Innovation drives new eco­nomic growth

Unicorn CEOs’ views on how tech­nol­ogy will change busi­nesses — and peo­ple’s lives

China Daily European Weekly - - Business - By CHENG YU and LIU YUKUN

Aboom­ing dig­i­tal econ­omy is re­shap­ing China’s eco­nomic land­scape as a string of unicorn com­pa­nies — star­tups val­ued at more than $1 bil­lion — gear up to be­come new growth en­gines in the coun­try.

These uni­corns, cov­er­ing a wide range of high-tech sec­tors in­clud­ing ar­ti­fi­cial in­tel­li­gence, in­ter­net of things and in­tel­li­gent man­u­fac­tur­ing, have thor­oughly changed how peo­ple live and are cast­ing new light to in­vig­o­rate the coun­try’s innovation and foster a new econ­omy.

Dur­ing the two ses­sions in March of the coun­try’s top leg­isla­tive and po­lit­i­cal ad­vi­sory bod­ies, China called for more in­ten­si­fied efforts to stim­u­late innovation and pledged to do more to im­ple­ment the innovation-driven de­vel­op­ment strat­egy.

As a col­lab­o­ra­tive pro­gram with iAsk Me­dia, an om­n­i­me­dia plat­form founded by Ai Cheng, a renowned jour­nal­ist and busi­ness­woman, we in­ter­viewed CEOs from three uni­corns for their views on op­por­tu­ni­ties and chal­lenges brought about by the coun­try’s on­go­ing progress, as well as their in­no­va­tive de­vel­op­ment strate­gies.

They are Dai Wei from Ofo Inc, one of the coun­try’s main bike-shar­ing play­ers; Liu Zhi­hong from Shen­zhen Royal Tech­nol­ogy Co Ltd, an in­no­va­tor and a man­u­fac­turer of smart elec­tron­ics; and Su Hua from Kuaishou, a lead­ing video-shar­ing and livestream­ing plat­form.

The two ses­sions this year called for more efforts to sup­port in­no­va­tive en­ter­prises, es­pe­cially in IPO and fi­nanc­ing. How do you view this pol­icy, and what ben­e­fits will it bring to your com­pany?

Dai Wei: As a Chi­nese com­pany, Ofo hopes to go pub­lic in China if pos­si­ble in or­der to cre­ate more value for the do­mes­tic cap­i­tal mar­ket.

As a young tech startup, Ofo has achieved suc­cess in the past years thanks to fa­vor­able poli­cies and busi­ness environment. Like most star­tups, Ofo is on its way of rapid de­vel­op­ment and needs to ex­pand fi­nanc­ing chan­nels to get more sup­port to bol­ster our busi­nesses.

The two ses­sions de­liv­ered a good sig­nal for star­tups like Ofo and re­vealed that the govern­ment has at­tached great im­por­tance to tech­nol­ogy innovation. These fa­vor­able poli­cies will help us to ex­plore more new ad­vanced tech­nolo­gies in the fu­ture.

What is your take on the role of China’s in­ter­net and tech­nol­ogy de­vel­op­ment in its eco­nomic tran­si­tion? What are the chal­lenges that we may en­counter?

Dai Wei: China has em­braced rapid in­ter­net and tech­nol­ogy de­vel­op­ment, which is sig­nif­i­cant to our eco­nomic tran­si­tion, es­pe­cially in im­prov­ing so­cial ef­fi­ciency. Big data and ar­ti­fi­cial in­tel­li­gence have been writ­ten into the govern­ment work re­port, in­di­cat­ing their fu­ture sig­nif­i­cance to in­dus­trial in­te­gra­tion, eco­nomic struc­ture and peo­ple’s life­styles.

We say Ofo is a great at­tempt in ap­ply­ing in­ter­net tech­nol­ogy to peo­ple’s life­style — their way of daily com­mut­ing. In or­der to en­hance its user ex­pe­ri­ence, Ofo has been fa­cil­i­tat­ing our tech in­no­va­tions, like the first NFC smart lock and big data plat­form for ur­ban traf­fic. Go­ing for­ward, we will con­tinue to de­velop edgy tech and fur­ther ex­plore ar­ti­fi­cial in­tel­li­gence and big data.

