Commentary: Alibaba's most innovative move to date? Jack Ma's graceful corporate exit

Commentary: Alibaba's most innovative move to date? Jack Ma's graceful corporate exit

In another display of being ahead of the curve, Ma shifts from dynastic leadership to professional management to sustain his legacy.

Alibaba founder Jack Ma on the first day of trading for Alibaba on the New York Stock Exchange in
Alibaba founder Jack Ma on the first day of trading for Alibaba on the New York Stock Exchange in 2014. (Photo: AFP/JEWEL SAMAD)

SINGAPORE: “A big tree attracts the wind,” my friend at the Alibaba Innovation Centre said, reminding me of a Chinese proverb and prompting a speculation of Jack Ma’s retirement. He elaborated: 

Big personas are all either killed or arrested or jailed. 

He was referring to Wang Jian, co-chairman and co-founder of HNA Group, who died in a fall in France in early July this year. He was referring to Anbang Insurance founder, Wu Xiaohui, who was sentenced to 18 years in prison last May for “abuse of power.” 

He was also referring to Liu Qiangdong, the chief executive of JD.com, who was arrested in the US on suspicion of rape this September. 

In a country where a corruption probe can result in the suicide of a top general, the relinquishing of the chairmanship at Alibaba by Jack Ma, now China’s richest man, in order to return to his true vocation of “teaching and education” at once seems pragmatic and inspiring.

Jack Ma, Chairman of Alibaba Group, attends a show during Alibaba Group's 11.11 Singles'
Jack Ma, Chairman of Alibaba Group, attends a show during Alibaba Group's 11.11 Singles' Day global shopping festival in Shanghai, China, November 10, 2017. (Photo: REUTERS/Aly Song)

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Once a cash-strapped English teacher, Ma amassed an extraordinary US$46 billion or so in wealth by building China's biggest e-commerce operator, which owns Taobao, TMall, and Alibaba.com; AliPay, which has become synonymous with mobile payment; and AntFinancial, a US$150 billion finance subsidiary that, alone, is worth more than Goldman Sachs. 

Ma presided over Alibaba as it set the record for the biggest IPO (initial public offering) in history when it was listed at the New York Stock Exchange in 2014. The company went on to became Asia's first company to exceed the US$400 billion valuation mark.

It’s hard not to compare Ma to Amazon’s Jeff Bezos, America’s richest man. But while Amazon’s iconic founder is likely to continue driving it in the foreseeable future, a professional management team will need to bring Alibaba to maturity.

Many have said that incoming chief executive Daniel Zhang would have “a big shoe to fill”, and “a hard act to follow”. 

Critics sneered at Zhang’s low profile, his lacklustre charisma, resembling “more Clark Kent than Superman”. 

No one except Zhang himself sees the man to be a “free and unfettered spirit,” a phrase Zhang picked for his own nickname at Alibaba. But what if this mild-mannered organisation man is exactly what Alibaba most needs now?

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FILE PHOTO: Alibaba Founder and Chairman Jack Ma talks to CEO Daniel Zhang at NYSE Bell Ringing cer
Alibaba Founder and Chairman Jack Ma (L) talks to CEO Daniel Zhang at NYSE Bell Ringing ceremony during Alibaba Group's 11.11 Global shopping festival in Beijing, China, November 11, 2015. (Photo: REUTERS/Kim Kyung-Hoon/File Photo)

ALIBABA IS 'GROWING UP'? 

In 1972, Larry E Greiner, a business school professor from the University of Southern California, observed how organisations went through crises as they grew. 

In what is now a Harvard Business Review classic, Greiner drew upon insights from clinical psychologists and laid out a series of developmental phases that companies had to go through as they came of age. It was written after two decades of post-war ascendancy. 

Corporate America had extended its footprint globally. Ford, General Electric, Procter & Gamble, and countless other corporations were present across the Atlantic and the Pacific. But they were in crisis.

As impressive as their geographic span was, these companies’ top management couldn’t effectively coordinate unified or cohesive strategies. 

Local chiefs ran their individual businesses as fiefdoms. Few resources were shared. Market synergy was all but nonexistent, and headquarters failed to marshal significant effort against new competitors that primarily came from Japan. 

It was a time of reckoning for CEOs. Economists recognised the inevitable decline of America’s competitiveness.

FILE PHOTO -  The corporate logo of Ford is seen on a billboard at the facilities of the company in
The corporate logo of Ford is seen on a billboard at the facilities of the company in Valencia, Venezuela July 12, 2018. (Photo: REUTERS/Marco Bello)

Greiner, as patient and forgiving as a psychologist could be, saw things differently. In his view, these embattled Fortune 500 companies were merely growing up. 

