{"id":3447,"date":"2015-12-08T19:52:52","date_gmt":"2015-12-09T00:52:52","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/tencent-the-growth-of-king-penguin\/"},"modified":"2015-12-08T19:52:52","modified_gmt":"2015-12-09T00:52:52","slug":"tencent-growth-of-a-king-penguin","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/tencent-growth-of-a-king-penguin\/","title":{"rendered":"Tencent: Growth of a \u201cKing Penguin\u201d"},"content":{"rendered":"

Introduction<\/strong><\/p>\n

\"Logo\"Established in 1998 as a copycat of online instant messenger software ICQ, Tencent chose a pengu
\nin as the logo of its only product, OICQ (Yes, the name was lame.). 27 years later, this penguin, listed in Hong Kong Stock Exchange, has hit a market value of $200Bil [1], transforming into\u00a0a \u201cking penguin\u201d.<\/p>\n

 <\/p>\n

To achieve so, Tencent\u00a0has repeatedly revolutionized itself and reached\u00a0beyond IM business, into\u00a0online gaming, social media, e-commerce, advertising, financial service and investment.<\/p>\n

What is Tencent?<\/a><\/p>\n

\"tencent\"<\/a>\"Screen<\/a><\/p>\n

Business model<\/strong><\/p>\n

Regardless of being a big conglomerate, Tencent has continued centering its business model on social media and user base. This strategy paid off. Of the top four social media websites\/apps in China, three, i.e. QQ, Qzone and WeChat, are under Tencent, accounting for nearly 1 billion users combined.[2]<\/p>\n

\"Screen<\/a>\"Screen\"Screen<\/a><\/p>\n

Based upon this user base, Tencent has built an elaborate ecosystem around its social media products.<\/p>\n

The core is its \u201cfreemium\u201d membership model, which offers free service to basic users, and tiered subscription-membership that offers customized services on both intra- and inter-platform levels. The services were so well designed and tailored that Tencent gained extraordinary adherence from both free and subscribing members.<\/p>\n

The second layer of revenue comes from value adding services. This sector contributes the bulk of Tencent\u2019s cash flow, with the main offering including music (QQMusic), mobile messages, and online gaming (QQGame), all of which are far ahead competitors.<\/p>\n

Tencent also successfully channels its users out to the services it offers on many aspects of daily lives. For example, it is a leading player in e-commerce (QMall, and a joint venture with JD.com, another leading e-commerce site in China), mobile cab hailing app (Didi Dache, Uber\u2019s counterpart), and online payment system (Wepay, Alipay\u2019s chief competitor)<\/p>\n

In addition, Tencent offers many softwares, such as QQ internet browser, that will easily integrate into and strengthen its ecosystem.<\/p>\n

Operation model<\/strong><\/p>\n

Adaption and improvement<\/em><\/p>\n

This has been a highly controversial operating model, but it greatly contributed to Tencent\u2019s success. Tencent is very skillful in adapting new ideas and innovations that are new to the market. It will digest and quickly improve the products. \u00a0With a better copy of the product and its giant user base, Tencent will easily defeat competitors. In recent years, due to public pressure, such practice has been curbed and the new products are more of innovation than copycat.<\/p>\n

Focus on user experience<\/em><\/p>\n

Another aspect that links to the success of \u201cadaption and improvement\u201d strategy is the attention to user experience. Tencent has a large and renowned product managers team, which has been highly effective in collecting users needs and coming up with good product designs, therefore making the copycats always better than the original.<\/p>\n

Agility and openness<\/em><\/p>\n

Tencent divides its business into six business groups (BGs), with each focusing on one sector. This decentralized approach ensures the BGs operate as small to medium companies, therefore preserves the spirit of entrepreneurship, and enhanced the creativity and agility within the team.<\/p>\n

Meanwhile, Tencent opened up the developing platforms between all the BGs, as well as to external developers. This move greatly strengthened the collaboration internally and externally. By 2012, the registered developers reached 300,000, consolidated Tentent\u2019s leading advantage among ISPs. [3]<\/p>\n

Human resource<\/em><\/p>\n

Tencent has long boasted as one of the most sought employers in China. It offers outstanding in service training and opportunities to empower its employees. Meanwhile, it was also one of the earliest Chinese high tech companies that introduced employee stock ownership plan. In 2015 H1, Tencent was ranked as NO.1 best employer in China.<\/p>\n

Investment<\/em><\/p>\n

Leveraging its high cash flow, Tencent has proactively acquired and invested dozens of companies, most of which have been leaders in certain niche markets. This has effectively expanded its territory and eliminated competitors.<\/p>\n

Blockading competitors<\/em><\/p>\n

This has been the new focus of accusation on Tencent recently. Given the lack of enforcement of regulations, Tencent has more or less abused its dominance in social media and blocked its competitors\u2019 access. The list of victims are long: Netease, Alibaba, Baidu, and the most recent one, Uber. [5]<\/p>\n

 <\/p>\n

Conclusion<\/strong><\/p>\n

Although sometimes surrounded by controversies, Tencent has done an excellent work in threading its company mission, business model and operation model. Marching towards the company mission of meeting all needs from users, it built an ecosystem which continuously offered the best products and services in the market. Meanwhile, demand of feeding such product and service stream further shaped an effective operation model that relentlessly harnessed endogenic and exogenic innovations.<\/p>\n

 <\/p>\n

References<\/p>\n

    \n
  1. Tencent Valuation. http:\/\/www.reuters.com\/article\/us-tencent-valuation-idUSKBN0N40WN20150413#7uuWDptvzqBFLrPh.97<\/a><\/li>\n
  2. China Internet Watch. http:\/\/www.chinainternetwatch.com\/12809\/tencent-2014\/<\/a><\/li>\n
  3. Tencent Internal documents. http:\/\/hr.tencent.com\/news_detail.php?id=94<\/a> (Article in Chinese)<\/li>\n
  4. Tencent defended No.1 best employer in China in H1 2015. (Article in Chinese). http:\/\/finance.sina.com.cn\/roll\/20150814\/211022970669.shtml<\/li>\n
  5. In Uber\u2019s Quest to Win Over China, Tencent Blocks the Way. http:\/\/www.bloomberg.com\/news\/articles\/2015-08-23\/in-uber-s-quest-to-win-over-china-tencent-blocks-the-way<\/a><\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

    From ICQ to MSN messenger, IM giants had come and gone, even more been forgotten. Why did Tencent survived? And more importantly, why did it prospered?<\/p>\n","protected":false},"author":989,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","categories":[153],"class_list":["post-3447","hck-submission","type-hck-submission","status-publish","hentry","category-tencent"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\nTencent: Growth of a \u201cKing Penguin\u201d - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/tencent-growth-of-a-king-penguin\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Tencent: Growth of a \u201cKing Penguin\u201d - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"From ICQ to MSN messenger, IM giants had come and gone, even more been forgotten. 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