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University of Southern California Dissertations and Theses

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Digital creativity and innovation in Chinese social network sites industry

(USC Thesis Other)

Digital creativity and innovation in Chinese social network sites industry

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Content Running head: DIGITAL CREATIVITY 1

DIGITAL CREATIVITY AND INNOVATION IN CHINESE SOCIAL NETWORK SITES INDUSTRY

By
Fan Dong

A Dissertation Presented to the
FACULTY OF THE USC GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(COMMUNICATION)

December 2012

Copyright 2012 Fan Dong
DIGITAL CREATIVITY 2

Table of Contents

Introduction 4

The prosperity of Social Network Sites (SNS): the worldwide phenomenon 10
The prosperity of SNS: the China story 14
The evolution of SNS in China 16
The China problem and shared problem 25
Shared problems 25
Differences 28

Creativity, innovation and the transformation 39
Copycat as a wild card in creativity and innovation 44
Creativity, innovation and analytical framework 44
On Analyzing Creativity 51
On Analyzing Innovation 55
Service innovation and Sociability 61

Methodology 71
Subject of study 71
Research Questions 72
Interviewing and content analysis 78
Interview templates 78
Content analysis coding sheet 82
Surveying on sociability and business success 102

Creativity, entrepreneurship and innovation: case studies of Chinese SNS firms 110
Hengzhi: the Chinese Linkedin 110
Molding Linkedin with Chinese characteristics 110
Turning ideas into actions and profits: start-up and investment do not clash 119
Turning the well-designed network into the cash cow: no shortcut 125
Qzone: the giant in Chinese SNS industry 125
Tencent QQ: where it all began 125
Qzone, one-stop social platform does not come easy 137
Recombination: gain mastery by striking only after the enemy has struck 146
Xiaonei: Facebook+Zynga+Groupon+Linkedin 155
Wang Xing: the unsung hero of Renren’s success 155
DIGITAL CREATIVITY 3

From Xiaonei to Renren: marketing and financial well-being are chronicle diseases 164
Fanfou: The Originator of Chinese Twitter 180
Wang Xing’s new trial: unexpected trouble at the developmental phase 180
Being present is more important than making profit 190
Kaixin001: in the competition to become Chinese Facebook 195
Kaixin001: either success or failure boils down to technology addiction 196
Facing innovation gap and challenge: knowing is different from doing it 206
Sohu White Society: born with silver spoon in mouth, walking on thin ice 216
Portal site support is not sufficient for SNS to succeed 216
Highbrow aesthetics may not fit every high-end user 223
Douban: Chinese Amazon without stores 231
Minority hub with vitality 231
From product innovation to valid business model 240
Moko: the social networking site for creative workers 249
Transferring personal experience to viable product 249
Full of opportunities, lack of profit-making tools 257
WE: the mobile side of SNS 265
Read Wei, Read yourself, Read the world 265
The odd case in front of financial performance 272
Sociability as a business model 278
Sociability and business success 278
Usability 283
Sociability 285
Individual case analysis on product innovation 290

Innovation with Chinese characteristics: coping with uncertainty 323
Under the disguise of American copycat 323
Walk along the creative path 341
Translating creativity into innovation 348
Creative imitators’ advantage and limitations 364

Conclusion 380

References 399

DIGITAL CREATIVITY 4

Introduction
This dissertation aims at exploring the development trajectory and mechanisms of
digital creativity and innovation industries in China through the lens of Chinese Social
Networking Sites (SNS) companies. By tracing the emergence, development and
evolution of SNS companies within the social, cultural and political context of
contemporary Chinese society, this project examines the manifestations of digital
creativity in China and its interrelation with innovation industries in three layers: first, the
conceptualization and transformation of digital creativity in China and how they are
translated into product and process innovation; second, underpinning factors for the
development of SNS companies including capital acquisition, labor structure, production
process, marketing strategy and producer-user dynamic; third, mechanisms of innovation
industries in China and fundamental obstacles to its cultivation and development. On the
one hand, in order to trace the interrelationship between creativity, innovation and
entrepreneurship, companies under study are divided into different categories based on
their developmental phase, scale, property characteristics, the background of founders
and entrepreneurs. On the other hand, to enquire the relation between product and process
innovation, this study examines to what extent sociability provided on each website is
translated into business success. Established upon these investigations, this dissertation
DIGITAL CREATIVITY 5

endeavors to map out the formulation of innovation networks within the industry and
establish systematic indicators on the development of innovation industries.
Social networking is arguable one of the most vital and influential aspects of today’s
society. It ranks the 20
th
most important innovation in the past thirty years by PBS’s
nightly Business Report and Knowledge @ Wharton. Social networking sites have
penetrated almost all aspects of life domains across different generations and brought
profound implications to political, cultural and economic practices in various sectors.
However, we tend to assume that these social networking companies were born with the
innovative gene and unquenchable creative capabilities to the extent that we invest little
time examining the actual conception and practices. More importantly, Silicon Valley has
been hailed as the ultimate incubator of this social networking mania that the prosperity
of the phenomenon in other parts of the world is always scrutinized through the
plagiarism scanner. This is especially the case for social networking industry in China
given its enormously huge user base and notorious failures of American leaders in this
promising market. Social networking sites have transformed the Web 2.0 landscape in
China substantially by reshuffling the power dynamic and enforcing incumbent IT
leaders to reconfigure their developmental strategy. Furthermore, the rise of social
networking sites in China triggered a new cycle of reflexivity over social, cultural and
DIGITAL CREATIVITY 6

economic imperatives in Chinese society that are in tight junction with people’s everyday
life. Living in the shadow of “world factory” for decades, the blossom of social
networking sites is perceived as an unprecedented opportunity to unleash the creative and
innovative prowess of China at individual, corporate and governmental levels.
In order to approach the creative and innovation process in Chinese SNS industry as
an initiative to understand the underpinning mechanisms, three key concepts including
creativity, innovation and entrepreneurship are explored built upon Drucker (1986) and
Senkar (2010)’s idea of “creative imitation” in correspondence to the contextual
specificity in China. Existing studies on creative imitations taught us that only companies
with the ability to solve correspondent problems and adapt to ever-changing environment
can survive challenging innovation exercises. Accordingly, this project will start off
analyzing the distinctiveness of Chinese SNS compared to their American progenitors.
As the representation of creativity changes with the development of company at
individual, team and organizational levels, the creative process of each Chinese SNS
company and the performance of different types of companies will be examined. As the
next step, this project examines the creativity-innovation transition, internal and external
resources for innovation process. More importantly, the origin of resources and its
specificity to firms should be explored. Additionally, entrepreneurs will be examined as
DIGITAL CREATIVITY 7

unique asset and driving force of innovation process. To investigate the relation between
product innovation and business success, usability and sociability and their relationship
with business success will be studied at individual and industrial levels.
The project strives to answer the following questions: is there distinctive creative
and innovation path in Chinese SNS industry? What is the role of American inspiration in
the Chinese developmental trajectory? What is the creative process for major Chinese
SNS companies at different stages? How do creative process and representation change
with company development at individual, team and organizational levels? What factors
have major impact on creative performance at different levels in the development
trajectory? How do Chinese SNS companies convert creativity into innovation and what
are key factors? What are major innovation process patterns for Chinese SNS companies
and what are key driving forces in the developmental trajectories? What role do founding
entrepreneurs play in shaping innovation process? What are major concerns for
innovation at different developmental stage? What types of innovation are achieved in
each Chinese SNS company and what is the general innovation pattern for Chinese SNS?
What is the relationship between usability, sociability and SNS business success?
To tackle these questions, two lines of methodologies are implemented. On the one
hand, longitudinal face-to-face interviews were conducted with founders and managers of
DIGITAL CREATIVITY 8

different sectors at ten leading Chinese SNS companies. Case studies and content
analysis were employed to identify key indicators of creative and innovation practices at
individual, group and organizational levels at different developmental phases. On the
other hand, online surveys were distributed to 2000 users of SNS under study in major
Chinese cities to measure usability and sociability. Univariate, correlation and multi-
linear regression analyses were operated to identify the relation between usability,
sociability and business success. Detailed illustrations of methodological practices will be
explicated in the methodology chapter.
Chapter I lay out the current status of SNS in the world and its specific
developmental trajectory in China. Shared and contextual problems are listed to depict
the panorama of cultural, social and political shaping force on digital creativity and
innovation in Chinese SNS industry.; Chapter II reviews existing findings and theoretical
frameworks towards creativity, innovation and entrepreneurship, pinpoints missing
dimensions in their analyses and introduces analytical framework for these three concepts
in this project; Chapter III illustrates the research design including subjects of study,
choices of methodology, implementation and data processing; Chapter IV exhibit the
distinctive creative and innovation process at Chinese SNS companies. It provides in-
depth case studies of each company under study following the analytical framework
DIGITAL CREATIVITY 9

introduced in Chapter III, the results of content analysis are reported on each case;
Chapter V identifies sociability as the business model for Chinese SNS companies based
on analyses over survey data and digital content service typology; Chapter VI
summarizes research findings through comparison among different types of Chinese SNS
companies across different developmental phases at individual, group and organizational
levels. Interview templates, coding scheme and interview transcripts are included in the
appendix. Our journey starts from individual case studies on creativity and transition to
innovation, then focus on the relation between product and process innovation. From
there, we go back to the grand picture of creativity and innovation practices and
representations at the industrial level and we will end the journey by exploring empirical,
theoretical implications for the field, industry practitioners, policy makers and their
American counterparts.

DIGITAL CREATIVITY 10

1.1 The prosperity of Social Network Sites (SNS): the worldwide phenomenon
In 2011, social networking via the internet has been voted one of thirty most
important innovations in the last three decades by PBS’s nightly Business Report and
Knowledge@Wharton. A social network site is defined as “a category of websites with
profiles, semi-persistent public commentary on the profile, and a traversable publicly
articulated social network displayed in relation to the profile”(2007). At present, social-
networking accounts have already outnumbered the number of people in the world,
according to Portet (2011). Market analysts report that there were 10 billion social-
networking and online-world accounts in 2010 and 4.5 billion of these are active. Social
network sites (SNS) have penetrated people’s daily lives in depth and width. Then again,
according to PEW Internet and American Life (2011), six years ago, only 5% of
American adults claimed using SNS. This figure skyrocketed to 65% in 2011, up from
61% in 2010. The growth of SNS has been exponential in absolute numbers over the past
few years, attracting more than 200 million U.S. visitors in April 2011. Monthly visitors
to the category have grown 61 percent since April 2008. As the number one SNS in the
United States since May 2009, Facebook accounts for every 3 out of 4 visitors to the
social networking category in April 2011. Visitors to the property have grown 332
DIGITAL CREATIVITY 11

percent since April 2008; at the time, the site was seeing about 35 million visitors per
month (comScore, 2011).

Figure 1. Long Term Trend of Unique Visitors to Social Networking Sites & Facebook
Social networking now accounts for 1 of every 6 minutes spent online in the United
States and the ratio almost doubled in four years (comScore, 2011). In terms of age group
trend, the frequency of social network site usage among young adult internet users under
age 30 was stable over the last year – 61% of online Americans in that age cohort now
use SNS on a typical day, compared to 60% one year ago. However, among the Boomer-
aged segment of internet users ages 50-64, SNS usage on a typical day grew a significant
60% (from 20% to 32%) (PEW Internet and American Life Project, 2011).

DIGITAL CREATIVITY 12

Figure 2. Social Networking: Share of Total Time Spent Online
The momentum of SNS has also been vindicated in the rise of mobile
communication. In April 2010, 69.6 million mobile users accessed an application on their
phone, an increase of 28 percent from the previous year. Social Networking experienced
the strongest growth in app access, increasing 240 percent to 14.5 million users. It led as
the top-gaining category for both application and browser access, confirming the surging
popularity of this service on mobile devices (comScore, 2010).

DIGITAL CREATIVITY 13

Figure 3. Top U.S Smartphone App Categories by Total Audience
Given the prevalence of SNS, it has been incorporated into the innovation strategy
of all types of institutions, including business, government, non-profit and education.
Moreover, it has become the next cash cow that advertisers count on. According to
eMarketer (2011), U.S. marketers will spend $3.08 billion to advertise on social network
sites this year. That’s a 55% increase over the $1.99 billion that U.S. advertisers
reportedly spent on social networking sites in 2010; and nearly 11% of what they are
expected to spend on all online advertising in the U.S. in 2011. Moreover, worldwide
spending on social networks is expected to rise 71.6% to $5.97 billion. This is
approximately 8.7% of the total amount advertisers are predicted to spend online in 2011.

DIGITAL CREATIVITY 14

Figure 4. US Social Network Ad Revenue
1.2 The prosperity of SNS: the China story
Boyd and Ellison (2007) called for a broader understanding of SNS outside of the
American idiosyncrasy by looking into other cultural contexts. Yet despite its massive
user population and rapid growth, there has not been any systematic investigation on the
emergence, development, and practice of the Chinese SNS industry. In 2008, China
overtook the USA as “the No. 1 nation in Internet users” with 220 million netizens
(MacLeod 2008) and over half of them were on Chinese SNS (CNNIC 2009). By the end
of 2009, China had hosted 170 million SNS users with a penetration rate of 54.9%
(CNNIC 2010). In 2011, Tencent QQ has become the second largest SNS in the world
with over 701 million users next only to Facebook (Tencent Website, 2011). The latest
report from Data Center of China Internet (2011) suggests a one billion Yuan SNS
market in 2009 with an increasing rate of 31.6%.
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Although dubbed as “Facebook copycats”, Chinese SNS surpassed their progenitors
in the capital market. On May 4
th
, 2011, one of the largest social networks in China,
Renren, went public on Nasdaq at $19.5 a share (Rusli, 2011). Within one week’s time,
Jiayuan.com, a dating SNS followed Renren’s footprint and made its debut at Nasdaq.
Renren’s biggest competitor, Kaixin001, and children’s SNS, Taomi also announced its
plan for an initialpublic offering (IPO) in 2012 (Huang, 2012). However, this honeymoon
period proved short lived Renren stormed the U.S. market with an IPO that raised $855
million but ended up losing 76% of its stock price within a year’s time. For its part,
Jiayuan.com’s shares finished their first day of trading at $10.52, 4.4 percent below the
initial public offering price (Selyukh, 2011). This series of setbacks even jeopardized the
three portal sites that went public in the last decade. The shares of Sina, Sohu and Baidu
fell with a ratio ranging from 5.61% to 13.48% in one week’s time while the benchmark
index only fell 2% (Shen & Wang, 2011). This “dark May series” resuscitated the old
argument that Chinese Internet conceptual stocks are bubbles as they lack innovation, a
mature business model and are confined by governmental control. However, to fully
understand the ecology of Chinese SNS, we need to first of all trace the evolutionary
trajectory of this industry.

DIGITAL CREATIVITY 16

1.2.1 The evolution of SNS in China
Table 1. Development trajectory of Chinese SNS

Despite the common Western focus on government censorship in China, many top
Chinese industry practitioners and technology scholars are optimistic about what the

2002-2004 2005-2009
2010-
1998-2001
Budding
Phase
Market Incubation
Phase
Fast Growing
Phase
Transition
Phase
Under the influence of Six Degrees, Friendster Under the influence of
Facebook, Myspace
Under the influence of
Linkedin, Twitter,
Groupon
*1998, China
Friend
Center
established

*Very few
users
Out of curiosity

* YOYONet ( 友友网络) ,
YeeYo ( 亿友娱乐), UUMe (
友友觅), Heiyou ( 嘿友) ,
Lianqu ( 联趣网), you2you (
友友网) , MEUU ( 觅友友)
* Limited interactive
interface, low user base and
frequency
* No valid business model
*51.com, Xiaonei ( 校内
网), zhanzuo( 占座网),
5q (5Q 校园网), Douban
( 豆瓣网), Moko( 美空)
，Hainei ( 海内网),
Kaixin ( 开心网),
Kaixin001 ( 开心网),
360quan.com (360 圈),
Fanfou ( 饭否)
* Real name registration
* Advertising, product
placement, virtual goods
and other profit-making
tools emerged
* Exponential growth,
attract venture capitalists
* Micro-blogging
leaders: Weibo( 新浪微
博), Tencent weibo （
腾讯微博）, group
purchase leaders:
Meituan( 美团), Lashou
（拉手）, Professional
SNS leader: Hengzhi(
恒知)
* Status stabilized with
apparent leaders and
mature business model
in each subcategory
* More integrated with
e-business,
entertainment, micro-
blogging
DIGITAL CREATIVITY 17

Internet and other new media technologies can bring for the Chinese society. For
example, having surveyed the digital culture and social dynamics among Chinese
netizens for almost a decade, Guo (2009) firmly believes that the diffusion of web-based
services such as SNS can help engage the Chinese in more open dialogues. From an
economic perspective, Xie (2009) comments that IT companies are significantly more
profitable compared to traditional mass media industries such as motion pictures. Yet, the
emergence of Chinese SNS is no coincidence and its growth is filled with trials and
errors.
Launched in 2002, Friendster.com initiated the first wave of SNS in the United
States by accumulating 4 million users in 2003 and securing US$ 13 million investment
from Kleiner Perkins and Benchmark & Battery (Gilmore, 2006). The success of
Friendster ignited the enthusiasm of two Stanford graduates: Liu Jian and Rao Lei, who
immediately returned to China and launched the first Chinese SNS called UUMe by the
end of 2003. Flaunting the battle of “Chinese Friendster.com”, this Chinese SNS upstart
acquired millions of US dollars from two top tier American venture capital companies:
Accel Partners and DCM (Pacific Epoch, 2004). Another ground breaking SNS called
YeeYoo.com almost surfaced simultaneously with a much earlier injection of US$ 1
million from the Silicon Valley on September 17
th
, 2003. The two founders, Ma Yun and
DIGITAL CREATIVITY 18

Liu Yong went back to China with the first bucket of gold and officially opened the SNS
aiming at serving Chinese all over the world (Reuters, 2007).
Many followed suit. Among them were Heiyou, Yoyonet, Lianqu, you2you, and
MEUU. They constituted the first generation of Chinese SNS with a similar model:
impressive backgrounds of their founders, bold website conceptualization and structure,
foreign investment and good global resources, as well as deep-seated influences drawn
from Friendster and Six Degrees. Unfortunately, these superior genes do not necessarily
result in good-quality offsprings. In early 2004, Friendster hit the ground due to server
incompatibility and started losing users massively. Almost at the same time period,
Chinese pioneers were also enmeshed in the challenge of unstable user base and
immature market environment. YOYONet and Heiyou merged to optimize shared
resources. They also tried to differentiate themselves from the first generation SNS by
building upon anonymous stranger networks and introduced a new service to “search for
friends’ friends”. This step, nevertheless, could not make up for the ground that they have
lost. Once hailed as the first profitable SNS in China with US $ 20 million in investment
and with a revenue amounting to 24 million Yuan in 2005 due to its social network and
added-value mobile service bundle, YeeYoo turned out to be a spark in the pan due to the
2005 Service Provider policy adjustment. Eventually, it ended being acquired by Meetic,
DIGITAL CREATIVITY 19

an European matchmaking website for a price tag of US $ 20 million (Interfax, 2004).
They eventually launched the Chinese eHarmony Baihe. Meanwhile, China InterActive
Corp acquired UUMe, and appointed its founder, Liu Jian, as the CEO of China
InterActive Corp. Although UUme strived for a transition into a video sharing website
like Youtube, it did not materialize and it was eventually abandoned by China InterActive
Corp in 2007. A few business-oriented SNS such as Tianji, Linkster and Weaklink
emerged, but they all turned out to be no more than dismal failures.
Despite their setbacks, the trailblazers in the market incubation phase paved the way
towards success with the completion of basic technological structures, leaving the second
generation to take off with the right economic climate and maturing user groups. With the
cooling of the Friendster frenzy, the second wave Chinese SNS started to forge ahead
following the MySpace model. Although it crumbled in the first six to nine months after
its debut, MySpace achieved viral expansion with the help of local bands and events;
managing to garner 4 million registered users in two years’ time (Boyd and Ellison,
2007). The success of MySpace in the United States aroused more passionate response in
the realm of Chinese SNS than the first wave. Hundreds of imitators branded themselves
as “Chinese MySpace”. The following were the most famous: Pengpeng.com,
UUZone.com, Hi.mop.com, 51.com, Wangyou.com, Ifensi.com, and Mosh.cn. Similar to
DIGITAL CREATIVITY 20

the first generation SNS, these self-acclaimed Chinese MySpace were warmly embraced
by venture capitalists. Pengpeng.com received US $ 12.5 million from Softbank at the
end of 2005; Hi.mop.com drew the blueprint of going public in the United States with an
investment amounting to US $ 48 million in 2006; 51.com announced a US $ 4 million
first round investment from Sequoia in 2006. Then again, history repeated itself as
Chinese MySpace incurred the similar predicament as the so-called Chinese Friendster.
In 2006, the CEO of Pengpeng.com quit and switched to wireless industry; Hi.mop.com
postponed its plan to go public, even the Chinese branch of MySpace ebbed with the
resignation of its CEO in 2007(Huang, 2010). In three years’ time, Myspace itself
encountered stagnation and continuous recession in American market. The only survivors
in this phase were 51.com and Xiaonei.
The survival of these two SNS did not come about due to pure luck. Although,
51.com was dubbed the Chinese MySpace and soon became the beachhead for young
migrating population living in second- or third-tier cities; its successful relocation
benefitted from the Tecent QQ experience of its founder, Pang Dongsheng, and had little
to do with MySpace. Pang realized after visiting Tencent QQ that simply copying
MySpace will never be a feasible strategy in Chinese market, and the only way to make a
difference is to localize the model. Therefore, he started to import various successful
DIGITAL CREATIVITY 21

applets on QQ to the 51.com platform. Understanding the essence of QQ business model,
Pang added new features to maximize the sales of virtual goods and advertising revenue.
By 2008, 51.com has acquired more than 100 million registered users and reached
financial balance. It even attracted an investment amounting to US $ 50 million from the
Giant Group and toyed with the idea of an IPO in 2010 (Huang, 2010).
The vitality of Xiaonei was reactivated by the third wave of Chinese SNS following
the Facebook model, and not the MySpace model either. Facebook surpassed MySpace as
the most popular SNS in June, 2008 and remained the fastest growing SNS in the world
to date (Stevens, 2008). Like the earlier two waves, this exciting news propelled the third
wave of SNS frenzy in China. The early pioneer, Wang Xing, has participated in the
second round and finally tasted the fruits of success with his invention of Xiaonei in
2005. By the end of 2005, Xiaonei had penetrated all of the 722 state-run universities and
tertiary institutions in China within the first nine months and attained 2 million users in
the first year (Lassister, Chen & Wong 2008). Unfortunately, Wang encountered financial
delinquency in 2006 and sold the website to China InterActive Corp in 2006 for US $ 2
million. As Wang left the new China InterActive Corp Xiaonei in May 2007, its chief
technology executive (CTO) Xu Chaojun had to operate the new SNS on his own.
Occupied by other large-scale acquisition projects on hand and confident in the leading
DIGITAL CREATIVITY 22

position of Xiaonei after receiving US $ 430 million investment from SoftBank in 2008,
Chen Yizhou, the CEO of China InterActive Corp did not even spend much time and
energy on this SNS at the very beginning as other Facebook imitators emerged from the
woodworks(Huang, 2010). The most famous imitators at this time were: Zhanzuo.com
that was founded by Zhang Fan, a University of Minnesota graduate in 2006 who
received a US$ 7.2 million investment from Sequoia; Hainei, a SNS that targeted the
white collar workers founded by Wang Xing after leaving Xiaonei; Yiqi.com, founded by
Xie Wen, the former CEO of Yahoo! China; Kaixin001, founded by Cheng Binghao in
2007 with a US$ 5 million investment from Northern Light Venture Capital;
360quan.com which was known as the base camp for teenagers born after the 1990’s.
While Hainei, Zhanzuo, 360quan and Yiqi gradually faded into oblivion, the
sweeping success of Kaixin001 nationwide urged Cheng to face the threat and explore
the potential of Xiaonei in this new round of competition. Within five months’ time,
Kaixin001 captivated more than 6 million users with two popular social games “buying
and selling friends”, and “vying for parking”. The antitypes of these are popular applets
on Facebook called “friends for sale” and “parking war”. Nevertheless, the seemingly
simple localization penetrated the Internet with unbelievable speed and depth. SNS
finally penetrated the enclave of mainstream Internet users in China after a decade’s
DIGITAL CREATIVITY 23

effort. Kaixin001 also followed the open platform strategy of Facebook to invite creative
applets on its portal. Chen Yizhou was forced to revise his attitude towards social games
and open his platform. In 2008, Xiaonei moved up its open platform release and in two
months, around 778 third-party applets flushed to Xiaonei (Huang, 2010). In October,
2008, China InterActive Corp even purchased the domain name Kaixin.com with a
premium and provided similar services like Kaixin001. This act infuriated Kaixin001 and
finally led to the 2009 lawsuit between these two old rivals (Le, 2009). In August, 2009,
Xiaonei changed its name to Renren (Li, 2009) and China InterActive Corp was forced to
merge Kaixin with Renren to finally settle the dispute in 2010 (Netease Technology,
2010).
During this period, SNS pioneers also started to explore new models. For instance,
Douban stood out as a popular SNS that connects users through shared interest in books,
music and movies. Fanfou was established as a Chinese adaptation of Twitter. Moko
stood out as the first SNS for the creative industry. Nevertheless, the overgrowth of the
third wave SNS was soon thrashed by a series of black tidings. On July 2
nd
2010,
360quan.com which once boasted of a US$ 22 million investment was forced to quit the
market due to insolvency. On July 14
th
, Mayi.com announced a slow down because of
DIGITAL CREATIVITY 24

capital chain ruptures. These two incidents ushered in the initial signal that the prosperity
of the third wave was now slowing down (Cai, 2010).
Industry statistics suggest that 2010 was a watershed for Chinese SNS, and the
stagnation exacerbated in 2011. Up until June 2011, the scale of Chinese SNS users
was230 million, 5.16 million short of the figure in 2010. The use frequency of SNS also
fell to 47.4% from 51.4% in 2010. The growth rate of SNS users dropped 22.7% and
24.5% in 2010 and 2011, respectively (Tang, 2011). All these suggest that Chinese SNS
has entered the transition phase. Strong signs of polarization emerged in the industry with
the decline of entertainment based SNS and the rise of tool based SNS. As a leader in the
entertainment based category, Kaixin001 suffered a 10% decrease in active users in the
last season of 2010 and the first season of 2011. Despite the incessant promotion of its
new social games, they failed to boost the users’ tenacity and curiosity as before (China
News, 2011). On the contrary, the SNS entrant, Chinaface, achieved fast growth with
online ticket booking as a supplement to entertainment.
Meanwhile, the disruption of the new SNS features further nibbled the user base of
third wave SNS; and the most typical ones are micro-blogging and group purchase. As
mentioned earlier, Wang Xing started the Chinese Twitter, Fanfou, only two years after
the launch of Twitter in 2006. However, the intensity of political issues during 2008 to
DIGITAL CREATIVITY 25

2009 in China smothered Wang’s trial. When Fanfou was finally allowed to go online
again in 2010, traditional portal site tycoons like Sina, Sohu and Tencent QQ have
already divided the territory among themselves. In 2010, domestic micro-blogging users
have reached the 30 million level, far exceeding that of the third wave SNS (Cai, 2010).
With a 200% growth rate in the first half of 2011, micro-blogging users jumped to 195
million (Yi, 2011). Similarly, after Groupon’s successful debut in the United States in
2008 and amassing 35.5 million users in 2010, Wang Xing, the SNS veteran imported the
model to China and launched Meituan.com. From April 2010, group purchase websites
burgeoned at a rate of 5 new sites daily. In less than one year, the number of group
websites with medium and higher scale reached 1250. By the end of 2010, 159 million
users were reported in this market (Xie & Long, 2011). However, a series of problems
were soon revealed including false information, inadequate business ties and vulnerable
credit system. After a year of dogfight, 21.6% of these websites went out of business, and
this ratio is expected to reach 95% in the coming year (Money Weekly, 2011).
1.2.2 The China problem and shared problem
Shared problems
Apparently, Chinese SNS are not alone in this tumultuous journey. In May 2011, the
leading SNS Facebook lost nearly 6 million users in its base camp of the United States,
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falling from 155.2 million at the start of May to 149.4 million at the end of it. This is the
first time the country has lost users in the past year. Canada also fell significantly, by
1.52 million down to 16.6 million, although it has been fluctuating around that number
for the past year. Meanwhile, the United Kingdom, Norway and Russia all posted losses
of more than 100,000 (Eldon, 2011). Research also shows that Twitter’s retention rate is
below 40%. This means Twitter is losing new users almost twice as fast as either
Facebook or MySpace (Connolly, 2009). Mucken (2011) believes migrating population
to mobile device is not the only explanation, SNS companies’ inability to continuously
innovate and maintain user stickiness plays a more decisive role. The typical case is
Groupon. The online daily deal deliverer once peddled 411,000 units of $50 for $25
coupons for the clothing company, Gap, in just one day. More recently, the two-year-old
company rejected a $6 billion purchase offer from Google. Now the numbers look a lot
different. Groupon's U.S. revenue fell 30% in February from a month earlier (Mucken,
2011). Mucken (2011) explains that impulse buying and the changing attitudes of its
buyers significantly shook the foundation of Groupon. Worse still, with group purchase
sites started to grow like bamboo shoots after a spring rain, the quantity and quality of
services provided by Groupon can no longer satiate users. A more vivid example would
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be MySpace. After several rounds of revamp and reconditioning, News Corporation
finally sold the site for 35 million, thus ending a six-year saga (Saba, 2011).
Furthermore, although the major SNS in the United States wooed record numbers of
users, profit-making process has been strenuous. Facebook announced a positive cash
flow in late 2009(Gaudlin, 2009), Twitter reported trivial profit through deals with
Google at the end of 2009 (Osward, 2009). More importantly, although Facebook has
achieved an average of US$ 300 million, Myspace once achieved US$ 500 million in
2006 and Linkedin generated US$ 4.5 million second-quarter profit after going public in
2011(King, 2011); it must be noted that a heavy reliance on advertising, virtual items and
subscription fees naturally leads to doubt on the sustainability of the business model
(Cheredal, 2011). Inability to explore revenue sources facing user growth slow-down also
challenges Chinese SNS. None of the major SNS in China disclosed their revenue status.
Xiaonei claimed a monthly advertising revenue of over 3 million Yuan in 2008.
However, it is difficult to independently verify this figure given that it has no more than a
dozen advertisements on the site. According to Huang (2010), virtual items are more
likely to be the bread earner. Currently at 51.com, only ¼ of revenue comes from
advertising, while virtual items are the biggest contributor to its over US$ 1 million
monthly income. Renren even acknowledged a US$ 68.3 million loss in 2009 and US$
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61.20 million loss in 2010 in its prospectus. Gao (2011) believes that a viable SNS
business model relies on advertisers’ acknowledgement and users’ willingness to pay for
services; neither condition has been met in Chinese market yet.
Differences
Apart from these shared problems, Chinese SNS are facing indigenous challenges
due to the following differences from their American counterparts.
Demographics
The use rate of SNS in America has risen from 35% in 2008 to 61% in 2010 (PEW
Internet and American Life Project, 2011), while the rate only increased 5.6% from 2009
to 2010 at the level of 51.4%. Young people between 18 to 33 years old are the backbone
of SNS users in both the United States and China (PEW Internet and American Life
Project, 2011; Wang, 2011). The difference lies in the older generation. This age group
has become a driving force for SNS growth rate in the United States (PEW Internet and
American Life Project, 2011), but their presence remains unfelt in the Chinese social
space (Wang, 2011). More importantly, framing SNS into the grand picture of Internet,
the penetration rate of Internet in America reached 79% in 2010 (PEW Internet and
American Life Project, 2011). However, the figure was merely 33% of the same year in
China with a severe digital divide. Rural users only account for 27.8% of the population,
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and the rate is twice the amount in Eastern China than in the West (CNNIC, 2011).
Facing dropping user numbers in urban area, SNS perceived the underdeveloped areas as
their promise land. Unfortunately, the low growth rate of Internet users in those areas
does not leave much room for that forlorn hope.
User behavior
According to PEW Internet and American Life project (Hapton et al, 2011), 92%
American SNS users are on Facebook; and the most popular activities on the said SNS
are: the “like” feature that allows users to “like” other users’ content (26%), and
comment on another user’s post or status (22%). On the contrary, the most popular
activities on Chinese SNS are updating personal status (68.9%) and sharing photos
(58.4%) (DCCI, 2011). In other words, American users enjoy two-way communication
with other users more than self-presentation. On the contrary, Chinese users prefer the
role of being information disseminators than two-way communication with other users.
This is why Facebook is more powerful than Twitter in America. But in China,
microblogs following the Twitter model are more popular than Facebook followers. Dong
Xu, an analyst on social network and microblogging at Analysys believes that the
dominance of Tencent QQ in Chinese SNS market caused the current situation (Southern
Weekly, 2011). As the most used social networking tool in China stretching over urban
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and rural areas covering all walks of life, when QQ started to siege Kaixin001 and
Renren by providing similar social game services, a huge multitude of users in third-tier
cities switched to QQ as they do not need to log on to another platform while using QQ
on a daily basis. Meanwhile, active users on Kaixin001 and Renren who do not play
games but track posts are also gradually converted as microblogs offer a more exclusive
information tracking venue (Southern Weekly, 2011).
However, the silver lining for Chinese Facebooks lies in the Chinese users’ purchase
power on social games despite a relatively low use frequency. Social games have become
major innovation point in Chinese SNS industry as cash and traffic driver. Three-quarters
of Renren users have played Happy Farmer; by comparison, less than 10% of Facebook
users play FarmVille (Rabkin, 2011).Smith and Hudson (2011) reported that 61.8% of
social game users play more than one game each day. Yet the ratio is only 21.9% in
China (Wang, 2010). When it comes to spending, 10% of Facebook users pay for social
games, and only 2% spend more than US$ 2.5 each month (Smith and Hudson, 2011).
Compared to that, 19.2% Chinese SNS users pay for social games, 5.9% spend between
US$ 16 to 35 each month, and another 3.2% spend more than US$ 35 US dollars (Wang,
2010). Wang (2010) argues that the high rate of homogenization and limited game
selections should be blamed for low use frequency among Chinese SNS users. The strong
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purchase power indicates that social game market has not yet been fully explored due to
the current SNS infrastructure.
Site infrastructure
Although Chinese SNS inherited the interface and basic functions from their
American paragons, few adopt the fundamental infrastructure. On the one hand,
ambivalent attitude towards open platform costs technological and content innovation.
Chen (2010) and Wang (2011) pointed out that although major SNS in China all initiated
an open platform and promoted it as their core competitiveness, the actual level of
openness is highly questionable. Immature outlet technology and cautious cooperation
with third party developers are the two most critical problems. Instead of being the
infrastructure and leaving development to third parties like Facebook, major Chinese
SNS like Kaixin001 and Renren tried to occupy two markets simultaneously, thus taking
more than they can chew. At the current stage, most SNS still rely on social games and
can hardly keep up with the pace of new demands from users. In that sense, Chinese SNS
are drifting to the Zynga model rather than the Facebook model. Unfortunately, once they
step into the lair of games, they inevitably confront fierce competition from well-
entrenched big players like Tencent QQ, Shengda and Netease (Southern Weekly, 2011).
Even though major SNS attempted to add e-commerce and other elements to the
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infrastructure realizing that entertainment alone can no longer attract users, the image of
SNS as the venue for entertainment only has already been entrenched into the users’ mind
and it takes extra effort to convert this stereotype. One promising step is to create new
online searching modes. Chinese SNS are not compatible with Baidu or Google at
present. However, as Facebook has taken the initiative to set up a social network based
search engine to challenge Google, Chinese SNS have shown enthusiasm to blaze the
trial. Again, a stable massive user base is a prerequisite for this effort.
On the other hand, unbalanced business innovation crippled profit-making process
for Chinese SNS. According to the Chinese application tracker, Appleap, the value of the
total social network’s apps install base is approximately US $4.5 million. Most Chinese
SNS follow the Facebook business model which fall into advertising, social gaming
revenue and partition with third party. The latter two sources based on open platform
only brings less than 30% of profit for Chinese SNS, yet they account for more than half
of profit for Facebook (Yarow, 2010). Chinese SNS excel at cementing the relationship
between application developers and the site’s user base (Deleon, 2009). China’s SNS
took the great leap forward compared to Facebook when 51.com became the first social
network in the world opening up its payment system to third party developers in 2008.
Users pay money to 51.com and receive virtual coins which they can then again spend on
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third party applications. The revenue is split half way between the social network and the
developer. At the same time, cost-per-click/cost-per-action (CPS/CPA) has become one
of the fastest growing sectors of Internet ads in China. This allows developers to trade
their virtual currency for hard cash (Deleon, 2009).
Unfortunately, this business innovation does not diffuse smoothly due to cautious
openness to third party as previously mentioned. According to Deleon (2009), when
Xiaonei and 51.com at first opened their own platforms, their terms of services outraged
the developer community with clauses that practically blocked all monetization
opportunities and a shared user base with their own websites. Although Chinese SNS
ameliorated their policies towards developers, most social networks continue to ignore
“Open Social” practices, opting for the more familiar “Guanxi paradigm” in business
practices with third parties. For social networks, this means that rather than developing an
open ecosystem, they focus on dealing with third parties individually and face to face.
New Open Social Networking platforms such as Yahoo’s Guanxi, Tencent’s Xiaoyou and
Tianya court established third party app developers like Five Minutes while largely
ignoring the wider developer community. Up till now, Tencent is the largest and most
rewarding platform that actually brings profits to third party developers. The monthly
sharing in revenue record on Tencent open platform has constantly been rewritten with a
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new climax of over 10 million RMB for a single social game (Zhang, 2011).
Consequently, popular developers foresee a consolidation in the app development market
soon with larger companies taking over and benefiting from effects of scale, rather than
individual developers still being able to produce top apps.
The same mentality also applies to advertising strategy. Facebook has established
systematic advertising analytics, which study user behavior and estimate what type of
advertisement is preferred. On the contrary, Chen (2010) proposed that Chinese SNS still
linger on the guessing phase, struggling to make profit out of advertising without
irritating high-end users who resent advertisement. Accordingly, Chinese SNS have been
busy feeding rather than creating their customers’ need. Therefore, they fail to integrate
the three most important features of SNS infrastructure: social network, mobile
communication and e-commerce even though they have incorporated mobile into the
service bundle long before Facebook.
Social and political factors
The limitation of Chinese SNS infrastructure construction is also a result of social
and cultural environment. Wang (2011) argued that familiarity among people in the
United States is substantially lower than that in China. The Chinese people know so
much about their friends and neighbors’ from offline life that the excitement of privacy
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scooping unearthed by Facebook in the United States is not so thrilling in China.
Consequently, Chinese SNS have to discover new teasers to cultivate their user base.
With respect to financial environment, an immature financial milieu has been a pain in
the neck for Chinese SNS. Huang (2011) pinpointed three reasons why Chinese SNS are
more infatuated with IPO than their American counterparts. To begin with, foreign
investment has always been the blood provider for Chinese SNS as state-owned
companies and banks will not seriously consider infusing some capital investments into
them. As a result, foreign market is the best exit outlet for investors; secondly, compared
to the stringent examination and approval process in Chinese stock market, it is much
easier for Chinese SNS to go public in the United States; thirdly, successful IPO on
Nasdaq is an invaluable accreditation to win the investors’ acknowledgement and
confidence. However, Chinese SNS companies are also benefiting from the specific
social and cultural environment in marketing and profit making strategies. According to
Deleon (2009), higher tolerance of intrusive app invitations enables social networking
apps to hit hyper-viral levels in China. It is common for apps to essentially force new
users to invite people and perform tasks before being able to join their friends online.
Once friends have joined they are required to interact much more with the apps and
advertisements than on American applications.
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Additionally, SNS companies face more strict regulation and censorship
environment in China than in the United States. After a series of research and
investigation on SNS, the General Administration of Press and Publication of People’s
Republic of China (GAPP) together with Ministry of Culture decided to release new
regulations on SNS including content management, service categories and social game
design. All services and games must apply for three licenses before going online. These
licenses include: intellectual property proof, license from Ministry of Culture and
publication serial number from GAPP (Beijing Commerce, 2010). More recently, the
State Council Information Office decided to expand a nationwide trial program that
requires users of microblog services to disclose their identities to the government in order
to post comments online (Wines, 2012). These facts led to the common belief that
Chinese government block foreign SNS because it is scared of greater internet freedom. If it
relaxes its grip on these platforms, Chinese Internet users might suddenly all start watching
forbidden contents. However, Moore (2010) rightly argued that bans on social media may be
nothing more than plain old protectionism. China is keeping YouTube out because it has its own
domestic video sites. Youku just made its debut on the New York Stock Exchange with market
value of around $5 billion. Likewise for Facebook., China doesn’t mind social networking.
Chinese SNS like Renren and Kaixin001 boast 100 million users between them. It is not
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surprising that Murdoch launched Myspace China successfully after straightening out
governmental relations and complying with Chinese regulations. In other words, Chinese
government never resist business opportunities with the condition that foreign companies have to
obey local rules. Chang (2011) reported that Chinese government showed interest in buying stock
shares from Facebook and he suggested that the only way to eradicate protectionism is to
allow government to have a stake.
Despite these gloomy pictures, studies have shown that the political factor does not
necessarily deter the innovation in the Chinese SNS industry. On the one hand, by
blocking American SNS like Facebook, “the government has unwittingly ignited an
especially fierce and litigious competition between Renren and Kaixin001. The two
networks have pushed each other strategically and technologically, devising ingenious
new ways to advertise to audiences that are even more saturated by marketing than
Americans”(Rabkin, 2011). As illustrated earlier, foreign SNS do not necessarily enjoy
an advantage in Chinese market even if the government lifts the ban due to insufficient
localization effort. On the other hand, SNS users are actively using different strategies to
get their voices heard just like back in the pre-SNS age. As a twist on the venerable
Chinese tradition of pun and wordplay, they quickly find words and images that can
subvert censorship and express their opinions (Rabkin, 2011; Kidler, 2011). In fact,
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Netpop Research revealed that Chinese Internet users are twice as conversational as
American users; in other words, they're twice as likely to post to online forums, chat in
chat rooms, or publish blogs. And SNS is twice as likely to influence Chinese buying
decisions as American ones. In Chapter IV, we will discuss how political influence might
affect specific SNS companies in detail.

