Despite completing a series of strategic, business, and systematic reconstructions during which business infrastructure and enterprise culture were fundamentally rebuilt under the reins of Lu Qi, Baidu has stepped into an “abyssal zone”.
Lu Qi, who joined Baidu in January 2017, started a thorough management overhaul during the last year – General Manager of Baidu, Tieba Hu Yue, General Manager of Baidu Maps, Li Donghao, and Vice President Li Jing departed from their positions within a month of the reshuffling. In addition, Senior Vice President and General Manager of Intelligent Driving Business, Wang Jin and two Vice Presidents, Lu Fubin and Wu Xuebin were succeeded by other staff.
The three major transformations conducted by Lu Qi were strategic changes aiming at “enhancing mobile business foundation and defeating rivals in the AI Age”, systematic shifts including dissolution of jiankang.baidu.com and waimai.baidu.com and segregation of jinxing.baidu.com and guojibaidu.com, apart from general value or complany culture reconstruction. In this turbulent period, cultural cohesion and value transitions were of primary significance to the company.
After encountering a decline in sales revenue in two quarters of 2016, Baidu had begun to recover from the financial setback. Sales revenue jumped 6.8%, 14.3%, 29%, 29% in the four quarters of 2017 and increased 31% in Q1 2018. Furthermore, the company’s market value surpassed USD 90 billion in 2017 after suffering a sharp decrease the previous year, and by the end of February 2018, the market value had risen to USD 88.6 billion, staying much ahead of JD.com, but far behind Alibaba and Tencent that were valued at USD 466.9 billion and USD 463.4 billion. Lu Qi said that “Baidu is now at a such a turning point that it should step outside of its comfort zone and enter a new stage of development, although it may suffer some losses.”
Four quadrants of Baidu’s business
Lu Qi split Baidu’s business into four quadrants, as shown in the following chart.
Along the y-axis was Baidu’s core mission - reinforcing mobile business foundation that is associated with its search services - and periphery mission - defeating robust rivals at AI Age that connected to its AI technology. “Main stream” focusing on strategic business and “city moat” supporting the “main stream” were displayed on the x-axis.
Based on the chart, Baidu’s first quadrant consisted of core mission plus “main stream”, including mobile search, Feed, and know.baidu.com. The second quadrant covered core mission and “city moat” such as PC search and major businesses. Periphery mission with “main stream” comprised the third quadrant that boasted jinrong.baidu.com, Duos, intelligent driving, smart home, Intelligent cloud, short clips, and AIG. The fourth quadrant included periphery mission and “city moat” in which Baidu Tieba, Baidu Knows, Baidu Maps, nuomi.com were the main services.
Lu Qi underlined that all internal and external resources should be integrated and utilized to support core business. According to the company’s budget plan, in spite of the “main stream”, Baidu Tieba, Baidu Knows, Baidu Maps, and other fourth quadrant services were excluded from further investment.
Experts analyzed that Baidu’s content ecology has shifted emphasis from PC-centric ecological chain that included Baidu Tieba, Baidu Knows, and Baidu Baike, to mobile-device ecological chain that covered information flow, baijiahao.baidu.com and sv.baidu.com, hitting out against Jinri Toutiao.
In fact, Baidu’s non-main-stream business was at risk of shrinking. In March 2018, nuomi.com announced its intention to downsize after releasing its ranking result. Moreover, although Baidu officially denied staff reductions in Baidu Maps, the number of layoffs exceeded recruitment –just “another form of shrinking”.
A period of completing reconstruction
Lu Qi conducted a series of systematic separation and integration in Baidu. In 2017, he dissolved jiankang.baidu.com and sold waimai.baidu.com. The next year, guojibaidu.com was expected to separate, besides jinrong.baidu.com. In addition to downsizing and segregating, Lu Qi mobilised current resources to establish three business groups: Intelligent Driving Group and Artificial Intelligence Group in March 2017, and Smart Living Group in March 2018.
Baidu’s business structure became increasingly apparent: six parallel businesses included a search company under Senior Vice President Xiang Hailong, Artificial Intelligence Group (AIG) in charge of Vice President Wang Haifeng, Intelligent Driving Group (ADG) under Vice President Li Zhenyu, Smart Living Group (SLG) controlled by COO Lu Qi, Emerging Business Group (EBG) administrated by President Zhang Yaqin, and Financial Service Group (FSG) ruled by Senior Vice President Zhu Guang.
Based on the business structure, the new list of Baidu Cabinets was supposed to consist of Li Yanhong and Ma Dongmin who were at the top of the power pyramid, Lu Qi assisted by Zhang Yaqin, Xiang Hailong, Zhu Guang, Wang Haifeng, and Li Zhenyu who dominated the business field, CFO Yu Zhengjun and Senior Vice President Liu Hui who separately controlled the financial and human resources divisions.
Compared to previous name lists since 2000, Baidu has been in a cycle of reshuffling the management team every 3 to 5 years. Three primary cabinet reshuffles in Baidu’s history have demonstrated that the company tends to employ external senior executives instead of promoting existing employees.
An “abyssal zone” for Lu Qi’s reformation
When the reformation dived into the “abyssal zone”, Lu Qi faced more trouble related to “human” and “finance”, even though human resources and financial affairs were directly administrated by CFO and Senior Vice President rather than Lu Qi. While at the helm of the business departments, Lu Qi carefully evaluated and balanced the reports being sent to his boss, Li Yanhong and to the boss’ wife, Ma Dongmin.
Today’s Baidu is “nothing but changes”. Cui Shanshan’s reinstatement indicated Baidu’s need for talented managers who can reassure staff and cope with the aftermath in troubled times. Cui might perform as a band-aid to Baidu, but whether she will be able to rebuild company culture and assist the organisation to achieve a smooth transition still remains to be seen.