8 months and 8 years, two farewells between Zhang Yong and Ali

Original link: https://www.latepost.com/news/dj_detail?id=1859

On September 10, Zhang Yong and Tsai Chongxin completed the power transfer of Alibaba Group as planned. Alibaba employees immediately received an all-employee letter from the new Alibaba Chairman Tsai Chongxin.

An Alibaba Cloud Intelligence employee initially thought that the words in the email were typos. After repeated confirmations, he realized that Zhang Yong had not only resigned as Chairman and CEO of Alibaba Group, he had also resigned as Chairman of Alibaba Cloud Intelligence Group for only 8 months. Chairman and CEO.

Some employees are expecting Zhang Yong to use his influence in the group to obtain better prices for Alibaba Cloud Intelligence. Recently, Alibaba Cloud Intelligence is renegotiating the purchase price of cloud resources with business groups such as Taotian and Cainiao.

Every month after taking office, Zhang Yong will hold meetings and discussions with Wang Jian, founder of Alibaba Cloud and chairman of the Alibaba Group Technical Committee; more than two months ago, at a “Academician Face to Face” employee event, Zhang Yong also met with Wang Jian Together they discussed the future development direction of cloud intelligence and answered questions from employees; in many recent government-enterprise cooperation projects, Zhang Yong has met with customers as a cloud business representative.

On June 20, Zhang Yong announced in a letter to all employees that he would step down from his management position in Alibaba Group on September 10 and concentrate on his work as chairman and CEO of Alibaba Cloud Intelligence Group full-time. He said in the letter that, taking into account the company’s requirements for standardized governance, he “is no longer suitable to serve as chairman and CEO of two groups at the same time.”

According to the plan announced at the time, Alibaba Cloud Intelligence Group will be completely split from Alibaba Group, and the two parties will no longer have equity ties. Zhang Yong will lead a completely independent company as chairman and CEO of Alibaba Cloud.

After this adjustment, Zhang Yong completely left the management of Alibaba Group and related businesses. The only Alibaba identity he retained was that of an Alibaba partner, and he was awarded the honorary title of the first “Meritorious Alibaba Person”. In a letter to all employees, Tsai Chongxin stated that Alibaba will invest US$1 billion to support Zhang Yong in establishing and managing a future-oriented technology fund. An Alibaba employee said, “The US$1 billion represents Alibaba’s respect for Zhang Yong’s many years of work.”

“LatePost” learned that Alibaba Group’s management adjustments have not stopped.

Alibaba Cloud CEO for 8 months: cutting projects and pursuing standardization

Zhang Yong officially took over Alibaba Cloud’s intelligence business on the penultimate working day of 2022.

It was almost the worst moment for Alibaba Cloud Intelligence – it had just experienced a server outage that was considered “the most serious accident in Alibaba Cloud’s history”; revenue growth dropped from 90% four years ago to only single digits , in the first quarter of this year, Alibaba Cloud even experienced its first revenue decline in its 14 years of existence (excluding part of Alibaba Group’s revenue).

When Zhang Jianfeng, the previous president of the cloud intelligence business group, took office, he proposed a three-year revenue goal of exceeding 100 billion yuan. An Alibaba Cloud management source revealed that in addition to being responsible for scale, Zhang Jianfeng also needs to complete the “high-quality development” goals proposed by Zhang Yong: First, the proportion of public cloud revenue should be increased, and more basic cloud servers (ECS) should be sold. storage and computing products; second, they must be profitable.

This means that Alibaba Cloud needs to sell more standardized products – selling the storage and computing services of Alibaba Cloud data centers to customers. In order to adapt to the environment, China’s major cloud computing vendors often work as project “contractors” to help government and enterprise customers customize a complete set of services, including computers, tables, chairs, and office mobile phones, all packaged and sold. The revenue looks like a lot, but the profit is actually very small.

After Zhang Yong took over Alibaba Cloud, he began to implement “high-quality development” more thoroughly internally. At the executive meeting in May this year, he sorted out the next three most important goals of Alibaba Cloud, ranked in order of priority: scale, revenue, and profit.

Scale refers to the number of CPU (central processing unit) cores in the data center, which corresponds to basic cloud resources such as storage and computing. In the future, Alibaba Cloud will sell more standard products that consume basic cloud resources, such as cloud servers (ECS), instead of Then just do customized development with poor scale effect just to increase revenue.

