-of success to the power of its unique
business model. And also to the discovery of a real consumer
insight. In China, most consumers were initially mistrustful of
the digital world because it was unfamiliar. Chinese suppliers
hesitated to sell things online because they worried that custom-
ers would not pay. This was the insight that led Jack Ma to create
Alipay. Alipay’s main feature consists of freezing the money. It’s
an escrow payment system. Vendors are reassured they will be
paid for the products they ship. At the same time, consumers
know that if they pay with Alipay, their account will only be deb-
ited once they are satisfied with the goods they have received.
Alibaba is intent on gaining control over the virtual wallet,
in particular against Tencent, China’s leader in messaging and
gaming, thanks to its more than one billion monthly active use
rs.
Alipay is an incomparable asset for Alibaba in this context. It now
handles close to a trillion dollars a year in online transactions,
three times that of PayPal. Jack Ma always thought that finance
must be disrupted, which is exactly what he did with Alipay.
Alibaba’s websites are designed to reflect Chinese culture.
They are packed with all sorts of information and graphics that
clash with the clean styles of Amazon or Google. For Westerners,
it all looks a bit messy. You need to scroll down several times to see
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the whole page. The impression of chaos is reinforced through
discovering the most improbable products on Alibaba’s sites, stuff
usually found in local street markets. Thousands of small, even
tiny companies, as well as millions of individuals from the back
of beyond, in the remotest of Chinese villages, were given the
opportunity to make money online. Most of them owe the very
existence of their businesses to Alibaba. All this contributes to
making its sites look like a gigantic online hardware store. From
the outset, Alibaba’s websites were intentionally built differently.
They are made in China, for the Chinese.
This reminds me of Big Bazaar’s amazing success in India.
Its founder Kishore Biyani came to the conclusion that the basic
principles behind successful retail in developed economies just
didn’t work in India. All those look-alike stores filled with long,
pristine aisles, tidy shelves, air-conditioning, clean graphics, and
skilled staff made Indians feel that they couldn’t afford the prod-
ucts on display. So Kishore Biyani transformed his stores into
huge local markets: bazaars. Garish colors prevail. People bump
into each other. They bargain just like in a street stall. Today Big
Bazaar is India’s most popular supermarket chain. Its president
loves saying “we can only survive in chaotic environments.” 8 He
knows what he is talking about. He had previously encountered
spectacular failure by following management consultants’ advice
to model his stores on Walmart and Carrefour.
Not adapting to local market characteristics proved fatal to
eBay’s success in some countries. Its website design faithfully
followed the American model, and the Chinese were uncomfort-
able with it. It was one of the main reasons for eBay’s amazing
failure in China.
Jack Ma’s unorthodox way of doing things manifests itself from
the top to the bottom of his company, in whatever the area. I have
retained two examples of this. First, when Alibaba’s sales suffered
Jack Ma
49
during the global financial crisis in 2008, Ma decided to lower
subscriber fees by 60 percent for those who signed up for a broader
range of services. As Duncan Clark points out in Alibaba: The House
That Jack Ma Built,9 the financial world reacted very badly. With
sales down, they hardly expected the company to drastically reduce
the cost of membership. An increase seemed more appropriate
for the situation. From one day to the next, a large proportion of
Alibaba’s revenue was put in jeopardy. This was evidently a risky
strategy and quite the opposite of what many envisioned. But Jack
Ma had anticipated that a rise in sales would offset the subscription
price cut. This is exactly what happened. And it heralded a totally
new period for Alibaba, resulting in more sales of value-added
services, which have since become its major motor for growth.
