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Alibaba biggest transformation initiated: Establishing six agile IPO-able business groups

Alibaba biggest transformation initiated: Establishing six agile IPO-able business groups


Source: Leidi. (touchweb)


It is learned on March 28 from Leidi (touchweb) that Alibaba Group is initiating the biggest organizational change in Alibaba’s history, with unprecedented breadth and depth.

On the evening of March 28, 2023, Zhang Yong, chairman and CEO of Alibaba Group, made a decision: Will establish six business groups — Alibaba cloud intelligence, e-commerce, overseas, local life services, Cainiao (logistics), and Dawenyu (entertainment); and form a 1+6+N organizational formation with the parent company Alibaba.

This means that each business group will be able to face market competition independently with a more agile attitude, and it also means that qualified business groups and companies in the future will retain the possibility of independent financing and listing.

Zhang Yong stated in Ali’s internal letter that he hopes that every Ali employee will return to the state of an entrepreneur before starting, “If you don’t embrace change, you will become rigid, and if you don’t change yourself, you will be defeated by the times.”

All having the possibility of independent financing and listing

According to the plan, under the Alibaba Group, six business groups and multiple business companies will be established, including Alibaba Cloud Intelligence, Taobao Tmall Business, Local Life, International Digital Commerce, Cainiao, and Dawenyu. Business groups and business companies will set up boards of directors respectively, and implement the CEO responsibility system under the leadership of the boards of directors of each business group and business company, while Alibaba Group will fully implement holding company management.

According to the internal letter to all employees, while Zhang Yong is the chairman and CEO of Alibaba Group, he also serves as the CEO of Alibaba Cloud Intelligence Group;
Dai Shan is the CEO of Taobao Tmall Business Group;
Yu Yongfu is the CEO of Local Life Group;
Jiang Fan is the CEO of International Digital Business Group;
Wan Lin continues to serve as CEO of Cainiao Group;
Fan Luyuan is the CEO of Dawenyu Group.
Other companies will also operate and manage independently.

This organizational governance reform was initiated by Zhang Yong and has been unanimously approved by the group partners and the board of directors. This round of reform started from the top level of the group, redefining and constructing the governance relationship between Alibaba Group and various businesses, which is considered to be “the most important organizational change in Alibaba in 24 years.”

In the letter to all employees, Zhang Yong stated that “To solve the development of productive forces and create differences, we must first start with the transformation of production relations.” This is also the starting point of Alibaba’s organizational transformation.

One of the key actions of this change is that each business group establishes a board of directors and implements the CEO responsibility system under the leadership of the board of directors, while Alibaba Group fully realizes the management of the holding company. For each business, the independence of the governance structure means facing the baptism of the market, which corresponds to the possibility of innovation incentives. In the open letter, Zhang Yong said, “The market is the best touchstone. In the future, qualified business groups and companies will have the possibility of independent financing and listing.”

The formation of the “1+6+N” organizational structure this time is the natural result of the further deepening of the agile organizational concept, which means that Ali is entering a new stage of organizational governance.

“Agile organization” is the inevitable direction of organizational evolution of large factories

The technology industry is currently undergoing profound changes. The emergence of generative AI represented by ChatGPT also marks the arrival of a new round of business revolution.

AI will change every industry, and the Internet will bear the brunt. This has almost reached a consensus. Bill Gates even called GPT the most revolutionary technological advancement since 1980. On the eve of the business revolution, Internet companies have to solve not only the problem of efficiency, but business innovation is an imminent reality. Innovation cannot be produced in shackles. In order to produce subversive innovation within a large company, it is necessary to allow business units to achieve complete flexibility and autonomy, and at the same time provide sufficient resource support.

This time, Alibaba put forward the concept of “agile organization”, which is also an inevitable need to reform the management method after the Internet industry has grown wildly.

The past history of China’s Internet is a history of rapid expansion and barbaric growth. It is accompanied by the dividends of the Internet and mobile Internet, and it has grown rapidly. However, rapid expansion cannot last forever. At present, major Internet companies generally face the fact that the scale and duration of users have peaked. Returning to the essence of business is an inevitable requirement of the times, and it must be transformed from scale-oriented to profit-oriented.

When the Internet returns to the essence of business, it is necessary to abandon the huge waste of resources caused by over-expansion of scale, and work intensively under the existing business territory. In order to deepen business and provide customers with better services and higher value, it is necessary to achieve organizational agility and provide more independent decision-making power to front-line business units in order to quickly respond to changing customer needs.

Therefore, “agile organization” is the inevitable direction of organizational evolution of Internet giants. As Zhang Yong said, making the organization more agile, making the decision-making link shorter, and making the response faster are the original intention and fundamental purpose of this reform.