When ByteDance’s iconic founder Zhang Yiming said in mid-May that he would hand over the CEO role to his trusted friend Liang Rubo, also co-founder and current director of HR at ByteDance, it confirmed a broader trend within management circles in China’s tech industry—founders are relinquishing the CEO title in favor of more strategic positions that aren’t in the limelight.
As many Chinese internet giant companies mature, some founders, whose innovative perspective proved excellent at growing the company from zero, realize that they are less equipped, and more importantly, less intent on managing the day-to-day operations of firms with many thousands of employees.
Zhang’s natural disposition as a deep thinker and introvert may endow him with the strategic foresight to lead ByteDance forward, but for a company of such scale, a more people-oriented approach is needed to build and maintain the uniquely egalitarian corporate culture that he tried to instill since ByteDance’s early days.
“I’m not very social, preferring solitary activities like being online, reading, listening to music, and daydreaming about what may be possible,” Zhang wrote in an internal letter announcing his recusal.
In stark contrast, Zhang’s successor, Liang Rubo, has proved himself to be a savvy operator in the last two years, leading legal, internal communications, logistics, and human resources at ByteDance. A source close to the company described Liang as “a housekeeper for corporate,” owing to his versatility, according to Fortune China,
The next episode
Zhang’s decision to step down may have surprised some who associated him with the company’s meteoric rise since its inception in 2012. Yet, Zhang is only the latest in a line of Chinese tech founders that have transitioned their roles to more hands-off positions, free from the daily grind.
Jack Ma bowed out as CEO of Alibaba as early as 2013, transitioning to executive chairman before the company’s 2014 landmark New York IPO. His successor, Daniel Zhang, was an accountant by trade and the company’s former COO. Taking on the role from 2015, his operational expertise and risk-averse leadership style have proved fundamental, given the tightened scrutiny and management demands on the newly public company. Ma, however, never left; he assumed an advisory, behind-the-scenes, role at Alibaba.
Another example is Pinduoduo’s founder and CEO, Colin Huang, who left the company’s board of directors in March 2021 to pursue long-term research in biology and life sciences after abdicating as CEO in July 2020. The lead at Pinduoduo was taken by Chen Lei, a gifted computer scientist known for his problem-solving abilities and down-to-earth demeanor, founding member of Pinduoduo, and the firm’s former CTO. Chen is also highly trusted by Huang, as the two have been colleagues for 13 years. Chen’s technical expertise and experience make him well-equipped to lead Pinduoduo forward in its strategy of modernizing China’s agricultural supply chains.
In place of a high-minded, ambitious mentality, established tech firms courting the public markets at times require the steady hand of a trusted custodian, well-suited and willing to cope with the rigorous administrative demands that come with helming massive organizations. Successors like Liang Rubo at ByteDance, Daniel Zhang at Alibaba, and Chen Lei at Pinduoduo, are better equipped to manage these sprawling organizations with ever-expanding teams, while the founders can focus on their vision for the future.
“For Zhang Yiming, he’s only giving up some of the managerial aspects to allow himself to become the company’s visionary,” Rui Ma, an experienced investor in Chinese technology and former partner at 500 Startups, told KrASIA. “Chinese tech founders grew up wanting to be scientists or inventors who could change the world. The idea of continuing to operate a successful creation is something that probably doesn’t interest or inspire them as much.”
Fear of the regulatory spotlight?
Since ByteDance’s next CEO was announced last week, some have also pointed to the increased regulatory pressure as a driving factor for Zhang’s revised status. Tech giants play an outsized role in China’s economy, with the digital economy accounting for nearly 40% of the country’s overall GDP. This gargantuan scale comes with immense responsibility, which partly explains the government’s newfound interest in regulating big tech in China.
The sheer influence of Chinese tech giants on society, which was underscored by the COVID-19 pandemic, has exalted companies beyond the mere status of corporations. They are institutions, former venture capitalist and development economist Lillian Li said in a podcast by SupChina. This overarching influence means the companies are examined more closely by regulators as well as the public, said Li.
“In addition to new regulations in China, there is also increasing scrutiny and public backlash. It’s no longer the days of techno-optimism as it was a few years ago. This means the CEO job has changed, not just in the day-to-day management, but also in terms of social stature as well,” Rui Ma added.
