Retired CEO is Zhang Yong's most dignified dismissal

Image source @ Visual ChinaArticle | Bounded rationalityWhat is the real threat to Alibaba? Pinduoduo Tiktok?After Zhang Yong took over the baton for 8 years, Alibaba gradually became a commercial empire accustomed to defense and counterattack. But history has proven countless times that defense can never win

Image source @ Visual China

Article | Bounded rationality

What is the real threat to Alibaba? Pinduoduo Tiktok?

After Zhang Yong took over the baton for 8 years, Alibaba gradually became a commercial empire accustomed to defense and counterattack. But history has proven countless times that defense can never win. At present, it needs to face Ma Yun's soul question directly: Who is Ali?

Ali needs a comprehensive reform from top to bottom in order to survive and benefit everyone. As a conservative leader, Zhang Yong, who comes from a professional manager background, does not have such prestige and courage. Power and obligation will eventually return to the founding team.

Jack Ma set Alibaba's first vision goal at the end of 2000- to live for 102 years.

The so-called 102 years refer to the year when Alibaba started its business in 1999, plus the first year of the next 22nd century, Alibaba can become a company spanning three centuries, living for at least 102 years.

This vision is somewhat unexpected, but it also aligns with Jack Ma's identity as a dreamer. In Alibaba's booming years of 2016 and 2017, the 102 year goal seemed easy to come by, but this year, the situation reversed and Alibaba was in a state of turmoil. Even Jack Ma felt a sense of crisis.

As Jack Ma himself used Nokia and Kodak as examples, a company's transition from industry benchmark to death takes six months to a year, which may be faster in the internet industry. The constantly evolving technology industry will not allow companies that make money lying down for a long time to exist, and any interest rate spread will be discovered and eliminated, even with the presence of Alibaba's size.

CEO replacement failed

After Jack Ma gradually retired from Alibaba in 2015, Alibaba entered the post Jack Ma era. Zhang Yong took over as the CEO of Alibaba and then became the new chairman of the board of directors. Ali's Eighteen Arhats is also slowly retiring. Joseph Tsai, who is one of the two permanent partners with Ma Yun, will only appear in the public's view as the owner of the NBA basketball team in recent years.

But this situation was broken a few days ago. Zhang Yong, who was once regarded as the second generation leader of Alibaba, left a full staff letter announcing that he would step down as the Chairman and CEO of Alibaba Holdings Group on September 10 of this year.

At the same time, Joseph Tsai, Executive Vice Chairman of the Group, will serve as Chairman of the Board of Directors of Alibaba Holding Group; Wu Yongming served as the CEO of Alibaba Holdings Group and continued to serve as the Chairman of Taotian Group.

Joseph Tsai and Wu Yongming are both members of the Eighteen Arhats of Alibaba. The first group of people who started their businesses with Jack Ma, including Dai Shan, the current president of Alibaba Group's domestic digital business sector, Jiang Fang, the current Alibaba CPO, and others.

Joseph Tsai's story is widely known. In 1999, Joseph Tsai, an investment executive with an annual salary of 700000 dollars, was convinced by Ma Yun's dream and eloquence, and joined this penniless startup company with a monthly salary of 500 yuan.

Ma Yun said personally that Joseph Tsai was his most grateful friend. It is said that Masayoshi Son proposed to buy 49% of Ma Yun's shares at a high price of 40 million US dollars. At that time, Alibaba was in a period of lack of funds. Ma Yun almost agreed. Fortunately, Joseph Tsai timely dissuaded Ma Yun and asked him to reduce the transaction price to 20 million dollars to buy 30% of the shares.

This stop ensured Ali's independence and Ma Yun's control, otherwise the company would fall into the hands of Masayoshi Son sooner or later.

Wu Yongming is an employee of Alibaba No.4 and also the first programmer. Of course, now he is also known as the wealthiest programmer in China.

During his stay in Alibaba, he successively served as the chief technology officer of Alibaba B2B platform, Taobao and Alipay. In 2007, Wu Yongming became the founding general manager of Ali Mama, and later participated in the establishment of mobile Taobao, and took charge of AliHealth.

Early Alibaba Mama employees, including several who merged from Yahoo to Alibaba, stated, "Wu Mama (Wu Yongming's nickname in Alibaba) may not necessarily have strong technology, but her abilities are really strong. With Wu Mama, Alibaba was able to develop its own advertising system, transitioning from a web company to a technology company

Ali Mama is the cash cow of the entire Alibaba Group, while Wu Yongming himself was the money bag of Alibaba Group in his early days. Ma Yun's level of trust in him is also unique within Alibaba. After coming out of Ali, Wu Yongming, the founder of Yuanjing Capital, participated in the investment of Li Auto, graffiti intelligence and other projects.

Compared to these two senior figures, Zhang Yong, who only joined Alibaba in 2007, can be considered a "newcomer" to Alibaba. When Zhang Yong succeeded Jonathan Lu as CEO of Alibaba, he was called "the young generation" by the media to distinguish himself from the founding generation.

