Recently, Kuaishou issued an internal email, announcing that the company has launched a new round of structural adjustments, involving 15 business lines such as main stations, e-commerce, and commercialization, and some media said that it is "the largest organizational structure and management adjustment since Kuaishou's listing in 2021".
Since the beginning of this year, Kuaishou has continued to adjust its organizational structure, which can be described as very positive. According to publicly available information, there have been as many as three major organizational and personnel changes since August.
- In August, the rank system was adjusted, including reforming the rank system and reducing the number of ranks.
- In October, it was announced that CEO Cheng Yixiao would also serve as chairman.
- In November, Wang Jianwei served as the head of the e-commerce business department and the head of the commercialization business department, reporting directly to Cheng Yixiao.
According to common sense, the organizational structure involves the most basic distribution of responsibilities and rights of the company as a whole, and it is generally not appropriate to change frequently. Could it be that you are panicking?
01 Merged departments and focused on recruiting real estate business
Specifically, this adjustment mainly involves the following four aspects:
- Kuaishou main station - a number of intersecting departments merged, the four sub-departments were reorganized into three horizontal departments of live broadcast, short video, production and social according to the user use module, and reported directly to Yu Yue, the person in charge of the main station, and the information transparency was increased; the original product department responsible for all products was cancelled, and its sub-departments were upgraded to a higher level; the new incubation product department was established, and the original search business department was renamed the search product department.
- Commercialization Division - Previously, the core business of Kuaishou Commercialization Division was the local consumption department, in this adjustment, the original consumption department was renamed the recruitment real estate business department, and the main business of the department was adjusted from local life services such as food and wine to the Kuaishou platform.
- E-commerce Division-The department responsible for the commercialization of small and medium-sized businesses and the ecological business of talents, which was originally under the Commercialization Division, was moved to the E-commerce Division.
- Operation Department - 8 business lines were reduced to 4, the Author and Content Ecology Business Department was newly established, and the original Entertainment Business Department was renamed the Entertainment Business Department.
After this structural adjustment, first, Kuaishou's business direction has shifted, and recruitment and real estate are regarded as the next key growth points. Second, in the e-commerce business, Kuaishou began to focus on firepower, that is, "put all the modules that can be closed-loop e-commerce business together". Third, the company has begun to make great strides towards commercialization from the content-oriented, and from the perspective of the organization as a whole, the management will be more flat, and the collaboration between departments will be smoother.
Figure 1: Adjustment chart of the organizational structure of Kuaishou main station
Note: The department name with * after the name refers to the newly established department of the main website
Source: Musheng Consulting, online information
02 Internal and external troubles, seeking new growth points
Kuaishou adjusted its organizational structure at this time, mainly for the following reasons.
(1) Sluggish GMV growth
The data shows that since the establishment of the Kuaishou e-commerce sector in 2018, the annual GMV (total merchandise transaction) of Kuaishou e-commerce has shown an increasing trend, but considering the recent data and the GMV growth rate, it can be seen that the situation is not optimistic (Figure 2). From 2018 to 2019, the GMV growth rate of Kuaishou e-commerce was as high as 61,598%, but with the passage of the tuyere, the growth rate declined all the way. From 2021 to 2022, the GMV growth rate of Kuaishou e-commerce will only be 32.5%, and the sluggish growth of GMV has become a fact. In the first three quarters of 2023, the year-on-year growth rate will be 32.6%, which is still not improving.
Figure 2: Kuaishou GMV and GMV growth chart
Note: The GMV growth rate in the first three quarters of 2023 is year-on-year
Source: Musheng Consulting, Kuaishou financial report
In addition, compared with Kuaishou's two-caliber human efficiency curve (Figure 3), the growth rate of per capita GMV is rising, but the growth rate of per capita net profit (loss narrowing) is relatively flat, indicating that the conversion rate of sales (to profit) of its e-commerce business is decreasing, or the cost of sales is increasing, and the difficulty of monetizing traffic is still a major pain point for Kuaishou. The focus of its people is still on doing it at scale, not on making it big. At a time when the interest e-commerce track has entered the second half and major enterprises are frantically harvesting, this anchoring of the focus of work may not be accurate.
Figure 3: Kuaishou human effect comparison chart
Source: Musheng Consulting, Kuaishou financial report
(2) Seek new growth points
Kuaishou's business is mainly divided into three major segments, including online marketing services (advertising), live broadcasting, and other services (including e-commerce). In the past, Kuaishou relied on the live broadcast business to get started, and in 2019, the proportion of live broadcast revenue in total revenue was as high as 80.4%. In recent years, Kuaishou's live broadcast revenue has maintained steady growth, but now, its revenue proportion has dropped to less than 35%.
Figure 4: Changes in the proportion of Kuaishou's live broadcast revenue
Source: Musheng Consulting, Kuaishou financial report
In other words, it is imminent for Kuaishou to seek new growth points.
