The biggest news out of the tech world this morning was Chinese ecommerce giant Alibaba's one-billion USD investment in Lazada, from which the author made his exit about ten months ago. The deal saw both Rocket Internet, Lazada's original incubator, as well as Tesco, the British supermarket chain, cashing out half of their shares, in the process giving Alibaba almost complete control over the overall operations and future directions of what meant be termed Southeast Asia's largest ecommerce platform at the moment.
The business logic behind Alibaba's move needs no detail elaboration. Faced with an increasingly saturated and competitive market for online shopping in its home market, the company needs to diversify into high-potential, high-growth locales that has few strong competitors and plenty of room to leverage existing advantages. Southeast Asia's increasing online population, proximity to China, and lack of attention from international competitors like Amazon means Alibaba has opportunities to reinvent Lazada, in the process incorporating proven services like the Alipay e-payment platform.
Indeed, for Lazada, aside from the invested money, the greatest benefit to be gained from Alibaba is the software. On one hand, client-facing functionalities like Alipay, having been perfected over years of usage by millions of Chinese consumers, bring greater convenience to customers and simultaneously reduce internal workload and fraud. On the other hand, software for internal usage, including those of order processing and vendor management, used to fulfill millions of daily orders on Alibaba, will greatly increase Lazada's capacity.
Of course, operating such software to their maximum benefit will likely require personnel who are suited to their operating processes and cultures. Alibaba's controlling stake in Lazada will likely mean certain degree of micromanagement, in which employees who thrive under current ways Lazada operates will find themselves not able to adjust under new, Alibaba-stipulated methods. Given paramount consideration for efficiency in an e-commerce firm designed for more and more orders, these "outdated" employees will likely be shown the door sooner or later.
Who replace these "outdated" employees will determine the future makeup of an already varied Lazada company culture. If Alibaba is to take micro-management of Lazada operations to the logical extreme, it may begin outsourcing Alibaba employees to every relevant department of Lazada, managing a company that is increasingly Alibaba-like in internal procedures. But more realistically, they perhaps would set up detailed reporting mechanisms from existing Lazada personnel in lieu of expensive, anger-inducing (from Lazada people) process of putting their "own people" in every place.
The result may be emergence of a cohort of "point people" for Alibaba within Lazada. By reporting on Lazada for Alibaba, in ways that Alibaba likes, these "point people," themselves not necessarily managers or heads of important functions, will gain out-sized influence that can rival even the very management of the company. As the direct communications liaison with Alibaba, they not only will get themselves promoted within Lazada, but also, in general, sway the way Alibaba perceives Lazada along with its key people.
It will be difficult to speculate on the potential profiles of these "point people." But what can be speculated is that, unlike what many will automatically assume, these people will not just be "Chinese, with strong e-commerce background in the Alibaba way." It serves Alibaba no benefit to blatantly step in through such intrusive manner, destroying some already precariously delicate employee relationships, thereby sacrificing morale and productivity. Instead, the "point people" will themselves become acquainted with the "Alibaba way" in the process of increased communications.
All in all, one thing cannot be avoided. It is that Alibaba's controlling stake in Lazada will lead to a massive shake-up of Lazada's internal culture. Internal organization and structures may remain the same, and much of the people may even remain in the same places, but their behaviors, mentalities, and attitudes will no doubt change, along with systems and processes to be introduced by the new investor. The dynamics of how people change within the company will be interesting not just for the employees themselves but also ex-employees and the firm's long-time customers.
The business logic behind Alibaba's move needs no detail elaboration. Faced with an increasingly saturated and competitive market for online shopping in its home market, the company needs to diversify into high-potential, high-growth locales that has few strong competitors and plenty of room to leverage existing advantages. Southeast Asia's increasing online population, proximity to China, and lack of attention from international competitors like Amazon means Alibaba has opportunities to reinvent Lazada, in the process incorporating proven services like the Alipay e-payment platform.
Indeed, for Lazada, aside from the invested money, the greatest benefit to be gained from Alibaba is the software. On one hand, client-facing functionalities like Alipay, having been perfected over years of usage by millions of Chinese consumers, bring greater convenience to customers and simultaneously reduce internal workload and fraud. On the other hand, software for internal usage, including those of order processing and vendor management, used to fulfill millions of daily orders on Alibaba, will greatly increase Lazada's capacity.
Of course, operating such software to their maximum benefit will likely require personnel who are suited to their operating processes and cultures. Alibaba's controlling stake in Lazada will likely mean certain degree of micromanagement, in which employees who thrive under current ways Lazada operates will find themselves not able to adjust under new, Alibaba-stipulated methods. Given paramount consideration for efficiency in an e-commerce firm designed for more and more orders, these "outdated" employees will likely be shown the door sooner or later.
Who replace these "outdated" employees will determine the future makeup of an already varied Lazada company culture. If Alibaba is to take micro-management of Lazada operations to the logical extreme, it may begin outsourcing Alibaba employees to every relevant department of Lazada, managing a company that is increasingly Alibaba-like in internal procedures. But more realistically, they perhaps would set up detailed reporting mechanisms from existing Lazada personnel in lieu of expensive, anger-inducing (from Lazada people) process of putting their "own people" in every place.
The result may be emergence of a cohort of "point people" for Alibaba within Lazada. By reporting on Lazada for Alibaba, in ways that Alibaba likes, these "point people," themselves not necessarily managers or heads of important functions, will gain out-sized influence that can rival even the very management of the company. As the direct communications liaison with Alibaba, they not only will get themselves promoted within Lazada, but also, in general, sway the way Alibaba perceives Lazada along with its key people.
It will be difficult to speculate on the potential profiles of these "point people." But what can be speculated is that, unlike what many will automatically assume, these people will not just be "Chinese, with strong e-commerce background in the Alibaba way." It serves Alibaba no benefit to blatantly step in through such intrusive manner, destroying some already precariously delicate employee relationships, thereby sacrificing morale and productivity. Instead, the "point people" will themselves become acquainted with the "Alibaba way" in the process of increased communications.
All in all, one thing cannot be avoided. It is that Alibaba's controlling stake in Lazada will lead to a massive shake-up of Lazada's internal culture. Internal organization and structures may remain the same, and much of the people may even remain in the same places, but their behaviors, mentalities, and attitudes will no doubt change, along with systems and processes to be introduced by the new investor. The dynamics of how people change within the company will be interesting not just for the employees themselves but also ex-employees and the firm's long-time customers.
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