Alibaba goes to the middle platform, will other big companies follow?

Is the middle platform leaving the stage of history?

Ten years ago, when the concept of the middle platform broke into the strategic layout of the Internet giants, China's Internet industry was growing wildly. In 2015, Jack Ma brought the experience of the middle platform to Alibaba after visiting the Finnish game company Supercell.

At the end of that year, Zhang Yong proposed the organizational strategy of "big middle platform, small front platform". After that, a "middle platform" trend swept through China's Internet giants. ByteDance, Tencent, JD.com, Baidu, Meituan... for a time, from large companies to small and micro enterprises, it seemed that everyone was running around for this concept that most people knew little about.

Today, eight years later, when Zhang Yong said in an open letter that the middle platform will be made light and thin, we realized that the middle platform wave that once swept the country has gradually receded. But behind this simple sentence, there seems to be another mystery.

So, how was the middle platform introduced? What role did the organizational structure adjustment of the middle platform play in many domestic enterprises? What is the background of the middle platform gradually losing its aura? What kind of form will it eventually exist in enterprises? This article will mainly study these issues.

The glorious "Internet middle platform era"

The first application of the middle platform concept in China can be traced back to 2015.

Before discussing the middle platform, we need to understand one thing. Before the middle platform appeared, the traditional front-end and back-end model was not unable to continue to empower the enterprise business line.

On the contrary, the solution of the front-end passing the demand to the back-end, and the back-end providing "ammunition" to the front-end, is the most direct and efficient service model. This model directly connects the supply side and the demand side, and intuitively conveys each other's resources and information display interaction. With a set of logical solutions, a business line can be achieved.

Therefore, the existence of the middle platform is not to solve the problem of difficult implementation of the business line.

In fact, the background of the middle platform is that the company has developed to a certain stage, most of the time it is the transition period from the growth period to the stable period. At this time, the enterprise has gone through the process of enclosure, the number of employees has increased, and the business scope has expanded. The accompanying result is often a decrease in operating efficiency. Due to the lack of a good internal communication mechanism, the efficiency of cooperation between employees and departments is reduced. The expansion of the production line has also caused an increase in the number of processes, equipment, and the associated interaction costs. For enterprises that are becoming more complex and diversified, these are the bottlenecks that restrict them.

In order to outline a clear path for the company's next strategy, a new solution for organizing the relationship between the front-end and the back-end is urgently needed.

Under the traditional front-end and back-end model, in order to ensure the smoothness of the business line, each module of the back-end needs to correspond to each business of the front-end, and then adapt to the specific characteristics of different businesses. With the increase of business lines, such a one-to-one docking will show an exponential growth in development, and the organizational structure of the enterprise will become complicated.

As a bridge connecting the front-end and the back-end, the role played by the middle platform is not only to connect the front-end and the back-end. After introducing the middle platform, the original integrated "coupling" structure was transformed into a "loose coupling" structure by retaining the common functions required by different business lines, adding specific functions, and encapsulating the standardization device integration and specific function output.

This is like a restaurant kitchen. When it was still a small workshop, one chef was enough to handle the entire process from buying, washing, cutting, to cooking. As the scale gradually expands into a large restaurant, more chefs are needed. At this point, the process of washing and cutting vegetables can be handled by one person full-time, which can save time for other chefs, reduce the hotel's costs, and improve professionalism through standardization, clarifying the kitchen's division of labor structure, and achieving multiple benefits with one move.

Helped Alibaba through difficult times

In fact, when Jack Ma landed on a flight back from the Baltic Sea 8 years ago, he probably couldn't have imagined that many Chinese companies would be swept up in a middle platform revolution that he himself had initiated in the coming years.

In 2015, Jack Ma and his executive team visited a Finnish gaming company, Supercell. Despite having only 200 employees, the company continued to create global phenomenon-level game products such as Clash of Clans, Clash Royale, Hay Day, and Cartoon Farm, with an astonishing per capita output value of 354 million yuan.

This high efficiency is largely attributed to the company rules set up by Supercell itself. Simply put, all game development shares one development platform. Employees work in small teams of 2-5 people to quickly test games, get user feedback, and quickly try and error, thereby reducing company operating costs and maximizing operating efficiency.