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2.1 Creativity, innovation and the transformation
Creativity has been conceived as the capacity to produce something new (Castells,
2008; Csikzentmihaly, 1996). More importantly, the newness must be considered not
from the point of view of the subject but against the stock of existing products in a given
society (Castells, 2008; Feinstein, 2006). Heap (1989) suggests that creativity is the
synthesis of new ideas and concepts by the radical restructuring and re-association of
existing ones. Amabile (1983) believes that creativity is a context- specific and subjective
judgment of the novelty and value of an outcome of an individual’s or collective’s
behavior. Clydesdale (2006) distinguishes creativity from innovation by suggesting that
the former is driven by intrinsic motives, whereas the latter is driven by extrinsic
incentives and motivation to surpass previous standards. As a mental process, creativity
always involves “linear and often illogical personal expressions”, but innovation involves
“calculated novelty” (Howkins, 2006:123). In order to transform this mental process to
social process known as innovation, a new value must be added to a product, the process
of production or distribution (Castells, 2008). In other words, innovation is a derivative of
creativity. In the organizational literature, the distinction between idea generation and
implementation is now most commonly characterized by the differentiation of creativity
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and innovation. Nooteboom & Stam (2008:18) believe it denotes both an activity and its
outcome.
In fact, Fagberg (2005), Mokyr (1990) and Schumpeter (1934) made compelling
distinction “that invention is the first occurrence of an idea while innovation is the first
attempt to carry it out into practice. Therefore, the latter is the ultimate driving force of
economic growth. For Schumpeter (1934:37), innovation means (1) the introduction of a
new good or quality there of (2) the introduction of a new method or production, (3) the
opening of a new market, (4) the conquest of a new source of supply of new materials or
parts, or (5) the carrying out of the new organization of any industry”. Yet Nooteboom &
Stam (2008) point out that currently innovation is largely reduced to the economic
domain, and the dominant interpretation perceives it as the successful exploitation of new
ideas. From this angle, innovation is “the visible tip of the iceberg of everyday creativity-
those creative efforts that strike the market as unusually distinctive, satisfying, and/or
productive in opening new ground. Establishing what ranks as an important innovation is
a process that involves the flow of information and exchange of views as well as the overt
economic responses of all the participants” (Caves, 2002:202).
Another perspective towards innovation originates from innovation management
studies. They focus on issues organizations incur when new technology rises. They often
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address new products, competition and privilege the adoption of innovation from the
individual or consumer perspective (Edler, Meyer-Krahmer &Reger, 2001; Frambach,
1993). Through this angle, West & Rickard (1999:47) define innovation as “the
intentional introduction and application within a job, work-team, or organization of ideas,
process, products, procedures, that are new to that job, work-team, or organization that
are designed to benefit that job, work-team, or organization”.
Drawn from different elements of the process, Bower and Kristen (1997) divide
innovation into technological innovation and marketing innovation. They take the case of
the birth of Xerox copier; the creation of the copier itself is technological innovation,
while putting it into circulation is marketing innovation. The European Institute of
Innovation and technology (EIT) (2009:14-15) categorizes the second type of innovation
“into a broad term of non-technical innovations, which contains three groups: 1)
innovation in the product or system itself. This denotes the realm of style and content:
new concepts, services, experiences; 2) innovation in the more general environment:
organizational or institutional within which innovation takes place; this is best
demonstrated by the case of Japan, when its fundamental innovation in production
systems simultaneously eliminated inventories and their costs, permitted constant quality
improvement, and reduced cost (Bar et al, 2001); 3) non-technical aspects of technical
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innovations. It is tightly connected to the technical innovation and can significantly
increase the adoption of the technology”.
Following the tenor of innovation management studies, Higgins (1995) distinguishes
among four types of innovation, namely: product innovation, process innovation,
marketing innovation and management innovation. EIT (2009:9) further explains that
product innovation is “strictly dependent on the sector (dynamics, features and sector
structure) but generally the traditional and sequential phases of: applied research-
innovation-engineering are much interrelated and often embedded in each other. But in
the area of service applied research and innovation, ‘user innovation’ is an important
challenge. Schemes, which also affect, to some extent, process innovation”. The
significance of user innovation was introduced by Hippel (1988) then further extended in
2005 as a driving force to democratize innovation. Based on the level of innovation,
Estrin (2009) added the third element of innovation to the traditional radical and
incremental innovation divide (Christensen, 1997), that is, orthogonal innovation. It is
refers to reframing the problems being solved and integrating things better. She gives the
example of America’s ‘Funniest Home Videos’ from Disney. Although they recognized
the trend of people using portable video cameras to record family events, when the
Internet age set in, they did not think orthogonally; thus, they failed to create a site that
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mirrors the show. The idea was finally taken up by start-ups like Youtube (Estrin,
2009:110). With the same aim to provide a more nuanced look at the traditional divide,
Henderson & Clark (1990) proposes a model that categorizes the aforesaid three into four
groups: radical, incremental, architectural and modular innovation. The basic
measurement is whether core concepts and linkages between core concepts and
components change.
However, these studies all originate from organizational studies. Ernst & Naughton
(2004) extend Henderson & Clark’s model to IT technology and provide a more
systematic typology of innovation using axes of architecture and component changes. In
their model, incremental innovation take the dominant component design for granted, but
improve on cost, time-to-market and performance; modular innovation plug new
component into a fundamentally unchanged system architecture; architectural innovation
use existing component, but change the way they are designed to work together; radical
innovation involves both the use of new component and changes in architectural design.
Accordingly, Ernst & Naughton (2004) argue that China excels in incremental and
architectural innovation, but falls short on radical and modular innovation.
Shenkar (2004) questions the compatibility of these terms in actual research. In part
because they tend to describe innovation with terms like evolutionary versus
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revolutionary. “These terms don’t distinguish an innovation’s origin from its impacts, and
sometimes even confuse them. Labeling suggests disappointing, even paralyzing, ties to
what has existed before; radical suggest the bold leaps forward that trigger dramatic shifts
in the market. But do revolutionary impacts require such bold leaps?” (Shenkar, 2010:4)
2.2 Copycat as a wild card in creativity and innovation
※ Imitation is not only more abundant than innovation, but actually a much more
prevalent road to business growth and profits
-Theodore Levitt, 1966
Forbes & Wield (2002:8-9) rightly pinpoint myths in the current studies and
understanding of innovation. Typical ones include: technological self-reliance is key to
break out of technological dependency; more technology is always good, high tech is the
best tech, action should be focused on gaining more blue-prints, not learning and
adapting; Research and Development (R&D) is key to innovation and is led by R.
Accordingly, too much attention has been given to radical, bold leaps that we forget that
innovation is the result of “bridging” ideas from different domains. Hargadon (2003)
believes that the concept of bridging reveals a couple of counterintuitive points. First,
“whereas it may be appealing to focus on the future, breakthrough innovation depends on
exploiting the past. Moreover, innovations that rely on the past are pragmatic” (Hargadon,
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2003: viii). A second counterintuitive point is that “organizing structure can dominate
individual creativity” (Hargadon, 2003: viii). New technology is almost always built on
previous learning and knowledge. Therefore, from a networked perspective, technology
should be defined as “the arrangement of people, ideas, and objects for the
accomplishment of a particular goal” (Hargadon, 2003:8). Taking the example of
Edison’s innovation strategy, Hargadon suggests it “relies not on breaking from the past
but instead on exploiting it by harnessing the knowledge and efficiencies that reside in
elements of existing technologies” (Hargadon, 2003:12).
As a result, studies of technical capability within nations and firms began to focus
on key attributes of indigenous technological capability (ITC). “This is what the subject
has been called, but what ITC is really about is the ability of a particular firm or a nation
to be competitive by continuously increasing firm or national value-added” (Forbes &
Wield, 2002:10). Brenznitz & Murphree (2011:4) propose that “China’s accomplishment
has been to master the art of thriving in second-generation innovation-including the
mixing of established technologies and products in order to come up with new solutions-
and the science of organizational, incremental, and process innovation”. Although the
development of Chinese SNS industry has always been scorned as copycats, ambitious
progenitors from outside of China have never succeeded in the field: Yahoo!, Google,
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Facebook, MySpace, Twitter, Groupon, just to name a few. Even though MySpace,
Groupon and Facebook recruited local talents to acclimatize themselves to the context,
they still fall flat in the fierce competition with local imitators.
Shenkar (2010:4) argues that “imitation is not only as critical as innovation to
business survival and prosperity but also is vital to the effective exercise of innovation
itself”. He further argues that imitation is “a rare and complex strategic capability that
must be carefully nurtured and properly deployed” (Shenkar, 2010:4). He thereby defines
imitation as “the copying, replication, or repetition of an innovation or a pioneering
entry”. Several caveats apply to the definition here. First of all, “what is imitated can be a
product, a process, a practice, or a business model”. Second, the imitation can be “as is”
or can represent variation or an adaptation. Third,” it can range from precise, blueprint
copying to broad-brush inspiration, or anything in between” (Shenkar, 2010:4). Fourth,
“the imitation can range from instinctive imprinting to full-fledged imitation”. Fifth,
illegal forms of imitation are not part of it. Finally, “imitation is approached as a strategy
that not only is consistent with innovation but also is essential to the focused and
effective use of innovative capabilities” (Shenkar, 2010: 5)
Drucker (1986) has detected “creative imitation syndrome” long before Shenkar;
and points out that creative imitation waits until somebody else has established the new,
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but only “approximately”. “Then it goes to work. And within a short time it comes out
with what the new really should be to satisfy the customer, to do the work customers
want and pay for” (Drucker, 1986:221). Drucker (1986:227-229) lists pioneers’ five bad
habits that allow newcomers to catapult themselves into a leadership position, “the new
innovation hypothesis, the tendency to “cream” the market, the belief in quality, the
delusion of the premium price, maximize rather than optimize”. Shenkar further provides
three reasons why this type of creative imitation actually works. To begin with, imitators
capitalize on the shortcoming of early offerings with the benefit of hindsight. “They can
tweak the original to fit shifting consumer tastes, or they can leapfrog into the next
technological generation. Because most productivity gains come not from the original
innovation but from subsequent improvements, imitators are often better positioned to
offer the customer something that is not only potentially better but also considerably
cheaper” (Shenkar, 2010:8-9). Secondly, “imitators are less likely to become complacent,
a significant problem for innovators and pioneers who are taken with their success to the
point of underestimating the dangers lurking in the rearview mirror” (Shenkar, 2010:10).
Finally, “because imitators often work from more than one model, they are constantly
reminded that there is more than one way to go forward, a precursor to further imitation
as well as to focused innovation” (Shenkar, 2010:10). From the perspective of contextual
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difference, Forbes & Wield (2002:10) highlight a strong relationship between local
knowledge ‘from the ground’ and another key characteristic of technology-its cumulative
nature. “The management of technology is thus highly firm- and locality-dependent,
often locked in people’s heads and difficult to write down in blue-prints”.
It is common sense that not all imitations succeed. Failed imitators did not engage in
true imitation and in particular, “failed to solve, or even tackle, the correspondence
problem. As a result, they were not able to produce a working replica, let alone adapt the
model to changing circumstances”(Shenkar, 2010:24). By contrast, successful imitators
are able to solve the correspondence problem using a set of skills. On top of all things,
imitators need to build a “culture and mind-set that not only accept but also value and
encourage imitation as much as innovation”(Shenkar, 2010:25). Then imitators must be
able to identify and target limitation models of potential value; searching, spotting,
sorting, contextualizing, deep diving. Last but not the least, they need to implement the
aforesaid skills (Shenkar, 2010:123). Overall, the technology-follower might “begin by
building process innovation capability on the ground with the aim of being as efficient as
other producers, but must then move beyond competing on price to competing on product
features (from process to product, from increasing efficiency of processes to higher
value-added products). At its most basic, both types of innovation aim at the addition of
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value-added per employee. Both product and process require major cultural change in the
enterprise” (Forbes & Wield, 2002:15).
Based on these facts, Brenznitz & Murphree (2011:2) argue that in the case of
China, “policy makers and academics put too much faith in the notion that states and
societies must create novel technologies in order to secure long-term growth and enhance
national welfare. Indeed, for China, excelling in other kinds of innovation has been the
key to economic growth”. They believe that China should stick to incremental
innovation at the current stage rather than blindly pursuing radical innovation. They
summarized three risks. “First, it is dangerous to try to impose behaviors and business
models developed over decades and under significantly different institutional systems and
environments on Chinese companies and entrepreneurs. The second risk is central-
government meddling, one that is becoming more and more apparent, is that may MNCs
will come to consider China an untrustworthy business environment. The last is that there
is the risk that China, by taking an overly heavy-handed approach to forcefully fostering
indigenous novel-product innovation, will be increasingly seen as a security threat by
other countries”(Brenznitz & Murphree, 2011:2).
The notion that late developers, or follower countries, should concentrate first on
imitation, utilizing economies of scale and scope to excel by using the latest technologies
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developed elsewhere, goes as far back as the work of Gerschenkron (1962).
Gerschenkron and his followers viewed this only as a stage that backward countries need
to master before they can develop the capabilities to excel in novel-product innovation
and become true economic powers. Brenznitz & Murphree (2011:4) state that this
“perspective might have been true in a world of vertically integrated, co-located
industries and a stable product cycle, a la Akamatsu (1962), Krugman (1979) and Vernon
(1966). However, in an era of fragmented production in which each country specializes
not only in specific industries but also in specific stages of production, and in which truly
novel products are produced or sourced globally without being produced in the countries
where they were developed, there are many modes of innovation that contribute to
sustainable long-term economic growth. Furthermore, each mode confers competitive
advantages relating to some stages of production but not others. They emphasize that
China and its “run of the Red Queen” model differ from the former Asian NIE’s fast-
follower model. First, unlike those countries where governments had specific policies
with clearly defined goals and the pathways to get there, China developed its Red Queen
run by accident, partly as a result of local experimentation, and the outcome looks quite
different from the declared goals of the central government. Second, the world has
significantly changed since the early 1980s. Today, in a world of fragmented production,
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successful Chinese information-technology companies have gained global prominence by
specializing in specific stage of production and a tighter industrial focus. Furthermore,
unlike previous NIEs, China does not need to master novel product innovation in order to
achieve sustained economic and industrial growth. Last but not least, unlike South Korea
and Taiwan, China has a massive and rapidly growing internal market (Brenznitz &
Murphree, 2011:5). Accordingly, instead of importuning whether Chinese SNS can be
counted as innovation or how radical those innovations are, the more interesting
questions would be how they weave the innovation network and translate creativity into
innovation in the specific context of China.
2.3 Creativity, innovation and analytical framework
2.3.1On analyzing creativity
Despite numerous definitions of creativity in the literature, no unanimity has been
reached. In fact, Plucker, Beghetoo, and Dow (2004) selected 90 articles that appeared in
either of the two creativity journals or that appeared in different peer-reviewed journal
with the word “creativity” in the title. Of these papers, only 38% explicitly defined
creativity. The fact that creativity entails different level of analysis leads to the
divergence. Hoelscher (2010) observes that the most abundant, mainly in psychology and
related fields, is concerned with the individual level (Simonton, 2000), although the
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importance and social context is often highlighted (Csikszentmihalyi, 1999). Business
and administration studies look at companies, in other words at a meso-level (Amabile,
1996). Other researches take into account other kinds of organizations, sometimes labeled
‘creative knowledge environments’ (Hemlin, Allwood, and Martin, 2008). Likewise
located on the meso-level, but much more concerned with networks and agglomerations,
is research about the creative potential of cities or regions (Florida, 2002; Scott, 2006).
Finally, nations are compared on the macro level, for example within the ‘national
innovation systems’ and similar approaches (Furman, Porter and Stern, 2002; Lundvall,
Johnson, Anderson, and Dalum, 2002; Patel and Pavitt, 1994). Because this study focuses
on SNS companies which fall into the meso-level, Plucker et al’s definition of creativity
(2004:90) is used here as it takes into account the concept of person, place, process, and
product: “creativity is the interaction among aptitude, process, and environment by which
an individual or group produces a perceptible product that is both novel and useful as
defined within a social context”.
However, even the meso-level analysis involves different components. As the
company transcends levels throughout budding, developing, transition and maturity
phases, each higher-level proposition incorporates the predictions of the preceding
propositions and adds contextual influences (Hoelscher, 2010). Specifically, “the first
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(individual-level) proposition suggests that individual creativity is a function of
individual characteristic, social influences and contextual influences. The second (group-
level) proposition suggests that creativity is a function of individual creativity of group
members, and of group and contextual characteristics. The third (organizational-level)
proposition suggests that creativity is a function of group creativity and organizational
characteristics (Agars, Kaufman & Locke, 2008:22)”.
Based on creativity theories, creativity is a systematic process that can be managed
(Bakhshi and McVittie 2009; Coyne et al. 2007; Fernandes et al. 2009). The creativity
process generally consists of four main stages: preparation (problem perception),
incubation (a gestation period through unconscious mechanisms), illumination (when the
ideas for a solution appear), and evaluation (when ideas are tested and their validity and
utility are assessed). At each level, these four stages of creativity generation are practiced
by companies drawing on various resources and capabilities.
Accordingly, we have to unravel contributing factors to creativity at each level. At
the individual level, researchers have considered group composition and its effects on
creativity (Agars, Kaufman & Locke, 2008: 34); Diversity (Egan, 2005), task motivation,
domain-relevant skills, and creativity-relevant group process (Tagger, 2002). At the
group level, group conflict (Beersma & De Dreu, 2005: Shalley, 2002), group autonomy,
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task requirements, reflexivity (West, 2002), participation in decision making (West,
2002) are major factors. At the organizational level, organizational climate, support
system, market environment, environmental uncertainty (West, 2002); the influence of
others inside and outside the organization (Eagan, 2005); job complexity (Oldham &
Cummings, 1996) and a supportive environment (Janssen, van de Vliert, & West, 2004)
are taken into consideration.
Current research further proposes that the presence of creativity varies at different
stages of innovation process. It may be more readily evident in the early stages of
innovation processes, when teams are required to develop ideas in response to a
perceived need for innovation (Hoelscher, 2010). As this innovation is tailored to the
organizational need and is stabilized, however, less creativity is required (West, 2002). In
addition, Ford and Sullivan (2004) have suggested that idea generation is vital to teams
that are still attempting to meet the requirements of the project; later, after the team’s
attention changes to executing an innovation, introduction of novel ideas may disrupt the
team’s efforts and lead to negative consequences, such as lower project quality, decreased
team member satisfaction, and reduced team member learning. In consequence, we have
to explore the manifestation of creativity at different stages across different analytical
levels.
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Jeffcutt and Pratt (2002) have rightly warned against the perception that creativity
acts as a kind of ‘magic dust’ which can turn base metal into gold. “The major problem is
that so-called creative people often pass off on others the responsibility for getting down
to brass tracks. They have plenty of ideas but little business-like follow-through. They do
not make the right kind of effort to help their ideas get a hearing and a try (Levitt,
2003:159)”. In consequence, creativity must be translated into innovation through
implementation. Shalley et al (2004:934) argue that, “Creativity refers to the
development of novel, potentially useful ideas. Although employees might share these
ideas with others, only when the ideas are successfully implemented at the organization
or unit level would they be considered innovation (Amabile, 1996; Mumford &
Gustafson, 1988)”.
2.3.2 On Analyzing Innovation
As mentioned earlier, innovation is a process of taking apart and reassembling
existing elements in new combinations. Given the specificity of Chinese SNS industry as
“creative imitation”, this study hereby borrows Nelson & Winter’s definition of
innovation (1982:130) as “a recombination of conceptual and physical materials that
were previously in existence”. Perceiving innovation as part of the social network,
Aydalot (1988) argue that to understand innovation, the key need is to study the firm, its
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local and regional context, and thus to identify the external conditions and internal
resources that helped both the creation of new firms and the adoption of innovations by
existing ones. In their seminal work, Kogut and Udo Zander (1996:502) point out that
firms are organizations that represent social knowledge of coordination and learning.
Therefore, Pavitt (2005:88) suggests that to fully comprehend the innovative firm, there
is a need to understand the actual learning processes: the relation between individual
capabilities and collective capabilities and between what is learned at a point in time and
how the learning cumulates over time. More importantly, given the impossibility of
predicting accurately the cost and performance, it involves experimentation and improved
understanding on users’ reaction to innovation. Therefore, trials and errors at different
developmental stages in relation to changing internal and external resources are critical
entry points to map out the innovation process. Yet, Lazonick (2005) reminds us that
resource-based theory, however, provided no perspective on why and how some firms
rather than others accumulated valuable and inimitable resources, or indeed what made
these resources valuable and inimitable. Consequentially, the origin of resources and its
specificity to firms should be explored. In the case of Chinese SNS companies as entrants
to the market, an important question would be how they get access to the resources that
they require to innovate (O’Sullivan, 2005).
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Gupta (2007:208) identifies six key components of successful innovation including:
funding for innovation, trained and educated staff, collaborative environment, key
individuals, corporate infrastructure and strategic planning. From there, he proposes
factors to consider for measure of innovation. For process innovation, excellence in
research, innovation management, time allocation; new idea deployment, extent of
improvement or change, degree of differentiation, disruption or innovativeness; time to
innovate; rate of innovation, saving, opportunities (Gupta, 2007: 221). For business
innovation: resources (funding, culture of risk taking, rewards, tools), activities (targets
for innovation, process, extent of institutionalization, idea management, internal and
external publications, knowledge management, internal and external collaboration,
recognition). Again, the weight of these indicators may vary at different developmental
phases. As Forbes & Wield (2002:15) point out, “process innovation will often be more
important than product innovation, but both matter and are different at different stages in
industrial development”. More specifically, product design is essential. “Although design
enters into R&D, most of it is distinct from R&D. Design does not always mean the
generation of new knowledge, but it almost always requires a mix of written down, tacit
and artistic knowledge” (Forbes & Wield, 2002;10). Accordingly, the index listed above
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will be deployed to measure innovation in Chinese SNS companies at different
developmental phases.
While strategic control and financial commitment are essential to the innovative
firm, it is organizational integration that determines the innovative capability that the firm
actually possesses. As an integral part of business innovation, Drucker (1986) believes
that ad hoc analysis on entrepreneurship is needed as innovation is the specific tool of
entrepreneurs. Entrepreneurs, by definition, “shift resources from areas of low
productivity and yield to areas to higher productivity and yield” (Drucker,1986:28).
“Entrepreneurship refers not to an enterprise’s size or age but to a certain kind of activity.
At the heart of that activity is innovation: the effort to create purposeful, focused change
in an enterprise’s economic or social potential. Four such areas of opportunity exist
within a company or industry: unexpected occurrences, incongruities, process needs, and
industry and market changes. Three additional sources of opportunity exist outside a
company in its social and intellectual environment: demographic changes, changes in
perception, and new knowledge” (Drucker, 2003:114).
Ford and Sullivan (2008:401) recommend Shane’s (2003:4) definition of
entrepreneurship as “an activity that involves the discovery, evaluation and exploitation
of opportunities to introduce new goods and services, ways of organizing, markets,
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processes, and raw materials through organizing efforts that previously had not existed”
for two reasons:
(1) It describes entrepreneurship in terms of “activity” and “organizing efforts’ that
introduce ventures that “previously had not existed”
(2) the phases it identifies are compatible with the variation, selection, and retention
phases specified in enactment-selection-retention (ESR) theory
Ford and Sullivan (2008) advocate the need to examine new ventures based on
problems in current entrepreneurship studies. First, the question “where do new ventures
come from?” was recently singled out in a review of research published in the Academy
of Management Journal as a key, underdeveloped research issue to be addressed by future
entrepreneurship studies (Ireland, Reutzel, & Webb, 2005). Second, entrepreneurship
research has not emphasized multi-level theory capable of capturing the interplay among
founders, founding management teams, new ventures, and their value networks (Ford &
Sullivan, 2008). The most prominent approaches to studying entrepreneurship follow
either an economics tradition that emphasizes environmental determinants of venture
creation and performance (Shane, 2000; Yates, 2000) or a psychological traditional that
emphasizes founder traits or characteristics associated with venture creation and
performance (Shaver & Scott, 1991; Shook, Priem, & McGee, 2003). “Lines of inquiry
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must address how, at the individual level, processes related to the founder’s functional
background identity play a role in the founder’s interpretation of the uncertainty in the
environment, thereby shaping the opportunity discovery phase” (Jaussi, 2008:483). Third,
process theories of entrepreneurship are rare in the literature despite an acknowledged
need to investigate how the entrepreneurial process unfolds (Shane, 2006). Essentially,
this entails study on how a team is formed and ratchet up the level of innovation (Jaussi,
2008). Fourth, new venture emergence could be considered a “pure” form of organizing,
capable of enriching our general ability to create and employ theories describing
important processes that lead to organizing (Heath & Sitkin, 2001). As most Chinese
SNS companies started off as ventures, they fit in as good subjects of study. Ford and
Sullivan (2008:435) suggested that at the individual or founder level, the main task is
opportunity discovery; at the team level, the main task is opportunity evaluation, while
opportunity exploitation is the major task for the venture or organizational level. At each
of these three phases, venture environment uncertainty, founder organizing and cognitive
S-R processes are kernel assessment elements on performance. As it moves on to the
team and venture levels, these three elements become key evaluation tools on escape
velocity. Following their model, elements at different levels of organization and venture
phase will be explored in the analyses on Chinese SNS companies in different categories.
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2.4 Service innovation and Sociability
Essentially, SNS are providing users with social networking service with its own
characteristics. A line of studies argue that innovation in services has distinctive
characteristics compared to that in manufacturing and thus should be treated differently
(Den Hertog & De Jong, 2007). Such research focuses on identifying service specificities
such as intangibility and high level of interaction, concentrating on organizational
innovation and provides types of innovation to understand its content and driving forces
(Gadrey, Gallouj & Weinstein 1995; Sundbo 1997; Salter & Tether 2006; Gallouj 2002).
Traditionally, the key difference between product (goods) and service lies on the degree
of separability of production and consumption (Erramilli & Rao 1993), or tangibility
(Jackson, Neidell & Lunsford 1995). However, new integrative perspectives considering
‘products’ containing combinations of goods and services elements (i.e. ‘product
packages’ or ‘offerings’) have emerged to deal with digital artifacts (i.e. software,
content) related to IT (Information Technology) (Daniels 2000; Giarini 1994; Grönroos
1990; Jack et al. 2008).
The digital content can have the two kinds: digital product and digital process.
According to Choi et al. (1997), digital product refers to “anything that one can send and
receive over the Internet (i.e. paper-based products or multimedia products)”; digital
process refers to “any process involving multiple human interactions and
communications”. Digital product is tangible, delivered in not interactive way including
information (e.g. books, journals, newspapers, magazines, database, and software),
entertainment (e.g. video and audio signals, multimedia products, such as movies,
television programs, and sound recordings). Digital process is intangible but exists as a
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knowledge base, continual connection or a real-time coordination with other users or
processes, including government services (e.g. forms and welfare payments), auctions
and electronic market, or communication (e.g. a news clipping service and electronic
messaging). Kim, Geum & Park (2011) provided a working typology for innovation of
digital content service listed below to analyze different types of innovation determined by
changes made to platform, product, process separately or collectively. Accordingly,
digital content innovation at each Chinese SNS under study will be analyzed based on the
typology to identify their innovation patterns at different developmental stages.

Figure 5. Classification scheme

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Table 2. Characteristics of Two Major Types for Divergence
Type Characteristics
Single change
- Deriving a variety of new services by changing a single component of a
source
Dual change
- Applying two types of a single change simultaneously and dependently
- Deriving a variety of new services by changing a combination of two
components of the source
Table 3. Definition of Six Detailed Types for Divergence
Type Definition
Single
change
Platform change
Providing the source for the new platform by converting digital
compression or transmission protocol
Product change
Reconstructing the existing product by changing its one-way
function, information, or genre
Process change
Reconstructing the existing process by switching the mode of
interaction or provision
Dual
change
Platform-
product change
Providing the source for the new platform, but also reconstructing
the existing product creatively by linking with the new platform
Platform-
process change
Providing the source for the new platform, but also reconstructing
the existing process creatively by linking with the new platform
Product-process
change
Reconstructing the existing product and process of the source
dependently each other
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Table 4. Characteristics of Two Major Types for Convergence
Type Characteristics
Integration
- A physical combination of different sources to be a single one
- No changes in the original purpose of sources
- Maintaining the unique characteristics of original sources when they are
separated after integration
Fusion
- A chemical combination of different sources to be a single one
- Changes in the original purpose of sources
- Losing the unique characteristics of converged content services and
being perceived as different content when they are separated
Table 5. Definition of Six Detailed Types for Convergence
Type Definition
Integration
Platform
integration
Integrating the sources through the interaction of two platforms
Product
integration
Integrating the sources simply by providing additional tangible
products
Process
integration
Integrating the sources simply by providing additional intangible
processes
Fusion
Product fusion
Combining the sources by overlapping and requiring close
relationship between products
Process fusion
Combining the sources by continuous processing and systematic
coordination between processes
Product- process
fusion
Combining the sources from both product and process by
providing continually, associating main purpose of each source
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More specifically, Boyd and Ellison (2007) argue that distinctive features of SNS
include making one’s personal social networks visible to selected others and the
technological platforms that users can easily adopt to leverage their social ties,
particularly with pre-existing connections. Accordingly, designing new social media
involves understanding the features that affect how they can be used. Among the most
important are rhythm, format, bandwidth, permanence and identification (Donath, 2004).
Several researchers employ the architecture of the SNS as starting point to discuss and
investigate a variety of related topics. Stutzman (2006) tracked the types of personal
information most likely to be disclosed on SNSs, pointing out the lexical or architectural
differences among these SNSs contributed to tendencies or variations in personal
information disclosure. Gross and Acquisti (2005) further suggest a confluence of user
motives, media attributes, and social ties or outcomes that have previously examined
media research within the approaches of uses and gratifications, social networks, and
through a discussion of media attributes or affordances of particular media genres or
platforms (Papacharissi & Mendelson, 2011).
Among various attributes, usability and sociability are identified as two key
concepts in understanding the dynamic of SNS. Usability refers to the capability of a
technical system to be used easily and effectively by individuals to fulfil their tasks, such
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as to seek or contribute knowledge (Shackel, 1991). Brooke (1996) designed the System
Usability Scale (SUS) to measure efficiency, effectiveness and satisfaction with the
design. Sociability is the quality or state of being sociable. Sociability online is the
quality of social interaction in a networked environment. It encompasses any interaction
between two users in an online environment (Preece, 2001). Preece (2001) further
illustrated that in terms of social psychology, sociability includes empathy, trust, identity,
reputation; in terms of social dynamic, the concept entails networks, reciprocity, social
capital; measured from purposes, sociability involves information, support, connect,
contribute, coordinate; from polices: cultural norms, rules. Guo, Dai, Fan & Kang (2010)
pointed out that it is difficult to derive a proper measurement of sociability from Preece’s
conceptualization, because it describes determinants of sociability rather than define what
sociability actually is. In contrast, Kreijns et al. (2007) defined sociability from the
perspective of the user’s experience. They defined the sociability of a computer-
supported collaborative learning (CSCL) environment as the extent that the environment
is perceived to be able to facilitate the emergence of a sound social space. This definition,
however, is limited to task-oriented group applications. To expand the scope to cover
both groupware and social software, Guo, Dai, Fan and Kang (2010) redefined the
sociability as the extent to which the communication environment mediated by social
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software is perceived to facilitate social interaction and to enhance social connectivity.
Accordingly, they introduced the following measurement on sociability:
System performance
Reliability of the system Speed – the speed, at which information for social activities can be
transferred
Prevention from disturbance – the extent to which the user can distinguish between wanted and
unwanted information and can block the latter
Privacy – the extent to which the user can control her or his private information in the system
Information bandwidth– the amount of data that can be maximally transferred within the system
at once
Social climate
Open communication – the extent to which users in the system tolerate and respect each other and
encourage discussion and different opinions
Immediacy – the degree to which users feel close to each other in the system
Friendliness – the degree to which members of the system respect and deal politely with each
other
Security – the extent to which social activities in the system are safe and will not threaten or
endanger personal property
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Affective communication – the ease and effectiveness at which emotions can be expressed to
other people and emotional support can be exchanged in the system
Benefits and reciprocity
Meaning to reality – the extent to which social activities in this system represent and contribute to
events and people in the real world
Reciprocity – the ratio of effort invested in the system and payback
Tangible rewards – the extent to which tangible rewards are received by users for their effort and
time invested in the system
Control of content quality – the extent to which the system censors information which is
transferred in social activities
People
Number of existing social contacts in the system – the number of contacts in the system, which
already existed before using the system, such as friends or family members
Relationship to existing social contacts in the system – the proximity to contacts, which already
existed before using the system, in the system
Amount of users – the overall number of system users
Interaction richness
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Customizability – the ease at which the content and format of exchanged information can be
controlled
Integrationability – the ability of the system to adapt and integrate contents from other systems
Socio-emotional rewards – the extent to which reasonable socio-emotional rewards are received
by users for their effort and time invested in the system
Self-presentation
Self-image building – the ease at which the user’s virtual image can be established and displayed
within the system
Reputation building – the effectiveness at which a good reputation can be acquired and
demonstrated in the system
Support for formal interaction
Support of group activity – the ease at which groups of special interests can be established and
maintained
Authenticity – the perceived realness of content and exchanged information in the system
Operation flexibility – the variety of operation modes, such as drag-and-drop, mouse clicks, and
shortcuts
From the users’ perspective, studies suggest that different measurements should be
applied to SNS based on their major functions. Phang, Atreyi and Sabherwal (2009)
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suggested that usability and sociability are two salient antecedents applicable to both
knowledge seeking and contribution. Ease of use and system reliability are considered
more important for usability, moderator perception is more important for sociability when
individuals seek knowledge. Meanwhile, individuals perceive tracking fulfilment as more
important for usability and social interactivity as more important for sociability when
they contribute knowledge. For social entertainment based SNS, Symbolic physicality,
inherent sociability, multiplay asychronicity and Inter-application interactivity are major
measurements (Wu et al, 2010).

