The ‘Hidden Opportunities’ that influenced Jack Ma’s Success Story -The Key Success Factors
Jack Ma, the founder and the executive chairman of Alibaba became one of the richest men in China in the last decade. An inexperienced English teacher who fought against U.S technical giants. How did he succeed despite being an English teacher? What were the reasons behind his success? His vision? His perseverance? Finding and managing talented people? Gender-equal recruitment? Obsession? Mindset? His talents? His passion? or…Is there something else also? What could we understand from the biography of Jack Ma? What could we learn? Let’s dig in.
Note: The following content is from Duncan Clark’s ‘Alibaba — The House Jack Ma built’.
OPENING UP OF CHINA’s ECONOMY
Jack Ma was born in Hangzhou in the year 1964. At that time, China had no private enterprises. Ninety percent of the companies were owned by the state. Starvation and poverty could be witnessed across the whole country. In the early 1970s, the Chinese government realised that the only solution to salvage the failing economy was to turn towards market-oriented reforms. They began to initiate the process. In February 1972, then U.S President Nixon made a historic visit to China. A hundred reporters travelled to China and tracked the progress.
During the period of 1978–84, China opened up the country to foreign investment and gave permission for entrepreneurs to start businesses. From 1984–93, Controls on private businesses and government intervention continued to decrease, encouraging more entrepreneurs to venture out.
Why has opening up of China’s economy to do anything with Jack Ma?
I went through Forbes Year 2017 list of Top 100 Chinese billionaires. I’ve separated them according to their year of births. I came across a peculiar data. See the image below.
51 People out of 100 billionaires were born during 1962 to 1971. If you were born during this period, you had a better chance to become a billionaire. Jack Ma was born in 1964.
Why this anomaly? Though the seeds of economy recovery planted in 1978, the results became prominent only in the 1990s. The Chinese economy went through the greatest transformation in its history in the 1990s. This was the time when China’s business-friendly environment was better than the earlier decades. This was the time when China’s premier that time Den Xiaoping aggressively pushed ‘Socialistic Market Economy’. In 1992, he undertook his famous “southern tour” and announced, “To get rich is glorious”. He gave an unambiguous invitation to become rich for the country’s entrepreneurs. It was a right time to venture into the business.
Who would be in the best position to take advantage of it? If you are too old in the 1990s, then you’d have already well placed in a job and would have a hard time making the transition to the entrepreneurial world. Your younger mind would have been shaped by the older China. On the other hand, People who grew up in the 1970s would have their minds shaped by the concepts of globalisation and entrepreneurship.
From the available data, we could see that this particular narrow ten-year window(1962–71) was perfect to utilise the advantages of economic reform.
Jack Ma was born in Hangzhou, which is the capital and most populous & prosperous city of Zhenjiang province for much of the millennium. It had a long tradition as a trade centre — A city of small business entities. It was one of the prominent tourist places in China. Zhejiang was also called the cradle of entrepreneurship. Why do we need to understand the importance of Hangzhou and Zhejiang province?
Following is an image taken from the book “China’s Tycoons — Profile of 100 Top Business Leaders” (2012 Edition)
The image shows where tycoons were born. We could see that most came from Zhenjian(16) followed by Jiangsu. Both the provinces are closer to Shanghai.
I had a look at the Forbes 2017 list of billionaires and checked their place of birth.
Twenty billionaires from Zhejiang province. Are these people blessed with entrepreneurial DNA or beneficiary of some hidden opportunities?
- Zhejiang and Jiangsu being coastal and closer to Shanghai helped them to exploit the ‘Open economy’ opportunity as exporting became easier.
- Hangzhou also served as a southernmost point of 1,100 miles long Grand canal. This canal served as a major trading route between north and south China for more than a thousand years.
- Hangzhou and the nearby Ningbo port lie on a flat land making it an ideal place for trading to flourish. Hangzhou’s nearby cities were mountainous or isolated by a patchwork of rivers.
- Most of the cities in Zhenjiang had little arable land and many were unemployed or underemployed. Unlike other provinces, they don’t have abundant natural resources. Lacking any alternative, they had to rely on trade for their livelihood. They looked for markets. Wherever people are there, they saw opportunities. They traded tea, houseware goods and so on.
Wholesale markets began to appear. In 1982, traders were allowed to set up their stalls in a patch of land in the city Yiwu. Seven hundred stalls popped up from nowhere. It was a mini offline Alibaba. Today an estimated 40,000 people visit the wholesale market every day and stalls have grown to 70,000. You could find any product from toys to hairpins, to jewellery to plant pots to clothing to home appliances.
When economy opened up, these Zhenjiang traders who had been already into entrepreneurship began to travel across China to sell their wares. They were in a better position to utilise the opportunity. As trading increased, entrepreneurs needed money. Unfortunately, the banks were not yet ready to give loans to private enterprises. So, the private sector in Zhenjiang began to devise their own private credit market to give loans to private businesses which would form the basis for Alibaba’s banking. As private capital was available, entrepreneurship exploded.
