Zhang Yong delegates power, Ali becomes thinner

Zhang Yong delegates power, Ali becomes thinner

After Ma Yun returned to China, Ali released a big news: On March 28, Zhang Yong, chairman and CEO of Alibaba Group, issued a letter to all employees, announcing the launch of the “1+6+N” organizational reform.

“1” refers to an Alibaba Group, “6” refers to the six business groups of Alibaba Cloud Intelligence, Taobao Tmall Business, Local Life, Cainiao, International Digital Commerce, and Grand Entertainment, and “N” refers to multiple business companies under its umbrella, such as Ali Health, Sun Art Retail, Hema, etc., as well as companies that Ali may create or invest in in the future.

Yunzhi Group has Zhang Yong as CEO; Taobao Tmall Business Group has Dai Shan as CEO; Local Life Group has Yu Yongfu as CEO; Cainiao Group has Wan Lin as CEO; International Digital Business Group has Jiang Fan as CEO; Dawen Entertainment Group Fan Luyuan will be the CEO.

Zhang Yong emphasized,Qualified business groups and companies have the possibility of independent financing and listing in the future.

This organizational change is called the most important change since Ali was founded 24 years ago. After the news was released, on March 28,Alibaba U.S. stocks opened up more than 11%.

The organizational change of Ali this time means several changes:

1. Each business group and business company set up a board of directors respectively, and implement the CEO responsibility system under the leadership of the board of directors of each business group and business company. Turn to the holding mode in an all-round way, participate in the board of directors of each business group and business company as a shareholder, exercise shareholder rights and fulfill shareholder obligations.

This may explore a new path for the structural governance of domestic ultra-large Internet companies.

2. In the future, Ali’s operational focus will also be separated from specific businesses, and more energy will be devoted to investment, innovation, and incubation. As Zhang Yong said, “When children grow up, they still have to go out and face the market independently. Alibaba Group is more like a big base to support them.”

Each business under Ali will be more like an independent start-up company, and the independent decision-making power of the business will be greatly strengthened. The annual business planning, market response, budget, salary and benefits will be determined by each business on its own, and it will face the market independently. This also means that the business will face the baptism of market competition, and the cooperation between businesses will also operate in a market-oriented manner.

3. For business employees,Incentives such as equity are more flexible, and it is easier to help Ali retain talents. Perhaps the future capital market will interpret more stories of wealth and freedom.

In the question and answer on the intranet, Zhang Yong also answered this point: “Financing and listing is essentially a market test. From large institutions to small individual retail investors, if you are willing to subscribe for your stocks, it means that your business is done well and you are popular. This is much more powerful than scoring 3.5 points, 3.75 points, and 3.25 points. The success of a career is not judged by performance, but by the market.”

Relevant people said,This reform confirmed that several major business segments of Ali have been relatively mature.The “big, medium and Taiwan” capabilities established since 2015 will enter the foreground in an orderly manner to serve more diversified development needs in a more agile manner. As the holding parent company, Alibaba Group may focus on innovative development and technological foresight, seeking to incubate the next Tmall and Alibaba Cloud.

“From the model point of view, Alibaba Group has similarities with Google’s parent company Alphabet (Alphabet), but there is more room for imagination.” The relevant person analyzed.

In recent years, Zhang Yong has strongly advocated “agile organization” within the group. He has repeatedly emphasized that today’s Alibaba has grown into a super-large organization with multiple businesses and formats. These businesses have different characteristics, face different market environments, different customers, and different development stages. This means that they need to have more independent business strategies and be able to quickly make their own judgments and choices based on changing market demands.

Zhang Yong hopes that every Alibaba employee will return to the state of being an entrepreneur before setting off, saying“If you don’t embrace change, you will become rigid, and if you don’t change yourself, you will be defeated by the times.”

A person close to Ali analyzed to “Chinese Entrepreneur” that splitting Ali is inevitable under the commercial ecology. Giants must become smaller, thinner, and lighter. Similar structural adjustments are in line with the general trend. The current cloud and international Globalization is the most promising business for Ali. Of course, this adjustment is also Ali’s response to organizational fatigue.The era of “good generals are like clouds” has passed,He believes that Ali is now strong in the waist, and once it reaches the brain, it will show a decline. To drive such a huge company, we cannot only rely on the waist and legs, nor can we only rely on one or two brains. How to find and cultivate a suitable “brain” as soon as possible, or let the waist strength with the ability to think evolve into The brain is the biggest test for the Ali organization in recent years.

Decentralization has long been seen


This round of reform started from the top of the group, redefining and constructing the governance relationship between Alibaba Group and various businesses,To some extent, it is also a decentralization of power.

