Alibaba, China’s e-commerce behemoth has revealed plans to split into six business groups, which will each be managed by their respective CEOs. The organisation will now follow a holding company structure.
The decision which was made last Tuesday was described as the “most significant governance overhaul in the platform company’s 24-year history.” It came just a day after Jack Ma was spotted in China for the first time after spending months abroad.
The reappearance of the billionaire founder of Alibaba and Ant Group has become a source of intrigue for investors and entrepreneurs, who see his whereabouts as a bellwether of Beijing’s relationship with the private sector.
Over the past three years or more, China has imposed a sweeping regulatory crackdown on the tech industry, freezing the IPO of Ant and driving Didi to delist from the U.S. But in recent weeks, the country has made efforts to restore confidence in the business community, for instance, by hosting a high-profile corporate summit that attracted the likes of Tim Cook and Ray Dalio.
Speaking on the development to the employees via email, the current CEO of Alibaba, Daniel Zhang said “This transformation will empower all our businesses to become more agile, enhance decision-making, and enable faster responses to market changes. However, Zhang will continue to serve as the chairman and CEO of Alibaba Group.”
“The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready, it also offers flexibility to Alibaba’s businesses to seek IPOs in different jurisdictions, where approval processes could vary greatly.”
“Each CEO will report to a board of directors and assume full responsibility for company performance,” he added.
In addition to being the head of the holding company, Zhang said he will serve as chief executive of the Cloud Intelligence Group, the company’s cloud computing and artificial intelligence division.
The staff and leaders of each subsidiary would be better incentivized by their respective stock option plans. When it comes to impact on staff, the reorg is undoing the organizational structure that it prided itself on for years — the “middle platform,” which are middle and back office functions that can be reused across departments for data and business purposes.
According to Alibaba, these resources will transition into the relevant business groups and companies going forward and only retain functions required for listed company compliance. As the units become more independent, resources will be siloed, which will inevitably lead to redundancy; but the good news is some departments might need to increase their headcount after months of big layoffs.
The six business groups of Alibaba are Cloud Intelligence Group (cloud computing — think AWS), Taobao Tmall Commerce Group (domestic retail businesses), Local Services Group (on-demand businesses like food delivery), Cainiao Smart Logistics (logistics), Global Digital Commerce Group (overseas retail businesses, including Lazada) and Digital Media and Entertainment Group (including the likes of video streaming).