By 2004, of the top hundred largest domestic firms in China, half came from Zhejiang province. By October 2015, there were six million Zhejiang entrepreneurs in China and two million Zhejiang entrepreneurs around the world.
By the mid-1990s when Jack was starting his business career, Zhejiang was already an entrepreneurial powerhouse. In a population of 44 million people, an estimated 10 million people owned business entities. As Steve Jobs’ life was shaped by growing up in a ‘Silicon Valley, Jack Ma’s life was shaped by growing up in ‘Hangzhou’ among the entrepreneurial community.
What if Jack Ma was not born in Hangzhou? or born a few years earlier?
HANGZHOU and THE ENGLISH
Hangzhou city is one of the prominent tourist places in China. When Nixon and his group of one hundred reporters came to China in 1972, they visited Hangzhou for a tour. After his trip, Hangzhou emerged as a major destination for foreign tourists. (Tourism multiplied by 40 times after Nixon’s visit).
Growing up in that area, Jack was surrounded by foreign tourists most of the time. He fell in love with the English language by interacting with the tourists. He worked as a local guide for the tourists from the age of fourteen. As the foreign tourists increased, Jack relished the opportunity to speak English. It was rare to find an English speaking Chinese at that time. For nine years, he worked as a guide, practised English every day for hours by interacting with the foreigners. Tourists not only helped Jack to learn English but shared the knowledge of outside world too.
“English helps me a lot. Makes me understand the world better, help me to meet the best CEOs and leaders in the world and makes me understand the distance between China and the world” — Jack Ma.
Learning English was a boon for Jack Ma. We would see in detail how English helped him throughout the whole career. There was another unintended benefit of interacting with so many foreigners — Jack had no shyness towards foreigners. He could easily become friends with them.
What would have happened if Jack grew up in some other city or if Nixon didn’t visit the town or if Jack was born a decade earlier?
In the year1980, an Australian Tourist Family toured Hangzhou. As usual, Jack was the preferred guide due to his English speaking skills. Jack and Morleys became friends soon. Morleys were impressed with Jack’s attitude of wanting to practice English. Though they went back to Australia, they maintained a pen pal relationship with Jack for many years. Jack would write letters regularly to Ken Morley and Ken would return those letters with corrections and alternate suggestions to help Jack’s learning skills. This further encouraged Jack to continue with the English studies.
(Image Source:asece.com.cn and Duncan Clark’s Alibaba)
Armed with his improved English skills, rich knowledge of local sites, Jack was given more opportunities to work as a guide for foreign tourists. The more he interacted with them, the more proficient he became. (Jack became well known around the town for his English skills).
In the year 1985, Ken Morley invited Jack to Australia. Jack went and stayed for a month. The first time, he left China. He was shocked to see a place completely different from his city. It blew his mind. Earlier, he had thought that China was the richest country in the world. He realised that he had to learn a lot and use his mind more. His Australian exposure changed his life’s perspective and meaning. What would have happened if Jack did not meet Morleys?
THE ENGLISH AGAIN
In the year 1988, Jack Ma graduated from ‘Hangzhou Teacher’s College’ and got placed as an English lecturer in ‘English and International trade’ at Hangzhou Institute of Electronic Engineering. While his fellow students got jobs to teach English in middle schools, Jack was the only one among five hundred graduates got this opportunity and the reason is…Yes. His English speaking skills and the knowledge.
After class hours, Jack began to teach part-time English classes after office hours which further gave him enough practice.
GETTING THE FEET WET
In the year 1992, Chinese premier ‘Deng Xiaoping’ urged people to start a business and planted the idea that getting rich is glorious. He built a lot of enthusiasm among youngsters. Many got smitten up by ‘entrepreneurship’ bug. Jack was one of them. Like many, he too resolved to launch his own business.
What would be the best business for an English teacher? Teach English? He had been doing that already. English translation? For whom? The Hangzhou city had only traders. Why do they need translation? So that they could find overseas customers. So, Jack started his first company ‘Hope’ a ‘Chinese to English’ translation company that would help local small businesses to find overseas customers. ‘Hope’ would translate a company’s marketing content into English and also help them in other business communications. Unfortunately, the business did not turn out as good as Jack expected.
Facing financial crunch, Jack had to start trading goods. He brought gifts, flowers, boos, plastic carpet and some other range of items and sold them. This way he could support his company for three years. He himself became a user of his product(The best way to understand your customer is to become the customer itself). Eventually, Jack had to close down the business.
