Alibaba Resets: CEO Zhang Yong and His Four Executives
This article is authorized to be translated from the original article of LatePost. Original title: 阿里变阵：CEO 张勇和他的四位分管大总裁 Author: Guan Yiwen and Ma Kexin. Editor: Song Wei. Copy editor: Peter Catterall
Once every year, Alibaba undergoes a major organizational adjustment after its annual ‘Double Eleven’ sale on November 11.
This time, Alibaba’s adjustment involves two key figures – Trudy Dai (戴珊) and Jiang Fan (蒋凡). Before the change, they respectively led the firm’s wholesale business and domestic consumer marketplaces. Now, Dai has taken over e-commerce platforms including Taobao, Tmall and Alimama from Jiang, who will take charge of the two overseas businesses of AliExpress and international trade that Dai was previously responsible for. One of them is responsible for Alibaba‘s domestic retail and wholesale business, and the other is responsible for overseas operations.
LatePost learned exclusively that Alibaba has added four chief executives under Zhang Yong, CEO and chairman of the board of directors, and above nearly 20 business group presidents. These four executives are Trudy Dai, Jeff Zhang (张建锋), Yu Yongfu and Jiang Fan, repectively responsible for China digital business, cloud and technology, lifestyle services and overseas digital business.
Zhang Yong revealed Alibaba’s brand-new organizational strategy in a recent email announcing the adjustment. The “middle desk [中台]” strategy since 2015 was upgraded to “diversified governance.” LatePost learned that Zhang has been thinking about the change for more than a year. An individual close to the firm said, “This organizational structure was designed by Xiaoyaozi (逍遥子, Zhang Yong’s nickname). He’s very determined.”
To drive business changes through organizational changes is a common practice at Alibaba. Over the past ten years, the company’s organization has been centralized and decentralized twice. From early stages to the mid-term, their priority went from business breakthroughs to flexibility and innovation; then more consideration is given to preventing risks. Now, the focus is back on flexibility and agility.
In July 2012, Alibaba set the goal of “One Company” and established seven business groups for the first time. Within three months, however, the founder said that the word “Company” was misused, implying that it won’t be a single company – there has to be many. At that time, their consideration was that in order to gather enough data, whenever a new vertical business that could change the industry thrives on the platform, it should be split off as soon as possible.
In 2015, Alibaba had a sprawling business. In order to avoid repetition and a waste of resources, Zhang Yong led an organizational strategy of “large middle desks, small front desks [大中台，小前台],” and the company moved towards “one Alibaba.”
The past year has been very challenging for Alibaba. Since Ant Group’s IPO was terminated in November last year, the company’s stock price has fallen by more than 60%. $400 billion was gone from its market value, which currently sits at just over $300 billion. During this period, Alibaba was also fined over 18 billion yuan ($2.8 billion) for its alleged monopoly and held a rather low-key Double Eleven shopping festival.
Now, Alibaba has shifted its structure from “centralized” to “decentralized” again. Confronted with complex competitions as well as complicated macro environment, the “One Alibaba” strategy is too slow to respond to changes in its frontline businesses today. Zhang Yong hopes to make the organization more flexible through “diversified governance.”
Under CEO and Above Business Group Presidents, Four More Chief Executives in Charge
There are three words frequently mentioned inside the company recently:
“Operational Responsibility System”(ORS) – Zhang Yong will delegate his power to the business groups (BG), and the business president will assume more responsibilities to become a business leader (i.e. a smaller CEO). In addition to being responsible for the business, the president must also manage finances, legal affairs, human resources, public relations and other tasks, similar to an independent company.
“Sector governance” – if ORS is to make a single business self-sufficient, then sector governance means multiple related businesses will be included into a single section, each to be independently overseen by a different person, focusing on “independence and autonomy.”
The phrase was first officially mentioned during its adjustment in early July of this year. At that time, the expression Zhang Yong used was a mouthful but as accurate as it could be: “sector governance model on the basis of the operating responsibility system for each business unit.”