A company should be able to continuously move forward in the hands of professional managers after the founder leaves, in order to achieve long-term growth. For example, after taking over Steve Jobs' position, Cook was able to lead Apple's stock price to continuously climb to new highs; After Bill Gates, the founder of Microsoft, retired, Ballmer and Nadella took the helm successively, and Microsoft gradually entered the normal CEO rotation stage.

In late May this year, Ma Yun convened the heads of Taotian Group's businesses to hold a communication meeting. At that time, Zhang Yong had not attended. On the day when the news of Alibaba's change of command came to an end, Ma Yun also personally appeared in Alibaba Cloud Cloud Park in Hangzhou, accompanied by outgoing Zhang Yong.

Nowadays, the Alibaba replacement plan has failed, and the founders of that time had to return to the battlefield.

Zhang Yong: CEO without courage

Looking back at Zhang Yong's record in Alibaba, he actually did quite well.

For example, when Zhang Yong was in charge of the B2C business Taobao Mall (now known as Tmall), he invented the "Double 11", the most influential e-commerce shopping festival in China, which helped Alibaba gain a lot of market share in the e-commerce market.

Tmall is a brand new initiative, and there has never been such an e-commerce company in the world that wants to gather all famous brands on one shopping website, "said an e-commerce analyst.

In addition to founding Tmall, when he served as the COO of Alibaba, Zhang Yong redesigned the business model of Taobao and led the battle of "Allin Wireless". If Taobao's transformation to mobile had failed, it is estimated that Alibaba would have long been a second-rate company.

Since Zhang Yong became CEO, Alibaba Cloud has entered a period of comprehensive development. Many business modules, such as Alibaba Cloud, local life, rookie logistics, and Alibaba International retail, have entered the deepwater area. In fact, Zhang Yong has contributed a lot.

However, in terms of market value, on the first day of Alibaba's listing in 2014, its market value surged by 38%, reaching 231.5 billion US dollars. Today in 2023, Alibaba's market value is less than 220 billion US dollars. Alibaba's market value has gone around a circle, and now it is less than the day it went public. From this perspective, Zhang Yong, who has been serving as CEO since 2015, must take on the majority of the responsibility.

We have talked to many Alibaba classmates, and overall, in the past few years, as the CEO, Zhang Yong has been diligent, leadership, and insightful enough. However, there is not enough imagination, courage, or deterrence.

Taking Alibaba's e-commerce business as an example, according to data from Goldman Sachs Global Investment Research Report, Taobao Tmall's market share was 66% in 2019, but last year its market share had dropped to around 44%. In just about four years, the market share of Taobao Tmall has decreased by nearly a quarter.

Correspondingly, the market share of Pinduoduo has increased from 10% to 18%, and the rest has been divided up by new e-commerce companies mainly focusing on Tiktok.

Pinduoduo has become a serious problem for Ali. Compared with e-commerce core revenue (advertising and commission), Pinduoduo only accounted for 43% of Ali's revenue in the last quarter, and Pinduoduo further tracked down 62% in this quarter.

An e-commerce platform staff told us this: "For Pinduoduo at that time, Alibaba and JD were the first to lose sight of it, the second to lose sight of it, and the third to lose understanding of it. After several years, it will be the fourth to lose sight of it."

The rise of Pinduoduo depends on two factors. The first is the inexhaustible social traffic in the WeChat ecosystem. Pinduoduo has quickly grown up and gathered a large number of buyers with the help of operational means such as cutting a knife. The second is Taobao's efforts to promote Tmall and big sellers. After giving up small sellers, these sellers were forced to find another way out and found an alternative platform such as Pinduoduo. Buyers and sellers gathered together, and Pinduoduo was killed out of the competition.

But for Pinduoduo, Ali could not see it before Pinduoduo went public, but after it went public, he looked down on it. He tried to make a profit to fight for Pinduoduo. After failing, he could not understand it, so he had to copy a special edition of Taobao (later renamed Taote). Finally, Pinduoduo took the lead, and Ali had no time to stop Pinduoduo.

The battle between Ali and Pinduoduo is destined to be a classic battle in the history of Chinese e-commerce. At first, domestic business was the absolute lifeline of Ali. Almost all businesses, including local life, rookie, entertainment, international business, etc., needed the money earned by Alibaba's e-commerce as subsidies. If Tmall Taobao lost in the competition, Ali would be doomed.

And this pot will definitely end up on Zhang Yong's head. There is no difference between Pinduoduo and Ali's model, which is typical of the lack of imagination.

Zhang Yong comes from a background as a CFO, and many people say he is a CEO who is skilled in accounting and has excellent control over how much investment needs to be made in various businesses. But in fact, when an Alibaba executive talked about Zhang Yong, he said, 'Some finance is in charge of investment, some finance is in charge of control. Zhang Yong has an auditing background, and his expertise is in auditing. This has led to Alibaba Group's failure in many acquired businesses, always resulting in excessive investment control.'.

