From managing to enabling

Written by Professor Ming Zeng, former Chief Strategy Officer of Alibaba Group

The following contents are excerpts from “Smart Business” by Professor Ming Zeng, who is the former Chief Strategy Officer of Alibaba Group.

In this part, Professor Zeng tries to explain as explicitly as possible the relationship between mission, vision, value, organization and culture in a smart business(it refers to a business in the digital era and its business is mainly driven by data intelligence and network coordination.)

How to retool the organization
When computers can do the routine but energy-intensive knowledge work more efficiently than humans can, and the network can coordinate effective response to consumer demands, what do organizations do? To be sure, a smart business — its operations, algorithms, and products — must be designed by humans. Yet once these elements are in place, the machines can do the heavy lifting. However, computers cannot create new products and services, much less engage in the visionary experimentation of the previous chapter. Innovation and creativity are the crucial human input that keeps an organization growing and thriving. Organizations of the future will focus on continual innovation. They go beyond computer calculations to intuit customer needs. In response to new technology, the people in an enterprise create original products and services or re-imagine existing offerings that will be even more efficacious for humans.

In the industrial age, organizations aimed to improve the efficiency of resource utilization. In the knowledge age, they optimized knowledge usage and management. Now, in the new age of smart business, an organization’s goal is to improve the efficiency of innovation founded on human insight and creativity. The success rate of innovation itself is the new game.

Think about that for a minute. Businesses have been talking about becoming more innovative for some time. However, today we are facing an innovation imperative that requires companies to come up with winning innovations quickly, consistently, and continuously. To meet this imperative, business must depart sharply from traditional management theory and practice.

Since Frederick Winslow Taylor and the idea of scientific management, management’s job was to know exactly what workers should do. Managers needed to prepare and motivate workers and ensure that they did the work as efficiently as possible. It was about planning and control. No longer.

When Alibaba realized in 2013 that it had to transform itself into a mobile internet company — the all-in decision described in chapter 4 — the transformation was a momentous task that could not be planned or controlled. It was not just the challenge of re-engineering software to operate Alibaba services on mobile services. The entire business had to be re-invented. What worked on a website might not be appropriate for the mobile market; website-based software certainly did not take advantage of the new opportunities that mobile offered. While company leaders could see the outline of the future, they could not accurately or easily foresee its details or direct its development. They faced the daunting but requisite task of mobilizing the whole organization to innovate quickly and figure out what the markets wanted.

Alibaba’s leadership lacked a road map for success in the mobile environment. However, our company’s experience with creating an online retail industry and, later, a logistics operation suggested a path. In those cases, we created a platform and tools that others used to build their businesses as they saw fit. They innovated and transacted; some made money and some went out of business. Now we had to do it internally. When Alibaba moved to mobile, we had to get our teams to innovate and experiment at a furious pace so we could learn what the market rewarded. We had to create the internal platforms, tools, and methods to ensure that market responses would immediately affect our internal activity and resource allocation.

This was a learning process, and we did not hit the gate running. However, armed with opportunity, vision, and increasingly relevant and powerful frameworks and tools, such as those described in this chapter, our mobile teams exploded with energy. Team after team came up with new forms of advertising — banners, live streaming, videos. They created apps or features that helped users learn new subjects, find products, and get together with communities of like-minded viewers to advise each other. The team members watched what other mobile and social networking companies around the world were doing and tried to take them to the next level on the Taobao mobile app. Some things worked and some didn’t, but the creativity and churn has been tremendous.

This kind of initiative, independence, and innovation is not what is expected of a typical employee; nor can it be managed in the traditional way. Many employees like, or are trained to like, coming to work, executing orders or policies, and going home with a paycheck. (This still seems to be a mistaken stereotype of the typical Chinese worker.) They focus on exploitation, i.e., trying to get better at what they have done so they can be more efficient. But they are not scanning the horizon (internally or externally) for new ideas or cross-fertilization and are not eagerly experimenting to see what works. Increasingly, today’s enterprises need to infuse their work with exactly this kind of initiative, independence, and innovation. Management’s job now is to enable these qualities.

H**ow to enable the organization**
A firm’s approach to innovation is not dissimilar to the path through which a business becomes smart, facilitating network coordination and leveraging data intelligence. Internally, the organization connects employees with different discipline expertise relevant to customer needs. At the same time, using data intelligence, the organization must provide internal platforms and data resources that make workflows smarter. For example, a company should comprehensively organize product development and deliberately institutionalize organizational memory. It must create smart metrics for employee and product performance. In practice, doing any of these things requires that internal workflows occur online, are softwared, and rely on live data.

