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Alibaba in Transition: Will the Magic Continue?

“No company can rely solely on its founders” (Jack Ma)

“Our goal is that in five years we will serve more than one billion customers globally.” (Daniel Zhang)

As transitions go, the ascent of Daniel Zhang and the bowing out of Jack Ma at Alibaba was seamless. One year before Alibaba’s 20th anniversary on September 10, 2019, Jack Ma announced his retirement as Executive Chair of the world’s most valuable e-commerce company.

Founder Jack Ma’s story is the stuff of legend, and as such it will most likely be embellished and repeated for a long time to come.

Start with a skinny teacher of English who pedaled his bicycle through the rain to have a chance to chat with tourists to improve his English, add to that a guy who applied to, and was rejected by Harvard University 10 times, drop in the fact that he was also rejected by Kentucky Fried Chicken when they came to China, and then finish by retelling the part where the same guy had a vision of the Internet in China and subsequently became the richest man in China. Considering all of this, Jack Ma, or Ma Yun, is indeed a hard act to follow.

Daniel Zhang, by all accounts, seems to be up to the job.

A graduate of the Shanghai University of Finance and Economics, Daniel Zhang joined Alibaba in 2007 at Taobao, the world’s biggest e-commerce website. Mr. Zhang’s background in finance might make him seem a bit lackluster compared to Alibaba’s founder, but clearly his is not without vision and imagination. On Zhang’s watch Single’s Day or Double 11, the wildly-successful online shopping spree was launched in 2009 on the T-Mall platform. Fast-forward to 2018 where Single’s Day saw sales reached $30.8 billion over a 24-hour period, easily eclipsing the Black Friday shopping day in the west.

The actual transition at Alibaba was celebrated with a huge party. Two short speeches were presented: one by Jack Ma, and one by the incoming Executive Chair, Daniel Zhang.

In his short speech Zhang outlined the vision for the future of Alibaba. Key points included:

To serve more than one billion customers worldwide in 5 years
To have the capability to handle 10 trillion RMB in transactions
To continue to create value for society
To solve society’s problems
To be a company that shoulders social responsibility

And now, with Jack Ma out of the picture it is up to Daniel Zhang and his team to make these goals and this vision for Alibaba’s future a reality. Will they succeed? Please let us know what you think about this.

News Roundup December 2015

At RG21 we cover a number of topics throughout the year that we feel are of interest to our Asian and world readers. As these stories are ongoing, we can not always cover developments as they happen in a weekly blog. So from time to time we will give a short roundup of current topics with links to news and official sources.

Taiwan Elections 2016: We have been following the Taiwan elections in 2015 rather closely. At this time it seems that the Democratic Progressive Party (DPP) will win big and Tsai Ing-wen will become president. The question is how badly will the KMT be defeated, and what will the post election direction be for Taiwan, especially in its relations to the People’s Republic. Tsai has indicated that there will be not much change in the status quo vis-a-vis the PRC, but the spring of 2016 will begin to give us some indication of how this plays out.

http://abcnews.go.com/International/wireStory/taiwan-presidential-candidates-clash-china-debate-35961982

North Korea: 2015 has been a rather “quiet” year for the DPRK and its supreme leader Kim Jung-un. Kim declined to attend celebrations to mark the 70th anniversary of WWII and observers speculate that he did not feel free to travel abroad despite his continuing tightening of his hold on the levers of power. Kim’s all-girl pop group made it as far as Beijing, but then returned without performing. The year ended with one of his chief advisors perishing in a mysterious automobile crash in the closing days of the year.

http://www.wsj.com/articles/north-koreas-top-official-on-south-korea-relations-dies-in-car-accident-1451445874

South China Sea: This year saw a tense standoff between China and the U.S. over the South China Sea. The U.S. claims that it has the right to navigate the South China Sea freely while China maintains that its sovereignty is at stake. A U.S. Navy ship sailed through the area without incident, and China protested. This situation shows no signs of abating in 2016, and apparently China has no intention to stop its “island building” and the U.S. has no intention of adhering to China’s claims on its claimed territory in the area.

http://www.independent.co.uk/news/world/americas/china-blasts-the-us-over-serious-military-provocation-in-taiwan-a6783556.html

