Lonely Cheng Yixiao, “wartime” CEO

Original link: https://www.latepost.com/news/dj_detail?id=1183

The CEOs of Chinese Internet companies often feel that they are living in a “wartime” state. Going to the Northeast to sell vegetables is a “battle”, financing is “ammunition”, and the HR arranged in the business department is called “political commissar”.

But according to Ben Horowitz, a well-known entrepreneur in Silicon Valley and co-founder of A16Z Ventures, for many years before the summer of 2021, Chinese Internet companies of a certain size are basically living in a state of peace.

Although these companies face fierce competition and may lose money unstoppably, they can always get money from the capital market – make slower decisions, make more mistakes, and have no life or death worries.

Horowitz believes that this type of company fits the management style of a “peacetime” CEO: the CEO is more likely to let his subordinates make decisions, even if it takes a little more time; long-term development of the organization.

But if the company loses its stable environmental support, a “wartime” CEO is needed: a CEO needs to make clear decisions alone in a very short period of time; many decisions can hurt an organization’s long-term development, but have to , because the life and death of the company is already a problem.

From Su Hua to Cheng Yixiao, Kuaishou made such a switch from “peacetime” to “wartime state” at the end of 2021.

In November last year, when Cheng Yixiao took over as CEO, Kuaishou’s morale was at its lowest point: the company’s stock price fell by more than 70% from its peak at the beginning of the year; the original expansion in overseas markets had been stopped; the company’s overall loss Still expanding.

The following month, Kuaishou initiated mass layoffs that affected every department. Everything from marketing advertising to R&D costs, from housing subsidies to meals and snacks, is shrinking.

After the layoffs ended, Cheng Yixiao mentioned these eight words at the last minute of the exchange meeting in March this year, “people are poor and short-minded, and face reality.”

These painful measures for employees have reduced the losses of Kuaishou. In mid-to-late March this year, the outbreak of the epidemic in Shanghai caused companies across the country to adjust their advertising budgets and also impacted e-commerce logistics. When the disaster came, Kuaishou’s operating costs had been greatly reduced.

In the first quarter of 2022, an average of nearly 350 million people opened the Kuaishou app every day, a record high. The company is still losing money, but it lost 2 billion yuan less than last year (35% loss).

It’s hard to say that Cheng Yixiao is a perfect CEO in a “wartime state”, but some difficult decisions have been made, and more than 20,000 Kuaishou employees are experiencing contrasts in their daily work and life.

There will be more Internet practitioners feeling this contrast. Kuaishou may be the first Internet company with a large number of layoffs, but it is far from the last.

Cheng Yixiao

Cheng Yixiao was born into a civil servant family in Tieling, Liaoning Province. In 2007, he graduated from the School of Software, Northeastern University, and worked as a R&D engineer at Hewlett-Packard and Renren. In 2011, Cheng Yixiao started his business for the first time. With his excellent product capabilities, he made an editing tool that can combine static pictures into a dynamic picture – GIF Kuaishou.

In 2013, Kuaishou transformed from tools to short video products and added social interaction functions. However, Kuaishou was on the verge of bankruptcy for a time – the daily active users fell into a bottleneck when there were less than one million. This is also the reason why Wuyuan Capital partner Zhang Fei later matched Su Hua to join – I hope that Su Hua and Cheng Yixiao can make up for each other’s shortcomings and cooperate with each other.

Su Hua brings strong technical strength to Kuaishou, but he does not like management in his heart, nor is he good at dealing with investors, and he is tired of endless business competition. He is very concerned about what kind of positive values ​​a company should bring to the society and users, which is the preciousness of Su Hua. But in the final analysis, the three basic and necessary tasks of a CEO are to set a strategy, be able to make money, and be able to manage.

“Neither of them are strong people. They have a tacit understanding of cooperation and a sense of boundaries.” Many people close to Kuaishou’s executives said that he, for example, asked the business cadres who reported to Suhua and Cheng Yixiao about business problems. Cheng will put forward his own opinions and suggestions, and explain what kind of results will be obtained in different ways, but Cheng Yixiao will not give instructions and ask what to do.