The organization is no longer a vessel for conveying orders from the top. It is a vacuum sucking up information about its environment then generating and coordinating effective response. The job of leadership is not to manage this experiment, but to make it possible and boost its success rate. These methods stand in direct contrast to traditional management techniques and philosophy. Within Alibaba, I use the term “enabling” to refer to the organizational methods for managing experimentation.

“Enabling” is a technical term within Alibaba because it mandates technical work. An enabling organization undergoes the complex task of creating the conditions, environment, and tools so that people within the organization can more easily their goals. Through enabling mechanisms, management provides the necessary conditions to tackle business problems through innovation as opposed to the execution of tried-and-true procedures. This means managers must now focus on things like articulating the mission and providing the environment that attracts the right collaborators, supplying the tools for them to experiment and scale successful ideas, and providing a market to assess the innovation’s success. Instead of micromanaging the firm, management creates the organization’s architecture to run itself.

The practice of enabling, a very concrete approach to organizations, requires specific values and technical infrastructure. Note that enabling is not a touchy-feely encouragement of employees. It is very, very difficult, and the overall costs of running organizations through various enabling practices have previously prohibited the techniques from being applied to organizations at scale. The techniques have similarities to those traditionally used in the arts, movie makings — the Hollywood model — or journalism. Technology has lowered these costs so that organizations can experiment with this new innovation-oriented paradigm. While no one has found all the right answers yet, smart businesses are making steady progress in this direction.

This chapter will examine what managers in smart business do differently on three dimensions: people, infrastructure, and mechanisms. I will show you what enabling looks like and how to do it. If you’re a manager, most of your job will be about understanding the type of people the organization needs; appealing to them; and designing the architecture for the interaction between groups of creators and their work, all to make innovation more effective.

Pe**ople: Who you need and what to do about them**
Smart businesses require people with technological comfort and business savvy. Different businesses and missions will have particular requirements, but when automation can do much of the routine, punch-the-clock type of work, employees or associates need to advance the overall mission or invest in the craft of their activity. They draw on their internal resources and training and seek inspiration, ideas, and support from wherever they can find them. The employees may seek advice and input but not direction. With their initiative on the line, they must seek the result of their contribution.

Management’s first function is finding the right people for its business. This requires different recruiting, vetting, and incentive systems than the ones most companies use today. Commensurate financial rewards for high performers are necessary but not sufficient. A compelling mission, an empowering environment, and a distinctive culture are also necessary for success. Each of these is a very tall order for organization leadership.

S**tart with Mission and Vision**
In the previous chapter, I discussed how a firm should formulate its vision and, to a lesser extent, mission. In the Chinese business world, Alibaba is well known as an uncommonly mission-focused enterprise. Alibaba’s mission, from nearly day one, has been “to make it easy to do business anywhere.” This phrase is not merely a slogan. It is a genuine belief on the part of the founders, and it has deeply affected nearly every important decision that the company has made.

Considering the wording of the preceding mission statement. By definition, business has to be easy for everyone if the mission is to be fulfilled; business cannot just be easy for the most convenient or profitable of clients. In the early years of Alibaba’s wholesaling platform, our B2B business focused on serving China’s small and medium-sized enterprises(SME). This focus differentiated Alibaba from the competition, but the leaders’ decision to focus on SMEs was not based on a calculation meant to entice investors. Their mission mandated that they serve the majority of clients.

To do that, they needed a business model that could rapidly scale to help everyone do business, everywhere. This mission continued into Taobao, where business grew to include not just retail, but also dozens of related functions. If business is easy everywhere, then business for ISVs and models and photographers must by definition also be easy. Looking back, our mission planted the seeds for network coordination: without large-scale coordination, it would be nigh impossible to make all business easy. And the data created through wide-scale network coordination also laid the functions for data intelligence.

After my many years of working closely with Jack Ma, I cannot emphasize enough that Alibaba’s mission and vision are not slogans written for shareholders. They are genuine beliefs that affect the entire makeup of the company. They are the yardsticks by which we measure our strategic decisions. In the context of this chapter, our company’s mission and vision attract people who resonate with our values. This resonance is one of the main functions of a genuinely expressed mission and vision.

Most people are not fully satisfied by material incentives. They want their personal passions to connect with the mission of the company. For the type of people whom smart business want to attract, motivation comes from personal achievement and the social impact of their creation. They are self-motivated. Monetary rewards are still important, but in today’s war for talent of this type, money is certainly not enough. Something more intrinsically inspiring is necessary. Asked to explain why he started his space transport company SpaceX, Elon Musk described how it was part of human nature to dream of space traveling, and that he thought being born on Earth and planning to die on Mars, although not on impact, was a great idea.

All the important business leaders of the last two decades have emphasized the importance of mission, vision, and values significantly more than have chief executives of the past. Whenever he talks about Alibaba, for instance, Ma always starts by saying Alibaba is a company driven by mission, vision, and values.

