Jack Ma steps into ‘mistakes’ brouhaha to boost Alibaba’s morale in staff memo, eliciting support from Chinese Embassy in US

‘We hacked away at the big-company disease,’ and ‘turned the company from a cumbersome organisation into one that is simple and agile,’ Ma wrote
After Ma’s memo was published, the Chinese Embassy in the United States posted it on X, formerly known as Twitter

Alibaba

Daniel Renin Shanghai

Published: 10:34am, 10 Apr 2024

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Alibaba Group Holding has fundamentally changed its corporate culture to put customers first in its adaptation of technology, its co-founder Jack Ma wrote, 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 (AI) will upend the e-commerce industry of today, because that time span is 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 echoes 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.

A screengrab of Alibaba Group Holding’ co-founder and executive chairman Joe Tsai (right) with Nikolai Tangen of Norges Bank Investment Management (left). Photo YouTube/Norges Bank Investment Management.

“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 HK$70.50 in recent 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 (US$332 billion) in value over that period.

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

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

Tsai’s candid admission of the missteps at Alibaba generated an uproar on China’s social media. There is nothing to fear from mistakes because nobody is error-free, but the “truly terrifying” spectre is 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.

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“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.

Hours after Ma’s memo ran, the Chinese Embassy in the United States published a post on X about it, featuring a photograph of the Alibaba co-founder.

Alibaba’s most fundamental change this year is 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.

The company’s flagship shopping platform Tabao said it would provide 10 billion yuan (US$1.38 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 was critical for Alibaba to return to a healthier development track.

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