The Burst Bubble of Internet Company Management Innovation

Wolf culture, OKRs, nicknames, flexible work schedules, and more…

Over the past 20 years, the tech industry has introduced numerous innovative management practices, with some originating from China’s own internet companies and many adopted from Silicon Valley, becoming common across the global tech landscape.

During the golden era of growth for the tech sector, nearly every successful internet company seemed eager to share its unique approach to management. Some disseminated their philosophies through founder speeches, others through publishing books, and giants like Tencent and Alibaba influenced their investee startups via exclusive entrepreneur clubs.

However, as the golden age of internet growth concluded and the global internet penetration bonus (domestically seen as a demographic dividend) disappeared, we were shocked to find that many of the management concepts previously celebrated within the tech industry began to falter from 2020 onwards… or perhaps, they were never truly effective to begin with.

Looking back at this juncture, whether it’s Alibaba, Tencent, ByteDance, or Western giants like Google, Amazon, and Netflix, it appears their management philosophies may have suffered from a fundamental attribution error—overestimating their own efforts (and managerial actions) while underestimating the tailwinds provided by the era they operated in.

In the realm of business management, there are a few clearly wrong answers, but everything else is deemed “right.”

This reflection stems from my recent reading of the book “Talent of the Big Tech”(《大厂人才》), authored by Samantha Lou, a partner at Mu Sheng Consulting. The book conducts a detailed horizontal evaluation of the management systems of major tech companies like ByteDance, Tencent, Alibaba, Meituan, and Huawei, occasionally comparing these models with traditional business management systems.

While the original author, Samantha, concludes her findings in a somewhat diplomatic tone, my own experiences working within these tech giants, coupled with my impressions from the book, lead me to a more blunt assessment: the management innovations of all these internet behemoths might just be unnecessary embellishments.

Take, for example, OKRs (Objectives and Key Results), whose most notable practitioner, Google, introduced a new management tool in 2022 called GRAD (Googler Reviews and Development). GRAD, a tool more performance (akin to KPI) rather than goal-oriented, marks a significant shift from OKR.

According to the book, Google’s switch to GRAD from OKR was motivated by two main reasons. The first is that, for a long time, OKR’s anti-KPI nature meant that a vast amount of routine work couldn’t be assessed, relegating OKR to just one part of the company’s broader Performance Management system, covering only 40% of tasks. The second reason is the complexity of OKR’s processes and evaluation mechanisms which became a burden to employees. The constant need for alignment, communication, and review often proved more painful than simply assessing whether a business metric was met.

ByteDance, a staunch advocate of OKRs (Objectives and Key Results) in China, adjusted its appraisal methods and rhythms in 2023, shifting from bimonthly to quarterly reviews. This change reflects a broader trend where even companies that once pledged to “de-KPI” their operations, such as Baidu and Xiaomi, have recently reverted to traditional KPI assessments.

Alibaba’s use of nicknames, intended to diminish hierarchical structures and promote flat management, ironically led to the formation of cliques and a “clan” culture within the company, moving away from its original purpose. Tencent’s “horse racing” mechanism and bottom-up approach sometimes resulted in the company losing sight of the bigger picture, missing out on crucial business opportunities in information streams and short videos.

From a sociological perspective, the essence of modern enterprises is the product of individual specialization and collaboration. Their function is to bind people together in specific social relationships to achieve feats beyond the capability of any single person. This implies that the Tower of Babel could be constructed in many ways; as long as there’s no divine intervention to confuse efforts, any method could reach the heavens. The “divine confusion,” in this metaphor, is the belief that one’s own method is the only correct path.

The widespread layoffs and downturns within the global internet industry in 2023 highlight a critical reevaluation of management innovations. These innovations, once thought to be universally applicable, may not even suit the tech industry itself. For instance, ByteDance, once dubbed the “App Factory” for its rapid production of hit apps, has not launched a blockbuster product since the full adoption of Feishu (Lark) in 2017. Tencent’s methodologies have not produced another WeChat, and ByteDance’s strategies haven’t replicated the success of TikTok.

This suggests that propositions like “advanced teams should use Lark first” or Alibaba’s goal to “contribute 1,000 talents with over 10 years of service to society each year” could be traps for other businesses. The tech industry’s journey with management innovations serves as a cautionary tale, highlighting the potential pitfalls of adopting these models without considering the unique dynamics and challenges of one’s own organization.

Believing that tools, talents, and methodologies borrowed from internet companies can revitalize a struggling business might lead to significant disappointment. This perspective is not from the book but an observation I’ve made regarding ByteDance’s approach. Notably, ByteDance, unlike Alibaba, rarely exports its corporate management theories. Yet, its product, Lark (Feishu), has been sold from its inception with a methodology bundled into the product. Lark has received accolades across media and internet companies, even being used by teams within Baidu and Alibaba for collaboration on peripheral projects, truly living up to the idea that “advanced teams use Lark first.”

However, the world is inherently composed of what might be considered “backward” elements.

