Innovation and Entrepreneurship
Enlightenment from the success stories of Chinese entrepreneurs
Quick growth of China’s economy and the “Mass Entrepreneurship and Innovation”
advocation from the government, enormous entrepreneurship companies were born in
Chinese market. Accompanied with the rapid development of the Internet industry and
the advent of the era of streaming media, internet companies became one of the fastest
growth companies in global, China is also of no exception. Ma Huateng, one of the
founders of Tencent, and Zhang Yiming, the creator of Tiktok, are well known in the
world; therefore, it is reasonable to conduct a cautious research on the secrets of the
commercial empire establishment of these two successful entrepreneurs.

Brief introduction of the founder, chairman and CEO of Tencent-Ma Huateng
Ma Huateng, graduated from Shenzhen University in 1993 with a Bachelor of
Science in computer science. Ma's first job was with China Motion Telecom
Development. As a supplier of telecommunications services and products, he was in
charge of developing software for pagers. Then he worked for Shenzhen Runxun
Communications Co. Ltd. in R&D center for Internet calling services. After a successful
stock investment, Ma has gained 600,000 Yuan as the first bucket of gold for his own
business. In 1998, he kicked off his business with 4 classmates and Tencent was
eatablished. Inspired by the idea of ICQ, Ma and his team, in February 1999, launched
a similar software with a Chinese interface and a slightly different name – OICQ (or,
Open ICQ). The product quickly became popular and garnered more than a million
registered users by the end of 1999, making it one of the largest such services in China.
Tencent got venture capital both from the U.S. and Hongkong owning to tencent's
prized service OICQ was offered free of charge. Ma Huateng changed the name from
OICQ to QQ after the arbitration disputes with AOL in December 2000. From 2003, Ma
Huateng expanded Tencent’s business significantly in many areas. As of August 2019,
he is China's richest man and the 20th wealthiest in the world, with a net worth of
US$37.7 billion. Ma is the first Chinese who enter Forbes' top 10 richest men list.
Obviously, strong willingness to quick growth and wealth, good reputation and huge
profits make Ma Huateng become a growth Entrepreneur.

Brief introduction of the funder of ByteDance
Zhang Yiming is another Chinese internet entrepreneur. He was a student of Nankai
University in Tianjin, where he had majored in microelectronics before changed
into software engineering. Zhang Yiming graduated in 2005 and after experiencing one
frustration in co-entrepreneurship, he joined Kuxun as a technician and then worked for
Microsoft. He developed the news aggregator Toutiao and the video sharing
platform TikTok (Douyin) by founding ByteDance in 2012. As of 2019, with more than 1
billion monthly users, ByteDance is valued at US$75 billion, making it the most valuable
startup in the world. Zhang's personal wealth is estimated at $13 billion, making him the
ninth richest person in China. Zhang Yiming’s business success is based on the AI
technology and he is mainly a technology entrepreneur.
Innovation and Entrepreneurship
As famous entrepreneurs in internet industry, these two entrepreneurs have many
similar characteristics. Initially, they all chose entrepreneurship in the internet industry
which is related to their familiar technological area they have studied in university. Both
of them are keen on software development and internet environment analysis.
Subsequently, “make it possible” working style with logical thinking is the critical factor
to the success of their business, although maybe they are not so good at expressing
their ideas sometimes owing to they are engineering graduates. Last but most important
is both of them accumulated technical and management skills before they really started
their own business. Also, business frustration is unavoidable in their process of starting
a business.
There must be some differences between Ma Huateng and Zhang Yiming when they
went on the way to success. Firstly, Motivation of entrepreneurship differentiation.
Entrepreneurship for Zhang Yiming is mainly owing to the challenge expectation and
interests to exploring, which also may help on customers’ needs and beneficial to the
society; while for Ma huateng and his partners, they chose entrepreneurship for profit
gain and better life at that period. Secondly, Models of entrepreneur diversity. Zhang
Yiming chose an independent way, but Ma Huateng co-found the company with his
classmates, which means complex corporation relationship among the founders.
Thirdly, entrepreneurship experiences discrepancy. Zhang Yiming experienced 5 times
entrepreneurship in his life, including two independent entrepreneurships and one
partnership. Whereas, Ma Huateng just had one co-founding experience with better
financial preparation than Zhang Yiming. Lastly, Preferences for work differentiation.
Zhang Yiming is keen on the work with freedom and likes things that have a sense of
experience and participation, which can get a quick result. So, Tiktok well reflect his
philosophy of life that everything takes an unusual step to youth group. By contrast, Ma
Huateng is pragmatic and is concentrated on the job, and he improvves business by
instant problem solving. As a result, his product is public facing and economic.
Nowadays, corporate social responsibility (CSR) increasingly gets public attention when
companies are running the business for profit. Over the years, Ma Huateng has been
actively involved in charitable and philanthropic projects, particularly in the areas of
medical care for children, disaster relief and environmental protection. He made plans to
donate 100 million shares of Tencent Holdings Limited in Hong Kong to a charity fund
that supports healthcare, education, environmental protection and other philanthropic
efforts in mainland China, apart from that, he also donate money for innovation projects
related to cutting-edge technologies and basic sciences research globally in 2016 and
10.8 billion in 2019. By comparison, Zhang Yiming also advocated CSR, Tiktok
organized CSR working group for the CSR work schedule and execution. Also,
“Sunflower plan” and health management plan was scheduled to protect adolescent
from over-using Tiktok.
Innovation and Entrepreneurship
Tencent Holdings Ltd.
-Strategic Innovation for the New Business Environment

