Richard M. Steers
Joyce S. Osland
Management
Across Cultures
Challenges, Strategies, and Skills
Case 6
Leadership Succession at Alibaba, Chinaã
Fourth Edition
Key concepts: executive succession, GLOBE leadership model, leadership, Pyramid leadership
model
Alibaba is a Chinese multinational conglomerate specializing in e-commerce, retail, Internet and
technology. Founded in 1999, the company provides sales services via web portals, as well
as electronic payment services, shopping search engines and cloud computing services. It owns
and operates a diverse array of businesses around the world in numerous sectors, and was named
as one of the world's most admired companies by Fortune. Alibaba was founded and led by Jack
Ma, who became famous in the industry for his eccentric, yet highly effective, leadership style.
When Ma retired in 2018, questions were logically raised about his successor, Daniel Zhang. Could
Zhang retain the company’s leadership position in the industry and, if so, how?
Jack Ma, entrepreneur
Jack Ma (Ma Yun) was born in Hangzhou to traditional musician-storyteller parents in 1964. From
a young age, he had a penchant for studying English and after college taught the language for
several years. But soon, he and his friends became fascinated with the Internet as it emerged across
China. They started a website development company called China Pages. As he and the industry
developed, Ma used his knowledge of both IT and English and launch Alibaba from his apartment
with several of his friends in 1999. His charismatic and visionary style quickly attracted millions
of dollars in international venture capitals, and he used this support to improve China’s domestic
e-commerce market and develop an e-commerce platform for small and medium-sized Chinese
enterprises.
Building on this initial success, Ma launched Taobao Marketplace, Aliplay, AliMama, and
Lynx. In 2013, Alibaba sought an initial public offering (IPO) in the US after Hong Kong
regulators blocked his efforts. Alibaba’s US launch was the largest in history, raising US$25
billion. Taobao now features a billion products and is one of the 20 most visited websites globally.
The company accounted for over 60 percent of parcels delivered in China by 2013 and 80 percent
of online sales by 2014. Alipay accounts for 50 percent of all online payment transactions within
China. Today, Alibaba has a market value of US$231 billion.
So, how did this dramatic success occur? Observers give much of the credit, not so much
to his technical or sales ability which he acknowledges are limited, but to his unorthodox leadership
style and management philosophy. One Western associate observed that he did it by blending the
best of Western and Eastern technologies, operational practices, and management styles. As Ma
ã
2020 Richard M. Steers. This case was developed and written with Subramaniam Ananthram for use with
Management Across Cultures: Challenges, Strategies, and Skills, published by Cambridge University Press, all rights
reserved. It is based on Michael Zakkour, “How Jack Ma’s crazy management style built a technology empire,”
Entrepreneur, September 30 2014; Charlie Rose, Interview with Jack Ma. World Economic Forum, Davos, January
23, 2015; Mac Ryan, “The crocodile and the shark: could Alibaba swallow eBay?” Forbes, September 30, 2014;
Karen Gilchrist, Jack Ma's succession plan offers an important lesson in leadership, CNBC, September 10, 2018; and
Katia Moskvitch, “Everything you need to know about Daniel Zhang, Alibaba’s new king,” Wired, September 13,
2018.
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observed, “Successful entrepreneurs do not let setbacks get them down and try and see both what
is possible and what is impossible, but the differences is that they focus only on the possible.”
Ma also understood that one need not reinvent the wheel. He realized that the best way to
compete with eBay was to add his own local knowledge to his Taobao platform. The Chinese value
relationships highly, and trust is of paramount importance. Fully aware of Chinese culture and
philosophy, Ma felt that the Taobao interface needed a personal touch, which would allow the
establishment of trust between buyers and sellers who did not know each other. So, he added a
real-time chat function between buyers and sellers, which allowed for transactions to become
personal. He used the same approach in the rollout of Alipay.
Jack Ma’s readiness to make fun of
himself and speak his mind contrasts with
the typical strict conservative Chinesestyle leadership. He is energetic,
approachable, and outspoken, and has
built a culture of loyalty, participation,
and fun. He is often seen singing karaoke
with employees, addresses employees in
outlandish suits and colorful outfits, and
holds weekend fun retreats for 15,000
employees to foster Alibaba’s cultural
values. Alibaba employees treat him like
a combination of father-figure, inspirational guru, and band leader, resulting in a super-loyal and
hard-working group of executives, managers, and employees.
None of this is by accident. Ma spent many years studying Western culture, management
concepts and successful businesses, took what he needed and ignored the rest. He combined that
with his love and understanding of China’s culture and consumption habits to create an allencompassing technology success that has quickly become China’s first truly global brand.
Another example of how Ma challenged the traditional patriarchal management hierarchy
in China is by employing and empowering women in Alibaba. The company currently employs 47
percent women and has 24 percent women in its senior management. This is unusual not just in
China but in many if not most parts of the world.
Jack Ma takes the maxim “the customer is always right” a step further and believes that
businesses should allow customers to succeed. This total customer focus in one of the key
underpinnings of the company’s philosophy. His leadership style has also been described as crazy.