“Diversified governance”, which includes sector governance, was first revealed in the recent adjustment email, and was elevated to the same status as the 2015 “middle desk” strategy as the group’s new organizational strategy.
It goes even further than “sector governance.” An Alibaba insider shared his understanding: sector governance is like brothers separating their lives, whereas diversified governance is like two brothers setting up their own families that have different temperaments, cultures and values.
Alibaba has more than 250,000 people. It is a huge organization with countless departments and complex businesses. “It needs a new organizational governance method to sort out its organization and departments, otherwise it’s too ambiguous,” the above-mentioned insider said. According to the incomplete statistics of LatePost, there are more than 30 executives directly reporting to Zhang Yong, making him probably the CEO with the biggest group of direct subordinates among Chinese internet companies.
Now, Zhang Yong has four business assistants whose responsibilities are clearly defined. Between Zhang and presidents of the business groups, Alibaba named four chief presidents in charge:
Shan ‘Trudy’ Dai is responsible for China’s digital business sector, which includes Alibaba‘s retail and wholesale business within China, including the main e-commerce business Taobao (comprising Taobao, Tmall and Alimama), the newly upgraded B2C retail business group, and community group buying businesses such as Taocaicai, Taote and Domestic Trade (CBU) among others, accounting for up to 65% of Alibaba‘s total revenue, according to data from the latest third quarter financial report.
Jiang Fan is responsible for the firm’s overseas digital business sector, including Lazada, an e-commerce platform in Southeast Asia, AliExpress, which helps merchants sell goods overseas, and international trade (ICBU). Together, these businesses account for 7% of Alibaba’s revenue.
Jianfeng ‘Jeff’ Zhang, Chief Executive Officer of Cloud and Technology, is mainly responsible for businesses including Alibaba Cloud Intelligence, DingTalk, Tmall Genie, Dharma Academy and Pingtou, as well as various others, accounting for 10% of Alibaba’s revenue.
Finally, Yu Yongfu is responsible for the life services segment (which includes Local Life, Fliggy and AutoNavi), the intra-city retail business group and the Lingxi Mutual Entertainment business group, with a revenue share of approximately 6%.
The chief executive in charge is referred to internally by Alibaba employees as the “0.5 level organization.” If the ‘0 level’ is the CEO and the ‘1 level’ is the business group, then the chief executives in charge are the “0.5 level” between the two.
Under “diversified governance,” the responsibilities and commanders of each unit are very clear. For example, in Zhang Yong’s busy schedule, at least one day per week was previously allocated to the firm’s local life services sector, but under the new arrangement, these matters will be handled by the corresponding chief executive Yu Yongfu.
The Adjustment’s Two Key Figures: Trudy Dai and Jiang Fan
Trudy Dai took over Taobao to the surprise of most of its employees. It’s easy for them to think this way, since none of Dai’s previous work experiences are directly related to Taobao’s business.
In addition to Taobao, Dai is in charge of the B2C retail business group with the fastest revenue growth among Alibaba‘s businesses. From the perspective of business importance, Dai is currently in charge of those that account for two-thirds of Alibaba‘s total revenue, indicating that her status and importance within the firm are rising rapidly.
Trudy Dai is 44 years old, and she is the only one of the original Arhats (阿罗汉, a term used to refer to the first 18 employees when Alibaba was founded) still in charge of a first-line business. She is the last class of students of Jack Ma’s career as a teacher, sticking by the founder since the beginning of the company’s business 22 years ago. Dai is Alibaba’s 11th employee, nicknamed Su Quan (苏荃). Within the company, employees likes to call her “MM.”
Before becoming the president of the B2B business group in early 2017, Dai was responsible for sales, marketing, human resources and other functional positions. She once told the media, “If the company lets me do sales, I will do sales. If they want me to do customer service, I’ll do customer service. I don’t think too much; I just do it willingly and happily.”