The main products
Tencent Holdings is a Chinese multinational conglomerate holding company founded in
1998, which has 5 SBUs and invested in more than 600 companies by 2018. It is a
typical growth venture whose employees increase fastly from 6194 in 2008 to 54309 in
2018 (Chart 1), meanwhile, the profit rose from 3.1 billion to 94.47 billion (Chart 2).
Tencent is one of the three biggest internet companies (BAT) in China, which uses
technology to enrich the lives of Internet users. The main products of Tencent are
divided by four categories:
Communications and social platforms: Weixin and QQ connect users with each
other, with digital content and daily life services in just a few clicks.
High performance advertising platform: Helps brands and marketers reach out to
hundreds of millions of consumers in China.
Financial technology and business services: Support partners' business growth and
assist their digital upgrade.
Talent and technological innovation: Actively participating in the development of the
Internet industry.

Business Model Reinvention
Tencent has the best business model among all technology-based companies in the
internet industry. This business experienced several commercial models’ change in 15
years. From the initial SP (Value-added Service Provider) model in 2000 to virtual
commodity sales model in 2004, then “Freemium” model（Free + Premium）, internet
portal, internet game, blog to create an "open platform of the whole industrial chain",
merge& acquisition and layout mobile end today.
Tencent makes more and more profit from the business model reinvention from welldefined value proposition, value architecture and value equation.
Value proposition
Most internet firms donate free things to customers in order to gain profits through online
advertising, but Tencent never give away services after managing to attract millions of
users worldwide. Firstly, Tencent’s main instant messaging platform QQ and Wechat,
offer total solution for most internet users. The company has added value to this service
because it is the most essential application that generates a lot of income for the firm.
Secondly, in order to ensure safety and privacy for communication tool users, Tencent
offers free security software that protects users’ gadgets from any harm from viruses.
Additionally, large users group bring fantastic commercial advertising opportunities to
the advertisers to establish brand awareness. Lastly, the open third-party platform
creates enormous chances for application developers to share the success with
Tencent.
Value Architecture
Innovation and Entrepreneurship
Strategic innovation plays a vital role in the success and sustainability of any business
in today’s global economy. Tencent redefined its value architecture and came up with a
new business model that makes it stand out amongst the competitors in the social
networking industry. Tencent holds a place in the social networking industry due to its
outstanding customer relations, product innovation, infrastructure management,
technology, market considerations, and financial aspects.
Value equation
Tencent generates a lot of revenues from its services, which makes it get a higher total
value. The molecule of Tencent’s value equation is the privacy safety guarantee to the
communication and platform users, the quality warranty of internet product and the
potential sharing profit with the commercial partners. The denominator is the cost / price
point that people have to pay for these rights acquisition. Both individual and
commercial customers gained their expected products from Tencent and also got
additional value from materialistic and spiritual levels.

Competitors and competitive advantage
Owing to fierce competition in internet industry, Tencent needs to face three main
groups’ competitors to fight for advertisement customers, individual customers and
enterprise customers in domestic. (Chart 3)
The top competitors of Tencent include Facebook, Meituan-Dianping, Sea and 140
Proof. (Chart 4) In all of these four international competitors, Facebook is Tencent’s
strongest competitor in revenue and active users, SEA was top in Alexa website ranking
and Meituan-Dianping is strongest in funding financing. But as a multinational listed
company, Tencent also very strong in financing, stock and VC are its main financial
channel. By contrast, Tencent has the biggest employees’ team and predominant yearly
net income.
Tencent has many competitive advantages compared with its competitors, such as
multi-dimensional network community establishment to support the information
communication, resource sharing and entertainment among the users, the exploring
and innovation spirit of the management team, abundant user operation experience,
and good partnership with other business handlers.