Though the translation business did not succeed, it provided him opportunities to interact with many small and medium companies. He gained knowledge about the needs, desires, expectations and limitations of those small businesses which would help in building the Alibaba’s success. Being an entrepreneur he got to meet many more entrepreneurs which further gave him much needed inspiration, motivation and knowledge.
THE ‘ENGLISH’ AGAIN and AGAIN
Though Jack’s ‘Hope’ business was struggling, his reputation as an Expert English speaker was growing due to his night classes and the translation agency business. The local government required an interpreter in helping to resolve a dispute with an American company over the construction of a highway. Whom should they approach — somebody who is good in English and also running a translation agency? Oh… Yes, They asked Jack to help them.
Now, this new job had an important component — Jack had to undertake a month-long trip to the United States to resolve the problem. A trip that would give him the first exposure to the Internet and change his life forever. Blame ‘The English’ again & again!
THE TRIP TO USA
Though the USA trip did not solve the business problem, Jack got an opportunity to learn new things which would transform his life.
Do you know where did Jack stay in the USA? Jack had a fellow English teacher by the name ‘Bill Aho’ in Hangzhou, whose son-in-law, Stuart Trusty was staying in the USA. Jack stayed at Trusty’s home. What was Trusty’s job? He was a successful entrepreneur working on ‘Internet consultancy’ business. The more time Jack spent with Trusty, the more he learnt about the internet. Being fluent in English helped him to understand the Internet and its proposed implications. It was a transformative experience for Jack Ma.
That was the first time Jack touched a computer. He searched china related content but got empty results. That was the time he realised that he needed to make something about China.
With the help of Trusty, Jack made a website of his business and uploaded on one fine morning. By afternoon, he got five enquiries across the world. That was the time Jack realised that he could help Chinese companies to find business outside China through Internet. Trusty told him that he could help Jack in the initial stages. The idea of ‘China pages’ — a precursor to Alibaba was born.
Bill’s relatives also showed Jack around the wealthier districts of the city. He was stunned by the larger houses of the city. He could see an enormous gulf between China and America. The fire of ‘Being Rich is Glorious’ began to burn aggressively.
What would have happened if Jack didn’t have any friend’s family in the USA or what would have happened if Trusty was not into Internet business?
After returning from the USA, Jack resigned as a teacher. With the help of Trusty, he built an online index called ‘Chinapages.com’ in English, listing businesses in China seeking overseas customers. Jack and his team went and met so many companies convincing them to have an online presence. This gave him further opportunity to understand a small business owner’s requirements.
Though Jack had sporadic successes, the business was not growing rapidly. The reason was that the internet penetration and awareness were very low.The small business owners could not understand the ‘Internet’ as they had not seen it. The computers, telecom installation were still expensive and not affordable. Jack had a hard time to get customers. He realised that the problem was that he had launched his venture too soon. He put his dreams on hold and took a job in Beijing at a unit of the Ministry of Foreign Trade and Economic Cooperation(MOFTEC). As the saying goes, that the pioneers take the arrows and settlers take the land, Jack took arrows with his first ever Chinese internet entrepreneur with Chinapages.com.
Though Chinapages.com failed, the business provided opportunities for Jack to become well known as an ‘Internet Expert’ — The start of a ‘Public Relations’ phase.
In the year 1995, Hangzhou was selected to hold the Formula One Powerboat World Championship, the first time the event was going to be held in China. Being a first internet entrepreneur, Jack was given the opportunity to make the official website of the event. Though Jack didn’t gain financially, he became famous as the website was a hit. His English oratorical skills made him popular among the foreigners. It was rare to see a China educated-English speaking tech entrepreneur.
Jack got another lucky personal break — The event website had prompted Zhejiang provincial government to invite ‘China pages’ to build its website. Zhejiang government got a lot of publicity because of the website and Jack too received a lot of coverage in Media and Press.
Jack worked at MOFTEC(A government body) for 2 years. As part of MOFTEC, Jack got opportunities to interact with more businesses, entrepreneurs and understand ‘International Trade’ in detail. Meanwhile, other internet entrepreneurs in China began to gain traction. In the two years after Chinapages.com closed, the environment had completely changed. The Chinese government brought down the costs of telecom, internet and made it very affordable for the common public. Jerry Yang, the Yahoo founder became a hero. Sina, Sohu and Netease rose. In the year 1999, every week a fresh millionaire was announced.
At MOFTEC, Jack developed a website — Chinamarket.com, meant for small business owners(As Jack’s experience lies in the domain of small and medium companies, he continued to choose the same market segment). The small business owners could list their products under various categories. Jack got almost listed eight thousand commodities. Jack invited visitors to post supply and demand information. The site also had an encrypted chat room to enable confidential business negotiations. But the companies struggled with registration due to government bureaucracy and Chinamarket.com was losing its shine.