In an interview with the media in 2017, Zhang Fei said that Cheng Yixiao has a rich heart, but is not good at expressing. Until now, Cheng Yixiao is not too talkative. Whether it is satisfied or dissatisfied with the business, the employees can’t see any expressions on his face.

“Although his name is One Smile, he is Never Smile.” A person close to Cheng Yixiao joked.

“What is the essence of business?” is a question frequently asked by Cheng Yixiao. He pays attention to the first principles of business, and is obsessed with returning to the most basic assumptions of things to look at problems, and then deduce step by step to see where the future is going.

This means that Cheng Yixiao needs to know enough business details and information to help deduction and judgment. A number of people who have communicated with Cheng Yixiao said that Cheng Yixiao looked at the data every day, reviewed the data at least once a week, and was used to constantly deducing and asking questions. “The discussion process is like going through a long exam.”

Cheng Yixiao participated in many meetings and had full discussions with the team, but he did not make decisions easily and was not easily persuaded.

“The lower limit is very low,” Cheng Yixiao once described himself internally. Although he asked a lot of questions, he had a high tolerance for various business details in the process. Managers tolerate deviations in details. The advantage is that employees are willing to express themselves and are not afraid of being punished; and managers can deeply understand the details of the company’s business from the bottom up.

Cheng Yixiao believes that what is important is the cognitive understanding behind the detail deviation. For example, when he played Kuaishou, he encountered a self-proclaimed deaf person, but he was not a deaf person. This is a deviation of details. He can be understood as the carelessness of the reviewers, which is an inevitable state of human nature. But if two such cases are swiped in a few minutes, it’s not a matter of carelessness, but a possible problem with the mechanism.

Cheng Yixiao insisted on clarifying important matters. He likes to prefix things like “I have to make this clear,” “very, very,” and even repeats one thing multiple times. “If everyone is not clear enough, I will say it a few more times.”

Cheng Yixiao thought boldly. Back then, there was great disagreement within Kuaishou on whether to use cash subsidies to push the Kuaishou Express Edition. In the end, Cheng Yixiao pushed the Kuaishou Express Edition under the pressure of losing money and affecting the ecology of the main station. A business person in charge recalled that he and Cheng Yixiao had discussed business budget planning, and Cheng Yixiao would repeatedly ask him, “I will add a 0 to your budget, how much faster can you push things forward, and how big is your share?”

After taking office as CEO, he made more realistic reflections. He believes that in addition to era and environmental factors, the elements of personal success include courage, luck and ability. “Obviously I’m not someone who succeeds on the third factor.” But as the uncertainty of the general environment increases, the factor of “ability” will become more and more important.

Starting from improving his personal ability, Cheng Yixiao maintains a certain frequency of meeting and learning with important figures from different companies, such as Xu Lei, CEO of Jingdong Group, Yu Yongfu, CEO of Ali Local Life; Wang Huiwen, co-founder of Meituan and independent non-executive director of Kuaishou. , and it is the object that Cheng Yixiao often communicates with.

In terms of organizational culture, Cheng Yixiao also made changes. In the past, “customer obsession” was the core of Kuaishou’s values ​​and the fundamental starting point of all work. “But not all Kuaishou customers and users’ needs must be met?” He wondered whether there could be a way to satisfy customers with an ROI (input-output ratio) greater than 1. The ROI is greater than 1, which points to the survival problem of Kuaishou.

Cheng Yijie was stern. He said that if he was obsessed with all the needs of customers, “the company would close down soon.” A month later, Kuaishou issued an internal letter, adding a “ROI greater than 1” to the value of “customer obsession”. requirements.

The more Internet companies use benchmarking, the more similar they become. If leaders lack strategic vision and focus more on the improvement of operational efficiency rather than on the implementation and implementation of longer-term strategies, superimposing competition and performance pressure, they will fall into exhaustion, from the team to the company’s business itself. .