For a long time, compared to Taobao, Tmall and local life services, Alibaba’s wholesale business had slow growth and Dai did not receive much attention from outside the company. However, in the past two years, the situation has changed. Whether it is Taote, which has more than 240 million annual buyers, or Taocaicai, which was established in March this year after integrating multiple community group buying businesses within Alibaba, the outside world has seen Dai and the wholesale business’s fighting capacity.
In the eyes of many Alibaba employees, Dai’s product abilities and business insights are not prominent in the firm. However, one insider commented that she is absolutely loyal to the firm, claiming, “Dai will not leave the company, or even retire, and will work until the last minute.”
An employee at Taocaicai recalled that Dai once expressed internally, “Of course the 807 incident will remind us to reflect on the organization and employee care, but I have never been hesitant or disappointed in the company. My love for the company started on my first day and has never changed. So will it be in the future.”
Unlike Trudy Dai, at least in the past year, there have been relentless rumors and discussions within Alibaba regarding Jiang Fan’s resignation.
In the operation-oriented Alibaba, Jiang Fan, who has strong product abilities, quickly emerged as a result of the first battle of Taobao’s wireless transformation, and later promoted the development of mobile Taobao with “a thousand people, a thousand faces” metrics and more interesting contents. Jiang worked on the platform’s Double Eleven shopping festival in 2017. Later, he became the president of Taobao, and two years later he took charge of Taobao, Tmall and Alimama.
At that time, Jiang, who was born in 1985, had a bright future at Alibaba. He barely uses a computer for work, opting instead for a mobile phone, and often holds a large power bank. Colleagues commented that he will stick to his point of view when differences arise, and talk about it a week later.
One Alibaba staff member commented to LatePost that Jiang is very meticulous about products. He brought about Taobao’s “second floor [ 二楼 ]” because he found that users like to swipe and don’t like to click. In 2019, Jiang also came up with the idea to add a weather reminder to the product details page to facilitate the sales of winter clothes during Double Eleven – “Isn’t it marketing genius?”
In April 2020, facing public debates of an alleged extramarital affair, Jiang Fan was questioned internally and externally. His position as an Alibaba partner was removed only a few months after it was in effect, and internal company discussions were targeted at his values. He has made fewer and fewer public appearances and did not show up in front of the media during the Double Eleven shopping festival earlier this year.
In the context of weak consumption this year, in the third natural quarter, Alibaba’s traditional core source of income – customer management fees (including advertising fees and commission incomes) from Taobao and Tmall – after accounting for 50% of the total revenue two years ago, fell to just 36%. This corresponds with a year-on-year growth rate of 3%, which is the worst growth rate among all businesses except for entertainment.
Some Alibaba insiders believe that Jiang is more like Taobao’s product manager. For example, this year’s new Double Eleven functions allowing users to share their virtual shopping carts via WeChat, as well as a larger shopping cart icon, were all driven by Jiang.
Jiang’s transfer from Taobao to take charge of international business is seen by many as being marginalized, but it may not be that bad for Jiang. First of all, he was promoted from his previous position of vice president to a chief executive; secondly, overseas represents a new market, a bigger playground to make results. Taobao is a mature business and faces fierce competition. Its priority is to keep its competitive advantage, rather than breaking new grounds.
Overseas markets are still quite complicated, with totally different environment, regulatory policies and customs are all different. It is a major challenge to do well. A typical example is that AliExpress is the leading local e-commerce platform in Russia, and it is ready to be listed locally. However, Russia requires state assets to take control and to operate the platform, and logistics is controlled by the official Russian postal service. Alibaba cannot make much money from it.
In the third quarter of 2021, Alibaba‘s overseas digital business segment generated 11.3 billion yuan in revenue, a year-on-year increase of 34%, accounting for 7% of the firm’s total revenue. The growth mainly came from the Southeast Asian e-commerce platform Lazada – which saw orders double year-on-year – and the Turkish e-commerce platform Trendyol.
