Tag: Business

I believe excellent CEOs need a set of unique skillsets – they need to be able to unite people, rally the morale, be bold and innovative in strategy.

Good CFOs are very good at numbers, very analytical when presented a well-defined question. They are also responsible for financing and executing M&As which can be strategical.

I think excellent CFOs can bring CEO-like value when they proactively pursue M&A deals or actively manage acquired companies. However, this is not a base case.

I could be wrong, but more often than not, CFOs don’t really need to be innovative or think outside the box to be okay – they are fine to be pragmatic and consistent, and sometimes expected to be so.

When CFOs become CEOs, there might be an attendance to deliver near-term numbers rather than focus on real value creation.

It could also go wrong if they rely too much M&As – bad deals will cost a fortune and even mediocre deals carry opportunity costs.

Alibaba used to have Daniel Zhang as CFO and he became CEO in 2015. When he stepped down in Sep 2023, the annualized return during his tenure is at best bond-like.

That’s why I don’t feel good about Mixue Group – it announced that its CFO Zhang Yuan will become CEO, effective immediately. Mixue founders will stay as co-chairman though.

Let’s see.

There are two core values provided by “e-commerce” platforms, transaction and discovery.

If you know what you want, search in Taobao, and put an order, Alibaba provides the “transaction” value.

If you just want to order McDonald’s food delivery, Meituan also provides the “transaction” value.

What shopping mall provides and what Taobao used to be famous for is that consumers are just wandering around / 逛 – this is how the “discovery” value can be provided.

“Discovery” is deserved to earn higher, and almost as a cut to final sales – businesses believe they win this incremental order because of you. In “transaction” mode, businesses believe they have already had the order; thus transaction providers can only earn the fulfillment fee.

In the transaction mode, the lowest transaction cost provider will naturally win more busines.

In the discovery mode, the provider that can generate more “new sales” can win more business.

So Tencent mini-program / mini-shop is good for luxury brands as the they just need a place to list. Consumers almost already know these brands. The lower than transaction cost the better.

Douyin, Xiaohongshu are better in discovery mode as users spend a lot of time in their app “wondering”. The apps are more likely than others to create incremental demand – users don’t know they want it until they see it.

Previously, transaction mode and discovery mode are served in the same place like Taobao.

This is also true for Meituan in food delivery or in-store dining. Chinese consumers scroll Meituan app for look for food delivery or dining ideas. Even if they are already in the restaurant or know what to order, they also go to Meituan to make related transaction.

Meituan also provides pre-defined sets for many in-store dining – this is tricky. Is this discovery mode? Consumers don’t know what to eat even they are already in the restaurant.

But I think it’s still more transaction mode. Think about the fixed tasting menus provided at a Michelin restaurant. Meituan doesn’t help create incremental demand here if I browse and purchase the $199 set via the app – the value is transaction or like credit cards.

All I want to say is that if Meituan will be like Taobao, competition will be from two fronts – one is by providing lower transaction cost, another is by stealing the discovery cake.

拭目以待

Alibaba recently outlined a 5-year target to $100bn AI+Cloud revenue, however many investors are either not convinced or skeptical of future monetization.

Why Alibaba has $100bn target in the first place?

Besides the delayed AI boom in China with potential breakthrough in domestic AI chip production, what are the drivers?

1) Amazon CEO Andy Jassy outlined $600bn goal in 10 years recently

$100bn would be about 700bn rmb and matches the AWS “number”.

2) Within Alibaba, there could be potential internal politics consideration

E-commerce is still the most profitable core business; Jiang Fan leads the e-commerce efforts, spending billions in quick commerce etc.

Eddie Wu leads the AI+Cloud and is CEO of Alibaba. This is growing fast but still not as profitable.

These two people might be fighting for resources and territory within Alibaba.

AI+Cloud needs to be bold.

700bn rmb rev with 15% EBITA margin will be ~100bn rmb EBITA.

This could be matching Alibaba’s China e-commerce adj. EBITA in 2026, which dropped from ~200bn though, due to massive subsidy.

For Jiang Fan, quick commerce is a way to paint growth picture for overall china e-commerce business.

Otherwise, Eddie Wu might get more of Alibaba’s incremental spending, which then will almost ensure Wu’s rise and Jiang’s fall.

Jiang was also smart in not picking the fight with PDD, which is probably harder to win. The fight with Meituan is not easy, but if you have to pick one to fight with between PDD and Meituan, Meituan is the choice.

Tencent also has already made the choice – it sold Meituan stake and kept PDD stake.

Fighting with PDD is more defending vs. fighting with Meituan is winning new businesses. KPIs will look more exciting in the new business.