Innovation drives new economic growth
Leaders from unicorn firms — Ofo, Royole and Kuaishou — offer their views on how technology is changing businesses and people’s lives
A booming 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, the internet of things and intelligent manufacturing, have thoroughly changed how people live, and are invigorating the country’s innovation and fostering a new economy.
During the annual sessions of the nation’s top legislative and advisory bodies in March, China called for more intensified efforts to stimulate innovation and pledged to do more to implement the innovationdriven development strategy.
In cooperation with iAsk Media, an omnimedia platform founded by Ai Cheng, a journalist and businesswoman, China Daily 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 Zihong from Royole Corp, an innovator and a manufacturer of flexible 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 with IPOs 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 the favorable policies and business environment. Like most startups, Ofo is on its path 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 might 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 were included in the Government Work Report, indicating their future significance to industrial integration, economic structure and people’s lifestyles.
We say Ofo is a great attempt to apply internet technology to people’s lifestyles — 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 innovative technology 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 US cents) per time, the profit rate of bicycle-rental is far better than cars.
Our main profit comes from the rental fees rather than the deposit. The deposit is not a property that users can invest in 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 deposit for other purposes and we are waiting for government policies on how to deal with it.
For our 3.2 version of Ofo bike, the cost is 400 yuan. As of June 2017, an Ofo bike is usually used four to five times a day, which generates 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 for themselves. In extreme cases, some groups can decode the pin of shared bikes. What’s your feeling towards this?
Dai Wei: At first, I felt anxious and sad. But now, I think that what we need to do is to continue increasing our scale 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 bikes are being made available. When a newcomer enters, it will face various challenges. How big do you think Ofo’s market will be? What’s your plan for 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 creating 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 jam information. 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 about 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 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 they will need to explore “no man’s land”.
It follows that entrepreneurs need to 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 companies.
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 on a large scale this year.
In the field of human-computer interaction, only limited types of technologies have the potential to become such platform-like technologies. I think that flexible electronics have great potential as they break the limit of physical space and have wide applications in a variety of industries. What are Royole’s core businesses and how are they developing?
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 into 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 flexible electronics market be?
Liu Zihong: Some international research institutes predicted 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 is operating in Silicon Valley, Hong Kong and Shenzhen simultaneously. What was the reasoning 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 large-scale operation would heavily burden 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 the 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 contracts 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 regulation?
Su Hua: We have regulations on our platform, and the bottom line is there is nothing that 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 intervene in this account. We do not intervene in the content creation process, but we do have regulations to exclude some improper content. Why did you refuse cooperation with studios who wanted to use talents from your platform in films and reality shows? It seems a good way to make money by nurturing talents and drawing in more audience.
Su Hua: Our users are mostly welcome to pursue what they want, but we will not get involved in 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 talents 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 can not 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.