At that time, this set of management logic was perfectly suited for large companies with a large organizational structure and a cumbersome and disordered management model, especially for behemoths like Alibaba that covered multiple fields. A management paradigm that could consolidate various business lines after sorting out the intersection points and reasonably allocate energy and resources might be like a timely rain after a long drought.

At that time, Chinese Internet companies had experienced explosive scale expansion after the initial traffic dividend, and some giants represented by Alibaba had gradually grown into towering trees with branches and leaves covering multiple fields such as e-commerce, finance, entertainment, local life, cloud services, and medical health.

Under the trend of increasingly diversified business development, how to allocate internal rights and responsibilities more reasonably, how to invest more resources in more promising business lines, and how to better respond to front-end needs with back-end support, such a "middle state" team that can integrate various businesses becomes particularly important.

Soon, the concept of "middle platform" was introduced in China and quickly became a benchmark.

On December 7, 2015, Zhang Yong, then CEO of Alibaba, formally proposed the "big middle platform, small front-end" strategy through an internal letter, and many other big companies followed suit. In the following years, as a non-traditional media that is set up between the front-end and back-end of the enterprise, refines the common needs of various business lines, and has a certain component packaging capability, the middle platform has repeatedly demonstrated its power.

From 2015 to 2018, Alibaba relied on the Shared Services Department to build an enterprise-level middle platform architecture, which supported multiple projects such as Tmall, Taobao, and Yitao. Alibaba's middle platform effectively reduced storage and computing resources, increased data storage capacity by 6 times, directly saving about 600 million yuan, and greatly shortened the time for new business to go online.

At that time, many people only regarded the construction of the middle platform as a technical evolution at the IT level, but it was not entirely true. Under the surface problem of hoping to solve resource waste and low efficiency, the significance of Alibaba's middle platform construction is more significant in terms of technology, business, and organizational upgrades.

And these are the heavy burdens that companies bear under the pressure of digital transformation.

However, in a sense, 2015 was not the starting point of Alibaba's middle platform. As early as 2009, under the parallel operation of Tmall and Taobao businesses, in order to connect two independent systems and solve the bottleneck of business development and resource waste, Alibaba's "Shared Services Department" came into being.

At that time, by sorting out and precipitating the business of the two platforms, Alibaba's top management hoped that it could help the two platforms avoid duplicate construction of functions and improve the fit of the two major business lines of the group.

Although the establishment and development of this department, which is on the same level as Taobao and Tmall in terms of organizational structure, was later proved to be very different from the expectations of the top management, it objectively laid the foundation for Alibaba's middle platform architecture transformation six or seven years later.

The establishment of Juhuasuan in 2010 was also a landmark event on this journey. It directly drove the endowment of the Shared Services Department's discourse, and indirectly enabled the 1688 established in the early stage and the businesses such as Feizhu, Youku, Ele.me, and Koubei that were later acquired to smoothly access the Alibaba ecosystem through the shared service system. In the era when the three e-commerce architecture systems of 1688, Taobao, and Tmall were completely isolated, and each application was developed and operated in opposition, this architecture was described as a "chimney" system.

After the establishment of the middle platform, the shared service system was formed, and organizational efficiency was greatly improved.

Demystifying the Middle Platform

After completing its historical mission, the middle platform finally reached the end of the ebb tide.

In fact, under the leadership of Alibaba, major companies such as JD.com, ByteDance, Tencent, Meituan, and Didi have launched their own middle platform systems in a few years. Some of them do meet their current needs, but some cannot avoid being accused of "riding the heat".

However, even Alibaba, which has been preparing for seven years, has to admit that after another eight years, the penetration rate of China's Internet has already reached its peak, and the middle platform strategy supported by the infinite extension of past businesses is finally unsustainable with the disappearance of traffic dividends and the arrival of stock patterns. At the beginning of creating ByteDance, Zhang Yiming integrated the middle platform architecture into the self-built system. At that time, ByteDance was called "APP Factory". When it took 6 months from project initiation to launching an APP in the market, ByteDance only needed 2 weeks. One of the reasons for this confidence is the highly efficient middle platform organization.

