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Ali's upheaval in progress: definitive and unknown

The giant group was not built in a day, and it cannot be dismantled and cleaned up in a short period of time.

Wen 丨 Chen Jing, Guan Yiwen, Zhu Yingli, Shen Fangwei, Song Wei

Editors丨Guan Yiwen, Huang Junjie, Gong Fangyi

The biggest change in Alibaba's 24 years of existence, from discussion to announcement, took a total of 2 months.

After the Spring Festival this year, Alibaba Chairman and CEO Daniel Zhang began planning for Alibaba's restructuring plan. For more than a month, the news was known only to single-digit Alibaba executives and Alibaba's permanent partners.

The week of March 20 was the management of Alibaba Group aware of the arrangement. At the president's meeting, Daniel Zhang officially announced the restructuring plan. Dense three- and four-person meetings filled the schedule of Alibaba Group executives, deciding the ownership of every business in this huge organization.

After negotiations between Daniel Zhang, Dai Shan, CEO of Taobao Tmall Business Group, and Jiang Fan, CEO of International Digital Business Group, Taobao's overseas business eventually became part of the international business, adding an important ally to Lazada and AliExpress. Alibaba Health and Fliggy had discussions of merging into Taobao Tmall Business Group and Local Life Group, respectively, but were eventually included in the "N" (other independent business companies) outside the six business groups.

As of this week, discussions continue, and the ownership of some businesses is likely to continue to adjust. Alibaba's once-proud middle office team, as well as splitting functions such as human resources, are also being developed, some of which will be finalized this week.

Such a speed of adjustment is not at all like a giant group with annual revenue of 850 billion yuan and management of 230,000 people.

Before the start of Alibaba's new fiscal year (April 1 every year), some data middle office departments have been cut off from Alibaba Group, canceling regular meetings with horizontal departments and vertical groups, and only reporting to business leaders. The business middle office has been merged into Taobao Tmall Business Group, which mainly includes business modules such as orders, commodities, transactions, and stores. The data middle office integrating functional modules such as data analysis, product operation, and user growth will be dismantled into each business group.

Starting from a B2B company that helped traders connect with factories, Alibaba established multiple e-commerce, logistics platforms, hundreds of offline supermarkets in 24 years, drove 8 trillion yuan in commodity sales a year, and entered different fields such as cloud computing, entertainment, local life, games, etc., and once owned the most potential financial company in China at that time.

These huge and complex businesses, massive users and data, and the culture and values that countless Ali people were once proud of were not built in a day, nor can they be broken down in two months.

Business inventory of six major groups

Taobao Tmall Business Group: The most profitable subsidiary, to fight the hardest battle

Over the past five years, Alibaba's digital business segment – now known as Taobao Tmall Business Group – has contributed about seventy percent of the group's revenue and almost all of its profits. In a way, Alibaba is Taobao Tmall.

This group of employees is probably the most relaxed. Some are glad that they are in the most central position, some are curious about salary and promotion rules, and some people watch the intensive meetings and adjustments of the group's middle office departments (such as manpower, security, customer service), and lament the situation they may face.

Taobao Tmall may not have to transfuse blood for other loss-making businesses. In the fourth quarter of last year alone, Taobao Tmall took out 6.57 billion yuan of 58.6 billion yuan in profit to fill the deficit in other departments.

A Taobao Tmall employee bluntly said that let e-commerce return to e-commerce.

After 2021, the "management responsibility system" and "diversified governance" were implemented one after another, and the presidents of the business segments were required to manage the organization like CEOs and be responsible for profits and losses. In this process, Dai Shan, who drafted Ali, promoted the reform of Taobao and Tmall after that, merged the two business groups, no longer simply pursued the scale of total transactions, and determined five major battles covering live broadcasting, private domain, content, price power, and local retail.

Alibaba's approach to businesses in the past was "crawler development" – that is, using mature businesses to support new businesses, and then using new businesses to drive growth when mature businesses enter a recession. In the past, 1688 and investment funds supported Taobao's free period, and when Taobao Tmall grew into a profitable business, it began to support finance, cloud, logistics and other businesses.

As Alibaba enters more businesses, Taobao Tmall's baggage is getting heavier and heavier. In addition to the business that grew out of e-commerce, Alibaba also acquired offline retail businesses such as Yintai and RT-Mart, and entertainment businesses such as Youku and Shrimp, and these diversified businesses are constantly consuming Taobao Tmall's cash flow.

