Why is it hard for other companies to copy from Pinduoduo?

The following are excerpts from an article published in Chinese. The author, Dongqi Yu, is a renowned business commentator. The views and perspectives expressed in this article are NOT those of Momentum Works; nonetheless, we find them interesting and worth sharing.

You can refer to Momentum Works’ “Who is Temu” report for structured analysis and insights about Pinduoduo. You can also read our book “Seeing the Unseen: behind Chinese tech giants’ global venturing” for more case studies, analyses, and reflections. 

This is final part of the three-part series: 

• Part 1: How strong is Pinduoduo’s execution?

• Part 2: Why is Pinduoduo’s execution so strong?

• Part 3: Why is it hard for other companies to copy from Pinduoduo?

 

Read on! 

 

The mechanisms behind Pinduoduo’s success are straightforward in theory, but why can’t other companies replicate them? Anyone who has managed a business or operation knows that what’s described in Part 1 and Part 2 is almost against human nature in every aspect for managers:

First, the demands for a high level of persistence and dedication from managers are contrary to human nature.

• Having stable, clear strategic capabilities is challenging. This is true even for Pinduoduo, which is why they focus solely on low-price, high-frequency, essential goods retail business. Even a powerful company like Pinduoduo avoids venturing into areas where they are uncertain, despite potential opportunities. Restraining and controlling the impulse of greed is counterintuitive.
• In Pinduoduo, managers are deeply involved in the frontlines. This means they also need to work harder. Many who aspire to be managers think it means less hands-on work and more comfort. However, managers need more information to make bigger decisions, and working as a good manager is much more tiring than being an employee. 

Pinduoduo’s execution is driven by the management team working closely with their teams. For instance, it’s said that Pinduoduo / Temu’s leader, Gu Pingping (with internal nickname Abu) starts her day at 8:30 AM at a café with executives to discuss daily work, only finishing after midnight, maintaining 16-hour workdays. This level of dedication requires a constant struggle against human nature.

Without these elements, employees can’t enter a positive competitive state. 

Frequent changes in orders and having multiple / diverse goals are detrimental to creating a positive competitive environment. 

Inconsistent and unclear assessment criteria, which leave substantial room for interpretation, can also lead to deception and concealment within the organisation, which is also unfavourable for competition.

Second, the persistence in making better business decisions, disregarding criticism, and ignoring temporary employee sentiments, is against human nature.

People generally fear conflict and feel upset when criticised, but Pinduoduo’s choices almost always prioritise business, regardless of the criticism it draws.

• The approach to people is counterintuitive: In most companies, new employees are given a grace period to adjust. But Pinduoduo immediately exposes new recruits to its real environment, quickly filtering out those who don’t fit, inevitably drawing criticism for such an unembellished induction process. But Pinduoduo firmly knows what kind of people they want, unafraid of offending others or bearing criticism.
• On the issue of decision-making at each level, not delegating authority is also abnormal. Most companies give employees opportunities to try higher-level tasks for development, but these attempts often lead to a waste of resources if they are beyond the employee’s capabilities. Pinduoduo does not provide such opportunities, sticking to the principle of doing tasks at one’s level, which goes against many companies’ conventional ways of employee growth.
• Employee promotions and demotions happen swiftly. Those who should get promoted will get promoted to managerial positions quickly, and if found unsuitable, they are demoted just as quickly, which is very contrary to human nature. 
• Insisting on business success above all else, solving other problems with money, and not fearing negative employee reactions, are against human nature.

 

Third, being willing to spend money is also counterintuitive.

Pinduoduo demands employees give up rest and work overtime crazily; to leave their comfort zones and accept changes; to give up a significant degree of autonomy and accept authority. These demands are against human nature. To make the team accept these demands, Pinduoduo must be willing to spend. Higher demands can only be met with money.

But for most business owners, spending freely is against their nature. Only when they are clear about what they will get in return for their money can they do so.

Each of these points contradicts conventional management and the human nature of managers or employees. Therefore, most companies cannot implement this set of mechanisms as firmly as Pinduoduo does.

But why can Pinduoduo do it?

After understanding Pinduoduo’s execution mechanisms, what I perceive is the company leaders’ intense desire for success. True desire is not just saying “I want success,” but being willing to pay a significant price for it. Pinduoduo’s leaders have an insatiable desire for success, have clarified what they must persist in to achieve it, and without wishful thinking, they decisively pay the necessary costs to create such an execution system.

As long as the goals are clear and continuously optimised, and there’s no hesitation in paying the price when needed, the formation of all systems and capabilities is just a matter of time. Company management, like business operations, is a combination of strategies that can be continuously refined to find better solutions. This is also a necessary state for any company’s success.

Thus, Pinduoduo’s leaders dare to make decisions that defy conventions and human nature. Going against the norm implies risks and potential criticism. Contradicting human nature means that even hard-working managers must bear the punishment of human nature. However, this is necessary for Pinduoduo’s business success.

