Abstract
The story of China’s internet tycoons like Pony Ma for the past two decades is that of a generation of carp becoming dragons. The twist, though, is that these idealist geeks, who ventured out to change the world, are now shackled and have become part of a system that they wanted to change.
In 2019, Tencent, a Chinese private enterprise, ascended to the ranks of the world’s top five companies, surpassing Facebook in terms of market capitalization. This watershed moment marked a significant shift within the global tech landscape, traditionally dominated by Silicon Valley behemoths. In Influence Empire, Lulu Chen unpacks Tencent’s journey towards becoming the world’s largest social and economic connector amid an increasingly turbulent environment characterized by volatility, uncertainty and complexity. Punctuated by insightful analyses and captivating narratives, the book draws a parallel between Tencent’s rapid ascension and a traditional Chinese story of transformation and perseverance when a lowly carp swims upstream to become a powerful dragon. In this metaphorical representation, it also offers new insights salient to several key debates within organizational studies as follows.
First, the book highlights the critical role of data in brokering market positions and affecting organizations’ ability to create and extract value from their products. Essentially, data is the new oil of our global economy and organizations that are able to best access, manage and monetize it have skyrocketed their market value. Just like Google or Facebook, Tencent was one of the pioneers in this domain with its revolutionary QQ number, an identifier developed in 1999 to link the various services it provided. Moreover, its perennial appetite for large user databases (mostly acquired through affiliates like Didi Dache or Meituan, the Chinese equivalents of Uber, and respectively Deliveroo, Groupon, Yelp and TripAdvisor combined) resonates closely with a vision that epitomizes economies of scale. As such, it is not surprising that the company’s most successful product – WeChat – is the ‘Holy Grail’ of apps, combining everything from social media, ride hailing, or finances to entertainment, food, and dating, and in the process, serving more than 1.2 billion users. Yet, on the academic front, while datafication is an area that is gaining momentum across multiple disciplines, there is a great need to move beyond conceptual and case studies to large-scale and data-driven empirical analyses that can assess causally and generally its consequences for organizations (Flensburg & Lomborg, 2023).
Second, from a strategy perspective, the book underscores the importance of taking purposeful chances, dealing callously with competitors, and maintaining organizational agility via diversification and innovation initiatives. Throughout the book, several ‘right bet’ decisions stand out for Tencent: its trailblazing role in the mobile gaming industry in China (through internal investments and lucrative licences and acquisitions), the early adoption of ‘freemium’ product strategies (i.e. play for free, but pay for perks and customization), or the persistent focus on speed rather than quality in its voice messaging segment. Competition-wise, Tencent was never shy about imitating both market leaders and disruptive innovators to survive and thrive. Its CEO, Pony Ma, put it bluntly: ‘I do not blindly innovate. Microsoft, Google are both doing what others have been doing. The smartest approach is to learn from the best examples and then try to surpass them’ (p. 137).
Moreover, diversification served as one of Tencent’s preferred modes for expansion, while its flexibility in securing partnerships with prominent companies like Meituan and Didi, became a blueprint for competing with its main domestic rival, Alibaba. Nevertheless, an important concern for Pony Ma was to stay alert and ahead of the game, to avoid the fate of past fallen giants like Kodak, Blackberry, or Nokia. This concern triggered also a significant shift in the company’s approach towards growth and diversification, moving away from targeting start-ups with ‘offers that they can’t refuse’ (p. 101) towards allowing complete independence to their partners, and essentially morphing into a company ‘incubator. . .instead of a killer’ (p. 42). Subsequently, Tencent became a major shareholder in Spotify, Tesla, Monzo, Snapchat and Reddit, covering a wide range of industries including finance, media, messaging, cloud computing and gaming. Together, these unique capabilities and their evolution over time present an important and understudied strategic arsenal for organizations in emerging markets with significant opportunities for new theorizing (Morris, Aguilera, Fisher, & Thatcher, 2023).