Taobao Tmall also needs to hand over profits to listed companies. But after removing the baggage, Taobao Tmall will have more budget and more freedom in decision-making.

But the most profitable sectors also have to fight the hardest battles.

From Pinduoduo to Douyin, younger rivals continue to divide the Taobao Tmall market with newer models and faster speeds. Alibaba's domestic e-commerce market share fell below 50% last year, and Taobao Tmall's revenue growth rate shrank year-on-year in the fourth quarter, and they can't afford more mistakes.

International Digital Business Group: From Learning from Ali to Learning from Competitors

In January 2022, when Jiang Fan was transferred to the overseas digital sector, many employees of Alibaba's overseas business saw the signal that they would be "independent".

He divided the overseas business positioning according to the coordinate axis, the horizontal axis is local to cross-border, and the vertical axis is self-operated to platform. Different models need to match different organizational capabilities and infrastructure, with the wholesale business Ali International Station, the retail business AliExpress, and the newly merged Tmall Overseas as cross-border business; Southeast Asia localization business was handed over to Lazada, in addition to the launch of European localized e-commerce platform Miravia. The overseas business segment also includes Trendyol in Turkey and Daraz in South Asia.

The investment and supply chain teams scattered across the platform were packaged into a middle office, and the platform operation, which emphasized personalization and localization, remained on the platform, and there was no attempt to mechanically copy the successful experience in China. For example, Lazada's country CEOs in Thailand, the Philippines and Malaysia are all locals.

It is understood that Lazada's share in some Southeast Asian countries has surpassed Shopee.

AliExpress has been positioned as "overseas Taobao" and "overseas Tmall" for many years. However, the process of cross-border e-commerce is much longer than that of China, AliExpress has operated extensively for many years, while SHEIN has built a supply chain in the past decade and has grown into the Chinese cross-border e-commerce platform with the highest sales volume today.

In the second half of 2022, AliExpress launched a fully managed business, that is, the platform is responsible for store operation, warehousing, distribution, after-sales service and other links, merchants only need to prepare goods into the warehouse, the whole model is similar to Pinduoduo's Temu. The biggest difference is that AliExpress still operates with stores as the main body, while Temu follows the explosive model of Pinduoduo's main station.

Ali has also become more patient with international e-commerce. Daniel Zhang told front-line employees that in the future, international e-commerce will consider business strategy in a three-year phase, rather than thinking about it once a year. "This is the biggest development in the overseas digital sector." Daniel Zhang said. Along this path, AliExpress launched 3-5-day delivery services in South Korea, and Lazada built overseas warehouses in Southeast Asian countries, etc. Miravia's incubation cycle is also set to two to three years.

After independence, there are also clear benefits to international businesses that need to be targeted to multiple markets – it can expand globally with a more flexible and local approach to business and management. As Daniel Zhang told employees earlier this year, "Different countries and different markets do things differently, and we need to be truly in awe." ”

But a new question also arises: where will the money come from after independence.

Revenue from overseas digital commerce includes wholesale and retail businesses, which together account for 7% - 8% of Alibaba Group's revenue. In 2022, although it had revenue of 64.9 billion yuan, it could not be self-sufficient, and it still lost 5.853 billion yuan overall. The overall loss of overseas business was narrowing this year, with a loss of only 763 million yuan in the last quarter.

Cloud Intelligence Group: The CEO personally leads the team to deal with the limited space market

Daniel Zhang is currently CEO of Cloud Intelligence Group, which will be the business he will invest the most in next. He is facing a business with revenue of more than 100 billion yuan, and a market with weak growth and difficulty in providing standardized services, which accounts for 1/8 of the entire Alibaba Group's revenue.

Alibaba Cloud, once seen as the second growth curve for the future, has slowed sharply in revenue growth, with growth of more than 80% in the fourth quarter of 2018 and only 3% in the fourth quarter of 2022, with a market share falling from 45% to 36%. These are the challenges that Daniel Zhang need to face.

Alibaba Cloud was founded in 2009 by Wang Jian, then CTO of Alibaba, which benchmarked against Amazon's AWS, selling the most basic computing resources (IaaS) and developing its own underlying technologies (such as Feitian). Hu Xiaoming took over the management of Alibaba Cloud in 2014, and after a four-year reign, he sold Alibaba Cloud to one of the fastest-growing Internet customers, Hu Xiaoming explored the path to commercialization of Alibaba Cloud, but he did not pay attention to technology precipitation. In 2018, Hu Xiaoming left and Zhang Jianfeng, who served as CTO of Alibaba Cloud for one year, became the new president of Alibaba Cloud.