“When I first appeared in Time Magazine, they called me Crazy Jack,” Ma observed. “I think crazy
is good. We are crazy, but we are not stupid. We know what we are doing.”
Ma also has a reputation as a risk-taker. When he entered the e-business industry, eBaycontrolled 80 percent of the market. But Ma had a strategy that was as risky as it was smart. He
later observed that “eBay is a shark in the ocean, while we are a crocodile in the Yangtze River. If
we fight in the ocean, we will lose, but if we fight in the river we will win.” Ma slashed fees for
local firms using the service, losing heavily in this trade-off. People again said he was crazy, but
for Ma this was a calculated risk. And it soon paid off. Alibaba kept eating into eBay’s market
share in China for three years, at which eBay acknowledged defeat and left China.
Jack Ma is an enigma and beneath his extraordinary success lies the passion, hard work,
and resilience to realize his vision of taking on big challenges and seeing them through. He believes
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in life-long learning and philanthropy, and from his early years as an English teacher to becoming
a beloved entrepreneur and management guru, he still remains true to his values.
Leadership succession: Daniel Zhang
So, what happens when such a leader steps down? How can a successful company replace him in
a way that continues the successful trajectory of the company? Jack Ma shared an important lesson
in leadership when he decided to step down as chairman of Alibaba. In late 2018, he stated that he
has started the process of “passing the Alibaba torch” to Daniel Zhang. Ma said the handover,
which coincides with Alibaba’s 20th anniversary, had been a decade in the planning and has helped
shape Alibaba into the multibillion-dollar e-commerce giant it is today. “I have put a lot of thought
and preparation into this succession plan for ten years,” Ma wrote in a letter to Alibaba customers
and shareholders. “This transition demonstrates that Alibaba has stepped up to the next level of
corporate governance.” “When Alibaba was founded, our goal was to build a company that could
make China and the world proud and one that could cross three centuries to last 102 years.
However, we all knew that no one could stay with the company for 102 years. A sustainable
Alibaba would have to be built on sound governance, culture-centric philosophy, and consistency
in developing talent. No company can rely solely on its founders.”
Ma had been preparing his 46-year-old
protege for several years. He said he had observed
Zhang demonstrate continued commitment to the
company and prove his abilities by managing 13
consecutive quarters of consistent and sustainable
growth. “His analytical mind is unparalleled, he
holds dear our mission and vision, he embraces
responsibility with passion, and he has the guts to
innovate and test creative business models.”
Ma’s commitment to legacy planning likely
stems from his early career as an English teacher in
his hometown of Hangzhou. “Teachers always want
their students to exceed them, so the responsible thing to do for me and the company to do is to let
younger, more talented people take over in leadership roles so that they inherit our mission “to
make it easy to do business anywhere,” he wrote. Ma was not explicit about his plans as he
announced he will step back from Alibaba, but he indicated his intentions to focus more time on
philanthropy in education and encouraging leadership among entrepreneurs, young people and
women.
Daniel Zhang has an impressive track record. He is the mastermind behind the biggest sales
bonanza on the planet – Single’s Day, held annually on November 11, or 11.11 (four ones to
represent four single people). Launched almost a decade ago, Single’s Day is now the world’s
largest retail event, topping $25 billion in sales for Alibaba alone, which makes it four times the
size of Black Friday and Cyber Monday sales combined – and that’s before Alibaba’s competitors
get in on the action. For Alibaba, some 140,000 brands took part in the event, offering their
products on Taobao and Tmall, the company’s business-to-consumer platform, also created by
Zhang.
Zhang is being watched with both curiosity and anticipation. He’s more pragmatic and
more reserved than Ma, but then most of China’s (and the world’s) business elites are more
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reserved than Ma, who has a rather unique leadership style. Where Ma was the bold visionary and
organizational builder, Zhang is more of the shrewd strategist and operator. “Climb into the ring
with either and you will probably get knocked out,” says Jeffrey Towson, a business professor at
Beijing University. Alibaba, he adds, is the stomping ground for some 66,000 of the smartest
people in China. How smart do you have to be to be at the top of that pyramid? “Daniel is widely
regarded as crazy smart and very tough,” Towson says.
New leader, new plans
Jack Ma managed to take Alibaba to the very top of retail in Asia – will Zhang now take it global?
Expanding the company’s global reach will be a priority. Alibaba is now aiming for half of its
revenue to be international. Alibaba wants to become the fifth largest corporate economy – so it
has to go global by default. And it’s already happening, in four main ways: connecting foreign
merchants with Chinese consumers, following Chinese consumers as they go abroad, strategically
expanding the platform across Asia, and being smart and opportunistic everywhere else. All these
approaches are consistent with Alibaba's number one strategy, which is to build on its strengths.
Despite taking baby steps in all these directions, Zhang inherits Alibaba at a tricky time.
