Business Information Systems Discipline

Assignment Submission Form

Module: MS802

Group Contact Person Details:

Surname: SHARMA

First Name: AMIT

Email: [email protected]

Lecturer: Dr. Lorraine Morgan/Dr. Denis Dennehy

Course: MS802 IS Strategy & Innovation

Assignment: Business Innovation Audit

I hereby declare that the work submitted is entirely our own, and that ideas or extracts taken
from other sources are properly acknowledged and referenced. Furthermore, I acknowledge
that the penalty for plagiarism may include suspension from examination.

Signed: _________Amit___________ Date: __02/04/2021________

Signed: _________Anirudh-________ Date: __02/04/2021_______

Signed: _________Ansh___________ Date: __02/04/2021_______

Signed: ________Gayathri_________ Date: __02/04/2021_______

Signed: ________Jiarun___________ Date: __02/04/2021_______

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 MSC IN INFORMATION SYSTEMS MANAGEMENT

MS802 ASSIGNMENT 1

We hereby declare that the work submitted is entirely our work and that ideas or extracts taken from
other sources are properly acknowledged and referenced.

Student ID Program Student Name Contact Details (Email, Telephone)

+353 899834556
20230819 M.Sc. ISM AMIT YOGESH SHARMA
[email protected]
+353 892044873
20231830 M.Sc. ISM ANSH YADAV
[email protected]
+353 89 941 7062
20234085 M.Sc. ISM ANIRUDH RAO
[email protected]
GAYATHRI SIRA +91 9590628049
20232113 M.Sc. ISM
RAJASHEKAR [email protected]
+86 150 6199 3777
20233807 M.Sc. ISM JIARUN ZHANG
[email protected]

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Table of Contents
1. INTRODUCTION ............................................................................................................................. 4
1.1 Company Background .............................................................................................................. 4
1.2 Company Selection ................................................................................................................... 4
2. INNOVATION AUDIT ASSESSMENT & RADAR CHART ........................................................ 4
3. KEY FINDINGS ................................................................................................................................ 5
3.1 STRATEGY ................................................................................................................................ 5
3.2 PROCESSES ............................................................................................................................. 6
3.3 LINKAGES .................................................................................................................................. 7
3.4 LEARNING ................................................................................................................................. 9
3.5 ORGANISATION ..................................................................................................................... 10
4. RECOMMENDATIONS................................................................................................................. 11
4.1. STRATEGY ............................................................................................................................. 11
4.2 PROCESSES ........................................................................................................................... 12
4.3 LINKAGES ................................................................................................................................ 12
4.4 LEARNING ............................................................................................................................... 12
4.5 ORGANISATION ..................................................................................................................... 13
5. CONCLUSION ............................................................................................................................... 13
References .......................................................................................................................................... 14

Table of Figures
Figure 1 Innovation Audit Radar Chart ............................................................................................. 5

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1. INTRODUCTION
1.1 Company Background
Tencent was founded by ‘Pony Ma’ Huateng and four college students in 1998.
Tencent QQ’s services offer popular online games, chat programs, search engines,
and an eCommerce marketplace. Tencent’s goal is to provide a ‘one-stop online life
service’ for Tencent QQ’s clients. Tencent is the world’s largest video game vendor,
largest social media, venture capital, and investment corporation. Tencent’s Music
Entertainment division has more than 700 million actives users.

1.2 Company Selection

Tencent is actively involved in network security services, communications, Internet
services, and broadcasting, entertainment, payment systems, and AI technologies.
Tencent is a part of Hang Seng Index Constituent Stock, which is publicly listed on
the Hong Kong stock exchange. Tencent’s business strategy has been widely
successful, making it the 7th most valuable company by market cap of $775.48bn.
Therefore, Tencent is an excellent research subject for Innovation Audit.

2. INNOVATION AUDIT ASSESSMENT & RADAR CHART

Undeniably, Tencent’s performance is top-notch in every business they have
founded or invested in, however with such formidable policies, there are few areas
on which we wish to consult.