Monetary compensation, including options, emphasizes rewards after the work is done. But the practice of enabling is more concerned with stimulating interest and passion with the right challenges. Only passion through internal interests, not instructions from superiors, can override the continuous frustration inherent in any innovative effort. With passion, an innovator can accept an uncertain(but possibly very large) upside for entrepreneurial work. Hence a core function of the organization is no longer assigning work and monitoring progress, but matching staff interest and expertise with customer needs.

Cu**lture: Ensuring a good fit**
Alibaba’s strong mission and vision have also given rise to a truly unique culture that is enticing to potential employees, especially in the earliest years of Taobao. Taobao began as a place of great imagination, where workers were involved every day in envisioning the future of online commerce in China. Thus, the company took a page from Ma’s favorite books as a child: Jin Yong’s Chinese martial-arts novels.

Every employee picked a nickname taken from these novels, assuming a superhero-esque alter ego as he or she traveled through the mythical landscape that was Taobao. (It would be as if every employee at Google picked a name from a Marvel comic, so that official work emails would thus begin with “Dear Lois Lane” or “Dear Wolverine.”) The practice of picking nicknames continues to this day. All new employees, upon entering the company, must pick a nickname, which is used for most internal communications, even with HR and back-office staff. Many employees do not know the real names of their closest partners in the office.

The whimsical and even cute culture of Taobao persists within the company today. Strong beliefs about equality run throughout the enterprise, and many of the common hierarchical terms for managing within traditional Chinese companies are not used at Alibaba. For example, in a typical Chinese workplace, lower-level employees usually refer to executives on the vice president or senior vice president level by their last name appended with the Chinese term for “President.” It would be unthinkably discourteous to use the executive’s full name, much less first name. At Alibaba, there has only ever been one “President”: President Ma. And even in the past few years, Ma has cautioned employees not to use the term. Instead, he prefers to be called “Teacher Ma,” hearkening back to his original line of employment.

A strong culture, by definition, does not appeal to everyone. Any anthropologist will tell you that culture works to segregate as much as it does to bring people together, and Alibaba is no different. The firm has a special class of HR workers who are assigned randomly to interview employee candidates. They are informally dubbed the “chief olfactory officers”. Their job is to “sniff out” the match between candidates and the strong corporate culture. When staff members disagree on a candidate, chief olfactory officers can have significant input on the final hiring decision.

Organizations can uphold a strong sense of community through a tight recruiting and vetting process. Zappos has long made news with its policy that pays people US$2,000 to leave after their first two weeks of paid training if the company does not seem to be good fit for them. Google has a long and complex process to evaluate candidates, ensuring that they not only are technically qualified but also fit the culture and interact well with the team. For many years, co-founders Larry Page insisted on making the final decision on every offer. Alibaba’s HR team continues to stand by its job of sniffing out new employees even as business teams put more and more pressure on HR to speed up hiring and to “avoid unnecessary overhead,” because hiring is the single most important thing a company can do to preserve culture.

Today’s enabling companies rely on culture more than traditional companies did. But the idea of culture is complex. Broadly, culture is the set of behaviors and common understanding that connect and perpetuate a group, forming the basis of how it navigates its environment. In the past, companies considered company culture the same way they viewed the “customer-first” mantra: clearly a great goal but not an issue that supersedes the considerations of the balance sheet. Traditionally, remuneration was clearly the most important incentive system for employees. Organizational culture was a second-order lever that managers could use to encourage or discourage certain type of behavior or that could help drive internal and external marketing efforts.

But in smart businesses, culture is fundamental. What the organization is committed to doing and how the organization does it is truly the starting point. People join the group, the culture, that they feel an affinity with. And an enormous part of the appeal of the organization is being a member of that culture and working together with like-minded people.

The attention to culture is very apparent within Alibaba. The company moves fast, requiring emotional and social maturity, and individual success often rests on an ability to speak directly to colleagues and to executives in power. Some would say you need to be able to argue to survive at Alibaba. (A sense of humor is a real asset, as well.) For people whose sensibilities are unlike those of our employees, the experience can be tough. But people who fit in with the group love working at the company.

Culture has always been a competitive advantage between firms, but it is even more so when the work is creative. Innovative work is demanding and uncertain, but with the right culture, it can become exciting and fun for the right people. For firms that want to enable creative workers, fostering internal culture is a business challenge no less important than product development, sales, or marketing. They need to make the culture explicit so that it attracts people with similar vision. Ultimately, an effective shared culture rewards those who find culture a good way to accomplish their goals.

Indeed, the atmosphere of the organization itself can be the best reward. Creative workers are much more serious about the culture and are willing to make sacrifices for a mission, a vision, and the values they believe in.

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.