In the past, the management of Kuaishou was most questioned by the outside world for “the strategy is not clear and the execution is not firm”. This is deeply reflected in the “K3 Campaign”, “Southern Campaign” and internationalization.

Cheng Yixiao took office for eight months, suspended the expansion of overseas markets, started layoffs and reduced costs and increased efficiency, and made it clear that the focus of the next stage of Kuaishou is to achieve profitability. He also began to try to touch the existing problems in the organizational culture – for example, one problem that plagued him was how to achieve consensus at the entire organization level. But he still has a lot to do. He has not yet found a breakthrough direction for the business that has entered the bottleneck period, has not replaced the senior management team, and has not yet clearly defined the next strategy internally.

When Cheng Yixiao first became the CEO of Kuaishou, some investors worried that he was not good at management and organizational culture, but these were not the key. Developing a clear strategy and executing it is the CEO’s main task. This is also the more core proposition of Cheng Yixiao after completing the goal of “spending less money and making more money”.

down, down, down

From November 2021, Cheng Yixiao decided to break even in Kuaishou’s domestic business in 2022. According to the financial report, Kuaishou’s net loss in 2021 will reach 18.8 billion yuan, a year-on-year increase of 135%.

For the first time, “cost reduction and efficiency increase” has been included in the quarterly assessment indicators of Kuaishou executives, and its importance is equal to “performance”.

Kuaishou welfare used to exceed bytes. At the most exaggerated time, the Kuaishou Administration Department will have a special person to ensure that the daily snack mix is ​​not the same, and employees can eat “unseen snacks”. At one point, they accurately measured the sweetness of the apples sent to employees for afternoon tea, and even introduced professional equipment to regularly test the sweetness and stem size of the fruit. Whether the beef in the cafeteria beef noodles is heavy enough also needs to be measured. Now that the free meals are gone, the ice cream provided in the pantry has changed from 3-4 yuan worth of cuddly and chocolate to 1-2 yuan worth of small puddings and old popsicles; employees only work overtime until 8 p.m. every day to get an ice cream. A 30-yuan canteen and convenience store coupon. Employees with more than 3 years of social service are no longer entitled to the monthly rent subsidy of 2,000 yuan.

According to the financial report for the first quarter of 2022, Kuaishou has saved about 100 million yuan in costs by cutting benefits from January to March.

Almost at the same time, Kuaishou began to shrink. At a Kuaishou high-level meeting in December 2021, some people proposed that the company set a ratio of presidents and members and distribute it equally to each department for execution. Three days later, the human resources department issued a final plan after synthesizing the opinions of both parties: each department laid off employees in different proportions, and the total layoff ratio of the whole company was set at 20%.

As of the end of 2021, Kuaishou has about 28,098 full-time employees, and if calculated at 20%, more than 5,600 employees will be laid off in this round of adjustments.

However, Kuaishou denied the above-mentioned layoff ratio.

The budget approval of Kuaishou’s various businesses has also become stricter. “In the past, spending was more arbitrary. Generally, you only need to fill in the amount and use to get the budget approved. Now, you need to clearly calculate the input-output ratio of each money.” A Kuaishou employee said. One of the words he heard most recently when reviewing the budget was, “A drop in money, a drop again.”


“LatePost” learned that Kuaishou plans to reduce server rental costs by building its own data center. The location of the data center is set in Inner Mongolia, because the local temperature is low all year round, and there is no need to configure a large number of air conditioners to help the server cool down, so that the cost can be further reduced.

The expansion path of new business has also changed from “holding high and hitting high” to “running in small steps”. In February 2022, Kuaishou launched the local life business and selected 6 cities including Harbin, Shijiazhuang and Changchun as pilots. Cheng Yixiao gave the team half a year to explore the feasibility. However, Kuaishou did not choose to enter the local life business by burning money. In terms of supply, Kuaishou chose a lighter model—on the one hand, it built its own team for expansion, and on the other hand, it chose to cooperate with Meituan to obtain merchant resources. “LatePost” learned that the conversion model of Kuaishou’s local life from traffic to transaction has not yet worked, and the cost of each transaction is relatively high.

