l Digital Commerce Group and Digital Media and Entertainment Group. What’s next In a conference call to investors, Daniel Zhang, chairman and CEO of Alibaba, said that the company has been evolving since its inception in 1999, and that its business models have been iterating as the company works to unlock productivity, value creation and progress. “An example of this is when we turned one Taobao into three Taobaos twelve years ago. It’s this kind of evolution that has unleashed tremendous productivity. These organisational transformations represent that same kind of courage to unlock this,” he told media and analysts on a conference call this week. The biggest difference between this transformation and previous ones is that the company is now a much larger and more complex institution that has a wide range of businesses that serves different markets and customer bases, he said. A necessary step Zhang is of the opinion that this reorganisation is more necessary than any previous one, but also more challenging as it will allow the businesses to become more agile. It will enhance their decision-making and enable them to respond faster to market changes. “As I’ve been saying over the past few years, to our employees, we’ve been stressing the idea of agility as this is important in the context of rapidly changing market dynamics and tightening competition,” he noted. The transformation is expected to create greater ownership and provide incentive plans to the management team and employees of the business groups to drive entrepreneurial innovation that stimulate growth.  Changes are afoot Based on initial reports, the six business units will have their own presidents, management teams and board of directors. According to Zhang, all six  business units will become independently operating companies with their own financial reporting. “Alibaba Group will be the holding company and the controlling shareholder of the business group companies. As the controlling shareholder, it will have control over the boards of these companies,” Zhang explained. He went on to say that the nature of the relationship dynamic will change. Alibaba Group will be more of an “asset capital operator” than a “business operator” in relation to its business groups. Each business group company will have its own corporate entity. New structures The companies will have their own governance structures, and they will be also set up to enable financing from third parties, so when conditions are right, they can go to market to seek financing. “We expect these changes to unleash more vitality from our business units,” Zhang said, emphasising that for the vast majority of the companies, the overall mission will remain unchanged. It will always be about ‘making it easy to do business anywhere.’ One of the main reasons Alibaba is pursuing this business transformation now is that the new fiscal year starts in April. According to Zhang, the strategy and business planning for these units will commence immediately. “The management teams of the business groups will be working on planning and mapping out strategies not just for the coming year but for the coming years too,” he added. Passion and excitement Zhang believes that the transformation taking place will bring passion and excitement to the business units as they formulate strategic plans to “unleash their vitality” for the future.  Toby Xu, chief financial officer for Alibaba Group, clarified that apart from Taobao Tmall Commerce Group, all of the remaining five business units will be set up in a way that enables financing from third parties, spin-offs and IPOs. “After going public, we will continue to evaluate the strategic importance of these companies and decide whether to continue to retain control or not. This will be an important strategic consideration,” he told media and analysts on a conference call this week. Xu also reiterated the Group’s commitment to the share buyback program. It will continue to evaluate the program periodically based on its cash flow situation and what is needed for investments.  The company will also continue to monetise less strategic investments in its portfolio to improve its capital structure. Maintaining synergies Xu acknowledged that the restructuring could have an impact on synergies within Alibaba Group, but he believes the Group will continue to maintain and build on the synergies among its business units in order to create value for the customers. “These synergies are hugely important. This is a key differentiator for us in the context of intense market competition. For example, all of our businesses are on Alibaba Cloud, and that’s created a lot of efficiency and resulted in lower costs,” he added. In his opinion, a lot of these business units have unique needs and characteristics, and the Group as a whole has worked out ways to “unleash” these synergies. If anything, he feels that the new organisational structures will be just a better market test to enhance these strengths. Lastly, on the topic of the Group’s progress with regards to a primary listing on the Hong Kong stock exchange, Xu said that the company is still evaluating market conditions and external circumstances. This process of this evaluation is still ongoing.