Recently, Cai Chongxin, chairman of Alibaba, publicly admitted his mistake in an interview and stated that "Ali is lagging behind", which aroused discussion and attention from the outside world. Subsequently, the founder Jack Ma issued an internal letter, further expressing Ali's determination to correct his mistakes.
In the letter, Jack Ma bluntly pointed out that Alibaba has been too focused on scale and speed in the past few years, and has neglected in-depth insights into the market and consumers. He mentioned that the company deviated from its original intention in some key decisions, over-pursuing short-term benefits, and ignoring the accumulation of long-term value. Although Alibaba's revenue and profit have continued to grow in recent years, the growth rate has slowed significantly, and the market share of its core business is also facing strong challenges from competitors.
Tsai Chongxin pointed out the company's internal management problems in more detail. For example, with the rapid expansion of the company's scale, there is an obvious trend of internal hierarchy and bureaucratization, the efficiency of decision-making is reduced, and the ability to innovate is weakened.
From the perspective of stock price performance, Alibaba's share price plummeted by 75% in three years, and its market value evaporated by 300 billion.
But judging from the cash reserves, when the previous one left, he left Ali with enough cash of about 800 billion.
The admission of Jack Ma and Tsai Chongxin is not only a reflection on the company's past development route and decision-making, but also a repositioning of the future development path. So what has Ali suffered in the past few years? What is the reason for Ali to fall behind? What strategic deployments does Ali have to make?
Strategically, what did Ali do wrong?
From a strategic point of view, in the past few years, the biggest problem Ali has encountered is that the strategy is not clear, and the internal management cannot tell who its customers are.
"Customer first" is the first value of Alibaba. With the rise of e-commerce live broadcast, Ali has not redefined the question of who is the customer, nor has it officially answered for all employees of the company and the outside world. Daniel Zhang, former CEO of Alibaba, also said internally: "The most difficult thing about the platform is the question of who is the first customer.
For a company of such a size, the most basic consensus has been vague for a long time, and the result is that in the past two or three years, Ali has lagged behind Pinduoduo, which focuses on C-end users, and JD.com, which continues to build its own logistics system, in terms of revenue scale.
In the past two years, live e-commerce and content e-commerce have exploded, Douyin, Kuaishou, and Xiaohongshu have grown by leaps and bounds, Alibaba has failed to adapt to changes in consumer trends in a timely manner, and its product structure and price strategy on its platform have failed to fully meet the needs of consumers.
According to the report on the webcast industry of Qizhi:
Under the guidance of Douyin Kuaishou live broadcast, after 2021, online live streaming affiliated companies have sprung up like mushrooms after a rain, reaching 5,470 stock enterprises in 2022, and the user scale and transaction volume of online live streaming platforms have shown a rapid growth trend. The market size will reach 4.9 trillion yuan in 2023, and the industry is still releasing growth signals.
Although Alibaba has also tried to get involved in the field of short videos and live streaming, according to Alibaba's official financial report, its investment and layout in this area are obviously insufficient, and the management of its bloggers is lacking.
On the other hand, Alibaba has been actively promoting its globalization strategy, hoping to further enhance the company's competitiveness and influence by expanding overseas markets, but it has also had little effect.
In January 2022, Alibaba appointed Jiang Fan, formerly known as the prince of Alibaba, as the CEO of Alibaba International Digital Business Group, responsible for the development of overseas markets, however, due to cultural differences and different consumer habits, Alibaba's products and services have not been widely recognized in overseas markets.
In particular, the trade blockade of China by the Western camp represented by the United States in recent years has brought considerable challenges to Alibaba's globalization strategy. Even if Jiang Fan, who has a dazzling halo, "leads the team", Ali International still has not come out of the quagmire of losses.
According to the data of the second quarter of fiscal 2024, Alibaba International's adjusted EBITA loss was RMB384 million, and Alibaba's expansion in overseas markets was not smooth.
Poor internal decision-making
From a tactical point of view, Ali has also made a lot of mistakes in internal decision-making in the past two or three years.