Third, Influence Empire highlights the growing importance of platforms for organizations, one that is continuously increasing through deeper embeddedness and more digital technologies in a self-perpetuating loop aimed at enhancing intrinsic value through network effects. These organizations adeptly construct intricate ecosystems comprising numerous third-party enterprises, thereby circumventing conventional supply chains and labour markets associated with traditional corporate structures. While Tencent focuses on four core activities (i.e. gaming, game development, social media and entertainment), Chen pays special attention to gaming, an area where the company capitalized masterfully on diversification and economies of scope and scale. As a result, Tencent stands as one of the largest publishers of Western-produced games in China, a very successful in-house developer (with releases like Honor of Kings, Gkart, or Arena of Valor), and a major stakeholder in major foreign developers such as Epic, Riot and Supercell. In addition, it managed to incorporate mini games in its WeChat ecosystem as a further source of income sustained by about 400 million users. Achieving and sustaining success in the platforms business remains an open area of research, considering the extreme highs (market valuations achieved) and lows (the number and magnitude of failures) we see on a daily basis. Subsequently, choosing platform architectures, developing and governing ecosystems, configuring business models, and capitalizing on cross-platform fertilisation are some exciting, open areas for new organizational research (Cennamo, 2021).
Fourth, the book taps deeply into the balance of power in a society, revealing the intricate interplay between commercial and political interests, one that can also change significantly over time. Strong allegiances and political connections remain mandatory for thriving in the Chinese economic system. Chen sees the relationship between Tencent and the Chinese government as an intimate quid pro quo affair: on one hand, a regulatory overlook on the questionable origins of private behemoths which often are linked to “original sins” – such as unruly appropriation of corporate assets, tax evasion, smuggling, or pollution – that allowed them to grow fast and unhindered; on the other hand, a symbiotic and subdued relationship between the CEOs of these large companies and the ruling Chinese politicians. Pony Ma himself is a member of China’s legislative council, and the close ties with the government are based on access to the wealth of data and information it harnesses daily from its customers.
However, the rapid rise to fame and power of the new Chinese tech giants was also, for many, the main cause of their downfall. While their demise has often come at the hand of foreign regulators (e.g. the 2020 Trump administration’s ban on TikTok plus WeChat over national security concerns), recent domestic policies have also been designed to curb the influence of these large tech private companies. For example, Alibaba was forced to stop its planned $35 billion IPO of Ant Group, while Tencent had to introduce time constraints for minor players and stop new game releases for two years, as video games have been labelled by Chinese politicians as a dangerous ‘spiritual opium’ that enslaves the country’s youth. And while Chen’s take on the future was rather bleak at the time she wrote the book, the recent US–China geopolitical tensions driven by ambitions for technological supremacy (Krammer, 2023) have benefitted Tencent by softening regulatory pressures on its gaming business and through a renewed governmental pledge to support tech industries. Given this remarkable turnaround, a pertinent and novel line of inquiry would examine when and why political affiliation becomes a liability rather than an asset for large, private multinational organizations (Wei, Jia, & Bonardi, 2023).
Finally, the book depicts the behaviours of Chinese multinationals largely as an offshoot of their cultural imprint. From overcoming significant technical limitations in the early days of WeChat (p. 115), tackling typical emerging market inefficiencies like cronyism (p. 118), handling cutthroat competition with a ‘kill or be killed’ mentality (pp. 44, 79, 100), or the perpetual 9-9-6 grind (p. 84) – i.e. working from 9 am to 9 pm, 6 days a week – Tencent’s culture is depicted as a ‘shark womb’ (p. 114) where compliance, workaholism and cannibalism are all mandatory for survival. This tension links back to the delicate symbiosis between Chinese private companies and the central government (pp. 120–123), one that balances the fears of anti-monopoly laws, policies to curb the consumption of ‘spiritual opium’, and taming the influence of digital empires built by tech moguls through participation in censorship, limitations of protests, access to user data, and full support for any geopolitical ambitions of the central government. But more importantly, as argued by Lai, Morgan and Morris (2020), it calls for investigations on how national cultural settings affect individuals and organizational identities, specifically the micro- and meso-level processes through which these identities are shaped by an ever-changing societal and political discourse.
In conclusion, Influence Empire goes well beyond the typical corporate hagiography, explicating in great detail the emergence and evolution of Tencent, one of China’s tech titans, and sharing intimate details about its enigmatic founder, and the rise (and downfall) of mighty, Chinese tech entrepreneurs at the hands of both foreign and domestic political manoeuvres. Furthermore, the book highlights potential avenues for new research, tapping into ongoing key debates in the field around the role of datafication, platforms and strategic imperatives for organizational success, as well as the contingencies of political affiliation and the role of national culture in determining individual and organizational identities.