Innovation and Innovation Strategies
The CEO of Tencent said: “Innovation is the ultimate pursuit of user experience.”
Tencent's innovation over the past 20 years reflects that Chinese Internet companies
have found their own unique methods in iterative product innovation and understanding
of consumer behavior, which has given this international social app a unique user
experience. The innovation system in Tencent includes product innovation and
management innovation. Product innovation largely improves product experience of
users via different functions development. There are more than 3,000 patents have
been applied worldwide, and more than 1,500 have been officially authorized. From the
management innovation aspect, Tencent changed traditional functional organization to
product organization which is more suitable for the business with long-term uncertainty.
Innovation and Entrepreneurship
This type of organization supports teams to work together for a long time to form a high
tacit understanding and form a good foundation for innovative teams.

Interrelationship among Tencent and the stakeholders
Accompanied with continuous refinement of the social division of labor, enterprises
have become part of the business ecosystem chain. Social responsibility has been
demonstrated not only by ethics, but also by the balance of interests of stakeholders in
the business ecosystem chain. As an internet company with the most users, Tencent
and its stakeholders will share the value that the company created for its users. The
senior management of Tencent regard CSR the same important as commercial profit
making - the internal charity organization was established especially for this purpose
and it donated 334 million to poor regions for primary schools built. High business profit
and CSR brought employees a sense of safety and these employees are willing to
contribute more on company’s further development. This positive action also got the
strong support and valuable comments from Chinese government and media, which
makes Tencent more famous without commercial advertisement. Public users are
benefited from the public platform organized by the third-party business partners by
providing enormous resources, and at the same time, the third-party business partners
also get profit from this partnership. Last but not least, Tencent proceeds environment
protection via building green database, energy saving servers and green products
design. All of these contribution from Tencent make the society harmonious and the
environment friendly.
ByteDance Ltd.

The products and underlined technology
ByteDance Ltd. is an internet technology company headquartered in Beijing, and it
developed the news aggregator Toutiao and the video sharing platform TikTok in 2012.
Toutiao, ByteDance's core product, is a content platform in worldwide. Toutiao started
out as a news recommendation engine and gradually evolved into a platform delivering
content in a variety of formats, such as texts, images, and question-and-answer posts. It
is a news aggregator app that scrapes news from the internet and this scraped news
are pushed to people-“based on their interests”. TikTok is consisted of acquired music
start-up musical.ly and Douyin, and it also runs BuzzVideo and Vigo Video. TikTok is a
creative social media platform primarily driven by short-form video content. It launches
various types of challenges to tap into the creativity of its users and therefore generates
attractiveness
ByteDance has advanced AI technology. In 2016, ByteDance's AI Lab and Peking
University co-developed Xiaomingbot, an artificial intelligence writing bot that writes
news articles. In general, Xiaomingbot published stories approximately two seconds
after the event ended. ByteDance's research arm-the AI lab，founded in March 2016,
focuses on researches of AI to understand information (text, images, videos) in depth
and on development of large-scale machine learning algorithms to recommend
personalized information.

Business and profit earning
Innovation and Entrepreneurship
ByteDance runs the main business, and at the same time, expands its core business to
overseas market and combining with acquisition and investment (Chart 5). The income
and profit come from paid advertisement, information personalization and data traffic
distribution and so on. (See Chart 6). ByteDance are planning to further develop its
business via products diversification, geographic expansion and M&A strategies.
ByteDance promotes its products via on-line customers and marketing campaigns, such
as launching several activities with Chinese celebrities to engage their fans' interest. For
example, its marketing campaign in 2018 Spring Festival Gala alone brought an
increase of 70 million daily active users. In February 2018, Tiktok launched a
partnership with Modern Sky to monetize music.
Compared with Tencent, the business model of ByteDance is much simpler although
the paid advertisement and data traffic distribution are both of their profit-making
channel. The business model of Tencent experienced several business model
innovations to better adapt to the changing environment, but ByteDance’s business
model is quite simple and just expended its main products to overseas market via
investment and M&A. Tencent has a full range of internet products and services based
on the communication platform, such as QQ. Also, from the promotion channel, the
third-party cooperation is a mutual benefit way to promote the products, compared with
ByteDance’s traditional promotion ways. Meanwhile, because of the predominant
independent financial capability from VCs, which is the main financial channel of
ByteDance, Tiktok also grows very fast in the internet market.