Zhang Jianfeng moved Alibaba Cloud from a server seller to a "foundation, middle office, ecosystem, and service" to a "real cloud", with more emphasis on the accumulation of underlying technologies and healthier operations. When it proposed to do 100 billion yuan in revenue within Alibaba, Alibaba Cloud's revenue was less than 25 billion yuan, because scale is the lifeline of cloud business.

Zhang's difficulty is to supplement the foundation and maintain growth, while maintaining a leading position in technology and efficiency.

An Alibaba Cloud person commented that over the years, there have been continuous accidents, breaking the established rhythm and "constantly filling holes". In the first quarter of 2021, Byte's overseas business TikTok abandoned using Alibaba Cloud due to geopolitical conflicts, and its domestic business also moved back to self-built data centers in this year, and Byte's business accounted for nearly 1/3 of Alibaba Cloud's revenue at that time; online education industry customers who consumed a lot of cloud computing resources disappeared; At the same time, the online gaming industry has little increment - all of which has led to a rapid decline in Alibaba Cloud's revenue.

In 2021, Daniel Zhang promote the management responsibility system within Alibaba, each business needs to calculate profits and losses independently, Alibaba Cloud began to adjust its business policy, emphasizing more on "quality income". After excluding non-operating expenses such as equity incentives, Alibaba Cloud has been profitable for two consecutive years.

This makes Alibaba Cloud passive in the competition. "Alibaba Cloud will easily not give any more discounts." A company technology leader who has used Alibaba Cloud for many years said he intends to use the company to offer lower discounts to cloud vendors when developing new businesses.

At the end of December 2022, Daniel Zhang announced that Zhang Jianfeng stepped down as president of Alibaba Cloud and "concurrently" himself. Many Alibaba Cloud people regarded the recent downtime of Alibaba Cloud in Hong Kong, China, as the trigger for this adjustment.

"LatePost" learned that in January this year, Daniel Zhang said internally that he believes that the problem facing Alibaba Cloud today is operational efficiency, and it is necessary to achieve advanced technology and internal management at the same time to produce a multiplier effect.

China's cloud computing industry is no longer as fast as it once was. At the end of 2022, IDC lowered the average growth rate of cloud computing in China over the next five years to 20%, 10 percentage points less than half a year ago.

The advancement of technology and the improvement of efficiency can indeed enhance Alibaba Cloud's competitiveness and attract more customers. But on the other hand, Alibaba Cloud's fundamental challenge is whether as a private company can operate infrastructure such as cloud computing on a large scale in China.

Cainiao Group: Relatively independent operation, but still relies on Alibaba's e-commerce

For nearly 20,000 Cainiao employees, Cainiao was already a relatively independent company before the spin-off. Cainiao Network, founded in 2013, gave employees Cainiao options early on instead of Alibaba stock.

In 2016, founder Ma Yun said at Ali's first investor day that Alibaba's business will take turns to lead the development of the entire Alibaba, with a three-year cycle, respectively Ant Financial and Aliyun at that time, in Ma Yun's view, the third leading business on a par with these two businesses is a rookie.

In 2020, Alibaba Group began to pilot the "business responsibility system" Soon after, Cainiao employees could no longer access Alibaba's intranet, and built their own Cainiao intranet "Cainiao Twitter"; In terms of values, Cainiao also summarized its own proposition - "Cainiao Four Strengths", including mission-driven tenacity, ruthlessness in facing difficulties, drive for excellence, and ingenuity for innovation based on customer value.

Cainiao CEO Wan Lin no longer needs to report to the Daniel Zhang, and the budget does not need to be approved by the group. Cainiao may even become one of the first companies to go public after Alibaba's spin-off. Just two days after Alibaba's big adjustment, there was news that Cainiao was already preparing for a Hong Kong stock listing, with a valuation of more than $20 billion, but Cainiao quickly responded that there was no clear plan and timetable.

In the past two years, Cainiao's revenue share in Alibaba Group has continued to rise, accounting for 5.19% of the group's total revenue in fiscal 2021, making it the third largest business in Alibaba's revenue, and since then it has continued to improve for several reporting periods, and by the fourth quarter of 2022, Cainiao's revenue accounted for 7%, second only to China Commercial (Taobao Tmall, 69%) and cloud business (8%).