For instance, Ant Group’s scrapped IPO was a massive blow to Jack Ma’s fintech giant, with the government cracking down on China’s most iconic tech executive. Since Ant Group’s business “rectification,” the flashy Alibaba founder has adopted a much more low-key public profile.
While the constraint to comply with shifting regulations in areas like fintech and antitrust certainly poses challenges, for some tech founders like Zhang and Huang, tighter regulatory scrutiny is a secondary concern compared to balancing executive management duties and top-level strategic thinking. The workload of leading a Chinese tech giant firm simply doesn’t leave much room for the same visionary planning that allowed these wildly successful startups to blossom.
The weight of execution-oriented leadership
As companies like ByteDance and Pinduoduo mature, the demands on its management team evolve. They can no longer abide by the same human resources and supervisory practices that gave their ventures maneuverability and agility in their early days.
The importance of a solid administrative organization rises with scale. With ByteDance’s global headcount expanding to over 100,000 this year, handling this breakneck recruitment and integration of new talent siphons significant attention resources from the company’s executives.
Even taking into account the typical six-day workweek in China’s grueling tech sector, ByteDance’s 40,000 new employees in 2020 means the firm was onboarding, on average, 129 new employees every day last year.
The arduous, day-to-day commitment of management has eroded tech founder’s capacity for longer-term strategic thinking. This was exacerbated in Zhang Yiming’s case, as 14 of ByteDance’s top executives reported to him directly. In the internal letter, Zhang explained how, despite his background as a top engineer, he had fallen behind in the latest industry developments, bogged down with administrative tasks that are inherent to the CEO position.
“After several months of thinking about this, I came to the conclusion that transitioning out of the role of CEO, with all of the related day-to-day responsibilities, would enable me to have a greater impact on longer-term initiatives,” Zhang wrote.
The license to dream
ByteDance has been able to transcend national borders with TikTok, and the company is expanding horizontally into areas like e-commerce, edtech, and healthcare technology. How does a company with its DNA in entertainment and content recommendation fit in these different sectors? It is a question that Zhang Yiming is sure to ponder. ByteDance’s founder has always been inquisitive by nature and attributes this quality to the company’s early success.
“Between graduating from college and starting ByteDance, I spent a lot of time thinking and learning about challenges like effectively disseminating information, using technology to improve products, and approaching the development of a company, much like one would a product: through constant re-evaluation, adjustment, and iteration. That period of profound thinking and ideation helped lay the groundwork for ByteDance,” Zhang wrote in his letter.
For the company Zhang founded in Beijing’s Zhongguancun district nearly a decade ago, there are few areas of the tech world that are not deemed as possibilities. ByteDance has even made investments in core semiconductor technology and has started a gaming business from scratch, acquiring developer studios ahead of incumbent leaders like Tencent. When Zhang talks about daydreaming, he doesn’t mean idle relaxation, but instead, imagining the frontiers of innovation for his company.
“For a long time, I’ve put my online status as ‘Daydreaming.’ What I mean isn’t that I’m zoning out, but rather that I’m thinking about possibilities that people might think are just fantasy. In the past three years, many things that seemed like fantasies have, in fact, become a reality,” he said.
There is a similar yearning to explore the frontiers of innovation from Pinduoduo’s Colin Huang. After starting his firm in 2015, the startup was originally branded as Pinhaohuo, and sold mainly fruits and vegetables. Since then, the social e-commerce company’s innovative business model burst onto the scene in China, selling products in various categories and amassing over 724 million monthly active users.
For the next stage of the company’s growth, Pinduoduo is returning to its roots in China’s left behind agriculture sector, which has long been defined by a fragmented supply chain and a lack of digitization. Huang wants to go even further than solving the logistical points of getting food from farm to table, so he decided to resign from the top executive role at Pinduoduo and throw himself into biological research and life sciences, with the goal of finding a granular solution to unsustainable food and resource consumption by mankind.
“If you look at Chinese history, it is not the richest people that live on in people’s stories, but the people who really gave back to society,” Rui Ma said. “These founders already have earned their fortune, and they want to leave a different legacy in society.”
There are only so many hours in a day, and it seems that visionary founders like Zhang, Huang, and even Jack Ma have decided that these hours are better spent planning for the long-term while leaving trusted operators to oversee the short-term execution of their companies.