With more than a billion daily active users, WeChat dominates daily life in China. It isn’t just the default option for social networking and chat, it is also the leader in mobile payments; taxi, restaurant, movie-booking and retail apps. These all open inside WeChat, providing a seamless and integrated service for upwardly-mobile Chinese users.
Many westerners are sceptical about successful Chinese software companies, bearing in mind Facebook’s absence and Google’s exit from the market in the early 2000s.
But WeChat didn’t get an easy ride. It had to fend off dozens of domestic competitors when it was launched, and it had to keep innovating to stay ahead. Most observers now rate WeChat as offering a superior user experience than its western counterparts today and its innovative features are now being copied by others.
But how did WeChat gain such a strong market position? While some aspects of the WeChat story are well known, there is virtually nothing written about how WeChat works from the inside. This is in large part because its founder, Allen Zhang, despite enjoying rock-star status in China, rarely gives interviews.
In this article, we provide an analysis of WeChat’s internal innovation process, how it created the original product, how it stays abreast of user needs and how it remains innovative and agile even though it has more than 2,000 employees.
The article is based on exclusive interviews with Allen Zhang and ten other senior executives, as well as extensive desk research. Where it all began
WeChat was the brainchild of Allen Zhang, a legend in China’s tech sector. Zhang created Foxmail in the late 1990s, and when his company was bought by Tencent in 2005 he led the development of QQ Mail, which became one of China’s top mail service providers.
In 2010, with mobile messaging starting to take off, Zhang formed a skunkworks operation: 10 people working in a ‘little dark room’ in Guangzhou, one-and-a half-hour’s drive from Tencent’s head office. This was a controversial move. Zhang’s team was in competition with another internal team who were also creating mobile messaging applications.
The new offering competed directly with Tencent’s existing Mobile QQ (originally a desktop messenger service and the cornerstone of its social networking and gaming services at the time). And the notion of a free messaging service was not popular with the giant mobile operators, as they were making good money from SMS services.
Pony Ma, Tencent’s CEO, allowed Zhang’s team to proceed in an internal ‘horse race’ with the other unit. Perhaps because of Zhang’s previous experience with QQ Mail, he was able to streamline the development and build a prototype far more quickly than the competing unit.
WeChat launched in January 2011, initially as a texting service. Rapid growth began with the introduction of voice messaging in May, then another breakthrough product, Moments, was released in April 2012, allowing WeChat users to create an intimate and private communication circle with their choice of friends.
If step one was about building user numbers, step two was the creation of a platform, with some services provided by third parties, not just by WeChat. Central to the platform logic was the launch of WeChat Pay, a product that would enable users to buy products directly through their smartphone. But there was the inevitable chicken-egg problem: how do you get vendors to accept a mobile payment service when there are no users? And how do you get users when there are no vendors?
The solution was the Red Packets feature, which quickly became one of the WeChat’s signature offerings. Building on the ancient Chinese custom of giving red envelopes filled with money at weddings and special occasions, Red Packets was a clever way to enable users to send small amounts of digital money to friends online.
It quickly took off, and soon users were linking their WeChat Wallet with their bank accounts. That led to growth on the other side of the platform, with retailers, public transport providers and restaurants all signing up to the service.
Another aspect of becoming a successful platform was for WeChat to be attractive to business users. The Official Accounts feature was launched in August 2012, equivalent to a Facebook page, a ‘shop window’ for a business or brand to present itself to the outside world, which users could then follow and receive updates.
Initially WeChat planned to charge a fee to third parties, but they decided to make it free of charge, with just a certification fee of 300 RMB (£33.2) to verify the identity of the third party. These Official Accounts grew rapidly, to about 20 million in 2017.
A related innovation that consolidated WeChat Pay’s leadership position in the face-to-face (offline) world, was the use of QR Codes. Zhang had started looking at QR codes as an ‘entry’ to the mobile internet back in 2011, before most people had heard of them. As they trialled QR codes with a small number of vendors, the ease of using them became apparent, and they quickly became an integral part of the WeChat payment system.