The international business, which has burned 13 billion yuan in 2021, has also begun to change its strategy. The budget has been reduced, the user growth target has been lowered, and the volume is only maintained in Brazil and Indonesia, which were previously advantageous regions. The main goal of other markets is to retain old users, while actively exploring overseas commercialization paths.

Kuaishou has long returned to reality. At the beginning of 2021, Kuaishou set a goal for the international business to have more than 100 million daily active users throughout the year, and to form a 1:2 market structure with TikTok globally within three years. According to internal calculations at the time, if the move was successful, Kuaishou would have the opportunity to become a trillion-dollar company.

How to internationalize, Kuaishou has designed two paths: one is to break through at a single point, and penetrate one market before entering the next market; the other is to build a unified overseas middle office and enter multiple markets at the same time. At that time, the idea of ​​Su Hua and Cheng Yixiao was that what Kuaishou wanted to achieve was globalization, and a slow breakthrough in a single market could only be called internationalization. In the slow progress of the single-point breakthrough, Kuaishou may miss the final window of globalization.

After much discussion, Kuaishou chose the latter path. However, since then, the entire overseas force has encountered TikTok’s tough strategy of “comprehensive suppression and no blanks”, and encountered changes in the international situation. Since then, the head of the business, Qiu Guangyu, has resigned. This path fails completely.

Cheng Yixiao is currently directly leading the overseas business, and they have returned to the first path of internationalization. Both inside and outside of Kuaishou believe that this may be the last chance for Kuaishou’s overseas business.

Back on track, but with a narrower tunnel

Economist Hirschman (Albert O. Hirschman) proposed the “tunneling effect”. When two trains with the same destination pass through the tunnel, the tunnel is congested and the two cars cannot pass through, and the passengers in the car are calm; and when one train starts to move slowly, the people of the other train will be anxious and want to transfer to another train in the car.

In 2021, Kuaishou and Douyin will conduct the final incremental user battle for short videos. In October of that year, affected by the general environment and the company’s growth costs, the two sides suspended competition and knew that the method of quickly ending the short video battle by burning money would not work.

“Douyin is unlikely to be able to kill Kuaishou in a short period of time; secondly, killing Kuaishou is equivalent to killing yourself.” An internet analyst who has been following Kuaishou for a long time said that the current situation is beneficial to Kuaishou, and it does not need to be affected by Douyin And you can move forward at your own pace without fear and without burning money frantically.

But the bigger challenge comes from the overall economic environment. The economic slowdown will directly affect the confidence of enterprises in advertising. Cheng Yixiao said in the first quarter earnings meeting that all kinds of advertisers are becoming conservative in their placement. The outbreak of the new crown pneumonia epidemic has further exacerbated the decline of the advertising industry. For example, the e-commerce platform, which contributes about 15% of the revenue of Kuaishou advertising, in the first quarter of 2022, due to the impact of local restrictions on its business, it has lowered its external marketing budget.

Kuaishou’s daily active users and user usage time increased by 17% and 30%, respectively, in the first quarter of 2022, hitting record highs in absolute terms. But more users did not bring the same revenue growth to Kuaishou. In the first quarter, Kuaishou’s advertising revenue (online marketing services) was 11.3 billion yuan, 32.6% more than the same period last year, but the growth rate was only 1/5 of last year’s. Similarly, Kuaishou’s live broadcast (rewarding) revenue was 1 billion yuan less than in the fourth quarter of last year.

Now, what supports the growth of Kuaishou advertising is more so-called “internal loop advertising” – the brand or the anchor who spends money to buy exposure.