As the internet landscape was changing rapidly, the decisions had to be quicker. In that case, Jack perceived that the government could not run the e-commerce site effectively under the layers of many officials and delayed decisions. Only a private enterprise could make the e-commerce work better. Jack was frustrated and was hoping to find a way out.
LUCKY MEETING WITH JERRY YANG
Jerry Yang, the founder of Yahoo, came to tour China with his family and Yahoo’s vice president. To Whom did MOFTEC give the responsibility to be a tour guide for Jerry Yang? Yes. Jack Ma.
Jack Ma got the opportunity as he was not only part of MOFTEC but also a fluent English speaker. Meeting Jerry Yang transformed Jack’s life. It gave him a new motivation. After coming back from the tour, Jack launched Alibaba within few months.
By 2000, China had 17 million online users. Personal computer prices began to fall. Millions of young, educated people came online. Thousands of Internet cafes mushroomed across the country. Every portal was trying to capture the individual users coming online. But Jack would not target individual customers. He was going to stick with what he knew best, what he experienced with — The Small businesses. In the USA, the B2B sites focussed on large companies but Jack was clear. A major chunk of the Chinese economy would be run by the small companies. That’s where the market and demand is.
Jack launched Alibaba with the aim to help millions of Chinese factories find an outlet overseas for their goods. Soon Jack had competition. A lot of B2B sites popped up in China. Some sites had got government backing as well as funding. But Jack had one major advantage — He had a better understanding of customers — his own experience and interaction with small businesses over the years and in fact, he grew up among them. He understood their pain, needs and desires.
The small business owners lacked the skills to market their products themselves. Many lacked the scale or connections needed to trade through the state-owned trading companies. Some of them were located in remote areas and it was too expensive for them to attend trade shows in selected cities. Another challenge was that those small business owners would keep changing the product they sold — One day they would sell T-Shirts and the next day they would sell Chemicals. Jack was aware of their needs. Two years in MOFTEC have taught him expectations of foreign buyers. Jack was in a better position than anybody else in the B2B business at that time.
THE LUCKY ‘ENGLISH’ AGAIN
Jack Ma had to market Alibaba to foreign buyers. He, being proficient in English had an undue advantage. He could communicate effectively. He could share his story with the world in their own language. He continued to be the Alibaba’s most effective marketing tool. A Chinese entrepreneur educated entirely in China but speaks English was more than a draw — His literary skills were extraordinary. He travelled intensively around the world and gave speeches. He got free promotion in many places.
Jack’s name began to appear a lot in foreign media. He was featured on the cover page of Forbes Global Magazine. He was covered in ‘The Economist’, ‘Businessweek’ and so on. As Jack’s name began appearing regularly in foreign media, his stature in China grew rapidly. They were proud of him. Chinese media began considering ‘Alibaba’ as a success story, though the business was yet to generate meaningful revenues. He was considered a management guru even before his business earned any worthy dollars. Jack was regularly invited at tech and investor conferences around the country to share his experiences with the people. His popularity brought him more buyers and sellers to Alibaba.
Peter Yip, Singapore born Chinese entrepreneur was tasked with the job of Nasdaq IPO listing of China.com(Part of China Internet Corporation-A Government Body). Nobody considered Yip as a worthy internet entrepreneur. He was not popular. People in China had hardly heard about China.com.
On July 13, 1999, Yip helped China.com list its shares on Nasdaq. The unknown company raised 484 million dollars in the IPO. The company then added $400 million in the following February in the second offering, valuing $5Billion. The Chinese tech-entrepreneur community was shocked. How come a guy who had a website which no one ever heard of raised so much money overnight? It gave entrepreneurs confidence that “If Peter Yip can do, then I can also do!” The unknown Yip showed the way.
Peter Yip’s success had made foreigners to look around for other China internet stocks to buy. Many foreign investors and deal makers travelled to China and showed interest in the Chinese companies. It was easier to get foreign investments after the IPO. Foreign media arrived to cover the China Internet story. Jack being proficient in English was covered extensively. Businessweek ran a cover story mentioning that Jack was one of China’s webmasters. Many business magazines predicted that investing in B2B e-commerce could mean an even bigger payoff than investing in consumer portals. Ted Dean, in South China Morning Post, predicted that Alibaba may turn out to be a global powerhouse. So, Peter Yip’s success helped many entrepreneurs including Jack Ma. It was a turning point.
In every successful person’s life, extraordinary opportunities which are hidden, play a critical role. Society, culture, people around him, parents, teachers influence the success and shapes the world-view perception of the individual. Sometimes where and when we grew up makes a massive impact in an individual’s life.
Malcolm Gladwell writes “Success is the result of “Accumulative Advantage”.
References: Alibaba by Duncan Clark, China’s Tycoons — Profile of 100 Top Business Leaders, Wikipedia, Forbes 2017 list of Chinese Billionaires, Bloomberg, Outliers by Malcolm Gladwell.