Original link: https://www.latepost.com/news/dj_detail?id=1572
On March 28, Alibaba founder Jack Ma was reported to have appeared in Hangzhou on the afternoon of the next day. Alibaba Group held a president meeting and announced a large-scale restructuring plan——Alibaba will set up six major business groups, which can be independently financed or even listed in the future. IPO.
“LatePost” learned that this is an organizational change initiated by Zhang Yong, chairman and CEO of Alibaba, and Ma Yun did not attend the president meeting.
After the adjustment, Ali is still a listed company, and its legal and financial entities remain unchanged. Most of the six newly established business groups continued from the existing business segments.
However, after the adjustment, each business group has set up a CEO and will establish a separate board of directors. The CEOs of these business groups will no longer report directly to Zhang Yong, but to their respective boards of directors.
An Ali source said that Zhang Yong spent several years preparing. This time the adjustment plan began in early 2023. “Alibaba’s 24-year development history is unprecedented and has changed the most.” Another Ali source described this adjustment as a ” “Great change” is an earth-shaking change.
A former Ali executive described that this is breaking down the whole into parts, “it is the correct strategy for a group that seeks change.” But he also believes that such a big change should not be made by Zhang Yong, “I guess Jack Ma’s assistance is needed to make a decision.”
In the last fiscal year, the transaction volume (GMV) completed by the entire Ali Group was 8.3 trillion yuan. Nearly half of the total online shopping in China is done through Taobao and Tmall. By the end of 2022, the entire Ali Group has a total of 239,740 employees, more than twice that 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.
After Zhang Yong took over the entire Ali Group, he set up various mechanisms to try to solve the problems caused by Ali’s “too big”.
But frequent organizational restructuring doesn’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 will be nearly 4.5 trillion yuan, equivalent to more than half of Ali’s domestic e-commerce business.
However, businesses such as entertainment, food delivery, and wine travel have not been able to challenge industry-leading opponents under the protection of the entire Ali Group. At the same time, the environment has also changed. Businesses such as Ele.me and Hema can no longer use Taobao’s huge user data.
This adjustment may solve Ali’s organizational problems and allow the CEOs of Ali’s business groups to take on more responsibilities.
In the face of young companies such as Pinduoduo and Douyin with stronger execution capabilities, Ali’s various businesses are also facing huge challenges. But in the opinion of many Ali people, “compared with ‘combining’ together, ‘dividing’ is a better choice.”
Ali Group CEO no longer manages everything in Ali
Ali established four major business segments at the end of 2021, and determined their respective chief executives. At that time, these four people were internally called “0.5-tier organizations” by Ali employees. If the 0-tier is CEO Zhang Yong, the 1st-tier is the business group, then the chief executive in charge is located in the “0.5 layer”.
After this adjustment, “LatePost” learned that Zhang Yong said internally, “The 0.5-layer organization will become a real 0-layer organization.”
This means that Zhang Yong, the chairman and CEO of Ali Group, will no longer manage everything in Ali. The CEO of each business group needs to be responsible for their respective operating results, and no longer report to Zhang Yong, but to their respective boards of directors. report.
According to the “1+6+N” organizational structure, Ali will be divided into three layers – “1” is a main body of Alibaba’s listed company, 6 business groups and a number of independent business companies.
The background of the adjustment is: in terms of external competition, its opponents are surrounded, and Ali’s growth rate in all aspects is slowing down or even decreasing; internally, Ali has grown into a super-large organization with multiple businesses and formats. They are different, facing different market environments, different customers, and different development stages. In the past many years, under Ali’s large system, most businesses were in a state of loss. They grew up relying on the money earned from Taobao and Tmall. Now when these The business is completely independent, and 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. The specific businesses they cover include:
- Cloud Intelligence Group, with Zhang Yong, chairman and CEO of Alibaba Group, as CEO. The main businesses include: Alibaba Cloud Intelligence, DingTalk, Tmall Genie, Bodhidharma Academy, etc., accounting for 8% of revenue (data from the financial report for the fourth natural quarter of 2022).
- Taobao Tmall Business Group, Dai Shan (flower name: Su Quan) is the CEO. The main business includes domestic e-commerce business Taobao (Taobao, Tmall, Alimama), B2C retail business group, community group buying business Taocaicai, Taote and domestic trade (CBU), etc., accounting for 69% of revenue.
