A Study of Innovation Management of Tencent company

朱欣童

【Abstract】This study chooses Tencent as a research object to explore the innovation management of the company. As an internet company， Tencent has grown to be one of the most influential company in China and even in the world within several years， its success must have amazing advantages. Tencent company was founded in 1998， which is one of the largest internet integrated service providers in China and is also one of the largest web portals in China. The reason why Tencent company is so successful is that it has been insisting on innovation constantly. Innovation is a special tool for entrepreneurs， by means of innovation， they can explore the opportunity of change for various business or service. Through the aspect of innovation， the article evaluates innovation development and management of Tencent.

【Key words】innovation management； entrepreneurs； development

1 Innovation

1.1 Product innovation

Product innovation means the development of new products， shift in design of established products， or use of new materials or components in the manufacture of established products. Tencents products always focuses on production innovation in order to meet the requirements of users， such as communication， entertainment， information and electronic commerce. Product innovation is always manifested visibly during the innovation process， which is driven by technology or market.

Tencent's various services include social networks， web portals， e-commerce， and multiplayer online games. Its offerings include the well-known instant messenger Tencent QQ and one of the largest web portals in China. Mobile chat service WeChat has helped bolster Tencent's continued expansion into mobile phone services. The update rate of Tencents products is rapid， there will be a new vision time to time. Not only can it keeps vigor of product， but also leads the trend of fashion.

Moreover， Wechat is another Tencents innovation product， which is a voice messaging communication tool that people can contact together rapidly. Tencent launched Wechat in 2011， Wechat can support text messaging， photo/video sharing， location sharing， broadcast and so on. However， the biggest advantage is that it supports hold-to-talk voice messaging among many people. Through voice communication， it brings many conveniences when people chat with each other. Wechat broke the monopoly of the China's three big communication operators due to it is free of charge. Wechat has become the most popular app in China in recent years.

1.2 Technology innovation

Technology innovation is a central pillar of the development of Tencent. Technology innovators always pose a threat on existing firms because they improved products significantly or meet customers needs satisfactorily.

Enterprises must grasp the core technology with independent intellectual property rights， and invest a large number manual labor， material resources and financial resources in research and development.

Tencent owns hundreds of big and small technology patents， majority of which constitute Tencent's six core technologies： network security， storage technology， data mining， video multimedia， Chinese P2P processing and distribution networks. Not only can these technologies promote the rapid development of Tencent 's business， and some technologies even have a commanding lead in the world.

1.3 Organization innovation

In terms of organization of Tencent， it invested one hundred million yuan to set up a research institute to attract Chinese scientists and technicians to join in the institute. In the second half of 2006， Tencent also launched QQ network laboratory to fully absorb the users imagination and demand. This way is also similar to Google. In the process of successful imitation， the structure of Tencent has been improved and adjusted constantly.

Tencent company established Tencent innovation center. It is the first time that Tencent found a particular department that responsible for the business innovation. After a project entering the innovation center， it will be evolved from an idea into a viable product until becoming mature and commercial products. The whole process shows a new product innovation funnel， namely， concept development and selection， detailed design， testing and launch used.

Therefore， innovation center within Tencent is also called "innovation incubator". In the innovation management of Tencent， the innovation center has gradually become the innovation of company warehouse， which can be used to collect staffs creativity internally and obtain users inspiration externally. In this way， its innovation organization provides guarantee for the companys knowledge creation.

1.4 Management innovation

Firstly， from the perspective of leadership， Tencent combined introduction with study efficiently， making innovation on the basis of introduction and learning. One of dimensions of learning is obtaining new knowledge to increase knowledge resources of the organization. （ Tidd. et al ，2001）. Tencent encourages employees to continue to learn during the process of working and provides employees with rich learning channels. For example， Tencent sends staff to the Korean game companies to learn technology. In order to find more opportunities and trigger innovation， people need to discover more new knowledge. By a series of institutional arrangements to make an effective combination of learning and enterprises activities of various layers， and achieve business innovation and development.

In terms of culture innovation， with the establishment of the Tencent innovation mechanism， independent innovation has been integrated into the company culture. Tencent advocates innovation culture and try its best to provide innovation opportunities and environment for every colleague， and makes employees maintain active thinking in the busy work environment， so that everyone can keep the passion of work. Tencent advocates that the innovation of idea can integrate deeply into the daily work， anyone can creative at any time. The corporate culture of Tencent is evolving along with the growth of the company. In the beginning， Tencent culture is happy and vibrant. It expects employees to learn and grow with Tencent together. According to the needs of the development company， Tencent upgraded their corporate culture to the second version， defining the company's vision to be the most respected internet enterprise. Tencent guides staffs by more professional ways and puts forward the ‘integrity， responsibility， cooperation， innovation of values.

Innovation competition held by Tencent facing the whole country， which a good example of open innovation among management scholars. At the first innovation of the competition， Tencent started from their own products and then encouraged any innovation design linked to the internet or the outside internet. Through the game， Tencent can find and cultivate innovative talents， and then apply innovation achievements into products for creating value for customers constantly.