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3.1 Methodology
3.1.1 Subject of study
Table 6. Subject of Study
Chinese Social Networking Site (SNS) companies

American equivalence
Category Name Founder
Indigenous Kaixin001 Cheng binghao Facebook
Moko Ma Yue N/A
E!We Bei zhicheng Lifestyle applet on iPhone
Tencent QQ Ma huateng ICQ/MSN
Transnational
Network
Based
(TNB)

Douban Yang Bo Yelp & Amazon
Xiaonei Wang Xing Facebook
Fanfou Wang Xing Twitter
Hengzhi/Youpay Li Tong Linkedin
Sohu Zhang chaoyang Yahoo!
Meituan Wang Xing Groupon
Edquist (2005:201) suggested that a stronger focus on activities would increase our
knowledge of, and capacity for, explaining innovation processes. “Given our limited
systematic knowledge about determinants of innovations, case studies of the determinants
of specific innovations or specific categories of innovations would be very useful”.
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Accordingly, the companies listed above were selected as the subjects of this study due to
their leading position and impact in their sub-categories within the Chinese SNS industry.
Measured by founders’ background, these companied were divided into indigenous and
transnational network based (TNB) companies.
3.1.2 Research questions
Existing studies on creative imitations taught us that only companies with the ability
to solve correspondent problems and adapt to ever-changing environment can be counted
as vital part of innovation exercises. Accordingly, this project will start of by analyzing
the distinctiveness of Chinese SNS compared to their American paradigms.
R1a: In what aspect are Chinese SNS influenced most by the American paradigm?
R1b: Does the American influence fluctuate at different developmental phases?
R1c: What internal and external factors determine the level of imitation?
H1a: Chinese SNS possess distinct product design, marketing and financial strategies
entrenched in social and cultural environment.
H1b: The American influence diminishes with the maturity of Chinese SNS companies.
H1c: The founders’ educational background, overseas experience, domain relative skills,
founders’ start-up experience, company size, proprietary nature of the company are key
determinants on level of imitation.
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Available literature on creativity suggests that its representations change with the
development of company at individual, team and organizational levels. And its
significance varies at four different stages of creative process. Accordingly, the creative
process of each Chinese SNS company and the performance of different types of
companies will be examined.
R2a: What is the creative process for major Chinese SNS companies at preparation,
incubation, illumination and evaluation stages?
R2b: How does the creative process and representation change with company
development at individual, team and organizational levels?
R2c: What factors have major impact on the creative performance at different levels in
the development trajectory?
R2d: Are there significant difference in creative process between indigenous and TNB
SNS?
H2a: The founders’ educational background, overseas experience, domain relative skills,
founders’ start-up experience, company size, proprietary nature of the company are key
determinants on level of imitation.
H2b: Key tasks of creative process and its representations change with the development
of the company.
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Innovation theories indicate that the creativity-innovation transition and innovation
process are shaped by internal and external resources. More importantly, the origin of
resources and its specificity to firms should be explored. Additionally, entrepreneurs
should be examined as the unique asset and driving force of the innovation process.
Consequently, how Chinese SNS companies translates creativity into innovation, and
what role the founding entrepreneurs play in shaping innovation process are explored.
R3a: How do Chinese SNS companies convert creativity into innovation and what are the
key factors?
R3b: What are the major innovation process patterns for Chinese SNS companies and
what are the key driving forces in the developmental trajectories?
R3c: What role do founding entrepreneurs play in shaping the innovation process?
R3d: What are the major concerns for innovation at different developmental stages?
H3a: Group composition, decision-making process, domain relative skills, group dynamic,
founders’ traits, venture environment and S-R process are key determinants on whether
creativity can be successfully translated into innovation.
H3b: Innovation process shift with the development of SNS companies at different levels,
and is influenced by founders’ traits, company traits, environmental change, S-R process.
Based on existing typology for digital content services, usability and sociability of
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SNS, each company will be examined accordingly with comparison across different type
of SNS platforms.
R4a: What types of innovation are achieved in each Chinese SNS company and what is
the general innovation pattern for Chinese SNS?
R4b: What is the relationship between usability, sociability and SNS business success?
R4c: How does usability and sociability differ due to internal factors?
H4a: Chinese SNS are more competent in divergence rather than convergence.
H4b: Higher level of usability and sociability leads to a higher level of business success.
H4c: The level of usability and sociability are associated with the founders’ educational
background, overseas experience, domain relative skills, founders’ start-up experience,
company size, and the proprietary nature of the company.
To answers these questions, mixed methods were implemented. In order to measure
creativity and innovation in the company environment, Lester (2004) suggested
investigation on two fundamental processes: analysis and interpretation. “Analytical
processes work best when alternative outcomes are well understood and can be clearly
defined and distinguished from one another. Interpretive processes are more appropriate
when the possible outcomes are unknown-when the task is to create those outcomes and
determine what their properties actually are” (Lester, 2004:6). According to Lester, the
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former entails the precise exchange of information, and the latter involves open-ended,
unpredictable conversation. He argued that interpretive processes have become the
missing dimension in our study of creativity as it is not fully recognized or well
understood. But the problem of combining the two goes beyond recognition and
understanding. “Ultimately, the inability of business practitioners to describe the activity
that we are calling interpretation is a symptom of something deeper. Managing
interpretive processes involves a way of thinking about the world that not only is very
different from the analytical perspective but, at least along certain dimensions, is
fundamentally at odds with it” (Lester, 2004:96)
As a result, in order to explore the interpretive process from the practitioners’ own
narratives, semi-structured in-depth interviewing served as the most appropriate method.
Interviews allow us to understand something from the subjects’ point of view and to
convey to others a situation from their own perspective and in their own words (Kvale,
1996). Interviews are particularly useful for getting the story behind a participant’s
experiences. The interviewer can pursue in-depth information around the topic and semi-
structured interviews enable interviewer to develop rich understanding of specific key
points without deviating from analytical framework (McNamara, 1999). Among various
interviewing formats, in-depth interviews are particularly useful when researcher wants
DIGITAL CREATIVITY 77

detailed information about a person’s thoughts and behaviors or want to explore new
issues in depth. Interviews are often used to provide context to other data, offering a more
complete picture of what happened and why (Boyce & Neal, 2006). Consequently,
interviews are the optimal strategy for us to collect information on industrial overview,
creative and innovation process in the company as well as the emergence path from the
founders’ perspective in this case.
Neuendorf (2002) perceived content analysis as a useful tool to describe the
substance characteristics of message content and make interferences to producers of the
message. When combined with results from other studies using individuals as units of
inquiry, it can provide important missing links in multistep models of human
communication behavior (Shoemaker & Reese, 1990). Thus content analysis assists our
understanding of interview materials here as most SNS companies listed in this study
were interviewed on the longitudinal term at different developmental stage apart from
Tencent and Sohu. It helps us to identify key determinants of creative and innovation
processes. At the same time, it reveals differences between companies that fall into
different categories. More importantly, content analysis helps us to discover different
types of digital content innovation following the typology. With the aim to collect users’
evaluation on SNS usability and sociability, survey was employed to keep methodology
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consistency with existing studies. Linear regression was calculated to measure
association between usability, sociability and business success. One-way ANOVA was
run to detect difference between indigenous/TNB companies, knowledge sharing and
social game base companies, what company or founders’ traits have influence on
usability and sociability.
3.1.2 Interviewing and content analysis
Accordingly, semi-structured in-depth face-to-face interview with founders and
marketing personnel of theSNS companies listed above were conducted. All interviews
were conducted in Chinese and then translated into English. The average interviewing
time for each interviewee is around two hours. All interviewees signed a research
cooperation contract with informed consent. The interview templates below was designed
based on existing literature on how to analyze the construct of creativity and innovation.
1. Interview templates
To company founders and marketing personnel
Company Strategy
• How did your site get started and what were your initial goals?
• What was the original composition of your founding team?
• What was the source of your venture capital and business model?
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• What are the principal components of the company’s marketing strategy?
• How have you sought to create the necessary critical mass of users to continue to attract
and maintain a large user base?
• What other application domains can your model be extended to?
Creativity and innovation
• How was your original design of the website influenced by the American paradigm?
• How would you compare yourself to your American counterpart?
• What are some of unique features of your product that differentiate you from the
American equivalent?
• How would you compare the industrial environment of your product in China to that of
the United States?
• What other application domains can your model be extended to?
• How would you interpret creativity and innovation?
• Do you think there is a distinct Chinese model in the creation of innovation? If yes,
what is your experience on this?
Transformations
• Has your company extended your services and products in the past decade? If yes, in
what aspects.
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• What motivated you to extend your original products and services?
• Among these new features, which ones have been proved most successful and why?
• How does your financial instruments, marketing strategy and interaction with users
change during the past decade?
• How does the general environment of Internet industry changed in the past decade
according to your own experience?
• Where do you see your company in the coming years?
• In what aspects do you think that Chinese innovation industries may contribute to the
rest of the world in the future?
Challenges
• How do you reach out to your users and analyze user data?
• What is the weakest link in the current operation of your company and where do you
see the most salient potential?
• What uses are you making of the massive amounts of personal information that you are
collecting?
• How are you dealing with troubling issues?
• How do you compete with your peers in the industry?
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• How are you tracking user information? What do you think are your obligations to the
users regarding data that they supply to you?
Source of innovation
• What are some of your metrics for evaluation?
• How do you recruit your talents?
• How does your R&D department work?
• Do you have any cooperation with national, local research institute or universities?
• How do you perceive the role of production innovation in the development of your
company?
• What are some of the major organizational or strategic changes you have led your
companies through?
Opportunities and Threats on the Horizon
• What do you see as the role of the mobile phone in the industry? Have you tried to
integrate it to your current service? What other forms of media convergence have you
incorporated into your services?
• What are the threats to your business model? Do you encounter similar challenges as
your American counterparts?
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• Have you ever considered going public on creative stock market in China or abroad? If
already in the stock market, what was the motivation behind the decision, and how would
you evaluate your performance?
• What kinds of opportunities do you see on the horizon for new services and/or products
for your site? How do you see the industry and Internet environment in China evolving?
• Where do you see Chinese companies surpass American counterparts? And where do
you see us fall short? Why?
2. Content analysis coding sheet
Based on the multi-level analytical framework suggested by existing creativity and
innovation literature, the interview data were transcribed and coded thematically to
identify indicators for creativity and innovation. Three coders who are themselves SNS
users were chosen from Chinese business or communication schools, a two-month
training session were provided to determine coding schema and inter-coder reliability.
After the first month training, two company interview data were coded to test the result
with a Krippendorf’s Alpha of .87. After a discussion among coders to phase out
discrepancies, at the end of the second month, Krippendorf’s Alpha increased to .98. The
following coding sheet was designed to interpret interview data. In order to provide in-
depth analysis on interview materials, companies were first studied individually then
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comparatively based on the following parameters: developmental phase, founder’s
background, size, proprietary nature. Besides, they were examined across the four
creativity stages: preparation (problem perception), incubation (a gestation period
through unconscious mechanisms), illumination (when the ideas for a solution appear),
and evaluation (when ideas are tested and their validity and utility are assessed). Second-
hand industry data were analyzed as supplement to face-to-face interviews with the aim
to generate a contour of innovation in Internet industry in China and the impact of
governmental policies and financial environment in China.
General parameters
Developmental phase
1 budding 2 developing 3 maturity
Company size
1 Small (1-20 people) 2 Medium (20-50) 3 Big (above 50)
Proprietary nature
1 Indigenous 2 Transnational-network based
CREATIVITY individual level
Founder and founding team
Educational background
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1 Below Bachelor’s 2 Bachelor’s 3 Master’s 4 Doctoral
Overseas experience
1 Educated in China 2 Studied abroad without working experience 3 Studied and worked
abroad
Major background
1 Engineering 2 Business 3 Social Science
Age group
1 30-35 2 35-40 3 40-45
Start-up experience
1 This is the first start-up trial 2 started business before and failed 3 studied business
before and succeeded
Founding team size
1 Only 1 person 2 2-3 3 3-5 4 More than 5
Founding team diversity
1 All engineers 2 mainly engineers, plus marketing 3 balance team with engineers,
marketing, finance personnel
Founding team relation
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1 founders’ classmates 2 founders’ colleagues 3 founders’ business partners 4 hired
employees
Task motivation
1 pursue personal interest 2 pursue desirable lifestyle 3 pursue new industry standard 4
pursue business success
Understanding of SNS
1 friends’ network 2 knowledge exchange platform 3 infrastructure for Web 2. 0
Inspiration
1 previous experience in the workplace or field 2 the success of American paradigm 3
both
American influence, on a scale of 1 to 7, low to high
Technology: 1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-
2-3-4-5-6-7 HR1-2-3-4-5-6-7
Domain-relevant skills, on a scale of 1 to 7, low to high
Technology: 1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-
2-3-4-5-6-7 HR1-2-3-4-5-6-7
Idea testing (I)
1 self-assessment 2 focus group 3 internal testing 4 user testing
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CREATIVITY Group-level
Group composition change, on a scale of 1 to 7, proportion low to high
Technology: 1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-
2-3-4-5-6-7 HR1-2-3-4-5-6-7
Founder’s impact on decision-making, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Participation in decision making, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Founding team change, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Group autonomy, on a scale of 1 to 7, low to high
Technology: 1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-
2-3-4-5-6-7 HR1-2-3-4-5-6-7
Task requirements, on a scale of 1 to 7, low to high
Technology: 1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-
2-3-4-5-6-7 HR1-2-3-4-5-6-7
Improvement
1 technological element 2 interface features 3 user experience 4 marketing strategy
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Improvement speed, on a scale of 1 to 7, from slow to fast
1-2-3-4-5-6-7
Group conflict, on a scale of 1 to 7, low to high
Technology: 1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-
2-3-4-5-6-7 HR1-2-3-4-5-6-7
Reflexivity, on a scale of 1 to 7, low to high
Technology: 1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-
2-3-4-5-6-7 HR1-2-3-4-5-6-7
Idea testing (G)
1 self-assessment 2 focus group 3 internal testing 4 user testing
CREATIVITY organizational-level
Organizational culture
1 centralized, hierarchical 2 flat, team based 3 flat, individual based
Key workforce age range
1 20-30 2 31-40 3 above 40
Impact of young people, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Support system
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1 employee training 2 team cooperation 3 external advisory 4 bottom-up appealing
Market environment, on a scale of 1 to 7, amiable to competitive
1-2-3-4-5-6-7
Environmental uncertainty
Technology: 1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-
2-3-4-5-6-7 HR1-2-3-4-5-6-7
Idea testing (O)
1 self-assessment 2 focus group 3 internal testing 4 user testing
Interaction with users, on a scale of 1 to 7, low to high
Technology: 1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-
2-3-4-5-6-7 HR1-2-3-4-5-6-7
Job complexity, on a scale of 1 to 7, low to high
Technology: 1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-
2-3-4-5-6-7 HR1-2-3-4-5-6-7
Political influence, on a scale of 1 to 7, low to high
Technology: 1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-
2-3-4-5-6-7 HR1-2-3-4-5-6-7
INNOVATION individual
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Educational background
1 Below Bachelor’s 2 Bachelor’s 3 Master’s 4 Doctoral
Overseas experience
1 Educated in China 2 Studied abroad without working experience 3 Studied and worked
abroad
Major background
1 Engineering 2 Business 3 Social Science
Age group
1 30-35 2 35-40 3 40-45
Start-up experience
1 This is the first start-up trial 2 started business before and failed 3 started business
before and succeeded
Risk-taking, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Founding team diversity
1 All engineers 2 mainly engineers, plus marketing 3 balance team with engineers,
marketing, finance personnel
Founding team relation
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1 founders’ classmates 2 founders’ colleagues 3 founders’ business partners 4 hired
employees
Venture Environment (I)
Source
1 self-input 2 individual venture capitalist 3 venture capital company 4 co-investment
with founding team
Amount, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Sustainability, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
S-R (I)
Level of homogenization, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Business model readiness, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Excellence in research, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Time allocation
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Technology1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-2-3-
4-5-6-7 HR 1-2-3-4-5-6-7
New idea deployment
Founder’s impact on decision-making, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Participation in decision making, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Improvement
Technology1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-2-3-
4-5-6-7 HR 1-2-3-4-5-6-7
Improvement speed, on a scale of 1 to 7, from slow to fast
Technology1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-2-3-
4-5-6-7 HR 1-2-3-4-5-6-7
Improvement extent, on a scale of 1 to 7, from low to high
Technology1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-2-3-
4-5-6-7 HR 1-2-3-4-5-6-7
Disruption, on a scale of 1 to 7, from low to high
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Technology1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-2-3-
4-5-6-7 HR 1-2-3-4-5-6-7
Time to innovate, on scale of 1 to 7, from short to long
1-2-3-4-5-6-7
Market readiness, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Main marketing strategy
1 traditional offline interpersonal 2 online viral marketing
Rewards
1 promotion 2 salary increase 3 founding mechanism 4 employment
Extent of institutionalization, on a scale of 1 to 7, from low to high
1-2-3-4-5-6-7
Internal Collaboration, on a scale of 1 to 7, from low to high
1-2-3-4-5-6-7
External Collaboration, on a scale of 1 to 7, from low to high
1-2-3-4-5-6-7
External elaborators
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1 University 2 Research firms 3 Industry peers with supplemental service 4 industry
peers with similar service
Recognition, on a scale of 1 to 7, from low to high
1-2-3-4-5-6-7
Major concern, on a scale of1 to 7, from low to high
Talent1-2-3-4-5-6-7 Financial well-being1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7
Political intervention 1-2-3-4-5-6-7 Team cohesion 1-2-3-4-5-6-7 R&D 1-2-3-4-5-6-7
INNOVATION group
Group composition change, on a scale of 1 to 7, proportion low to high
Technology: 1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-
2-3-4-5-6-7 HR1-2-3-4-5-6-7
Founder’s impact on decision-making, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Participation in decision making, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Founding team change, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Group conflict, on a scale of 1 to 7, low to high
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Technology: 1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-
2-3-4-5-6-7 HR1-2-3-4-5-6-7
Employee educational background
1 Bachelor’s 2 Master’s 3 Bachelor’s and Master’s
Employee major
1 Engineering 2 Business 3 Social Science 4 Engineering, Business 5 Engineering, Social
Science, 6 Engineering, Social Science, Business
Employee age range
1 20-25 2 25-30 3 30-35 4 above 35
Employee function
1 Technology 2 Marketing 3 Sales 4 Finance 5 Design 6 HR
Employee leaving rate, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Venture Environment (G)
Source
1 self-input 2 individual venture capitalist 3 venture capital company 4 co-investment
with founding team
Amount, on a scale of 1 to 7, low to high
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1-2-3-4-5-6-7
Sustainability, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Revenue, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
S-R (G)
Level of homogenization, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Business model readiness, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Excellence in research, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Time allocation
Technology1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-2-3-
4-5-6-7 HR 1-2-3-4-5-6-7
New idea deployment
Founder’s impact on decision-making, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
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Participation in decision making, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Improvement speed, on a scale of 1 to 7, from slow to fast
Technology1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-2-3-
4-5-6-7 HR 1-2-3-4-5-6-7
Improvement extent, on a scale of 1 to 7, from low to high
Technology1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-2-3-
4-5-6-7 HR 1-2-3-4-5-6-7
Disruption, on a scale of 1 to 7, from low to high
Technology1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-2-3-
4-5-6-7 HR 1-2-3-4-5-6-7
Time to innovate, on scale of 1 to 7, from short to long
1-2-3-4-5-6-7
Market readiness, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Main marketing strategy
1 traditional offline interpersonal 2 online viral marketing
Market occupancy, on a scale of 1 to 7, low to high
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1-2-3-4-5-6-7
Rewards
1 promotion 2 salary increase 3 founding mechanism 4 employment
Extent of institutionalization, on a scale of 1 to 7, from low to high
1-2-3-4-5-6-7
Internal Collaboration, on a scale of 1 to 7, from low to high
1-2-3-4-5-6-7
External Collaboration, on a scale of 1 to 7, from low to high
1-2-3-4-5-6-7
External elaborators
1 University 2 Research firms 3 Industry peers with supplemental service 4 industry
peers with similar service
Recognition, on a scale of 1 to 7, from low to high
1-2-3-4-5-6-7
Major concern, on a scale of1 to 7, from low to high
Talent1-2-3-4-5-6-7 Financial well-being1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7
Political intervention 1-2-3-4-5-6-7 Team cohesion 1-2-3-4-5-6-7 R&D 1-2-3-4-5-6-7
INNOVATION organizational
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Group composition change, on a scale of 1 to 7, proportion low to high
Technology: 1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-
2-3-4-5-6-7 HR1-2-3-4-5-6-7
Founder’s impact on decision-making, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Participation in decision making, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Organizational change, on a scale of 1 to 7, low to high
Founder 1 left 2 added 3 the same Technology 1 left 2 added 3 the same Design 1 left 2
added 3 the same marketing 1 left 2 added 3 the same Finance 1 left 2 added 3 the same
HR 1 left 2 added 3 the same
Group conflict, on a scale of 1 to 7, low to high
Technology: 1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-
2-3-4-5-6-7 HR1-2-3-4-5-6-7
Employee educational background
1 Bachelor’s 2 Master’s 3 Bachelor’s and Master’s
Employee major
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1 Engineering 2 Business 3 Social Science 4 Engineering, Business 5 Engineering, Social
Science 6 Engineering, Business, Social Science
Employee age range
1 20-25 2 25-30 3 30-35 4 above 35
Employee function
1 Technology 2 Marketing 3 Sales 4 Finance 5 Design 6 HR
Employee leaving rate, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Venture Environment (O)
Source
1 self-input 2 individual venture capitalist 3 venture capital company 4 co-investment
with founding team
Amount, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Sustainability, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Listed on stock Market
1 Yes 2 No
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Public offering plan
1 Yes 2 No
Stock performance, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
S-R (O)
Level of homogenization, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Business model readiness, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Excellence in research, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Time allocation
Technology1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-2-3-
4-5-6-7 HR 1-2-3-4-5-6-7
New idea deployment
Founder’s impact on decision-making, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Participation in decision making, on a scale of 1 to 7, low to high
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1-2-3-4-5-6-7
Improvement speed, on a scale of 1 to 7, from slow to fast
Technology1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-2-3-
4-5-6-7 HR 1-2-3-4-5-6-7
Improvement extent, on a scale of 1 to 7, from low to high
Technology1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-2-3-
4-5-6-7 HR 1-2-3-4-5-6-7
Disruption, on a scale of 1 to 7, from low to high
Technology1-2-3-4-5-6-7 Design 1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7 Finance 1-2-3-
4-5-6-7 HR 1-2-3-4-5-6-7
Time to innovate, on scale of 1 to 7, from short to long
1-2-3-4-5-6-7
Market readiness, on a scale of 1 to 7, low to high
1-2-3-4-5-6-7
Main marketing strategy
1 traditional offline interpersonal 2 online viral marketing
Rewards
1 promotion 2 salary increase 3 founding mechanism 4 employment
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Extent of institutionalization, on a scale of 1 to 7, from low to high
1-2-3-4-5-6-7
Internal Collaboration, on a scale of 1 to 7, from low to high
1-2-3-4-5-6-7
External Collaboration, on a scale of 1 to 7, from low to high
1-2-3-4-5-6-7
External elaborators
1 University 2 Research firms 3 Industry peers with supplemental service 4 industry
peers with similar service
Recognition, on a scale of 1 to 7, from low to high
1-2-3-4-5-6-7
Major concern, on a scale of1 to 7, from low to high
Talent1-2-3-4-5-6-7 Financial well-being1-2-3-4-5-6-7 Marketing 1-2-3-4-5-6-7
Political intervention 1-2-3-4-5-6-7 Team cohesion 1-2-3-4-5-6-7 R&D 1-2-3-4-5-6-7
3.1.3 Surveying on sociability and business success
According to the background review in Part I, existing industry report on SNS
perceives the following to be key measurement of business success: monthly unique
visitor, user growing rate, profit-making capability, investment sustainability. Based on
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the usability scale developed by Brooke (1996) and on the sociability scale developed by
Guo et al. (2010), Wu et al. (2010), companies were divided into the following two types
to examine the level of usability and sociability provided.
Information seeking
Knowledge sharing (IK)

SNS based entertainment (SNSE)
MOKO Kaixin001
Meituan Xiaonei
Douban Tencent QQ
Fanfou Sohu White Society
Hengzhi
E!We
Meituan
Due to the inaccessibility to user population of these SNS, quota sampling was used
to recruit survey respondents. Given that the majority of users are located in Beijing and
Shanghai with a relatively even gender distribution, a total of 100 respondents, half male
half female from each city were drawn to the survey online. This adds up to 2200
respondents as a whole to measure the sociability of these eleven SNSs. For each
company, the first 200 respondents that successfully answered all the questions were
given a ten Yuan reward card online as an incentive and informed consent were collected
as they clicked on the entry page.
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Usability scale (10 item, on a scale of 1 to 5, strongly disagree to strongly agree)
1. I think that I would like to use this system frequently
2. I found the system unnecessarily complex
3. I thought the system was easy to use
4. I think that I would need the support of a technical person to be able to use this system
5. I found the various functions in this system were well integrated
6. I thought there was too much inconsistency in this system
7. I would imagine that most people would learn to use this system very quickly
8. I found the system very cumbersome to use
9. I felt very confident using the system
10. I needed to learn a lot of things before I could get going with this system
Sociability scale for both IK and SNSE (24 item, on a scale of 1 to 7, from low to high)
System performance
Reliability of the system Speed – the speed, at which information for social activities can
be transferred
Prevention from disturbance – the extent to which the user can distinguish between
wanted and unwanted information and can block the latter
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Privacy – the extent to which the user can control her or his private information in the
system
Information bandwidth– the amount of data that can be maximally transferred within the
system at once
Social climate
Open communication – the extent to which users in the system tolerate and respect each
other and encourage discussion and different opinions
Immediacy – the degree to which users feel close to each other in the system
Friendliness – the degree to which members of the system respect and deal politely with
each other
Security – the extent to which social activities in the system are safe and will not threaten
or endanger personal property
Affective communication – the ease and effectiveness at which emotions can be
expressed to other people and emotional support can be exchanged in the system
Benefits and reciprocity
Meaning to reality – the extent to which social activities in this system represent and
contribute to events and people in the real world
Reciprocity – the ratio of effort invested in the system and payback
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Tangible rewards – the extent to which tangible rewards are received by users for their
effort and time invested in the system
Control of content quality – the extent to which the system censors information which is
transferred in social activities
People
Number of existing social contacts in the system – the number of contacts in the system,
which already existed before using the system, such as friends or family members
Relationship to existing social contacts in the system – the proximity to contacts, which
already existed before using the system, in the system
Amount of users – the overall number of system users
Interaction richness
Customizability – the ease at which the content and format of exchanged information can
be controlled
Integrationability – the ability of the system to adapt and integrate contents from other
systems Socio-emotional rewards – the extent to which reasonable socio-emotional
rewards are received by users for their effort and time invested in the system
Self-presentation
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Self-image building – the ease at which the user’s virtual image can be established and
displayed within the system
Reputation building – the effectiveness at which a good reputation can be acquired and
demonstrated in the system
Support for formal interaction
Support of group activity – the ease at which groups of special interests can be
established and maintained
Authenticity – the perceived realness of content and exchanged information in the system
Operation flexibility – the variety of operation modes, such as drag-and-drop, mouse
clicks, and shortcuts
Gaming specific sociability scale for SNSE ( item, on a scale of 1 to 7, from strongly
disagree to strongly agree)
Symbolic physicality
SNSEAs provide experiences of real-life activities
Themes of SNSEAs come from daily lives
Conventions of SNSEAs are the same as everyday life
Playing SNSEAs requires much game experience (reversed)

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Inherent sociability
SNSEAs support interaction with friends
Player’s personal private information can be found in the SNSEAs
I feel stay connected with others when playing SNSEAs
Playing SNSEAs makes me feel friendly to others
Multiplay asynchronicity
SNSEAs allow me to play the game alone
It is available to play SNSEAs whenever I have access to Internet
I do not have to coordinate with other players in playing SNSEAs
SNSEAs allow me to play wherever I have access to Internet
Inter-application interactivity
Outcome of SNSEAs A affects the performance of SNSEAs B
There are many methods to exchange outcomes among SNSEAs
SNSEAs allow me to gift personal owns to other users
There is little interaction among different SNSEAs (reversed)
Perceived Playfulness
I am not aware of the time, when playing the SNSESs
I am not aware of distracting noise, when playing the SNSEAs
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I often forget other commitments, when playing the SNSEAs
I often feel interested, when playing the SNSEAs
I do not feel enjoyable, when playing the SNSEAs (reversed)
Stickiness
I would play the SNSEAs every time I visit the SNS
I would stay longer in the SNS for playing SNSEAs
I would visit the SNS as often as I can for playing SNSEAS
I would like to discontinue play the SNSEAs (reversed)

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Creativity, entrepreneurship and innovation: case studies of Chinese SNS firms
4.1 Hengzhi: the Chinese Linkedin
4.1.1 Molding Linkedin with Chinese characteristics
At the start, Hengzhi was hardly a product of a calculated business plan. Frustrated by
constant loss of contact with other ‘sea turtles’, Li Tong and his friends decided to set up
their own social network to solve this problem. Given the fact that most existing SNSs in
China are non-exclusive and do not meet the need of professionals, Li decided to develop
a new venue which provides user-friendly interface and consumes multiple functions
matching businessmen’s demand. Li did not expect this personal social network to
penetrate the business community at such a fast speed. Hengzhi has accumulated 200,000
registered users within the first four months of its debut from August to December, 2010.
Early adopters stretched over all levels of the most prestigious financial and legal firms in
China, as well as business school candidates inside and outside of China.
As the first professional social network in China, Hengzhi has inevitably been
compared to the American prototype: LinkedIn. Li fully acknowledges the seminal role
of LinkedIn in the creative process of Hengzhi construction, but considers Hengzhi
inherently different from LinkedIn from the onset due to its deep roots in the Chinese
context and irreplaceable features. As the chart below suggests, at both budding and
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developing phases, the influence of LinkedIn is mostly reflected in the realm of
technology and financial finesse, but much lower in terms of design, marketing and
human resource, which are more culturally sensitive. In Li’s perception, SNS is a
knowledge discovery and sharing hub. It is the foundation of a semantic web. Built upon
this belief, a strong feeling of trust and belonging on Hengzhi differentiates itself from
LinkedIn. LinkedIn is more of a job hunting ad hoc, thus less likely to maintain user
stickiness, while Hengzhi is more devoted to knowledge sharing which locks users in the
community.

Figure 6. American influence on different domains in Hengzhi creative process

0
1
2
3
4
5
6
7
Influence on
Technology
Influence on Desgin Influence on
Marketing
Influence on Finance Influence on HR
Budding
Developmental
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Figure 7. Domain-relative skills in Hengzhi creative process
The knowledge sharing structure of Hengzhi is co-shaped by the founding team and
users. As Li and his founding team of five all fall into the category of Hengzhi’s targeted
users, their own demands and preferences serve as a meaningful measurement on the
feasibility of each element they apply to the network. The founding team maintained a
high skill level in technology, finance and HR, but lacked design and marketing expertise.
Therefore, they suffered experienced a strenuous idea testing process with the aim of
presenting the network to their users. Li conceives creativity as a different way of solving
a problem, and he applies this philosophy to the idea-testing model. At the budding phase,
self-assessment served as the primary idea-testing method at the individual and team
level. At the organizational level, the primary method switched to focus group when a
tangible user base was established. On the contrary, self-assessment only counts for the
main idea testing method at the individual level of developmental phase, as the level
0
1
2
3
4
5
6
7
Technology
skills
Design skills Marketing
skills
Financial
skills
HR skills
Budding
Developmental
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ratcheted up to team and organizational level, focus group and internal testing became
major levers to collect more feedback from users.
The level of interaction with users and reflexivity at each sector increased as
Hengzhi moved from budding to developing phase. To enhance the feeling of belonging,
Hengzhi provides an open platform for offline activity summon and even started a new
Q&A feature in 2011 that allows users to have an instant conversation on shared interest
and concerns. However, the HR team seldom adjusts its recruitment criteria based on
users’ feedback as it remained under the founders’ tight control. At the same time, the
founders’ maintained a tight control pact on decision making while team participation
dropped slightly throughout the process. Even so, as the company developed with a more
mature structure, the level of autonomy for the HR department dropped due to a more
volatile internal and external influence.

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Figure 8. Interaction with users at organizational level in Hengzhi creative process

Figure 9. Reflexivity at group level in Hengzhi creative process

Figure 10. Group autonomy in Hengzhi creative process
0
1
2
3
4
5
6
7
Technology team
interaction with users
Design team
interaction with users
Marketing team
interaction with suers
Financial team
interaction with users
HR team interaction
with users
Budding
Developmental
0
1
2
3
4
5
6
7
Technology
reflexivity
Design
reflexivity
Marketing
reflexivity
Financial
reflexivity
HR
reflexivity
Budding
Developmental
0
1
2
3
4
5
6
7
Technology
group
autonomy
Design group
autonomy
Marketing
group
autonomy
Financial
group
autonomy
HR group
autonomoy
Budding
Developmental
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As the team size of Hengzhi grew from five to around twenty and reached the
developmental phase, the creative task requirement changed for each team and the
company as a whole. Once the prototype is established, less technological effort is
required. Yet, it does not necessarily translate to a reduction of job complexity at the
organizational level because system maintenance and capacity backup consume time and
resources. With a growing user base and market readiness, more intensive marketing and
financial campaigns are needed. Whether a HR can recruit more talents to enhance these
two teams generates the problem of unpredictable talent sustainability. As user demands
and feasibility are gradually crystallized in the developmental process, more agreements
are reached on how to expand marketing and financial resources. In fact, with diverse
capital resources at hand in the case of Hengzhi, it has become much easier to pursue
financial subsidy at the developmental phase. Nonetheless, the founders are still the key
determinant in securing financial stability, thus outsiders can hardly penetrate this sector
of the company. The same principle works for the HR sector, with a relatively small core
team, the founders’ play a decisive role in talent recruitment and human resource
allocation. Meanwhile, as users are habituated into existing design features, design
requirement stays stable and is better maintained by the original team that is familiar with
the process.
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Figure 11. Task requirement at group level in Hengzhi creative process

Figure 12. Job complexity at organizational level in Hengzhi creative process

Figure 13. Environmental uncertainty for each sector in Hengzhi creative process

0
2
4
6
8
Technology
requirement
Design
requiremnt
Marketing
requirement
Financial
requirement
HR
requriement
Budding
Developmental
0
1
2
3
4
5
6
7
8
Technology
job
complexity
Design job
complexity
Marketing job
complexity
Financial job
complexity
HR job
complexity
Budding
Developmental
0
1
2
3
4
5
6
7
Technology team Design team Marketing team Financial team HR team
Budding
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Figure 14. Team composition change in Hengzhi creative process

Figure 15. Team conflict in Hengzhi creative process
According to Figure 16, technology, design and HR team are seldom affected by
political intervention in China during the creative process; in contrast, the marketing and
financial team are more prone to experience intervention. This is highly due to the
‘growing pain’. By September 2011, Hengzhi released that they have accumulated more
than 1 million users and had become the largest real name registration based professional
SNS in China. Among these 1 million users, more than 100,000 are CEOs, more than
0
1
2
3
4
5
6
Technology team
change
Design team change Marketing team
change
Financial team
change
HR team change
Budding
Developmental
0
0.5
1
1.5
2
2.5
3
3.5
Technology
team conflict
Design team
conflict
Marketing
team conflict
Financial
team conflict
HR team
conflict
Budding
Developmental
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400,000 are senior managers, professionals and executives. Finance, high-tech, media,
consulting and law are the top five domains for its user base. Hengzhi does not only serve
Forbes Top 500 enterprises in China, top 100 venture capital and private equity firms in
China, top 100 multi-national corporations in China; but also operates as a designated
SNS for professional associations among overseas Chinese. Up to the end of August 2011,
Hengzhi users posted more than 8000 business activities, 10,000 experienced level job
openings and more than 50,000 industry research reports on this platform. Consequently,
Li and his team discovered a new terrain for development: event payment and online
transaction service for these professional organizations. He led the founding team to
launch a separate network called Yoopay with similar functions to EventBrite in June
2011. As an integrated online financial tool, its promotion strategies and financial
operation are more subject to state regulation and licensing requirements.