In fact, decentralization has already begun.

Zhang Yong has always advocated the organization first to drive business changes. He once said that commercial design and organizational design are two major responsibilities that cannot be shirked as the No. 1 position of an enterprise. Among them, organizational design can be summed up in four words: vertical, horizontal, split, and combined, “If you want to run fast, you have to divide, and you become vertical; It becomes horizontal.”

Since taking office, Zhang Yong has also been researching and designing the most suitable organizational formation for Ali’s current situation, making the organization more flexible and agile. As early as 2020, Zhang Yong had repeatedly proposed internally that with Ali’s size and complexity, any one-size-fits-all strategy would be extremely harmful.

To this end, he implemented a management responsibility system under the multi-governance structure in Ali.

Last year, Zhang Yong added chief executives between himself and 20 business group presidents. Dai Shan, Zhang Jianfeng, Yu Yongfu, and Jiang Fan were in charge of China’s digital business, cloud and technology, life services, and overseas digital business.

Some specific business decision-making rights are handed over to the chief executive in charge. The responsibilities and commanders of each combat unit are very clear, the decision-making speed is faster, and the organization is relatively more flexible. The nature of the department president also tends to be a “mini CEO”, and the power is gradually enlarged.

According to the “LatePost” report, people close to Ali said that diversified governance is an organizational relationship designed by Zhang Yong himself. For this reason, he has been thinking for more than a year, “All these reforms are foreshadowing. Today we Come on, take a big step forward.”

Last year, Ali also set off an efficiency revolution internally, in order to achieve “same desires from top to bottom, alignment from left to right.” On the one hand, it is the reform of the assessment mechanism. Ali reformed the internal KPI (Key Performance Indicators) into OKR (Objectives and Key Results), changing from data-oriented to value-oriented, from Zhang Yong to every employee. The OKR set by oneself ensures that the responsibility belongs to the person.

At the end of 2022, Ali adjusted its organizational structure again. Zhang Jianfeng no longer served as the president of Alibaba Cloud Intelligence. Zhang Yong personally led the team of Alibaba Cloud. Zhang Jianfeng continued to serve as the dean of Dharma Academy.

Now Ali has restructured its six major business groups, implementing the CEO responsibility system under the leadership of the boards of directors of each business group and business company, and taking overall responsibility for their respective operating results, which also makes the logic of “delegating power” clearer, as Zhang Yong concluded:“The original intention and fundamental purpose of this change is to make the organization more agile, shorten the decision-making link, and make the response faster.”

In the history of Alibaba, the several strategic transformations and upgrades that determined the fate of Ali were also driven by the innovation of individual businesses.

In 2004, Alipay was spun off from Taobao and became a separate company, and then Ant Group grew out. In June 2011, Taobao was dismantled into three (Yitao.com, Taobao.com and Taobao Mall), and Tmall grew out of it. In July 2012, Ali launched “Seven Swords Under the World”, which grew Alibaba’s external e-commerce ecosystem.


Source: Respondents
Ali uses a brand-new organizational structure and power structure in order to maximize the flexibility and initiative of individual businesses, so that specific businesses can drive the group and inject vitality into the group.

Which business will go public first


What is most concerning about this change is that the six major business groups and business companies can independently raise funds or go public independently. So, which business will come out first? How big is the imagination of the market value, and can it create countless millionaires or even billionaires?

During the Investor Day in 2020, Wu Wei, then CFO of Alibaba Group, publicly stated: “According to the sum-of-the-category valuation method, the market has not given due value to many business segments in Alibaba Group’s overall business, whether it is the core The new business in business, cloud computing, and the value of shares in the invested companies are not included in Ali’s current market value.”

In other words,Many businesses within Ali are underestimated in the current market value of Ali.

At present, Sun Art Retail, Ali Health, and Ali Pictures under Alibaba have all been listed independently. In the past year, there have been many reports in the market that Hema is raising funds independently, and that Alibaba Cloud and Lazada are considering separate listings.

From the perspective of internal employees, multiple businesses such as Alibaba Cloud, Cainiao, Hema, and AutoNavi are industry leaders in vertical fields, and there is a lot of room for imagination.

At the end of last year, Ali announced a new round of organizational structure adjustments. The most notable change was that Zhang Yong was concurrently the president of Alibaba Cloud Intelligence and directly in charge of DingTalk.This time, Zhang Yong personally took charge of Alibaba Cloud’s smart business. It can be seen thatCloud computing has become the hope for Ali’s next stage of development.