The CEO lacks courage, resulting in internal conflicts between different factions. Nailing is the most potential social networking project within Alibaba Cloud. However, in order to promote the competitive advantage of Alibaba Cloud Cloud in the B-end market, Nailing needs to merge with Alibaba Cloud to promote the integration strategy of cloud nailing.

An Alibaba Cloud Cloud salesperson said that for a period of time, the conflict between no move (Chen Hang, former CEO of Alibaba Cloud Nail) and "go crazy" (Zhang Jianfeng, former president of Alibaba Cloud Smart) was extremely acute. However, after no move left, the conflict did not stop immediately. The struggle of the upper layer was reflected in the lower layer, which led to the long-term failure of sales systems on both sides. When it came to practical operations, How to divide the sales performance of Alibaba Cloud and that of Pinch has become a problem.

The problem of a company's strategy being ambitious but unable to be implemented is all about organizational and management issues. Ultimately, the issue of organizational and management is whether the top-level CEO has sufficient deterrence to unify the actions of the entire company, "he concluded.

Ali: Standing on the edge of a cliff

Under the great crisis, the successor Zhang Yong was forced to abdicate, and Ma Yun, who had retired three times, regained power and began a series of reforms.

On March 29 this year, the Alibaba Group became a 1+6+N system. Under the Alibaba Group, six business groups and several business companies were established, including Alibaba Cloud Cloud Intelligence, Taobao Tmall Commerce, Local Life, Cainiao, International Digital Commerce, and Great Culture and Entertainment.

Under this organizational structure, Taotian can temporarily get rid of the burden of other businesses and stabilize the crisis first.

Alibaba Cloud first went public independently. In terms of personnel, Zhang Yong is credited with leading Alibaba Cloud to go public, which is also a reward for Zhang Yong's contributions in recent years. In terms of business, Alibaba Cloud Cloud's intelligent split is the first completely solo business, setting a template for other businesses to be listed, such as Ele.me and Hema.

Alibaba Group, on the other hand, aims to become a light company and an investment oriented company. In the past few years, this company has been about to be dragged down by multi line operations, like a huge ship with too deep draft and facing the danger of sinking. All the lifeboats on board have been lowered and passengers are allowed to escape separately.

So Joseph Tsai and Wu Yongming, both of whom were on the top this time, are experienced investors. They become the chairman and CEO of the group, which means that Ali will completely get rid of the organizational structure of "small front desk, large middle desk", and turn around will be more light in both business and group.

Essentially, Alibaba Group's relationship with 6+N is only the relationship between the controlling group and its subsidiaries. The identity of the group is more like an investment institution. The continuous splitting and thinning of the decision-making hierarchy of the group means that Alibaba Holdings Group will no longer participate in specific business operations.

On May 18th this year, Zhang Yong revealed in an internal letter that Alibaba plans to completely spin off Cloud Intelligence Group from Alibaba Group and complete its listing in the next 12 months, forming a new company completely independent of Alibaba Group in terms of equity and corporate governance.

Of course, this does not mean that Alibaba Group will completely become an investment institution. The background of Joseph Tsai and Wu Yongming means that they should manage and assist each subsidiary in the way of investment, and realize the Group's income in the way of return on investment.

At the Alibaba financial report release conference call in May this year, CFO Xu Hong mentioned that in the future, Alibaba Group, as a holding company, will focus on three major priorities:

• Firstly, while further maintaining prudence in the capital structure, focus on improving the return on capital for managing company assets;
• Secondly, design, review, and implement plans that can increase earnings per share;
• Thirdly, explore various ways to improve shareholder returns.

An internet observer believes that in the past, Alibaba's strategic investment style was to constantly erode the independence of the invested enterprise and ultimately absorb it into this behemoth. After this organizational change, Alibaba Battle Investment may develop a new style similar to Tencent Battle Investment's "I serve you".

This new organizational approach means that even if Taotian does not have an advantage in the competition of e-commerce, the impact on the group company will be minimized. The attention of the capital market will not only focus on Taotian's market position. As long as the return on capital is sufficient, the market value of listed entities will not be too poor, and the group will not fall into a situation of rapid collapse.

This is a great test of Joseph Tsai and Wu Yongming's ability to control the capital market.

Of course, Alibaba has not abandoned its e-commerce business. Jack Ma also proposed three major policies for Taotian, namely "returning to Taobao, returning to users, and returning to the internet". The biggest focus of the Internet in 2023 is Taotian, Pinduoduo, Tiktok E-commerce and Jingdong's Siguoshan.

If we can win, Alibaba Phoenix will be in a state of nirvana, ushering in another decade of glory. If we cannot win, Alibaba will become a second-rate company, and the rest of our time will be to continue our lives and cross the century? Dream it.

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