What’s Ofo’s busi­ness model? How does the com­pany gain prof­its? Do you mainly gain from the de­posit?

Dai Wei: It’s more like the car-hail­ing busi­ness, where we offer prod­ucts for users to rent and users pay by times. In fact, even though users only need to pay 1 yuan (16 cents; 0.13 euro; 12 pence) per time, the profit rate of bi­cy­cle-rent­ing is far bet­ter than cars.

Our main profit comes from the ren­tal fees rather than the de­posit. De­posit is not a prop­erty that users can in­vest to pre­serve or in­crease the value. It is not at all a prod­uct and, from my per­spec­tive, will not ex­ist in the long run. We’ve never di­verted the de­posits for other pur­poses, and we are wait­ing for govern­ment poli­cies on how to deal with them.

For our 3.2 ver­sion of Ofo bike, the cost is 400 yuan. By June 2017, an Ofo bike is usu­ally used four to five times a day, which gen­er­ates a revenue of four to five yuan. We can re­coup the cost of one bike within half a year. We are prof­itable in many cities, with the max­i­mum profit hit­ting 40 per­cent.

Shared bikes have caused many prob­lems. There are peo­ple who keep the bikes as pri­vate. In ex­treme cases, some groups can de­code the pin of shared bikes. What’s your feel­ing to­ward this?

Dai Wei: At first, I felt anx­ious and sad. But now, I think that what we need to do is to con­tinue in­creas­ing scales and us­ing our re­sources to get used to such a con­cept and then use it. Our statis­tics show that fewer bikes are be­ing dam­aged as more and more are placed on the street. When a new­comer en­ters, it will face var­i­ous chal­lenges.

How big do you think Ofo’s mar­ket will be? What’s your plan in the fu­ture?

Dai Wei: Five bil­lion peo­ple across the globe will ride bikes. Even now, more than 100 mil­lion bikes are sold ev­ery year. You can see peo­ple rid­ing a bike in nearly ev­ery cor­ner of the world. In the fu­ture, we hope that we can serve sev­eral mil­lion peo­ple ev­ery day and Ofo can be found ev­ery­where glob­ally.

The in­ter­net of things will be a cer­tain trend. We are co­op­er­at­ing with Huawei and China Tele­com in do­ing the next gen­er­a­tion of IoT prod­uct. It may be­come one of the largest ap­plied sce­nar­ios for nar­row-band IoT. In the fu­ture, bikes will be in­ter­con­nected and can help govern­ments to col­lect data in­clud­ing air qual­ity and traf­fic jams.

This year marks the 40th an­niver­sary of the na­tion’s re­form and open­ing-up. What op­por­tu­ni­ties and chal­lenges do you think the re­form and open­ing-up have brought to Chi­nese tech com­pa­nies?

Liu Zi­hong: A great num­ber of tal­ents in Chi­nese tech com­pa­nies, es­pe­cially in­ter­net com­pa­nies, were born af­ter the launch of re­form and open­ing-up and thus have en­joyed ben­e­fits brought by this pol­icy.

These tal­ents are able to re­ceive high-qual­ity ed­u­ca­tion from home and abroad to grasp ad­vanced knowl­edge in tech­nolo­gies and form an in­no­va­tive mind, thanks to the re­form and open­ing-up.

In ad­di­tion, the deep­en­ing of re­form and open­ing-up has brought up a group of Chi­nese in­ter­net gi­ants and pro­vided them with a great in­no­va­tive environment, so that they are able to sur­vive and grow.

We no­tice that some Chi­nese en­ter­prises have al­ready stood at the fore­front of fields in­clud­ing e-com­merce and mo­bile pay­ment, but go­ing for­ward fur­ther they will need to ex­plore some “no man’s land”.