1.5 Market innovation

Market innovation may be an intangible or tangible embodiment of the innovation process （Ahmes. et al. 2010）.. According to Tidd （2001）， marketing should be stressed to recognize and understand the customer demand， and make efforts to create value for customers in the process of innovation. In order to meet requirements of users， Tencent puts emphasis upon user experience and attempt to create ‘ one-stop internet community for users， which allows them to find their business needs easily after log Tencent community. Online life industry model is a major innovation during the process of Tencent operation in the market. QQ users have accustomed to its interface and are not willing to transfer to other similar products easily. Thus， users have a dependence on Tencent's products， which making Tencent seizes opportunities to integrate relevant information products and expand its awareness of the brand.

Tencent has launched Internet value-added services， especially introduced different types of new online games. Not only QQ game have their own game studio， but also cooperate with other online game companies efficiently.

By this way， QQ game can further diversify product mix and expand the user group of game. Moreover， some virtual currencies （QQ coins） are adopted to make a profit. Meanwhile， internet advertising provides an online advertising platform for Tencent.

2 The challenges of Tencent

2.1 The internal and external competition

First of all， there is competition between internal products. Although each product conception of starting point is different， conflict may be presented in a particular function. When the conflict appeared， it would cause a sense of confusion and lead to loss of users. Moreover， the product diversification dispersed Tencent， making it pay less attention to the specific product. However， due to the large user base， increasing one more product can produce huge data volume， which constrained the Tencents flexibility of new business development.

Secondly， Tencent is confronted with external competition pressure around the world. QQ customer segment mainly targets young people who usually use QQ with the primary aim of entertainment. These users， perhaps as the change of age and surroundings， will transfer to other instant message softwares， for example， MSN messenger and Google Talk. In this sense， Tencent's challenge is similar to kids products company， children always grow up， a new generation still choose you？ Therefore， it is key for Tencent to offer new services， keep fresh and obtain a new source of users in the future.

Moreover， while imitation is the basis of innovation and learning， but the long-term imitation and learning restrain Tencents sense of innovation， as well as devastate Tencents brand reputation.Various innovative products， such as SNS， Weibo， Group purchase and so on can quickly occupy the market， which makes Tencent cannot take advantage of its platform to occupy a leading position.

2.2 The disadvantages of micro innovation

Although micro innovation ability of Tencent is strong， the micro innovation is not a large-scale innovation. Therefore， it can not form a good reputation and ignored by the users. If tencent don not execute large-scale effective innovation， it will not be able to compete with other innovative companies to gain more market share， or even possible decline in market share.

3 Summary

Tencent has more advantages than other competitors. Firstly， there are a huge number of registered users and mass user data. QQ Brand has a strong impact on users. Tencent pay much attention to brand image. Moreover， Tencent has comprehensive and successful product lines and mature experience of internet services. Thirdly， Tencent has excellent R & D capabilities and be expert in managing huge amounts of data. Lastly， there are stable cash flow and plenty of excellent earnings in recent years， giving a strong sense of trust to investors.

Apparently， as China's rapid economic growth， China's internet industry maintains continuous and stable development. Tencent face many opportunities in the future. On the one hand， enterprises increasingly require effective means of communication. Internet value has been recognized by companies， business investment on the internet will further increase. Moreover， network services have been enlightened and deeply rooted in people， the demand of users are able to be stimulated effectively. Increasing advances in technology makes it possible to meet the needs of users.

Based on the above analysis of Tencent advantages and opportunities， the development direction of Tencent is very broad. Additionally， Tencent requires employees to strength an ability of sustainability innovations. Sustainability innovations play an important role in the process of developing successful sustainability marketing strategies， especially in competitive internet era. In order to keep Tencents position in a dynamic and competitive industry， Tencent has to continue increasing investment in the aspects of research and innovation， the technical construction， talent development and brand and so on in the future. Tencent can consider that take the various segments of the services subcontract to other professional companies. In this way， not only its own risks of research and development can be reduced， but also enrich own advantages by learning othersstrength. At the same time， Tencent should create a variety of new products， increase the propaganda and attract more users to use Tencent's products in order to improve market share. Choosing different forms of market innovation is a key for success of business management. Tencent is a live case study that shows how innovation happened in high-tech industry and assisted Tencent in gaining more market share.

References：

[1]Ahmed， P. and Shepherd， C. 2010. Innovation management： context， strategies， systems and processes. Harlow： Pearson Education Limited.

[2]Tidd，J.， and Bessant， J. 2013. Building the innovative organization. In： Managing Innovation：Integrating Technological， Market and Organizational Change 4th ed. Chichester： Wiley Publications.pp.106～131

[3]Tidd，J.，and Bessant， J. 2013. Creating new products and services. In： Managing Innovation：Integrating Technological， Market and Organizational Change 4th ed. Chichester： Wiley Publications. Pp.400