This realization hit me during a conference with slightly older participants, where I was sharing my document through Lark (the one with tens of thousands of words). Mid-presentation, an audience member asked me, “Which page are we on?” I was momentarily stumped. Lark doesn’t have page numbers because it never anticipated that someone would print out a digital document to follow along.

The questioner, in his 50s, was regarded as “old” from the perspective of many Chinese internet workers. Yet, he was also a tech pioneer who had been using computers since the 1990s. It would be unfair to question his digital literacy. This incident underscores a broader issue: most online document tools do not support “endnotes,” a critical feature in academic writing (not to mention “track changes”), enabling software like Kingsoft Office to capture market shares that Tencent Docs and Lark cannot.

Is it because these dazzling online document tools aren’t “advanced” enough? No, it’s because they are too advanced, failing to align with the more “backward” aspects of our reality.

Unless society assumes a scenario where everyone retires at 35, backward compatibility is a fundamental element of both advanced management and productivity tools. This alignment—or misalignment—between innovative solutions and the practical needs of a diverse workforce highlights a significant gap in the tech industry’s approach to product development and deployment.

The SaaS (Software as a Service) market’s challenges in China have been thoroughly analyzed, with numerous reasons cited for its difficulty. Yet, by 2024, it’s hard to find a company bold enough not to subscribe to Microsoft Office. Even the popularity of the free WPS Office stems from its similarity to Microsoft Office, enabling it to capture a segment of the market. This observation led to a realization during a discussion with a friend about SaaS:

“If you create an office suite that you believe is innovative and doesn’t resemble Office, then you’ve likely made a mistake. This is because every button in Microsoft’s suite is backed by a product and development team possibly as large as yours, each contributing to 0.x% to x% of market share.”

While tools like Lark, Notion, and Obsidian may be used for daily tasks and small team collaborations, they fall short in larger-scale societal collaborations, where Microsoft Office becomes indispensable. Would ByteDance use Lark to share documents with government agencies? Would Alibaba and Tencent use DingTalk documents for preliminary contract reviews? Unlikely.

This principle applies not just at the tool level but also in management methodologies. OKRs, touted as an “innovation-oriented” management tool, do not represent the norm for businesses, even in the last half-century of intensive human innovation. Innovations create new growth opportunities, but the subsequent expansion is invariably driven by extensive, routine work powered by large teams and significant funding.

Recent years have offered stark contrasts in this area. On one side, the increase in layoffs has led to more complaints on Maimai, a professional social networking platform, about “parachuting” employees from companies like Alibaba. These stories often involve a high-ranking individual from a major firm implementing sweeping management and tool reforms in smaller companies, leading to business decline or even company closure within three months.

On the other side, Elon Musk’s acquisition of Twitter in late 2022, with his approach of overturning all management philosophies and cutting staff in essential positions by half, showcased a different outcome. Musk’s drastic server switch strategies—symbolized by his willingness to personally disconnect servers—did not result in a decline in Twitter’s (now X’s) main business metrics. In fact, progress in new AI ventures even surpassed that of Google.

These scenarios illustrate the complexities of adopting new tools and management practices. They underscore a critical truth: while innovation is essential, understanding the context and ensuring compatibility with established norms and systems is equally crucial for sustainable growth and operational stability.

Company Name Number of companies founded by resigned employees Number of listed companies IPO landing rate
Huawei 481 25 5.2%
Meituan 115 3 2.6%
Tencent 720 18 2.5%
Alibaba 941 16 1.7%
ByteDance twenty one 0 0%
Data source: Mu Sheng Consulting, IT Orange

The book ingeniously includes a dimension to prove a point that I find quite admirable. The author utilizes the entrepreneurial success rate of former employees from major companies as a measure to gauge the effectiveness of a company’s management system. Although this metric is not without its flaws, given the potential for underreporting and the fact that successful entrepreneurship is not solely measured by IPOs, it starkly highlights that Alibaba, which prides itself on its values and methodologies, falls significantly behind in this comparison.

In this analysis, Huawei is positioned as a “traditional enterprise” for comparison against internet companies. As a result, Huawei appears to have an advantage in nearly every assessed category, which might suggest a bias on the part of the author. However, is Huawei’s success truly attributable to its management philosophy, and is this philosophy replicable in other companies?

It’s well-known that Huawei has undertaken some talent management initiatives that are beyond the reach of private enterprises. Similarly, Pinduoduo has demonstrated unique capabilities in handling e-commerce consumer disputes. Thus, whether a company aims to instill a culture of hard work, implement a “refund only” policy towards suppliers, or any other ambitious strategy, the founders must realistically assess their capabilities.

Returning to the point I made at the beginning, there are clearly wrong answers in business management, and everything else might be considered “right.” When learning from others, understanding their mistakes is often more critical than emulating their successes. Unless your business is already failing, blindly following another’s path is not advisable.

Especially in the current economic downturn, a business’s failure might not necessarily be due to poor management. Attempting to imitate the frontrunners could hasten your demise. This cautionary note underscores the importance of discerning adaptation over mere imitation, encouraging businesses to critically evaluate which practices truly align with their unique contexts and challenges.

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