On the day after Ma Yun was revealed to have returned to China, Zhang Yong, chairman of the board of directors and CEO of Alibaba Group, announced a decision on organizational change: to establish a “1+6+N” organizational structure, that is, to establish six major business groups and multiple business companies under Alibaba Group, including Alibaba Cloud Intelligence, Taobao Tmall Business, Local Life, International Digital Commerce, Cainiao, and Big Entertainment.

Undoubtedly, this is the biggest organizational change in 24 years. It not only proposed a “1+6+N” organizational structure, but also proposed an independent listing... On this day, the world was turned upside down for Alibaba in the future.

Regarding this round of adjustments, industry insiders have separately explained different views to Sina Finance.

There are opinions that this split is due, on the one hand, to the fact that the combined valuations of the six groups must be higher than the current Alibaba Group; on the other hand, it is also an effective anti-monopoly measure by Ali. According to another opinion, most large companies face “huge organizations, but decisions are slow and action is slow.” After adjustments, the Ali Group level will focus more energy on portfolio management and strategy formulation in the future, and can break away from specific business operations.

After this round of adjustments, Alibaba's various business groups will also face market competition independently. In the future, eligible business groups and companies will retain the possibility of independent financing and listing.

So, Idle Fish, Hema, Rookie, DingTalk, Alibaba Cloud... in Ali's series of businesses, which sector will go public first?

There are three major businesses, and they are probably the first to hit the line

In the letter to all employees, the most important point raised by Zhang Yong is that after this organizational change, Alibaba Group will fully implement holding company management.

According to the adjustments, the six major business groups and multiple business companies will establish separate boards of directors for each business group and business company, implement a CEO responsibility system under the leadership of the board of directors of each business group and business company, and bear overall responsibility for their respective operating results.

Zhang Yong said, “Making the organization more agile, making decision-making links shorter, and responding faster is the original intention and fundamental purpose of this change.”

In fact, Guojin Securities once divided Alibaba's business into eight major sectors: the core commercial exchange market, new retail, Lazada, local life (hungry plus word of mouth), Cainiao, Alibaba Cloud, Youku & Innovation business, and important investments.

According to Guojin Securities's view, the core commercial exchange market business, including Taobao and Tmall plus domestic wholesale, is highly competitive and has mature profitability. It is Ali's cash cow, with a valuation of 3878.1 billion yuan.

The new retail businesses, which mainly include Hema and Yintai, are in the development period and received a valuation of 84.2 billion yuan. The valuations of Lazada and Local Life (Hungry? + Word of Mouth) were 37.7 billion yuan and 101.1 billion yuan respectively. Cainiao is an investment period business, and Youku is the company's ecological collaboration business, with valuations of 122.3 billion yuan and 11.8 billion yuan respectively. Due to the high growth of the cloud computing industry, Alibaba Cloud's leading position is stable, with a valuation of 283.6 billion yuan.

And who of these will be the first to go public?

According to independent commentator Wang Ruchen, small units that are small in scale, do not need to seek higher financing, and do not have many equity relationships are easier to go public. For example, Hema, which “rises from flat ground” and has independent personnel, stores, and distribution systems, has sought external financing for the past two years, and has now reached the next development point.

Furthermore, Wang Ruchen believes that rookies are also likely to go public independently first. On the one hand, this year marks the 10th anniversary of Cainiao's establishment, and JD Logistics has also been listed. At this special moment, there is also great hope that Cainiao will go public, but the focus on assets is a passive aspect of it.

From a financial perspective, he analyzed that Alibaba Cloud, which has grown to the 100 billion level, is also likely to go public, provided that in the next two quarters, Alibaba Cloud will grow again after the business structure is reorganized. “However, Alibaba Cloud is large and adjustments may not have to be that fast.”

In fact, if each business were to be left alone, Alibaba's value would probably far exceed its present value. For example, Alibaba Cloud, after Alibaba released its 2020 Q1 results, many institutions such as Goldman Sachs and J.P. Morgan raised Alibaba Cloud's valuation to more than 100 billion US dollars. Of these, Goldman Sachs raised Alibaba Cloud's valuation to 123.8 billion US dollars. In the first half of that year, Alibaba Cloud's revenue reached 24.5 billion yuan, and its market share increased for 4 consecutive quarters. Although 120 billion US dollars was still the high point of Ali's valuation at the time, the logic can be used as a reference.

“Slow decision-making and slow action” will be resolved

According to incomplete statistics, over the past seven years, Ali has made more than 20 organizational restructuring adjustments, an average of more than 3 times a year.

Zhang Yong has always maintained a clear view: organizations must be made more agile and flexible. He said bluntly, “The market will never stop changing. A new wave of technology continues to emerge. If you don't embrace change, you will become rigid, and if you don't change yourself, you will be defeated by the times.”

Wang Ruchen believes that Ali's split is a “matter of luck” process. “Previously, Alibaba was wrapped up in the e-commerce system, but in reality, Alibaba had many businesses such as entertainment, finance, advertising, cloud infrastructure, etc., and it is difficult to accommodate the e-commerce dimension alone.”

In addition, Alibaba is also “in the midst of a double listing” this year. A re-listing allows the outside world to see Alibaba's value. This is quite different in value from 2014 or 2019. “The combined valuations of the six groups must be higher than Alibaba Group, which also allows the outside world to see the vitality of the organization. More importantly, this is an effective anti-monopoly move by Alibaba.”

Zheng Zhigang, a professor at the School of Finance and Finance at Renmin University of China, gave an opinion on the other side. He believes that it is easy for big companies to organize huge things, but decisions are slow and slow to act. Ali's current reforms are aimed at these problems.

“Newly established business groups can make their own flexible decisions according to rapid changes in the market, without requiring approval from Ali's headquarters. On the other hand, by introducing capital and going public independently, we can enter the fast track of a new round of development.” Zheng Zhigang said.

On the other hand, as far as Ali Group headquarters is concerned, Zheng Zhigang also believes that in the future, it can focus more energy on portfolio management and strategy formulation, and break away from specific business operations.

“When children are older, they need to go out and face the market independently. Alibaba Group is more like a big platform to support them.” Zhang Yong said.

Editor/phoebe