Cainiao is currently the fastest growing among Alibaba's six groups, with revenue growth of 27% in the fourth quarter of last year, higher than local life (6%) and international business (18%). "LatePost" learned that Cainiao also got a performance score of "3.5+" in 2022, which is at the forefront of the group's internal business rating.

The seemingly independent rookie still relies heavily on Taobao Tmall's growth in its domestic business.

Cainiao is a platform company in the logistics system, which does not have the heavy warehousing facilities and distribution teams of ZTO, YTO and SF. As the default logistics platform for orders placed on Taobao Tmall, Cainiao transfers most of its orders to other couriers to complete the main delivery process.

In the six months ended September 30 last year, Cainiao's revenue was 25.5 billion yuan, surpassing companies such as ZTO and Yunda. However, these express delivery companies all achieved profits during the period, and Cainiao had an operating loss of 1.472 billion yuan in the six months.

JD.com has its own logistics, Pinduoduo has also built its own logistics system, and Cainiao can not win many traditional e-commerce customers. Throughout 2022, China's e-commerce turnover grew by only 6.2%, the lowest on record. Taobao Tmall GMV fell for the first time.

Domestic growth prospects are gloomy, and Cainiao is focusing heavily on cross-border logistics.

At the Cainiao Open Day in July last year, Wan Lin said that he should focus on five things, two in China: home delivery; Launched supply chain solutions for specialty industries such as beauty, FMCG, home improvement, and cold chain.

Three overseas: upgrade international express services, AliExpress is the first in the industry to promote cross-border logistics timeliness commitment, "worry-free standard" five dollars and ten days to arrive, less than will be compensated; Logistics technology goes to the countryside to promote the automation of logistics in hundreds of counties and townships in China, and then open up services such as warehouse distribution equipment at home and abroad to the whole society.

Cross-border logistics is roughly divided into 4 sections, with section A collecting and transporting the first kilometer; Segment B cross-border transportation; Section C customs clearance; End-of-line delivery in segment D. Many freight forwarders only serve one of these segments, and few can cover the entire chain.

Cainiao is relatively lightweight and flexible in segment A, where the former works with strategic investment firms and the latter builds digital clearance systems for more than 60 ports around the world. Cainiao has invested heavily in segments B and D, and has built a multimodal transport capacity network with CMA CGM, COSCO Shipping, Atlas Cargo, Qatar Cargo, and China-Europe Express, and has gradually established its own terminal logistics network in Europe, Russia and the Americas.

At present, the top three international logistics companies are UPS, FedEx, DHL, Cainiao has ranked fourth in terms of order volume, and Cainiao's annual average daily cross-border parcel volume in 2022 is more than 4.5 million, which is far from the first UPS's daily average of 23.3 million parcels. The revenue gap is even wider, with UPS earning nearly $20 billion in international operations alone, more than three times the size of the entire Cainiao Group.

Cainiao's largest overseas customer is AliExpress, AliExpress, an overseas e-commerce platform, and last year's conflict between Russia and Ukraine, two AliExpress advantageous regions, directly led to a significant reduction in AliExpress in this region; In 2021, the European Union announced the cancellation of import VAT exemptions for products under 22 euros, which also led to a decline in AliExpress Europe's orders, and the impact was eventually transmitted to Cainiao.

Next, Cainiao will open up its logistics capabilities globally, and in addition to facing international giants, it will also directly compete with cross-border logistics companies such as SF International and Yuntu.

Local Life Group: Catch the most competitive year

The two core businesses of Alibaba Local Life Group are AutoNavi and Ele.me, including the recent integration of AutoNavi and the management of hummingbird delivery with more than 3 million registered riders.

AutoNavi, Koubei, and Ele.me have all been born for more than ten years, and all of them are businesses acquired by Alibaba. Yu Yongfu himself is an "outsider", and he joined Alibaba in 2014 with UC and became a partner of Alibaba.

Under Yu Yongfu's governance, AutoNavi first surpassed Baidu Map to jump to the first place, and then entered the ride-hailing market through the aggregation model, seizing the market gap left by Didi's removal, and increasing its market share from single digits to 30% in a year and a half. got the market that Meituan couldn't get.