In 2015, an internal letter announcing Zhang Yong’s appointment as Alibaba’s CEO expressed the hope that in the five years between 2019 and 2024, the company’s business ecosystem would be further globalized, establishing an international business platform that can serve 2 billion consumers and tens of millions of enterprises with a “Buy Globally, Sell Globally” drive.
Alibaba’s latest financial report shows that as of the end of September 2021, its annual active consumers reached 1.24 billion, of which 285 million were from overseas. This means that international markets are an important battlefield for the company to achieve its goal of 2 billion.
The battlefield is big and important enough – and Jiang is in dire need of a victory.
Alibaba Has Dismantled Itself Once, Nine Years Before
During a sharing session in 2019, CEO Zhang Yong said that as Alibaba‘s “number one,” he has two major responsibilities: one is business design, and the other is organization design. His summary of organizational design is “to solve the problems at vertical and horizontal levels, and to decide what to divide and what to integrate at a specific point in time.” He believes that when an organization pursues speed, it should turn its business into a vertical one, and let the business run separately. When the organization needs to accumulate its assets and settle, it needs to turn some of its parts horizontally.
For large companies, how exactly to achieve such a balance of horizontal and vertical, division and integration, may represent a never-ending question. In the past ten years, Alibaba‘s overall organization has been centralized and decentralized twice.
In July 2012, Alibaba proposed the goal of “One Company” and adjusted the original six subsidiaries to seven business groups, namely: Taobao, Yitao, Tmall, Juhuasuan, International Business, Small Enterprise Business and Alibaba Cloud. This adjustment is called the “Seven Swords Combination,” bringing people, finances and things together at the group level.
But less than three months later, company management said that “One Company” was wrong. “We went to great lengths to turn this company into a ‘One Company’ system, only to discover that the word ‘Company’ was misused.” The implication was that Alibaba could not be a single company – there must be many.
On January 10, 2013, Alibaba split the original seven business groups into 25 business divisions. At that time, Alibaba envisioned the final firm ecosystem as “the same ecology, with tens of thousands of companies,” hoping that the operation of more small business units would affect more subdivisions.
However, after Alibaba went public, its organization went from “decentralized” back to “centralized.” At the end of 2015, Alibaba proposed to build a more innovative and flexible “large middle desks, small front desk [ 大中台，小前台 ]” organization and business mechanism, and set up a “middle desk” business group. Zhang Yong said in an internal letter published today that this is “the most important organizational strategy of the group in the past few years.”
In the past, if a business needs to respond quickly, the fastest way is to let one person take charge of the business from top to bottom. However, when the business becomes more and more complex and there are more and more vertical businesses, there would be excessively redundant construction and waste of resources. As for the so-called middle desk strategy, Zhang Yong hopes to build a unified technical architecture, product support system, security system, and service system – that is, a “horizontal” support system to support the various businesses above.
In the following years, Alibaba has moved closer and closer to “One Ali.” In 2019, Alibaba Group and Ant Group established a 13-member Economic Development Executive Committee, which was the company’s highest-level organization at the time, headed by Zhang Yong with Ant’s chairman and CEO Jing Xiandong as his deputy.
Since last year, the 13-member Economic Development Executive Committee has ceased operations. One insider said that Alibaba and Ant are not one economic system, but two independent companies, which hold shares in each other and are each other’s clients.
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The middle desk strategy has been running at Alibaba for six years. LatePost previously reported that since the end of last year, Zhang Yong had not been satisfied with Alibaba’s middle desk strategy at the time. He published an article on the company’s internal communications platform in which he bluntly stated that the firm’s business development had become too slow, and that the middle desk must be cut back. “Agile organization” has become a new keyword frequently mentioned by Zhang Yong.
Nine years later, with the establishment of a business responsibility system, diversified management, and new chief executives in charge, the company has once again become decentralized, from “one Alibaba” into four operational business units. It may seem like another round of separation and integration, but today Alibaba has more problems to solve, and they are more complicated.
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