As Alibaba’s Stock Slides, Employee No. 52 Still Believes In Its “Tao”

Sunday was supposed to mark a smooth transition to new leadership and growth at China e-commerce giant Alibaba Group. The company said in June chairman and CEO and Daniel Zhang would step down; then vice chairman Joe Tsai, a co-founder, would become chairman, and Eddie Wu, another co-founder, would take over as CEO as part of a corporate reorganization aimed at unlocking shareholder value. Zhang was to lead an important cloud computing subsidiary and be replaced by Wu on Alibaba’s board of directors.

On Sunday, however, part of that plan unexpectedly changed. Zhang, after 16 years at the company that included the last four as chairman, would exit and establish an investment fund backed with $1 billion of Alibaba money. Shares in Alibaba Group slid by 5.8% in Hong Kong to HK$85.55 on Wednesday compared to the end of last week as investors mulled Zhang’s surprise departure.

Yet Brian Wong, a long-time Alibaba insider and the author of “The Tao of Alibaba,” a study of its culture, told Forbes this week he expects the switch will ultimately work out. “It is an unexpected change yet something the Alibaba Group management is handling effectively in order to minimize disruption to their plans for a Cloud spinoff,” said Wong, hired as Alibaba’s 52^nd employee in 1999 and whose senior posts at Alibaba over two decades included special assistant to its main founder Jack Ma. Today, Wong runs his own media and investment companies and lectures at an Alibaba global entrepreneurship academy that he set up.

“Eddie is capable and qualified to take on the interim Cloud CEO role and will shepherd things forward until they find an appropriate replacement for Daniel,” Wong said. “Enabling Daniel to move to a new Alibaba invested technology fund and providing him an emeritus status ensures he stays connected to the Alibaba Group and can help with the transition. “

“The complexity of the group restructuring is enormous and there are bound to be changes that occur that one doesn’t anticipate,” Wong said. “But given the depth of experience and skill within the Alibaba talent pool, I’m cautiously optimistic that they will be able to work through this in due time.”

Alibaba remains an icon of China’s e-commerce clout; its market capitalization at $225 billion makes it one of the world’s most valuable Internet companies. Ma, a former English teacher turned billionaire, has long been viewed around the world as the embodiment of China’s private sector success after China’s Communist Party launched a period of economic four decades ago. Wong, whose pre-Alibaba posts included stints at McGraw-Hill Companies and as a special assistant to San Francisco Mayor Willie L. Brown, said he was skeptical about “purpose in your work” as a driving force in life until he joined Alibaba.

“Jack in everything he did from the onset… was very much someone who created a company with a purpose. And from everything I’ve seen and observed firsthand, that was really the driving force that allowed the organization to succeed through the peaks and troughs and many of the challenges they encountered,” Wong said. Alibaba has also been able to go “beyond the zero-sum game mentality” in U.S.-China ties and “think about how to integrate the best of both.” Besides special assistant to Ma, Wong’s roles over the years included head of international marketing and business development, vice president of global sales, and executive director of the Alibaba Global Leadership Academy. He also led the Alibaba Global Initiatives team where he created training programs for entrepreneurs, universities, and government leaders in emerging markets.

Ma’s criticism of the state-dominated banking system in 2020 along with a Chinese government crackdown on the country’s most powerful Internet firms was followed by years of a low profile and a costly setback to listing plans for Alibaba’s financial services arm Ant. Ma this year has returned to a more visible public presence, though is no longer on Alibaba’s board. “Jack’s very symbolic of the entrepreneur community in China. In a way, his return is an acknowledgment or a nod to the importance of entrepreneurship,” Wong said.

“Right now in China — in terms of getting the economy back on its feet — I think that it (also) represents confidence or belief in the country and what entrepreneurship contribute, but also the future opportunities that lie ahead despite the tumultuous sort of period that not only China but the world’s gone through in the last two years,” Wong said.

Alibaba’s reorganization into six main units announced in March is aimed at unlocking value and fostering competitiveness of a business whose shares have lost approximately 70% of their value in less than three years. Zhang at that time continued as chairman and CEO of Alibaba, which is to become more like a holding company with each of the six business groups having its own board of directors and CEO. The six groups are Cloud Intelligence, Taobao Tmall Commerce, Local Service, Cainiao Smart Logistics, Global Digital Commerce and Digital Media and Entertainment. “The move marks the most significant governance overhaul in the platform company’s 24-year history and positions Alibaba’s businesses to capture market opportunities and further stimulate growth,” Alibaba said at the time.

“I thought (the restructuring) was a brilliant move amidst a very challenging time in the market,” Wong said. “What the company needed to do is figure out a way to unlock the value of the many businesses that it’s built up in the last 10-15 years. Also, how do you motivate employees amid a time when there’s just a lot of fatigue and also uncertainty,” he said. “By giving more ownership to the individual businesses, you really inspire (and) motivate the leaders and also the employees themselves to see that there’s a light at the tunnel.”

It additionally “addresses a lot of the antitrust and monopoly concerns from a regulatory perspective,” Wong noted. “So I think it’s a good move and hopefully will allow the company to continue to develop at a faster speed and with more sustainability.”

New CEO Wu was reported to have said in a memo to staff this week that the company needs to embrace changes being brought by AI and attract young talent. “If we don’t keep up with the changes of the AI era, we will be displaced,” he was quoted as saying. Alibaba already faces a new e-commerce landscape from a few years ago. For instance, TikTok, the hugely popular social media platform owned by China’s ByteDance, for instance, is making a big push into e-commerce. Chinese online fashion seller Shein has been eyeing physical stores.

As for new Alibaba Group Chairman Joe Tsai, Wong said his legal, investment and international background (the billionaire also owns the Brooklyn Nets basketball team in the NBA) will help the company. “With Alibaba’s new stage of thinking of going beyond just the domestic market, someone with Joe’s credentials (is) critical to guide that organization.”

Wong himself left the day-to-day at Alibaba in 2017 to set up his own media company RADII aimed at young readers. “It’s been a humbling lesson,” Wong said. “At Alibaba, I recognized that the organization would not exist without this confluence of U.S. and China, both in terms of thinking and resources. So I’ve decided to spend my time now to figure out how to facilitate more understanding between East and West, but focusing on cross-cultural understanding,” he said. Hopefully, that will allow “more engagement and less fear as we embark on this next stage of geopolitical complexities,” Wong said. “I do think that there needs to be a foundation of understanding and that’s what I’m trying to do through this effort.”

Wong also leads investment firm Seacliff Partners that backs digital startups, and teaches at an entrepreneurship academy he set up earlier at Alibaba. The values he wrote about at Alibaba in “The Tao of Alibaba” continue to guide his own life today, even though he is no longer directly in company management.

“It’s all interlinked,” Wong said.

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