Another significant moment for WeChat came with the introduction of the Mini Program feature in 2017. This was an ‘app within an app’, which made it possible for users to scan the QR code of a coffee shop on entering the premises, and quickly access the menu, and pay.
These Mini Programs were significantly simpler than the native applications developed for iOS or Android, and could be created for about 20% of the usual cost of mobile apps. Speed and ease-of-use led to widespread adoption. A work of art, not a commercial product
There are many elements to WeChat’s huge success, but a common theme is an ability to manage paradox. The Chinese yin/yang symbolises two opposing worldviews that come together to create an integrated whole, and we can think of WeChat’s innovation strategy as managing the tension between these two worldviews, and shifting their position over time as the product has matured (see figure 1).
We identified four main areas where tensions in WeChat are most acute, and where adjustments to the business model are most likely to be needed to enable the firm to continue to grow.
Let’s look at each dimension in turn. Figure 1: Managing the Yin/Yang of Innovation
Like most really successful mobile products, WeChat is simple and elegant. It is impressive not because it has so many features, but because it has so few. We asked Zhang about his product philosophy. This is what he said:
“Before perceiving WeChat as a commercial product, I’d rather picture it first as an impressive work of art. When I started designing user interactions for Foxmail, I complicated everything. It felt wrong because it no longer looked neat. For WeChat, I now see the necessity of subtraction – making things simpler – and focusing on the product’s aesthetic quality.”
As one example, the feature bar at the bottom of the screen is four icons: Chat, Contacts, Discover, Me. Over the years many people suggested adding to this list, like many other apps. Zhang refused.
He added: “I told the team to establish a rule that WeChat shall always have a four-icon bar, and never add anything to it.”
Another example is the almost complete absence of advertising. Unlike Facebook or LinkedIn, WeChat users see a maximum of two ads per day or so through the Moments feature. Again, Zhang has been relentless on this. In a rare public speech in early 2019, when talking about ads on the WeChat start screen, he said:
“How much time do you spend on WeChat every day? Do you spend more time with your loved ones or on WeChat? If WeChat were a person, they would have to be your best friend for you to spend so much time on them. So, how would I even dare to put an advertisement on your best friend’s face?”
Of course fewer ads means lower revenues, and fortunately WeChat has other sources of income (a commission on transactions) as well as a supportive owner company (Tencent makes a lot of money from gaming and venture investments, and a growing share of revenue from its cloud business).
But there will always be a tension between artistic ideals and commercial reality in the world of mobile apps.
The New York Times
reported that Mark Zuckerberg wants Facebook to emulate WeChat by reducing the number of ads, but he hasn’t done so, presumably for fear of reducing Facebook’s profitability.
Allen Zhang, in contrast, is facing requests to increasing the amount of advertising on WeChat because Tencent, like any publicly-traded company, is under pressure to increase its profitability. Zhang has, to date, held his ground. As the HR head for WeChat notes, this decision “is a testament to Allen’s ideology sinking into the heart of the team”. Adopting a ‘dumb user’ perspective
Every software company claims to design its products around its user needs, but some clearly do it better than others. WeChat’s approach is to ask developers to put themselves in the shoes of their least sophisticated ‘dumb users’ – people who might be technology illiterate, or trying WeChat for the first time.
Zhang is well known for his ability to shift in and out of dumb user mode. And from his early days in the company, he pushed others to develop this capability, through what he called the 10/100/1000 principle: product managers were expected to do 10 end-user interviews, read 100 user blogs, and collect feedback from 1000 user experiences every month.
In Steve Jobs-like fashion, Zhang has shown an uncanny knack for creating user demand, rather than responding to existing demand. Mini Programs and QR code scanners have helped to secure WeChat’s dominant position in off-line payments, while quirky innovations like the ‘shake’ function, which link people shaking their phone at the same moment have proven popular.
