Curated by Alibaba Business School
From: Hupan University
What is strategy and corporate culture?
I always wonder “what is strategy?“ And my answer is “strategy is customer value.” Without customer value, there is no strategy. Then what is customer value? Take Grandma’s Home as an example (Grandma’s Home is one of the largest restaurant conglomerates in China), its customer value is to make customer feel delicious, and to make people feel ease when they stand in queue.
To further explain customer value, In my point of view, customer value=benefit * experience. This is my very personal feeling from the experience of working in Alibaba and Ant Financial in the past dozen years. What is benefit? Simply speaking, it is that whether the user can feel what they want from our product and service after they pay the money.
Why do we advocate user experience? Sometimes the user would feel the experience of getting a good service is very poor because of the rough details. Even if you have provided benefits to satisfy him/her, the experience is not good. So, the customer value equals to benefit multiplying by experience. Benefit is the core, but better experience can double the customer value. However, the bad experience would greatly reduce the benefit.
So, what is the starting point and most important thing of strategy you can figure out? No matter how small a company is, a start-up, a listed company or a company as big as Alibaba, the starting point – named as “original heart” — is always the most important thing in Alibaba.
It is the first Alibaba dialect of strategy.
And what is the second dialect?
Today, we are talking about culture and organization. Culture is how you behave. No matter which industry are you in, culture is expressed by your behavior. When you visit a company, you can feel its culture the moment you enter into it. The reception and the wash room are the places where can very much reflect the corporate culture.
When you enter into Alibaba or Ant Financial, you can feel the culture from the videos which are played around the campus, from the advertising position in front of squatting pot in every wash room. You can feel the culture from the way we communicate with our partners and users, from the way we provide service, even from how we dress up. All these things are culture.
So, the first thing I want to share with you today is about strategy and culture. And I have a very simple understanding: Strategy is customer value, culture is how you behave.
The landing of strategy and culture
What is the thinking and logic in the implementation of organization strategy and culture? You need to have a methodology behind the linkage between strategy map and organization map, what is this methodology? As entrepreneurs, you must have a clear map of the business and industry you are working for.
This very map is about your strategy thinking. It is very important. Why is it so important?
First, you should not be the only person who understands this map. No matter you are doing online game, catering, or health business, no matter what kind of customers you are facing, you have to let your core leadership team and even all your staff stand on the same picture about how you deploy the resources. Otherwise, people will only pay attention to their own trouble. However, we have to understand that although we stand in different positions, but we have to form a complete battle map.
Alibaba’s strategy is a map of triangle, e-commerce, logistics and finance. It is very clear that eCommerce sector includes platforms of B2B, Taobao and Tmall. Logistics is about Cainiao Network and our logistics partners. Finance is Ant Financial, which includes payment, fund, small loan and online banking. As you can see, this strategy map is completely aligned with Alibaba’s mission, which was created from the very beginning - “To Make it Easy To Do Business Anywhere”
Today, our core strategy is still based on the mission that started in 1999, and it continues evolving. Alibaba’s strategy is very similar to Taoism’s philosophy - “The Tao produces one, one produces two, two produces three, and three produces all things”. Over the past 17 years, Alibaba’s strategy has evolved in this way.
Why can it evolve in this way? As I mentioned earlier, we always keep asking ourselves, “Why do we do this? What is the original heart?“
Only by keeping this question in our minds, the strategy is possible to become clearer. And we figure out that when things become more and more difficult as well as our business deployment has been insufficient to serve our customers, it is even more important for us to keep asking “why” and then ask “who am I”, then we might have ideas about the new business map. Because when we keep pushing us to answer this question, we will find that we are far from good enough, thus we should build more products and services to better serve our customer, and then we will have a new business map. In the past two years, we have started some new businesses, such as Alibaba Health, Alibaba digital entertainment, Alibaba Picture, as well as some global businesses, which also belong to our overall strategy plan.
All CEOs must be hermaphrodite (have both sense of business and people), this is very important ability. You should not only manage the business, and then ask HR to recruit people. It should not be like this. Based on your strategy map, what are the organization abilities, talent structure, and culture you want to build? You have to work with your HR and create this map together. You should not only take care of the business part and hand over the rest to the HR. It’s not right.
If the HR is not able to align with you, then what he does may be different from what the business actually needs. In particular, I notice that many entrepreneurs are aware of the importance of HR, but they had not taken any further action. Realizing it is just the first step. You have to work with your HR, and make a very clear communication with the whole HR team about your organizational thinking based on the strategy map. This is a necessary process.
When Savio (Savio Kwan, who used to work in GE China since 1986, and later joined Alibaba as COO) joined Alibaba in 2001, Alibaba was at the turning point from a grassroots team to a professional team. At that time, I was in charge of HR team. Savio, Jack Ma, and I spent a lot of time on how we should turn the strategy map to the organization map. We did a lot of training and discussions about every detail of “Alibaba Nine Sword Value System”.
It may sound incredible. At that time, we could hardly survive (in 2000, the Internet bubble burst and the whole industry fell into cold winter. Just after the Spring Festival of 2001, Savio Kwan and Joe Tsai flew to all over the world to shut down all offices outside Mainland China. Even most of offices in Mainland China were shut down as well, leaving only a few people in Hangzhou, Beijing and Shanghai offices. Meanwhile, the senior management team took the lead to reduce their wages by half and the advertisement budget were totally cut out.). But, do you know what were we discussing about internally at that moment? You may not believe that we discussed about our values - what was the meaning of “customer first”, “straight forward without hurting” etc.