During the heady years of mergers and acquisitions, companies have to apply “a decentralised organisational structure”. 

For the quick capturing of local opportunities, responsibilities have to be pushed downward, allowing factory and sales managers to react swiftly to local market conditions. This process of delegation elicited heightened motivation among the rank-and-file at a time when simply chasing after customers and sales orders relentlessly equated success.

Greiner saw that the delegation phase had outlived its usefulness. Companies were falling into crisis because central coordination was required to mount any meaningful counterattack against competition. 

But substantial product development or global marketing was expensive, so moonshot projects had to be initiated from the very top. Hence, a new organisational structure gained extreme popularity: It was the matrix.

FILE PHOTO: The logo for Procter & Gamble Co. is displayed on a screen on the floor of the NYSE
The logo for Procter & Gamble Co. is displayed on a screen on the floor of the New York Stock Exchange in New York, U.S., June 27, 2018. (File photo: REUTERS/Brendan McDermid)

NO STRUCTURES LAST FOREVER

For seasoned executives whose schedules are characterised by endless meetings, matrix organisations require no introduction. The matrix is a company structure in which reporting relationships are set as a grid rather than a traditional hierarchy.

Managers have dual reporting lines. A marketing manager for laundry detergent reports to the head of the country where she operates. But she also reports to the head of detergent, who sits in another city and keeps a watchful eye on the global positioning of the overall category. 

Suddenly, with two bosses in mind, trade-offs are no longer singularly dimensioned. Rather, to recycle the ultimate cliche, managers had to “think globally, act locally.”

Alas, no structure can last forever. As we enter the Internet age, digital disruptors are besieging many bellwethers. 

These are the Silicon Valley paragons who came with little administrative heritage. Driven by a very simple structure, emboldened by entrepreneurial founders, and supported by a core group of loyal employees who haven’t minded working excruciatingly long hours, these digital upstarts embody millennials’ hyper-adaptation to the rapidly changing world. 

In the process, they displace as many old incumbents.

FILE PHOTO: Zuckerberg speaks at Facebook's annual F8 in San Jose
Facebook CEO Mark Zuckerberg speaks at Facebook Inc's annual F8 developers conference in San Jose, California, U.S. May 1, 2018. (File photo: REUTERS/Stephen Lam)

No wonder the mere mention of digital transformation can cause great alarm among grey-haired executives these days. They all realise the importance of infusing Silicon Valley’s agility into their traditional commercial discipline. It’s Greiner’s final stage of growth: The transition from coordination to real collaboration.

But learning applies to everyone. It’s just that Alibaba is coming from the other end. Alibaba is gigantic. In terms of maturity, it still runs like a garage upstart. This paradox is not entirely new. 

Google, Facebook, Netflix, and even Amazon achieved global dominance with relatively rudimentary management systems. This was partly because the Internet economy allowed them to postpone complex coordinating mechanisms as long as possible.

Fiat Chrysler achieved US$118 billion in revenue in 2016 by employing roughly 230,000 workers. Google made US$90 billion with 47,000 workers. In these instances, fewer people translated into less human communication and easier coordination.

That postponement of complex coordination, which would facilitate dealing with human managers over a wide geographic span, is no longer possible at Alibaba, however.

Google logo on office building in Irvine, California
The Google logo is pictured atop an office building in Irvine, California, U.S. August 7, 2017. (File photo: REUTERS/Mike Blake)

STEPPING UP TO THE NEXT LEVEL

The company seeks to blend online shopping with brick-and-mortar stores through the Hema grocery chain. 

It also seeks to expand in promising new markets such as Southeast Asia and India at a time when the Chinese economy is showing signs of slowing. And it is expanding into entertainment, setting up its own film studio and investing in logistics and delivery services.

It doesn’t help that the Chinese government is playing a greater role in regulating private enterprises, not only cracking down on online news but also online games. 

That’s how a solid, no-nonsense organisation executive who murmurs orders with steely discipline is increasingly looking more attractive than a flamboyant boss who constantly reminds everyone that his company is going to disrupt the status quo. 

“No company can rely solely on its founders,” Jack Ma noted in a letter to staff and shareholders. 

This transition demonstrates that Alibaba has stepped up to the next level of corporate governance from a company that relies on individuals.

Ma is, in effect, handing over a hugely successful company to someone he personally trusts and trained for the job for years — someone who’s been doing the day-to-day management since 2015. 

As Ma puts it, the company is ready for him “to step away without causing disruption”.

Howard Yu is the LEGO professor of management and innovation at the IMD Business School in Switzerland and Singapore and the author of LEAP: How Businesses Thrive in a World Where Everything Can Be Copied.

Source: CNA/nr(sl)

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