Ali, who has always embraced change, once again embraced change. On March 28, 2023, Ali announced a new organizational change, which should be Ali's most important organizational change so far, and its magnitude of change is unprecedented.
Specifically, Ali Group will set up six business groups and multiple business companies including cloud intelligence, Taobao Tmall business, local life, international digital business, rookie, and big entertainment. The six major business groups 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 Ali Group will fully implement holding company management. This also means that each business can flexibly adjust its strategy according to its own needs, and independently face market competition. Businesses that meet the conditions also retain the possibility of independent financing and listing.
Ali summarized this structural adjustment as "1+6+N": 1 is the Ali Group, 6 is the six major business groups, and N is a number of business companies and innovative businesses in incubation.
In fact, Ali makes large-scale adjustments in organization and personnel almost every year. Of course, most of these adjustments stay at the business level. The reason why Ali's transformation is "dramatic" this time is because Zhang Yong directly started from the top level and decisively redefined and restructured the governance relationship between the Ali Group and various businesses.
In a sense, the "1+6+N" organizational change is a "reform and opening up" of Ali's new management cycle.
To put it more vividly, Ali wants to bid farewell to the "big pot of rice" and become a "responsibility contract system". Although this time it is not a "separation of families", it is also "brothers climbing mountains and working hard on their own." Give each business more freedom.
When talking about this change, Zhang Yong said: "Instead of putting these diverse businesses in one pot, let them face the market alone. Only in this way can we solve the problem of "who are we fighting for" generation after generation? The problem".
This "1+6+N" transformation is a staged management farewell for Ali. Zhang Yong, chairman and CEO of Ali Group, made a "self-reform" in management.
In May 2015, Zhang Yong took over as the CEO of Ali Group, and Ali also proposed the "China-Taiwan Strategy", forming a One Company under the governance model of "large, medium-sized and small front desks". "Large, medium and small front desks" is Ali's "centralization" at the management level. Its background is the turning point of the mobile Internet entering the middle stage. In the face of market changes, Ali needs to concentrate its superior forces and make a breakthrough. Of course, the direct effect of the strategy of "large, medium and small front desks" is that Ali will make great strides in terms of revenue scale, stock market value, user scale, and platform transaction volume from 2015 to 2020.
At present, the Ali platform has 1.3 billion active buyers worldwide, and the transaction volume of the platform exceeds 8 trillion. The organizational design of "Taizhongtai, small front desk" is the original intention of "making a hole with strength", and the effect of "making a hole with profit".
If you comb through the history of Ali’s enterprise, you will find that Ali has consistently led the industry in the self-reform of corporate governance and the adjustment of organizational structure. The root cause may be that Ali’s business is in fierce market competition, and the rapidly changing market environment requires it There must be constant organizational and managerial adaptation. The e-commerce business of Taobao and Tmall, the logistics business of Cainiao, the local life of AutoNavi, the cloud computing of Alibaba Cloud, etc., are all fully competitive and even tragic tracks.
The fierce external competition and self-awareness are the reasons why Ali is keen on structural adjustment. In the past seven years, Ali has adjusted its organizational structure more than 20 times, with an average of 3 adjustments per year. Every "embracing change" also brings new vitality, and Ali also benefits from this: for example, in 2004, Taobao split into Alipay, and Alipay grew ants. "Seven swords under the Tianshan Mountains" created opportunities for the rise of Alibaba Cloud, and also paved the way for the rookie to take off.
If you use "centralization" and "decentralization" to look at Ali's organizational changes, you can see Ali's management cycle. Ali's management cycle obeys the market cycle: when the market has relatively certain expectations, it needs to tackle tough problems, and it needs to concentrate its forces in organization and management. When the environment changes and there are many uncertainties, it will delegate power and let those who hear the gunfire make decisions.
Self-denial and self-reform are very difficult for an organization, especially a successful enterprise. What is even more difficult is that while self-reform, there is also a consistent essence and content. Alibaba has made 20 organizational adjustments in the past seven years, with a consistent management goal, which is to "make the organization agile" and adapt to the ever-changing market.
In the final analysis, the continuous operation of an enterprise requires a combination of idealism and realism.
Ali's "1+6+N" reform attempt began with "diversified governance" in 2021. This year, Zhang Yong's organizational strategy was upgraded, and he began to emphasize "thinning the middle and Taiwan". At the end of 2021, Zhang Yong announced that Ali would upgrade from "China-Taiwan Strategy" to "diversified governance". Four sections of business. After a year of trying, Ali finally experienced a major change that has not been seen in 24 years.
Strictly speaking, "1+6+N" is not a negation of "big, medium and small front desks", but an upgrade. Both are trying to answer the same management proposition, how to avoid big company diseases, let elephants dance, and organize agilely. After experiencing the rapid expansion of the mobile Internet era, Internet companies generally have the problem of bloated scale and the resulting lack of innovation. Zhang Yong said his answer when he took office as Ali CEO in 2015, "agile organization" and "making a big company small".
From the China-Taiwan strategy in 2015, the diversified governance in 2021, to the "1+6+N" this time, it is essentially an attempt to "make a big company small". In fact, not only Chinese Internet companies, but foreign technology companies also face the management challenge of "big company disease". When Google reorganized Alphabet, its founder Larry Page said:
“We’ve always thought that over time, companies would become more conservative and just make adjustments. But in technology, where revolutionary, disruptive innovations are driving the next big growth area, you need to let I have some restlessness to continue to be linked to the industry."
Regarding Ali's organizational changes, Zhang Yong's remarks are still very frank:
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.