Figure 16. Political influence on each sector in Hengzhi creative process
0
1
2
3
4
5
6
7
Technology team Design team Marketing team Financial team HR team
Budding
Developing
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4.1.2 Turning ideas into actions and profits: start-up and investment do not clash
Li himself rightly cited Malcolm Gladwell’s (2002) famous work “The tipping point:
how little things can make a big difference” to describe the generation of Hengzhi as a
social phenomenon. It is an integration of maven, sales person and connector. Li
summarized three key elements of innovation: big market that cultivates demand;
engineering and manufacturing gifts; entrepreneurs. After graduation from MIT, Li
worked at Merrill Lynch in 2001. At that time, big banks were required to store, sort and
audit their emails based on Sarbanes-Oxley Act. This is extremely difficult to achieve in
an original email server system that only receives and send emails. As a result, IT
departments of Wall Street were trapped in a paradox: they have to fix the email system
to meet the demand. But fixing the email system may cause the malfunction of the whole
company server system. Li proposed setting aside a hard driver cache so that by simply
turning on and off the switcher, emails can be stored, sorted and audited. This idea turned
into Li’s first successful start-up company called Jatheon Technologies Inc. Later on, he
was invited as the founding manager of an angle fund called Origin Capital. Using this
platform and money he earned from Jatheon, he successfully founded another online
international call service start-up called Tokiva Technologies Inc. Therefore, Li has taken
on two roles at the same time from the very early days: founder of a start-up and an
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investor. These invaluable experiences provided a solid base for his credibility in the
industry, therefore, gathering sufficient funds for Hengzhi has never been difficult. In fact,
Hengzhi was the first Chinese SNS to secure venture capital in 2011.
Li attributed his achievements to two factors: first of all, an open-minded venture
capitalist who are fully supportive of the founding team’s beliefs and ground-breaking
ideas. Secondly, a great founding team. The current scale of Hengzhi employees are less
than twenty, among which 80% are technology personnel. These two factors are closely
related to Li’s previous accumulation in the business world. His core team of three were
inherited from the former two technology companies; thus, are experienced and loyal to
the new firm. At the same time, previous capital accumulation provides him an edge in
the fierce competition over initial capital for Hengzhi. More importantly, the network
resources he deposited from previous experience triggered the momentum on user
expansion at the initial stage. At the budding phase, technology and design are the bricks
and mortar to turn creative ideas into concrete products across all levels, while marketing,
finance and HR are less critical. Maintaining financial and HR well-being are more the
duty of founders rather than the obligation of the entire group or company.
Li recalled how difficult it was to turn their blueprint of the website into user-
friendly features. For example, how to ensure a user interface that allows intuitive
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navigation; how to guide and regulate user behaviors to keep a healthy growth of the
community. One of the quality control efforts is to prevent users from sending out
business cards if their profiles are incomplete. Similarly, how to organize functions on
the SNS was determined by repetitive user experiment and feedbacks. His hard work paid
off. Based on Alexa traffic stats (2011), the average visiting time on Hengzhi is 26
minutes, which is three times higher than that on LinkedIn. Li proposed two reasons for
higher stickiness on Hengzhi. First of all, the number of Chinese professionals
skyrocketed in recent years and they have a stronger desire to improve their business and
career with the burgeoning economy and online media capacity ; secondly, Hengzhi
provides more diversified applications to meet networking, career development and
business cooperation demands, while LinkedIn is more focused on job-seeking.

Figure 17. Time allocation on difference sectors in Hengzhi innovation process
0
1
2
3
4
5
6
7
8
Technology Design Marketing Finance HR
Budding Individual
Budding Group
Budding Organizational
Developmental Individual
Developmental Group
Developmental Organizational
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As the company moved towards the developmental phase, marketing, finance and
HR loomed as more acute tasks. While groups and company as a whole are more
involved in these processes, founders remain key contributors to the growth by utilizing
their personal networks. Although technological input at the individual and group level
slightly fell, reliable technological system that enhances user experience remains a
critical task for company operation. Time spent on design declined as users have become
accustomed to the existing interface.
However, it is not difficult to observe that compared to design, marketing and
financial strategies, disruption are much rarer at the technological and HR aspects across
different levels and phases. Marketing and financial advancement are most prominent in
the budding to developmental phase transition with a relatively faster speed, while
technological, design and HR changes are less frequent as the level of institutionalization
increases. Both the extent and speed of improvement are likely to be higher at the
individual and group level compared to the organizational level.
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Figure 18. Disruption in Hengzhi innovation process

Figure 19. Extent of improvement in each sector in Hengzhi innovation process

0
1
2
3
4
5
6
7
8
Budding individual
Budding group
Budding organizational
Developmental individual
Developmental, group
Developmental, organizational
0
1
2
3
4
5
6
7
8
Budding individual
Budding group
Budding organizational
Developmental individual
Developmental, group
Developmental, organizational
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Figure 20. Improvement speed in Hengzhi innovation process

Figure 21. Time to innovate in Hengzhi innovation process

Figure 22. Major concern in Hengzhi innovation process
0
1
2
3
4
5
6
7
Budding individual
Budding group
Budding organizational
Developmental individual
Developmental, group
Developmental, organizational
0
1
2
3
4
5
6
7
Individual Group Organizational
Budding
Developmental
0
1
2
3
4
5
6
7
8
Budding individual
Budding group
Budding organizational
Developmental individual
Developmental, group
Developmental, organizational
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At the same time, it takes a longer time for innovation to occur as the company
further developed with more mature structure and stable routine. And as the company
enters developmental phase, marketing expansion, financial well-being and the
sustainability of talents become more kernel issues across all levels. In contrast, R&D,
team cohesion and political intervention are not top issues for both phases and all levels.
In the case of Hengzhi, loyalty to the company established through previous experience
guaranteed team cohesion. At the same time, the nature of services it provides does not
require high R&D input. Although after stepping into online payment service at the
developmental phase, Hengzhi encountered more political intervention, it has less to do
with content censorship but industrial conduct regulation, thus not detrimental to its
innovation process.
4.1.3 Turning the well-designed network into the cash cow: no shortcut
At the budding phase, user growth and business model were not Li’s major concerns.
He privileged improvement on user experience and feature design. According to him, the
best companies create demand, while the second tier meets demand. Hengzhi is caught in
between and set the goal to explore users’ demand. He considered the Hengzhi
community quite different from the general Internet users in China who heavily consume
online entertainment and gossip. Consequently, more customized functions should be
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designed to meet the demand of Hengzhi users, hence the need to keep the vitality and
cohesion of the site. Based on this principle, Li was not rushing into the mobile platform
taking into consideration the compatibility problem and non-intrusive design. However,
as Hengzhi reached the watershed of 1 million users in 563 days, Li layout new plans for
this social network and placed mobile network based service as the next big thing for
Hengzhi in less than 5 months. In July, 2010, led by the Hina Group, Li acquired a
second round angle funding from China, United States and Singapore. Chen Hong, the
board chairman of Hina Group pointed out two trends in China: 1) unprecedented
urbanization process, 2) transition from labor-intensive to knowledge-intensive. He
argued these will propel the development of professional class in China who will account
for 40% of urban population and 60% of overall purchase power. Subsequently, the
market is ready for Hengzhi to prosper (ChinaVenture, 2010).
Despite all these rosary prospects, Li knows well that making profit is still the
ultimate solution. Right now Hengzhi inherits the business model of LinkedIn:
recruitment, advertising and added-value services. However, it introduced a new toll of
Zhi dollar, which is a type of virtual money that can be purchased through online banking
or Paypal with 1:1 exchange rate to real currency. This tool allows users to expand their
network and get access to more industry materials. It also works a stimulus mechanism to
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encourage interaction among users at different levels. A detailed instruction on how to
accumulate and spend Zhi dollar is shown below.
Table 7. Hengzhi Monetization Scheme

User Action
Zhi Dollar
Rewards
Explanation
Hengzhi
Business
card
Successful
registration
+5

Upload photo +5
Must be your own
professional photo
Fill in personal
introduction
+5
Includes CV and personal
archives
Networking
Each success friend
referral
+10
Invited friend completes
personal introduction
Q&A
Private question +5 Ask at least 5 friends
Answer questions +2
question asker considers your
answer helpful
Microblog
Tagged by others +1
When the link is opened by
users
Tag other users’
microblogs
+1
When your recipient reads the
content
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User Action
Zhi Dollar
Rewards
Explanation
Microblog stored by
other users
+1 When the files cached
PPT
Post ppt +5 Professional ppt only
Allow ppt download
User set
the value
You can set up a price for
your own content
Groups
Establish a group +50
New groups need
administrator’s approval
New member
participation
+1
Each new member in group
brings 1 dollar
Activities
Post activities +10 Professional activities only
New registered user +1
Each new user register for
your activity brings 1 dollar
Others
Comment on other
users
+2

Introduction between
users
+2

Suggestions to
Hengzhi
varies When suggestion is adopted
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Although 1 billion Yuan business cooperation has been achieved on the Hengzhi
platform up till now, the sustainability of this added-value service based commission
model still need to endure further tests. According to an iResearch report on Chinese SNS
user behavior (2011), the Internet has been considered as a free service in China from the
very beginning; thus more than 52.7% of users do not consume on SNS. Among the 47.3%
who do pay for SNS online, 22.3% spend less than 10 Yuan each month, 7.7% spend
between 10-20 Yuan each month, only 5.2% spend more than 50 Yuan each month.
Fortunately, Li excels in securing financial resources through multiple channels.
Apart from virtual money, he applied the stimulus mechanism to potential capital
contributors, and the “200 founding members program” is a typical case. Li handpicked
200 influential socialites in China to own 10, 000 Hengzhi stock options with $0.01 per
share. The founding members were allowed to purchase an Hengzhi stock with the option
price within the first five years after the company goes public. In order to enjoy this
privilege, founding members need to invite 100 new members to Hengzhi who are also
noteworthy professionals in their own right. Besides, they need to post twice on
microblogs each week and promote Hengzhi to people in their network. This snowballing
process maximizes the potential of personal network and encourages influential
individuals to serve as Li’s personal marketing army. More importantly, Li managed to
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collect another 2 million Yuan as his initial capital with a minimal obligation in the near
future.
With the launch of Yoopay, Li further executed his business strategy along the same
line. As China's first online payment platform for events, groups, peers, and cross border
transactions, Yoopay.cn supports 1 billion China UnionPay card holders, 500 million
Alipay users, and 800 million Visa, Mastercard, and Paypal users. Yoopay exceeded
RMB 1M in transactions in just 3 weeks since its launch in early May 2011. With just
over 10,000 registered users, Yoopay is growing rapidly with the support of Origin
Capital which Li founded. Yoopay has signed up UnionPay and Alipay, China’s two
largest payment platforms with over 500 million users, as key partners and is in
discussions with other Chinese commercial banks. Below is a detailed illustration of
Yoopay’s business model.

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Table 8. Yoopay Transaction Rates
Billing Free
Transfer Free
Withdraw
2.6% (Please select one of the pre-paid package for more
discount)
Pre-paid
Packages
Pre-pay
Amount
Withdraw Cap
Withdraw Rate
within Cap
Withdraw Rate
above Cap
Startup
Package
500
RMB/Year
20,000
RMB/Year
0% 2.6%
Small
Business
Package
2,000
RMB/Year
100,000
RMB/Year
0% 2.6%
Medium
Business
Package
5,000
RMB/Year
350,000
RMB/Year
0% 2.6%
Enterprise
Package
50,000
RMB/Year
5,000,000
RMB/Year
0% 2.6%
The management team is tight-lipped about upcoming features, but already has an
impressive list of event partners, including Financial Times, WSJ, HengZhi, CEBEX and
others. For now it looks like Yoopay is primarily focused on the larger events organized
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by formal organizations. It will be interesting to see if Yoopay will follow in EventBrite‘s
footsteps and offer features that will allow them to setup their own event pages and
market through Facebook and Twitter (or China’s equivalents), thus targeting more
informal ad-hoc events that are common on EventBrite.
4.2 Qzone: the giant in Chinese SNS industry
4.2.1. Tencent QQ: where it all began
In 1997, Ma Huateng became a user of ICQ and was deeply impressed by this new
instant messenger tool. He found out that the English interface and high operational
requirement limited its expansion in China. As such, he began to configure a Chinese
ICQ. This effort ushered in the birth of “Shenzhen Tencent Computer System
Corporation Limited”, which was founded by Ma and his college classmate, Zhang
Zhidong, on November 12
th
, 1998. As a former researcher and developer in a
telecommunication company after acquiring a Bachelor’s degree in Computer Science
from Shenzhen University, Ma naturally set up the initial core business of Tencent as
wireless paging services. At that time, one of the big enterprises intended to invest a
substantial amount of money into Chinese ICQ. Tencent decided to give it a shot but
failed to win the bid. As a result, Ma decided to develop his own ICQ without external
financial resources.
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In the following year, ICQ copycats flooded the Chinese market, e.g. Picq and
OMMO. Even early IT leaders like Sina, Netease and Sohu also joined the fray. In
February, 1999, Tencent released the first generation QQ called OICQ. With a clear
target on low-end users in Chinese market, OICQ stood out with its user-friendly
interface and accumulated more than 200,000 users in two months. After a few months’
user education, Tencent began to add new features including public chat room, file
transition, paging, messaging, voice talk to the beta version and released a new product
called OICQ 99a. This product led to Tencent’s dominance in the instant messenger
market. By the end of 1999, OICQ occupied more than 80% of domestic market with
more than 1.3 million users and 15,000 average online users. By 2000, OICQ almost
occupied 90% of the market yet encountered legal trouble. America Online or AOL sent
a lawyer’ letter to Tencent asking it to stop using the name of OICQ because ICQ is
AOL’s trade mark. As a result, Tencent started to use QQ2000 in its 0325 version of
installation file. Tencent never thought that the nickname users popularized, that is, ‘QQ’,
would become its official new name overnight. In order to prevent further legal assault,
QQ replaced all trade mark cartoon icons including Smurfs, Hello Kitty, Snoopy to its
original designs.
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Worse still, market occupancy did not translate into profits. By November 1999,
only around 10,000 Yuan was left on the ledger and Ma was forced to court venture
capitalists. With 6 versions, more than 20 pages business plan, Ma was forced into
negotiations that were turning out to be endless, fueling his pessimistic outlook on QQ’s
destiny. By 2000, less than two years after founding the company, the founders had
exhausted their initial savings, and the company was on the verge of bankruptcy. As a
young technology start-up, Tencent failed to obtain loans from banks. In desperation, the
founders tried to sell the company for as little as one million Yuan, but all potential
buyers including Shenzhen Telecommunication Data Bureau considered this price
astronomical and insisted on the 600,000 benchmark. Ma was infuriated and forced to
seek other solutions. Their change of fortune came when Shenzhen’s municipal
government invited Tencent to participate in its annual high-technology trade fair. As a
result, Tencent managed to secure support from the International Data Group (IDG) and
Pacific Century CyberWorks of Hong Kong (PPCW) which invested $2.2 million with
20% share each.
However, PPCW decided to cash out in 2001 and sold its share to MIH for$12.6
million. Subsequently, MIH further purchased 13% stock share from IDG and another
13.5% from the co-founders of QQ in 2002. By June 2002, Tencent founders accounted
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for 46.3% of the share, MIH 46.5% and IDG only 7.2%. By August 2003, the Tencent
founding team managed to buy back shares from IDG and MIH. Therefore, it balanced
the share structure to 50/50 between MIH and the founding team. The company’s first
profitable service was instant messaging for XLT phones and wireless QQ, which
commenced operations in 2000. Tencent continued to grow, launching more and more
services as China’s Internet population exploded in the early 2000’s. In 2003, the
company launched its Internet portal, QQ.com. In 2004, it went public in Hong Kong.
The market value of Ma skyrocketed to 1.7 billion HK dollars after the company went
public. To support the expansion of services into e-commerce, online payment, search
engine, information security, social networking and games, Tencent invested over 100
million Yuan in 2007 to established three Internet Research Institutes in Beijing,
Shanghai and Shenzhen. This effort was unprecedented in the development of Chinese
Internet history. Moreover, Tencent launched the first Internet industry Charity Fund and
its online service gongyi.qq.com to facilitate youth education, regional development in
inferior areas and poverty alleviation.
In 2010, Tencent was deeply embroiled in a dispute with Qihoo over competition
practices. Qihoo, the producer of 360 Safeguard, an anti-virus and real-time protection
software, is under direct threat from QQ Doctor, which gained 40% of the Chinese market
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overnight after bundling with Tencent QQ. On September 27, Qihoo released a privacy
guard software that shows QQ's suspicious spying activities on its users. Tencent
responded with a fabricated report alleging Qihoo was under investigation for ads
involving pornographic web sites. In addition, Tencent rallied support from Qihoo's
competitors in the anti-virus front such as Kingsoft and Kaspersky. Later, Qihoo alleged
that QQ scans the installed programs in user's computer based on a "super black list", and
continues with personal attacks on Ma, who has been receiving government subsidies for
housing. Qihoo also updated the privacy guard to block ads in QQ, to Tencent's furious
objections including an unfair competition lawsuit and later an update that blocks itself
from running on machines with 360 Safeguard installed. Hundreds of millions of Chinese
netizens were forced to choose either side, either to uninstall QQ or 360's privacy guard.
Although this ferocious dispute simmered down after the intervention of regulatory
bodies and 360’s subsequent announcement that they would resume compatibility with
QQ, the image of QQ as an user-centered company was severely damaged with 79% of
Sina poll participants agreeing that QQ cares more about business interests than their
users. On November 4, 2010, the day after Tencent stopped carrying the messaging
service on computers where 360 were installed, Tencent Holding lost 10.6 billion HKD,
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or 3.1% in market cap. Kingsoft jumped 17.86% and gained 784 million HKD in market
cap. Another instant messenger software producer, Shenzhou Taiyue, raised 3.7%.
4.2.2 Qzone, one-stop social platform does not come easy
With the prevalence of blogging in China, Tencent launched its own product called
Qzone in 2005 with a sparkling slogan “King of enclosure: I have my own space”. Yet
apparently, Tencent has more ambitious blueprint for this new service from the very
beginning following Ma’s philosophy of “one-stop social platform”. Perceiving
grassroots users as its bedrock from the onset, QQ prioritizes low-end user experience.
As Link Songtao, the manager of Qzone said “we only consider blogging part of Qzone,
as it is supposed to be an individual terrain that allows users to have full experience of
social life online. According to our scientific research, only around 100,000 bloggers
manage to attract meaningful traffic in China, the rest are left in the wild land. Qzone is
the space for them to make an impact and enjoy social networking.” As usual, Qzone did
not provide a multi-functional design until one year later and launched its mobile applet
at the same time. By 2007, with more than 100 million active users per month, which is
5% more than that of Facebook, Qzone executed its upgrade plan and successfully
accomplished the transition into a social networking platform in 2008 with massive user
base and gigantic inter-applet connection system. This well-designed platform enabled
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Qzone to import new features of SNS continuously in the following year. Social games,
individualized platform decoration and Qzone mobile surfaced one after another. In 2009,
Qzone extended third-party collaboration with Douban and Five Minutes social games to
booster the richness of social life. By 2010, Qzone incorporated instant messenger,
sharing functions with existing features and released ranking system to encourage
interaction online. By this time, Qzone has accumulated more than 200 million users with
11 million daily updates.

Figure 23. American influence on different domains in Qzone creative process
As a member of QQ product family, the creative development of Qzone inherited
the same philosophy with the following emphases: rooted localization, low-end user
orientation, feeding users’ ever-changing demands. As Chart 4.2.1 shows, although
Qzone was influenced by blogging and Facebook, apart from technological contribution,
American paradigms helped little with the rest of key elements in the creative process and
the proportion dwindles from budding to mature phases. Key localization designs in the
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creative process of the first generation QQ has now served as internal examination
question for all Tencent product managers. Link explained that the “average Chinese
Internet users are much less tech-savvy than Americans. Just take the Internet cafe as an
example, people walk in and ask the owner to start the computer for them, and they want
to see all features clearly listed on the screen without further effort. Accordingly, while
Americans pursue concise interface, we have to provide fool proof interface that allows
users to get everything they want immediately when they first log on to the site”. Based
on this thesis, the first generation QQ beat the rest with three advantages: 1) with a small
user pool, instead of searching for friends based on their name or user ID, QQ provided
automatic random search on whoever online. Because Internet was still at the budding era
back in 1998, being able to find people from other cities and provinces was novel enough
to attract users of that time; 2) with limited bandwidth and downloading speed, QQ
repetitively compressed the installation package that allowed users to get the software
and open it within the shortest time; 3) ICQ only provided choices of male or female
icon, but QQ understands Chinese users’ preference for individualized presentation
online without revealing real name and identity. As a result, they provided individual
cartoon icon. Once the user starts sending messages or talking, the icon instead of the
message will keep flashing as if he or she is talking to you personally. This feature was
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later on developed into QQ show and Qzone providing more than 100,000 choices of
DIY icons.

Figure 24. Domain-relative skills in Qzone creative process
Qzone started with a relatively high level of technology skills and maintained the
advantage throughout all phases. This has a lot to do with the composition of the
founding team. CEO Ma Huateng, CTO Zhang Zhidong, CIO Xu Chenye, COO Chen
Yidan, and emeritus consultant Zeng Liqing were all engineers with relevant working
experience. What have been dramatically elevated are design, marketing, financial and
HR skills. The results in Chart.4.2.3 and Chart 4.2.4 further demonstrate that although at
the company level, financial and HR sectors do not interact with users frequently, they
still benefit from other sectors’ initiative to collect feedback and consciously improve
their performances accordingly. In fact, even without abundant user data at the budding
phase, Tencent utilized founding members and employees’ personal networks to test
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ideas. They even set up quasi-experiments to observe and record user behavior. This
tradition has become a fundamental part of Tencent company culture. Therefore, even at
the mature phase when Tencent has become a dominator in the market, the personal
network based idea testing habit still permeated the whole organization.

Figure 25. Interaction with users at organizational level in Qzone creative process

Figure 26. Reflexivity at group level in Qzone creative process

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Figure 27. Group autonomy in Qzone creative process

Figure 28. Job requirement at organizational level in Qzone creative process

Figure 29. Job complexity at organizational level in Qzone creative process
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The above three charts illustrate that as Qzone further developed, the level of
autonomy dropped at each sector with the exception of the marketing team. As Qzone has
secured market occupancy early on in the developmental phase, the level of autonomy for
the marketing team stayed the same. Similarly, although marketing and financial
requirements decreased as Qzone gradually took over domestic market, job complexity
did not change dramatically as Qzone aimed at exploring international market in Russia
and South-east Asia. Likewise, they endeavored to maximize their capital in the
investment world. In 2011, Tencent purchased 15.86% of Kingsoft share to counteract
the impact of other anti-virus and gaming companies. It also invested $ 84.4 million in
Yilong, an e-commerce website and 445 million Yuan in Huayi Brothers, a film and
entertainment company.
As Qzone stepped into more fields and reached out to more diversified users, the
uncertainty of marketing, financial well-being and talent recruitment ascended from
developmental to mature phase. As a result, both sectors experienced huge transition at
the developmental phase and slowly returned to routine at the mature phase. On the
contrary, even with decreasing environmental uncertainty in technology, design, more
work is needed to maintain system stability and keep up with ever-changing user
demands. At the same time, group conflicts declined with the prosperity of the company
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with an exception of HR sector which need to balance all factors mentioned above that
might change the composition of other sectors within the company.

Figure 30. Environmental uncertainty for each sector in Qzone creative process

Figure 31. Team composition change in Qzone creative process

Figure 32. Team conflict in Qzone creative process
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Figure 33. Political influence on each sector in Qzone creative process
Political influence is less relevant for technology, design and HR at all phases; but it
is more pertinent to marketing and financial prospects. QQ has been awarded most
influential enterprise in the city of Shenzhen and has drawn the special attention of the
central government as the hope of becoming China’s first IT company with a global
reach. As a result, it has to take into consideration corporate responsibility at both the
developmental and mature phases. These factors restrict its marketing and financial
decisions. As Link put it “as a nationwide honored corporation with public offering, our
major task is to stabilize stock performance and bring economic benefits to the city and
our nation. Thus, we cannot afford to try out adventurous creative paths”.
4.2.3. Recombination: gain mastery by striking only after the enemy has struck
Being constantly attacked by industry peers as imitator rather than innovator taking
advantage of its vast user base, Tencent has its own understanding of innovation. Its team
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believes that restructure existing elements to further meet users’ demand is the main trend
in SNS industry and more likely to provide continuous experience innovation. Link said
in the interview that “who came up with the idea first is not important, how you manage
to reach the goal in the right way is the key point. QQ is not the only company that
imitates, but only we succeed, and the reason is QQ excels at innovation”. Qzone excels
at three types of innovation: 1) feature restructuration: Tencent was the first to implant
Avatar services originated from South Korean to its own platform to meet Chinese users’
demand for individualized presentation online. This move also brought a business model
for Qzone. According to Tencent financial report 2011, active users of Qzone jumped to
530.7 million in the second quarter with a 5.1% increasing rate compared to the first
quarter. Among these users, 76.5 million are registered for added-value service payment
plan including monthly package of 10 Yuan to 100 Yuan in changing the skin of their
space, DIY their icon and other self-presentation gimmicks. The growth rate of paid users
is 5.8% compared to the first quarter. Link sees Chinese users’ fever over these self-
presentation gimmicks to be a typical contextualized difference from the American
pattern. “Users will not be given so many individualized options on American SNS, and
our American counterparts can never understand why Chinese users are willing to spend
so much money continuously on these frivolous things”. 2) cross-platform
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restructuration. Qzone was combined with mobile and wireless capabilities immediately
even before the mobile market was well in shape. Qzone is fully aware of the fact that
revenue growth may be slower at the initial stage due to the prevalence of bootlegged
mobile phones in China. However, focusing on low-end customers has been a long-term
strategy for the whole company, and they believe that with the expansion of Android,
these low-end users will be turned into revenue driving forces. This strategy increased
user stickiness and extend revenue sources for its services. Mobile and wireless added-
value services brought Tencent $242.9 million in 2011 with a 52.6% increase rate
compared to 2010. Registered users on mobile and wireless payment plan increased 9.6%
compared to the first quarter with a number of 29.8 million. 3) integrated restructuration.
Taking advantage of the breadth and depth of its services as well as third-party
applications, Qzone managed to integrate information, gaming, e-commerce and online
searching. This strategy enabled mutual benefit between Qzone and other relevant
services.
The extent to which different sectors within QQ accomplish these three types of
restructuration. By focusing on creating a durable technology and design prototype at the
budding phase, Qzone saved energy and resources on tinkering at the developmental
phase when they are supposed to improve marketing and financial operations. In fact, no
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dramatic change was made to Qzone five years after its birth and users are complacent
with the design. This proves the success of their prototype. At the mature phase, when
more information security problems emerged, e.g. complaints on stolen QQ number, the
company as a whole was forced to devote more technology resources to protect users’
rights. This is also when the issue of talents emerged as critical for the further upgrade of
the company. As a result, more disruption occurred at both the group and organizational
levels with the HR and technology departments.

Figure 34. Time allocation on difference sectors in Qzone innovation process
Technology
Design
Marketing
Finance
HR
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Budding Group
Budding Organizational
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Figure 35. Disruption from budding to mature phase in Qzone innovation process

Figure 36. Improvement from budding to mature phase in Qzone innovation process
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Figure 37. Major concerns from budding to mature phase in Qzone innovation process
Figure 37 further supports the aforesaid points by showing that R&D and talent
became more significant concerns across all levels with the development of the site. At
the same time, political intervention loomed as an influential factor as new added-value
mobile service regulations were conferred to limit Content Provider (CP) behaviors.
Similarly, QQ has to fulfill more enterprise obligations as it draws more attention from
governmental and regulatory institutions. Meanwhile, marketing reoccurred as a problem
that needs attention at the mature phase. Both political intervention and marketing
pressure are primarily hinged on its dispute with Qihoo in 2011. Tencent was accused as
an Internet monopoly and was hauled to court on an anti-trust trial. But Xie Wen, former
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CEO of Yahoo! China considered the term ‘monopoly’ as an exaggeration. According to
him, the 12 billion Yuan income is trivial compared to that of leading Internet companies
in America, let alone Chinese monopolistic enterprises in energy or telecommunication
industries. Tencent accounts for 29.3% of the top ten Chinese Intern company income
and does not enjoy an absolute advantage although it still ranks the first in terms of SNS
users. More importantly, although Tencent is good at restructuring, most of the efforts
stagnate on the product level, and infrastructure construction is still under way. The old
method of enclosure may drive the giant into the dead alley if planning and structuring
cannot keep up with the burgeoning speed of products. Besides, although aiming at low-
end users have established solid foundation for Tencent, it lacks skills dealing with mid
and high-end users. Losing support from users during the QQ Qihoo dispute further
revealed its inferiority in public relations and branding strategies.
The innovation cycle was prolonged as the company became more mature. Although
the update of technology and design have been substantially expedited moving from the
budding to mature phase, the growth of marketing and financial performance does not
benefit accordingly. QQ has already become cautious of this phenomenon and is pinning
their hope on their talent recruitment and cultivation programs, both falling within the
responsibility of the HR department.
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Figure 38. Improvement speed from budding to mature phase in Qzone innovation

Figure 39. Time to innovate from budding to mature phase in Qzone innovation process
Link acknowledged that due to financial performance pressure, most long-term
innovation projects are not carried out within the company but at the Tencent Research
Institute. The institute aims at establishing a knowledge bank anytime, anywhere and
anyway for their employees (3A). At present, it hosts hundreds of internal and invited
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lecturers with more than a hundred independent R&D courses and over a thousand online
courses. Tencent even established cooperation with renowned business school such as
Harvard, as well as companies such as HP, Motorola, and Changjiang and imported Q-
learning system to cultivate its team. They have invested substantially on campus
recruitment, close-session training and mentoring programs for new employees. Apart
from strengthening the technology and design team, Tencent encourages employees to
develop management and marketing skills to meet the company’s future needs.
This mechanism has facilitated the formation of a Tencent culture that has not been
changed throughout different phases. Link explained that although they do have a user
experience team conducting experiments and relevant researches, interaction with users is
deeply rooted in the company value. Every employee at QQ serves as a user experience
agent voluntarily. “Even on holiday, they will bring back new products to their families
and friends for feedback. If complaints online or offline are spotted, our employees will
reach out to customers asking how QQ can help solve problems. These efforts almost
always shock our users as they never thought their opinions matter to us.” More
importantly, with the power of Ma’s personal charisma, his management style deeply
shaped the company and played an important role across all levels in the decision-making
process. “Even I myself can hardly believe that there is little politics in a company like
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Tencent with more than 10 thousand employees. But this is exactly the case because Ma
himself does not like politics. Thanks to that, we have the lowest brain drain rate in the
industry and our competitors keep telling me that our previous employees would never
say a bad word about Tencent after they left the company”.
Another innovative effort that was spearheaded by Tencent was the open platform.
The furious reaction of QQ users over forced choice between Tencent and Qihoo stirred
Ma deeply and he realized that the ‘loyal user base’ has never been indestructible. On the
other hand, Ma discovered that the all-encompassing service strategy not only
antagonized too many enemies for QQ but also became impossible to manage with the
convergence of technology and the trend of open-platform. Ma announced that it is no
longer an era of bitter competition between rivals but one of cooperation to ensure a win-
win situation. Instead of selling API and traffic, Tencent chose to provide third-parties
with account and payment connection, application and development experience including
module, testing, data set, service, maintenance. This means that small and mid-size
companies only have to focus on R&D if they have creative ideas, and Tencent will take
care of the rest. This strategy might sound appealing, but other developer might have
second thoughts as Tencent can easily seize the fruits of their labors and claim them for
its own. To sum up, the belief in all-encompassing ‘one-stop platform’ is entrenched in
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Tencent culture and the sensational move towards an open platform may end up as a
bigger monopoly plot.
4.3 Xiaonei: Facebook+Zynga+Groupon+Linkedin
4.3.1 Wang Xing: the unsung hero of Renren’s success
On May 4
th
2011, Renren went public on Nasdaq hailed as “Chinese Facebook”, and
was once the fourth most valuable IT company in China with $7.07 billion market value.
The owner of Renren, Chen Yizhou, who is also the CEO of China InterActive Corp
became the focus of limelight overnight. However, Wang Xing, the founder of Xiaonei
which paved the way for Renren was obliterated in the process. After the acquisition by
Chen, Wang stayed at Xiaonei to oversee data integration with 5Q.com, a competing SNS
site founded and run by China InterActive Corp. After helping Xiaonei to gain over four
million registered users through its presence in over 1,000 schools, Wang left Xiaonei in
April 2007. Wang might be dubbed as “the most tenacious SNS pioneer” in China owing
to his consistent experiments on a variety of SNS models. Wang admitted that his
conceptualization of social networks changed significantly through his entrepreneurial
experiences and he has gradually realized the difference between social networks and
social networking. His initial understanding of SNS was heavily influenced by the first
generation SNS in the United States as a real space for real people online; this philosophy
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led to his decision to sacrifice the diffusion rate for a healthy environment that protects
users’ privacy and prevent inappropriate acts with the aim to draw traffic. However, as
his experience in the field became diversified, he recognized the significance of online
offline dynamic that plays a critical role in defining the scope of social networks (c.f.,
boyd & Ellison, 2007). Accordingly, he moved on to locate a niche market by
incorporating gaming elements and a mobile platform into his first successful SNS.
Wang is aided on his enterprise by two potent tools, namely, a strong technical team
and an ability to quickly adapti to the market. As a drop-out from his doctoral studies at
the University of Delaware in early 2004, he started setting up a series of Internet startups
in China. His first foray into the industry was Dodoyo.com which he put together with
another Ph.D. dropout, Wang Huiwen, who also happened to be his college roommate at
Tsinghua University and Lai Binqiang, Wang’s high-school classmate (Lassister, Chen
& Wong, 2008). Due to the lack of focus on promotion that is commonly found among
technicians, Dodoyo only drew in 20,000 subscribers in a year. And this cruel fact forced
Wang to seek for alternative ways to develop SNS. And by the end of 2005, his first
lesson finally led him to a successful attempt of Xiaonei (meaning “on campus”) which
penetrated all of the 722 state-run universities and tertiary institutions in China within the
first nine months (Lassister, Chen & Wong, 2008).
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Figure 40. American influence on different domains in Xiaonei creative process

Figure 41. Domain-relative skills in Xiaonei creative process
As Figure 40 and 41 illustrate, strong technology and design skills handed down
from Dodoyo still benefitted the development of Xiaonei from its budding to
developmental phases, after the transition from Wang to Chen. This good tradition was
then passed on to the later version, namely, Renren. As a result, though constantly
inspired by Friendster and Facebook, apart from financial strategies, both Xiaonei and
Renren are more technology and design independent. In fact, Wang developed Xiaonei
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based on Dodoyo source codes which were not related to Facebook at all. In the early
days of Facebook, their users were not allowed to browse pages created by users from
other schools. There was no such restriction in Xiaonei. Another original concept was to
honor certain “Campus Stars” based on an individual user’s popularity index, which was
calculated by the number of page views recorded on his pages. These campus stars could
be shown on the homepage of their schoolmates’ Xiaonei pages. Furthermore, American
influence dwindled even more in marketing, financial and HR sectors with the growth of
the company. Figures below demonstrate that before the transition to Renren, Xiaonei
maintained a relatively low level of interaction with users in terms of technology and HR
as the founding team boasted of strength in these areas. Moreover, with a low
environmental uncertainty as well as task requirement and job complexity at both group
and organizational levels in these two fields, self-assessment and internal testing were
major idea-testing methods for budding and developmental phases. However, the level of
reflexivity in these two fields kept improving as interactions with users were gradually
enhanced. With the burst of user numbers, services and stock performance at the mature
phase, Renren was forced to pay more attention to technology and design capabilities to
meet increasing user demands and service reliability. In 2008, Xiaonei started to
incorporate mobile function and officially opened APP platform. In 2010, it further
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launched API beta version and became the first Chinese SNS to provide open mobile
platform Android v3.6.1 with a location based service ability.
In contrast, marketing and financial issues continuously plagued Xiaonei at all levels
and challenged its marketing and finance teams. The high level of interaction with users
at the budding and developmental phases in marketing and financial aspects is highly
related to the offline interpersonal promotion strategy Xiaonei utilized. More viral
marketing methods were applied to Renren with more mature market. Even though the
challenge in these two fields decreased after Renren’s public offering on Nasdaq,
environmental uncertainty remained high for two major reasons. In terms of marketing,
high level of homogeneity in SNS industry triggered fierce competition, therefore,
Renren needs more proactive marketing strategies to secure users. In terms of financial
well-being, going public is by no means a panacea, there is still a long way ahead before
Renren generates profits.

0
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with users
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Figure 42. Interaction with users at organizational level in Xiaonei creative process

Figure 43. Task requirement at group level in Xiaonei creative process

Figure 44. Job complexity at organizational level in Xiaonei creative process

Figure 45. Environmental uncertainty for each sector in the Xiaonei creative process
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Figure 46. Reflexivity at group level in the Xiaonei creative process
Furthermore, Figure 47 to 49 indicate that despite the steady expansion of
technology, design and marketing teams from the budding to the developmental phases,
financial and HR teams remained stable as the founding team possessed dominance in
terms of decisions in these fields. Due to the small size of the company at the Xiaonei
stage, group autonomy remained the same despite company growth. Group conflict
increased with increasing pressure from marketing and finance at Xiaonei, but stayed
stable for other sectors. Although conflict in marketing group dropped in the Renren era,
it remained a problem for HR and financial sectors with the fast expansion of company
services and due to the talent issue as well. At the same time, with substantial changes in
the team composition after the Xiaonei Renren and founding team transition, group
autonomy dropped from the developmental to mature phase. Figure 50 further suggests
that Xiaonei was rarely affected by political influence during its growth, however, Renren
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was not that lucky except in the technology and HR development. A series of political
unrest inside China in 2009 directly led to more strict regulation on the SNS industry and
Wang indicated that this was an important factor that resulted in changing the name of
Xiaonei and the integration of Kaixin with Xiaonei.