Supported by the middle platform, from 2020 to 2022, ByteDance has launched nearly 20 products in total. Different business lines are "parallel and intersecting", advancing all the way on a series of battlefields, and the middle platform has played the role of a super engine.

Represented by ByteDance, many Internet giants, and even many small and medium-sized manufacturing companies want to build a middle platform, all aiming for two goals: reducing costs and improving efficiency. However, as the volume of Douyin becomes increasingly large, and Tiktok's overseas monthly active users far exceed those in China, just the Douyin business alone needs to branch out more and more small front-ends through a tree diagram, undoubtedly bringing about the continuous incubation of small middle platforms.

But as different businesses become more and more distant from each other, the connection points become more and more dispersed, and the number of small middle platforms increases, the more they do, the heavier they become.

Let's turn our attention back to Alibaba. When building the "large middle platform and small front-end", Alibaba further amplifies the resource scheduling and data support transmission capabilities most needed under diversified businesses by building a unified technical architecture. Finally, it can use the same basic infrastructure and package the same resources under different scenarios. But there is always room for improvement. The front-end will complain that the middle platform is not responsive enough, the middle platform will be annoyed by the time lag of the back-end encapsulation, and the back-end will find it difficult to have direct business communication with the front-end. Over time, there will be resentment among colleagues, and the negative effect on organizational efficiency will be feedback.

Ultimately, the construction of the middle platform objectively lays the "wait, rely, and demand" fuse between the front and back ends. However, it takes time from igniting this fuse to exploding.

As a company that undergoes organizational changes most frequently among companies of the same scale, Alibaba's requirements for the middle platform are obviously stricter than those of ordinary companies. Just by strictly controlling the level and ensuring the smooth flow of resources, Alibaba needs to ensure that every adjustment it makes meets the requirements of a flat architecture. Just like the process of a light bulb being powered on, once there is a short circuit or even a break in the complex front, middle, and back ends connected by different components, this line cannot run on the original track.

Therefore, from 2016 to 2019, in less than four years, Alibaba underwent 20 organizational adjustments. Many of the high-level personnel changes, department mergers, data sharing, and business integration involved were extremely complicated. Change is important, but stability is also indispensable. Finding a balance between change and stability is not easy.

In fact, the construction of the middle platform is not friendly to the growth of new businesses in the future.

Taking Taote as an example, at the beginning of its establishment, Taote was highly expected by Alibaba to play the role of a stumbling block for Pinduoduo. In the early days of its birth, it naturally relied on the technology and data support of Taobao. However, when Taote officially began to establish its business line, it was found that it often took one or two months from the middle platform proposing requirements to receiving positive feedback from the middle platform, which was difficult for Taote, which was in the early stages of growth, to accept. At that time, as the Taotie team grew from a dozen members to thousands in a short period of time, in order to achieve independence faster, the project team moved out of the Xixi Park and began independent operation.

Represented by the failed cooperation case between Maotai and Yunxi Technology, not only Internet companies, but also many manufacturing companies followed the trend of building a middle platform as a stage goal at the beginning of the middle platform storm, and found it tasteless after it was built, and it was a pity to abandon it.

Now, after the initial rush, more and more companies have realized the shortcomings of the middle platform and their views on it have become more rational. In addition, after experiencing three years of epidemics, companies generally face huge financial pressures. Today, it is far more practical to customize the transformation based on their actual needs than to blindly enter the middle platform for outsourcing construction.

"Dismantling" or "Splitting"?

Alibaba's values are "embracing change." After Zhang Yong released a company-wide letter titled "Only by self-change can we create the future," these four words are probably all that the management wants to express to employees.

In this so-called "the most important organizational change in Alibaba's history," Zhang Yong clearly stated that "the group's middle and back office will be made light and thin."

In fact, Zhang Yong's attitude towards the middle platform had already been revealed to the outside world a few years ago. As early as the 2019 Lake University sharing session, Zhang Yong had said that if a company is doing the middle platform for the middle platform, it is dead. At that time, he had already conveyed a signal that the middle platform is by no means the goal, but a means. Since it is a means, there will always be a day when it is not so useful with the changes of the times.