We did a survey recently. In the past two years, all Alibaba partners, who have most limited time in the company, spent more than 20 working days in the past two years, and they would permanently get together 3-4 times per year, 2-3 days each time only to discuss the topics of Partner System: what is the value of partners? Why do partners exist? What should partners do? How to evaluate the responsibility and values created by a partner? As well as the future, vision and mission of the whole group. I think we have to invest our time in these things. There is no short cut.
Alibaba’s business strategy map has evolved into today’s organization map. What is the organization map? It is our mission, vision and result. The Heart power, Head power and Hand power in the middle of the triangle - The 3H powers are the key component of organization energy level. As an organization ability and organization strategy, each of the three parts is indispensable.
The Heart Power of an Organization
What is heart power? Heart power is what you truly believe and are passionate about.
What’s the lowest hanging fruit in a business environment? It is the head power (brain) and hand power (execution). Hand power is the first capability a startup acquires. In the early stage, we are able to execute fast once there is a direction. However, as we move to the later stage, the execution takes a toll on us and we start to question why we are doing what we do and why it takes so much effort.
I have been talking to a female entrepreneur who is running a fast-developing platform. She was complaining to me that she had to constantly deal with a lot of complex situations from the investors, competitors and team. She asked the rhetorical questions - why I have to work so hard? Why do I exist and where is my value?
As an entrepreneur, you will of course have to believe in something to start the startup. It may be that you want to make some money or accomplish something significant. This belief may encourage you to go fast at the beginning, but it will not sustain you to go far.
There is another type of belief which is I like this, this being a product or a service, and I want to share it with others. When I see people are happy enjoying my products and service, I will be very happy. This is also a belief.
The third type of belief is that I want to help other to have a better life. This is the kind belief Alibaba had - to make it easy to do business anywhere. Alibaba was created to help others on their survival and development. Ant Financial was also created to support SME’s in their most difficult times from the financial point of view. This belief is altruistic.
What is this belief related to? It is related to how sure you are about creating the value for your users. This heart power is very important.
Quite often, it is the small things that consume the heart power. It is the small stone in your shoes prevent you from walking far.
For example, the investment scene today is complex and many of my friends are facing challenges arise from different startup stage. As a startup team that is facing the transition from the grass-root team to the professional team, the original team felt that the company no longer love them and the professional team sees the chaos in the company. How would you balance that? Where would you draw the line if you are disrupting the traditional industry? What kind of impact would it impose on the traditional organizations?
Take the shared economy business model as an example. You are bound to encounter some hiccups. Will you retract and question what you have done wrong and why you have to face doubts from the different stakeholders? Where do you find strength and motivation when you are questioned by your investors, customers and partners?
These are real issues you will face. Are you motivated by making money or by creating impact? It also depends on the lifestyle you want for yourself. Do you want to continuously create value for the society to progress?
On the practical level, this is the thinking behind your business model. On a more philosophical level, it is the decision you have to make based on your value system. I always believe that belief (heart power) is the most important. It will determine how you want to live your life and what kind of person you want to become. I believe everyone has thought about this. You can only inspire others and make others feel excited about your dream if you have the heart power.
What does heart power look like? It is the temperature, the air and the intensity you can feel. Others should be able to feel the warmth and value of the things you are doing. Heart power should inspire and excite others.
The Head Power of an Organization
Why does the head power of an organization become more and more important today?
First, today’s entrepreneurial environment is indeed very tough. When we started Alibaba in 1999, we were all very young, including Jack Ma, as young as the post-1980s entrepreneurs today. At that time, although it was very difficult, we were lucky to survive such a narrow escape from death. The whole entrepreneurial environment today is more complex than it was then. This view may vary, but it is true that the unique phenomenon today did not exist in those years.
Second, because there are a lot of resources today, to put it mildly, there are a lot of funds. As long as you have some ideas, you have the opportunities to make it happen. However, it is also difficult for you to find a field that has not been known yet, to go into the so-called “blue ocean” like entering an unpeopled land.
Third, the development of the Internet has penetrated into all aspects of life in China over the past 18 years. This has imperceptibly influenced the change of the whole society and even the mindset, and it clearly exerted an imperceptible influence on the transformation and penetration of the entire China’s economy. It is no longer possible to separate it from the whole Chinese social system, no matter what you do today you can’t avoid. This will certainly put forward higher requirements for the whole social governance structure, and for the practitioners inside, so it is really difficult today.
If you are not smart enough, your team is not smart enough, there is no way to deal with such a complex situation. How to do it? The most important thing is to go back where you started, ask yourself: “what is my customer value?”, “who am I?” “where am I from?” “where am I going to?” This is also a philosophical problem. You can also ask yourself these questions every moment of the day. Only in this way, your brain source will not be exhausted.
How to solve these problems? Later, I will talk about different organization modes, how to cooperate with each other, and as a leader, how to integrate all team members’ abilities?
The Hand Power of Organization
What is Hand power? Your Hand power decides the level of your execution. You may have good Head power and good Heart power, however your hands and feet may not be able to catch up with your thoughts at all. You may not be able to walk fast, or act fast enough, then your plan will go vague.
Don’t we always come across such kind of people? They will think and talk a lot, and are very appealing, however when it comes to implementation, there will always be problems. They can’t gain enough customers and satisfaction, and when it comes to a specific business index, they can’t achieve good performance either. 
The 3H organizational abilities decide different management systems and implementation frameworks. It reflects your hiring criteria, your review system, and your organization method. When your team comes across difficulties, how will people react to it? Just like the knee-jerk response, their response is closely related to the 3H abilities.
Alibaba Business School‘s vision is to empower entrepreneurs, women and youth globally through the education and training programs on the digital economy and the benefits it brings to larger society.
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