Harvey Zhou, Corporate Vice President and Head of WeChat Technology Development explained the logic:
“Allen thinks social interaction should not be forced: if you send me a message, I may not want to respond immediately, and if I know you have received a notification, that pressures me to respond. We are determined not to add this, to respect the individual and to preserve their independence.”
Another striking feature of WeChat’s user orientation is the amount of work the teams do before moving into development. Many software companies today adopt a scattergun approach, trying out a range of different prototypes to see what sticks. But this can lead to wasted effort and an incoherent offering. As explained by Wawa Ye, Product Head of WeChat Pay:
“We talk about what we are actually going to produce, who the target user is, what the functionality is… and only after thoroughly discussing everything would we ask the team to start developing. The key is being able to zero in on the gist of the problem, for example, demands for sending pictures, or changing the way group chat is done, or including different things in the friend circle.”
Of course, not all WeChat’s new features are successful, but by deliberating over how users are likely to respond, and selecting for trial only those things that fit with existing features, the coherence of WeChat is maintained.
The term strategy is rarely used inside the company. As Lake Zeng, a senior executive, observed: “strategy is a pretty far-removed concept. Our attention is focused on the problems users encounter. We use all the necessary and most reasonable methods to satisfy their demands. I have always believed that everything we do revolves around this.” Top-down coherence over bottom-up innovation
There is an inevitable tension between top-down and bottom-up input in the innovation process. WeChat managers recognise the importance of people in their teams coming up with new ideas, and they explicitly seek to hire challenging and creative employees. “We encourage people who present their own way of thinking - I encourage them to speak out,” said Zhang.
But at the same time, it is clear that the top-down process dominates in WeChat, with Zhang making all the key decisions. New features are submitted to him for approval, and he decides on the icon, the nickname, and other key aspects of the user experience. The Mini Programs project, as a recent example, was led directly by Zhang. Developers are keenly aware that the biggest challenge is how to ‘get past Allen’, and that many seemingly good features are vetoed by him. If Allen says no, there is an “immediate sense of defeat.” While he kills off many of the ideas people bring to him, he also kills many of his own ideas, after debating them with others.
There is an apparent contradiction here: WeChat hires people to think for themselves and to come up with new ideas, but Zhang makes every key product decision himself. There are two reasons why this makes sense. First, Zhang is striving for a meritocracy, where the best thinking wins out. “I have always told the team, don’t take it personally when we discuss an issue; focus only on the problem.”
He likes nothing more than discussions late into the night, debating product features with smart junior colleagues.
Second, WeChat has benefitted enormously from having a singular, coherent identity; and for the consistency of the product to be maintained over time, it has been helpful to have a single architect with decision-making authority. When a product feature is vetoed by Zhang, it isn’t because it’s a bad idea in its own right, it is because that feature doesn’t fit with his vision for WeChat.
“When we did QQ Mail, everyone was a user; we experienced it through our perspective, and if something wasn’t good enough we just changed it. Every developer could be part of an optimisation process. But when we are trying to create something radical, a bottom-up process would tear it apart. Users need to be given an extremely clear concept with precise information – and that needs a single architect.”
As WeChat matures, though, it seems likely there will be more bottom-up involvement in the innovation process. Zhang led the Mini Programs feature because it was so novel. But for several of the more incremental features being developed today, such as Top Stories, he is giving the relevant teams full authority to make their own choices. Revering an introvert leader
You cannot spend more than a few minutes talking to WeChat employees before Allen Zhang’s name crops up. He is an enigma. He avoids public appearances where possible. He is an introvert, much happier interacting with a computer or a team of programmers than with other executives. He eschews formal reporting and paperwork. But he is a micro-manager who frequently vetoes the ideas of his colleagues, and who is revered for his vision and insight. “Allen is always right” is a comment we heard several times in our research.