Alibaba's initial success was due in large part to its precise strategic positioning to create an integrated e-commerce platform that would meet the diverse shopping needs of consumers.
However, in the past few years, Ali has continued to bet on investment in areas that he is not familiar with.
According to the company's free search platform, Alibaba has shown 664 pieces of investment information, and Alibaba has been increasing its investment in diversified businesses in recent years, but these new businesses have not brought the expected growth. On the contrary, the growth rate of core business e-commerce platforms has been declining year by year.
According to the second quarter report of fiscal year 2023, in terms of core retail business data, Alibaba's core China retail business quarterly revenue was 131.222 billion yuan, down 1% year-on-year. Among them, the revenue of customer management (CMR, e-commerce business) was 66.497 billion yuan, down 7% year-on-year, and the net loss in a single quarter was 22.4 billion yuan.
At the same time, Alibaba's investment in new retail, cloud computing and other fields has gradually increased, and in fiscal 2021, Alibaba's R&D expenses reached 38.2 billion yuan, a year-on-year increase of 29%. The number of R&D personnel has also increased to 107,000. This diversification investment, not to mention whether it diversifies the company's resources and energy, does lead to a decline in the competitiveness of the core business.
Alibaba has always been known for its unique organizational culture and values, which is key to attracting and retaining a large number of top talent. However, with the company's rapid expansion and diversification of its business, Alibaba's organizational culture has also undergone a certain metamorphosis.
In the past year, Alibaba has promoted the "1+6+N" reform, and employees are deeply aware of the frequent change of leadership. In a short period of time, the company has seen six changes in the management of the CEO position. In March this year, before the end of Alibaba Group's fiscal year 2024, three business CEOs stepped down. Yu Yongfu, Chairman of Local Life Group and CEO of Ele.me, Hou Yi, CEO of Freshippo, and Lin Xiaohai, CEO of Sun Art Retail, have all retired from management positions.
In the face of frequent leadership changes, employees have gradually developed a survival strategy to understand and adapt to the preferences and work styles of the new leaders. For example, Dai Shan, the CEO of Taotianyuan, pays attention to the sense of value of employees, so she tries to show her feelings when reporting, and she doesn't like flashy PPTs, so many people use Word documents instead. After Wu Yongming took over, he avoided adjectives as much as possible, preferring to rely on data for business decisions.
As the leadership changes, so do the goals and plans. An employee of Taotian revealed that their KPIs have been adjusted several times in the past year.
The frequent change of leadership has also affected the employees below. On April 16, a long article on "The Complete Record of Workplace Bullying of Alibaba Taotian Group" circulated on the Internet, in fact, this is not the first time Alibaba has faced the problem of "workplace sexual harassment".
According to the financial report, Alibaba's employee turnover rate has increased year by year in recent years, and as of the end of March 2023, Alibaba's total number of employees was 235216, a decrease of 19,725 from 254941 at the end of March 2022. The reduction in the number of employees cannot be equated with layoffs, including resignation, job hopping, etc., which indicates that employees' sense of identification with the company's culture and values is significantly reduced.
Enterprises know that in Alibaba's business risks, there are 41 articles in labor arbitration. This kind of organizational culture transformation not only affects the enthusiasm and efficiency of employees, but also brings potential risks to the long-term development of the company.
When it comes to crisis management, Alibaba has also made a number of mistakes.
Alibaba has been mired in public relations crises many times in recent years, from Ant's cancellation of IPOs, to reducing its holdings in Bilibili and Xiaopeng, to withdrawing from Meinian Health, and finally to the recent sexual harassment in the workplace.
Each of Alibaba's actions has attracted widespread attention in the market, and these crisis events have had a considerable impact on Alibaba's reputation and market position. However, in the face of these crises, companies have been slow to respond to crises and often miss the best time to deal with them, especially Alibaba's lack of transparency in handling issues, which has led to a decline in public trust in Alibaba.
It is necessary to acknowledge and correct yesterday's problems, and it is all the more necessary to face the reform of the future
Jack Ma and Tsai have successively admitted the mistakes made by Ali in the past few years, bringing new hope and motivation to the company, and also strengthening the public's confidence in Alibaba.