Zhang Yong also admitted at the financial performance meeting that cloud computing is one of Ali’s core strategies for the future. The cloud business will focus more on customer value and services. Alibaba Cloud will also further consolidate and strengthen its market position from five aspects: Optimizing cloud computing performance and reduce costs, build and prosper the technology and industrial ecology of cloud computing, provide services to customers together with partners, form a cloud and nail integrated service with DingTalk, and make every effort to build its own pre-trained large model and provide good data for the market. Computing power support.

As a new retail format, Hema has also matured, with outstanding performance for several consecutive quarters.Alibaba’s latest financial report shows that from October to December 2022, Hema will record double-digit same-store sales growth. In January of this year, Hema CEO Hou Yi revealed in an internal letter that while Hema will grow rapidly in 2022, the main business, Hema Xiansheng, has already achieved profitability.

The fastest-growing business in the past two years is Cainiao. According to Ali’s financial report for the third quarter of fiscal year 2022 (2022Q4), Cainiao’s revenue increased by 27% year-on-year, and it still ranked first in the group. Not only that,The rookie is almost not losing money.

The Ali International business segment under Jiang Fan continued to improve in the third quarter.Revenue increased by 18% year-on-year, and this growth rate ranked second among all sectors of Ali, second only to Cainiao. In particular, the international retail segment (mainly including AliExpress, Lazada, Trendyol and Daraz) performed strongly this quarter, with revenue of 14.644 billion yuan, a year-on-year increase of 26%.

Hu Qimu, deputy secretary-general of the China Digital Reality Fusion 50-person Forum, analyzed to “Chinese Entrepreneur” that Ali has successfully incubated six major business groups that can be listed independently, and it is not ruled out that there will be new business groups that will continue to incubate in the future.

“Alibaba’s business management and control model has entered a new stage, which matches his huge business volume and is conducive to better utilizing its professional advantages to allocate resources.” Hu Qimu said.

Zhang Yong said: “I hope that Alibaba will grow several listed companies in the future. After a few years, several listed companies will be able to have children, and more listed companies will emerge. In this way, Alibaba’s business is real. on the way to prosperity.”

Attached is the full text of Zhang Yong’s answers to employees’ questions on the intranet (edited and edited video, some deletions)

Q: In the employee letter, you said that this organizational change is the most important change in Ali in 24 years. How do you understand this sentence?

Zhang Yong:Indeed, the magnitude of this change is unprecedented in Alibaba’s 24-year development history, and it is the most dramatic change in production relations.

Today’s Alibaba has multiple businesses covering different fields, some are consumer business, some are entertainment, some are logistics, and there are also Alibaba Cloud, Pingtouge, and to B related businesses, including the new company Lingyang, and so on.

Internally, we hope that these companies can truly face the market, truly release organizational vitality from the top-level production relationship, accelerate organization, decision-making, and market response.

Externally, in the face of market competition, the business can become more agile. At the same time, it has also changed the mentality of employees, and they are truly fighting for their own business and fighting for their own field.

I think this is the transformation of our production relationsmost importanta basis for

In 2015, we proposed the China-Taiwan strategy, which brought many advantages. Now many core competencies are based on “big, medium- and small-scale front desks.”

Today, such production relations need to be transformed. In order to allow the organization to run faster and better access each main business, let each business form a closed-loop organization. The changes in this production relationship are drastic and the challenges are unprecedented.

Q: Why did you choose now to initiate this organizational change?

Zhang Yong:At the beginning of this year, I told everyone the word “progress”, and the company will move forward. I also mentioned in my letter that the development and creation of productive forces cannot be separated from the relations of production. This change is the result of a series of changes in organizational governance over the years, especially after 2020.

In the past few years, we have done a lot of work on the management responsibility system and loop governance. For example, after changing from the original headcount management to the comprehensive salary package management in the past two years, all managers think differently.

For many companies that have been looped, they have gradually gotten used to this change. Because he has to take responsibility and make his own choices, instead of saying “lack of resources, ask the group for it”, “lack of this thing, listen to the group”, the thinking of “waiting for it” will decline, and the initiative will rise.

We now set “1+6+N”, “1” is the subject of a listed company of Alibaba, and this will not change. 6 large business groups have changed from a 0.5-tier organization to a real 0-tier organization, taking full responsibility for their own business. At the same time, implement the CEO responsibility system under the leadership of the board of directors of each business group and business company, and the core team must better think about how to face market problems.