After 2019, influenced by various factors, the domestic commercial pattern has undergone certain shocks. With the end of the era of wild growth of network traffic almost at the same time, the business expansion of head companies represented by Alibaba is no longer as smooth as before.

The stagnation of business development determines the difficulty of the middle platform strategy at the underlying logic. The rise of the middle platform itself originated from the anxiety of enterprise management during the rapid expansion of business. Once the development trend of business is suppressed, the high reuse characteristics of the middle platform itself cannot be fully utilized, but will instead drag down the overall rhythm.

However, it should be noted that "thinning" is not equal to "dismantling."

The difference between the two, whether from Zhang Yong's wording or Alibaba's actual decision-making, is quite obvious. Thinning can be understood as breaking down and slimming down, which is essentially "splitting," not "dismantling."

As mentioned earlier, the middle platform is a strategy that takes a long time to take effect. Alibaba has even laid the groundwork for seven or eight years, with large upfront investment and uncertain short-term returns. As a result, in the process of actually building the middle platform, it is easy to cause responsibility shirking and interest conflicts among personnel. But the results accumulated over the long term have already penetrated into the roots of the enterprise, and it is difficult to give up the system that has been painstakingly built, whether from the perspective of group strategic inertia or personnel gradient configuration.

From the chimney-style architecture to the distributed architecture and then to the shared architecture, Alibaba's e-commerce architecture model has emerged with the continuous emergence of applications such as Tmall, Juhuasuan, Xianyu, and Wantu. The business focus of Alibaba's middle platform has been set as external output, forming a system of middle platform core products + expert consulting services + ecological delivery cooperation. Through Alibaba Cloud, Alibaba will fully integrate the intelligent capabilities it has built in the process of implementing its middle-end strategy, including machine intelligence computing platforms, algorithm capabilities, databases, basic technology architecture platforms, and scheduling platforms, with Alibaba Cloud. As Ant Financial adjusts its financial business and competition for artificial intelligence models intensifies, Alibaba Cloud, as one of Alibaba's three major strategies clearly stated on its official website, has long been responsible for a task that is no longer the same as before. The middle-end that used to complement Alibaba Cloud still retains some value.

Today, companies face different challenges than before. The problem now is how to split sub-businesses, mobilize more flexibility, and inject vitality into the organization. The traditional problem of "waiting and relying" has become a chronic disease for many large enterprises, and the best way to solve this problem is to let go.

This time, Alibaba's "1+6+N" transformation is the prescription. Each subsidiary implements its own welfare, budget, employee incentive and punishment mechanism, and self-reliance will inevitably lead to different directions in different industries.

Under such changes, the original middle-end is no longer suitable. Combining the relationship between Temu and Pinduoduo, the independent financing of different subsidiaries of JD.com in recent years, and the background of Internet giants splitting their businesses, the splitting of underlying capabilities and organizations will inevitably drive the splitting of the middle-end.

In fact, Alibaba has not completely dismantled the middle-end. In the current situation where the rules of the game have changed, the middle-end becomes "thin" to clarify the boundaries of the middle-end and extract the truly abstract underlying operating framework and logic. This can greatly reduce costs and ensure the visibility of results within a certain range. After being adjusted and broken down, the capabilities of the middle-end will gradually be absorbed by stronger front-ends in a more agile way, thus serving more diversified development needs.

Conclusion

"The only constant is change."

As the company with the most frequent changes among companies of the same scale, Alibaba's corporate culture developed over the years is change. Although there have been external disclosures in the past few years, the largest organizational structure change in more than 20 years, which was initiated by Alibaba, still made many people tremble after the strategy was considered ineffective for a long time.

Under the pressure of cost reduction and efficiency improvement, Alibaba can make the decision to "deliver business to society" that cannot be delegated. At the same time, after more than a decade of strategic accumulation, different factions must have already emerged within the company. At this time, Alibaba's ability to actively seek change and self-correction is evident in its courage and determination to launch such a major reform.

Although it remains to be seen whether this strategy will be effective, this move must be made.