In August 2021, Yu Yongfu became the CEO of Alibaba's local life, "pulled" Ele.me's market share and began to reduce costs and increase efficiency, and in the second quarter of 2022, Ele.me achieved the first UE (unit economic model) to turn positive.

Looking back at Ali's exploration of local life, he is full of struggle and persistence.

Ali invested in Koubei in 2006, wholly acquired it in 2008, and successively merged it into Taobao-Alipay-Ele.me; It has also tried to use Alipay as an entrance to local life, and since 2015, it has tried to access apps such as Ele.me, Koubei, and Fliggy.

Yu Yongfu's plan for New Local Life Group is to use AutoNavi with a daily activity of 130 million as a unified entrance to the in-store business, use its own traffic to promote service transactions around the destination, carry food, clothing, housing and transportation with maps, and Ele.me provide instant home delivery services, the two complement each other to complete the coverage of Ali's local life "home + destination", and comprehensively benchmark Meituan. Meituan currently has a market capitalization of $111.3 billion.

Over the years, Yu Yongfu has maintained a relatively independent relationship with Alibaba Group. But the entire local life sector has been in the red, relying on the group's blood transfusion, and its loss in 2022 reached 15.2 billion yuan.

AutoNavi is mainly engaged in map business, high-precision map surveying and mapping, production costs are high, and its revenue mainly relies on the sale of on-board maps to car manufacturers, which cannot directly recover costs. At present, the taxi and local life business explored by AutoNavi is expected to contribute profits in the future, but the revenue brought is far from enough to make up for the expenditure of its main map business.

The local life management has not further explained to employees about the split. Some employees are optimistic, believing that in the past, the distribution of benefits within a group would be more complicated, and the impact of some non-business factors would be amplified, causing the business to lose focus. A clearer split means that the management responsibility system can be further implemented, and everyone can focus more on the business itself and have stronger combat effectiveness in the future.

The establishment of Ali Local Life Group caught up with the most competitive year. At the beginning of the year, Douyin set a radical target of 400 billion yuan in turnover of local life business, and Meituan concentrated its superior resources to respond to Douyin's attack, and the measures were not limited to investing in content ecological construction, giving merchants more preferential policies, and investing in more subsidies.

AutoNavi's map traffic matches the taxi scene of the travel scene, but there is still a distance from the destination consumption, which requires long-term operation strategies to improve the user's mind, and AutoNavi needs to continuously provide subsidies and preferences to ensure that it has a price advantage compared with Meituan and Douyin.

Word of mouth has previously shrunk to less than 10 directly operated cities, lagging far behind competitors in the expansion and operation of offline merchants, and Alibaba's local life market share is currently in single digits, far lower than Meituan, and also ranked behind Douyin.

Da Wenyu Group: The most stressful and existential crisis

In this round of spin-offs, the most stressed and most existential crisis is the Grand Entertainment Group. Its predecessor was the digital media and entertainment business of Alibaba Group, including Youku, Alibaba Pictures, and online game business, and the CEO was Fan Luyuan.

In the past four quarters, in addition to the 4% year-over-year revenue growth in the third quarter, revenue in the first, second and fourth quarters fell 5%, 10% and 6% year-over-year, respectively. In the fourth quarter alone, the operating loss of Dawen Entertainment reached 1 billion yuan, and the operating profit margin was -13.4%.

Ali Group used to have high expectations for the big entertainment business, which belongs to the "Double H" strategy (Health + Happiness) determined by Ali after its listing. Since its IPO in 2014, Alibaba has successively acquired its literature, music, games, film, video and sports businesses.

After the establishment of Alida Entertainment in 2016, the group's expectation for Grand Entertainment was to achieve 100 billion yuan in revenue per year, but in fiscal 2022, this goal was only completed by less than 1/3.

In the past 9 years, Alibaba Entertainment has changed more than a dozen core executives and three presidents: Alibaba partner Yu Yongfu, former Youku CEO Yang Weidong, and Alipay veteran Fan Luyuan. Alibaba Group continues to provide funds and also uses Taobao's 88VIP to pull new Youku - for every 100 88VIP users, 38 will use Youku.

Even so, Youku fell from the number one in the industry when it was acquired in 2015. According to QuestMobile, iQiyi (110 million) had the highest daily activity in February this year, followed by Tencent Video (65 million), and Youku was only a little more than half of Tencent Video (36 million).

