(Chinese Version)

Editor’s Note:

On April 1st, Wang Jin, senior vice president of Baidu Group, officially left Baidu. However, he’s already the third senior executive who left Baidu recently. Before him, Wu En, chief scientist of Baidu, and Zeng Liang, general manager of Nuomi, had also left.

On the same day, Baidu Doctor was also officially closed. For the past month, TMTpost has paid special attention to the remaining problems after the dissolve of Baidu Health Business Division. Besides, by linking Baidu’s major moves in recent months, we figured out the significance of Baidu’s recent move.

We also noticed that Baidu had even made up its mind and begun to downsize, which was quite abnormal at Baidu.

All these are not April Fool’s Day jokes. Founded on January 8th 2015, Baidu Health Business Division was officially closed 764 days later.

By interviewing former employee at Baidu Health Business Division for the past month, TMTpost attempted to have a better understanding of the development of the business divison from cradle to grave for the past 764 days.

“This is actually a good thing,” Chen Hao (pseudonym) told TMTpost in relief. At the beginning of March, almost a month before Baidu officially closed the Baidu Health Business Division, he and several his colleagues were laid off by Baidu.

Two months before he joined the Baidu Health Business Division, there were already signs that the business division was facing dissolve: since October 2016, Baidu has stopped updating “Baidu Doctor”’s official Sina Weibo account. A large array of employees resigned in this period, since “nobody wanted to be drowned along with the ship”. Last December, the second-year business plan of Baidu Health Business Division was vetoed, spreading doubt over the business division’s future among employees.

Shortly after the Spring Festival, those who chose to stay were finally informed that the business division would soon be officially dissolved.

“I received job offers by colleagues from other business divisions the night I was told about the decision. They would say: ‘Now that the Health Business division has been dissolved, come and join us, will you?’” Chen recalled. He got along well with colleagues.

According to the internal letter, the company would offer relevant employees job opportunities at other business divisions based on their specific situation. Therefore, Chen followed the instructions and applied for job transfer.

However, he never expected that his application failed and he had to resign.

“Except for a few engineers, others were all laid off. Even those who already accepted alternative job opportunities at other business divisions were later laid off,” he told TMTpost.

Prior to this, Baidu has basically never laid off any worker, except when employees went beyond the bottom line.

“We've lost the battle even before it started”

Founded on January 8th 2015 and dissolved on Feb 9th 2017, Baidu Health Business Division lasted 764 days. Its product “Baidu Doctor” was also officially closed on April 1st and all the data on the platform was also erased.

The announcement, titled “closing announcement”, looked quite inconsistent on the homepage of Baidu Doctor APP. As of March 27th, 206 pieces of comments were left under the announcement. The phrase “what a shame” appeared 45 times, while other comments, including “pity”, “unreliable” and “why”, also appeared several times. It is only in the comment area of the announcement can we realize that it has indeed come to an end.

Today, as long as Baidu is linked with keywords such as “health”, the public will be significantly critical. Therefore, it comes as no surprise that the business division was finally dissolved, since it seems to be the only politically correct thing to do.

However, Chen didn’t think it’s wrong for Baidu to conduct the health business. “There should have been a better alternative,” he told TMTpost.

To integrate its various types of mobile health and medical resources, Baidu established Baidu Health Business Division in January 2015. As the online hospital registration market has matured, Baidu launched “Baidu Doctor APP” on January 28th 2015 in due time, providing mainly online hospital registration service.

However, since Baidu didn’t have many resource at first, it had no choice but to put online hospital registration resource on Baidu Doctor through cooperation and investment.

In addition, Baidu stated that during the first four months of 2015, it had entered into strategic cooperation agreements with Beijing 301 Hospital, Shanghai First Maternal and Child Health Hospital, Beijing Sino-Japanese Friendship Hospital. While Baidu agreed to help these hospitals build a patient data collection and medical big data analysis platform, these hospitals will open their high-quality resources to “Baidu Doctor”. However, a former employee at Baidu Health Business Group confirmed to TMTpost, saying that only Beijing Sino-Japanese Friendship Hospital followed the agreement.

Since hospital registration could be easily quantified, it became the target of Baidu Health Business Division in 2015.

To achieve high KPI, there are two simple ways: on then one hand, Baidu could attract new signups by holding offline promotion activities and giving subsidies (around 9,000 per day); on the other hand, Baidu could give doctors RMB 30 for each new signup when they encourage patients to register in both online and offline channels (around 5,000 per day).

In other words, Baidu could easily increase its hospital registration volume through the above two ways.

However, after they’ve attracted almost all the traffic in 2015, Baidu stopped putting more subsidy in the business in 2016. Since then, Baidu Doctor accepted over around 1,000 new orders from both APP and PC end every day. “That year, we achieved high KPI through money-burning strategy,” a former employee at the business division revealed to TMTpost.

Around the 2016 Spring Festival, Baidu changed the general manager of the business division. Last March, the business division changed its positioning into “getting through and perfecting resources and services in the sector”.