In order to clarify the priority of resource allocation, Zhang Yong divided the products into four levels – the cloud computing operating system is a first-line product; Tongyi large model, basic operation and maintenance, development tools, etc. are second-line products; customized and developed by ecological partners, Alibaba Cloud’s integrated products are classified into the third and fourth tiers. Projects are also divided into three categories – projects that require the use of Alibaba Cloud computing resources are first-ring projects, projects that only use Alibaba Cloud applications are second-ring projects, and the rest are third-ring projects.

In terms of revenue, Zhang Yong set Alibaba Cloud’s revenue target this year at 110 billion yuan (excluding part of Alibaba Group’s revenue), which is an increase of 22% compared to the 90 billion yuan target proposed by Zhang Jianfeng last year.

Many Alibaba Cloud employees are not optimistic about achieving this revenue target this year. Recently, Alibaba Cloud is renegotiating cloud resource purchase prices with many subsidiaries of Alibaba Group. Previously, the annual renewal price of cloud servers (ECS) provided by Alibaba Cloud to external customers was 40% off the official website price, while the annual renewal price provided by Alibaba Cloud to some subsidiaries of Alibaba Group The discount can reach 20% off. The renegotiation of prices may increase Alibaba Cloud’s revenue, but in the long run, Alibaba Group already has the right to freely choose cloud service providers, and Alibaba Cloud’s bargaining space will be challenged.

For the government and enterprise markets with huge room for growth, Alibaba Cloud may introduce partners to jointly expand. According to media reports in early September, Alibaba Cloud may obtain financing of 10 billion to 20 billion yuan by introducing state-owned enterprises.

Alibaba Cloud’s future imagination lies in large models. In April this year, Alibaba Cloud released a large GPT-like model “Tongyi Qianwen”. Later, Zhang Yong also announced that the prices of Alibaba Cloud’s core products would be reduced by 15% to 50% across the board. He explained to analysts that this was done to make More small and medium-sized enterprises and developers use cloud computing. In the view of industry insiders, it is still to use low prices to leverage a larger market.

In order to reduce costs, Zhang Yong cut off dozens of products and laid off about 15% of production and research personnel after taking office. He made an internal calculation and found that 90% of revenue was actually contributed by 10% of products, so products that were not profitable and consumed less cloud computing resources were canceled in large numbers. An Alibaba Cloud source said that before Zhang Yong came, there had been repeated internal discussions about shutting down low-ranking products, but in the end the products were often discontinued, while the people who operated the products were retained.

During Zhang Yong’s tenure, DingTalk and Damo Academy were stripped out of Alibaba Cloud Intelligence Group and returned to Alibaba Group to become “N” companies. This will allow Alibaba Cloud to save billions of yuan every year, and its business will be more focused.

An Alibaba Cloud employee commented that in addition to clarifying strategic priorities, the biggest change Zhang Yong brought to Alibaba Cloud was to allow the Alibaba Cloud team to return from pursuing revenue goals to improving products and technologies themselves, and building the cloud into a reliable infrastructure.

Previously, Alibaba Cloud’s product and R&D personnel were required to memorize revenue indicators and cooperate with frontline sales to provide solutions for various industries. This year, production and research personnel no longer need to be directly responsible for revenue targets and focus on production and research.

At an Alibaba Cloud meeting at the beginning of this year, Zhang Yong criticized the previous “movement-style management”: Last year, Alibaba Cloud launched a round of assessments to reduce the number of customer consultations, and each business line regularly compared who had reduced the number of customer consultations. Many times, this approach was originally intended to improve the user experience, but in the end, in order to meet the assessment, employees asked customers to raise consultation questions in the DingTalk work group instead of submitting questions through the backend to reduce the number of consultations.

After Zhang Yong took office, he held meetings with Wang Jian every month to discuss major business directions. The two agreed on the future development direction of Alibaba Cloud: Alibaba Cloud should become an infrastructure like water, electricity, and coal, allowing more businesses to The company has grown on this infrastructure, so it should sell more standard public cloud products and do less customized development with low human efficiency.

During his short eight-month tenure as CEO of Alibaba Cloud, Zhang Yong made it clear that scale and revenue were the priority, and asked the team to return from sales to products and technology, but he had no time to make more specific adjustments.

8-year CEO: Firm investment in consumption upgrade, organization from centralized to decentralized

Zhang Yong joined Alibaba in 2007 and has served for 16 years.