Hi-Tech: The big news in mid-December was the purchase of the South China Morning Post (SCMP) by Internet giant Alibaba. Jack Ma’s company (which has experienced some turbulence this year) paid in excess of $200 million for the Post. This move follows Amazon’s recent acquisition of the Washington Post. The question now is how will a China-based corporation influence news coverage by the SCMP. What changes, if any, will become apparent in 2016 under the new Hangzhou-based management?

http://www.theguardian.com/world/2015/dec/14/chinese-internet-giant-alibaba-buys-south-china-morning-post-for-266m

Photo: Korea Net via flickr https://www.flickr.com/photos/koreanet/23574365105/in/datetaken/

Jack Ma and Alibaba Take A Big Hit

Internet giant Alibaba has taken a substantial hit this week when its stock price dropped by 5%. The stock closed at $73.38, the lowest since the 2014 NYSE IPO. The company reported a 28% increase in earnings, but this was below market expectations. Analysts say Alibaba is faced with the slowing of the Chinese economy and stiff competition from rival Internet companies Baidu and Tencent.

Alibaba founder Jack Ma’s personal fortune is said to have declined $752 million with the fall of the stock price. To reassure investors, the company has agreed to a $4 billion buyback and the founder and current executive vice chairman say they will not sell their Alibaba shares.

On a positive note, the company seems to still have an appetite for expansion. They will invest $4.6 billion in Chinese electronics retailer Suning. This will give Alibaba access to a ready-made distribution network to increase speed of delivery in the Chinese market. Ma says that he takes the long view on this situation.

(Report compiled from Web sources)

Person of Interest : Alibaba’s Lucy Peng

Lucy Peng, (Peng Lei) has been with Alibaba since the beginning. She is one of the original 19 co-founders of the game-changing Hangzhou startup that went on to become one of the most talked about IPOs ever launched on the New York Stock Exchange.

Peng, who was not even sure which way the company would go when she signed on in the late 1990s is now listed as # 33 on Forbes Magazine list of the world’s most powerful women. After graduating in 1994 from the Hangzhou Institute of Commerce she taught college briefly before joining Jack Ma’s improbable venture. Peng has held various positions within Alibaba to include:

CEO of Alipay
Chief People Officer (HR)
CEO of Small and Micro Financial Services

Small and Micro Financial Services has been re-named Ant Financial Services. Ant Financial Services, which Peng heads up, processes Ali Pay transactions, handles the Yu’E Bao fund and manages a new internet bank. Ali Pay, which is like PayPal, has 100 million users. There are rumors that Ant Financial Services might go public in 2017. So far Jack Ma has no comment on this.

Last month, in May 2015, Jack Ma reshuffled his management team. CEO Jonathan Lu was replaced by accountant Daniel Zhang. Analysts said Ma did this to counter Alibaba’s falling share price and adverse publicity.

At the same time Ma sent a letter to his staff explaining that there must be a change of management to the 1970s generation. Previously, he himself had said that he was getting too old for the business.

So where does this leave Lucy Peng? Her name does not appear in the announcement of the re-shuffle, so it seems that she is secure, at least temporarily, in her position as CEO of one of the most promising of the Alibaba entities, which some day may have an IPO to rival Alibaba’s own.

Comments? Thoughts? Please log in and let us know.

Peng Lei Interview: The DNA Code of Alibaba

http://www.daonong.com/g/2009en/specialreport/20090914/10769.html

Alibaba Management

http://www.alibabagroup.com/en/about/leadership

Jack Ma’s Memo: Born in the 70’s

http://blogs.wsj.com/digits/2015/05/07/born-in-the-70s-jack-mas-memo-to-alibaba-employees-on-management-shuffle/

China’s Innovaters—Names You Had Better Get To Know

Li Jun Introduces new Xiaomi phone

by David Parmer

Can China innovate? Will China innovate? Does China innovate? It seems that some critics would rather make up their own answers to these questions than take a look at the evidence on the ground.They blame the government, the school system and the government industries for China’s inability to innovate. Rote learning and government interference are the big problems holding China back they say. What?