Figure 47. Group autonomy in Xiaonei creative process

Figure 48. Team composition change in Xiaonei creative process
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Figure 49. Team conflict in Xiaonei creative process

Figure 50. Political influence on each sector in Xiaonei creative process

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4.3.2 From Xiaonei to Renren: marketing and financial well-being are chronicle diseases

Figure 51. Time allocation on different sectors in the Xiaonei innovation process

Figure 52. Disruption from budding to developmental phase in Xiaonei innovation
Technology
Design
Marketing
Finance
HR
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Figure 53. Improvement in Xiaonei innovation process

Figure 54. Major concerns in Xiaonei innovation process
Technology and design did not pose any serious concern for the company until the
mature phase when Renren faced more diversified customer needs and changing user
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composition. As earlier users graduated from the universities and entered the workplace,
the original design of Xiaonei can no longer satiate their social networking requirements.
As a result, Chen has to revamp the site to serve a broader user base. At the same time,
marketing and financial performance topped concerns for both the Xiaonei and Renren
phases across all levels. Talent was not a big concern at the budding and developmental
phases. But with increasing services and financial performance demands, it has become
acute for mature phase especially given the rising brain drain rate. In order to canvass
talents, especially young people who understand user behaviors the most, in 2011,
Renren launched “zero interest housing mortgage plan” to provide all qualified
employees with an RMB 200,000 to 400,000 mortgage. This campaign provided timely
help to desperate Chinese young people facing sky high housing prices in major Chinese
cities.
Although marketing and financial innovation were dramatically improved in the
developmental and mature phases, thus requiring less time allocation, they still occupied
a great proportion compared to other elements in the developmental trajectory.
Meanwhile, even after the takeover by China InterActive Corp with the ensuing
disruption in almost every sector of the company, disruptive innovation was still rare in
the marketing and finance areas. Compared to Wang, who was a creative and
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adventurous young engineer without much marketing and business experience in the
industry when he first started Xiaonei, Chen was a veteran in the business. After
obtaining his Master’s degree from MIT and MBA from Stanford, Chen became the
board chairman and CEO of Chinaren in 1999 which was the first successful university-
based online community in China. In 2000, Chinaren was acquired by Sohu and Chen
became vice president of Sohu. Two years later, Chen started China InterActive Corp to
establish his multi-platform Web2.0 basecamp. Xiaonei and Mop (a popular SNS among
high school students) were just a few of the SNS that he acquired. Consequently, Chen is
more experienced and knowledgeable in capital operation and marketing strategies than
Wang by the time he purchased Xiaonei. Yet this by no means lowers the difficulty for
him to secure market occupancy and turn popularity into cash flow.
Looking back on marketing strategies for Xiaonei, Wang believes interpersonal
snowballing was the best choice based on Chinese university culture and resources
available at that time. With the success of Facebook in the United States and the personal
lessons he obtained from the Dodoyo experience, Wang and his team realized the
importance of market segmentation and positioning. They decided to focus on college
students, a segment which they understood the most. On December 8, 2005, Xiaonei was
opened to three of the best universities in Beijing, namely, Tsinghua University, Peking
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University, and Renmin University. The choice, however, was not random, as Wang was
an alumnus of Tsinghua while his girlfriend, Guo Wanhuai, also the head of marketing at
Xiaonei, was a graduate from Peking University. All three renowned universities were
also clustered in Beijing’s Haidian district in the western part of the city.
Leveraging on Wang’s personal network and insider knowledge, Xiaonei was able
to penetrate these campuses through many grass-root initiatives. When Xiaonei launched
its services in Tsinghua in mid-December 2005, it coincided with the annual ball of the
Faculty of Electronics, the largest faculty inside the school. From his days as a Tsinghua
undergrad, Wang knew that a ticket to the event was one of the hottest pursued items on
campus. Xiaonei then partnered with the Faculty to organize an online ballot for tickets.
The ballot successfully motivated more than 2,000 students to register themselves at
Xiaonei using their real identities as they were required to present their identity cards to
be able to enter the venue.
Later in January 2006, Wang organized another promotion campaign across these
campuses called “Big Buses Sending You Home”. During the Chinese New Year, college
students studying in Beijing would rush back to their home towns. It became a major
hassle for students to get to the rail station, which was more than 12 miles away from the
Haidian district, on the public transport system. Spending RMB 20,000, Xiaonei rented a
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few dozen coach buses that traveled back and forth from the student dormitories of these
three universities to the Beijing station. To get a seat on these shuttle coaches, students
needed to have a Xiaonei account. According to Wang, this campaign was particularly
effective as students sitting on the same bus more or less belonged to the same social
network and they communicated with each other not just on the Internet but also in the
real world. Such efforts helped Xiaonei recruit 30,000 subscribers within the first three
months of its launch, a milestone that dodoyo never accomplished. From the university
cluster in Beijing, Xiaonei moved on to other cities. In March 2006, a total of 10
universities had joined Xiaonei’s network, including Fudan University and Jiaotong
University in Shanghai. By the end of June 2006, Xiaonei had opened its access to all 106
top-tier universities in China, often collectively known as the “Project 211” schools.
Registered users exceeded 600,000 by May 2006, and Xiaonei became the most popular
SNS provider in China according to the results posted by Alexa.com, an Internet traffic
statistics provider (Lassister, Chen & Wong, 2008).
During this period of time, Xiaonei employed an extensive network of “campus
ambassadors” to promote the site across these schools. Each of these ambassadors, all
active users of Xiaonei, was given a sales kit, which consisted of Xiaonei’s posters and
instructions to conduct promotion on the campus. Guo recalled, each of these
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ambassadors had their own ways of getting through to the school authorities. Those who
had a close relationship with the school management could adopt a top-down approach in
which the school authority helped spread the messages on the benefits of joining the
social network on Xiaonei. However, there was even a case when an ambassador
pretended to be a leader of the school and circulated the messages. Most of the promotion
efforts, however, followed the routine of distributing posters in student dormitories, most
frequently in schools’ public poster bulletins, with slogans like “Xiaonei―a pure college
students community”. To enhance Xiaonei’s visibility, ambassadors were also
encouraged to leave messages about Xiaonei on local web sites and discussion forums, or
to set Xiaonei as the default home pages on Internet browsers installed at computer labs.
Apart from campus ambassadors, Xiaonei also relied on manual labor to verify the
background of its subscribers. Similar to the early days of Facebook, all Xiaonei users
came from those schools to which the company had been granted access. However,
unlike college students in the United States, those in China did not necessarily have a
unique e-mail address ending with specific .edu.cn domains. Wang’s team, thus, had to
collect a pool of IP addresses that originated from various campuses and then cross-check
them with the IP addresses of each newly registered user. During the early days of
Xiaonei, Wang and his team even went from block to block of the dormitories to collect
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and to verify the profiles of Xiaonei’s users. By using such grass-root efforts, Xiaonei
was able to keep acquisition cost per user at approximately RMB 1 (US$0.12), including
all the postage and salaries paid to campus ambassadors (Lassister, Chen & Wong, 2008).
As Wang left the new China InterActive Corp Xiaonei in May 2007, the chief
technology executive (CTO) Xu Chaojun had to operate the new SNS on his own.
Occupied by other large-scale acquisition projects on hand and confident in the leading
position of Xiaonei after receiving US$ 430 million investment from SoftBank in 2008,
Chen Yizhou, the CEO of China InterActive Corp did not even spend much time and
energy on this SNS at the very beginning when other Facebook model imitators were
sprouting like wild mushorooms (Huang, 2010). Even after the potential of Xiaonei
exploded in 2009, Chen abandoned Wang’s early strategy completely and resorted to
third party open platform, believing that providing diverse applications online is the best
online marketing. Nevertheless, he failed to recognize that the platform provided by
Renren is semi-open at best as Renren kept releasing new products of its own to compete
with third-party developers. Consequently, many developers chose to switch to other
Asian markets like Japan and Taiwan (Wang, 2010). The retreat of third-party developers
cost product innovation as Renren’s own product innovation ability faced a bottleneck.
Active users of Renren’s own application slumped with a daily percentage of 5.54 and
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ranked penultimate on the top 10 application chart (Wang, 2010). The ebbing
improvement capacity is further confirmed by Chart.4.3.16 and Chart.4.3.17 below. The
innovation cycle slows down from the budding to mature phases and at all levels,
although the technology and design improvement speed remain fairly stable, marketing
and financial improvement speed can barely hold their ground.

Figure 55. Improvement speed in Xiaonei innovation process

Figure 56. Time to innovate in the Xiaonei innovation process
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Moving on to the financial aspect, Xiaonei in Wang’s hand constantly struggled to
balance its management and venture capital. While Wang and his team emphasized on
acquiring new customers and enriching user experience through interface improvements,
they spent relatively less time in identifying revenue streams and business partners, let
alone establishing a sustainable business model. As competition for the SNS market
heated up, Wang continued to grab market share. Prior to Xiaonei’s eventual sell-off,
only one advertising deal was lined up. It was a deal struck with a small eyewear shop,
located on the sixth floor of a building near the Tsinghua campus in January 2006; it was
only worth RMB 7,000 Yuan paid for a month-long campaign. While Wang didn’t have
specific plans to drive advertising revenues, he saw the potential in spearheading local
advertising opportunities on Xiaonei. He believed that only large, nationwide business
operations could afford to advertise themselves on major portals like Sina, Sohu, and
Netease. It is not cost efficient for small and independent companies to promote
themselves to audiences beyond their geographic reach in other Chinese cities. Therefore,
Xiaonei, which clearly targets users from schools, could offer an alternative advertising
channel for local businesses that deal with the college student communities.
Unfortunately, the theory was barely translated into practice. Between March and
April 2006, Xiaonei partnered with China-Pub, an online book store specializing in the
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distribution of textbooks and computer books, to organize a giveaway campaign. Xiaonei
users could enter an online lottery to win a free copy of the book they desired by entering
its title and ISBN number. Those who joined the event were referred to China-Pub to get
the book’s ISBN number. In the partnership deal, China-Pub sponsored around 1,000
textbooks of which Xiaonei used to attract its potential members. By mid-April 2006,
Wang launched another campaign called “Traveling with You in May” for the
forthcoming Labor Day vacation that lasted for a week starting May 1st. Similar to the
Easter Break in the U.S., the Labor Day vacation allowed college students to travel
together to faraway destinations. Xiaonei then featured a page where its users could sign
up for trips together with otherwise strangers. The campaign allowed Xiaonei users to
make new friends online and travel as companions in the real world. Again, the campaign
served its existing users without having to arrange any commercial deals with travel
agents, airlines, or hotels.
Managing cash flow was an imperative for Wang to maintain Xiaonei’s operation,
particularly with its limited revenue generating activities. The company had limited initial
capital, when compared to some of its competitors like Zhanzuo and 5Q.com. These two
had substantial backup from venture capitalists or cash-rich holding companies.
Bootstrapping on an initial capital of RMB 700,000 (approximately US$87,000), Xiaonei
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had to endure a monthly burn rate of approximately RMB 100,000. The cash flow
problem soon became severe as the management team grew from the initial three to a
total of eight by March 2006. The company soon needed to raise debt through personal
loans from families and friends. By the time Xiaonei was sold to China InterActive Corp,
the company was in debt for a total of RMB 400,000. However, the company was not
short of opportunities in obtaining funds due to its market leader status in one of the
fastest growing segment in the world’s largest Internet market. On December 19, 2006,
just 10 days after the launch of Xiaonei, Wang received a phone call from Sequoia
Capital China, whose American parent had invested in such startups as Apple Computer,
Electronic Arts, Cisco Systems, Yahoo!, PayPal, and most recently, YouTube. While
Sequoia Capital eventually did not invest in Xiaonei after three rounds of negotiations
during the first half of 2006, Wang felt it was a strong boost to the confidence of the
whole team, and commented “we were ecstatic about their inquiry even though the deal
did not go through in the end. Their approach meant very positive recognition on our
work and direction. I guess they decided not invest in Xiaonei because we were not
experienced enough and our planning was not very thorough”.
In April 2006, Wang received his first financing from Dr. Andreas Weigend, a
former associate professor at the Stern School of Business of New York University who
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was then an advisor with BV Capital, a venture capital firm based in the Bay Area and in
Europe. Dr. Weigend invested US$50,000 (RMB 400,000) in Xiaonei after they met in
an alumni event at Tsinghua University. Weigend did not specify any terms with regard
to Xiaonei’s performance on this personal investment as he believed he could recuperate
the sum soon. Through Weigend’s referral, Wang was invited to meet with BV Capital in
San Francisco. By the end of June 2006, BV Capital proposed to Wang a term sheet
which offered US$1 million in investment and a US$4 million post-money valuation.
However, after Thomas Gieselmann, a partner at BV Capital, visited Xiaonei’s office in
August 2006, the term sheet was withdrawn. A year later, the pair met again in Beijing
and Wang learned that the withdrawal was mainly due to the fact that competition in
China’s SNS market was too intense and that BV Capital didn’t have a long-term
physical presence there to keep track of their investment in China. Prior to the negotiation
with BV Capital, China InterActive Corp, the eventual buyer of Xiaonei, had been in
regular contact with Wang (Lassister, Chen & Wong, 2008). But Wang hoped to forge
the destiny of Xiaonei in their own hands and declined a conglomeration and acquisition
offer from China InterActive Corp twice. This proved disastrous as Xiaonei plummeted
after most students left campus for their summer vacation. Ultimately, Xiaonei was sold
at a much lower price.
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Even though more experienced and possessing more resources, Chen did not turn
the situation around after the acquisition. Slow and limited traffic on Xiaonei constrained
the growth of advertising revenue in 2000. And in 2001, Renren Media was delisted from
the Hong Kong stock exchange as the shareholders continuously sold their shares. This
incident happened no longer than two years after the company secured its first venture
capital. Due to the fast growth of the Internet in China, Chen managed to re-enter the
industry with a new emphasis on life and consumption information. Yet this venture
failed again in 2007 when investors started to suspect the ability of Chinese SNS to
generate revenue. After the integration of Kaixin and Renren into Renren in 2009, Chen
chose to maximize the linking effect with other SNS providing supplemental services like
video streaming, ranking and rating, as well as Wikipedia to save cost on content
production. Renren even purchased the famous online video site 56.com for US $ 80
million in 2011 to strengthen its entertainment function. It also bought the group purchase
website, Nuomi , to increase revenue sources. At the same time, Renren released a new
product called “family space” with the hope to attract elderly users who would like to
share family memories online.
More importantly, realizing that mobile Internet users reached 303 million in 2011
and account for 66.2% of Internet users in China (CNNIC, 2011), Renren duly decided to
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launch Brew with China Telecommunication, a mobile SNS customer server. After going
public, Renren even established strategic cooperation with Microsoft which allows
Renren users to enjoy MSN China contents and new location, browsing and email
services. Similar cooperation with big names in the industry enhanced Renren’s
reputation and catapulted it as the best brand in the Chinese SNS category in the 2011
China Business News Weekly Company Man brand report. As a firm believer of
Social+local+mobile (SoLoMo) business model proposed by John Doer, the partner of
KPCB, Renren seeks to generate profits from the synthetic service platforms that it has
established through acquisition and external cooperation. However, compared to
Renren’s industry role model Facebook, Renren has not crafted a solid business model.
To begin with, Renren has not made full use of the open platform as it only approved
1000 applets among more than 100,000 submissions. Secondly, Facebook brought out
virtual money for daily deals with 30% commission income in each deal. But Renren is
still more reliant on advertising (42% of total revenue) without a clear target. Moreover,
active users on Facebook per month has exceeded 500 million, while in a 450 million
Internet user environment, Renren only attracts no more than 31 million active users.
The transient triumph on Nasdaq did not last longer than a month when the share
value of Renren kept falling and led to a board decision of a $150 million buy-back in
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September 2011. However, the first financial report of Renren showed that the self-
claimed “Facebook+Zynga+Groupon+Linkedin” model did not prevent the company
from burning money. Renren earned $ 123 million in 2009 and 2010 with a net loss of
$130 million. From 2008 to 2010, the annual compound growth rate of Renren is 135.7%,
while the growth rate decreased 4% in the fourth quarter of 2010. If the statistics is
broken down, online advertising revenue increased 38% compared to 2009, but decreased
4% compared to the first quarter of 2011. Online gaming accounts for 41% of total
revenue ($8.62 million) with a much slower increase rate compared to online advertising.
It increased 4% compared to 2009, but decreased 3% from the previous quarter. On the
other hand, company cost increased 29% compared to the previous quarter and reached $
4.22 million. And the fourth quarter operational profit fell by 39% compared to the third
quarter with $2.33 million. Despite the gloomy prospect, the vast SNS user base has
earned the patience of its investors. From 2006 to the present, Renren has acquired
around $480 million in investments from DCM, General Atlantic, Accel Partners, Lenovo
and Softbank. In the second quarter of 2011, Renren posed a $ 800,000 net profit. In
addition, the company started to level up their R&D and HR sectors. Input in R&D
increased 32.3% mainly due to salary increases. And with the integration of Nuomi into
its scope, compared to the same period in 2010, sales and marketing cost increased
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135.2%, operational cost increased 86.4%, administrative cost increased 115.9%.
Furthermore, Renren’s $2.6 million loss was 75.6% lower compared to the same quarter
in 2010. However, it may be too early for Renren to be optimistic for two reasons: 1)
skyrocketing advertising figure is the major contributor to this improvement. The 108.6%
growth rate of online advertising is way above the 27.1% industry average. However,
added-value services and online gaming stagnated; 2) Nuomi will be hardly able to
contribute to financial performance in the near future, yet it will cost Renren substantially.
The net loss of Nuomi in the second quarter is $4.5 million, if taken apart, Renren would
have achieved $6.5 million profit as of the moment.
4.4 Fanfou: The Originator of Chinese Twitter
4.4.1. Wang Xing’s new trial: unexpected trouble at the developmental phase
After Leaving Xiaonei, Wang wrote a new set of source codes for Hainei.com
(meaning “in the world”), a SNS targeted at recent college graduates and white collar
workers living in first-tier cities such as Beijing and Shanghai. Although facing
competition from Xiaonei with the new funding from Oak Pacific and MySpace China,
Wang believed that Hainei filled the gap of existing Chinese SNS services. Although the
backbone of this new company has stayed with Tsinghua graduates of computer-related
backgrounds or professionals working at major Chinese Internet firms for several years,
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and the promotion strategy still relies on word of mouth, this time around, Wang placed
more importance on raising sufficient funding and user specification. For instance, based
on the nature of users, more detailed classification of groupings and better control of
privacy are enacted to differentiate Hainei’s services from those of Xiaonei as well as
other Chinese SNS. Moreover, he provided more robust business model that integrates
advertising, premium services and virtual items. All his efforts paid off and by the end of
April 2008, Hainei had accumulated 100,000 users, a figure growing roughly 2% per day
since its inception. Instead of being aggressive, he set his goal to one million users by
December 2008 and 10 million by the end of 2009 (Lassister, Chen & Wong, 2008).
Early adopters were from the IT industry, professionals working for mass media and
NGOs.
Wang’s enthusiasm in SNS is not limited to this one particular format. The success
of Twitter showed him the potential of SNS as information platforms for mass-self
communication (Castells, 2009), thus propels him to explore SNS as mini blogs.
Nevertheless, the simplicity and functionality of this new model challenges Wang’s belief
in the realness of SNS because it is difficult to identify users in the new environment.
Consequently, he resumed his previous model targeting at a different niche market. In
May, 2007, the first Chinese Twitter named Fanfou went online with API, private
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messaging, blogging, posting and instant messenger bundle functions. In one month’s
time, @ link, storage and share, multimedia message and flash were quickly added to
existing features. Wang handpicked the name Fanfou meaning “have you eaten yet?”
which is the most commonly used greeting among Chinese people. He hoped that this
will be more than just a mini blog but a space for all users to have daily conversations
and share life experiences. The founding team was composed of core members from
Xiaonei who worked with Wang before and Wang’s former classmates at Tsinghua
University. The majority of users were from Beijing, Shanghai, Wuhan and Guangzhou,
yet it managed to penetrate remote areas in China as well.

Figure 57. American influence on different domains in Fanfou creative process
As Figure 57 suggests, although inspired by Twitter, Wang used the wisdom of his
own team to construct source code and design style. Although Fanfou adopted the
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concise interface like Twitter, the founding team installed many features with Chinese
characters to better serve local users. For example, Fanfou allows for large-size pictures
and icons, and more abundant editing choices to meet Chinese users’ demand for self-
presentation. Besides, they regularly post contents with strong local linguistic
characteristics to increase community cohesion.

Figure 58. Domain-relative skills in Fanfou creative process
It shows that with experiences and high skills in every domain of the original Xiaonei
team, it only took one year for Fanfou to attract 100,000 users. By 2008, the number
jumped to 300,000 and by early 2009, the number tripled again to over a million. The fast
growth of Fanfou is partly accredited to the flooding participation of intelligentsia and
social activists who are early adopters of this new SNS platform. To protect the relaxing
and friendly atmosphere on Fanfou, Wang and his founding team rarely filtered contents
on the site and believed that only meaningful contents can stand out from vast
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information base. This new website was closely bonded with mobile phones and instant
messaging software such as MSN and QQ, the most popular instant messaging tool in
China with over 300 million subscribers (Lassister, Chen & Wong, 2008). Wang
considered the integration a booster to existing user structure.
Unfortunately, the quick and broad dissemination of information not only attracted
users but governmental attention as well. Due to a series political unrest in China in early
2009, especially the “July 5
th
Xinjiang insurrection”, users can no longer update contents
on Fanfou from 11pm on July 7
th
, 2009. Although Fanfou promised its users that it will
solve the problem by July 10
th
, users were unable to log on to Fanfou on the 8
th
and
complete server shut down came afterwards. Other Chinese mini blogs gradually suffered
the same fate by July 22
nd
. And in August, Fanfou finally acknowledged that they were
forcibly shut down by the government due to content censorship. Wang grieved over the
unfair treatment as he believed that among the millions of posts on Fanfou, only a tiny
few touched on sensitive issues. However, as always, he remained optimistic that by
negotiating with governmental institutions, Fanfou will once again be allowed to online.
Meanwhile, Fanfou users became stragglers online as they were not only evicted from the
website, but other communities related to Fanfou such as Baidu posting and Douban
groups as well. Many users migrated to the Sina mini blog or Twitter with the help of
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proxy.
After a year’s time, Wang and his team realized that waiting for an unpredictable
future is not the ideal solution, so they relocated resources to a group purchase website.
However, deep inside Wang’s heart, he did not officially abandon Fanfou as he still
hoped for its resurrection. In November, 2010, Wang officially confirmed that the
government finally lifted the ban on the Fanfou domain name, yet he acknowledged that
the site cannot function properly as yet. At 2am on November 13
th
, 2010, a testing post
appeared on Fanfou founding team blog after a year’s shut-down; it stated “Hello, World!
Hello, sleepless Fanfouers!” On November 25
th
, 2010, Fanfou was officially reopened to
old and new users. And it inherited the grassroots approach with an emotional picture at
the front page “Dinner is ready”. However, as Chart.4.4.3 and Chart.4.4.4 reflect, after
one year’s hibernation, Fanfou was no longer relevant in the business. The Twitter model
was a fresh idea in 2007, but it became a sensation in 2009 as most big IT companies like
Sohu, Sina, Netease and Tencent QQ started to devote substantial time and energy to this
field. As a result, although Fanfou was the originator, by the time it returned to the
market, it has already lost its edge in either idea, market or financial prospects. Wang has
always been aware that competing with these giants is a ‘mission impossible’, thus he
had to locate a niche market to get back into the game.
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Figure 59. Environmental uncertainty for each sector in Fanfou creative process

Figure 60.Political influence on each sector in Hengzhi creative process
Figures above all show that due to immense political intervention, apart from HR
department, task requirement, job complexity, user interaction and reflexivity all
increased in response to new challenges. In the area of technology, the Fanfou front page
stopped functioning for a week after its reopening caused by a technological glitch
malfunction of applications. It takes additional effort to build up a stable system to meet
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Technology team Design team Marketing team Financial team HR team
Budding
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Technology team Design team Marketing team Financial team HR team
Budding
Developing
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technological standard in the new environment. At the same time, the design team has to
alter their mindsets to meet governmental demands. Beforehand, users can register
accounts according to their own will, but now, they either have to be old users of Fanfou
or they have to be invited by old users with a referee’s account number to be able to
register on the site. In other words, Fanfou now has to keep track of every user in their
dataset so that the government can keep track of them if needed. Nevertheless, the top
task of Fanfou is still to better serve their users. And for that purpose, they have to
enhance interaction with users to understand their demands, identify new channels and
methods to reach out to potential users.

Figure 61. Task requirement at group level in Fanfou creative process
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3
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7
Technology
requirement
Design
requiremnt
Marketing
requirement
Financial
requirement
HR
requriement
Budding
Developmental
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Figure 62. Job complexity at organizational level in Fanfou creative process

Figure 63. Interaction with users at organizational level in Fanfou creative process

Figure 64. Reflexivity at group level in Fanfou creative process
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3
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8
Technology
job
complexity
Design job
complexity
Marketing job
complexity
Financial job
complexity
HR job
complexity
Budding
Developmental
0
1
2
3
4
5
6
7
8
Technology team
interaction with
users
Design team
interaction with
users
Marketing team
interaction with
suers
Financial team
interaction with
users
HR team interaction
with users
Budding
Developmental
0
1
2
3
4
5
6
7
Technology
reflexivity
Design
reflexivity
Marketing
reflexivity
Financial
reflexivity
HR reflexivity
Budding
Developmental
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Figure 65. Group autonomy in Fanfou creative process

Figure 66. Team composition change in Fanfou creative process

Figure 67. Team conflict in Fanfou creative process
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2
3
4
5
6
7
Technology
group
autonomy
Design group
autonomy
Marketing
group
autonomy
Financial
group
autonomy
HR group
autonomoy
Budding
Developmental
0
0.5
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1.5
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team change
Design team
change
Marketing team
change
Financial team
change
HR team change
Budding
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team conflict
Design team
conflict
Marketing
team conflict
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team conflict
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conflict
Budding
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Although it experienced tremendous changes, the Fanfou team enjoyed a high level
of autonomy throughout the process as they have proven themselves capable in
successfully hurdling challenges with the leadership of Wang. Although group conflict
increased in the field of marketing and finance due to changes in the team composition,
they stuck to the belief in the resurrection of the site. Their confidence is built upon
enthusiastic users who returned to the site with sympathy for the misfortune of Fanfou.
Most returning users maintained deep personal attachment to this SNS.
4.4.2 Being present is more important than making profit
Fanfou has been actively promoting the integration between the Internet and mobile
platforms from the very beginning. Instead of only snow shuffling everything from the
Internet to the mobile venue, Wang paid special attention to the Chinese users’ obsession
with instant message function and self-presentation tools. He was among the first mini
blogger operators to simplify the mobile uploading experiences so that users can log on to
the platform more frequently with easy access through mobile phones. However, these
efforts demand strong and stable technological support. According to Figure 68 to 70,
due to the reloading process at developmental phase, apart from HR, all other sectors
required more time allocation in product and process innovation with limited human
resources. At the same time, it took longer time for each sector to improve their
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innovation performances across all levels to enhance original features so as to meet new
environment and improve marketing and financial performances.

Figure 68. Time allocation on difference sectors in Fanfou innovation process

Figure 69. Extent of improvement in each sector in Fanfou innovation process
0
1
2
3
4
5
6
7
Technology Design Marketing Finance HR
Budding Individual
Budding Group
Budding Organizational
Developmental Individual
Developmental Group
Developmental Organizational
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1
2
3
4
5
6
7
Budding individual
Budding group
Budding organizational
Developmental individual
Developmental, group
Developmental, organizational
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Figure 70. Improvement speed in Fanfou innovation process

Figure 71. Disruption in Fanfou innovation process
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7
Budding individual
Budding group
Budding organizational
Developmental individual
Developmental, group
Developmental, organizational
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4
4.5
Budding individual
Budding group
Budding organizational
Developmental individual
Developmental, group
Developmental, organizational
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Figure 72. Time to innovate in Fanfou innovation process
However, the innovation cycle slowed down across all levels in the new phase and
the level of disruption did not increase accordingly across all levels due to two reasons.
First of all, due to Wang’s competent technology team and avant garde concept in the
first version, most current functions and features were already in place. The typical
example is that by 2009, Fanfou has accumulated more than 101 API applications when
other types of SNSs only started to open the platform. Secondly, with the money Wang
cashed out from selling Xiaonei and with his substantial experiences at hand, less
pressure is felt for short-term sensational performances. Wang perceived Fanfou more as
an interesting project that he and his team cherish. He did not want to impose a grand
plan on how fast the site can grow, how it may be used, nor whether he can make money
out of it. More importantly, the Xiaonei experience told him that technological innovation
is not the determinant of Fanfou’s future, rather it rests on how they cater to their users’
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7
Individual Group Organizational
Budding
Developmental
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needs and whether he can secure financial resources for further development.

Figure 73. Major concerns from budding to developmental phase in Fanfou innovation
process
Wang’s philosophy is fully represented in Figure 73. Talent, team cohesion and
R&D are far less critical to Fanfou than financial well-being, marketing and political
intervention. According to Wang, early adopters of Fanfou came relatively easy as they
are Twitter fans, thus more than willing to use the Chinese version and promote the new
tool on their blogs to other friends. However, in the new era inundated with all kinds of
mini blogs, Wang had to reconstruct his marketing plans. The cruel reality is that with the
surge of portal site based mini blogs like Sina, Sohu and Tencent QQ, independent mini
blogs found it increasingly difficult to maintain users’ attention with limited services on
site. Moreover, it is more difficult for independent mini blogs to attract celebrities and
created media sensation. iResearch report 2011 on mini blogs showed that apart from
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1
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3
4
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6
7
8
Budding individual
Budding group
Budding organizational
Developmental individual
Developmental, group
Developmental, organizational
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Follow5 which acquired 20% growth monthly visit, monthly visit to all other mini blogs
dropped more than 30%.
Wang repetitively emphasized that Fanfou is different from portal site based mini
blogs “we will never categorize users to VIP and common based on their social status
like those portal sites do, our focus is not on celebrities, but average user who enjoy the
space and social experience we offer”. Abundant venture capital partly contributed to
Wang’s confidence and patience. In January 2011, Fanfou received more than RMB ten
million from Green Pine Capital Partners while other independent mini blogs were still
enmeshed in financial famine. The former standing place of Fanfou and Wang Xing’s
personal brand are key to investor’s decision. Facing doubts and expectation at the same
time, Wang posted an intriguing message on his own mini blog “someone asks what type
of knight Louis Armstrong is (In Chinese, Jazz and knight have the same pronunciation).
If you still need to ask a question like that, then it means you will never understand the
answer. Likewise, if someone asks me why after so long time and so many changes in the
market, Fanfou still chose to come back, I think you have already got my answer”.
4.6 Kaixin001: in the competition to become Chinese Facebook
4.6.1 Kaixin001: either success or failure boils down to technology addiction
Compared to other SNS founders we have mentioned so far, Cheng Binghao, “the
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father of happiness” (Zhou, 2010) is an authentic outlier in the domain of Chinese SNS.
However, his design philosophy rooted in his rich life experience and in-depth
understanding of Chinese networks enables him to make a difference. In order to fulfill
his parents’ dream of escalating their household registration status (Hukou) from
agricultural to urban residence, he was forced to sacrifice his own dream of getting
higher-education and ended up in technical secondary school attached to the China
Research Institute of Nuclear Chemistry. After graduation, he was employed by the
research institute and the exclusively technical environment instigated his enthusiasm in
programming and computer language. The hands-on experience finally opened the door
for him to join the IT industry. In 1998, he was hired as a senior engineer by Sina, one of
the leading web portals in the industry. In 2003, the surge of Baidu as the Chinese Google
ignited the rest of the corporations to follow suit, and Sina certainly do not miss out on
the opportunity. At the end of 2003 and the beginning of 2004, Cheng became the project
leader of iAsk, Sina’s own search engine that presumably will compete with Baidu for
market share.
However, similar to the “elephants can’t dance” metaphor imposed on IBM
(Gerstner, 2002), Cheng underwent the same experience of bureaucracy in a giant
organization that allows limited space for individual autonomy and innovation. Even so,
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Cheng devoted most of his time and energy to this project hoping to fulfill his mission.
Long-time strenuous work even devastated his health and he was soon diagnosed with
xeroma and arrhythmia. After one year, he still could not work for more than five
minutes a day on the computer. Despite his dedication, Sina stopped the project realizing
its gloomy future in 2006 which mauled Cheng physically and mentally even further.
That is when he determined to leave the company and start his own business. This tragic
experience also reshaped his life philosophy. He perceives happiness as the ultimate
pursuit of life instead of success, fame, or fortune. This belief resulted in his
establishment of the Happy People Information Technology Corporation Limited in
February 2008 with an emphasis on two keywords - friends and happiness. Unlike the
former two start-ups, Cheng used his own money as the initial funding with a total of
three million RMB (about US $450,000). This adventurous investment further
demonstrated his determination in creating his own foothold in the industry.
Influenced by the emergence of SNS platforms in the United States, Cheng and his
new team migrated from Sina and other Internet companies. They decided to explore
their possibilities in China. Since the whole team was composed of white-collar workers,
their sub-consciousness drove them to building up a network through their personal
networks, which was composed of the same social class essentially. Nevertheless, this
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original design was criticized by many people in the industry as the prevalence of
Xiaonei and other similar sites confined them to the belief that SNS is only suitable for
students who have the time and interest in socializing online. Moreover, as most early
adopters of Kaixin001 are employees at Sina, people even considered it ironic for Cheng
to build up an internal social network site for Sina after leaving the company.
Nonetheless, Cheng’s continuous attempts finally paid off in mid-2008 when the network
effect accelerated in China’s two biggest cities Beijing and Shanghai. Now users from
Shanghai took up about 20% of the user pool, while Beijing, the Yangtze Delta and the
Zhujiang Delta each took up around 10%. Kaixin001 had accumulated more than 70
million registered users by 2009 and has become the social networking hub for half of the
Chinese SNS users. The demographics of users suggest an equal gender distribution and
the dominance of white collars and university students.

Figure 74. American influence on different domains in Kaixin001 creative process
0
0.5
1
1.5
2
2.5
Influence on
Technology
Influence on
Desgin
Influence on
Marketing
Influence on
Finance
Influence on
HR
Budding
Developmental
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As Figure 74 shows, although the interface of Kaixin001 resembles Xiaonei and
Facebook, Cheng’s rooted belief in ‘sharing happiness with friends” privileges
information sharing and SNS games as determining features of the site. And this strategy
differentiated the site from its American paradigm. However, some popular applets
stirred up contentions and criticisms. For instance, “Slavery trade” is bashed as a
blasphemy of friendship and distortion of human relations. Similarly, buying houses that
allows users to steal produce from their friends or wreck friends’ farms is condemned as
disseminating discord between friends and degenerating friendship to a profit-making
tool. Yet, Cheng considers these critiques missing the point as those games only provide
a medium to maintain or create friendship, in other words, they are accessories to
friendship rather than the other way around. According to Zhou (2010), although
frequently accused as a copycat of Facebook, Facebook employee personally told Cheng
that they investigated Kaixin001 and believes it is fundamentally different from
Facebook and they admit that many designs and applications of Kaixin001 are
undoubtedly brand new. Kaixin001 stands out with more comprehensive integration of
gaming and networking. Cheng believes that the synergy of these two elements is the
signature of their own innovation as it expands the scope and enriches the meaning of
social networking. Traditional SNS tools like profile building, photo tagging, message
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exchange are constrained to selective communication ends and studies have proven that a
great proportion of these are limited to strong ties, while a great proportion are dormant
networks that are only activated at special settings like festival, birthday or things alike.
By contrast, SNS games provide a much broader networking space that does not
discriminate against weak links. Furthermore, they propelled long-term and frequent
communication among users in order to achieve the goal of the game, which in turn
cements existing networks. At the same time, traditional information exchange applets
like photo tagging, posts forwarding are also integrated into the gaming experience. As a
result, users are more likely to embrace these messages with great interest and willing to
disseminate them.

Figure 75. Interaction with users at organizational level in Kaixin001 creative process
0
1
2
3
4
5
6
7
Technology team
interaction with
users
Design team
interaction with
users
Marketing team
interaction with
suers
Financial team
interaction with
users
HR team interaction
with users
Budding
Developmental
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Figure 76. Environmental uncertainty for each sector in Kaixin001 creative process
However, Kaixin001 maintained a relatively low level of interaction with users from
the very beginning and even this even becomes worse at the developmental phase.
Moreover, its reluctance to provide an open platform and cooperate with third-party
developers led to slower and slower creative process. With fading interest in major
applets that brought Kaixin001’s fame and popularity in the first place, Alexa data show
that Kaixin001 has fallen out of the top 100 website in the world chart in July, 2010. The
clicking rate dropped 13.8% between August and October, 2010. The burst of mini blogs
in China is another cause of the slumping user number on Kaixin001.
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Technology team Design team Marketing team Financial team HR team
Budding
Developmenta
l
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Figure 77. Domain-relative skills in Kaixin001 creative process

Figure 78. Task requirement at group level in Kaixin001 creative process

Figure 79. Job complexity at organizational level in Kaixin001 creative process
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6
7
Technology
skills
Design skills Marketing
skills
Financial
skills
HR skills
Budding
Developmental
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8
Technology
requirement
Design
requiremnt
Marketing
requirement
Financial
requirement
HR
requriement
Budding
Developmental
0
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Technology
job
complexity
Design job
complexity
Marketing
job
complexity
Financial job
complexity
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complexity
Budding
Developmental
DIGITAL CREATIVITY 203

Figure 80. Team composition change in Kaixin001 creative process
Moreover, Cheng’s addiction to technological perfection jeopardized the whole idea
creation, testing and execution process. It might be too harsh to call Cheng a geek but it is
fair to describe him as highly demanding on technological perfection. He set up a judge
panel at Kaixin001 to repetitively discuss every proposal submitted by product managers.
As a temporary team, the panel does not have a systematic measurement on proposals.
Most decisions were made spontaneously and took more than a few months. A typical
example is proposal suggesting optimizing browsing speed by limiting clicking times on
gaming and sending posts. The suggestion was immediately passed and executed without
even realizing that decreasing clicking rate with hurt traffic which is the life line of the
website. Therefore, although Cheng’s rigidity with technology saved him energy in skills
training and built-up, it does not give them advantage in the industry as it moved up to
developmental phase. More importantly, insufficient emphasis on other elements fast led
0
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3
4
5
6
Technology team
change
Design team change Marketing team
change
Financial team change HR team change
Budding
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to dropping user numbers after 2009. Accordingly, Figure 81 and 82 suggest that Cheng
learnt to constrain his bigotry with technology partly due to fading popularity of the site,
partly due to his visit to other successful SNS companies and CEOs. The reflexivity level
jumped at the developmental phase consequently and caused more team conflict in
almost every segment except for HR which is tightly controlled by Cheng in the
transition from budding to developmental phase. Still, figures below demonstrate that
even conscious of existing problems in the company and rarely affected by political
influence, group autonomy for design, marketing and financial teams are constantly
lower than that of technology team throughout all phases even though the autonomy of
technology team itself dropped at the developmental phase. The rising autonomy in HR
team is highly related to urgent call for talents to save the game after the 2009 slump.

