Daniel Zhang initiated Alibaba's organizational change: set up six major business groups to operate completely independently

On March 28, Daniel Zhang, Chairman and CEO of Alibaba Group, released a letter to all employees, "Only by Self-Transformation Can We Create the Future", kicking off a new round of corporate governance reform.

According to the plan, under Alibaba Group, six business groups and a number of business companies will be established, including Alibaba Cloud Intelligence, Taobao Tmall Commerce, Local Life, Cainiao, International Digital Business, and Dawen Entertainment. Business groups and business companies will establish separate boards of directors, and implement the CEO responsibility system under the leadership of the board of directors of each business group and business company, while Alibaba Group will fully implement the management of the holding company.

In the letter, Daniel Zhang hopes that every Ali person will return to the state of an entrepreneur and start again, "if you do not embrace change, you will become rigid, and if you do not change, you will be defeated by the times."

According to the letter from all employees, Daniel Zhang serves as chairman and CEO of Alibaba Group and CEO of Alibaba Cloud Intelligent Group. Dai Shan is the CEO of Taobao Tmall Business Group; Yu Yongfu is the CEO of Local Life Group; Wan Lin continues to serve as CEO of Cainiao Group; Jiang Fan is the CEO of International Digital Business Group; Fan Luyuan is the CEO of Dawen Entertainment Group. Other companies will also be managed independently.

The organizational governance reform was initiated by Daniel Zhang and has been unanimously approved by the partners of the group and the board of directors respectively. This round of changes starts from the top of the group, redefines and restructures the governance relationship between Alibaba Group and various businesses, and is considered to be "Alibaba's most important organizational change in 24 years".

In the letter to all employees Daniel Zhang he stated that "to solve the development of productive forces and create differences, we must first start with the transformation of production relations." This is also the starting point of Alibaba's organizational change. In 2015, Alibaba promoted the "Middle Office Strategy", which once became a benchmark for corporate governance in the Internet technology industry; In 2020, Daniel Zhang promoted the reform of the business responsibility system, and realized Alibaba's diversified governance with four major sectors, and established a number of independently operated ring companies.

From the perspective of Alibaba's development history, the deep adjustment of the organization is constantly stimulating major technological and business innovations. For example, in 2011, one Taobao became "three Taobao" and Tmall grew.

A key move in this change is the establishment of a board of directors for each business group, the implementation of the CEO responsibility system under the leadership of the board of directors, and Alibaba Group's full management of the holding company. For each business, independent governance structure means facing the market baptism, corresponding to the possibility of innovation incentives. In the open letter, Daniel Zhang said that "the market is the best touchstone, and in the future, qualified business groups and companies will have the possibility of independent financing and listing."

At present, Alibaba's Alibaba Cloud, Cainiao and other businesses have become market leaders, and there are continuous rumors of financing and listing of Freshippo, Pingtou Ge and other businesses. For the six business groups and business companies, full independence allows the market to better value and "allow employees to truly fight for their own business".

In the past two years, Daniel Zhang has repeatedly emphasized internally and externally that agile organization is the path to achieve efficient governance of multi-business and multi-format ultra-large enterprises. The formation of the "1+6+N" organizational structure is a natural result of the further deepening of the agile organizational concept, which means that Alibaba is moving towards a new stage of organizational governance.

At the same time, the functional departments of Alibaba Group will also usher in orderly changes. According to the letter of all employees, the middle and back office of the group will be lightened and thinner, which means that the "big middle office" capabilities established by Alibaba since 2015 will be gradually absorbed by a stronger front office to serve more diversified development needs in a more agile way.

With full staff letter:

Only by self-transformation can we create the future – the decision to change Alibaba Group's organizational governance

Dear Ali people,

As we enter a new fiscal year, I would like to thank you for your continued efforts and contributions in the face of many new challenges over the past year.

Self-transformation is always the best choice to maintain the original intention and create the future. Since its establishment in 1999, Alibaba has continuously evolved and iterated in innovation and change, and has always used the advanced nature of production relations to drive the release of advanced productive forces, create value and lead development. Today, we are also celebrating one of the most important organizational changes in Alibaba's 24-year history.

Today's Alibaba has grown into a multi-business, multi-format super-large organization, these business characteristics are different, facing different market environments, different customers, and different development stages. At the beginning of the new fiscal year, we fully responded to the call of the national "fight for the economy", and actively took action to assist small and medium-sized enterprises to comprehensively upgrade digitally and build modern business digital infrastructure. To promote the development of productive forces and create a difference, we must first start with the transformation of production relations, which in turn must start from the top of the group.

Eight years ago, in 2015, the group fully proposed the middle office strategy, forming One Company under the governance model of "large middle office, small front desk". Since 2020, the Group has actively advocated the creation of an agile organization and implemented the management responsibility system under the diversified governance structure, and has established a number of independent ring companies. Today, on this basis, we will further deepen the reform and move towards a new stage of organizational governance - building a "1+6+N" organizational structure, that is, under Alibaba Group, we will set up six major business groups and a number of business companies, including Alibaba Cloud Intelligence, Taobao Tmall Business, Local Life, Cainiao, International Digital Business, and Dawen Entertainment, and establish the boards of directors of each business group and business company, implement the CEO responsibility system under the leadership of the board of directors of each business group and business company, and take overall responsibility for their respective business results. The specific plan is as follows:

Founded Cloud Intelligence Group, with me as CEO;

Established Taobao Tmall Business Group, with Dai Shan (Su Quan) as CEO;

Established Local Life Group, with Yu Yongfu as CEO;

Cainiao Group continues to have Wan Lin as CEO;

Established an international digital business group, with Jiang Fan as CEO;

Established Dawen Entertainment Group, with Fan Luyuan (Mu Huali) as CEO.

In addition, other qualified business organizations will set up a number of business companies and fully implement corporatized management.

Making the organization agile, making the decision-making link shorter, and making the response faster is the original intention and fundamental purpose of this change. After this adjustment, in addition to meeting the compliance requirements of listed companies, Alibaba Group's middle and back office functions will be fully light and thin, and the group will fully implement the management of holding companies. The middle and back office capabilities we have accumulated over the years will enter the relevant business groups and companies in an orderly manner, and continue to play an important role in the development of the front office business. Shared middle and back office services necessary for multiple business groups and companies will be provided through the professional services firm model. Special thanks to the Group's middle and back office teams for their hard work over the past eight years, thanks to your valuable precipitation, there is a solid foundation for implementing this change.

Facing the future, each business group and company must actively face the rapid changes in the market and the rapid changes of technology, form their own development strategies, make quick decisions, strive for progress, be brave in innovation, and face the test of the market. Every Ali person, no matter which business group or business company you are in, must return to the state of an entrepreneur and start again, accept the baptism of the market with their own passion and strength, and create their own tomorrow. We believe that the market is the best litmus test, and in the future, qualified business groups and companies will have the possibility of independent financing and listing.

The market never stops, a new generation of technology waves are emerging, and if you don't embrace change, you will become rigid, and if you don't change yourself, you will be defeated by the times. Will be the water hit 3,000 miles, 24-year-old Ali is ushering in a new development opportunity. We have the courage and sense of mission to change, and we have the ability and confidence to change. To become a good company that lives for 102 years, to insist that there is no difficult business in the world, we must always be self-driven, must have the courage to change ourselves, and must insist on walking on the road of self-change. 

The future belongs to those who are more determined, agile and embrace the future!

Chairman and Chief Executive Officer of Alibaba Group

Daniel Zhang (Xiaoyaozi)

March 28, 2023