- Local Life Group, Yu Yongfu served as CEO. The main business includes AutoNavi, Fliggy, and Ele.me, accounting for 5% of revenue.
- Cainiao Group, Wan Lin is the CEO. Revenue accounted for 7%.
- International Digital Business Group, Jiang Fan is the CEO. The main businesses include Lazada, an e-commerce platform in Southeast Asia, AliExpress (AliExpress), which helps merchants sell overseas, and ICBU, etc., accounting for 8% of revenue.
- Big entertainment group, Fan Luyuan (nickname: Mu Huali) is the CEO. Revenue accounted for 3%.
Apart from these six groups, Ali Group also has a number of independent business companies. Including Hema, Pingtouge, Ali Health, RT-Mart, Yintai, Lingyang, etc. Among them, Hema is already preparing for an independent listing.
Not every group will be able to survive independently of Ali. For example, Ali Group’s financial report listed Tmall’s 88VIP as one of the main driving forces for the growth of paying users of the entertainment business. With the support of the group, the revenue of this business in the fourth quarter of last year was still down 6%, with a loss of 1 billion yuan.
“LatePost” learned that Zhang Yong may join some of the boards of directors of the six independent business groups and business companies, but the candidates for the boards of directors of these groups and companies have not yet been determined.
In the past few years, Zhang Yong has withdrawn from the boards of directors of companies invested by Ali, such as Didi and Weibo. He is also not listed on the boards of RT-Mart and Ali Health—both independent listed companies controlled by Ali.
AliHealth board list (excluding independent directors)
- Zhu Shunyan, chairman of the board of directors and executive director. Ali Health CEO.
- Tu Yanwu, executive director. Ali Health CFO.
- Shen Difan, executive director. Ali Health COO.
- Li Guangfa, non-executive director. Senior Financial Director of Alibaba Group.
List of RT-Mart Board of Directors (excluding independent directors)
- Huang Mingduan, chairman of the board of directors, non-executive director; former CEO of RT-Mart.
- Lin Xiaohai, executive director. CEO of RT-Mart.
- Han Liu, non-executive director. Vice President of Ali Group City Retail.
- Liu Peng, non-executive director. Vice President of Ali Group, President of B2C Retail Business Group.
It is not yet clear whether Zhang Yong will serve on the board of directors of Ali’s various businesses that will be established in the future.
Like Zhang Yong, the company’s middle and back office functions are no longer responsible for everything in Ali.
In 2015, Zhang Yong established the strategy of “big, medium and small front desks”, hoping to build a unified technical architecture, product support system, security system, and service system to support Ali’s diverse businesses, and hope to improve the efficiency of the front desk business. Six years later, Zhang Yong said internally that Ali’s business development was too slow, and that China and Taiwan were going to be thinner.
Now, Ali’s middle and back office functional departments will be fully light and thin. These functional departments will enter corresponding business groups and independent business companies according to specific business characteristics. Professional service firm model to provide services.
Zhang Yong told employees within the company today that many of Ali’s core capabilities in the past were based on the middle-Taiwan strategy, but today, the organization needs to accelerate, the decision-making needs to be accelerated, and the market response needs to be accelerated. In order to make the business run faster, “in the past The production relationship needs to be changed, everyone’s mentality needs to be changed, and they must truly fight for their own business.”
Zhang Yong’s Exploration, Changes in Ali’s Governance Structure
In May 2015, Jack Ma handed over the position of CEO of Ali Group to Zhang Yong, and he resigned as chairman of the board of directors four years later. Since then, Zhang Yong has personally managed not only the main business of Ali, but also flew to Southeast Asia to hold two-day meetings every month to direct Lazada’s specific business; he also listened to Hema’s report every week, and cared about the community group buying experiment with only dozens of stores. What is the progress of the Hema Neighborhood business? He also went directly to Ele.me’s Shanghai headquarters for a meeting. Ele.me once had a dedicated office for Zhang Yong.
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, Ali had less than 40,000 people and only three core businesses (B2B, Taobao, Cainiao).
In the following 8 years, the number of employees of Ali has increased by 6 times, and the annual income has increased by 11 times. During this period, Ali successively acquired businesses such as Youku, Sun Art Retail (RT-Mart), and Ele.me, which became large and complex. And being big is a problem in itself.