Today, Alibaba has begun to adjust its strategic direction, strengthen investment and innovation in its core business, and optimize its internal management mechanism to improve decision-making efficiency and innovation capabilities.
In 2024, "focus" will become a key word for Alibaba. Ali has changed from the epitaxial expansion that used to do everything, to focus. The three businesses that Alibaba originally planned to list first are all in flux: Alibaba Cloud gave up a complete spin-off, Hema suspended listing, and Cainiao gave up listing.
In late May 2023, Jack Ma said that he would return to Taobao, users, and the Internet.
In order to do a good job in Taotian, Ali really worked hard, and the capable executives of many groups were also transferred to Taotian Group, such as Chen Weiye, the former COO of Ele.me, and Wu Jia of the Intelligent Information Business Group.
It is understood that Ali's e-commerce-related resources have been reverted back to Taobao and Tmall, Taote's merchants and goods have been moved back to Taobao, the wholesale platform 1688 has opened stores on Taobao to provide cheap goods, and the Cainiao Station team has settled in Taotian co-working to improve the user experience of "home delivery", etc.
The report on the express logistics industry shows that:
At present, there are 2,108 express logistics-related enterprises in the mainland, from upstream technical services, auxiliary equipment, production equipment, auxiliary raw materials, to downstream cargo transportation insurance and other enterprises, a complete logistics system has been established, and Ali is actually fully capable of further optimizing the user's receiving experience.
In addition to focusing on Taobao and improving the home delivery experience, Alibaba's investment scope has also shrunk significantly in the past year, and the direction of Ali's investment has focused on the AI field.
After Wu Yongming became the CEO of Alibaba Cloud in September 2023, Alibaba Cloud's new strategy, which mainly carries Alibaba Technology's business, was clearly described as: "AI-driven, public cloud first".
According to the Qizhi free patent search platform, the total number of global patents of Alibaba Cloud Computing exceeds 2,000, and the number of valid patents exceeds 700, reaching the peak of patent applications and authorizations in 2022.
Today, there are 6 large-scale unicorns in the Chinese market (MiniMax, Dark Side of the Moon, Zhipu AI, Baichuan Intelligence, Zero One Everything, and Stepleap Star), and Alibaba has invested in 5 of them, making it the most aggressive investment among all major Internet companies.
Alibaba's investment in AI matches Alibaba's AI strategy, in which the cloud computing service layer is the top priority of Alibaba's AI strategy and the growth point of future business.
At present, the number of enterprises related to the cloud computing and intelligent computing algorithm (large model) industry has entered a stable period, and Ali's bet on cloud computing and large models in this period also proves its courage to break the kettle and want to reform.
The stock and increment of cloud computing enterprises
Intelligent Computing Algorithm (Large Model) Enterprise Stock and Increment
At present, Alibaba Cloud hopes to seize the opportunity of the large model to make AI computing infrastructure, and implant its own cloud computing into the current large model, for example, Ali has invested nearly 800 million US dollars in the dark side of the moon on the condition that the dark side of the moon must promise to purchase Alibaba cloud computing resources.
Cloud computing, large models, and e-commerce express delivery have become the three magic weapons for Ali's future reform and success. At present, it seems that in addition to returning to Taobao, Ali has shrunk from the past comprehensive bets on retail, entertainment, enterprise services and chips to cutting-edge directions such as AI, quantum computing and controllable nuclear fusion, all of which are related to intelligent computing infrastructure.
External factors such as changing consumer trends, the rise of emerging technologies, and the complexity of its global layout have put unprecedented pressure on Alibaba. At the same time, the company's internal misjudgment in strategic positioning, organizational culture, and crisis response has exacerbated its predicament.
However, the internal reflection of Jack Ma and Tsai Chongxin has brought a new turn for Alibaba's development, and the next step is the decisive factor after the leadership course is determined.
A more mature, robust and innovative Alibaba will continue to lead the development trend of China's e-commerce industry and provide consumers with more and better products and services.