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What does Jack Ma’s retirement mean to Alibaba?

By ESC Editorial Team, over 5 years ago People
What does Jack Ma’s retirement mean to Alibaba?

On September 10, 2018, Alibaba announced that as of September 10, 2019, the 20th anniversary of Alibaba, Jack Ma will no longer be the chairman of Alibaba Group. Current CEO Daniel Zhang Yong will take over the position of chairman.

1. The succession system of Alibaba

Five years ago, Mr. Ma announced his resignation as CEO of Alibaba Group at the 10th anniversary conference of Taobao and was gradually less involved in Alibaba’s day-to-day management. "An investment of less than CNY 20 billion doesn't have to come to me," Mr. Ma said at Alibaba this year. It was evident that the management had been delegated completely to Yong Zhang's team.

For many companies, "no successor" is an unavoidable challenge in the development process. For Alibaba, however, the talent mechanism has been continuously improved with the development of the company.

Alibaba Group’s talent system includes a 36-member "partnership system" that is similar to the highest decision-making body of organisations. There is also the system of the core business committee of Alibaba, a decision-making organisation made up of Alibaba partners.

At Alibaba, partners have the right to appoint half of the directors. As more than half of the directors are nominated, minority shareholders indirectly control the board of directors and can then appoint management teams, including the CEO. The right to nominate also depends on the general meeting of shareholders as to whether a nominated director can be appointed. If the general meeting rejects the nomination, the partners will have to submit a new nomination. Ultimately, the main task of a partner is to choose the most suitable future leader. The second is to limit foolish decisions of future leaders.

Alibaba currently has 36 partners. The selection criteria for a partner are very high. According to EVP Joseph Tsai, members are generally tested for up to three years if they want to become a partner, and need the support of 75 percent of the current partners after this trial period. Among Alibaba's partners are several young people, such as Zeming Wu, head of technology at Tmall, and Xi Hu, deputy CTO of Ant Financial, both of which belong to the young generation born after the 1980s.

In an open letter, Mr. Ma said that stepping down as executive chairman was a deliberate plan that had been carefully prepared over the last decade. "It is well known that no one can stay with a company for 102 years, and the company's long-term development depends on the governance system, the culture system and the endless talent pool."

2. Jack Ma's successor: Zhang Yong and "New Retail"

Jack Ma said in an internal email that he has "full confidence" in Daniel Zhang Yong and his team. Mr. Zhang has changed Alibaba in many ways, especially in new retail.

In March 2009, Daniel Zhang took over the troubled Taobao mall, led the founding and promotion of Tmall, and established a new mode of working with global brands following Alibaba’s original business model. In addition, the business model of Taobao was redesigned and the strategy "All in wireless" was introduced. Mobile Taobao is now the world’s largest platform for mobile commerce.

The Tmall "double 11" Festival, which was proposed and led by Zhang Yong, became a phenomenal commercial success immediately after its launch, greatly impacting the e-commerce industry.

With the advent of the new retail trend over the past two years and under the leadership of Zhang, Alibaba invested in Suning and Yintai, founded Hema Market, became a share-holder of Gaoxin retail, purchased, and achieved a comprehensive strategic cooperation with a number of international brands such as Starbucks. New retail, integrating online and offline, has been a keyword and an important trend of Alibaba's global business since 2017.

Alibaba's new retail business is expected to change as Zhang Yong takes over as Chairman from Jack Ma:

Firstly, new retail was proposed by Jack Ma in October 2016, and Zhang guided and delivered it from the model idea to the concrete implementation, especially the investment and merger of a number of physical retail enterprises such as Suning and RT-MART. After assuming Alibaba’s chairmanship, Zhang will undoubtedly spend more energy communicating with all sectors of the world on behalf of Alibaba Group. The new retail plan also needs a successor to replace Zhang in his current position. However, the reference to this candidate is still confidential.

Secondly, Zhang's promotion of new retail has turned Alibaba from an ecommerce-dominated Internet company into a full-fledged technology company, dominated by social consumption and digitalisation of the retail industry, and fully involved in human intelligent technology. Under the leadership of Zhang Yong, Alibaba successfully transformed in less than four years and performed well.

In global capital markets, Alibaba has maintained a growth rate of over 55% for six consecutive quarters. In the domestic market, Alibaba's growth rate is also in a leading position among the three technology giants Baidu, Alibaba and Tencent (BAT). The gradual development of the new retail business and the maintenance of stable growth as well as the development of new growth points beyond new retail will be the biggest challenge for Zhang Yong and the young talents of Alibaba.

Thirdly, after the departure of Jack Ma, the founder of Alibaba, the integration and communication of the relevant companies may be subject to a degree of adaptation and change. For example, how will Alibaba Group and Ant Financial Group continue to integrate in the future?

With all the speculation and rumours that followed the announcement, Mr. Ma said he would remain a partner and guardian of Alibaba's culture. At the same time, he will devote himself to the areas he loves, such as education and philanthropy.

Read this book on our website to learn more about the relationship between Alipay and Alibaba
The Rising Chinese E-Payment Giant – Alipay

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