Qu. no. Score Qu. no. Score Qu. no. Score Qu. no. Score Qu. no. Score

1 6 2 6 3 7 4 6 5 5
6 5 7 6 8 6 9 6 10 7
11 6 12 6 13 5 14 7 15 4
16 4 17 5 18 6 19 6 20 6
21 6 22 4 23 6 24 4 25 5
26 7 27 5 28 5 29 5 30 6
31 5 32 7 33 7 34 7 35 6
36 7 37 7 38 7 39 6 40 6

Totals 46 46 49 47 45

¸ by 8 5.75 5.75 6.125 5.875 5.625

Your
Strategy Processes Organisation Linkages Learning
score
5.75 5.75 6.12 5.87 5.62
for…

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 Figure 1 Innovation Audit Radar Chart

We wish to discuss current Tencent’s innovation policies and Innovation Audit

assessment which analyses Tencent’s strategy, process, organisation, linkages, and
learnings. We suggest potential recommendations to improve Tencent’s innovation.

3. KEY FINDINGS
3.1 STRATEGY
Tencent despite being a relatively new company, founded in 1998 has progressed
far into various sectors such as music, gaming, phone, electric auto manufacturing,
eCommerce, messaging services such as WeChat, payment services such as
WePay, and even online advertising. With successes in most fields that they have
entered, exceptional strategy can be attributed to as one of the many crucial factors.
They have also evolved significantly with WeChat as an example going from mobile
to Desktop to mobile-only after considerable user research. This shows how they
have assessed future threats and opportunities and structured product offerings on
those lines.

Tencent has deeply invested in their organisation and encouraged new and
innovative products from within. Taking the case of WeChat, employers were told to
compete internally to develop a product after considerable research was done.
Tencent invested in developing it further recognizing the potential of the product that

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came out of it. They not only utilize employees keeping in the horizon the need for
continuous innovation, but they also invest considerably in forecasting and analysis.

Tencent has followed a multi-prong methodology for its strategy. Tencent has
invested deeply both time and money in research and development. This can be
seen through the expansion of their research and development teams. Tencent has
moved around 50% of their workforce to their R&D division. Tencent has also
partnered with multiple brands to gain a wider audience such as leading brands of
the countries to market their products for example - partnered with Zynga,
Vinagame, LevelUp in countries such as the USA, Vietnam, and Singapore,
respectively. In this partnership, they cannot create a product from scratch either
they have invested or accomplished strategic partnerships. They have also used a
low-cost marketing technique such as in the case of WeChat, make their offering
more popular. They utilize WeChat to make their products popular.

The top management of WeChat has always supported innovation. From developing
internal mechanisms to completely restructuring the organisation, Tencent has
always moved towards an innovation-first approach. Apart from this, the top
management has looked to invest in multiple sectors which have looked promising.
The organisation then has followed a well-drawn path of developing a product by
also giving them considerable time and resources to grow. Everyone in Tencent is
aware of their roles and aware of the innovation first approach and hence the overall
environment is competitive and in developing innovative products. Tencent’s
innovation program is well in line with the company's vision - "enrich the lives of
online users".

3.2 PROCESSES
Tencent follows Micro-Innovation and Adaptive Development process to build their
products. An adaptive development process is an unconventional approach to
product development. In this process, a product is developed based upon existing
versions or other similar functional products available in the market. The product
developed, inherits the core properties of the parent product along with additional

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features and enhanced user experience. Hence, this product achieves incremental
degrees of innovation rather than radical. For instance, the product WeChat a
messaging app developed by Tencent exhibits the concept of the adaptive
development process. It is cloned from WhatsApp. Users can use it not just for
messaging, voice, and video calls. But also to link their bank accounts with their
WeChat account to pay and receive money using QR codes.

The products with limited features are introduced into the consumer market by
Tencent. Siting references of consumer feedback reports, the company works with
various teams and incorporates feasible lucrative features onto the product. During
this process, in order to minimize the preparatory work time of getting product into
the market, company associates concurrently work on distinct components of the
product. Thereby, periodic upgradation of the products is done to enhance the user
experience. Tencent believes that, customers are always in search of excellence. As
an assert to this, Tencent’s QQ instant messenger was developed within 3 months,
while the global standard was more than six months. QQ app had frequent updates
at the rate of two to three versions every month.