A second example of Jack Ma’s unconventional way of doing
things is illustrated by the fact that he once told his staff to sell
some of the shares they owned in the company. I’m not aware
of any other chief executive who has done this. Jack Ma believed
that the people who worked so hard for the company, and whose
jobs often kept them away from their loved ones, deserved to be
rewarded—along with their families. In September 2014, Alibaba
made the largest stock market flotation in history. The surge of
the share price valued the company at $230 billion. Jack Ma told
his employees, “Selling the stock doesn’t mean you don’t like the
business. I encourage you to sell some, to build your life, to give
a reward to your family.”10
Many observers talk of Jack Ma’s contrarian mind. It’s true
that a lot of his initiatives go against the grain of conventional
Western habits. They echo what was referred to in the 1990s
as contrarian marketing. I remember being critical of this kind
of approach back then. In my book Disruption, published in
1996, I noted that “you can oppose something without propos-
ing its opposite.”11 At the time, contrarian marketing seemed
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too simplistic to me, but I must admit that seeing Jack Ma’s
success with it has led me to reconsider. Whatever the subject,
it’s worth asking whether, at a given point in time, an approach
that is diametrically opposed to conventional practices could
prove fruitful.
embracing Change through paradox
Later in this book I will examine in more detail paradoxes, those
contrary elements that all business leaders must manage. They
are sources of tension, but at the same time they can serve as a
positive platform for inspiration. Mastering paradox is a charac-
teristic of great industry leaders.
For example, Jack Ma knows how to walk the fine line between
chaos and order. On the one hand, he loves to say, “If you plan,
In practice, his company doesn’t follow a three- or five-year
plan. But this doesn’t stop Jack Ma from believing in rigor and
discipline. In China’s Disruptors, Edward Tse quotes Alibaba’s
chief strategy officer as saying:
Alibaba is constantly looking for the right combination of
opportunity and competence—where we can bring together
the biggest opportunity and the most important leverage
point. We don’t jump randomly, we do this in a very
disciplined way.13
A second paradox comes from the fact that, like several other
Chinese entrepreneurs, Jack Ma thinks that all competitive
advantages can only be temporary; they cannot be sustainable. But
at the same time, he is obviously looking to create a sustainable
company. He has publicly set the objective of having Alibaba
survive until 2101. Why 2101? Because at 102 years of age,
Jack Ma
51
the company will have covered three different centuries since
its creation in 1999. His approach differs from those American
academic thinkers who, for decades, have been preaching about
finding a sustainable competitive advantage. Jack Ma believes
that, in an incredibly fast-moving and complex market like China,
this is a useless exercise. What’s important for him resides in a
different kind of quest. His goal is beyond finding competitive
advantages in a particular sector; rather, he seeks to
constantly
redefine the frontiers of the sector itself. The only way to survive
is to always look for the optimal field of activity, to enter into
new sectors, and even to invent them.
This is the way for Jack Ma to build a sustainable company
with a great long-term future, even without being based on a
clear, sustainable advantage.
This leads me to a third paradox. Jack Ma is persuaded that
Alibaba’s culture, which he wants to keep as Chinese as possible,
is an asset for conquering other markets. He believes that a
company cannot be competitive internationally without having
a strong local culture. He often explains that you have to build
on your nationality, then go beyond it—or better yet, transform
the inherent qualities of your local culture into a strength that
can help you conquer the world. Bernard Arnault does nothing
less when he exports the French spirit through the houses of
LVMH. And this is exactly what Zhang Ruimin also wants to
achieve, turning Haier’s company culture into a competitive
asset.
U.S. In, China Out
Chinese business leaders today owe much to their predecessors
who first paved the way and marked forever the young business
history of their country. Back in the 1980s and 1990s, in a
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Confucian, risk-adverse culture that revered authority and
conformity, these pioneers dared to adopt capitalistic methods,
a mere decade or two after the end of the Cultural Revolution.
This required real courage because, at that time, people could be
punished for taking capitalist initiatives. They had a real sense
of risk; they were immersed in uncertainty. “They were cross-
ing the river by feeling the stones,”14 as Deng Xiaoping, China’s
leader during that period, would have said.
Today’s new entrepreneurs, like Jack Ma, Robin Li, Ren
Zhengfei, Lei Jun, Pony Ma, Li Shufu, Wang Jingbo, and Diane
Wang, have all benefitted from this bold heritage. They form a
generation of experimenters for whom change is the norm. They
don’t debate it, as is often done in the West. They live it and
practice it naturally. This inclination for change is at the core of
their DNA.
As with Japan in the sixties, China was initially a low-cost
producer for Western industry. That still remains partly true
today, thanks to the gigantic capacity of the country’s millions