Alibaba: Is It a “Mature” Company?

I still vividly remember the last time I visited Alibaba’s headquarters in Hangzhou. It was the summer of 2016. I was in town for the G20 Summit and happened to have another unrelated meeting with one of Alibaba’s original co-founders, who functioned as Jack Ma’s chief of staff at the time – an “old Alibaba veteran” (“老阿里人”).

The office building I went to was not one of the large, modern, steel-and-glass structures that are commonplace on Alibaba’s vast campus (or really any tech giant’s corporate campus). It was a brand new building, architecturally styled as a traditional estate befitting a wealthy family in ancient China. It had rooms for conducting tea ceremonies, playing Go or Chinese chess, and practicing calligraphy, along with several spacious courtyards to do Tai-chi. It’s where Jack Ma, his most senior lieutenants, and closest personal staff work – the true HQ within the HQ.

The building was not only the polar opposite of the typical look and feel of a tech company, but of any kind of corporation formed under a capitalist market economy. It was the newest “old” building I’ve ever been to, beautiful and understated in some ways, but unnecessarily extravagant and self-indulgent in many other ways.

While I no longer remember anything about that meeting, this building where the meeting happened clearly left an impression on me. I remember thinking at the time: is Alibaba no longer a fast-growing company, but a “mature” one? After all, that building is the kind of thing that big companies with lots of money with no good place to invest that money spend money on.

A few weeks ago, a thought-provoking op-ed published in the Financial Times’s Chinese language edition by two seasoned observers of China's tech industry, Yang Fangxi and Wang Yingliang, more or less confirmed my suspicion since stepping out of that building six years ago. (Yang also used to work for Alibaba’s North America division.)

Color-Coded Badges

One observation from this op-ed, aptly titled “The Conflict Between Alibaba’s ‘Maturation’, Innovation, and Corporate Culture”, that most viscerally illustrates Alibaba’s “maturity” is in 2019, during Alibaba’s 20th anniversary celebration, the company introduced color-coded badges to all employees. Different colors correspond to different people’s seniority, so who is new and who has been around for a long time is completely obvious.

According to Yang and Wang, these color-coded badges have this effect:

"In a large company where being an ‘old Alibaba veteran’ carries unique sway and privileges, allowing everyone to easily see a person’s ‘employee age’ can quickly help determine that person’s true level of seniority and ‘soft power’. This type of system further calcifies the existing power structure and institutionalizes a bureaucratic culture, where seniority automatically confers authority. Under this environment, employees’ need for psychological safety is hard to satisfy." (This translation is my own, not official)

Implicit in this argument is that without “psychologically safety” – which in the corporate culture context means a mental state where employees of any level feel safe to express their opinions without fear of punishment – innovation, creativity, and the growth that comes with them will cease to exist.

Alibaba’s color-coded badges are not necessarily unique in tech. Amazon has had a similar scheme for longer. As much as Jack Ma hated being called the “Amazon of China” and tried hard to highlight differences between his baby and Jeff Bezos’s, there are many eerie similarities between these two tech giants. Even on the “unnecessarily extravagant HQ” front, before Jack Ma built his traditional Chinese courtyards to practice Tai-chi, Jeff Bezos built the “Amazon Spheres” – essentially three giant greenhouse domes that contain a nice coffee shop, some meeting spaces, and every single rainforest plant from every corner of the world. Why? Because…Amazon the rainforest?

I wouldn’t be surprised if Alibaba referenced the Amazon Spheres before greenlighting its traditional Chinese courtyards. I also wouldn’t be surprised if Alibaba referenced Amazon’s color-coded badges before rolling out its own.

If the ultimate goal is to grow and mature at the same time, Amazon is not a bad example to follow. But is it working for Alibaba?

A Lost Decade or Switching Engines?

If we use its stock price alone as a barometer, it certainly looks like Alibaba is heading towards a lost decade. In 2014, Alibaba’s IPO on the NYSE was priced at $68. Fast forward to 2022, the stock is currently trading at around $80. If you are an investor who was lucky enough to get a chunk of Alibaba at its IPO, but unlucky enough to have held every share until today, you would’ve made a paltry 17% return.

Of course, it’s not at all true that Alibaba did nothing right in the last eight years, as its current stock price may reflect. What is hard is building and maintaining a creative and cohesive corporate culture, no matter how many good (or bad) things a company does, or how favorable (or unfavorable) the market reacts to its actions at any given time.

Perhaps having color-coded badges is not such a bad idea! Knowing who has seniority and thus the institutional knowledge about a product or business unit can be quite helpful in accelerating new employees’ learning. Perhaps having a HQ building that’s architecturally symbolic of both the company’s cultural roots and ambitious longevity of lasting 102 years to produce some workplace unity is not so bad either. After all, Alibaba has never been shy about experimenting with quirky activities to build a unique corporate culture. My personal favorite is where Jack Ma officiates an annual mass wedding for every employee who got married that year – building a literal “Alibaba family”.

There is a popular airplane analogy often used in the tech startup world. Every early-stage startup is basically “building a plane while flying it”. Most of these “startup planes” struggle to fly and eventually crash. Only a small handful of them successfully take off and keep flying.

Alibaba is one of them.

Mature or not, growing or not, Alibaba is now in the “flying a plane while switching engines” phase, as Yang and Wang accurately identified. It is a rarified phase, because few tech companies make it this far to begin with. And it is not a foregone conclusion that a company can survive this “maturing” phase, just because it survived the previous “startup” phase (see Yahoo). So it's very hard to know if the color-coded badges, or the HQ with traditional architecture, or something else that Alibaba may try in the future will be the right “engine” or not.

The only honest answer is perhaps what every mindful westerner’s favorite Chinese farmer would say: maybe.