Today we are sitting in Hangzhou, and it is hard to imagine how we should respond to competitors’ actions quickly in the face of the rapidly changing market environment in Southeast Asia. We are in different fields, and the cycle of each business is different. For example, Taobao has been in business for 20 years this year, and new businesses such as Quark, Lingyang, Dingding, etc. are in different cycles. It is easy for them to find a target in the market. He should think about his business plan according to this logic of thinking, instead of saying that all problems revolve around it being a member of the Alibaba Group family.

Today we have the confidence to take this historic step. To make the organization simpler and more agile, we still have to start from the head. When children grow up, they still have to go out and face the market independently. Let us give them good support. Whether it is based on our past accumulation or the objective needs of the market, we must take this step.

Q: What is the relationship between Ali Group and business groups and business companies in the future?

Zhang Yong:In fact, every piece of our business is the target of Alibaba’s investment, but it was originally raised in our own home, and now we let them face the market independently, which is the same as our external investment. So from this perspective, the focus of the group’s operations will change.

Students in the future group must reposition their work and define their functions from this perspective. This change is huge. In the future, we will strengthen the brands of each business group, let the team have a sense of belonging to these brands, and let customers connect with these brands. The Alibaba Group is more like a big base to provide support.

Therefore, under this change, we emphasize that in the relationship between Alibaba Group and various business groups and companies, the following remain unchanged:

First, our mission – to make business easy to do in the world is still true for most businesses.

Second, vision. We still hope that every business that Ali goes out can live for 102 years and be a good company for 102 years. The two things of reconciling the company in 102 years should be the common pursuit of all of us. I think a good company represents a kind of social responsibility, and 102 years represents that we must continue to innovate in order to live to three centuries. These two are our bottom lines, and we hope to stick to them.

Of course, because the nature of different types of business is different, the temperament of the team is different, and the cultural characteristics will also have obvious differences. Today, the engineer culture of Alibaba Cloud in Yungu Park and the culture of our Youku Film students in Wangjing, Beijing, have different cultural temperaments. Today, we must face this reality, face it squarely, and accept it generously. This reality encourages diversity. Therefore, at the level of values, there will be more diversity.

A few years ago, I mentioned eight words: agile organization, simple culture. Through this change, the first four words have really taken a big step forward from the top level, but the last four words have been changed from simple culture to multiculturalism. We must accept multiculturalism.

Q: You mentioned in your employee letter that “qualified business groups have the possibility of financing and listing”. How should this sentence be understood? What kind of conditions do you have?

Zhang Yong:I think everyone will be very concerned about this sentence. Today Alibaba, as a listed company as a whole, has diverse businesses. Looking at the large listed companies around the world, some are larger than ours; but few have such diverse businesses and such a large span. From this point of view, instead of putting diverse businesses in one pot and one listing carrier, it is better to let them face the capital market alone decisively when the conditions accepted by the market are reached, and one matures and one goes public.

Listing is not only listing itself, but also independently facing the higher requirements of the market. We hope that several listed companies can come out, and several listed companies will be able to have children after a few years, and more listed companies will be separated. In this way, our business can be regarded as prosperous, and we can solve the problem of “whom to fight for” generation after generation of employees. We hope that everyone can fight for themselves and for the cause they are fighting for.

Financing and listing is essentially market testing. Large institutions as small as individual retail investors are willing to subscribe for your stocks, which means that your business is done well and you are popular. That’s much stronger than hitting 3.5, 3.75, 3.25.

This also solves a fundamental problem: everyone does not come together to achieve performance, but to do a business together. Whether a business is successful is not evaluated by performance, but by the market.

Customers first, employees second, shareholders third, this sentence remains unchanged. If it can really create value for customers and employees, shareholders will like it, and the market will like it. In the end, the market is the golden key, and it is tested by the market.

Q: In the future, will the cooperation and synergy between business and business be different from what it is now?

Zhang Yong:This is avery goodquestion. I think this change can be summed up in one sentence: when the company grows bigger, instead of encouraging everyone to collaborate in various ways, it is better to use the market method to make two-way choices.

Of course, we will set some bottom lines in the middle, such as the compliance requirements of listed companies, the financial reporting system, financial standards, and listing compliance requirements, which must be met. On top of this, we hope to use business rules and business agreements to achieve cooperation. For example, company A is using the service of company B. If the service of company B is good, he will continue to use it in the future.

Recently, we have been sorting out the collaborative relationship between various businesses. It still emphasizes that everyone can fix the mutual cooperation relationship in the form of legal agreement. You cannot change your mind just by changing people. Why? Liability for breach of contract. Internally we want to form such a serious relationship. Instead, it’s good when you say it, and when you encounter a problem, there will be arguing, and then you will rely on the organization to coordinate. This is too inefficient, this needs to be changed.

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