laitimes

Alibaba's sea change: more independent business, more empowered CEO

author:Late LatePost
Alibaba's sea change: more independent business, more empowered CEO
Alibaba Group CEO Daniel Zhang will no longer own everything about the company.

Wen 丨Guan Yiwen, Song Wei, Zhu Yingli

Editor丨Huang Junjie

On March 28, the afternoon after Alibaba founder Jack Ma was reported to appear in Hangzhou, Alibaba Group held a meeting of its presidents and announced a large-scale restructuring plan — Alibaba would set up six business groups that could be independently financed or even listed in the future.

LatePost learned that this was an organizational change initiated by Daniel Zhang, Alibaba's chairman and CEO, and Ma did not attend the president's meeting.

After the adjustment, Alibaba is still a listed company, and the legal entity and financial entity have not changed. Most of the six newly established business groups continue their existing business segments.

However, after the adjustment, each business group will have a separate CEO, and a separate board of directors will be established. These business group CEOs will no longer report directly to Daniel Zhang, but to their respective boards of directors.

An Alibaba source said Daniel Zhang it took several years to prepare, and this time the adjustment plan began in early 2023, "Alibaba's 24-year development history is unprecedented and the biggest change." Another Ali source described the adjustment as a "sea change", a seismic change.

A former Alibaba executive described it as a piecemeal "the right strategy for a group looking for change." But he also believes that such a big change should not be Daniel Zhang to make a decision, "I guess I need Jack Ma's assistance to make a decision." ”

In the last fiscal year, the turnover (GMV) completed by the entire Alibaba Group was 8.3 trillion yuan. Chinese almost half of the total online shopping is done through its Taobao and Tmall. By the end of 2022, Alibaba Group had 239,740 employees, more than double the size of Tencent Group.

This huge company also operates online retail, offline supermarkets, online wholesale, logistics, cloud computing and other businesses with completely different business models and team genes.

Daniel Zhang took over the entire Alibaba Group, he set up various mechanisms to try to solve the problem caused by Alibaba's "too big".

But frequent organizational changes won't stop more dynamic competitors. According to the estimated data obtained by LatePost from analysts and related companies, the combined GMV of Pinduoduo and Douyin e-commerce in 2022 is nearly 4.5 trillion yuan, equivalent to more than half of Alibaba's domestic e-commerce business.

Entertainment, takeaway, wine and tourism businesses have not been able to challenge industry-leading competitors under the protection of the entire Alibaba Group. At the same time, the environment has also changed, and businesses such as Ele.me and Hema can no longer use Taobao's huge user data.

This adjustment may solve Alibaba's organizational problems and make the CEOs of Alibaba's business groups more responsible.

In the face of young companies with stronger execution such as Pinduoduo and Douyin, Alibaba's various businesses are fighting for themselves and facing huge challenges. But in the view of many Ali people, "'divide' is a better choice than 'combined' together." ”

The CEO of Alibaba Group no longer manages everything in Alibaba

Ali set up four major business segments at the end of 2021 and determined their respective presidents, at that time, these four people were internally called "0.5-layer organization" by Alibaba's employees, if the 0th layer is the CEO Daniel Zhang and the 1st layer is the business group, then the president in charge is located in the "0.5 layer".

After this adjustment, LatePost learned that Daniel Zhang said internally, "Layer 0.5 will become a real Tier 0 organization." ”

This means that Daniel Zhang, as chairman and CEO of Alibaba Group, will no longer manage everything in Alibaba, and the CEO of each business group will be responsible for the results of their own operations, no longer reporting to Daniel Zhang, but to their respective boards of directors.

According to the "1+6+N" organizational structure, Alibaba will be divided into three layers - "1" is an Alibaba listed company, 6 business groups and a number of independent business companies.

The background of the adjustment is: in external competition, its opponents are around, and Ali's growth rate in all aspects is slowing down or even decreasing; Internally, Ali has grown into a multi-business, multi-format super-large organization, these business characteristics are different, facing different market environments, different customers, different development stages, in the past many years, under Alibaba's large system, most of the businesses are in a loss-making state, relying on Taobao and Tmall to grow up, now when these businesses are completely independent, they must learn to be self-reliant.