Taking the position of CEO as the dividing line, in the first eight years, Zhang Yong established Tmall and the Double Eleven Shopping Festival, which made brands willing to sell goods and advertise on Alibaba. In the eight years after becoming CEO, Zhang Yong further chose to bet on consumption upgrade—— Access to international brands such as Uniqlo and L’Oréal; acquire Intime and RT-Mart, incubate Hema, and invest heavily in “new retail”; acquire Ele.me to compete directly with Meituan to meet the new middle class’s consumer demand for instant home delivery.

Consumption upgrading has indeed been a major trend in China’s social development for a long time. Under Zhang Yong’s leadership, Alibaba Group’s annual sales exceeded one trillion US dollars, and it once became the company with the highest market value in China, bringing huge returns to shareholders.

Over the past three years or so, the consumption environment has begun to change. When consumers prefer cheaper alternatives, and when merchants are overstocked and looking for clearing channels, the extremely low prices that Pinduoduo has always pursued become more attractive. Brands do not want clearance and discounted out-of-season products to affect their new product sales. On e-commerce platforms, they put more clearance products on Pinduoduo for sale, and do not want cheap products to affect the sales of Tmall flagship stores.

No matter how successful Alibaba’s consumption upgrade is, it will be difficult for it to turn around and seize the low-price market. On the one hand, Alibaba itself has ignored the changes in the consumption situation, and its past success has slowed its response; on the other hand, its challengers are growing rapidly, posing an imminent threat.

In 2019, Pinduoduo’s GMV was just over 1 trillion yuan, only 1/7 of Ali’s. At that time, Douyin had not yet built its own e-commerce and was Ali’s sales channel. Three years later, Pinduoduo’s GMV exceeded 3 trillion yuan and Douyin’s e-commerce GMV exceeded 1.6 trillion yuan. The GMV of the two companies is already equivalent to more than half of Alibaba.

Zhang Yong founded the Double Eleven Shopping Festival 14 years ago, and Xu Lei, the former CEO of JD.com, founded the “618” Shopping Festival 9 years ago. The people who created Double Eleven and 618 both said goodbye to their companies this year.

In terms of business strategy, Zhang Yong’s firm investment in consumption upgrading has accumulated hundreds of billions of dollars in cash for Alibaba Group, which also limits the company’s possibilities in e-commerce.

As for the governance of large companies, many of Zhang Yong’s explorations as CEO are trying to cross the river by feeling the stones. It is difficult to easily judge whether these explorations are successful.

Zhang Yong has been the busiest CEO on the Internet in China for many years. For a long time, more than 30 people reported directly to him. He was the gathering point for decision-making, always doing it himself, and taking care of online retail and offline businesses at the same time. Supermarkets, online wholesale, logistics, cloud computing and other businesses with completely different business models and team genes.

“A company as big as Alibaba, with many competitors and founders who are not on the front line, is indeed facing a very big governance problem.” An Alibaba management said.

When Zhang Yong took over as CEO in 2015, Alibaba had more and more businesses. In order to reduce duplication and waste of business, Zhang Yong led the implementation of the organizational strategy of “large, middle office, small front office” to allow all businesses to share data and technology. Trying to get the Alibaba Group to work together to fight against the enemy, the company moved towards “One Alibaba”.

Starting from the end of 2021, Alibaba’s organization will shift from “centralized” to “decentralized” . In the face of complex competition and macro-environment, the “One Ali” in the past is too slow to respond to front-line business changes today. Zhang Yong hopes to make the organization more flexible through operating responsibility systems, diversified governance, and the establishment of a chief executive in charge. Alibaba has developed into four operational business units, but many important decisions still require Zhang Yong to make the decision.

By the end of March 2023, Ali announced the launch of the “1+6+N” organizational change, and CEO Zhang Yong completely delegated power to Ali.

From 2015 to the present, Zhang Yong, as CEO, has been exploring solutions to how to effectively govern a group with complex businesses like Alibaba. He did solve some of the problems, but he was unable to solve the real problem.

Four years ago, on September 10, Alibaba held its 20th anniversary party at the Binjiang Olympic Sports Center in Hangzhou. Under the attention of 60,000 Alibaba employees and Alibaba friends, Jack Ma announced that he would step down as chairman of Alibaba’s board of directors and hand over to Zhang, then CEO of Alibaba. Brave.

Jack Ma and Alibaba veterans Tsai Chongxin, Peng Lei, and Wang Jian formed an A band on the spot, singing “Blooming Life” and fading out of the front-line management stage of Alibaba Group. Four years later, these four Alibaba veterans all returned as chairman and directors of the business group, and once again took charge of Alibaba, which they helped to found.

Source of title picture: Visual China

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