Users follow the film and television series and have little loyalty to the platform. Youku, iQiyi, and Tencent, backed by large companies, have burned more than 100 billion yuan in the past decade, spending a lot of money to buy copyright and content, and in the end, no one has achieved a monopoly advantage. Dawen Entertainment's daily beautiful listening and shrimp music were eventually shut down due to chaotic product design and team turmoil. And Alibaba Pictures lost money for 7 consecutive years, and finally made a profit of 154 million yuan for the first time in fiscal 2022.

Today's short video is clearly a more dynamic product and a better business. And Alibaba has missed the opportunity to enter the industry.

When the giants' main businesses are facing a decline in growth or even stagnation, they are unwilling to invest too many resources in non-core businesses that continue to lose money. In the past few years, the three parent video platforms have been working hard to reduce costs and increase revenue. At present, only iQiyi is profitable all year round.

In the years before this adjustment, the territory of Alida Entertainment has been shrinking, and the corresponding losses are gradually decreasing. In 2019, UC Browser, Ali Literature, and Shrimp Music were spun off from Dawen Entertainment and merged into the Innovation Business Group; In 2020, the game business Lingxi Interactive Entertainment was upgraded to a business group, and it became a large entertainment independently; In 2021, Shrimp Music shut down.

With Taobao Tmall withdrawing, it is not difficult to imagine the choices that the big entertainment group that has lost the group's blood transfusion can make.

"N" Company: definite and indeterminate

According to Alibaba's latest "1+6+N" organizational structure, the entire Alibaba will be divided into three tiers: "1" holding company - Alibaba's listed company entity, "6 business groups" and "N" independent business companies.

Alibaba's business is complex, and Alibaba Group Holdings Co., Ltd., founded in 2019, owns 896 companies, and this is just some of the companies in this huge group. Also in 2019, Alibaba began to set up a new concept of "Loop Company", which is now the predecessor of the latest "N" business company.

Since 2019, Alibaba has tried to use "core business", "loop company" and "ecological company" to further sort out its complex and diversified business. LatePost has been trying to understand the list since then, but few Alibaba employees have been able to make it clear. Based on the interview, we tried to restore the following:

"Core business" refers to Alibaba's wholly-owned subsidiary, employees hold group stock, and go through group finance, which is the real Alibaba. Typical examples include Taobao (Taobao, Tmall, B2C, Alima, etc.), overseas e-commerce, Alibaba Cloud, functional lines (CCO line, CTO line, CRO line, CPO line, CMO line, CFO line, etc.);

"Ring Company" refers to an independent company that has a close relationship with Alibaba's business and over which Alibaba has control, but is responsible for its own profits and losses. Typical examples include Sun Art Retail, Yintai, Local Life, Freshippo, Fliggy, Lazada, Ali Health, etc.;

"Eco Company" refers to a company in which Alibaba holds shares but does not have control.

In the previous division, some of the "ring companies" were listed and had complete boards of directors; Some have been spun off into independent companies that can raise funds independently and have more independent operations and structure design.

In 2021, Ali also further began to fully implement the management method of "business responsibility" throughout the group (and then further upgraded to "sector governance" and "diversified governance"), the big design idea is that Ali's chairman and CEO Daniel Zhang delegate power at the business group level, giving business leaders greater power, but also allowing them to assume more independent responsibilities, calculating whether the business makes money or loses money is only a small part of it.

At a meeting of the organization department in June 2021, Daniel Zhang emphasized that the members of the organization department (with the level of senior director / M5 and above) and business leaders should become real leaders and plan the future from long-term development, "Today's Ali, relying only on me, relying only on a few O's of the group, cannot be a family." ”

It can be seen that from the layered combing of "core business", "ring company" and "ecological company", to the step-by-step organizational strategy of "business responsibility system", "sector governance" and "diversified governance", and now to the latest structure of "1+6+N", all of them are Alibaba's active design of its own governance and business structure.

It's hard to say how much such frequent organizational changes can solve the strategy and growth problems of a huge company. It is clear that from Daniel Zhang as the CEO of Ali in 2015 to the current "1+6+N" structure, this CEO will truly no longer take over everything in Alibaba.