Based on the new positioning, the new general manager adjusted the structure of the business division a couple of times, which turned out to backfire, as many employees believed.

Previously, the business division was divided into four divisions, product, technology, operation and market, and employees at all divisions managed the product together. After the adjustment, however, “battle zones” were added to the business division, and “online hospital registration” became only one of the battle zones.

In other words, the general manager had to manage not only four divisions, but also employees, specialized in marketing, technology, product and operation, in different “battle zones”.

Chen went through all these adjustments and turmoil. When an employee belonged to two divisions, business would naturally overlap.

“Since every employee’s KPI was counted by the boss at the original division, head of different ‘battle zones’ found it extremely hard to give orders,” he explained.

Worse still, there was a “commissar” for each “battle zone”. While the “commander” was in charge of daily operation, the “commissar” checked the “commander”. As a result, the entire business division was divided into various “battle zones” and managed by heads from different business segments.

“We’ve lost the battle even before it started,” a former employee at the business division told TMTpost with a sigh.

Being caught in an awkward position for 764 days

However, different from what many outsiders believed, there was no direct connection between the dissolve of Baidu Health Business Division and the “Wei Zexi Incident”. In fact, the “Wei Zexi Incident” affected the Baidu search business, not Baidu Health Business Division.

Baidu Health Business Division was established to “build up a new shield for Baidu”. In fact, Baidu seized the right timing to establish the business division.

“The attack time has come. We need to focus our business and integrate our organizations to improve efficiency,” Robin Li, founder, board chairman and CEO of Baidu Group, came up with the slogan in the internal letter about the structural change in 2015.

In January that year, Baidu went through a major structural change, made clear the position of three vice presidents (Zhang Yaqin, Li Mingyuan and Xiang Hailong), integrated business segments and divisions into three business divisions, Search Service Group (SSG), Mobile Service Group (MSG) and Emerging Service Group (EBG).

Search business was at the core of Baidu and was quite lucrative business; MSG undertook Baidu’s mission in the next five to ten years; Zhang Yaqin was in charge of the emerging service and responsible for “Baidu’s development in the next one to two decades”. Some of the major business scope of the ESG included: education, health and internationalization, etc.

It wasn’t coincidental that Baidu attached so high importance to health.

Based on the annual financial report of the year 2014, Baidu’s search business had reached a bottleneck. While Baidu’s online marketing revenue increased by 40 per cent year-on-year, the total number of customers rose only by 8 per cent. Obviously, customer growth slowed down under the bidding model and baidu need new customers desperately.

Therefore, Baidu focused its business and adjusted the structure to support emergin businesses, such as health. However, products that provide doctor-patient service and doctor service, strangely, don’t belong to Baidu Health Business Division.

In March 2015, Baidu Zhidao launched its patient-doctor Q&A community “Muzhi Doctor”; a month later, Baidu Marketing Center released “Baidu Health”; Baidu Zhida had an O2O platform “Yao” targeting medicine delivery; while Baidu Health Brain and Baidu Smart Health Device Platform are also separate units.

Five years ago, Baidu invited doctors and experts to compile entries in the health sector and gradually stepped foot on the health information service. However, it never had any concrete moves in the sector, and Baidu never made profit out of these entries.

Perfecting these entries was more like a supplement to the search business. “Health and medicine contributed to 35 per cent of Baidu’s profit, so we can’t lose in this sector,” Li Zheng, then-head of Baidu’s external cooperation division at ESG, once told the media.

However, a former employee at the Baidu Health Business Division revealed to TMTpost that there was huge error in the figure. Based on JP Morgan’s estimation, medical ads accounted for 15 to 25 per cent of Baidu’s annual revenue. In comparison, “medical ads only contributed to 12 per cent of Sogou’s revenue,” as Wang Xiaochuan, founder and CEO of Sogou, once revealed to media.

After the “We Zexi Incident”, revenue from medical ads dropped significantly, which ultimately caused the sharp decline in total revenue in Q2, 2016.

According to a former employee at Baidu Health Busines Division, the only connection between search business and Baidu Health Busines Division was that “search business provides the best traffic gatewaty for Baidu Doctor”. Since Baidu Doctor was about matching doctors and patients, Baidu will recommend users to register directly through Baidu Doctor when they are searching for relevant information.

Li Junming, a former employee at Baidu Health Business Division and founder of Yihubao.com, issued an article after the dissolve decision was made in February, saying that:

I was responsible for the project “Search and Register”. At first, we planned to take full advantage of Baidu’s huge search traffic, grab internet users’ huge amount of hospital registration data and directly meet users’ needs. Therefore, we could nurture users’ awareness to register at hospitals online and thus create a “gateway”. However, since we didn’t take some measures, there wasn’t many online registration requests. At last, we were downgraded since we failed to meet the KPI for Q3.

In fact, since it’s hard to coordinate single-point health service, it’s natural that efficiency failed to be improved effectively.