Why must Pinduoduo maintain such strong execution? A former Pinduoduo employee’s words left a deep impression on me:

He came from a small village to a big city for college. When graduating, he chose Pinduoduo over other offers because he liked the experience. I was curious about this. Like me, who would only worry about the quality of products on Pinduoduo, why did he think the experience was good?

He explained that when he first went to college and was introduced to online shopping, he found shoes on Taobao costing hundreds or even thousands of yuan. To him, this was expensive as he was used to shoes costing only a few tens of yuan. Later, on Pinduoduo, he saw shoes priced within his expectations. Those were the shoes he knew they could afford.

I then understood. Pinduoduo needs to push its employees to the limit because low pricing is their core user experience. For platforms like Taobao and JD.com, a small portion of the marketing cost of shoes priced in the hundreds or thousands (¥1000 = US$ 140) can cover team expenses. But for Pinduoduo, selling shoes for just less than 100 yuan (< US$ 14), how much profit can be extracted to sustain a large team?

Thus, execution is a necessary condition for Pinduoduo’s business success, but not necessarily for Alibaba and JD.com.

Therefore, Pinduoduo chose to prioritise “execution.” However, every new “priority” inevitably comes at the cost of giving up something else. Just like Pinduoduo chose strong compliance and hardworking employees, attracting talents meant offering higher salaries. 

This is a basic business principle: focusing on the main contradiction (抓主要矛盾) i.e.:  focusing on most critical and impactful problem. 

Most companies, unlike Pinduoduo, are not so thorough and decisive in grasping the main contradiction and giving up secondary ones.

But it is precisely such decisiveness that allowed Pinduoduo to seize opportunities between Alibaba and JD.com, breaking through in a market where most thought there was no chance.

Before communicating with friends from Pinduoduo, knowing that the workload at Pinduoduo is probably the highest in China’s internet industry, I thought many would criticise the company. However, to my surprise, most people who worked at Pinduoduo for years, not just a month or two, spoke of it with pride and excitement. Their speech would involuntarily quicken.

One friend said, “Working at Pinduoduo is like being in hell physically but in heaven spiritually.”

Why is this? At Pinduoduo, evaluation criteria are extremely unified, stable, and straightforward, purely based on performance, leaving little room for manipulation. For most employees who want to focus on work, the biggest annoyance is being robbed of achievements due to office politics. An environment that eliminates such spaces, although stressful, is unprecedentedly pure and simple.

Due to the high quality of management strategies and strong team execution, the team continuously experiences victory, which becomes another motivation. Though they are just soldiers, they have experienced victory after victory, winning remarkable battles. 

Regarding work experience, they say Pinduoduo only offers money, and aside from that, there is no experience. But they also understand and agree with the management’s choices, understanding that explanations are futile and that it’s necessary for the management to persist in core strategies.

An entrepreneur who was previously in Pinduoduo said what he gained most from the company was the strategy: hire one person, pay for two, and make them work for three. Simple and effective. They say that offering money is the greatest kindness a company can show its employees.

 

Conclusion

Looking back, I believe Pinduoduo is a very unique company.

The elements that constitute Pinduoduo’s execution strength are simple, namely authority and competition. 

Authority helps the management outline the company’s development direction, serving as a framework guiding the team’s efforts and competition. 

Competition, on the other hand, turns the team into a driving force for each other, transforming the team’s execution from a limited game of merely following management instructions to an unlimited game of mutual competition.

However, other companies do not implement these elements as thoroughly and decisively as Pinduoduo. Whether it’s in terms of being willing to pay, the strategy of rapid personnel filtering, or the restraint of the management in strategic decisions. 

Consequently, many strategies that constitute Pinduoduo’s strong execution have become sources of misunderstanding by outsiders. 

I observe that many aspects of Pinduoduo’s management mechanisms are unconventional and even against human nature, yet they align with many basic business principles like “focusing on the main contradiction”  (抓主要矛盾) and “centering around the customer” （以用户为中心）.

Each aspect of being unconventional and against human nature implies a significant cost that the Pinduoduo management team needs to bear. A crucial reason for Pinduoduo’s extraordinary success is precisely that its leaders have a clear understanding of what they want, are willing to pay the price for it and continue to optimise.

In the end, I see that although Pinduoduo is unique, it shares many common traits with successful enterprises of our era:

• Finding ways to attract outstanding people.
• Establishing mechanisms for employee competition and motivation.
• Having the flexibility to adapt and adjust quickly.
• Insisting on putting business success first.

In these aspects, Meituan, ByteDance, and Pinduoduo are no different.

It’s just that each has chosen different solutions.

And Pinduoduo, emerging from a corner where success was once deemed impossible, faces unique challenges.

I believe that it has found an optimal solution that suits it.