As of press time, after multiple interviews, LatePost can basically determine that the independent business companies attributed to "N" include:

Freshippo, Alibaba's new retail No. 1 project, the first offline store opened in 2016;

Fliggy, Alibaba's online travel service platform, grew out of Taobao Travel, founded in 2010;

Ali Health, Ali's "Double H" strategy (Health + Happines) platform in the health field, Ali officially became its controlling shareholder in 2015;

Intelligent Information Business Group, established in 2021, has UC browser, quark, book flag novel and other products, whether the new company name will continue to be called "intelligent information" is uncertain;

Sun Art, Alibaba's Chinese retail operator, whose main brand is RT-Mart, became its controlling shareholder in October 2020;

Yintai, Alibaba's Chinese department store, which became the controlling shareholder of Yintai in 2017;

Zebra.ai, an intelligent connected car open platform designed based on AliOS, formerly known as the Alibaba YunOS platform established in 2010, was jointly initiated and established by Alibaba and SAIC in 2015;

Pingtou Ge, Alibaba's wholly-owned semiconductor chip business entity, was established in September 2018;

Lingxi Interactive Entertainment, a game brand integrating Ali Research and Operation, was upgraded to Ali's independent business group in September 2020, parallel to Ali Da Entertainment.

At present, it is not clear whether Alibaba's basic scientific research institution DAMO Academy, local life SaaS system Keruyun, lottery management and technology company Yabo Technology, and Alibaba's intelligent interconnection business (Tmall Genie) belong to the ranks of "N".

Some subsidiaries that had previously undergone a "ring company transformation" are now divided into business groups. "LatePost" learned that the holding subsidiary Lingyang, which was spun off from Alibaba's main business in July 2022 - integrated multiple teams such as Alibaba's data middle office, business middle office, customer service system, and supply chain management system, and is a unified export of Alibaba's data intelligence services to the outside world - did not enter "N" after this adjustment, but was classified as Cloud Intelligence Group.

An Ali source said, "All companies that are N may have to be listed separately in the future, so [the division] will be more cautious." ”

Among the "N" companies, Hema is considered to be an earlier independent company, which issued its own options at the beginning of its establishment in 2016, and when the group implemented the "management responsibility system" in 2021, it was classified as a "ring company" and was required to bear its own profits and losses.

In fact, Hema still received a lot of support from the group after being classified as a "ring company", for example, during the epidemic last year, part of the operating costs of Shanghai Hema were borne by the group, and some agricultural products were also partially subsidized. "LatePost" learned that Hema is preparing for listing, and the relationship between Hema and the group will be more clearly divided in the future.

A year ago, Fliggy was also spun off into an independent subsidiary (Fliggy Business Services Co., Ltd.), and in Alibaba's positioning at the time, Fliggy gradually transformed from a business group within the group system into an independent company that needed to be responsible for its own profits and losses. In March last year, Fliggy CEO Zhuang Zhuoran issued an all-staff letter saying that Fliggy will shift from a "pure air force" with matchmaking services to a ground team that emphasizes service and fulfillment; Fliggy will also set up an employee stock ownership plan and issue Fliggy's own options to promote employees to return to the entrepreneur mentality.

It is worth noting that Fliggy, which was classified into the life services segment together with Gaode and Local Life Company in July 2021, was not included in the local life group where Yu Yongfu is the CEO in this adjustment, but as an independent "N" business company.

As Ali Health, which was once valued by Alibaba's "Double H" strategy (Health + Happiness), has turned a profit at the end of September last year, and in the six months before the end of September, the adjusted profit was 350 million yuan, which is one of the few profitable businesses among Alibaba's many "N" companies.

Sun Art, also an independent company, lost 87 million yuan in the half-year period from March to September last year, and its revenue fell 2.2% from the same period last year to 40.6 billion yuan. Last year, due to the impact of the epidemic, fewer people went to offline supermarkets, but Sun Art's online orders increased by 14.3% year-on-year.

As far as we know, Alibaba's internal - whether it is the six major business groups or the entire Ali Holding group level - is still being sorted out, and it is not yet fully clear which businesses belong to the "N" company sequence.

"LatePost" learned that, for example, Ali Health was previously discussed to be divided into Taobao Tmall Business Group, but later decided to be listed as a separate "N" company; Taobao's overseas business was struggled with whether to put it on Taobao or overseas, and finally management decided to divide it into an international digital business group.

In addition to the division of "N" companies, it is more noteworthy to note the composition of the six major business groups and the subsequent boards of directors of business companies, which to some extent determines how much actual control Alibaba's highest authority, the 29-member partner team, still has over this "1+6+N" multi-group.