Zhang, 49, is a quintessential computer geek. He was one of China’s first internet developers during the 1990s, and he attracts a cult-like following in China, for his pioneering work with FoxMail, QQmail and WeChat, and also for his prowess as a gamer and a top amateur golfer. For westerners, he comes across more like a young Bill Gates than Steve Jobs. He is thoughtful and articulate in conversation, but understated and ultimately quite shy. While he is evidently proud of what he has achieved with WeChat, he doesn’t relish the job of heading a 2,000-person organisation. We asked him how he spends his working day:
“I spend most of my time in meetings. But there are two kinds of meetings. There are management meetings I have to attend, when HR or Finance wants me. Personally I don’t like them, but I have to show up. The other kind are meetings about our product, which I much prefer. I enjoy sitting together with everybody, to go through new features or optimise the product. We always use up our scheduled hours, but everybody seems to be totally cool with it, even if discussions continue into the late night.”
Zhang exemplifies the leader as product architect. He knows every detail of the product. He feels personal responsibility for the WeChat user experience, and he makes all the key decisions himself. This has worked well for WeChat, and it’s a model that we can recognise in other highly-successful tech companies, including Facebook and Google. But it’s a style of leadership that works best in start-up and growth mode. As a product matures, a different style of leadership, built on enabling and empowering others, starts to become more attractive.
When Zhang moves on from WeChat, there are question marks over the company’s future leadership. “I don’t see anyone who can replace his role; our management model is defined by having him at the centre,” said one executive. But Zhang himself is sanguine about how succession will work out:
“I have no intention of moving on any time soon, but of course this will happen eventually. The one thing I’d very much like to see after I leave this position - my successor needs to have a distinct personality, to guide the product his own way, instead of blindly following others. He will probably be someone totally different from me; his thoughts may also be different from mine. It’s OK as long as it’s one person. The thing that [would] worry me is if product decisions become the compromise and consensus of ten people.” Maintaining agility – finding the right balance
Looking towards the future, Zhang’s first priority is to keep things as agile as possible, even with 2,000 employees. He has always had a sense of urgency. For example, he announced Mini Programs as a new feature to the market before the developers were quite ready, just to keep the pressure on — and the imperative for speed and responsiveness is no less important today.
This means operating with a flat and simple structure. Zhang has 20 managers reporting to him, each with up to 150 people [an average of 100 people per team]. These units are self-sufficient. They are able to operate in a closed-loop with few interlinkages to other units. Cross-functional teamwork is also the norm. People tend to work in open plan offices in a campus of adjoining old textile factory buildings in Guangzhou.
Given Zhang’s dislike of paperwork, it also means maintaining a high level of informality, with product decisions being made through discussion and experimentation, rather than through rules and procedures. None of this would surprise someone coming from a big US tech company, but it is a far cry from the norms in most Chinese corporations.
A lot of emphasis is also put on hiring the right people. To retain some coherence about who they bring in, an interviewing committee of directors screens all candidates. Attributes they are looking for, in addition to high intelligence, are critical analysis, independent-thinking, self-motivation and good listening skills. Zhang personally leads the orientation event for fresh graduates to give them exposure to his views directly, and he brings younger employees into project meetings to acculturate them to WeChat’s distinctive values.
But to return to the yin/yang logic introduced earlier in this article, WeChat’s executives must get the balance right on each dimension of their model. When you compare WeChat to typical fast-growing firms, it is noteworthy how well the business has managed to hold onto the operating model it had as a start-up: its notion of the product as a work of art, its focus on creating user demand, and its top-down innovation process. Perhaps the most interesting thing about WeChat’s story is that it has not suffered any major internal crises to date.
But this model is now coming under some pressure.
There are increasing commercial expectations on the business and there are new competitors like ByteDance that WeChat is having to respond to. This will require a shift in emphasis, a greater responsiveness to user feedback, a more bottom-up innovation process, and a new style of leadership that enables and empowers others.
These changes will be critical for WeChat’s success over the next eight years and into the future.