China’s trade war with the US isn’t helping the company in the slightest, impacting on its aims to
connect US merchants with customers back home in China. Then there is Alibaba’s domestic
rivalry with e-commerce giant Tencent, which shows no sign of easing off. It forces the company
to spend massively on both innovation and promotion, to lure and keep shoppers and brands. And
there are heavy costs springing from Alibaba’s New Retail concept, which combines online
shopping with bricks-and-mortar supermarkets.
Right now, the UK is the third biggest market for Alibaba, and the company’s Londonbased team is working hard to make shopping easier for Chinese consumers abroad, part of the
company’s expansion strategy. Eyeing Western consumers is also plausible, but not part of the
plan for the next couple of years, says the company’s managing director in the UK, David Lloyd.
At the moment, Chinese as well as other Asian customers are a priority. And there are many of
them. Just two years ago, there were some 250 million buyers; today it’s 550 million – and
Alibabsa has recently pledged to get to two billion consumers by 2036. It will now be up to Zhang
to deliver on this ambitious vision.
Zhang is a known quantity not just at Alibaba, but in the global business world. He’s been
with the company for 11 years – and the past three years as CEO, effectively managing the firm,
with Ma acting more and more as its figurehead. Under Zhang, Alibaba has switched from PCbased transactions to mobile, which now accounts for about 80 per cent of entire gross merchandise
volume.
Just like many Alibaba employees, Zhang sports a nickname inside the company –
Xiaoyaozi, the name of a character in a Chinese martial arts novel. It literally means the “free and
unfettered one”’ – possibly a reference to the character who stays out of battles, but is great at
training others. He reportedly has even used this nickname on his business cards. With a diploma
in accounting from Shanghai University of Finance and Economics, Zhang first worked as a senior
manager at global auditor PriceWaterhouseCoopers and then chief financial officer at Shanda
Interactive Entertainment, a leading Chinese developer of online games. He joined Taobao, the
Alibaba-owned e-commerce site, as chief financial officer in 2007. He stayed, climbing the ladder
– becoming chief operating officer before taking over the chief executive role from Jonathan Lu
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in 2015. Zhang has also been seen a lot in the West, frequently appearing at the World Economic
Forum in Davos and other high-profile events.
Gaining more and more hands-on experience running various subsidiaries of Alibaba has
certainly been the perfect training ground for the chairman role. “In the world of business, the
excitement never ends; the competition never ends. You must keep awake every minute, keep your
eyes open in your sleep. You must keep learning and innovating,” Zhang said in a recent, and he
is already doing just that.
After nineteen years at the helm, Ma’s decision to stand down wasn’t sudden, even if it
seemed so from the outside, says Matthew Wong, managing intelligence analyst at CB Insights.
“It shouldn't cause any major unexpected shifts within the company as the narrative around his
retirement has been building for a long time,” he adds. After all, Ma is handing over a hugely
successful company with great prospects to someone he trusts and has personally trained for the
job for years – and someone who’s been doing the day-to-day management since 2015. But Ma
isn’t disappearing completely; he will remain a director on Alibaba's board and a permanent
member of the Alibaba leadership team, still working with Zhang. They should complement each
other well. While Ma can come across as more visionary and “passionate to influence the world at
a higher level,” Zhang is likely seen as more rational and strategically-minded.
Continuing to provide a premium shopping experience for millions of people a day is not
an easy task though, and despite the tangible success of the past few years, Zhang does have pretty
large shoes to fill. Connecting brands and consumers anywhere in the world is another priority for
Alibaba in the near future with the aim of delivering any product from anywhere in the world to
anyone within 72 hours. Will that happen during Zhang’s time as chairman? At Alibaba, it seems,
anything is possible. What does the future hold for Daniel Zhang and Alibaba? We shall see.
Case questions:
Introductory note: Cases by their very nature are static at a particular point in time. As you prepare
for the questions below, it might be helpful to update yourself about recent activities of Alibaba’s
new CEO, Daniel Zhang. Is he off to a good start?
1. In your view, is Jack Ma a Chinese leader or a global leader? Explain.
2. If you were Jack Ma, write your own definition of leadership.
3. As discussed in chapter 4, what situational factors contributed to Jack Ma’s success at
Alibaba? Explain.
4. Apply the GLOBE leadership dimensions to Jack Ma and explain his leadership style. What
can we learn?
5. Can you find evidence in the case that Ma exemplifies the application of the Pyramid model
of leadership? Explain.
6. How would you compare the leadership style of Jack Ma and Daniel Zhang? What are the
relative advantages and drawback of each style for a company like Alibaba??
7. Alibaba has been in the forefront in China in hiring and developing women managers. How
is this consistent with Alibaba’s corporate philosophy?
8. Based on what you have learned, how would you describe the corporate culture at Alibaba
under Ma? Will this likely change under Zhang? Why?
9. What can global managers learn from the example of Alibaba under both Ma and Zhang that
can help them with their own leadership challenges in the field? Explain.
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10. If there is one principal lesson from this case about global leadership, what would it be?