In this adjustment, Kuaishou changed the name of the local consumption department, which was previously the most core local consumption department, to the recruitment real estate business department, which is enough to see its emphasis on the real estate business. Since Kuaishou invested in the real estate business in 2022, the results are obvious to all, and the GTV (total transaction value) of Kuaishou's real estate business in 2022 exceeded 10 billion yuan, and even the real estate transaction volume in the third quarter of this year alone reached 14 billion, surpassing the transaction volume of last year.
According to the financial report data, in the second quarter of 2023, Kuaishou achieved its first profit since listing, with a net profit of 2.69 billion yuan, and in the third quarter, Kuaishou's total revenue increased by 20.8% year-on-year to 27.95 billion yuan, with a net profit of 3.17 billion yuan, achieving profitability for two consecutive quarters.
The real estate business has undoubtedly become a new "lever" to promote Kuaishou's growth, and even if the real estate industry is in a downturn, Kuaishou's real estate business is still developing rapidly. But how long this leverage can last, and whether it will be as short-lived as Taobao real estate and Jingdong real estate in the past, remains to be verified.
(3) Competitive pressure
In addition, the strong rise of Douyin has also put Kuaishou under pressure.
According to QuestMobile data, as of September 2023, the monthly active users of Douyin and Kuaishou are 743 million and 457 million respectively, with a year-on-year growth rate of 5.1%, but due to different bases, the gap between the two has further widened. Reflected in the financial report data, the contrast between the two is more obvious, in the third quarter, Douyin's revenue was as high as 186 billion yuan, while Kuaishou's revenue in the same period was only 27.95 billion yuan.
Figure 5: Douyin and Kuaishou monthly active user growth chart
Source: Musheng Consulting, QuestMobile database
On the one hand, with the rise of domestic short videos, the competitiveness of the Douyin platform is increasing day by day. On the other hand, in the face of the standardization of the live broadcast industry and the loss of anchors, as the first brother in the field of live broadcasting, Kuaishou urgently needs to make certain changes.
03 Cliff driven, it's not too late
According to Dr. Mu Sheng, there are only two situations in which companies can choose organizational change:
- Either it is "willingly driven", the enterprise sees the "next stop" of the organization and wants to become better;
- Either it is "cliff-driven", and the company is forced to have no choice but to change.
Based on Musheng Consulting's experience in organizational change, 99% of the companies that implement organizational change are cliff-driven, not willing-driven. What are the remaining 1 percent? They must have a top boss like Ren Zhengfei and Zhang Ruimin, and this kind of boss is a rare long-term activist who can see the end game and is willing to pay the price of reform.
Kuaishou is facing internal and external troubles, and this organizational change is obviously "cliff-driven". Organizational change is a big move, involving changes in all kinds of responsibilities and rights, and who is willing to go to great lengths unless it is absolutely necessary? Kuaishou has more or less seen its own "cliff", and to a certain extent, this kind of operation is still worthy of respect.
However, in the long run, Kuaishou's organizational design is still not "moderately advanced", but more "dragged by the business", and follows the cognitive rules of general enterprises for organizational design.
In the early stage of the development of general enterprises, the boss has a Xi in organizational design, does not like a clear division of labor, but likes to put many responsibilities into a super department that a strong person is responsible for, and become their own doppelganger, such as operation center, operation center, product center, coordination center, etc., forming a "dammed lake department", that is, the ability limit of this strongman is the efficiency limit of this department; and then, a little "dammed lake department" appears If the operation is not smooth, it will be canceled, and the various lines will be reported directly to the boss again, and the boss's management will be exaggerated.
This traditional organizational design approach makes it difficult for them to gain an advantage over their opponents in this field, so the hard business has become the only option. Even, in some strategic areas that everyone can see, they will fall behind because of the lag in organizational design.
For example, everyone has seen the field of interest e-commerce, but Douyin's basic traffic is larger, and with the same organizational efficiency, the latter must win. Just imagine, if Douyin is not only more resourceful, but also ahead in organizational design, then the result of this business war is self-evident.
It is still unclear whether Kuaishou's adjustment will allow them to regain their advantage in organizational design, but judging from the organizational adjustment information disclosed so far, Kuaishou still has some questions that need to be answered.
For example, after the organizational adjustment, there are as many as 17 managers who report directly to Yu Yue, the person in charge of the main station, according to the general organizational design principle, such a parallel model of "flattening + centralization" is not sustainable, unless Yu Yue is "superhuman".
In addition, it should be noted that in organizational adjustment, the adjustment of organizational structure is only the bright line, and the follow-up of the incentive mechanism and empowerment mechanism is the dark line. Only when the two lines of light and dark are straightened out can the organizational adjustment be truly implemented and the organizational efficiency can be truly guaranteed. In these two areas that require hard work, the high-flying Internet companies have always been "paying lip service and acting slowly", and it is unknown whether Kuaishou can take the lead again.