The secret to Alibaba’s culture: Jack Ma’s apartment

Bet the business on a new venture became the cornerstone of company strategy

In 2002, the year Alibaba.com first became profitable, founder Jack Ma gathered a handful of employees in his office and told them there was a secret project that they had the opportunity to join. But to do so, they would need to resign from Alibaba, work from a secret location and refrain from telling friends or family or Alibaba staff about this new start-up they would be building. This decision – to bet the company on a new and distinct business – was the first such move by Ma, but it would become the cornerstone of Alibaba's strategy.

Today Alibaba looks more like a conglomerate than a typical tech company, with a diverse set of businesses operating largely independently.

That transformation began with Ma's decision to launch Taobao, the consumer commerce site that would dash eBay's hopes in China and propel the Alibaba Group to even greater success.

The employees agreed to the secret project, and Ma revealed the location from which they’d be working: his old apartment, where years earlier he and 17 co-founders had launched the original Alibaba site. That choice cuts to the heart of Alibaba, according to Porter Erisman, who served as a vice-president at the company from 2000 to 2008, and whose documentary on his time there debuted in 2012.

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By launching Taobao out of the same apartment from which he had launched Alibaba.com, Ma was able to imbue the new project with the same culture of his existing company, while keeping it totally separate.

“They went off to the original apartment that Alibaba was founded in and that’s where they worked with the same kind of spirit as Alibaba in those early days,” said Erisman.

“Alibaba was started in Hupan Garden. That was the name of the apartment complex. Over time we realised that this Hupan culture was important to preserve even as we grew to a big company.”

It's clear from the documentary, Crocodile in the Yangtze, that Alibaba sees a strong corporate culture as critical to its success. Preserving culture while scaling is difficult in general, but for Alibaba the task was complicated by its decentralised approach to decision-making, where separate businesses are largely allowed to chart their own course.

Ma’s insight was that a shared founding space could unite a new project with its predecessor, even while maintaining secrecy and complete separation.

The decision to launch Taobao out of the apartment that spawned Alibaba worked so well that Ma took the same approach with Alipay, the company's digital payment business, which launched in 2004, also out of the apartment.

Of course, this only works for skunkworks projects. As the company grew, it had to devise more traditional ways to extend a unified culture across increasingly diversified business units. To do so, Alibaba had to articulate the values it believed comprised this “Hupan culture” – principles like “embrace change” and “teach and learn” – and instil them through more traditional methods, like new employee orientations and Outward Bound-style trips.

Though Ma’s apartment no longer serves as a rite of passage for Alibaba’s innovators, the culture it created lives on. However, such a strategy might not work in every circumstance.

Imagine one of Apple's secretive new product initiatives working out of Steve Jobs' old garage, or a Google team working out of the Menlo Park garage where the company first located. © 2014 Harvard Business School Publishing