Competitors and competitive advantage
Because short videos are new in recent years, unlike Ali and Tencent, the competitors
of ByteDance around the world have not formed a leading scale. ByteDance should
strive for worldwide data traffic in this area. For search engine business, the main
competitors of ByteDance are Baidu, Ali and Sougou in domestic market. At the same
time, Facebook and google in worldwide. General speaking, ByteDance's top
competitors in the world include Sina Corporation, SafeGraph, Aureus Analytics and
LiftIgniter, whose main competitive businesses are online media, big data, predictive
analytic products and the machine learning personalization products (Chart. 7). As a
leading internet company in the world, ByteDance has its special competitive
advantages, such as bigger company scale than the competitors, large numbers of
monthly active users, considerable net income, especially for the independent financial
capability of ByteDance.

Innovation and Innovation Strategies
ByteDance is a company that changes the way of connection between people and
information by technology. The business target of ByteDance is to make the information
distribution more efficiently through technical means since kicking off the personalized
recommendations. To form a complete closed loop among people, data, and algorithms,
and further to form a complete technological innovation system are necessary to
achieve this target. In early 2017, ByteDance only had about 20,000 servers in the
rented data center, while today, it has built its own ultra-large-scale data center with
170,000 servers in less than 9 months.
Innovation and Entrepreneurship
User experience would beimproved by the advancement of technology, and then more
users will use the technology advanced products. And this result will further generate
more demand, which stimulates the products improvement via new technology. The
continuous product improvement is proceeding in this virtuous circle.
At the same time, ByteDance faced many challenges during the progress of the rapid
development and the realization of global operations. The problems arisedfrom new
business models, such as the construction of overseas IDCs and long-distance
transmission. These challenges cannot be solved simply by increasing resources.
Because of this, ByteDance established partnership with Intel in all aspects of the data
center infrastructure, software optimization and landing applications, including big data
analysis and artificial intelligence. Otherwise, IDCBD and the supply chain team have
been specially established to cope with the extremely high requirements on
infrastructure, IDC construction, and the supply chain owing to the high-speed business
development.

Interrelationship among ByteDance and the stakeholders
As an internet company in social media industry, the stakeholders of ByteDance were
divided into six categories, they are VC, governmental departments (SARFT, Internet
supervision departments, The Press and Publication Administration PRC), competitors,
media, customers and the internal stakeholders (employees, senior management). In all
of these stakeholders, VC, senior management of ByteDance and a part of
governmental departments are VIP groups for ByteDance owing to their high power and
high interest, their attitude imposes the big influence on the business operation of
ByteDance. Media and customers are main promotion groups of company and
products, delivering positive information to them is critical. Some governmental
departments will jump in to put their oar in the business operation of ByteDance if the
relative policies are violated, although they are not so interested in ByteDance’s
business operation. Keeping this group satisfied is important to prevent them from
changing the role. Keep competitors and employees informed are enough because of
their low influence on the business operation. The government and media stakeholders
have some negative comments on the CSR work of Tiktok. Owing to public safety and
order are still routinely disrupted just because the Tiktok user want to take the creative
and exciting short videos. Also, the youth protection plan still pays a limited role in daily
life Strengthening CSR project execution and management is urgent although it is
common for the business profit to a company.
Learning from the above two successful entrepreneurs, a successful entrepreneurship
holds great promise based on workable financial channels, as long as a good business
model setup with strategic innovation, novel products which may improve users’
experience and good CSR sense in an entrepreneurship company.
Innovation and Entrepreneurship
Appendix 1-Tencent
Chart 1. Tencent Employees from 2008 to 2018
Chart 2. Profit before income tax of Tencent from 2008 to 2018(in billion yuan)
Chart 3. Domestic Competitors of Tencent
Data Source: https://wenku.baidu.com/view/91b254494531b90d6c85ec3a87c24028905f8550.html
Innovation and Entrepreneurship
Chart 4. Global Competitors of Tencent
Data Source: https://craft.co/tencent/competitors
Innovation and Entrepreneurship
Appendex 2-ByteDance
Chart 5. Global Business Model of ByteDance
Chart 6. Profit Model of ByteDance
Chart 7. Main Business Competitors of ByteDance
Innovation and Entrepreneurship
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Innovation and Entrepreneurship
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Innovation and Entrepreneurship
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