Figure 81. Reflexivity at group level in Kaixin001 creative process
0
1
2
3
4
5
6
7
Technology
reflexivity
Design
reflexivity
Marketing
reflexivity
Financial
reflexivity
HR
reflexivity
Budding
Developmental
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Figure 82.Team conflict in Kaixin001 creative process

Figure 83.Group autonomy in Kaixin001 creative process

Figure 84.Political influence on each sector in Kaixin001 creative process
0
1
2
3
4
5
6
7
Technology
team conflict
Design team
conflict
Marketing
team conflict
Financial
team conflict
HR team
conflict
Budding
Developmental
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1
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3
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7
Technology
group
autonomy
Design group
autonomy
Marketing
group
autonomy
Financial
group
autonomy
HR group
autonomoy
Budding
Developmental
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1
1.5
2
2.5
Technology
team
Design team Marketing team Financial team HR team
Budding
Developing
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4.6.2 Facing innovation gap and challenge: knowing is different from doing it

Figure 87. Major concerns in Kaixin001’s innovation process
In accordance with Figure 87, Kaixin001 does not seem to be under financial
pressure even with its lackluster performances after 2009. Kaixin001 secured $5 million
in the first round financing, and $18 million in the second round in its first 2 years, which
is much more in shape compared to the same developmental phase of Facebook. Only
judging from latest data at the end of 2010, Kaixin001 seemed to remain in good shape
with over 100 million registered users and over RMB 10 million in the second quarter.
All these performances are better than that of Facebook in its first three years. Cheng
even announced his ambition to go public in the United States in 2011 though refused to
declare the amount of initial offering. However, crisis on talent recruitment, retaining
market share, teach cohesion and R&D input due to long-term technology-centered
0
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3
4
5
6
7
8
Budding individual
Budding group
Budding organizational
Developmental individual
Developmental, group
Developmental, organizational
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model has forced the company to reallocate its time on the development of Kaixin001. As
Cheng himself puts it “we used to be a technological institute, now it needs to grow as
social networking company”.

Figure 88. Time allocation on difference sectors in Kaixin001 innovation process
Their continuous effort led to their leading position in product and process
innovation other than technology at the budding phase. Long before the Facebook
announcement in 2009 to launch mobile connections that would link 65 million users,
Kaixin001 has been operating under this convergent model ever since the beginning.
Moreover, Kaixin001 is a SNS that emphasizes more on SNS games and perceive that as
the fundamental connection between users. The most popular gaming applets are: buying
houses, vying for parking lot, slavery trade and forwarding posts and virtual gifting.
0
1
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3
4
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6
7
8
Technology Design Marketing Finance HR
Budding Individual
Budding Group
Budding Organizational
Developmental Individual
Developmental Group
Developmental Organizational
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Buying houses allows users to purchase virtual properties and decorate them with
furniture. In order to purchase properties, users need to take job opportunities listed by
the website and plant flowers, fruits, crops and raise fowls. Users can earn virtual money
through either selling their produces, or steal their friends’ gains. However, in order to
buy seeds with higher economic values, users need to present their gains to their friends
to increase glamour index. Vying for parking lot requires users to successfully park their
virtual vehicles in other users’ private parking lot as long as possible without being
noticed or reported to the police. The money they earn from successful parking allows
them to purchase more expensive cars, ships or helicopters. Moreover, once they manage
to purchase at least five luxury cars with the same brand, they can create their own team
and compete in the car race for a half million championship reward. Once in the car race,
users need to log in daily to ask for support from their friends which will increase the
racing speed. At the same time, they need to take the risk of being sabotaged by
supporters of their rival teams. Slavery trade is for users to buy and sell their friends as
slaves. Slaves are supposed to redeem themselves by cajoling their owners, while owners
accumulate wealth not only through trading slaves, but either punishing or rewarding
slaves with given orders. Apart from banner advertisement, brand communities and brand
ambassador competition online, these popular applets are paradise for product placement.
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In the first five to six days of product placement, Buick Regal 2009 attracted more than
400, 000 buyers online, and generated more than one million RMB in revenue (150,000
U.S. Dollars) for Kaixin001 in the first month (China Management Daily, 2009). Table 2
illustrates major product placement strategies applied on the site. Kaixin001 has achieved
over 10 million Yuan profits each month backed up by product placement in 2010.

Figure 89.Disruption in Kaixin001 innovation process

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6
Budding individual
Budding group
Budding organizational
Developmental individual
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Developmental, organizational
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Table 9. Product Placement Strategies on Kaixin001
Buying houses Name houses after properties of real-estate companies in
real life
Sponsor decorations and electronic devices of houses
Provide background for farms and meadows with the brand
image
Offer special seeds for planting with brand name on it and
encourage sending the gains to other users to increase the
earning
Provide job opportunities with the highest reward in
advertisers’ company settings
Vying for parking
lot
Provide background for parking lots with brand image to
attract visitors
Provide 3D virtual vehicles for purchase
Provide concept cars for car race
Slavery trade Provide owners with reward and punish methods related to
the product
Allow slaves to earn money by treating owners with
promotions offered by advertisers
Post-forwarding Provide news stories or picture displays about the product
Collect poll opinions on the product or news
Gift-forwarding Provide virtual products as gifts
Provide click-through information and promotions
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Figure 90. Extent of improvement in each sector in Kaixin001 innovation process

Figure 91. Improvement speed in Kaixin001 innovation process
0
1
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3
4
5
6
7
Budding individual
Budding group
Budding organizational
Developmental individual
Developmental, group
Developmental, organizational
0
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6
7
Budding individual
Budding group
Budding organizational
Developmental individual
Developmental, group
Developmental, organizational
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Figure 92.Time to innovate in Kaixin001 innovation process
Nevertheless, figures above reveal that Kaixin001 gradually lost its steam in
innovation as it entered the developmental phase. Apart from HR department, disruption,
improve extent and speed of all other departments declined against individual endeavor to
turn over the stagnation. Facebook started with communication tools to enhance
networking, open platforms for gaming and applets to increase stickiness, then extend the
scope to e-commerce as revenue generator. Kaixin001 exactly took the opposite
developmental trajectory. It took off with social games and with limited growth in talents
and slow bottom-up execution speed, Kaixin001’s independent innovation on games
dwindled substantially and drove away users. Cheng’s ambivalent attitude towards open
platform was to blame to this awkward situation. To Cheng, the level of control on the
open platform was durable given the current development of the site. The purpose of API
is not to make profits but to provide more abundant and interesting contents to the site.
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Although Kaixin001 was forced to eat its words and launched API in 2010, they have
already missed out the best opportunity to retain its user base. Worse still, Kaixin001 was
has been constantly complained by third-party developers as not open enough. Given the
fact that almost all of the $100 million advertising revenue in 2010 came from product
placement in games, the advertising prospect is jeopardized with a falling user number
and less third-party involvement.
Kaixin001’s second move was to integrate SNS with other features, yet none has
been proven effective. Although Kaixin001 quickly opened its own mini blog function,
yet it proved to be a white elephant among numerous portal mini blogs with massive
royal users. Fully taken advantage of organizations and social groups on Kaixin001,
Cheng set the goal to build up social branding strategies for organizations on the site.
However, he overestimated the capability of his marketing team. Until early 2009,
Kaixin001 only had two sales employees with 20 million registered users. And as the site
owned the momentum at that time, the sales team did not even have to make much effort
to achieve a RMB 7 million revenue in a month. By 2010, Kaixin001 finally managed to
expand the sales team to over ten people, and with steady flow of potential advertisers,
Cheng made a clear principle of not intervening user experience. Therefore, product
placement is the first choice, followed by direct and third-party advertisement. He also
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made it clear that only one brand can be placed in each game. This strategy caused two
problems, first of all, heavy reliance on product placement and third –party advertisement
(80% of its revenue) required constant growth of gaming products which cannot be
achieved with current production innovation ability. This vicious cycle will
fundamentally damage advertising revenue of Kaixin001 let alone the much lower price
to advertise on Kaixin001 compared to portal sites. It costs around RMB 50,000 per day
to post one text advertisement on the front page of Sina, and more than RMB 100,000 for
picture advertisement. However, RMB 50,000 per day allows for all page full color
advertisement on Kaixin001. Secondly, with vast application base, Kaixin001 failed to
protect user experience and fenced off spam information. Extensive use of post-
forwarding platform which was the primary reason for users to remain on the site after
gaming quality decreased has turned this platform into annoying gaming and product
promotion applet. Similar situation happened to its photo tagging tool.
Worse still, deeply shaken by the revenue making capability of Tencent after an
invited visit to the company, Cheng started to promote virtual money called Kaixin001
Dollar on the site following Tecent’s step. Yet he neglected the reality that unlike
Tencent whose major users are low-end, irrational consumers. Kaixin001’s backbone
users are white collars and more resistant to irrational consumption. No wonder this
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virtual money failed to generate bursting effect contrary to Cheng’s expectation.
Nonetheless, Cheng has not given up his pursuit of e-commerce as advertising and virtual
money models were all proved vulnerable. His zest on e-commerce was further ignited
after his meeting with Ma Yun, the CEO of China’s largest e-commerce website Alibaba.
In January 2011, they acquired two domain names: Kaituan.cn and Kaituan.com.cn with
the purpose to start their own group purchase feature. Moreover, they cooperated with
Alitong IP telephone and installed flash version IP telephone applet for its users.
Unfortunately, in the tumble fight among thousands of group purchase ad hoc websites in
China, the lackluster performance of this new feature only aggravated financial pressure
to Kaixin001. It was forced to contract all its group purchase business to F Group, an
individual group purchase website in October 2011.
The quick failure of his e-commerce initiative frustrated Cheng somehow, and he
finally went back to the drawing board and decided to first provide better social
networking experiences. His next plan was to provide a Q&A applet similar to the
unfinished “iAsk” project he did before leaving Sina, yet the ultimate question is not
what product he releases, but how to maintain user stickiness. Cheng believes a
reputation system will be the solution to encourage participation, revenue generation and
celebrity making. He expected this new feature to be the life line of Kaixin001’s future
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when the growth of advertising revenue slows down.
4.7 Sohu White Society: born with silver spoon in mouth, walking on thin ice
4.7.1 Portal site support is not sufficient for SNS to succeed
In the nationwide SNS welling tide, major portal sites started to release their own
social sites. And quite similar to the birth of Qzone, White Society was deemed as a child
born with a silver spoon in his mouth at its debut in 2009. Why did Sohu call the site
White Society? Because it targeted specifically at white collars, the space for white
collars to get together is White Society. Fang Gang, an engineering and literature
graduate from Tsinghua University serves as president of the site, whose words are
sparkling with intellectual and artistic vocabularies. With a leader like Fang, White
Society was doomed to be laden with an highbrow style from the very beginning. Rooted
from the Chinese culture, Fang imbued White with two meanings: pure and candid
culture. He hoped that these two principles can attract cooperative young people who are
hungry for knowledge. Accordingly, as Figure 93 shows below, apart from technology,
the whole positioning strategy of White Society is dramatically different from its
American paragons from budding to developmental phases.
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Figure 93. American influence in Sohu White Society creative process
Owing to abundant resources at its mother company Sohu, White Society enjoyed a
high technology and design skills level from the budding to developmental phase.
Compared to its counterpart sites, White Society provided a more user-friendly and well-
designed navigation interface, a more personalized referring and searching function on
site. Moreover, benefiting from Sohu Note, a mature instant messenger function on the
mother site, White Society was able to allow online chatting on the site which was
original among SNS at that time. More importantly, a high level interaction of users at
the budding phase allowed the team to release a unique function called “boss switch”,
which allows users to immediately switch to Sohu search webpage if their boss suddenly
appeared.
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Figure 94. Domain-relative skills in Sohu White Society creative process

Figure 95. Interaction at organizational level in Sohu White Society creative process
With these efforts, Sohu White Society expanded with a 562% user increase rate and
514% visit time increase rate from July to December in 2009. By the end of 2009, it has
accumulated more than 15 million registered users and 3.6 million daily active users with
an average of 45 minutes visit time. Users of White Society even started to form an
online class called “little White” with the majority residing in Beijing, Shanghai,
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Shenzhen, Guangzhou, Xi’an and Shenyang. The age range is between 20 to 39 years old.
Compared to other SNS users, “little Whites” are more enthusiastic on fashion and open
to new things. However, although enjoyed technology, design, marketing and HR
advantage of Sohu in the Internet industry as well as minimal political intervention, Fang
and his team constantly failed to turn good design into profits in the fierce competition
with other SNSs.

Figure 96. Environmental uncertainty in Sohu White Society creative process

Figure 97. Political influence on each sector in Sohu White Society creative process
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As a result, White Society was forced to re-evaluate their design, devoted more time in
marketing and revenue generating strategy at the developmental phase as suggested by
Figure 97 and 98.

Figure 98.Task requirement at group level in Sohu White Society creative process

Figure 99. Job complexity at organizational level in Sohu White Society creative process
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Figure 100. Reflexivity at group level in Sohu White Society creative process

Figure 101.Group autonomy in Sohu White Society creative process

Figure 102. Team composition change in Sohu White Society creative process
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Figure 103.Team conflict in Sohu White Society creative process
As Figure 99 to 103 show, after harrowing reflexivity and debate on marketing,
sales and business model inside the team, in 2011, Sohu found out that unlike Qzone
whose mother company excels at social gaming and third-party applet based networking,
their advantage in the SNS market is information aggregation-based. This is rooted in the
fact that ohu was among the first few largest news aggregation websites in China. Both
Fang and Charles Zhang, Sohu’s CEO, have yet to make an unenviable decision to
transfer resources and attention from White Society to mini blog. Fang was moved from
White Society to Sohu mini blog, and took away core marketing talents from the original
White Society team. This caused a stir in the marketing and financial teams during the
transition. At the same time, group autonomy dropped at all aspects while both Fang and
Zhang rarely mention the progress of White Society after Sohu mini blog became a
national sensation in 2011.
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4.7.2 Highbrow aesthetics may not fit every high-end user
Taking advantage of various features at its mother site, White Society has managed
to provide a wide range of divergence and convergence innovation listed above. The aim
was to synchronize users’ experience and incorporate White Society as an organic
element of the family product tree.

Figure 104. Time allocation in Sohu White Society innovation process
With a strong and balanced team, as Figure 104 shows that White Society did not
spend too much time on finance and HR. Fang and his team believed in the power of
prototype construction, therefore they spent a lot of time at the budding phase on product
innovation based on interaction with users through user experiment and ethnography. For
example, the release of “Dream House” allowed white collars under housing price
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pressure to build up their own dram house and pay off the debt by renting it to other users.
The planning, investment and cooperation ethics in this applet broke the stealing and
bullying ethics promoted by major SNSs at that time like Kaixin001 and Xiaonei. This
design philosophy executed Fang’s original idea of White and propelled the appearance
of optimistic “little White to housing” as a substitute to the pessimistic “slaves to housing”
among white collar users. Similarly, instead of using “log on”, “user terms” and other
routine terminologies, users are “punch in” to White Society as what they do every day at
their workplace. Moreover, “bosses are not allowed to White Society” was promoted as
its key slogan so as to cater to users. Consequently, by January 2010, original applet and
social games at White Society enabled more than 600% increasing rate in gaming and
20% increasing rate in user attention while Kaixin001 and Xiaonei social games started
to stagnate.
White Society was also the first to launch credit based task completion system
among Chinese SNS to encourage user stickiness, viral marketing and cross-platform
participation. The detailed credit accumulation rules are listed below. With the launch of
integration with iPhone, Android and other platforms, White Society even provided a
special credit system to encourage users to fully utilize both end servers as they can earn
double credit by simply logging on through mobile phones. All these product innovation
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efforts did bring high level of user stickiness as the team has expected. In February 2010,
White Society ranked No.5 among the top 10 Chinese SNS. However, given Sohu’s
prestige in the industry, Fang can hardly accept the ranking as satisfactory. The team’s
devotion to artistic and fancy design on every aspect of White Society ended up in
“aesthetic fatigue” among users as ultimately what matters to them is convenient
networking experience with friends online, not how beautifully those features are
designed. Furthermore, with the prevalence of all types of SNS in China from late 2009,
these highbrow designs and marketing strategies were no longer disruptive with the high
level of homogeneity. How to turn the technology-edge into profit became the core of the
competition in the industry.
Table 10. Sohu White Society Credit Accumulation System
First upload of real image +50
complete personal file +200
Successful invite a user +50
first log-on to mobile White Society +100
First use of “by the pond” applet +50
Your pond upgraded to level 2 +100
Your pond upgraded to level 3 +200
Adopt electronic pet +50
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Your pet upgraded to level 1 +100
Your pet upgraded to level 2 +200
First mini game participation +100
Daily log on +20
Daily punch in +5
Post a message +2
Launch a mini survey +5
Participate in survey +1
Upload pictures +2
Write blogs +5
Launch and exchange words with other users +2
Share a message +5
Comment on other users content +1
Support other users’ content +1
Post a secret anonymously +5
Post a secret using real name +10
Support other users’ secrets +1
Post a resolution +5
Explain other users’ dream +5
lottery +2
Daily English learning +2
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Take daily quiz +10
Launch a challenge +5
Play a mini game +2
Talk to good friends +2
Visit other people’s space +1
Send a gift +20
Add a good friend +20
Post forwarding +5
Participate in post forwarding +1
Delete a message -2
Delete a poll -5
Delete a picture -2
Delete blog -5
Delete sharing -5
Delete comment -1
Delete anonymous secret -5
Delete real name secret -10
Delete message -2
Delete good friends -20

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Table11. Special Credit Accumulate System for Mobile White Society Users
First log on +100
Daily log on to mobile platform additional+5
Post a message through mobile +4
Post a picture through mobile +4
Post a comment through mobile +2

Figure 105. Major concerns in Sohu White Society innovation process
As Figure 105 indicates, even well-protected in the umbrella of Sohu, financial well-
being has risen quickly as a major concern for the development of White Society. It has
chosen to follow the Tencent model of added-value and virtual money oriented revenue
generation strategy. To prevent drainage of independent innovation, White Society
provided open platform for third-party from the onset. Unlike Tencent who set up a 1:1
virtual and real money exchange rate, White Society chose a moderate 100:1 virtual and
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real money exchange rate. Unfortunately, they made the same mistake like Kaixin001
who underestimated rational consumption behavior among white collars. To remedy this,
White Society provided online sales carnival during holiday seasons and imported well-
known brands to participate. Users are allowed to purchase items either by real money on
the site or credit they have accumulated with the aim to boost user participation and sales
performance at the same time. The success of this activity triggered another campaign
called “dream house comes true”, which encouraged users to accumulate more credits
through “dream house” applet and win RMB 500,000 house purchase coupon. This action
not only attracted users but also brought in commission and advertising from major real
estate companies. However, without a sustainable revenue model, these random
campaigns can only contribute to short-term impact and profit.
More importantly, the highbrow tone White Society set up for itself made it a better
platform for non-profit rather than commercial organizations. Fang believed from his
own experience that a well-planned all-encompassing blueprint for the site and good
social image will benefit the company in long-term. This is by no means wrong, yet for a
social networking site at its developmental phase, short-term performance and immediate
reaction to ever-changing market is also kernel to its future vitality. Figures below show
the improvement speed and extent dramatically dropped at the developmental which
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implicated innovation cycle consequently. This is partly due to Sohu’s strategic transition
from White Society to mini blog, partly due to excessive attention on maintaining the
highbrow positioning of the site in every aspect. Fang realized the problem and believed
that may not be easily solved for two reasons. First of all, leaders of White Society are all
at his age of 30’s, while new users of the site are all at their 20’s. The generational gap
between designer and users requires a reshuffling of core team and promotion of young
leaders who really understand the need of users. Secondly, although deemed as a leader
in Internet industry, the expansion and depth of Sohu services enjoy limited if not non-
particular competitive advantages compared to other IT giants in China. Therefore, it
faces more severe challenge in talent recruitment process even though they realized that
R&D and talent shortage are gnawing its innovation capability bit by bit. In front of all
these drawbacks, Sohu had to focus on what they are good at from the beginning:
providing and aggregating information in the new social networking environment.
Inherited the elite based blogging style which brought it success during the tide of
blogging before 2008 and Zhang’s personal influence in the celebrity circle, switching
attention to elite centered mini blog may prove to be a salvation for Fang and his team.
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Figure 106. Extent of improvement in Sohu White Society innovation process

Figure 107. Improvement speed in Sohu White Society innovation process
4.8 Douban: Chinese Amazon without stores
4.8.1 Minority hub with vitality
After obtaining a Ph.D. in Physics from the University of California, San Diego,
Yang Bo decided to return to China and start his own business. Yang’s first trial was a
travelling website for backpackers and then he joined a team of start-ups outside of the IT
industry. It was not until 2004 when he devoted all his energy to Douban that perfectly
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combines his personal interests in technology and books. In 2005, Yang spent most of his
time in Starbucks writing codes for Douban and his hard work paid off with its debut in
August, 2005. Looking back on the development trajectory, Yang is not surprised by the
fact that Douban was conceived as a personal website in the first place and he did not
consider the 10 million monthly unique visits in 2008 a benchmark for his website until
later on. By 2009, Douban had gathered 30 million monthly unique visitors, 3.6 million
registered users and12 million active users who visited the website at least 4 times in a
month. The demographics of Douban show an even distribution between men and women.
80% have a college degree, 70% reside in the top twenty largest cities in China, and 77%
are between 21-36 years old. By 2011, Douban possessed over 40 million users, 160,000
interest groups, 1518 organizations and 4978 independent musicians.

Figure 108. American influence on different domains in Douban creative process
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As Figure 108 shows, technology and financial models in America inspired Yang
the most. The American paradigm at that time proved that starting from a niche is
perfectly fine as long as the scale and growth rates elevate relatively vigorously. This is
why Douban did not have a fully established team in the first year, nor did it absorb any
venture capital until one and half years later when all technological and design elements
managed to function properly and met the expectation of the founding team. Yang and
his team devoted great amount of time providing unique and creative design. Yang insists
that bootstrapping American models may provide an easy entry point, but the effect fades
fast. “Who is reading the book” is one of the key features to distinguish Douban from
Amazon. Apart from recommendations and reviews, products listed on the website
become social media for users to formulate their own online communities based on
shared interests. Yang managed to maintain high-level product creativity thanks to its
strong technology and design team at the budding phase as suggested by Figure 109. To
keep this advantage, Yang consciously enhanced talent maintenance and skills training at
the developmental phase.
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Figure 109. Domain-relative skills in Douban creative process
As Figure 110 and 111 indicate, Douban actively engages with users at both phases
and reflex on creative possibilities in every aspect with the growing size of its user base.
In fact, the Chinese meaning of Douban (beans) signifies grassroots, and among all
groups, more than 90% have fewer than 50 members. The original design of Douban
secured its targeted audience with a clear message to attract highly educated, small
interest groups within grassroots. First of all, Yang defines Douban as a community to
share knowledge and experience, not a shopping mall; secondly, to ensure the quality of
reviews and reference on Douban, Yang minimizes the picture posting function to meet
the taste of intelligentsia. Similarly, he does not adopt the points-collecting rewarding
system fearing that users may simply upload meaningless posts to earn points; thirdly,
Yang designs a whole line of orientation and titles to improve community cohesion.
Instead of technological slogan, all orientation lines are personal and amenable. He even
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collected ideas from users and created a “Douban dictionary” to describe life on Douban.
For example, bean sprout (Douya) is a nickname for newcomers; soy bean (Huangdou) is
a nickname for experienced users. Besides, Douban initiated “the 15 minutes of fame
group” to randomly recommend great books and cultural products. The purpose is to
offer all users an equal opportunity to establish reputation in the community.

Figure 110. Interaction with users in Douban creative process

Figure 111. Reflexivity at group level in Douban creative process
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How the role of the website as a social networking venue gradually surfaced and
grew consistently out of expectation during the development of Douban is a typical
example of how Douban’s interaction with users and reflexivity assisted creativity.
Although launched as a by-product, the formation of online communities through this
gadget soon skyrocketed and now the use of online communities and product reviews are
evenly split in popularity among average users. To maximize the potential of this element,
Douban users are allowed to create profiles and write blogs to extend their networking
process. More importantly, the networks enabled by Douban are also natural shield
against spams and predators and puts the site in a relative advantage compared to
Amazon in terms of guarantee the quality of contents published there. However, Yang
does not consider it a general pattern for online interactions to be translated into offline
interactions. He believes that Douban is a community for strangers rather than
acquaintances. The ultimate goal for these users is to discover new things through the
network rather than maintaining the network.
Nevertheless, with the growth of social networking and relaxing environment for
comments and reviews on Douban, more and more sensitive contents emerged within
different sections. To avoid suffering the fate of Fanfou, Yang and his team started to
enact strict regulation and filtering on user generated contents. This move inevitably
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annoyed Douban’s long-time users and led to small scale migration. Accordingly, at the
beginning of 2010, Yang was on the verge of determining Douban’s future: whether it
should be shaped more as an artistic review website and maintain its original flavor or be
converted to a social networking centered platform. Apart from political reason, the fast
growth of social networking on the site diluted the professionalism of reviews and
comments on Douban as more low-end users entered the space. Moreover, the rising
revenue-making potential of the social networking function of Douban compared to other
features urged Yang to reconsider his original plan of the website. In the end, Yang
decided to separate these two functions with four independent parts: Douban books,
Douban music, Douban movies and Douban community. Consequently, Douban had to
experience a new round of test by the market with changed user composition.

Figure 112. Political influence on each sector in Douban creative process
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Figure 113. Task requirement at group level in Douban creative process

Figure 114. Job complexity at organizational level in Douban creative process

Figure 115. Team composition change in Douban creative process
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Figure 116. Team conflict in Douban creative process

Figure 117. Group autonomy in Douban creative process
Because of the repositioning of Douban, task requirement and job complexity level
dramatically increased for all sectors of the company at the developmental phase. As a
result of the recession of Internet industry in 2008 and 2009, Yang was not fully
confident on securing second round investment. He chose to accomplish the transition of
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the website without hiring or firing anyone in the technology and design team. Yet, with
decreasing level of group autonomy as Yang himself has escalated to a manager and
entrepreneur, and not just a member of the technology team in the budding phase, group
conflict jumped rapidly. In Yang his own words, “each little change or new proposal had
to go through grueling debate and quarrel, nothing got passed easily”. Even so,
throughout Douban’s growing process, technology team enjoyed a privilege in the
company seen as the driving force of creativity which differentiates Douban from other
SNS. The technology team even has their own “quiet zone” to guarantee the quality of
their thinking and working processes.
4.8.2 From product innovation to valid business model

Figure 118. Time allocation on difference sectors in Douban innovation process
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Figure 119. Major concerns in Douban innovation process
As Figure 118 and 119 display, in order to successfully reconfigure the structure and
business model of the company, Douban has made continuous effort trying to balance
product and process innovation at the same time at every developmental phase. It has
explored all aspects of divergence and convergence, adding new elements to its core
products, testing the limit of the Internet and the mobile platform. By 2009, Douban had
assimilated 40 employees. With a strong emphasis on product innovation, half of the
employees are technicians and around 20 % are product designers. Interestingly still,
Yang is the only one with an educational background outside of China, while the
majority of his employees are graduates with Master’s degrees in science and technology
from Tsinghua University where Yang got his Bachelor’s degree. Production innovation
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is considered the leading competitive advantage for Douban to stand out among various
SNS in China. For Yang, low entry point means fierce competition over social resources
and marketing outreach which is not the forte of Douban. Accordingly, he deliberately
avoids the dead alley from the very beginning.
Furthermore, this fundamental objective of discovering new things also helps
Douban to deal with the issue of user privacy and advertising strategies. To begin with,
unlike Amazon users whose main objective is to purchase products, Douban users are
more interested in getting to know new things and people with similar taste; as a result,
although they can customize privacy controls, the majority choose not to as that might
hinder the experience of networking. Secondly, unlike Facebook users whose major
attention is on other users’ information rather than advertisement, Douban users are in the
shared space constantly browsing for new products, thus the effect of advertisement is
much higher in this context. Realizing that an open environment and high quality reviews
are core competiveness of Douban, Yang stopped paying attention to registered users two
years after the birth of the website and switched to monthly unique visitor as the golden
standard for its performance.
Moreover, Yang values more on the quality of reviews rather than the quantity of
commentators. Consequently, he believes that the fact that Douban caters more to niche
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users rather than the general mass is not a disadvantage, but the source of dynamics for
communities with regard to generate bonding effects among users in small groups. To
make the case, Yang argues that Douban is the Chinese Myspace for independent
musicians undoubtedly. In fact, 90% of independent musicians migrate to Douban
because of the niche characteristic of Douban communities. According to the September
26
th
Billboard 2009, Douban is rated as the most direct, transparent and lively music
community in China. Around 600,000 albums are released on Douban up to 2009 with a
monthly growth of around 10,000 new albums. Hundreds of daily reviews on these new
albums are shared among users which forebode the trend and future development of
music industry in China. Yang emphasizes the distinction between online communities
and social networking sites, and he sees the former as a potential field for Chinese
innovators to make contributions to the world.

Figure 120. Extent of improvement in each sector in Douban innovation process
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Figure 121.Improvement speed in Douban innovation process

Figure 122.Disruption in Douban innovation process
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Figure 123. Time to innovate in Douban innovation process
As Figure 121 to 123 indicate, although the improvement speed of Douban did not
drop dramatically due to its incessant innovation effort and abundant financial support
from venture capitalist, little improvement space and disruption are seen in the area of
technology and design compared to marketing, finance and HR sectors which have not
been paid too much attention to at the budding phase. The launch of Douban Radio in
2009 became a stitch of cardiotonic to the technology and design team, and it was
perceived as almost impossible to be copied with the amount of time and resources taken
to legalize music provided on the applet. However, with the rapid growth of homogenous
services on other SNS sites with strong content provision background, the leading
position of this innovation may not last too long. More importantly, Douban Radio still
relies on commission sharing with e-commerce sites that provide music to Douban,
which made its future revenue generation capability more unpredictable.
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Douban started to make profit in 2005 and received the first round venture capital in
2006, yet after four years’ time, trying to break even was still Yang’s promise. On
January 14
th
, 2009, the new version of Douban’s online magazine “9 O’clock” was
launched. On June 3
rd
, posting and reply functions are temporarily closed. On June 19
th
,
the Beta version of Douban Radio was up for enclosed public test. On July 8
th
, Douban
closed a series of functions including group reply, blog reply, signature modification,
group setting modification, “I say”, responses; meanwhile, several groups were privatized.
All these changes signaled the transformation that Douban went through. The conflict
between maintaining the minority hub status and making profits challenges the future
development of this SNS. Yang has debated between non-profit and business-driven
model, he thought about borrowing Craigslist model: small scale, VC free, IPO free but
manage to have multi-million revenues annually. This original thought soon became
obsolete given the growing speed of Douban.
However, Douban was still able to slowly reposition and restructure the site due to
strong financial resources. Yang successfully acquired first round investment of $2
million from Ceyuan Capital who gave him full freedom to practice his creative ideas in
the first place. In January, 2010, Yang announced a successful second-round financing
with two million US dollars from Ceyuan VC and EZCapital. Although language is not a
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barrier for Yang to reach out to international VC, he chose a venture company with
domestic background believing that they understand the Chinese market much better.
The involvement of these investors propelled the transition of Douban product innovation.
Although they appreciate the creative spirit and Yang’s business model, ultimately they
expect Douban to make profits. Therefore, Yang and his team had to launch the reloaded
Douban with a clearer revenue model.
Before the transition, the revenue model of Douban was based on: 1) e-commerce
commission, 2) visual and audio clicking commission, 3) movie commission, 4) user data
aggregation. Yang has managed to increase revenue four times in 2009 compared to 2008
under this model. However, this has barely allowed Douban to maintain daily operation.
In order to escalate to the next level, Yang may have to convert his belief and step into
direct sales. As a big potential contributor to revenue, Douban only had nine advertisers
in two years’ time and generated 540,000 RMB revenue. This means that a great many
advertisers are not interested in placing advertisements to Douban groups whose majority
was smaller than 50 members. To supplement group product placement, Douban
launched its own Taobao stand in 2009 selling small electricity products and handcrafts.
However, only less than 400 deals were achieved in more than one month’s time, let
alone mediocre reviews on the B2C platform. The decision of not tapping into the logistic
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world presents precious clicking rate to the hosting portal while leaving little profit space
for Douban itself. This move to the B2C realm further confused its users on the
positioning of Douban: whether it is a review site or social networking site on everyday
life.
These experiences further confirmed Yang’s decision to set up separate ports for its
key revenue generators. The latest move is “Douban reading plan” which gave full scope
to Douban’s advantage in book reviews and recommendations. Users can purchase
uploaded books with RMB1.99 per item and Douban will get 60% share in every
purchase. Yang also incorporates all key elements of the new Douban with mobile
platforms to expand its depth and profit-making potential. Yang finally understood that
Douban can only sustain itself by gaining profit-making ability, not by relying on venture
capital. Therefore, he decided not to resort to the third round financing before making
profit. Yang announced a RMB 10 million revenue by the end of 2010 and firmly
believed that they have reached the watershed of break-even. However, he believed it is
too early to craft any IPO plan before the new model is warmly embraced by users and
generate profit for the company. One big step to take is to improve its employee team.
Defining himself as technical staff at the budding stage of Douban, Yang now has to
transform his role to manager and trail-blazer. The unique user-base and the creative team
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are believed to be his biggest asset. From the original five people core team to the 40
people assembly in 2009, up till 2011, the employee camp jumped to 200 with more
balanced composition of engineers, sales, marketing and financial experts. He
acknowledged that the whole team has been arguing against each other all the time
through the brainstorming process on how to balance design and profits. Since many
employees are earlier adopter of the website, Yang believes it is a natural advantage to
know users’ behavior and preference better and ultimately the transformation should be
determined by its users as they are the ones who would actually guide the trend and test
the business model.
4.9 Moko: the social networking site for creative workers
4.9.1 Transferring personal experience to viable product

Figure 124. American influence on different domains in Moko creative process
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As the only SNS that serves the creative industry, Moko has become the biggest
sensation in China from the beginning. As CEO and founder of the company, Ma Yue’s
original idea was to provide a standardized vertical platform to entertainment business
and people in creative industries. This explains what MOKO stands for, “more
opportunities keep online”. As Chart.4.9.1 shows, unlike other SNS in China, the most
important inspiration for Moko is not an American paradigm but Ma’s own personal
experience. As a former national super model competition winner, Ma has been in the
industry for around ten years. He was tired of the chaotic environment and set the goal to
establish a transparent selection system forthis industry. Drawn from his personal
experience, he believed the so-called “hidden rules” are caused by information
asymmetry. Agents and managers have monopolized the sources of information and use
it as a jetton to exploit newcomers in the business. Moko endeavors to create more
opportunities for newcomers and potential artists by providing a two-way choice niche
platform. He believes Moko is inherently creative as the industry standard maker and will
become a real innovation when it monopolizes the market.
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Figure 125. Domain-relative skills in Moko creative process
As Figure above indicates, Ma’s founding team was composed of high-level
technology and design talents among which he himself is an example. Ma was born in a
family with an art heritage. His father is a singer and his mother is a painter. With a
Bachelor’s degree in visual arts, his shining yet transient experience in modeling business
mirrored his innermost desire to become an artist. Although his first trial of a design
company ended up with almost zero profit, he managed to weave his network in the
industry by designing personal websites for almost all super models in China. He realized
as a result of this experience that personal reference is still the major networking method
which contains big market for more diversified networking channels. Therefore, he
rearranged his design team and obtained US$ 2 million from Songlei Group to found
Songlei FMPlay Interactive Media Co. He devoted all the capital to infrastructure design,
team building and technology development.
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As Figure 126 and 127 suggest, as a brand new concept in the SNS industry
completely constructed upon the founding team’s previous experience in creative
industry, Moko’s fate was unpredictable in terms of design and marketing. They had no
clue how this platform will be received by users whether existing features meet their
demand. Although without much promotion online at the budding phase, the “beauty
bomb strategy” Moko used to provide massive Photoshop edited beauty photos on the
site quickly swept the Internet and snatched male users with a 3 million daily clicking
rate in the first 11 months of 2009. Consequently, the level of uncertainty dropped at the
developmental phase in these two aspects and allowed for more time to interact with
users and improve marketing and financial performances. The “beauty bomb strategy”
worked as a double-sword for Moko and the catalysis for Moko to transform originated
from the Moko001 imputation incident in April 2010. Observing the power of massive
beauty pictures, a copycat called Moko001 went online posting Moko members’ photos
without permission and even disseminating pornographic pictures. Although Ma
announced legal action against this copycat immediately, this incident was soon linked to
an earlier accusation against Moko that he was a whore master. Ma felt deeply hurt by the
blasphemy on his company but acknowledged that every great company is bound to make
mistakes at the founding period. As Figure 126 and 127 reflect, this incidence increased
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the level of political intervention in its marketing conceptualization, which propelled
reflexivity dramatically across all team levels. Ma began to understand that possessing
good ideas was not enough to produce desired result unless he can establish a sound
protection mechanism of his ideas.