During the company’s initial stages, the Adaptive development process gained them
rapid success. However, just relying on imitative innovation and feedbacks from
users to develop a product can restrain a company’s sense of innovation and
uniqueness of the brand. To overcome this, Tencent has established a Research
Institute to identify innovative ideas by following the approach of Collaborative and
Independent Innovation. The research centre has gradually become the innovation
hub of the company. It collects employees’ insights internally and user’s creative
ideas externally. Products such as Red Packets, Tencent Cloud, and investments in
multi-media (Tencent pictures, Tencent games) are good examples. The flexibility of
the processes to adapt and identify effective mechanisms played a vital role in the
company’s success.

3.3 LINKAGES
Tencent has a complete staff training system. Helping employees to grow through
professional training and career development systems. Tencent Academy was
established in 2007 to train employees in professional skills, technology, and

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leadership. (Tencent, 2017) However, due to high work intensity, Tencent's turnover
rate is higher than that of its competitors, so it needs to spend more on employee
training and development.

Tencent provides Internet services and portals to its customers. The products
provided will be updated regularly and are very popular. As a leader in various
product fields, Tencent has invested a lot of resources in research and innovation in
areas such as process optimization and product iteration. Although product demand

has not declined, Tencent platform customers are still dissatisfied, which is reflected
in the comments on various online platforms.

Tencent cooperates with more than 183 universities around the world. It has
successively established joint laboratories with Tsinghua University, Nanyang
Technological University of Singapore, and the National IT Security Research Center
to launch an industrial Internet platform. It is committed to conducting scientific
research to jointly promote innovation in industry, universities, and research fields.

In terms of maintaining a good "enterprise-customer" relationship, Tencent has

always agreed to the corporate tenet of "meeting user needs as the main goal" and
provides satisfactory services. By improving user satisfaction and product reliability,
users will use the product more closely.

Strategic cooperation with strong partners in certain fields is Tencent's development

direction. They cooperate with other companies to open up new areas of the market,
such as mobile games, social media, and news. However, due to concerns that
users may be transferred or dispersed, Tencent is reluctant to interconnect with
companies in the same field such as Alipay. Besides, since Tencent's current
strategic positioning is "China's leading Internet service provider", its response to
internationalization is relatively slow.

As an industry leader, Tencent also lacks key talents, especially in the fields of
technology and digital transformation. (Salvatore Cantale，Ivy Buche，Joel Barbier,
2018)

Tencent established Tencent Education in 2019. Tencent Classroom Intelligence

and We-Learning are two of the company's latest offerings, which span a wide

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variety of education fields and address diverse user segments, as well as offering
technology to integrate the entire education sector. (Insights, 2020)

Tencent has firmly locked in users in the Chinese Internet market (>90%). Tencent's
products are interconnected in an ecosystem, and users can easily move from one
product to another. Currently, Tencent products are far ahead of other Internet
products in China. However, the size and potential of the market are still great.
Tencent's products and businesses still need to continuously explore the needs of
Internet users and market segmentation through continuous product upgrades to
meet the needs of Internet users at different levels.

3.4 LEARNING
Tencent has been profitable since 2006 with annual revenue ranging from €1.16bn
to €62.3bn in 2020 (Tencent, 2020). As the employee strength increased, Pony Ma
introduced 7 principles at Tencent to avoid becoming an overly complex giant:-
agility, openness, user first, speed, resilience, evolution, and innovation.

Tencent's dizzying popularity was largely due to its ability to produce hot products
rapidly. Tencent empowered younger employees to take the lead, as the next
generation was in a better position to dream for the next big product idea. Small
companies that have expanded quickly, such as Tencent, have an advantage: they
were designed to be agile from the outset.

Tencent Academy's founding in 2007 was a watershed moment in the company's

employee training and growth. Tencent Academy's mission is to "be the most
esteemed business university." It provides a rigorous educational program that leads
to the advancement of our employees' careers.

Tencent embraced open-source software on a similar mandate as Amazon.

Employees from various departments exchange ideas, applications, and whole
bodies of code. Pony Ma demanded full transparency and ensured that all Tencent
teams prepare and build service interfaces that could be opened to outside
developers.

Tencent follows the 10/100/1000 rule – Every month, product managers conduct ten
end-user polls, read 100 user posts, and receive input from 1,000 people. Tencent's

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employees are on a hunt for perfection. They release two-three version update
changes every month for their most complex application QQ, eclipsing their rival’s
product.