It re­quires that en­trepreneurs be more in­no­va­tive to ex­plore some un­ex­plored fields to catch up with some pre­cious op­por­tu­ni­ties.

What do you think about Chi­nese in­ter­net com­pa­nies’ in­no­va­tions in re­cent years? Which fields are ex­pected to be­come the next fron­tier of innovation?

Liu Zi­hong: Chi­nese in­ter­net en­ter­prises have grown at an un­prece­dented speed, with some of them hav­ing stood out to lead the world, such as e-com­merce and mo­bile pay­ment.

I think that hu­man-com­puter in­ter­ac­tion, ar­ti­fi­cial in­tel­li­gence and IoT are ex­pected to be trend­set­ting in the fu­ture, and each of them will be able to be­come an im­por­tant plat­form to serve a wide range of in­dus­tries.

Hu­man-com­puter in­ter­ac­tion be­came cru­cial last year. It will de­velop rapidly and start to be ap­plied to a large scale this year.

In the field of hu­man-com­puter in­ter­ac­tion, only lim­ited types of tech­nolo­gies have the po­ten­tial to be­come such plat­form­like tech­nolo­gies. I think that flex­i­ble elec­tron­ics has great po­ten­tial, as it breaks the limit of phys­i­cal space and has wide ap­pli­ca­tions in a va­ri­ety of in­dus­tries.

What are Roy­ole’s core busi­nesses and how do they de­velop?

Liu Zi­hong: Our busi­nesses are un­der­pinned by tech­nolo­gies of flex­i­ble dis­plays, flex­i­ble sen­sors and smart de­vices, with all three de­vel­op­ing neck and neck.

We are also in­te­grat­ing them into one tech­no­log­i­cal plat­form called Flex­i­ble+. It rep­re­sents the idea that our fun­da­men­tal and in­no­va­tive tech­nolo­gies re­gard­ing flex­i­ble elec­tron­ics will be ap­plied to a wide range of in­dus­tries in­clud­ing smart­phones, tablets, wear­able de­vices and smart home, as well as in­tel­li­gent ar­chi­tec­ture and dec­o­ra­tion.

Roy­ole has ac­cu­mu­lated more than 1,700 patents, which means one patent nearly ev­ery day. How has Roy­ole achieved this?

Liu Zi­hong: In fact, if you and your team re­ally fo­cus on innovation, you just come up with new ideas con­tin­u­ously with patents com­ing nat­u­rally.

In Roy­ole, about 70 per­cent of em­ploy­ees are tech­ni­cal and R&D staff, who come up with great ideas ev­ery day. Our R&D costs ac­counted for roughly 80 per­cent of the to­tal spend­ing in the first three years.

The past two years wit­nessed a de­crease of R&D as more of our prod­ucts have en­tered the mar­ket, but still, over half of the to­tal spend­ing is on R&D.

How large will the mar­ket for flex­i­ble elec­tron­ics be?

Liu Zi­hong: Some in­ter­na­tional re­search in­sti­tutes pre­dict that the mar­ket size of flex­i­ble elec­tron­ics is ex­pected to ex­ceed $300 bil­lion in the next five to 10 years. It is hard to say how ac­cu­rate this fig­ure is, but I be­lieve that the mar­ket will be huge, as flex­i­ble elec­tron­ics tech­nolo­gies are uni­ver­sal and can be ap­plied in var­i­ous in­dus­tries.

Roy­ole was es­tab­lished and op­er­at­ing in three places, in­clud­ing Sil­i­con Val­ley, Hong Kong and Shen­zhen si­mul­ta­ne­ously. What was your con­sid­er­a­tion be­hind this un­usual de­ci­sion?

Liu Zi­hong: It was not an easy de­ci­sion. We were very cau­tious about it, as we were afraid that such a largescale oper­a­tion would pose a heavy bur­den in a startup’s early de­vel­op­ment and may even drag the com­pany down to col­lapse.