Figure 126. Interaction with users at organizational level in Moko creative process

Figure 127.Reflexivity at group level in Moko creative process
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Figure 128. Environmental uncertainty for each sector in Moko creative process

Figure 129.Political influence on each sector in Moko creative process
Accordingly, figures above demonstrate that Ma and his team were forced to
work on effective protection mechanisms over the reputation of Moko and its original
promises to both users and the creative industry. The best strategy at hand was to control
user registration through advanced technology and design. Consequently, task
requirement and job complexity both increased at the developmental level. Although
expanding market was no longer exigent as the budding phase, it has become more
difficult for the team to maintain explosive growth at the developmental phase. What
became more urgent is its ability to recruit more talented employees and registered users
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to boost its financial performance and satisfy their investors. However, as figures below
display, although Ma augmented the original 5 people team to around 50 employees at
the developmental phase, team conflict also increased in the marketing, financial and HR
teams with the increasing need for breakthrough in these fields. Ma said he himself and
his investors were patient and confident with the current growth of the website, thus
although group autonomy suffered at the developmental phase due to new pressure, the
joyful spirit still dominated the whole company which lay the groundwork for Moko to
try out all types of creative possibilities. Up till the end of 2010, Moko has received half a
million registered users. He was planning to expand the current 40 employees’ scale to
over 50 after February 2011. The current team is dominated by designers and
programmers; and only 5 employees have modeling experience before and the majority
attained Bachelor’s degree. As one of selective few people in the team that are above 30
years old, Ma brought his design philosophy to the company decoration and culture. He
would like to present a young, fresh and innovative image not only to members coming to
the Moko headquarters, but also to his own team. He believes a creative space is more
likely to stimulate creative workers.
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Figure 130. Task requirement at group level in Moko creative process

Figure 131.Job complexity at organizational level in Moko creative process

Figure 132. Team composition change in Moko creative process
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Figure 133. Team conflict in Moko creative process

Figure 134. Group autonomy in Moko creative process
4.9.2 Full of opportunities, lack of profit-making tools

Figure 135. Major concerns in Moko innovation process
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Figure 136. Time allocation on difference sectors in Moko innovation process
Moko has incorporated all aspects of the creative industry line from production,
manufacturing to distribution online to enrich process and product innovation. In 2012,
Moko started to extend their effort to the realm of mobile phones. As most creative
people prefer iphone, they chose iPhone as the first platform for its beta version. By mid-
2011, Moko has attracted around 1.5 million registered users with slightly higher
proportion of female over male given the nature of the entertainment business, Ma never
tried to avoid describing himself as a businessman, therefore, attracting eyeballs can
hardly meet his requirement of a successful business.
Talent recruitment and financial well-being have become Moko’s major concerns at
the developmental phase which are time and energy consuming. Learning from the brand
imputation lesson, Moko started to protect and improve its brand through a constant
effort in technology and design. Despite the unhappy incident, Ma still perceived the
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“beauty bomb strategy” critical innovation to achieve its momentum at the budding phase.
At the beginning, only invited members were allowed to register on Moko in order to
maintain the quality, May did not open the FS level registration to the public until 2009.
Without real name check mechanism, Moko was soon subjected to solicitation posts on
the platform. Ma and his team were highly vigilant to the new phenomenon and launched
real name checking system. For users to update to MP and higher levels, they were even
required to provide ID documents and needed to undertake identity check at the public
safety department. Although FE members complained about these new methods, Ma
insisted on it as a principle to prevent reputation-tainted incidences.

Figure 137. Disruption from budding to developmental phase in Moko innovation
As Figure 137 depicts, the emergence of Moko was a disruption in the SNS industry
at its budding phase judging from every aspect with its unique positioning, highly artistic
design, marketing strategy and promised business model. At the current stage, all
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registrations are free and no pop-out advertisement can be found on the website. A five-
layer user classification system is employed: free service (FS) for entry-level users, MP,
VIP, SVP and MVP. All members above the MP level needs to be managed by MOKO
professionals, and each level is subject to different user restrictions. More importantly, in
order to increase affinity and familiarity with Moko, Ma designed over 100 mascots
called “Mokoman” to represent over 100 different types of jobs in the industry.
Compared to making profits, Ma is more interested in designing top-rated products and
seizing the market and designing individualized packages for users. The most visible
business models right now are: commission based recruitment agency, this is the most
irreplaceable function of Moko given the deep-root it possesses in the industry; product
placement in SNS applications, this has been proven valid by other SNS platforms. With
the further stabilization of the five-layer classification, Ma is expecting to stipulate layer-
specific charging packages.
However, with emerging copycats and the digitalization of existing offline talent
scout companies, Moko’s model gradually lost its edge in the maturity of the market.
Moreover, both extent and speed of innovation slowed down in technology and design
which are Moko’s competitive advantage in the industry. As an open platform, Ma
believed that Moko should be friendly to web-celebrities and controversial figures.
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Although these moves successfully attracted eyeballs in the first place, if also diluted
Moko’s image as a transparent, fair industry standard setting platform. Ma fully
understands that stopping the traffic is far from fulfilling Moko’s mission, thus from
October 2010, his team started to broaden the scope of artists registered at Moko and
emphasized more on two-way communication between employers and job hunters rather
than dazzling photo exhibitions. Ma even planned to cooperate with leading online
streaming websites to create live resume and demo for artists which may break new
ground for industry talent scouting. At the same time, although Ma and his team
strengthened talent recruitment and marketing strategies, it has not been turned into
concrete financial return at the current stage.

Figure 138. Extent of improvement in each sector in Moko innovation process
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Figure 139. Improvement speed in Moko innovation process

Figure 140. Time to innovate in Moko innovation process
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The lackluster financial performance of Moko despite another RMB 10 million
venture capital in 2010 dragged down the innovation speed of Moko. Currently, Moko is
still circumscribed to two major revenue models: 1) Moko employment: posting job
announcement for recruiting companies and sharing commissions with companies who
ultimately hire Moko registered users as models or actors; 2) Online video cooperation
with Youku, the largest online streaming company in China to expedite recruitment
process. However, the second model is barely a supplement to the first one while without
dominating authority in the industry, recruiting companies rather than Moko had the last
word on pricing. Without pricing power in the industry chain, marketing team at Moko
still had to nail every contract based on best price offered by recruitment companies, as
producing acceptable artistic works using Moko’s own crew is expensive. Ma revealed
that the company has already reached break-even solely by posting job announcement on
the site. However, he acknowledged that this is not even Moko’s main business. There
has already been a big gap between profit made through “beauty economy” and
advertising, while the potential of advertising in profit contribution remained falling
behind.
Ma thus decided to fully utilize the vast user data pool and charge new users as its
new revenue model to meet his goal of going public on Nasdaq in three years’ time. To
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facilitate the process, he recruited professional financial consulting company to work on
financial performances of Moko as Ma himself was unconfident on the blow-out potential
of his company. Despite Ma’s optimism, the inconvenient truth is that Moko is not only
competing with other copycats who possess less competitive resources, but large-size
offline talent companies who have more mature structure and power in the industry.
Moko has not figured out how to avoid offstage deals between users and recruiters that
will substantially affect Moko’s revenue generating ability. Meanwhile, compared to
mature offline talent companies who have established long-time verification and artists
supervision system, business morality is still a big concern for investors. After the
imputation incidence, angle capitalists have already provided three suggestions to Ma: 1)
hire professional PR firm to solve the crisis; 2) increasing advertising promotion; 3)
ameliorate and tighten registration process. However, this incidence caused Moko direct
economic loss of more than RMB 2 million as two international brand luxury car
manufacturers decided to cancel the cooperation. Even though the control mechanism
was dramatically improved consequently, with the majority of users at the age below 20
and with low education, it is difficult to predict their behaviors on Moko for the sake of
instant fame and fortune. This delayed action bomb may demolish Moko’s future
overnight hence causing more concern from the investors’ perspective.
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4.10 WE: the mobile side of SNS
4.10.1 Read Wei, Read yourself, Read the world

Figure 141. American influence on different domains in WE creative process
Compared to other SNSs we have discussed so far, WE is fundamentally different as
mobile is no longer an extensive, but principle platform here for social networking and
information dissemination. Launched in 2008 as the new news feeds based social model
serving high-end urban users with life style information, brand consumption and coupon
functions, WE existed as an original format built upon consumption culture before the
potential of mobile platform has been fully recognized in the United States. As a result,
American SNS paradigm did not have a meaningful impact on its development according
to Figure 141. Bei Zhicheng, the founder of We Media Group: the entertainment E-
magazine, has been widely known within the intelligentsia circle as the first online appeal
organizer in China twelve years ago. His sympathy to the young victim of a secretly
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placed toxic chemical in the dormitory at Tsinghua University has set the example of
integrity with his persistent investigation on the criminal. Born to a family with deep
roots in the upper-level officials’ circle, Bei is more interested in promulgating liberal
thoughts and social justice than money-making. He perceives money making as no more
than a means to better fulfill his spiritual pursuit. After successfully running the Peking
University founded software enterprise as CEO after dropping out from Mechanics at
PKU in the third year, he admitted that the venture on We is more for fun and tapping
into the new realm of mobile networking.

Figure 142. Domain-relative skills in WE creative process

Figure 143. Group autonomy in WE creative process
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Figure 144. Team conflict in WE creative process

Figure 145. Team composition change in WE creative process
Launched with a full-fledging team in technology and design that has been
successfully cultivated at his first business trial, Bei did not experience much difficulty
planning and installing the infrastructure for both the Internet and mobile versions of WE.
As most team members have been working for Bei for many years, Bei did not change
the composition of the team other than adding more marketing positions to explore the
new frontier. As Figure 142 and 143 exhibit, without the pressure to make profit in short-
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term, WE teams maintained a relatively high level of autonomy following the same
routine as in previous company although repetitive debate and internal testing occurred
more frequent in technology, design and marketing teams in order to provide an interface
that suits the need of WE customers which is a new challenge. Even so, Bei did not
consider the process too painstaking, as most employees fell into the category of their
target users and they understand the need of urban elite’s consumption behaviors well
enough to serve their need.
Consequently, as Figure 146 and 147 display, apart from a marketing team which
conducted longitudinal, extensive focus group and surveys among potential users to
figure out the best promotion channel, other teams’ idea testing processes were more
limited to self-assessment as they develop features based on data provided by marketing
team on users’ general demand and behavior patterns. At the same time, WE is almost
political intervention insulate as it only focuses on consumption and life style information.
The only concern is mobile registration and cancelling procedure. The new regulation on
content provider in 2011 asked for refund to any stop payment requirement made by
subscribers at any specific time in order to protect consumers’ rights. In different words,
if the user decides to stop the service on the second day of subscription, they will get
refund for the remaining 29 day service out of his monthly package. Content providers
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can no longer charge the full monthly package fee if the user quit in the middle like
before. Although this new policy harm content providers’ revenue making ability, Bei
believed it is actually beneficial to the industry as a lever to encourage better service to
retain users.

Figure 146. Interaction with users at organizational level in WE creative process

Figure 147. Political influence on each sector in WE creative process
WE proposed four core values to products: 1) customized information; 2) non-
conventional media that shares high-quality wireless magazine with customers to form
0
1
2
3
4
5
6
Technology team
interaction with users
Design team
interaction with users
Marketing team
interaction with suers
Financial team
interaction with users
HR team interaction
with users
Budding
0
0.5
1
1.5
2
2.5
3
3.5
Technology
team
Design team Marketing team Financial team HR team
Budding
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brand-based network among consumers; 3) advocate self-based optimistic life style, pay
more attention to details and delicacy; 4) promote mini information reading life style in
China enabled by instant, real time feedback through user network. Accordingly, as
figures below show, these core values require high-level performance in technology,
design and marketing while how well the design fit the demand is the wild card in the
budding phase of WE. As it is much easier to collect browsing and purchase patterns
among users with the help of mobile devices, it became much easier for WE team to keep
track of their users and maintain a high level of reflexivity across all sectors as they
always receive the first-hand feedback from user monitoring process.

Figure 148. Environmental uncertainty for each sector in WE creative process
0
1
2
3
4
5
6
Technology team Design team Marketing team Financial team HR team
Budding
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Figure 149. Task requirement at group level in WE creative process

Figure 150. Job complexity at organizational level in WE creative process

Figure 151. Reflexivity at group level in WE creative process
0
1
2
3
4
5
6
Technology
requirement
Design
requiremnt
Marketing
requirement
Financial
requirement
HR
requriement
Budding
0
1
2
3
4
5
6
Technology job
complexity
Design job
complexity
Marketing job
complexity
Financial job
complexity
HR job
complexity
Budding
0
1
2
3
4
5
6
Technology
reflexivity
Design
reflexivity
Marketing
reflexivity
Financial
reflexivity
HR reflexivity
Budding
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4.10.2 The odd case in front of financial performance

Figure 152.Time allocation on difference sectors in WE innovation process
As Figure 152 demonstrates, apart from the HR department which has been
stabilized long before the existence of WE, other sectors devote relatively equal amount
of time in product and process innovation at individual and group level. As the
organizational level, marketing and finance occupy most time and energy with the aim to
further develop the site. Although WE established a website, the major purpose is to draw
attention to the mobile package. The principle is to provide individualized wireless
magazine to consumers who respect easy-going life style. With visual text messages as
the major communication channel, WE encouraged instant user-provider interaction as
well as networked communication among users. Rather than separating product
manufacturers or providers from users in the form of company profile which is quite
0
1
2
3
4
5
6
7
Technology Design Marketing Finance HR
Budding Individual
Budding Group
Budding Organizational
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common among SNS, WE considers these companies part of the network and allows
direct connection. This positioning shortens the supplying chain and enables both ends to
grasps the information they need most. A clearly defined user group is the solid basis for
this endeavor. WE targets users living in the top 25 cities in China with a monthly
income over 3000 Yuan. Forty two percent of users are between 29 to 35 years old, 23%
are between 23 to 27 years old, 18% are between 18 to 22 years old, while 13% are
between 36 to 45 years old. Around 46.51% have monthly income ranging from 3000 to
8000 Yuan, 34.66% earn between 8000 to 15,000 monthly, 11.63% earn more than
15,000 Yuan monthly, while 6.98% have more than 15,000 monthly income. These
demographics reveal the purchase power of WE users, as voluntary subscribers to the
service, these product placement text messages are non-intrusive and serve as
conversation starters for both users in the mobile network and offline in the working
space. Although the current business model is to share commission with ISP and
advertisers instead of charging users, users will not be surprised if they have to pay
certain fees to get special message packages or coupons.
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Figure 153. Disruption in WE innovation process
As Figure 153 shows, the birth of WE was a disruptive product in the SNS industry
in terms of technology backup, design philosophy, marketing strategies and financial
performance. Bei summarized eight innovation points in its product and service: 1) high
arrival rate: 24 hours service with mobile phones as the end server; 2) high reading rate,
piecemeal information that allows reading during travel and leisure time; 3) exact
location based on GPS bundle to the mobile phone; 4) strata information provided to all
types of consumer needs; 5) instant advertising at brand’s request; 6) high interaction
among users anywhere, anytime; 7) easy storage and retraction of information on mobile
service backed up by on-site detailed information; 8) unlimited second-time promulgation
among users to creative massive impact.
0
1
2
3
4
5
6
Technology Design Marketing Finance HR
Budding individual
Budding group
Budding organizational
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Figure 154. Extent of improvement in each sector in WE innovation process

Figure 155. Improvement speed in WE innovation process
In order to fulfill the goals listed above, due to strong internal cooperation, WE
managed to keep substantial improvement with a quick responsive speed in almost every
sector at the budding phase except for HR. Marketing and financial performance even
stood out in the crowd. WE adopted individual-based data marketing in four major
channels: 1) user-augmentation communication based on user demographics; 2) targeted
communication reaching 25 major cities in China through multi-media messages; 3)
0
1
2
3
4
5
6
Technology Design Marketing Finance HR
Budding individual
Budding group
Budding organizational
0
1
2
3
4
5
6
Technology Design Marketing Finance HR
Budding individual
Budding group
Budding organizational
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interactive communication through mobile platform and between users; 4) need-triggered
communication, WE only provides information voluntarily requested by users or
forwarded among users. With user-driven demand and high-income user base, Bei was
not surprised about WE’s ability to generate revenue efficiently, what struck him was the
high speed of profit-making.

Figure 156. Time to innovate in WE innovation process

Figure 157. Major concerns in WE innovation process
0
1
2
3
4
5
Individual Group Organizational
Budding
0
1
2
3
4
5
6
Budding individual
Budding group
Budding organizational
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Figure 156 and 157 exhibit that the innovation cycle at the budding phase for WE
was relatively fast inasmuch as marketing was the major concern for the company. The
fast profit-making process may be exciting news to the team and investors who also
invested Douban without an obvious return, yet it may not necessarily thrill Bei
personally. He has established a couple of successfully running software companies
simultaneously and with his personal interest in pursuing social changes in Chinese
society rather than making money at the current stage, he is worried about having too
many pies in his hands. “I have earned enough money and this adventure is purely
triggered by my interest in the new media platform. I did not expect WE to make money
so easily and quickly, now it is impossible to close down the business as I thought I
would do in a couple of years.” Apparently, the easy success of WE did not challenge Bei
enough with his curiosity to pierce into the mobile media market, “however, this business
may work as a pilot for my social movement initiative. Yet, I know clearly that
disseminating consumption content is completely different from disseminating sensitive
issues. Staying off the record may still be the best choice for the latter”.

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Sociability as a business model
5.1 Sociability and business success
In Chapter III, the positive relation between usability, sociability and SNS business
success was hypothesized. The founders’ background and company characteristics were
believed to be associated with usability and sociability performance. This part is
dedicated to test these hypotheses.
5.1.1 Usability
Hengzhi: 69.4
Tencent QQ: 84.2
Xiaonei: 76.7
Fanfou: 76.8
Meituan: 75.3
Kaixin001:75.6
Sohu White Society: 72.6
Douban: 74.8
Moko: 80.9
WE: 84.6
A regression analysis was conducted with business success as the criterion variable
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and usability as the predictor. Usability was a significant predictor of business success,
β= .26, t (1998) = 12.10, p=. 00, and accounted for 68% (R
2
= .17) of the variance in
business success scores. There is a moderate significant positive relationship between the
level of usability and business success. r (1998) = .30, p <.05. To identify major
contributors in usability scale, a multiple regression was conducted predicting revenue
from the ten usability items. Overall, the regression was significant, F (10, 1998) = 35.31,
p=.00, R
2
= .38. Of the predictors investigated, five were significant. Willingness of
frequent use (β= .30, t (1998) = 11.39, p=. 00); system complexity (β= -.08, t (1998) =
3.71, p=. 02); imagine others using the system easily (β= .05, t (1998) = 2.12, p=. 03);
system cumbersome to use (β= -.12, t (1998) = -.54, p=. 00); need to learn a lot before
use (β= .04, t (1998) = .07, p=. 00). Among predictors investigated, need to learn a lot
before use have strong negative correlation with business success (r (1998) = -.68, p
<.05). Willingness of frequent use (r (1998) = .36, p <.05) has moderate positive
correlation with business success; system complexity (r (1998) = -.22, p <.05) has
moderate negative correlation with business success. Imagine other using the system
easily (r (1998) = .18, p <.05) has small positive correlation with business success.
System cumbersome to use (r (1998) = -.20, p <.05) has small negative correlation with
business success. Since a good SUS score should be aove 68, Chinese SNS achieved
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success in general accordingly. Chinese SNS companies scored high on providing users
with confidence to use the platform and do fairly well with system integration, intuitive
navigation and willingness to use the system frequently. They also minimize
inconsistency, complexity and cumbersome features. Yet they still need to work on a
self-explanatory interface with burgeoning multi-platform feature so that users do not
have to learn a lot before use the system.

Figure 158. Usability breakdown
After one-way ANOVA, usability varied by developmental phases and cities. For
developmental phase, F (2, 1997) = 21.65, p=.00, η2= .50, suggesting strong effect.
Tukey’s post hoc procedure indicated that SNS at developing phase (M=29.80, SD= .11)
has lower usability score compared to budding phase (M=32.10, SD= 1.4). SNS at
developing phase (M=29.80, SD=.11) has lower usability score compared to maturity
phase (M=31.69, SD=.23). There is no significant difference in usability score between
0 1 2 3 4 5
frequent use
easy to use
system integration
imagine easy to use for others
confidence in using the system
Mean
Mean
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budding and maturity phases. After independent sample t-test, usability varied by gender
and proprietary nature. Female scores on usability (M=31.45, SD=4.37) are higher than
male scores (M=30.03, SD=4.03), t (1998) = -7.5, p<.05, d= -.33. Indigenous companies
score higher in usability (M=31.27. SD=3.80) compared to transnational-network based
companies (M=29.55, SD=4.41), t (1998) = 9.34, p=.00, d=.42. SNSE scored higher on
usability (M=31.00, SD= 4.35) compared to IK (M= 30.23, SD=4.09), t (1998) = -2.43, p
<.05, d=-.21.
After one-way ANOVA, founder’s age and size of the company do not contribute to
usability variance. The founder’s overseas experience, start-up experience and
educational backgrounds are meaningful fixed factors. For founder’s overseas experience,
F (2, 1997) = 19.05, p=.00, η2= .10, suggesting small effect. Tukey’s post hoc procedure
indicated that founders that were educated in China (M=31.11, SD= .11) has higher
usability score compared to those educated and worked abroad (M=30.21, SD= 1.0).
Founders who solely studied abroad have the lowest usability score (M= 28.99, SD= .32).
For start-up experience, F (2, 1998) = 129.08, p =.01, η2= .61, suggesting strong effect.
Founders with Bachelor’s degree (M=33.57, SD=.22) outperformed those with below
Bachelor’s degree (M=30.49, SD=.13). Founders with Master’s degree fell behind in
usability performance (M=29.72, SD=.21). After independent sample t-test, usability
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varied by founders’ major and proprietary nature. Engineering majors score higher on
usability (M=30.56, SD=4.31) than social science majors (M=29.82, SD=3.74), t (1998)
= 9.32, p<.05, d= .18. Indigenous companies score higher in usability (M=31.27.
SD=3.80) compared to transnational-network based companies (M=29.55, SD=4.41), t
(1998) = 9.34, p=.00, d=.42. SNSE scored higher on usability (M=31.00, SD= 4.35)
compared to IK (M= 30.23, SD=4.09), t (1998) = -2.43, p <.05, d=-.21.
4.12.2 Sociability
A regression analysis was conducted with business success as the criterion variable
and sociability as the predictor. Sociability was a significant predictor of business success,
β= -5.65, t (1998) = -12.74, p=. 00, and accounted for 17% (R
2
= .17) of the variance in
business success scores. There is a strong significant positive relationship between the
level of sociability and business success. r (1998) = .40, p <.05. After one-way ANOVA,
sociability varied by companies, developmental phases, proprietary nature, founders’
educational background, overseas experience, start-up experience, major background, and
gender. For companies, F (9.1990) = 123.02, p=.00, η2= .36, suggesting moderate effect.
Tukey’s post hoc procedure indicated that, Tencent QQ enjoyed a vast lead in sociability
compared to other companies. Independent sample t-test suggests that sociability varies
between Information Seeking and Knowledge Sharing SNS (IK) and SNS based
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Entertainment (SNSE), SNSE sociability (M= 112.38, SD= 11.16) is higher than IK
sociability (M= 109.57, SD= 7.72), t (1998) -6.62, p=.00, d=-.30.

Figure 159. Sociability by company name
For the developmental phase, F (2, 1997) = 40.93, p=.00, η2= .14, suggesting small
effect. Tukey’s post hoc procedure indicated that SNS sociability at maturity phase
(M=117.60, SD= 6.5) is higher than budding phase (M=110.41, SD=5.4), and the
budding phase is higher than developing phase (M=108.17, SD=4.8). For founders’
educational background, F (3, 1996) = 44.42, p=.00, η2= .73, suggesting strong effect.
Tukey’s post hoc procedure indicated that in descending order, founders with Bachelor’s
degree achieved highest sociability (M=115.29, SD= 4.5), followed by founders with
Master’s degree (M=110.10, SD=3.2), then founders with Doctoral degree (M=108.42,
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SD=3.5), with founders with below Bachelor’s degree the lowest (M= 107.59, SD=4.2).
For overseas experience, F (2, 1997) = 35.90, p=.00, η2= .03, suggesting small effect.
Tukey’s post hoc procedure indicated that in descending order, founders studied and
worked abroad achieved highest sociability (M=113.20, SD= 8.1), followed by founders
educated in China (M=111.42, SD=11.0), then founders studied abroad without working
experience (M=108.72, SD=7.5). For start-up experience, F (2, 1997) = 107.81, p=.00,
η2= .07, suggesting small effect. Tukey’s post hoc procedure indicated that in descending
order, founders started business before and succeeded achieved highest sociability
(M=113.65, SD= 7.4), followed by first trial attempters (M=112.90, SD=11.7), then
founders who started business before and failed (M=108.2, SD=7.5).
Independent sample t-test suggests that sociability varies between indigenous and
international-network based SNS, indigenous sociability (M= 112.10, SD= 11.00) is
higher than international-network based sociability (M= 109.22, SD= 6.7), t (1998) 2.83,
p=.01, d=. 13. Independent sample t-test suggests that sociability varied between
founders with engineering and social science major background, founders with
engineering background (M= 111.20, SD= 9.6) attained higher sociability compared to
founders with social science background (M=106.20, SD=6.6), t (1998)= 7.28, p=.00,
d= .52. Independent sample t-test suggests that female and male users rate sociability
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differently, female sociability score (M= 115.21, SD= 8.6) is higher than male score
(M=106.19, SD=7.6), t (1998) = -24.72, p=.01, d= -1.08.
To identify major contributors in sociability scale, a multiple regression was
conducted predicting revenue from the variables system performance, social climate,
benefits and reciprocity, people, interaction richness, self-presentation, support for formal
interaction. Overall, the regression was significant, F (7, 1992) = 272.99, p=.00, R
2
= .56.
Of the predictors investigated, all were significant. System performance (β= .04, t (1998)
= 3.06, p=. 00); social climate (β= -.05, t (1998) = .01, p=. 00); benefits and reciprocity
(β= -.05, t (1998) = .01, p=. 00); people (β= -9.09, t (1998) = .01, p=. 00); interaction
richness (β= .34, t (1998) = .01, p=. 00); self-presentation (β= -.07, t (1998) = .01, p=. 00);
support for formal interaction (β= .18, t (1998) = .01, p=. 00). Among predictors
investigated, the followings have strong positive correlation with business success,
interaction richness (r (1998) = .68, p <.05); benefits and reciprocity (r (1998) = .47, p
<.05); self-presentation (r (1998) = .46, p <.05); system performance (r (1998) = .40, p
<.05). While the followings have moderate negative correlation with business success,
social climate (r (1998) = -.31, p <.05); support for formal interaction (r (1998) = -.30, p
<.05). People (r (1998) = -.10, p <.05) has no or negligible correlation with business
success. Chinese SNS companies scored high on social climate, benefits and reciprocity,
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system performance and support for formal interaction; but achieved low score on self-
presentation, interaction richness, and people.

Figure 160. Sociability breakdown
After independent sample t-test, these sub-constructs varied between IK and SNSE
except for system performance. SNSE outperforms IK in the following aspects: social
climate, SNSE (M= 24.40, SD= 2.6), IK (M= 21.83, SD= 4.1), t (1998) = -15.76, p=.00,
d=1.7; people, SNSE (M= 15.54, SD= 2.1), IK (M= 11.48, SD= 2.5), t (1998) = -4.06,
p=.00, d=.21; self-presentation, SNSE (M= 9.32, SD= 1.5), IK (M=8.78, SD=3.7), t
(1998) = -3.89, p= .00, d=.14. Meanwhile, IK outperforms SNSE in the following aspects:
benefits and reciprocity, IK (M= 19.90, SD= 3.1), SNSE (M= 17.54, SD= 3.1); t (1998) =
2.36, p=.00, d= .10; interaction richness, IK (M= 13.63, SD= 2.48), SNSE (M= 12.16,
SD=3.31), t (1998) = 10.26, p=.00, d=1.1; support for formal interaction, IK (M=14.11,
0 5 10 15 20 25
System Performance
Social Climate
Benefits & Reciprocity
People
Interaction Richness
Self Presentation
Support for Formal Interaction
Mean
Mean
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SD=2.60), SNSE (M=13.46, SD= 2.04), t (1998)= 5.95, p=.00, d=.13.
For SNSE specific sociability, a regression analysis was conducted with business
success as the criterion variable and game sociability as the predictor. Game sociability
was a significant predictor of business success, β= -5.65, t (1998) = -7.95, p=. 00, and
accounted for 70% (R
2
= .70) of the variance in business success scores. There is a strong
significant positive relationship between the level of game sociability and business
success. r (798) = .84, p <.05. After one-way ANOVA, game sociability varied by
companies, founders’ educational background. For companies, F (3,796) = 812.89, p=.00,
η2= .75, suggesting strong effect. Tukey’s post hoc procedure indicated that, , Tencent
QQ surmounted all other SNSEs in game sociability, Xiaonei enjoyed a slight lead
compared to Kaixin001 and Sohu, while there is no significant different between
Kaixin001 and Sohu. For founders’ educational background, F (2,797) = 117.20, p=.00,
η2= .74, suggesting strong effect. Tukey’s post hoc procedure indicated that founders
with Bachelor’s degree (M=106.51, SD= 3.9) achieved higher game sociability compared
to those with Master’s degree (M= 84.95, SD=2.9) and those with below Bachelor’s
degree (M=84.12, SD=2.3). But there is no significant difference between founders with
master’s and below bachelor’s degree.
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Figure 161. Game sociability by company name
Independent sample t-test suggests that game sociability varies between SNSEs at
developing and maturity phase. Developing phase game sociability (M= 84.07, SD= 5.58)
is lower than maturity phase game sociability (M= 96.08, SD= 11.64), t (798) = -18.59,
p=.00, d=-1.3. Independent sample t-test suggests that game sociability varies between
indigenous and transnational-network based SNSEs. Indigenous SNSE game sociability
(M= 95.20, SD= 12.60) is higher than transnational-network based game sociability (M=
84.07, SD= 5.59), t (798) = 15.03, p=.00, d=1.1. Independent sample t-test suggests that
game sociability varies between founders who were educated in China and those who
studied abroad without working experience. Founders educated in China achieved higher
game sociability (M= 95.20, SD= 12.20) than founders who studied abroad without
working experience (M= 84.95, SD= 5.24), t (798) =15.03 p=.00, d=1.1. Independent
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sample t-test suggests that game sociability varies between first trial and those who
started business before and failed. First start-up trials achieved higher game sociability
(M= 91.53, SD= 11.87) than those who have started a business before and failed (M=
87.40, SD= 5.40), t (798) =6.71 p=.00, d=.55.
To identify major contributors in game sociability scale, a multiple regression was
conducted predicting revenue from the variables symbolic physicality, inherent
sociability, multiplay asynchronicity, inter-application interactivity, perceived
playfulness and stickiness. Overall, the regression was significant, F (6, 793) = 660.48,
p=.00, R
2
= .82. Of the predictors investigated, all were significant expect for symbolic
physicality. Inherent sociability (β= .19, t (798) = 9.16, p=. 00); multiplay asynchronicity
(β= .19, t (798) = 11.59, p=. 00); inter-application interactivity (β= .47, t (798) = 20.00,
p=. 00); perceived playfulness (β= .27, t (798) = 12.16, p=. 00); stickiness (β= .88, t (798)
= 4.3, p=. 00). Among predictors investigated, the followings have strong positive
correlation with business success, inter-application activity (r (798) = .84, p <.05);
perceived playfulness (r (798) = .68, p <.05); inherent sociability (r (798) = .66, p <.05);
stickiness (r (798) = .55, p <.05). While multiplay asychronicity has moderate positive
correlation with business success (r (798) = .39, p <.05). Symbolic physicality has
moderate negative correlation with business success (r (798) = -.37, p <.05). As displayed
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below, Chinese SNSE companies scored high on multiplay asychronicity, stickiness and
inherent sociability; but achieved lower scores on perceived playfulness, inter-application
interactivity and symbolic physicality.

Figure 162. Game sociability breakdown
5.1.3 Individual case analysis on product innovation
According to Chart 5.1.6, Hengzhi stands above the industry and IK average in
system complexity, technical support needed, system integration and nimble system
design. Yet it falls behind in terms of users’ willingness to use frequently, easy to use,
system consistency, confidence to use and it requires more pre-knowledge. This reality is
closely related to its high-end target strategy with the assumption that these business
professionals should be more comfortable with terminology and they should be more
tech-savvy than the average. Based on Chart 5.1.7, Hengzhi outperforms its IK peers in
0 5 10 15 20
Symbolic Physicality
Inherent sociability
Multiplay asynchronicity
Inter-application interactivity
Perceived Playfulness
Stickiness
Mean
Mean
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providing better social climate, people, support for interaction. It presents a dramatically
higher achievement compared to its IK peers in people and self-presentation related items.
However, it falls short on people compared to the SNS industry as a whole. More
importantly, its system performance is lower than both industry and peer average, which
is resonant to its usability score. To further understand its sociability performance, we
need to take into consideration their innovation of digital services based on the
innovation typology.

Figure 163. Hengzhi usability performance

0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Hengzhi
Overall
IK
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Figure 164. Hengzhi sociability performance
Table 12. Hengzhi Innovation Typology

0
5
10
15
20
25
30
Hengzhi
Overall
IK
Convergenc
e
Integration Fusion
Platform integration
Hengzhi Internet and
mobile
synchronization
Innovation of digital services at Hengzhi
Divergenc
e
Single change Dual change
Platform change
Hengzhi mobile
apps shuffle
Product change
Hengzhi Q&A
business card
Process change
User incentive
plans
Platform-product
change
Yoopay
Product-Process
change
Hengzhi dollar based
services
Platform-process
change
N/A
Process integration
Hengzhi project
collaboration
Product integration
N/A
Product fusion
N/A
Process fusion
N/A
Product-process
fusion
N/A
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Hengzhi set the goal to differentiate itself from LinkedIn by enhancing user
interaction and community stickiness without compromising social quality. Accordingly,
it devoted most energy to product change, process and product-process change. Instead of
simply sending out networking requests, Hengzhi enforces business card completeness
before networking actions and installs 1 to 6 degree screening. Moreover, it allows users
to directly post Q&A on project collaboration and recruitment. This effort proffers users
with a space similar to bulletin board, which has been the most popular feature among
Chinese users from the early days of Internet. What makes it different now is that people
can post multimedia messages on the platform. Moreover, Hengzhi established a
systematic user incentive system bundled with virtual dollar to quantify social activities
that may lead to productivity offline. This function is deeply rooted in the fact that
Hengzhi accumulated early adopters through offline interpersonal networks.
Consequently, the trust based network was nurtured from the onset and easily translated
into the online world. This is why Hengzhi outperforms its IK peers in terms of the
people element. Hengzhi has essentially become a space for emerging business stars’
debut and reputation building. Therefore, self-presentation, benefits and reciprocity,
social climate are key areas to attract and maintain users. As a late comer in adopting
mobile platform, Hengzhi is lame in system performance in order to fully maneuver the
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two different media. This is also why they do not master interaction richness. Although
Hengzhi did a good job on process integration, its product and platform integration are
still at preliminary stage. It has not fully utilized resources from other venues, and it is
still on a long way towards any type of fusion at the current stage.
According to Figure 165, Tencent QQ beats its SNSE peers and industry average
across the whole board with special advantage in willingness of frequent use, easy to use,
system integration and imagining others learn quickly. This result reiterates the belief in
low-end users from the origin. Tencent perceives this group to be the ultimate revenue
driver of the business and created every detail of their product line to feed their needs.
Based on Chart 5.1.10, again, Tencent Qzone sweeps the board in almost every aspect of
sociability with the exception of social climate. The concern over QQ security skewed the
score in that tons of QQ numbers were hacked at the developmental stage. Although QQ
implemented stricter monitoring system to prevent this afterwards and substantially
diminished hacking rate, apparently the nightmare was still hanging upon users’ mind.
This has a profound impact on QQ’s overall performance as almost all of its products can
be associated with QQ number thus may be breached. It presents a dramatically higher
achievement compared to its SNSE peers on benefits and reciprocity, interaction richness
and support for formal interaction. A closer look at Chart 5.1.11 reveals why Tencent
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Qzone manages to stay on top in the SNS industry.

Figure 165. Tencent QQ usability performance

Figure 166. Tencent QQ sociability performance
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Tencent QQ
Overall
SNSE
0
5
10
15
20
25
30
Tencent QQ
Overall
SNSE
DIGITAL CREATIVITY 296

Table 13. Tencent Qzone Innovation Typology

Convergence
Integration
Fusion
Platform integration
Qzone Internet and
mobile synchronization
Innovation of digital services at Qzone
Divergenc
e
Single change Dual change
Platform change
Qzone mobile
Product change
icons/avatar
space skin
Process change
N/A
Platform-product change
Automatic info feeds
Product-Process change
Interaction based social
games
Platform-process change
Mobile status updates
Process integration
N/A
Product integration
Third party social
games or info searching
Product fusion
N/A
Process fusion
N/A
Product-process
fusion
Real-time
chatting
DIGITAL CREATIVITY 297

Qzone takes advantage of its umbrella of products to enrich the social networking
experience across single and dual changes. The ‘anywhere anytime’ feature of mobile
platform goes in accordance with its core product, QQ instant messenger. Yet, QQ did
not stop at integrating different sources and introducing third-party developers. They
fused real-time chatting with gaming, blogging and tagging features in both its online and
mobile versions to maximize the bundle effect of its killer app. This strategy soon drove
other competitors in the industry out of the game as it is simply fruitless competing with
QQ given its fully established vast user base. Tencent enjoys an apparent lead in inherent
sociability, multiplay asychronicity, inter-app interactivity, and perceived stickiness.
However, Qzone can hardly be accused as playing the user card as they provide the most
bountiful selection pool of self-presentation gadgets like icons, avatar and space skins.
The multi-dimensional social experience unleashed by Qzone represents the “one-stop
social platform” goal set by its founder and the whole team. That is also why Tencent
scores high on perceived playfulness.