The six business groups are Cloud Intelligence Group, Taobao Tmall Business Group, Local Life Group, Cainiao Group, International Digital Business Group, and Dawen Entertainment Group, which cover specific businesses including:

  • Cloud Intelligence Group, which is concurrently served by Daniel Zhang Chairman and CEO of Alibaba Group. The main businesses include: Alibaba Cloud Intelligence, DingTalk, Tmall Genie, Damo Academy, etc., accounting for 8% of revenue (data from the fourth natural quarter of 2022 financial report).
  • Taobao Tmall Business Group, Dai Shan (flower name: Su Quan) as CEO. The main businesses include domestic e-commerce business Taobao (Taobao, Tmall, Alimama), B2C retail business group, community group buying business Taocaicai, Taote and domestic trade (CBU), accounting for 69% of revenue.
  • Local Life Group, Yu Yongfu as CEO. The main business includes AutoNavi, Fliggy and Ele.me, accounting for 5% of revenue.
  • Cainiao Group, Wan Lin as CEO. 7% of revenue.
  • International Digital Business Group, Jiang Fan as CEO. The main businesses include Southeast Asian e-commerce platform Lazada, AliExpress (AliExpress), international trade (ICBU), etc., which help merchants sell goods overseas, accounting for 8% of revenue.
  • Da Wenyu Group, Fan Luyuan (flower name: Mu Huali) as CEO. Revenue accounted for 3%.

In addition to these six groups, Alibaba Group has a number of independent business companies. Including Freshippo, Pingtou Brother, Ali Health, RT-Mart, Yintai, Lingyang, etc. Among them, Hema is already preparing for an independent listing.

Not every group will necessarily survive independently without Ali. For example, Ali Group's financial report listed Tmall's 88VIP as one of the main drivers for the growth of paying users in the big entertainment business. With the support of the group, the revenue of the business in the fourth quarter of last year still fell by 6% and lost 1 billion yuan.

LatePost understands that Daniel Zhang may join some of the boards of the six separate business groups and business companies, but the board of directors of these groups and companies has not yet been determined.

Daniel Zhang has stepped down from the boards of Alibaba-invested companies such as Didi and Weibo in the past few years. He is also not on the boards of RT-Mart and Alibaba Health, both of which are independently listed companies controlled by Alibaba.

List of Alibaba Health Board of Directors (excluding independent directors)

  • Zhu Shunyan, Chairman of the Board and Executive Director. CEO of Alibaba Health.
  • Tu Yanwu, Executive Director. CFO of Ali Health.
  • Shen Difan, Executive Director. Ali Health COO.
  • Li Guangguang, is a non-executive Director. Senior Chief Financial Officer of Alibaba Group.

List of RT-Mart Board of Directors (excluding Independent Directors)

  • Huang Mingduan, Chairman of the Board and Non-executive Director; Former CEO of RT-Mart.
  • Lin Xiaohai, Executive Director. CEO of RT-Mart.
  • Han Jie, Non-executive Director. Vice President of Intra-city Retail of Alibaba Group.
  • Liu Peng, Non-executive Director. Vice President of Alibaba Group, President of B2C Retail Business Group.

It is unclear whether Daniel Zhang will serve on the boards of the future Alibaba businesses.

Like Daniel Zhang, the company's middle and back office functions are no longer in charge of everything in Alibaba.

In 2015 Daniel Zhang established the strategy of "large middle office, small front desk", hoping to build a unified technical architecture, product support system, security system, and service system to support Alibaba's diverse businesses and improve the efficiency of the front office business. Six years later, Daniel Zhang bluntly said internally that Ali's business development was too slow and that the middle office would become thinner.

Now, Alibaba's middle and back office functions will be comprehensively light and thin, and these functional departments will enter the corresponding business groups and independent business companies according to the specific business characteristics, and when it comes to the middle and back office functions they commonly need, these functional departments will provide services in the mode of professional service companies.

Daniel Zhang told employees within the company today that many of Alibaba's core competencies in the past were based on the middle office strategy, but today, the organization needs to accelerate, decision-making needs to accelerate, and market response needs to accelerate, in order to make the business run faster, "the past production relationship needs to be transformed, everyone's mentality must change, and they must really fight for their own business." ”

Daniel Zhang exploration, the change of Ali's governance structure

In May 2015, Ma handed over the role of CEO of Alibaba Group to Daniel Zhang, and four years later he stepped down as chairman of the board. Since then, Daniel Zhang has been hands-on, not only managing Alibaba's main business, he has flown to Southeast Asia for two days a month for meetings to direct Lazada's specific business; He also listened to Hema reports every week, and was concerned about the progress of the Hema neighborhood, a community group buying trial business with only a few dozen stores; He also went directly to Ele.me's Shanghai headquarters for a meeting, where there used to be a Daniel Zhang office.

Ma Yun once said that even if Ali is 102 years old, it should not exceed 50,000 employees. When he stepped down as CEO, Alibaba had fewer than 40,000 people and only three core businesses (B2B, Taobao, Cainiao).