Facing sharp competition from Baidu and Alibaba on home turf and Facebook,
Amazon, Netflix, and Google internationally – Tencent has survived easily through its
Innovation. China's behemoths are notorious for snatching the latest from the West
and adapting them for a domestic market. However, when done correctly, imitation is
a true type of innovation.

3.5 ORGANISATION
Tencent is a company that has periodically changed its organisational structure and
hierarchy as per industry demands. It made its major change first in 2005 in the pre-
mobile era with 2 core units Business and Platform Development. It then changed
again in 2012 into different business groups with "products as the core" (Brennan,
2018) and now it recently changed again in 2017-18 keeping an eye for the future.
This shows they're adaptable to change with innovation and growth as the focus.
Tencent is known to have dynamic management, companies continuously modify
their goals to not only compete but stay on top of the changes that are taking place
in the market. (Yuan, 2018)

Tencent's WeChat, one of the most influential apps with one billion monthly active
users in 2018, owes its popularity to Innovation organisational changes at the
Tencent. (Jiang, 2019)

Tencent's decentralized and flat organisational structure allowed innovations to

happen. One department did not heavily affect the other departments and innovative
activities were given a high degree of freedom. For example, the wireless and the
interactive system department despite being cash cows did not exert influence on
emerging departments like WeChat (which went on to become Tencent's flagship
ventures). (Xiaoming Yang, 2016)

Furthermore, the information flow also was facilitated by this flat organisation, which
led to better communications. Tencent has a culture of small teams that lets them
react quickly and facilitate innovation. While bloated organisations with huge

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hierarchies might not be able to react quickly, small teams can make decisions
rapidly and react to change rapidly. (Xiaoming Yang, 2016)

One of the most key things to note is Tencent's HR Three pillar model. IT consists of
the Centre of Expertise (COE), the Human Resource Business Partner(BP), and the
Human Resource Shared Delivery Centre(SDC). COE takes care of various aspects
including employee compensation, employee training, employee welfare, etc. The
Tencent Academy helps them in this. SDC is like a system expected to support long-
term strategy requirements and the BP group communicates and finds solutions to
develop a business alliance. (Jiang & Gong 2019) To handle long-term strategy,
innovation and to compete in the present, development, and management of the
current talent pool is essential. Awareness of the business requirements and
conditions requirement for coming together of different teams is necessary.

Tencent has a very intense competitive environment. WeChat reportedly emerged

after employees were asked to compete against each other for developing a
messaging platform. (Chen, 2016) Employees are always looking for new trends and
sometimes are rewarded with amounts up to 300,000 yuan (€ 38,000). In 2017,
Tencent even rewarded its employees with 17.87 million shares worth USD 620
million.

In Tencent's monthly meetings, a range of staff, from junior level to new employees
and even vice presidents take part and discuss new projects. Reportedly, CEO Ma
Huateng and President Martin Lau even join via WeChat in the meetings business
units organize. (Chen, 2016)

4. RECOMMENDATIONS
4.1. STRATEGY
All the products and value-added services are mostly catered to China. It will be
better if they target the global audience. As they have already the best advertising
platform, they should target a global audience to compete for Google and Bing’s
advertising solutions. They should study the products before launching as their
products are mostly regulated by govt. A recent example, their top-selling game got
banned in India due to data breach allegations.

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4.2 PROCESSES
Adaptive innovation can be both a strength and a weakness at the same time. This is
one of the major threats to Tencent's brand reputation. For example, Tencent QQ
has been accused of plagiarism since it was established. To overcome this, Tencent
should start developing authentic innovative products by utilizing more resources
from Tencent Research Institute.

Tencent initially launches a basic functional product to the market. Based upon user
feedback, the product undergoes repetitive changes which cause significant rework
and frequent use of resources for the development. This affects the budget assigned
either way which is not an ideal rule of thumb for an efficient process. Hence
adequate research should be made to identify customer needs rather than
completely depending on customer feedback.

4.3 LINKAGES
Tencent's business is always expanded around the two core platforms of QQ and
WeChat. As Tencent's business becomes wider, competition becomes more and
more intense. To quickly establish an advantage in the competition, the infrastructure
must have a high degree of reliability.