This de­ci­sion was based on what we are go­ing to do in the fu­ture. We need to in­te­grate dif­fer­ent re­sources of those three places to fa­cil­i­tate our busi­nesses.

How can or­di­nary peo­ple be­come su­per­stars overnight through Kuaishou?

Su Hua: Un­like com­peti­tors who have con­tracted with stars and in­flu­encers, Kuaishou po­si­tions it­self as a plat­form where com­mon peo­ple can share their life with oth­ers from the very be­gin­ning. Our plat­form started as a GIF tool, but soon switched to a short-video-shar­ing com­mu­nity to meet the ap­petite of the au­di­ence.

What is your strat­egy fac­ing the in­creas­ingly fierce and rapidly chang­ing in­ter­net in­dus­try?

Su Hua: The key is to fig­ure out what you want and con­tinue with it. The in­dus­try al­ways changes, but you need to find some­thing that you can stick with. Once you start, you ought to think for your users and solve their prob­lems.

It is im­por­tant to do the right thing at the right time, but we don’t fol­low what oth­ers are pur­su­ing.

Are you wor­ried that users may harm them­selves when mak­ing er­ratic videos for more pub­lic at­ten­tion? What’s your take on content cen­sor­ship?

Su Hua: We have reg­u­la­tions on our plat­form, and the bot­tom line is no lee­way against the law. We will stop some ac­counts if they break the bot­tom line.

How­ever, gray ar­eas still ex­ist. What we are do­ing is to mea­sure the amount of users who send us com­plaints. Once the com­plaint reaches a cer­tain num­ber, we will in­ter­fere with this ac­count. We do not in­ter­fere with the content creation process, but we do have reg­u­la­tions to ex­clude some im­proper content.

Why did you refuse co­op­er­a­tion with stu­dios that wanted to use talent from your plat­form in films and re­al­ity shows? It seems a good way to make money by nur­tur­ing talent and draw­ing in more au­di­ence.

Su Hua: Our users are mostly welcome to pur­sue what they want, but we will not get in the mid­dle of their de­ci­sions nor rep­re­sent them. We position our­selves as a plat­form fo­cus­ing on video shar­ing be­tween or­di­nary peo­ple, and that is why it at­tracted so many users at the very be­gin­ning.

Mak­ing money by nur­tur­ing talent and draw­ing in more au­di­ence is a trend that many video-shar­ing plat­forms fol­low right now. Kuaishou, how­ever, has no cur­rent plans to step into the busi­ness.

The govern­ment is step­ping up efforts to re­duce the tax bur­den of busi­ness en­ti­ties. How do you view this?

Su Hua: The de­creas­ing tax bur­den can­not only en­hance our com­pet­i­tive­ness against com­pa­nies in other coun­tries, but also al­low Chi­nese en­ter­prises to in­vest more in innovation, which will en­able them to bet­ter par­tic­i­pate in the fierce global com­pe­ti­tion.

PRO­VIDED TO CHINA DAILY PHO­TOS

Ai Cheng (cen­ter), founder of iAsk Me­dia, and Liu Zi­hong (right), CEO of Roy­ole Corp, at­tend the Con­sumer Elec­tron­ics Show in Las Ve­gas, the US, in Jan­uary.

Dai Wei, founder and CEO of Ofo Inc, one of China’s main bike-shar­ing play­ers.

Su Hua, CEO of Kuaishou, a lead­ing video-shar­ing and livestream­ing plat­form.

Liu Zi­hong, chair­man and CEO of Roy­ole Corp, an in­no­va­tor and man­u­fac­turer of flex­i­ble elec­tron­ics.

A pair of bi­cy­cles sit on a dis­play on the Ofo Inc. hire bi­cy­cle ex­hi­bi­tion stand at the Au­ton­omy ur­ban mo­bil­ity sum­mit in Paris, France, on Oct. 19, 2017. Ofo is a great at­tempt to ap­ply in­ter­net tech­nol­ogy to peo­ple’s life­styles.

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