Focus at Alibaba is back on customers, Jack Ma tells staff

Founder of e-commerce giant urges employees to embrace change and prepare for AI revolution

Alibaba Group Holding had fundamentally changed its corporate culture to put customers first in its adaptation of technology, its co-founder Jack Ma has written, as he stepped into a social media hubbub over the hubris that caused what was once the world’s largest e-commerce platform to lose ground to competitors.

“We hacked away at the big-company disease,” according to Ma’s memo to Alibaba employees. “We turned the company from a cumbersome organisation into one that is simple and agile, where efficiency comes first, and the market comes first.”

The rise of artificial intelligence would upend the e-commerce industry of today, because that time span was like a century in the internet era, wrote Ma, who remains influential in Alibaba as the company’s largest single shareholder, even after his 2019 retirement. “The AI era has just arrived. Everything has just begun, and we are in the moment!”

Ma’s memo to staff echoed a podcast interview made last week by executive chairman Joe Tsai, when the Alibaba co-founder conceded to Norges Bank Investment Management’s CEO Nicolai Tangen that “mistakes” had been made by the company since its establishment in Ma’s Hangzhou flat in 1999.

“We have fallen behind because we forgot who our real customers are,” Tsai said in the podcast. “Our customers are the users who use our apps [for] shopping, and we did not give them the best experience. In a way, we stepped on our own foot and did not focus on where we can add value.”

The capital markets have punished Alibaba for its mistake.

The company’s stock has plunged 77 per cent from its 2020 record of HK$307.40 per share in Hong Kong to close at just below HK$74 in yesterday’s trading, faring worse than the 31 per cent decline in the Hang Seng Index over the same period. Alibaba has lost HK$2.6 trillion in value over that period.

Tsai touched on a number of topics in the 37-minute podcast, from Alibaba’s challenges and United States-China relations to his work routine and his love of sports. Tsai is chairman of the Post, wholly owned by Alibaba.

He also commented on the state of China’s AI industry. The country was about two years behind the US in the global AI race, but China would develop its own ability to make high-end graphics processing units over the long term, Tsai said.

There was nothing to fear from mistakes because nobody was error-free but the “truly terrifying” spectre was hubris and the refusal to change, Ma wrote. He affirmed the “admirable courage and wisdom” by Tsai and Alibaba’s CEO Eddie Wu in leading the change at the company.

“We made countless mistakes in the past 25 years, and we will [continue to] make mistakes in the next 77 years” over the course of Alibaba’s aim to span three centuries, wrote Ma.

“Facing problems is not to deny the past, but to find the way responsibly to the future.”

The messages by the two co-founders served the same purpose to boost morale at Alibaba, which Tsai conceded had been low over the past three years due to a combination of factors. Another overarching theme was to remind employees to better understand the needs and challenges ahead.

Alibaba’s most fundamental change this year was to abandon the blind pursuit of performance indicators, and focus instead on customer value, wrote Ma, echoing Tsai. To return to its growth track, Alibaba simplified its structure in February to focus on two core businesses – cloud computing and e-commerce – in the wake of a sweeping restructuring announced a year ago.

Its flagship shopping platform Taobao said it would provide 10 billion yuan (HK$10.8 billion) of cash to subsidise content creation, such as live streaming and short videos, on the platform in 2024, Cheng Daofang, general manager of Taobao and Tmall Group’s e-commerce content unit, said at an event last month.

Two weeks ago, Alibaba withdrew the initial public offering of its logistics operation Cainiao in Hong Kong, and has offered to buy all remaining shares in the unit, in a major change that seeks to achieve synergy between its delivery arm and core e-commerce operations. Ma thanked the staff and their families for their understanding and support on these changes, which he said were critical for Alibaba to return to a healthier development track.

Four months earlier, Ma encouraged Alibaba’s employees in an internal memo to embrace change and stick to the firm’s original vision. PDD Holdings, which operates budget shopping platform Pinduoduo and Temu, was closing in on Alibaba’s valuation and Taobao’s market share.

“The important [question] is not who to catch up with today, but to think about how tomorrow’s e-commerce should improve the consumer experience,” Ma wrote.

Facing problems is not to deny the past, but to find the way responsibly to the future JACK MA, ALIBABA CO-FOUNDER