At present, Tencent is unwilling to implement interconnection, because it is worried

that users will be diverted to other platforms, which will damage the interests of the
company. However, Tencent’s main competitor, Microsoft, has begun to establish
strategic alliances through interconnection. Through cooperation with Yahoo, large
Chinese companies, and various small and medium-sized operators, Microsoft has
increased users and expanded its corporate network. As the strategic alliance
continues to expand, it will inevitably endanger Tencent’s market share. Therefore,
how to be prepared for danger in times of peace and use strategic alliances to
maintain its competitive advantage is an issue that Tencent must invest in.

4.4 LEARNING
In November 2020, China's SAMR drafted Anti-Monopoly Law to prevent
monopolistic behaviour in the platform economy. The draft rules look at practices like
using customer data or subsidizing programs at a low cost. Tencent's social media
applications are offering highly tailored advertising to wealth management customers
and fintech firms. Tencent should be in regulations with local government’s policies
so that they will not get targeted by Chinese officials as in the case of Ant's group.
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Tencent, despite being one of the most successful companies in its market, has
struggled to expand into new product markets due to its current culture. Post COVID-
19, Tencent could be able to tap into new opportunities because of new customer
behaviour patterns. It gives the company a perfect chance to diversify into new
product markets while still generating new sales sources.

4.5 ORGANISATION
Tencent is known to reward employees with financial incentives including stock
options but it can also encourage non-financial long-term recognition-based
incentives, which fuel a continuous innovative seeking behaviour than one that is
based on short bursts.

The competitive environment at Tencent is too intense (Yuan, 2018) and can be
more holistic such as observed in companies that can be called "less innovative"
than Tencent but are important for reducing employee attrition.

Constant restructuring can cause employee panic and loss of assets. As much as
dynamic management is needed so is a foundation. A middle path that lets culture
and models take root and build-up is needed.

5. CONCLUSION
Based on Tencent’s 2020 Interim Report, Tencent is performing well. However, a
few problem areas will hamper Tencent’s growth in China as well as International
markets – Chinese economic slowdown, Gaming Industry regulation, and Chinese
government crackdowns under the Cybersecurity Law and Anti-Monopoly Law.
Tencent has heavily invested in ABC – AI, Big Data, and Cloud computing since
2016, surely this will yield beneficial results.

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References
Brennan, M., 2018. China Channel. [Online]
Available at: https://chinachannel.co/a-deep-dive-into-tencents-restructuring-the-
struggle-to-master-b2b/
[Accessed 2021].
Chen, L. Y., 2016. How Tencent, China's most-valuable company, pushes
employees for growth. [Online]
Available at: https://www.afr.com/technology/how-tencent-chinas-mostvaluable-
company-pushes-employees-for-growth-20160919-grj6r6
[Accessed 2021].
Insights, G., 2020. Tencent Education’s latest moves to connect the whole education
industry. [Online]
Available at: https://edtechchina.medium.com/tencent-educations-latest-moves-to-
connect-the-whole-education-industry-7913bc68ae4
[Accessed 31 03 2021].

Jiang, Z. a. G. X., 2019. The Research on Humanresource Development. Journal of

Human Resource and Sustainability Studies,, p. 12.
Salvatore Cantale，Ivy Buche，Joel Barbier, 2018. China's Tencent: Leading the
Way in Monetizing Platforms SWOT Analysis & Matrix / MBA Resources. [Online]
Available at: https://embapro.com/frontpage/swotcase/21549-tencent-platform
[Accessed 31 03 2020].
Tencent, 2017. Tencent employees. [Online]
Available at: https://www.tencent.com/en-us/employees.html
[Accessed 31 03 2021].
Tencent, 2020. Tencent Financial Report. [Online]
Available at: https://www.tencent.com/en-us/investors/financial-reports.html
[Accessed 2021].
Xiaoming Yang, S. L. S. R. P. L., 2016. Micro-Innovation Strategy: The Case of
WeChat. Asian Case research Journal, p. 28.
Yuan, Y., 2018. Why is Tencent more innovative than Facebook?. [Online]
Available at: https://medium.com/@yingziyuan/is-tencent-more-innovative-than-
facebook-b006d5d673b7
[Accessed 2021].

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