Jack Ma’s Philosophy on Shareholders

MBA books teaches you that – shareholders are the most important stakeholders of the company and that company’s main objective is to increase shareholder value.

However the founder of Alibaba.com, biggest online company in China, says that for him “the most important groups are customers and then employees. He says that customers are the ones who pay him and employees are the ones who stick with him but shareholders come and go. And for this reason, shareholders come last for him.”

That’s a very interesting point that he makes. Read his other two company philosophies on TechCrunch here. Watch the full interview here.

Paying attention to the right stuff, and learning how to sacrifice

Update: This came to be known as Lean Startup, popularized by Eric Ries in late 2008.

prioritize.png Last week in my MBA class (Management Control Systems) I had a case-study about “Balanced Scorecard” and how it was implemented in a particular company in the banking industry. Obviously the company had a lot of challenges and issues during the BSC implementation.

One of the lessons from the case was, for the BSC to be implemented successfully and fully, you need to keep improving it as the implementation phase moves along. One of the reasons cited for BSC implementation failure was because some companies want a perfect BSC – from the start. But that’s not possible, since BSC is a continuous thing, which has to be improved, changed, and adjusted over time.

Relating it to web-projects and Startups

This case-study reminded me of few occasions where I noticed how some people want everything to be perfect. They pay attention to the wrong (or shall we say less important) parts of the project. Every project consists of different parts, if it is a web project for example, then it could be divided into design, development, choosing hosting, choosing domain name, marketing, advertising etc.

However in order for the work to begin, you only need design and development (i.e scope of work) first. So don’t waste your time thinking how you will promote the website after its completion. Similarly, if you just want to test the waters whether the project will work or not, then don’t delve too much on the design of the interface. Just get a functional user interface that will do the job fairly and see if your project will stand the test. Because I noticed that some people will spend so much time perfecting the design of the website that they delay the launch of the project, or even worse the project gets not launched at all.

Because in most cases, it’s not the user interface that determines if the project will work or not. It’s the IDEA that determines the fate of your project. If your idea is good, then even if your website is not that “good looking” – it will still work! But not vice versa. You might have the best designed website, but still fail.

Lessons to be learned

So, in conclusion; first prioritize your tasks, identify the parts that are most important for the project to be completed. Once you have identified, work on those important parts first. Don’t waste your time on the tasks that will follow after the project has been completed.

Secondly, try to learn how to sacrifice on the design. Yes great logo is important for the brand, but don’t search for it for months until you delay the project. Same goes with the design of the website, some people spend so much time on the design that the real objective of the project gets forgotten.

Entrepreneurial Death Traps

I was reading this article called “Entrepreneurial Death Traps – How to avoid the classic entrepreneurial mistakes”. If you are ever going to start your own business in the future then you should read this article and take into account the advices given. Because you don’t want to repeat those problems.

Friend as a Co-Founder

It discusses about the partnership issues that start with a simple trust between friends and turns into a major problem later on. For example: Two friends launching a start-up together with 50/50 share. After few years one works and another simply looses interest and doesn’t work. The one who does not work still gets paid every month, and owns 50% of the company. Without his consent no major decision cannot be taken, and that includes firing him. So they are trapped.

Second example:

What about the three (or four) (or five) musketeer’s death trap. Although in one sense it’s a corollary of the 50-50 partnership deathtrap, in some ways it’s even more insidious. You know the story. Three friends decide to start a company. They split the ownership absolutely equally, they draw identical salaries, they’re going to make decisions “by consensus.” It’s the logical, “fair” thing to do. One of them (perhaps the oldest or the one whose idea it was originally) reluctantly assumes the presidency because state law requires there to be one.

What a recipe for failure! There are three primary problems with this set-up. First, this company has no leader, no one ultimately responsible for its success or failure. Second, sooner or later a major, honest difference of opinions will arise. What do they do then? Third, the reluctant president will almost inevitably come to see himself as “a little more than equal.” If they have any success, for example, and get written up in the local or trade press, guess whose picture the reporter will want? Guess whose quotes will be plastered all through the story? Guess which other two people are going to hang the article on their family room dart board?

The solution? Pick a CEO and treat him like one. Give him the largest equity position and salary, even if they are only symbolically larger. Somebody has to sit where the buck stops.

There are many more advices and examples, read the full article at http://www.vcinstitute.org/bookstore/deathtraps.html

I think it’s really important to make everything clear before you set out for a business with your friends. Discussing all the financial things might sound a bit money minded first, but that can actually save your friendship later on. What do you think?