Zhang Yong has been the busiest CEO of China’s Internet for many years. For a long time, more than 30 people reported directly to him.
“A company like Ali that is large, full of competitors, and whose founders are not on the front line is indeed facing a very big governance problem.” An Ali management said.
Zhang Yong tried to explore more effective governance methods. Beginning in 2015, his exploration theme was “big, medium and small front desks”, and the starting point was to solve the company’s large and inefficient problems. He said, “I hope that instead of repeating low-level wheels, we can create more different wheels more efficiently.”
On the basis of “large, medium and small front desks”, from 2017 to 2019, Zhang Yong introduced the committee as an organization to strengthen governance. In the past three years, Ali has become more and more “one Ali”. By 2019, Ali has set up a 13-member Economic Development Executive Committee, headed by Ali CEO Zhang Yong, and Ant Group Chairman and CEO Jing Xiandong as his deputy. There are 13 people in total, with five committees and four offices. The Fourth Office of the Committee traverses and traverses the entire Ali and Ant Group.
At that time, the committee was regarded as Ali’s highest organizational organization at the business level, focusing on the top-level design of the business, with the purpose of unifying the strategies of Ali and Ant, and realizing “unified command, unified development, and unified confrontation with the enemy.” Although Ant had split with Ali as early as 2011.
However, the committee is essentially a cross-department and cross-business group collaboration and communication unit, and there is no clear division of powers and responsibilities. In the perception of many Ali employees, this massive development executive committee did not actually work. It is still “Xiaoyaozi and his President’s Office” who are making business decisions.
With the gradual cutting of Ali and Ant, starting from 2020, the 13-member Economic Development Executive Committee has ceased to operate.
Before and after, Zhang Yong conducted intensive internal reflections on the inefficiency and organizational rigidity caused by the “Great Unification”, followed by the thinning of the middle office. In July 2021, at the site of Alibaba’s “Century-Year Ali Partners Face to Face”, Zhang Yong said that if the middle office is too thick, it will be difficult for the front office to develop independently and run quickly.
From 2021, Ali has entered a new stage – the “operating responsibility system under the diversified governance structure” will be implemented. Zhang Yong said on many internal occasions that the business leaders should be allowed to settle their own accounts. He said at the CTO line management conference at the beginning of last year, “Make the big pot of rice smaller, and each person has a pot, which is clear. There is only this little rice and this little water in the pot, and this little rice can be cooked.”
He believes that the role of implementing the management responsibility system is to make the business more closed-loop in terms of operation and resources, and its essence is to “enable all parties involved in the business to make better choices.”
Change is a business need as well as an environmental need. In the same year, Ali was fined 18.2 billion yuan by the government for unfair competition. Zhang Yong publicly stated, “I am more determined that we should reform in all aspects-reform our business, reform our organization, and reform our mechanism.”
Since then, Zhang Yong has tried to continue decentralizing power. In December 2021, Zhang Yong added four executives in charge between him and nearly 20 business group presidents—Dai Shan, Zhang Jianfeng, Yu Yongfu, and Jiang Fan. Responsible for Ali’s four major business segments (China Digital Commerce, Cloud and Technology, Life Services and Overseas Digital Commerce).
This new organizational structure has indeed played a role, making the power and responsibility of each business segment more clear. At the same time, each big 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 yet true decentralization. For example, CEOs can decide how to spend the total budget. However, the total budget still needs to be approved by the group. An Alibaba executive said that many major business decisions are still made by Zhang Yong. “The CEO makes the decision, and the president will communicate and synchronize more.”
In Zhang Yong’s own words, “In charge of the chief executive is to represent me and the group in charge of a part of the business within the scope of authorization.”
From 2015 to the present, Zhang Yong, as CEO, has been exploring solutions to how to effectively govern a group with complex businesses like Ali. He did solve some of the problems, but he did not solve the real problems.
“In the past, Ali had neither real division nor real cooperation.” The above-mentioned Ali source said.
Ali Group has a partnership system, which allows the founding team to appoint a majority of the company’s board of directors, and then can also determine the appointment of the company’s executives. Ma Yun and Cai Chongxin are the only permanent partners among the 29 Ali partners.
But after Ma Yun handed over Ali to Zhang Yong, he “really let go” at the specific business level.
Now is the time for Zhang Yong, as a manager, to really let go of his business.
Title map source: Visual China
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