As to the reason why some health-related services weren’t included in Baidu Health Business Division, a former employee at the division guessed that the fundamental reason was that “Baidu Health Business Division was simply not good enough”; another former employee revealed to TMTpost that for a while, seven business divisions at Baidu conduct businesses related to health and medicine, so it was impossible for Baidu Health Business Division to integrate all their services.

Indeed, what Baidu Health Business Division could do was quite limited.

After all, the business division couldn’t touch the core in the health sector with simply online hospital registration business, and thus couldn’t solve the more urgent problem, resource shortage. Although Baidu Doctor had some value, it couldn’t affect the entire industry. In addition, it was difficult to find an appropriate profit model. Other rival products, such as DXY, Guahao.com, Chunyuyisheng, Haodf.com, have all turned to offline scenarios in an attempt to find offline service closed loops. However, Baidu couldn’t rely on such heavy-asset methods.

Therefore, it came as no surprise that performance of the business division was the worst.

Value, or KPI?

“What’s wrong with Baidu? From Zhida, O2O to unmanned driving… it seems that none of them can make it. Why is it that Baidu has enough experts and proper resource, but still can’t succeed?” an internet user once asked on a Chinese social network platform.

There are many other people who have the same doubts. After the “We Zeixi Incident” broke out, Robin Li issued an internal letter titled “Stay Gold, Or Baidu Would Go Bankrupt Within A Month” and shared his reflection:

“Owing to the blind pursuit of KPI by both the executive body and employees, our value system has been compromised. Sales growth has replaced user performance, easy operation has replaced easy reliable operation, as the most important thing. We are gradually drifting away from our users, from the mission and value system we used to uphold when we just started.”

Indeed, KPI has become a headache for Baidu and its employees, just like the Incantation of the Golden Hoop for the Monkey King.

Chen could never forget that “since some time staff training was less about business and operation, but more about writing promotion reports, managing colleague relations and finding overlapping spots between others and one’s own KPI”.

Li also mentioned this problem in this article, saying that “KPI has always been the priority at Baidu Doctor. Once a project failed to meet the KPI, it had to be suspended.”

“KPI is like a promise, so you’ve got to keep to the promise. Indeed, many people attach high importance to KPI here at Baidu. It’s not necessarily a bad thing, but what shall we do when KPI and our value system are contradictory. This is a more critical problem,” he wrote.

Why are value system and KPI contradictory sometimes? In an interview with a financial media, Robin Li also admitted that the contradiction between value system and KPI was a critical problem at Baidu. He told a small story to illustrate his point:

To lower surgical mortality, New York State once adopted a policy and allowed patients to choose doctors when doing bypass surgery. However, after the policy was enacted, surgical mortality increased. How come? Of course, doctors will do everything they can to save patients. However, since high risk is involved in bypass surgery, surgical death is sometimes unavoidable. Therefore, the best way to lower surgical mortality is to refuse to have bypass surgery for patients who are severely ill.

“Easy and reliable” used to be at the core of Baidu’s value system. However, when it comes to promotion, KPI is the most important indicator. An aggressive incentive mechanism disrupt the balance between value system and KPI. When KPI became the sole indicator to get promoted, an increasing number of employees will give up value and opt instead for ways to achieve higher KPI.

A former employee at Baidu Health Business Division revealed to TMTpost that in the early stage, users couldn’t cancel their registration. “When some people advised that we should enable registration cancelling, others would disagree citing excuses such as such measure would undermine their KPI,” he explained.

“We should have focused on other businesses besides online hospital registration. We shouldn’t have focused much attention on competing in a mature market. Money should have been spent in blind spots, in areas that don’t guarantee profit in the short term but could generate values in the long run,” he reflected.

Indeed, it’s KPI that caught Baidu in a trap and limited its innovative power.

“Middle managers often constitute the biggest obstacle to innovation,” Zhang Yaqin, president of Baidu Group, said during the recent 2017 Boao Asia Forum. For him, the senior executives often like innovation, but middle managers often constitute the biggest obstacle since they generally prefer to maintain the status quo. In any large-sized enterprise, convincing middle managers is the most challenging task. Therefore, many enterprises achieve innovation through bypassing middle managers.

Although people who determined tactics and strategy are often different in large-sized companies, they should have met properly. However, as to Baidu Health Business Division, strategy and tactics were disjointed. This is why high-level strategic decisions were often misinterpreted in the tactic level, and KPI chosen as the sole indicator for good performance, and even promotion and pay rise.

“When I look back, I would imagine if Baidu chose to invest in others instead of doing everything by itself, we should have done better,” a former employee at Baidu Health Business Division told TMTpost.

On the official website of Baidu Doctor, we can still see its progress for the past two years:

Covering 343 cities, 12,791 hospitals and 270,764 doctors; providing online hospital registration service for 9,113,253 users in total.

Nevertheless, there used to be a wonderful plan beneath these data: “connecting people and information; channeling information between patients and doctors”.

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[The article is published and edited with authorization from the author @Fu Mengwen, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.