Why China’s tech giants are all restructuring this year

This is an adapted translation of this article by Han Yuanjia for the Beijing Morning Post.

Tencent, Alibaba, Xiaomi, Meituan, Ofo, and Didi. That’s a list of some of China’s top tech giants – and it’s also a roster of companies that have announced significant restructuring in 2018.

In a series of open letters, these companies spoke of “power transfers,” “difficult choices,” and “adjustments to the core business,” characterizing their decision to restructure as a moment to be reborn with a renewed eye on their core values.

Ride-hailing app Didi is the latest company to announce such an initiative, having recently made public a letter to employees announcing organizational upgrades.

Photo credit: Didi Chuxing

Among these shakeups, the merging of Didi’s core business groups has turned the most heads. What were once separate departments for express car booking, premier car booking, and luxury car booking are now merged into a single entity – the Ride-hailing Business Group (RBG). Moreover, Didi’s new owner services and car services are being merged into its Asset Management Center. Its bicycle, scooter, escrow, and enterprise services are joining its travel services group.

Based on these adjustments, it seems that Didi is looking to focus on two core businesses: services and ride-hailing.

The change represents a shift from what the company announced earlier this year. At a rebranding event for Didi’s premier car-booking service Licheng, CEO Cheng Wei revealed plans for each Didi vertical to operate as independent brands. Higher-end, business-focused branding like Licheng was seen by some as the key to Didi’s future profitability.

But as questions and doubts about Didi’s safety problems spread following the murder of a female passenger by her driver over the summer, it became clear that maintaining rider safety was more critical than brand development or profits.

Cheng Wei said as much in the letter announcing the restructuring, which also creates chief safety executive and chief security executive positions that would directly report to the CEO. Thus, this restructuring can be viewed as Didi’s CEO prioritizing safety and security over rapid growth.

‘Life and death’ decisions

Didi’s structure was adjusted to adapt to clear changes in the business environment. Ofo’s restructuring was for a simpler reason: survival. But all of the internet companies that have morphed in 2018 have done so in reaction to significant changes in the overall market environment.

Photo credit: Ofo

For example, when Tencent shifted from seven main business groups to six in September, it was interpreted as a signal that the company was actively embracing the “enterprise internet.” In order to enhance its offerings to businesses, Tencent established a cloud and smart enterprise division and made moves to integrate its network media, social media, and mobile business groups into a new Platform and Content group.

It’s the environment