In theory, “internal loop advertising” is less affected by economic fluctuations – the economy is not good, and people still need cheap goods. But Cheng Yixiao said that as e-commerce logistics and warehousing are affected by the epidemic, “internal circulation advertising” is facing a slowdown in growth similar to GMV, but there are some signs of recovery recently.

The epidemic is uncertain, the future of the economy is uncertain, and so is the growth of Kuaishou.

Kuaishou’s own advertising delivery mechanism has yet to be improved. For example, the algorithm recommendation is not accurate enough, which directly affects the efficiency of Kuaishou’s advertising. An advertising agency said that if you put two or three materials in Douyin a day, you can know whether the effect is good or not, and it may take longer to try it in Kuaishou.

LatePost has reported that Kuaishou has set an annual advertising target range of 58 billion to 59 billion yuan in 2022. It is understood that the management of Kuaishou has already begun to discuss lowering this target.

Kuaishou’s second-largest source of income, live streaming, has also suffered. In May, the four departments jointly issued the “Opinions on Regulating Online Live Rewards and Strengthening the Protection of Minors”, of which the two regulations that had the greatest impact on the platform were “prohibition of ranking users based on the amount of rewards”, and “every From 20:00 to 22:00 during the peak period of daily Internet access, the number of PK (challenge) sessions in the live broadcast room for a single account shall not exceed 2 times.”

The new policy will significantly affect the revenue of platforms and streamers. A Kuaishou person said that canceling the list with the reward amount as a single latitude will greatly reduce the enthusiasm of users to reward.

It is understood that creators of the same type and the same number of fans earn much lower income in Kuaishou than Douyin. An anchor who has nearly one million fans on Douyin and Kuaishou said that he broadcasts live on Kuaishou twice a week and broadcasts on Douyin most of the time.

The submission rate of Kuaishang waist creators has also declined slightly. This means that Kuaishou must spend more money to subsidize creators and maintain their enthusiasm for creation on the platform.

The loss of creators leads to the loss of users. “LatePost” understands that Douyin has poached Kuaishou creator Wang Xiaoli in 2021, and he is also the actor of Liu Neng in the TV series “Country Love”, which is popular among northern people. After Wang Xiaoli arrived on Douyin, he directly brought in a lot of new northern users from Kuaishou for Douyin.

Douyin and Kuaishou are like two trains. If Kuaishou cannot solve the problem that creators’ monetization efficiency is not high enough, the migration of the content supply side may only be a matter of time.

Cheng Yixiao’s heart may not always be as calm as his appearance. He has repeatedly expressed to friends that he likes Elon Musk very much, saying that Musk has done a lot of exciting things he wants to do. Musk is the chairman and CEO of electric car company Tesla. He also owns Space X, a company dedicated to helping humans achieve interplanetary civilization, and Suncity, a sustainable energy company.

Cheng Yixiao also reflected on the communication meeting between middle management and cadres in March this year. Kuaishou gave up the acquisition of Musical.ly because of the price. Now it takes ten times or more strategic resources to make up for the loss.

But today, Cheng Yixiao put away his inner dream, he told the team, “We need to make more money at this stage, and first become a profitable company.”

Before the summer of 2021, as long as Chinese Internet companies rush into the first echelon, they can rely on continuous financing to drive growth and avoid problems. But in today’s environment, CEOs no longer have that luxury. Like it or not, CEOs face responsibility for the “wartime state.”

Su Hua and Cheng Yixiao have jointly managed the company for more than eight years, and both honor and risk are shared. Cheng Yixiao was not used to it during the period when Su Hua retreated behind the scenes. Occasionally, he would show his thoughts in front of people, thinking of the days when he fought side by side with Su Hua. He has said internally that he is “alone” now.

CEOs are lonely, and no matter how important executives and investors are, they can only help him bear part of his work and anxiety. Only the CEO knows all the risks and problems of a company. Everyone can escape, leave, turn a blind eye to certain problems, only the CEO cannot escape, he has to face all problems.

This article is reprinted from: https://www.latepost.com/news/dj_detail?id=1183
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