The evidence for Chinese innovation is clearly quite to the contrary of what critics are putting out. Current Chinese history is a story of constant and ongoing innovation. Chinese innovation can be seen in areas such as:

Telecommunications
Mobile technology
Online services
Biotechnology
Medical devices

The current period in China’s development is seen as a movement from imitation to innovation, from producer to designer. It is clear that this transition is not only ongoing but has massive government and industry support. Forbes magazine states that there are no less than 1500 R&D centers set up in China by foreign companies alone, not to mention Chinese institutions. Locally there are an estimated 700 hi-tech incubators, and China’s universities turn out 700,000 engineering graduates annually. The amount of R&D facilities around the city of Hangzhou alone is staggering. Some estimates give a figure of 2% of GDP for the R&D budget nationally.

Recently US Vice President Joe Biden challenged a university graduating class to name one innovative product from China. A very interesting reply came from CNN Money (see below) that named four Chinese organizations that might answer his question:

Xiaomi-mobile device maker
Tencent-messaging service
Huawei-telecom equipment maker
B.G.I- Biotech leader

Much of China’s innovation is directed internally, but Xiaomi and Tencent (We Chat) and Lenovo have already made their presence known in the world market.

In the history of science we have the famous question posed by British scientist Dr. Joseph Needham: Why did China, the birthplace of so many ancient technologies that pre-dated their western counterparts, lose its technological will and edge to Europe and the west? Now the focus for the 21st century and beyond should be: What innovations can we expect from the people who gave us gunpowder, printing and the magnetic compass?

Photo: Androidheadlines.com

CNN Money: http://money.cnn.com/2014/05/29/technology/innovation/biden-china-innovation/

China-Hotbed of Innovation: http://www.innovationmanagement.se/2013/01/09/china-hotbed-of-innovation-for-our-planet-in-the-21st-century/

Person of Interest: SoftBank’s Masyoshi Son

(Photo: M. Son/Facebook)

by David Parmer

Is Softbank’s CEO and founder a pioneer or a visionary? Recent tech history gives us the answer: he is both. Son is a pioneer—since 1980 he has been a key player in the worldwide information revolution. Son is also a visionary—realizing back in the 1980s that the future lay with digital technology. At that time he began to think strategically in terms of decades. The company’s current 30-year goal, according to their website is “to be a corporate group needed by most people around the world.” At the rate that SoftBank is going, the world’s population might not have much of a choice.

SoftBank is nothing, if not connected. It is now comprised of 1300 companies around the world. Iran, North Korea and the polar regions seem to be the only places on the planet where SoftBank is not. China’s own Jack Ma, Chair of Alibaba, sits on the SoftBank board and Yahoo Japan and PayPal have long been members of the fold. Sprint (=SoftBank) has now set its eyes on acquiring U.S. carrier T-Mobile, and making some big waves in the U.S. telecom market.

Masayoshi Son is currently CEO of Softbank, CEO of Softbank Mobile, and Chairman of Sprint Corporation. Forbes magazine estimates his personal net worth to be $9.1 billion. ( “Billion” is the word most associated with Son. “Million” is about as outdated as the rotary dial phone when talking about him personally or his businesses.) When the tech bubble burst in 2000, he personally lost…billions. Son was born on August 11, 1957 in Japan to a poor Korean family. As a teenager he realized that opportunity for him lay overseas. Overcoming initial family resistance he went to the U.S. for high school, and in college studied economics and computer science at U.C. Berkeley. Following some promising business success in the U.S., he returned to Japan where he founded SoftBank, a company specializing in the sale of various types of software. After more than a decade of funding startups, SoftBank went public in 1994. The company continued to expand, was hit hard in 2000 when the bubble burst, recovered, continued to expand, and in 2008 was the first and only provider of the Apple IPhone in Japan.

SoftBank’s latest move, the T-Mobile acquisition is facing opposition from U.S. regulators. There are now four carriers in the U.S. : ATT, Verizon, Sprint and T-Mobile. If Sprint gets control of T-Mobile, Son predicts a price war, and one that will benefit consumers, by reducing prices. Analysts say the mobile phone market has reached a saturation point, and that the only way for one company to get subscribers is to poach them from another carrier. And Son’s price war would certainly encourage users to defect from the number one and number two carriers. Speaking about this question on an American TV show Son declared “I wanna’ be number one! ” In many ways he already is, and is showing no signs of slowing down.