Over the next 8 years, Alibaba increased its workforce sixfold and annual revenue 11-fold. During this period, Ali successively acquired Youku, Sun Art Retail (RT-Mart), Ele.me and other businesses, which became large and complex. And big, in itself, is a problem.

Daniel Zhang was the busiest CEO of the Internet in China for many years, and at one point more than 30 people reported directly to him for a long time.

"A company like Alibaba, which is big, has many competitors, and has founders who are not on the front line, does face a very big governance problem." An Alibaba executive said.

Daniel Zhang try to explore more effective ways to govern. Since 2015, his exploration theme has been "Big Middle Desk, Small Front Desk", starting from solving the company's large and inefficient problems. "The hope is not to reinvent low-level wheels, but to build more different wheels more efficiently," he said. ”

On the basis of "big middle office, small front office", between 2017 and 2019, Daniel Zhang introduced the organization of the committee to strengthen governance. In these three years, Ali has become more and more "one Ali". By 2019, Alibaba set up a 13-member Executive Committee for Economic Development, headed by Ali CEO Daniel Zhang and Jing Xiandong, chairman and CEO of Ant Group, as his deputy, a total of 13 people, with five committees and four offices, and five committees and four offices across and across the entire Ali and Ant Group.

At that time, the committee was once regarded as Alibaba's highest organizational body at the business level, focusing on the top-level design of the business, in order to unify the strategy of Ali and Ant, and achieve "unified command, unified development, and unified confrontation with the enemy". Although Ant had split up with Ali back in 2011.

However, the committee is essentially a cross-departmental and cross-business group collaborative communication unit, and there is no clear division of rights and responsibilities. In the perception of many Alibaba employees, this huge development executive committee did not actually work. It's still "Xiaoyaozi and his president's office" making business decisions.

As Ali and Ant gradually cut off, the 13-member Executive Committee on Economic Development has ceased to function since 2020.

Around this time, Daniel Zhang intensively rethinking internally about the inefficiencies and organizational rigidity caused by "grand unification", followed by the thinning of the middle office. In July 2021, Alibaba's "Centennial Ali Partners Face to Face" scene said Daniel Zhang that if the middle platform is too thick, it is difficult for the front desk to develop independently and run quickly.

Since 2021, Alibaba has entered a new stage - the "business responsibility system under a diversified governance structure" has been implemented. Daniel Zhang said on many occasions internally that it was up to the business leaders to settle their own accounts. At the CTO line management conference early last year, he said, "Make the pot of big pot of rice smaller, and everyone has a pot, it is clear." Just this little rice in the pot, just this little water, just boil this little rice. ”

He believes that the role of implementing the management responsibility system is to make the business better closed loop in terms of operation and resources, and the essence is to "make better trade-offs for all parties involved in the business".

Change is a business need, but also an environmental need. In the same year, Ali was fined 18.2 billion yuan by the government for unfair competition. Daniel Zhang said publicly, "I am more determined that we should reform in all aspects – reform our business, reform our organization, reform our institutions." ”

Since then, Daniel Zhang has tried to continue decentralization, and in December 2021, Daniel Zhang added four big presidents between him and nearly 20 business group presidents – Dai Shan, Zhang Jianfeng, Yu Yongfu and Jiang Fan, who are responsible for Alibaba's four business segments (China Digital Business, Cloud & Technology, Life Services, and Overseas Digital Business).

This new organizational structure has really made a difference, making the powers and responsibilities of the various business units clearer. At the same time, each major president is responsible for the overall operation and independently formulates different business strategies according to local conditions to cope with competition.

But this is not really decentralization. For example, how the total budget is spent, the presidents can determine themselves. But what is the total budget, it is still necessary to approve the group. An Alibaba executive said that many major business decisions are still decided by Daniel Zhang, "the CEO makes the decision, and the president will be more communicator and synchronized."

In Daniel Zhang's own words, "The chief president is in charge of a part of the business on behalf of me and the group within the scope of authorization." ”

From 2015 to the present, Daniel Zhang as CEO has been exploring solutions to how to effectively govern a group with a complex business like Alibaba, and he has solved some problems, but not the real ones.

"Ali didn't have a real division in the past, and there was no real union." The above-mentioned Ali source said.

Alibaba Group has a partnership system that allows the founding team the power to appoint a majority of the company's board of directors, which in turn can also determine the appointment of the company's executives. Jack Ma and Tsai Chongxin are the only permanent partners of two of Alibaba's 29 partners.

But after Ma Yun handed over Ali to Daniel Zhang, he "really let go" at the specific business level.

Now is also the time for Daniel Zhang as managers to really let go of the business.

Source: Visual China

Ali

Read on