“One of the most critical factors for a startup is SPEED—speed of insight, speed of decision, and speed of delivery. This week, as Temu disrupts the global e-commerce landscape, its parent firm, PDD, inches closer to overtaking Alibaba. Over the past year, Temu has set a remarkable example of agility in both go-to-market (GTM) strategies and product development.

Here’s a concise overview of my observations:

1. Centralized and Efficient Organizational Structure: Rapid information transmission, efficient decision-making, and guaranteed execution efficiency characterize their approach.
2. “Amoeba” Team Organization: Teams compete internally, with the winner gaining more resources and business space—a unique strategy fostering competitiveness.
3. Embracing Simplicity and Efficiency: The commitment to simple execution not only streamlines processes but also contributes to employee satisfaction.

While building a successful company involves numerous factors, these insights serve as a solid starting point. Let’s delve deeper:

1. Centralized and Efficient Organizational Structure

Before delving into how PDD achieves this, it’s crucial to note that different industries may favor different organizational structures. In the case of e-commerce, a mature and low-innovation-required industry, PDD strategically positions itself as a later player in the game, both in China and the US. This positioning requires them to rapidly learn from others and implement innovations swiftly.

Centralized VS Decentralized

A centralized organization implies that the majority of decisions are made by the C-team or central management. At PDD, the central managing team, including figures like Colkin Huang, Abu, Jiazhen, proposes and decides on the majority of company decisions—typically numbering between 10 to 20 key individuals.

On the other hand, a decentralized organization distributes decision-making authority throughout the entire company. Take Bytedance, the ‘App Factory,’ as an example. It launched apps like TikTok, Douyin, Xigua Video, Huoshan Video, etc., in a decentralized manner. This approach allowed for redundancy in projects and human resources, attracting numerous talented individuals to drive various innovations. The success of Tiktok is a testament to the effectiveness of this decentralized model.

Implementing Centralized Management at PDD

The primary advantage of a centralized decision-making structure lies in minimizing time spent on meetings.

Meetings, while standard, often consume valuable time and are considered a less efficient means of decision-making. Instead of relying on discussions alone, PDD opts for in-depth research and simulation to make informed decisions. This approach mitigates the need for excessive meetings, freeing up time for teams to focus on execution, ultimately yielding a higher ROI

Many teams resort to meetings when they don’t have a clear understanding of issues. PDD, however, discovered that most of the meetings only bring less than 10% incremental information, which hardly resulting in fundamental changes to decisions. Recognizing this, PDD emphasizes rapid work implementation and iterative feedback is more beneficial, the 10% incremental inforamtion could also be made up during thie process.

Before Temu entered the US market, their business lead conducted in-depth research on the operation experience of existing e-commerce platforms, the backgrounds of their senior teams, as well as user habits in various market segments, and consumer category demands. This comprehensive research informed the deployment of Temu’s factory supply chain. While the research and decision-making process was time-consuming, once the optimal solution was identified, PDD swiftly executed it, emphasizing the importance of timely implementation.

2. “Amoeba” team organization

What is Amoeba?

Amoeba Management begins with dividing an organization into small units called “amoebas.” Each amoeba leader is responsible for drafting plans and goals for the unit. Amoebas achieve their goals through collaboration and the hard efforts of all their amoeba members. In this system, every employee plays a major role and voluntarily participates in managing the unit, achieving what is known as “Management by All.”

Amoeba in PDD

TEMU has a flat organizational structure, which facilitates rapid information flow and decision-making to adapt to the fast-changing market environment.

PDD’s middle management practices amoeba management logic – continuous learning and innovation, because they need to compete for resources. Under the amoeba management model, the winning winners have a strong fighting spirit, and a stable core team.

The organizational design ensures that the winning team can get more opportunities and room. PDD retains these people through great incentives, while ensuring they maintain their fighting capacity.

How does PDD divide each Amoeba unit?

As the organization expands, the conventional method of allocating business units based on manager’s ability and experiences may not be a good approach.

So what does PDD do instead?

A notable example is the internal competition for the second tab in PDD’s Chinese app. Rather than assigning units by a top-down approach, there were two potential proposals—an engaging community farming game and a short video feature —competed internally between teams.

Pinduoduo made the two teams compete (PK). The farming game team could request DAU and certain amount of content exposure from the company. PDD gave those resources to the farming game team to test if it could bring higher GMV to the product compared to the short video team with the same resources. The business that performed better would be placed in the second tab.

However, this challenge model does not provide unlimited chances for teams to take other teams’ resources. They have to pay a “challenging fee” to the company (usually $1.5M/day) to earn the right to challenge. Also, challengers who fail multiple times will lose company’s trust, making it hard to undertake important projects in the future… This encapsulates how PDD enforces Amoeba management, ensuring a fair balance in the allocation of business opportunities among internal teams.

3. Embracing Simplicity and Efficiency

Frontline employees at PDD do not have much understanding of the company’s overall strategy and insights, such as data, conversion rates, industry background. Everyone is doing some simple execution work. In conversations with their employees, it becomes apparent that they typically allocate less than 10% of their working time each week to strategic-level thinking.

Within PDD’s business, employees are not burdened with extensive strategic contemplation. The nature of their responsibilities is direct and uncomplicated. Whether specializing in programming or sales, employees are encouraged to hone specific skills. PDD offers industry-leading salaries for these roles, attracting individuals with robust execution capabilities.

In the retail sector, a landscape of standards and clarity prevails. The first and second-level management tiers meticulously analyze business logic, leaving frontline employees with a focus on simple execution. The emphasis on simplicity and efficiency is not just a preference at PDD; it’s a fundamental aspect of their operational philosophy.

Applicability to Your Startup

PDD, as a late entrant to the e-commerce scene, demonstrates the effectiveness of tailoring management systems to a clear target market and user demands. Their commitment to high-efficiency practices allows them to move three times faster, enabling them to catch up with and surpass competitors.

For startups, especially those in industries where success stories are well-documented, adopting a lean and rapid execution approach is crucial. Take, for instance, X AI learning from OpenAI’s experience, demonstrating the importance of hiring strategically and swiftly developing based on a clear direction.

However, it’s essential to note that PDD’s structure might not seamlessly align with startups in AI or highly innovative industries. Decentralized management, as seen in ByteDance, could be an alternative solution for fostering innovation in such contexts. Recognizing the unique demands of your industry and learning from both successful and diverse approaches can guide your startup towards efficient and effective management practices.

---

Comments? Any lessons to share?
If you liked this post, please follow me on Twitter. You can also find more essays here.