How ByteDance became the most valuable startup in the world

At just 10 years old, ByteDance, the world’s most valuable startup, has broken growth records. In 2021, with 1.9 billion monthly active users in 150 countries and an employee base of over 110,000, the company recorded an astonishing $58 billion in revenue. Most users only know the company from its hit short-video app TikTok, which has been downloaded more than 3 billion times worldwide, a feat only surpassed by Meta and its family of apps. But ByteDance has actually produced one smash hit product after another – among them its first hit, Toutiao, China’s most popular news app, which now has 320 million monthly active users, and Douyin, a short video app that preceded TikTok. Respectively, Toutiao and Douyin account for 20% and 60% of the company’s total advertising revenue respectively.

How did ByteDance manage to have such consistent success? An important contributing factor, in our opinion, is its innovation strategy, which is based on a shared services platform, or SSP.

Specialized teams

Bytedance uses its SSP platform differently than most companies. Company product teams or units do not control their own operational resources. Instead, many common business, technology, and operational functions (including HR and legal) are centralized and organized into corresponding teams. Teams are highly specialized, so the right people can be found and deployed flexibly as needed for each new business. Cloud and shared operational tools, some of which were developed in-house, enable ByteDance to maintain this seemingly complex organizational setup. Product and related teams are still focused on meeting customer needs, but they rely on different SSP teams to accelerate development and growth. For example, when ByteDance assigns a new corporate team to investigate user needs and market opportunities, the team may turn to SSP’s user research specialists for assistance with data, saving time on market analysis. In other companies, these tasks are performed by the product team, which is rarely better equipped for this type of information gathering. Subsequently, when a use case justifying the development of a new application or a new product functionality has been identified, the product team is associated with engineers at the SSP level to develop the new product or the new feature.

In some cases, product teams customize existing technologies that have already been developed by the SSP. Algorithms are a good example. ByteDance’s product teams work with SSP algorithm engineers to fine-tune their extremely powerful recommendation engines. The SSP has also brought together other important teams: User Growth Teams, which help identify and acquire desired users; content teams, which partner to acquire new content; analytics teams, which help develop deeper insights into users; and sales teams, who drive monetization.

As expected, since so many features have been centralized in this large SSP, the actual product teams tend to be small and focused, especially in the exploration phase. Douyin, for example, started with just a handful of employees, and the education team started with just two. It is important to note that the relationship between the SSP and the teams facing the market is symbiotic and mutually beneficial. It is this virtuous loop of discovery and continuous improvement that has made ByteDance successful.

SAP Strategies

Building on its SSP, ByteDance has developed unique strategies for innovation and growth. These strategies have five main characteristics:

Extensive prospecting.

Since its inception, ByteDance has widely sought out new product opportunities and does not hesitate to send multiple teams into the same segment. It launched 12 entertainment content apps in its first months as a company and 20 apps to test opportunities in overseas markets in 2015. It also had two other teams incubating short-video products alongside it. she ran Douyin. Between 2018 and 2020, the company had at least 140 apps across 11 different verticals available in app stores.

Quick iteration.

ByteDance is also renowned for its rapid product development and time to market, much of which is made possible by its SSP. It took the company just four months to launch an educational app that one employee said took competitors 18 months. As quickly as it launches new products, ByteDance terminates underperforming products and disbands or reconfigures the product teams involved. Unlike other companies, ByteDance employees can wade through a handful of projects each year, some of which never make it to launch.

Selective focus.

However, ByteDance’s vast exploration does not mean a lack of focus. The company allocates key resources to a few selected priorities for a few years at a time. Its first three years were dominated by experiments with text and photo content linked to the success of Toutiao, its news app, while 2016 marked a shift towards short video. After three years of experimentation, ByteDance has made the growth of its education business a priority, launching no less than 11 different products in seven market segments. Although this effort was stalled in 2021 by unfavorable government regulations, it demonstrates the company’s strategy of experimenting extensively in select focus areas.

Cross pollination at maximum capacity.

ByteDance’s SSP also allows new product teams to easily integrate the best technologies and features, saving valuable time and resources. When a team explored HR opportunities, for example, they were able to incorporate AI technologies that had been designed by the SSP algorithm team, including interview transcription and CV scanning. The company’s smart education devices, including a smart assignment lamp, which can record, assess and analyze students and allow parents and guardians to remotely supervise children’s homework, have also taken advantage of SSP capabilities. , including voice recognition, visual recognition and search.

Production of platform services.

Shared services often start out as new features, but are elevated to the SSP level if usage, actual or projected, increases across multiple products, as has happened with live streaming. Some of the company’s shared services, including many of its algorithmic offerings, are sold as external cloud products. For example, Lark, its collaborative work tool, was originally developed for internal needs.

Organizational enablers

ByteDance’s SSP strategy – accelerating new projects by providing instant access to best-in-class technologies and operations – has been so successful that one would expect many other companies to have adopted it. Yet few companies have successfully replicated ByteDance’s success with the strategy. Why? Because they didn’t put in place the organizational enablers that helped ByteDance overcome fiefdom mindsets, which inhibit collaboration.

Three of these organizational enablers are particularly important:

OKR system.

Inspired by Google, ByteDance’s strategy and operations are guided by a transparent bi-monthly system of objectives and key results (OKRs) that flow from the highest level, aligning the priorities and actions of the SSP and product teams. Everyone’s OKRs are visible to everyone, including the CEO. Completing OKRs, which typically involve multiple teams, rather than individual team achievements, is the core of ByteDance’s performance. It helps eliminate siled thinking.

Explicitly flattened hierarchy.

To induce collaboration and sharing, ByteDance uses a 360-degree performance review system. Moreover, unlike most other Chinese companies, it has abolished the use of titles and deliberately reduced its hierarchy to a few levels, so that employees can focus on their responsibilities instead of worrying about their status. Employees report that superiors are easily accessible and very helpful, facilitated by shared OKRs and the lack of concern over title differences. Mentoring is also widespread in the organization and is common among peers, who generally do not see each other as competitors but as collaborators towards a common goal.

Data-driven culture.

ByteDance founder Zhang Yiming believes the company’s most fundamental competitive advantage is its data-driven organizational culture. Its foray into short-form video, for example, was prompted by an executive noting that time spent watching videos had increased sharply on Toutiao. Carefully planned marketing based on data-driven insights has also helped TikTok grow from its teenage dance user base to the much larger audience it enjoys today.

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ByteDance’s SSP-based innovation strategy has clearly played a key role in its first decade of explosive growth. It allowed the company to quickly and broadly incubate and scale efficiently, using centralized yet flexibly deployed technical and operational stacks. This strategy has served the company well in part because of the similarity between its various algorithm-based products. ByteDance is now exploring other product categories and refining its strategy to better suit its evolving organizational model and processes, but no matter how the business evolves, its SSP-based innovation strategy will certainly play an important role.

About Geraldine Higgins

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