Alibaba's values: Each business can have its own

"Values are Ali's soul." An Ali employee said. Even now, many of Alibaba's management and employees still recognize and believe in the positive impact of values on the 24-year-old company.

In the third year of Ali's founding, in early 2001, the founder team refined Ali's first version of the value "Dugu Jiu Sword", and in 2005, considering the rapidly expanding organizational scale, the value was upgraded to "Six Veins Excalibur", which lasted for the next 14 years of Ali. Until 2019, the 20th anniversary of Ali's founding, the values were upgraded to "New Six Veins Excalibur", changing from the keywords of the past to six sentences of "Ali native words".

In the past two decades of escalating values, Alibaba's business has diversified. Different business departments have different goals, different stages, different capabilities required, different interpretations and standards for Alibaba's values, and employees who enter Alibaba at different times also have different degrees of identification with this cultural system.

Alibaba's values have been increasingly challenged, and the more famous value events include the mooncake incident in 2016, the DingTalk substitute test incident in 2020, the "To Ali" intranet hot post in 2021 and the Ali female employee incident.

It is no longer possible to manage Ali uniformly with exactly the same standard of values and cultural systems, and everyone knows this. An Alibaba employee said bluntly, "Everyone knows that you can't win a battle by relying on values. ”

Before the adjustment, some of Alibaba's businesses had formed their own relatively independent values. For example, Ele.me set its own three cultural keywords "pragmatic, self-driven, persistent" in May last year, and Alibaba International also defined the values of "ultimate trust and one step forward" two years ago.

However, such a trend will be clearer and more thorough in the future. LatePost understands that after this adjustment, business groups are allowed to have their own cultural values.

An Alibaba employee believes that this does not mean that the general values are not told, "The new six-pulse Excalibur is Ali's bottom line and a moral standard." It's just that in different collectives, pluralism is better. ”

Many Alibaba employees speculated that the "1+6+N" organizational adjustment email released on March 28 Daniel Zhang may be the last "all-staff letter" they receive at the level of the entire Alibaba Group.

"LatePost" also learned that the "Centennial Ali" value training for new employees, which has been held for more than 2,000 sessions, has been canceled, and the cultural event "Ali Day" held on May 10 every year will no longer be held by Ali Group, but by each business itself.

What we have learned so far is that the active intranet of the Alibaba Group will remain the place where employees learn about the company, share opinions, carpool, make friends, question unreasonable business, improper management, and report violations - the place called "Ali Weier".

The invention and birth of the partnership system is one of the things that Alibaba has done more than any single business decision in the past ten years. Alibaba's partner team is also the highest level of authority in the firm.

This system began to operate in 2010, and it was not until the eve of Alibaba's listing in 2013 that founder Jack Ma first made it public through internal mail.

One of the main purposes of the original partnership system design was to inherit values, such as the requirements for new partners to be selected, in addition to the hard standard of 5 years of work in the group, but also to require personal integrity, outstanding contributions to the company, and practice Alibaba's values. The partners will hold meetings from time to time to discuss Alibaba-related issues based on culture and values.

In a way, becoming a partner means not only becoming a spokesperson for Alibaba's culture and spirit, but also entering the very core of the company.

Partners can appoint new partners, nominate not less than half of the candidates for the board and, if not selected, have the right to appoint interim transitional directors to fill vacancies. The board of directors decides on executive appointments, including the CEO.

An Ali source believes that the partnership system was originally to solve the problem of control and dividend rights, and the responsibility was to maintain Alibaba's culture, but its rights in business operations have not been clear, "resulting in the eventual becoming an institution that focuses on and inherits culture." ”

Following the spin-off, the CEOs of each business group will report to their newly formed boards. It is unclear whether Alibaba's partners have the authority to determine the composition of the boards of directors of each business group.

An important question that cannot be answered at this time is, who will represent the interests of Alibaba Group when there is a conflict of interest between the Alibaba Group and its subgroups?

Ordinary Alibaba employees don't even know whether values will still account for 50% of their future assessments.

But what they do know is that Ali Holding Group, which is the main body of listing, no longer needs so many people. Self-financing business groups and business companies had to accelerate the streamlining of expenditures. More Alibaba employees will face career choices actively or passively.

For a large company, under the new great changes, compared with the aforementioned business, values, management mechanisms, etc., the first to face the changes are always front-line employees.

Source: Visual China

Reporters He Qianming and Gao Honghao also contributed to the article.

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