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Figure 167. Xiaonei usability performance

Figure 168. Xiaonei sociability performance
Xiaonei does not enjoy any particular advantage in usability industry-wise or among
its peers other than imagine others to learn the system quickly and confidence in using
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Xiaonei
Overall
SNSE
0
5
10
15
20
25
30
Xiaonei
Overall
SNSE
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the system. It is inferior in aspects like willingness of frequent use, easy to use, system
integration. And it is accused of cumbersome system. This explains why Xiaonei
gradually ran out of steam as it tried to load too many features on the same platform
without organizing them in manageable manners. Xiaonei only has tiny advantage over
its peers in social climate, people, benefits and reciprocity. But it falls behind in all other
aspects of the sociability scale. A closer look at gaming specific sociability performance
suggests that Xiaonei only achieved slightly higher score on inherent sociability,
perceived playfulness and stickiness. The reason goes back to its attempt to do too many
things at the same time without any specialty. Users can easily find alternatives to all
types of features offered on the site that it becomes extremely difficult to maintain user
stickiness to the community. Table 14 reveals the same problem once again. Xiaonei
steps into almost all corners of single, dual change as well as integration. They brought in
mobile synchronization, API, incentive plans and campus star promotion, self-
presentation gadgets like photo editing and sharing, personalized skin; they even added
group purchase feature to the site. They adopted reactive rather than proactive attitude
towards new forms of social activities online and gradually lost its way in the incessant
follow-up with latest features. They spent most of the time integrate different sources
without fuse them to create its own competitive products. This also leads to low
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performance on inter-app interactivity in gaming specific sociability.
Table 14. Xiaonei Innovation Typology

Convergence
Integration Fusion
Platform integration
Xiaonei Internet and
mobile synchronization
Divergenc
e
Single change Dual change
Platform change
Xiaonei APP
Brew
Product change
New social features
Personalized skin
Process change
Campus star

Platform-product
change
Mobile gaming
Product-Process change
Social games for
reputation in
community
Platform-process change
Mobile incentive program
Process integration
News/tweets sharing
Photo editing & sharing
Product integration
API
Group Purchase on site
Product fusion
N/A
Process fusion
N/A
Product-process
fusion
N/A
Innovation of digital services at Xiaonei/Renren
DIGITAL CREATIVITY 301

Figure 169. Fanfou usability performance

Figure 170. Fanfou sociability performance
Fanfou stands above the industry and IK average in system integration and stays
around average in the rest of usability aspects. Fanfou was among the first to introduce
API and mobile aspect to the website, and it has successfully incorporated these two
elements into its system at the budding phase. After the close down drama, Fanfou
managed to maintain the momentum although encountered a series of technological
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Fanfou
Overall
IK
0
5
10
15
20
25
System
performance
social
climate
benefits and
reciprocity
People Interaction
richness
Self
presentation
Support for
formal
interaction
Fanfou
Overall
IK
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glitches at the comeback debut. Based on Figure 170, Fanfou outperforms its IK peers in
providing better social climate, people and self-presentation. However, it falls short on
interaction richness, support formal interaction, system performance benefits and
reciprocity. To further understand its performance, we need to take into consideration its
innovation typology.
Fanfou was an early bird to integrate different sources, especially mobile and other
instant messenger systems. The purpose was to provide more in-depth social experience.
Fanfou even incorporated location base service and instant photo uploading function to
encourage multimedia presentation on both web and mobile platforms. Fanfou’s early
adopters were avant-gardes in cultural and social circles, thus the discussion atmosphere
at Fanfou was intellectual and friendly, contributing to an amiable social climate. More
importantly, these early adopters have strong demand for self-presentation online and
took every opportunity offered by Fanfou to fulfill this goal. These two aspects served as
driving force to user growth at the budding phase. Moving on to developmental phase, as
most users came back with sympathy to the site, they are even more genial to members of
this recovered community and consider participation a demonstration of their standpoint
online.

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Table 15. Fanfou Innovation Typology

Convergence
Integration Fusion
Platform integration
Fanfou Internet and
mobile synchronization
Divergenc
e
Single change Dual change
Platform change
Fanfou mobile apps
shuffle
Product change
Imaging, editing
choices

Process change
Automated
tweets
Platform-product
change
SMS feeds
Product-Process change
N/A
Platform-process
change
LBS services
Process integration
Instant tweeting and
chatting
Product integration
API, MSN and QQ
Messenger
Product fusion
Photo upload and
tweet
Process fusion
N/A
Product-process
fusion
N/A
Innovation of digital services at Fanfou
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Yet, Fanfou did not provide users with many customizable features, tangible
rewards or group activity. At the budding phase, it even did not control the quality of
conversation as Wang believed that the reputation system will take care of everything.
These deliberate choices led to low sociability score on interaction richness, support
formal interaction, benefits and reciprocity. The low score on system performance is
highly related to the unexpected shut-down due to political intervention. It took
additional time and resources to reconfigure the system so that it stays relevant in the new
mini blog competition.
Meituan stands above the industry and IK average in system integration, system
consistency. It requires less pre-knowledge in using the system and has low complexity.
It stays around average in imagining others learn the system quickly. Meituan was the
first of its kind when it made its debut to Chinese SNS users, thus it took a learning
period for them to get used to group purchase activities online and built up trust in online
purchase given the low credibility level of e-commerce in China. Meituan outperforms its
IK peers in providing better benefits and reciprocity and support for formal interaction.
These advantages come naturally as users receive tangible rewards based on real life
rules by participating in group activities. And the whole buying and selling process is
based on authentic information and identity. However, it falls short on social climate,
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people and self-presentation. It is determined by the fact that users are grouped together
for deals and information, not making friends. They expect the recommendation and
authentication network to gain benefits, not to provide social or emotional support.

Figure 171. Meituan usability performance

Figure 172. Meituan sociability performance
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Meituan
Overall
IK
0
5
10
15
20
25
Meituan
Overall
IK
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Wang understands the nature of network on Meituan well so as to innovate services
around the core business. Meituan devoted great effort identifying users’ location and
make recommendations accordingly, they also integrate mobile and web functions to
encourage more frequent browsing and buying activities. More importantly, Meituan
maximized the networking effect by allowing group texting function over the mobile
platform. This not only helps users to get the word out to their friends but also boosters
Meituan’s user base. It provides Meituan with first-hand data on consumption patterns
and recommendation effect. This instant response system also helps Meituan to get quick
feedback on their consumption experience so that they know the quality of deals and
what type of deals should be approved in the future.

Figure 173. Kaixin001 usability performance

0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Kaixin001
Overall
SNSE
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Table 16. Meituan Innovation Typology

Convergence
Integration Fusion
Platform integration
Meituan Internet and
mobile synchronization
Innovation of digital services at Meituan
Divergenc
e
Single change Dual change
Platform change
Meituan mobile
apps shuffle
Product change
Meituan mail
system
Process change
Deals
recommendation
Platform-product
change
SMS updates
Product-Process change
Interactive customer
service/White list
Platform-process change
LBS deal searching
Process integration
Social sharing of deals
Product integration
N/A
Product fusion
N/A
Process fusion
N/A
Product-process
fusion
N/A
DIGITAL CREATIVITY 308

Figure 174. Kaixin001 sociability performance
Kaixin001 stands out in easy to use and confident to use compared to both industry
and SNSE average. It does not require much pre-knowledge before use. Although its
system integration is higher than industry average, it is below average among its peer.
Similar to Xiaonei, Kaixin001 strived to win back users by adding more products to the
site without arranging them properly. Kaixin001 was the trailblazer of various divergent
and convergent products. They almost explored every corner of the innovation typology.
Despite heavy emphasis on products, they lack process and product-process fusion to
simplify user experiences. Consequently, users are lost in choices and no wonder they get
users’ complaint on cumbersome and inconsistent system. And despite high inter-app
interactivity, Kaixin001 is lackluster in all other gaming specific sociability categories,
suggesting that their intention to integrate products failed. Kaixin001 scores higher in
0
5
10
15
20
25
30
Kaixin001
Overall
SNSE
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people since most users have already known their connections offline before interaction
online and they seldom reach out to strangers. Although Kaixin001 achieved higher score
on social climate compared to industry average, it has zero advantage among its peer.
This has a lot to do with the fact that users are more concentrated on playing games or
forwarding posts that they spend little time on sharing opinions or in-depth
communication. With a decaying quality of games on the site, benefits and reciprocity,
interaction richness, support for formal interaction and system performance all started to
drop heavily and fall behind industry and peer average.

Figure 175. Kaixin001 gaming specific sociability

0
2
4
6
8
10
12
14
16
18
20
Kaixin001
Overall
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Table 17. Kaixin001 Innovation Typology

Convergence
Integration
Fusion
Platform integration
Kaixin001 Internet and
mobile synchronization
Divergenc
e
Single change Dual change
Platform change
Kaixin001 mobile
apps shuffle
Product change
Localized social
games
Process change
Auto feeds
Platform-product change
One click mobile play
Product-Process change
Interactive branding and
social games
Platform-process
change
N/A
Process integration
Commenting and
sharing
Product integration
Group purchase, Radio
Product fusion
Photo upload
and editing
Process fusion
N/A
Product-process
fusion
N/A
Innovation of digital services at Kaixin001
DIGITAL CREATIVITY 311

Figure 176. Sohu White Society usability performance

Figure 177. Sohu White Society sociability performance
Sohu White Society does not have any comparative advantage in the industry apart
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Sohu
Overall
SNSE
0
5
10
15
20
25
30
Sohu
Overall
SNSE
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from less technical support needed. As a relatively latecomer into the territory of SNS, by
the time Sohu White Society came into users’ sight, they have already been accustomed
to fundamental interface of SNS. Therefore, despite the high-end design style and strong
technical team, White Society does not possess absolute superiority in usability
performance. Sohu White Society enjoys slightly better system performance but falls
behind in almost all other features except for social climate. On the one hand, the
majority of users are white collars with higher education background, they are more
likely to be polite and tolerant to members of the community. On the other hand, Sohu
White Society devoted a lot of energy into creating a white collar friendly environment.
To begin with, they created a whole line of products derived from office terminology and
experiences like boss button and Sohu Note. Then it fully understands that white collars’
need to kill commute time, thus they provided auto-feeds and location based services on
the mobile platform. However, White Society only scratched the surface on each feature
without fully unleashing the potential of their dual change and integration services.
Therefore, the attraction of these innovation was soon replaced by the emergence of mini
blog which serves as a more immediate and convenient platform to socialize among
white collars.

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Table 18.Sohu White Society Innovation Typology

Convergence
Integration
Fusion
Platform integration
WS Internet and mobile
synchronization
Divergenc
e
Single change Dual change
Platform change
WS mobile apps
shuffle
Product change
Boss button,
apps naming
system
Process change
Auto tweets and
updates
Platform-product
change
N/A
Product-Process change
Task completion
system, social games
Platform-process change
Instant msm and tweets
Process integration
News browsing and
sharing
Product integration
Sohu Note, alumni bus,
online radio, mini blog
API
Product fusion
N/A
Process fusion
LBS
recommendation
Product-process
fusion
N/A
Innovation of digital services at White Society
DIGITAL CREATIVITY 314

Figure 178. Douban usability performance

Figure 179. Douban sociability performance
Based on Figure 177, the high-profile tech team at Douban contributes to higher
system consistency and its users have higher confidence to use the system. However,
their intricate design with higher system performance also leads to higher system
complexity, difficulty using the site and users believe they need to learn a lot before use.
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Douban
Overall
IK
0
5
10
15
20
25
30
System
performance
social
climate
benefits and
reciprocity
People Interaction
richness
Self
presentation
Support for
formal
interaction
Douban
Overall
IK
DIGITAL CREATIVITY 315

Douban’s constant quality control effort and encouragement on rising sub-groups led to
superior social climate and self presentation. Building up reputation and positive self-
image through comments and recommendation network on Douban is the living
philosophy of the community. Therefore, it is more likely to achieve an amiable
environment with users respecting each other’s effort to introduce more interesting new
things to the community. To maintain the momentum, Douban also introduced Douban
daily activity to encourage cooperation and more frequent visit to the site. Douban may
well be the only SNS in China that achieved all types of innovation in digital services. It
not only integrates mobile and web products and process, but also incorporated Radio
Frequency Identification (RFID) system allowing users to search for items through their
phones after scanning ISBN code. This provides a solid base for Douban to provide fresh,
instant reviews and recommendations on site that are not easily beaten by other online
venues. More importantly, Douban added algorithm based “guess what you like” feature
and city based feeds to extend the network. The whole team quickly responded to the fast
growth of sub-group and community activities although it was not part of the original
design.

DIGITAL CREATIVITY 316

Table 19. Douban Innovation Typology

Convergence
Integration
Fusion
Platform integration
Douban Internet and
mobile synchronization
Divergenc
e
Single change Dual change
Platform change
Douban mobile
apps shuffle
Product change
15 minutes fame
Douban
dictionary
Process change
Guess what you
like
Platform-product change
Douban mail
Product-Process change
Douban community
Douban daily activity
Platform-process change
Instant message
Product integration
API, Douban FM, 9
O’clock magazine
Product fusion
Douban city based
feeds
Process fusion
ISBN bar code scan
and searching

Product-process
fusion
Review and instant
chatting
Innovation of digital services at Douban
Process integration
Information feeds and
sharing
DIGITAL CREATIVITY 317

Figure 180. Moko usability performance

Figure 181. Moko sociability performance
As a brand new SNS model in China, Moko achieved low system complexity, high
confidence to use. It requires less need to learn a lot before use and users do not need
much technical support. However, the revamp of Moko in response to the defamatory
incidence caused higher system inconsistency. Moko provides much higher benefits and
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Moko
Overall
IK
0
5
10
15
20
25
System
performance
social
climate
benefits and
reciprocity
People Interaction
richness
Self
presentation
Support for
formal
interaction
Moko
Overall
IK
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reciprocity. It also allows for strong self presentation. As a training, scouting and
marketplace for creative people, Moko explored new promotion product and process for
its users. Moko cooperated with leading online video streaming site to produce visual
resumes for registered users. They also launched top girl weekly campaign not only to
promote users but to enable product placement. Each week, they publish a series of
photos with female users showcasing sponsors’ products, e.g. clothes, and jewelry,
among othersMembers of the community can vote for their favorite girls and also check
out products listed in the side box. Moreover, Moko enabled photo based fashion
recommendation that allows users to receive automatic reviews on photos they browse.
All these efforts allow users to enjoy tangible rewards and real world benefits through
building a multi-dimensional self-image online. Nevertheless, Moko scores low on social
climate, people and support for formal interaction. Given the fact that most users have
determined goals to gain fame and fortune through this platform, it is not surprising to
spot low level of group activity, affective communication on Moko. Similarly, the
number of existing social contacts in the system and proximity to contacts on Moko are
low given most users are linked through weak ties.

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Table 20. Moko Innovation Typology

Convergence
Integration Fusion
Platform integration
Moko Internet and
mobile synchronization
Divergenc
e
Single change Dual change
Platform change
Moko iphone
app
Product change
Moko portfolio
online courses
Process change
Moko job board
Moko top girl
Platform-product
change
N/A
Product-Process change
Job posting and sharing
Star Scout package
Platform-process change
N/A
Process integration
Moko exhibition and
sharing
Product integration
Online video streaming

Product fusion
N/A
Process fusion
Moko display and
fashion
recommendation

Product-process
fusion
N/A
Innovation of digital services at Moko
DIGITAL CREATIVITY 320

Figure 182. WE usability performance

Figure 183. WE sociability performance
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
WE
Overall
IK
0
5
10
15
20
25
System
performance
social
climate
benefits and
reciprocity
People Interaction
richness
Self
presentation
Support for
formal
interaction
WE
Overall
IK
DIGITAL CREATIVITY 321

Table 21. WE Innovation Typology

WE excels at willingness of frequent use, low system complexity, easy to use,
confidence to use. It does not require much technical support, and is not cumbersome to
Convergenc
e
Integration Fusion
Platform integration
WE Internet and
mobile
synchronization
Innovation of digital services at WE
Divergenc
e
Single change Dual change
Platform
change
WE mobile
apps
Product change
Customized
content
package
Process change
Brand real time
updates
Platform-product
change N/A
Product-Process
change
N/A
Platform-process
change
Text message updates
Process integration
LBS coupon search
Product integration
N/A
Product
fusion
N/A
Process
fusion
N/A
Product-process
fusion
N/A
DIGITAL CREATIVITY 322

use. However, with its heavy reliance on mobile platform, it provides less system
integration and more inconsistency occurs on the web version. WE enjoys high system
performance, interaction richness, profound benefits and reciprocity. And most of WE
innovation are focused on the mobile platform, therefore no fusion has been created on
the site. The highly customizable information package designed by WE based on strong
ties and bountiful economic, socio-emotional rewards provided by its information
network contributes to this leading fields. Similar to Moko, with clear task of finding
deals and life style information on the site, low level of self-presentation and affective
communication happens on WE. However, WE presents higher level of people
involvement compared to its IK peer as users are more likely to pass on information to
closest friends through texting method.

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Innovation with Chinese characteristics: coping with uncertainty
6.1.1 Under the disguise of American copycat
Although frequently accused of American copycats, Chinese SNS are slightly
influenced by American influence in general with a mean of 2.21. Design and financial
strategies stand above the mean, while technology, marketing, human resource are below
the mean. To identify factors that have an impact on the level of American influence, we
discovered that after a one-way analysis of variance to evaluate the relationship between
American influence on the creative process of Chinese SNS and the defining features of
companies under study including company size, developmental phase, proprietary nature,
founders’ overseas experience, founders’ educational background, founders’ major,
founder’s start-up experience, founders’ age group, founding team size and understanding
of SNS. The following factors contribute to how much the company is influenced by
American paradigm:
1) company size
The ANOVA was not significant for any of the creative element except for
American influence on finance, F (2, 18) = .83, p= .01. The strength of relationship
between company size and American influence on creative process, as assessed by
η2 was strong, with company size factor accounting for 37% of the variance of the
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dependent variable. Follow-up tests were conducted to evaluate pairwise differences
among the means. Because the variances among the three groups ranged from .25 to
2.5, we chose not to assume that the variances were homogeneous and conducted
post hoc comparisons with the use of the Dunnett’s C test. There was a significant
difference in the means between small and large size companies, but no significant
differences between small and medium, or medium and large size companies.
Financial strategies of small size companies are more likely to be influenced by
American paradigm compared to big ones.
2) developmental phase
The ANOVA was not significant for any of the creative element except for
American influence on design, F (2, 18) = 2.25, p=.01. The strength of relationship
between developmental phase and American influence on creative process, as assed
by η2 was medium, with developmental phase factor accounting for 20% of the
variance of the dependent variable. Follow-up tests were conducted to evaluate
pairwise differences among the means. Because the variances among the three
groups ranged from .01 to 2.1, we chose not to assume that the variances were
homogeneous and conducted post hoc comparisons with the use of Dunnett’s C test.
There was a significant difference in the means between budding and developing
DIGITAL CREATIVITY 325

phase, but no significant difference in the means between developing and maturity
phase or between budding and maturity phase. American influence on design
dramatically declined at the developing phase compared to budding phase.
3) proprietary nature
The ANOVA was not significant for any of the creative element except for
American influence on design and financial strategies. For the design element, F (1, 19) =
8.95, p =.01. The strength of relationship between proprietary nature and American
influence on creative process, as assessed by η2 was strong, with proprietary size
accounting for 32% of the variance of the dependent variable. Transnational network
based companies are more likely to be influenced by American paradigm in the prototype
design of their sites compared to indigenous ones. For financial strategies, F (1, 19) =
10.06, p=.01. The strength of relationship between proprietary size and American
influence on creative process, as assessed by η2 was strong, with proprietary size
accounting for 35% of the variance of the dependent variable. Transnational network
based companies are more likely to adopt American financial finesses compared to
indigenous ones.
4) founders’ overseas experiences
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The ANOVA was not significant for any of the creative element except for
American influence on financial strategies. F (2, 18) = 10.35, p=.01. The strength of
relationship between founders’ overseas experiences and American influence on creative
process, as assessed by η2 was strong, with founders’ overseas experiences accounting
for 55% of the variance of the dependent variable. Follow-up tests were conducted to
evaluate pairwise differences among the means. Because the variances among the three
groups ranged from .25 to 2.6, we chose not to assume that the variances were
homogeneous and conducted post hoc comparisons with the use of Dunnett’s C test.
There was a significant difference in the means between founders educated in China and
founders studied overseas with working experience, and between founders studied
overseas with and without working experience; but no significant difference in the means
between founders educated in China and studied overseas without working experience.
The level of American influence dwindles as it moves to studied overseas with working
experience to studied overseas without working experience, then to educated in China.
5) founders’ educational background
The ANOVA was not significant for any of the creative element except for
American influence on financial strategies. F (2, 18) = 8.88, p=.01. The strength of
relationship between founders’ education background and American influence on
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creative process, as assessed by η2 was strong, with founders’ educational background
accounting for 50% of the variance of the dependent variable. Follow-up tests were
conducted to evaluate pairwise differences among the means. Because the variances
among the three groups ranged from .16 to 2.5, we chose not to assume that the variances
were homogeneous and conducted post hoc comparisons with the use of Dunnett’s C test.
There was a significant difference in the means between founders with Master’s degree
and founders with a degree below Bachelor’s, but no significant difference between other
groups. Founders with Master’s degree are more likely to adopt American financing
methods than founders with a degree below Bachelor’s.
Accordingly, the impression that Chinese SNS design is simply an imitation of
American originators was more accurate for transnational network based companies at
the budding phase. They are accustomed to key features and interfaces of SNSs that they
have been using regularly while studying and working in the United States. When they
returned to China, the easiest starting point is to follow the prototype and adjusted it to fit
in the Chinese context. However, for most indigenous companies who were not widely
exposed to American paradigm, they simply borrowed the concept of social network and
construct it according to their own understanding of it. As most indigenous founders
consider SNS to be a network for friends, they infused the design with their
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understanding of friendship in Chinese culture thus created a space fundamentally
different from American paradigm. More fool-proof interface with detail-oriented
navigation, more individualized decorations and interaction modes, unique vocabulary
and guidelines with Chinese characteristics are just some examples of their creation in the
field of design. Yet, even for transnational network-based companies who were more
deeply influenced by American counterparts at the budding phase, they began to adopt
the same localization strategies used by indigenous companies from developmental phase
to better serve users’ demand and occupy market, as a result, American influenced
dropped at later grown-up phases.
When it comes to venture financing, Chinese SNS learned their lessons from the
American model because venture capital shortage is especially acute in the Chinese
environment as banks, in particular Beijing’s state-owned banks, refuse to serve small,
private IT companies. Most interviewees repeatedly said that the only acceptable
collateral for a loan is physical property. However, most entrepreneurs do not have
enough property to back up loans. As a result, they are cut off from China’s largest single
source of capital (Brenznitz & Murphree, 2011:120). Kellee Tsai argued that the problem
is structural, since loan officers know they will be forgiven for authorizing a loan that
turned out to be bad for an SOE, but punished for a bad loan given to a private company.
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This leads them to avoid granting loans to most private companies, especially smaller
ones (Tsai, 2002). When we take a look at sources of VC, self-input is the choice for
founders with previous successful start-up experience, while the majority of SNSs
starting from ground zero had no choice but to ask for help from venture capital
companies instead of individual venture capitalists. This is because individual venture
capitalists are more willing to invest in real-economy rather than high-technology in
China. Meanwhile, big SNSs suffer less financial performance pressure and are more
self-independent compared to small ones. These two reasons led to the basic financial
complexion of the industry: small, transnational network-based companies with founders
who have both studied and worked abroad with at least a Master’s degree are more likely
to adopt the American venture financing model in their creative process, while big player
in the industry, or founders with little experience in financing or lower degree are more
likely to craft financial strategies based on Chinese reality, in other words, utilize
whatever financial resources available within the political and economic milieu.
A closer look at the amount and sustainability of venture capital to Chinese SNS
companies suggest that big companies, diverse founding team or founders with previous
successful start-up experience are more likely to frame creative financing plan and secure
money. After running one-way variance analysis on relation between financing creativity
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and defining features of companies under study including company size, developmental
phase, proprietary nature, founders’ overseas experience, founders’ educational
background, founders’ major, founder’s start-up experience, founders’ age group,
founding team size and understanding of SNS. The following factors are major
contributors:
1) Individual level:
a) Amount of VC
The ANOVA was not significant for any of the factors except for start-up
experience and founding team diversity. Starting with start-up experience, F (2, 18) =
4.22, p=.03. The strength of relationship between start-up experience and amount of VC,
as assessed by η2 was strong, with founders’ overseas experiences accounting for 32% of
the variance of the dependent variable. Follow-up tests were conducted to evaluate
pairwise differences among the means. Because the variances among the three groups
ranged from .25 to 3, we chose not to assume that the variances were homogeneous and
conducted post hoc comparisons with the use of Dunnett’s C test. There was a significant
difference in the means between founders who successfully started business before and
first time founders, and the means between first time founders and founders who failed
before, but not significant difference between experienced founders with or without
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success before. Newcomers to the industry are less likely to craft successful financing
plans and attain venture capital compared to experienced founders. On founding team
diversity, F (2.18) = 5.56, p=.01. The strength of relationship between founding team
diversity and amount of VC, as assessed by η2 was strong, with founding team diversity
accounting for 36% of the variance of the dependent variable. Follow-up tests were
conducted to evaluate pairwise differences among the means. Because the variances
among the three groups ranged from 14.51 to 27.42, we chose not to assume that the
variances were homogeneous and conducted post hoc comparisons with the use of
Dunnett’s C test. There was a significant difference in the means between balanced teams
with engineers, marketing, financial experts and teams mainly composed of engineers
with limited marketing labors. However, there was no significant difference between pure
engineer teams and the above-said two teams.
b) Sustainability of VC
The ANOVA was not significant for any of the factors except for company size and
founding team diversity. Starting with company size, F (2, 18) = 5.73, p=.01. The
strength of relationship between start-up experience and amount of VC, as assessed by η2
was strong, with founders’ overseas experiences accounting for 39% of the variance of
the dependent variable. Follow-up tests were conducted to evaluate pairwise differences
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among the means. Because the variances among the three groups ranged from .25 to 2.8,
we chose not to assume that the variances were homogeneous and conducted post hoc
comparisons with the use of Dunnett’s C test. There was a significant difference in the
means between small and big companies, but no significant difference between small and
medium or medium and big companies. Founders are more likely to acquire sustainable
VC within a big company compared to small one. On founding team diversity, F (2.18) =
5.79, p=.01. The strength of relationship between founding team diversity and amount of
VC, as assessed by η2 was strong, with founding team diversity accounting for 39% of
the variance of the dependent variable. Follow-up tests were conducted to evaluate
pairwise differences among the means. Because the variances among the three groups
ranged from .12 to 2.7, we chose not to assume that the variances were homogeneous and
conducted post hoc comparisons with the use of Dunnett’s C test. There was a significant
difference in the means between balanced teams with engineers, marketing, financial
experts and teams mainly composed of engineers with limited marketing labors. But there
was no significant difference between pure engineer teams and the above-said two teams.
2) Group level:
a) Amount of VC
The ANOVA was not significant for any of the factors except for developmental
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phase, company size, start-up experience. Beginning with developmental phase, F (2, 18)
= 6.96, p=.01. The strength of relationship between developmental phase and amount of
VC, as assessed by η2 was strong, with developmental phase accounting for 44% of the
variance of the dependent variable. Because the variances among the three groups ranged
from .25 to 4, we chose not to assume that the variances were homogeneous and
conducted post hoc comparisons with the use of Dunnett’s C test. There was a significant
difference in the means between budding and developing as well as budding and maturity
phases, but no significant difference in the means between developing and maturity
phases. It is much easier to create feasible financial strategies at developing and maturity
phases compared to budding phase. Moving on to company size, F (2, 18) = 6.39, p=.01.
The strength of relationship between company size and amount of VC, as assessed by η2
was strong, with company size accounting for 41% of the variance of the dependent
variable. Follow-up tests were conducted to evaluate pairwise differences among the
means. Because the variances among the three groups ranged from .94 to 6.01, we chose
not to assume that the variances were homogeneous and conducted post hoc comparisons
with the use of Dunnett’s C test. There was a significant difference in the means of big
and small companies, but no significant difference between small and medium or
medium and big companies. Big companies are better at designing sounding financing
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plans than small ones. In terms of start-up experience, F (2, 18) = 45.21, p=.01. The
strength of relationship between start-up experience and amount of VC, as assessed by η2
was strong, with founders’ overseas experiences accounting for 37% of the variance of
the dependent variable. Follow-up tests were conducted to evaluate pairwise differences
among the means. Because the variances among the three groups ranged from .14 to 2.1,
we chose not to assume that the variances were homogeneous and conducted post hoc
comparisons with the use of Dunnett’s C test. There was a significant difference in the
means between first time start-up and started before but failed as well as started business
before but failed and successful start-up before, but no significant difference between
first time founder and successful start-up before. Experience in the industry is helpful in
creating financing plans even if it was not successful.
b) Sustainability of VC
The ANOVA was not significant for any of the factors except for overseas
experience, start-up experience and founding team diversity. Starting with overseas
experience, F (2, 18) = 2.17, p=.01. The strength of relationship between start-up
experience and amount of VC, as assessed by η2 was strong, with founders’ overseas
experiences accounting for 38% of the variance of the dependent variable. Follow-up
tests were conducted to evaluate pairwise differences among the means. Because the
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variances among the three groups ranged from .24 to 4.5, we chose not to assume that the
variances were homogeneous and conducted post hoc comparisons with the use of
Dunnett’s C test. There was a significant difference in the means between educated in
China and studied abroad without working experience as well as studied abroad without
working experience and studied abroad with working experience. But no significant
difference between educated in China and studied abroad with working experience.
Teams with working experience after study abroad are more likely to achieve VC
sustainability than those without working experience, and teams with overseas study
experience are more likely to maintain VC than those educated in China. In terms of
start-up experience, F (2, 18) = 6.2, p=.01. The strength of relationship between start-up
experience and amount of VC, as assessed by η2 was strong, with founders’ overseas
experiences accounting for 40% of the variance of the dependent variable. Follow-up
tests were conducted to evaluate pairwise differences among the means. Because the
variances among the three groups ranged from .10 to 2.7, we chose not to assume that the
variances were homogeneous and conducted post hoc comparisons with the use of
Dunnett’s C test. There was a significant difference in the means between first time start-
up and started before but failed as well as started business before but failed and
successful start-up before, but no significant difference between first time founder and
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successful start-up before. Experience in the industry is helpful in creating financing
plans even if it was not successful. On founding team diversity, F (2.18) = 8.02, p=.00.
The strength of relationship between founding team diversity and amount of VC, as
assessed by η2 was strong, with founding team diversity accounting for 47% of the
variance of the dependent variable. Follow-up tests were conducted to evaluate pairwise
differences among the means. Because the variances among the three groups ranged
from .04 to 2.4, we chose not to assume that the variances were homogeneous and
conducted post hoc comparisons with the use of Dunnett’s C test. There was a significant
difference between balanced teams with engineers, marketing, financial experts and
teams mainly composed of engineers with limited marketing labors. Meanwhile, there
was significant difference between teams with pure engineers and mainly engineers with
limited marketing labors. But there was no significant difference between balanced teams
and teams purely composed of engineers.
3) Organizational Level:
a) Amount of VC
The ANOVA was not significant for any of the factors except for start-up
experience and founding team diversity. Beginning with start-up experience, F (2, 18) =
5.06, p=.01. The strength of relationship between start-up experience and amount of VC,
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as assessed by η2 was strong, with company size accounting for 36% of the variance of
the dependent variable. Follow-up tests were conducted to evaluate pairwise differences
among the means. Because the variances among the three groups ranged from .94 to 6.01,
we chose not to assume that the variances were homogeneous and conducted post hoc
comparisons with the use of Dunnett’s C test. There was a significant difference in the
means first time start-up and started before but failed as well as started business before
but failed and successful start-up before, but no significant difference between first time
founder and successful start-up before. Experience in the industry is still essential at the
company level. On founding team diversity, F (2.18) = 5.67, p=.01. The strength of
relationship between founding team diversity and amount of VC, as assessed by η2 was
small, with founding team diversity accounting for 10% of the variance of the dependent
variable. Follow-up tests were conducted to evaluate pairwise differences among the
means. Because the variances among the three groups ranged from .14 to 3.7, we chose
not to assume that the variances were homogeneous and conducted post hoc comparisons
with the use of Dunnett’s C test. There was a significant difference in the means between
balanced teams with engineers, marketing, financial experts and teams mainly composed
of engineers with limited marketing labors. However, there was no significant difference
between pure engineer teams and the above-said two teams.
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b) Sustainability of VC
The ANOVA was not significant for any of the factors except for start-up
experience and founding team diversity. Starting with start-up experience, F (2, 18) =
2.22, p=.01. The strength of relationship between start-up experience and amount of VC,
as assessed by η2 was medium, with founders’ overseas experiences accounting for 20%
of the variance of the dependent variable. Follow-up tests were conducted to evaluate
pairwise differences among the means. Because the variances among the three groups
ranged from .12 to 2.4, we chose not to assume that the variances were homogeneous and
conducted post hoc comparisons with the use of Dunnett’s C test. There was a significant
difference in the means between first time start-up and started before but failed as well as
started business before but failed and successful start-up before, but no significant
difference between first time founder and successful start-up before. Experience in the
industry is helpful in secure VC even if it was not successful. On founding team diversity,
F (2.18) = 5.79, p=.01. The strength of relationship between founding team diversity and
amount of VC, as assessed by η2 was strong, with founding team diversity accounting for
45% of the variance of the dependent variable. Follow-up tests were conducted to
evaluate pairwise differences among the means. Because the variances among the three
groups ranged from .02 to 2.8, we chose not to assume that the variances were
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homogeneous and conducted post hoc comparisons with the use of Dunnett’s C test.
There was a significant difference between balanced teams with engineers, marketing,
financial experts and teams mainly composed of engineers with limited marketing labors.
Meanwhile, there was significant difference between teams with pure engineers and
mainly engineers with limited marketing labors. But there was no significant difference
between balanced teams and teams purely composed of engineers.
Accordingly, start-up experience is fundamental in determining the amount of
venture capital Chinese SNS companies can canvass across all levels. Founders’ previous
network and lessons learnt in the industry benefit not only personal development but
financing performances of the company as well. Founding team diversity works as an
important factor at the group level but the impact became weaker as it moves up to
company level. Although the auspice of big companies may contribute to easy access to
VC at the group level, the other two factors are more influential as the company grows
more mature and institutionalized. At the same time, founding team diversity plays an
important role in deciding how sustainable VC can be for Chinese SNS companies even
though it is less powerful at the organizational level. Big companies only enjoy the lead
at individual level when founders first receive support from its financial department, as it
ratchets up to group and organizational level, they still have to fight for continuous
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sources of funding. Overseas experience facilitated the financial team with their broad
outreach but may not sustain fast growing company size, while start-up experience begins
to show its prowess at group and organizational level as founders are better equipped
with resolutions to emergent financial crisis.
The problem of VC has directly affect creative process of Chinese SNS from the
onset. When it comes to challenges to Douban as well as Chinese SNS at large, Yang
acknowledged that financial support is a crucial issue for startups. Although he was lucky
to encounter a venture capitalist that encourages innovative ideas and not rush to harvest
revenues, most of the time, the first question venture capitalists asked would be whether
there is existing model in the United States to follow so as to guarantee quick return of
investment. Before the launch of IPO for creative industries in October 2009, most
startups relied on venture capital from the United States. Yet, Yang believes this
complexion could be changed if more successful original models pop up in China. But it
takes a long time to cultivate the environment given the marketing ecology in China.
Unlike American SNS that follow the path of conglomeration, most startups in China
choose to establish everything on their own which causes unnecessary waste of resources
and homogeneity.

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6.1.2 walk along the creative path
As Haragadon & Sutton (2001) rightly agued, the first step of the creative process is
capturing good ideas from a wide variety of sources. In the case of Chinese SNS industry,
founders assimilate the essence of American paradigm and their own previous working
experience at the budding phase. As they moved into developmental and maturity phase,
working experience in the industry surfaced as more important parameter for their next
creative movement. More importantly, being able to take full advantage of the open
platform proved to be a touchstone of Chinese SNS companies’ creative ability as
openness to new ideas and models set the tone for future development of the company.
The second step is keeping those ideas alive by playing with them, discussing them, and
using them. Imagining new uses of old ideas is the third part-some knowledge brokers
encourage cross-pollination by creating physical layouts that allow, or even force, people
to interact with one another. The foundation of the latter two steps is enduring domain
relevant skills. To identify factors that have an impact on the domain relevant skills, we
discovered that after a one-way analysis of variance to evaluate the relationship between
domain relevant skills required in creative process of Chinese SNS and the defining
features of companies under study including company size, developmental phase,
proprietary nature, founders’ overseas experience, founders’ educational background,
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founders’ major, founder’s start-up experience, founders’ age group, founding team size
and understanding of SNS. The following factors determine creative skills of Chinese
SNS companies.
1) Developmental phase
The ANOVA was not significant for any of the creative element except for
marketing and HR skills. For marketing skills, F (2, 18) = 1.27, p= .01. The strength
of relationship between developmental phase and marketing creative skills, as
assessed by η2 was strong, with company size factor accounting for 36% of the
variance of the dependent variable. Follow-up tests were conducted to evaluate
pairwise differences among the means. Because the variances among the three
groups ranged from 2.4 to 4.9, we chose not to assume that the variances were
homogeneous and conducted post hoc comparisons with the use of the Dunnett’s C
test. There was a significant difference in the means between budding and maturity
phase, but was no significant difference in the means between budding and
developing or developing and maturity phase. Marketing skills dramatically
improved at the maturity phase compared to budding phase. For HR skills, F (2, 18)
= 4.95, p=.01. The strength of relationship between developmental phase and HR
creativity, as assed by η2 was medium, with developmental phase factor accounting
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for 36% of the variance of the dependent variable. Follow-up tests were conducted
to evaluate pairwise differences among the means. Because the variances among the
three groups ranged from .01 to 2.1, we chose not to assume that the variances were
homogeneous and conducted post hoc comparisons with the use of Dunnett’s C test.
There was a significant difference in the means between budding and matuirty
phase, but no significant difference in the means between developing and maturity
phase or between budding and developing phase. HR creativity elevated at the
maturity phase compared to budding phase.
2) Proprietary nature
The ANOVA was not significant for any of the creative element except for
technology creativity skills, F (2, 18) = 22.17, p=.00. The strength of relationship
between proprietary nature and technology creativity skills, as assed by η2 was
medium, with developmental phase factor accounting for 54% of the variance of the
dependent variable. Transnational network-based SNS possess stronger technology
creativity skills than indigenous companies.
3) Founders’ overseas experience
The ANOVA was not significant for any of creative element except for technology
creativity skills. F (2, 18) = 4.89, p= .01. The strength of relationship between overseas
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experience and technology creative skills, as assessed by η2 was strong, with company
size factor accounting for 35% of the variance of the dependent variable. Follow-up tests
were conducted to evaluate pairwise differences among the means. Because the variances
among the three groups ranged from 1.1 to 4.2, we chose not to assume that the variances
were homogeneous and conducted post hoc comparisons with the use of the Dunnett’s C
test. There was a significant difference in the means between educated in China and
studied abroad with working experience, but no significant difference between the other
two groups.
Therefore, transnational network-based SNS companies in China with founders’
who have overseas working experiences enjoy a technology creativity edge in the early
competition, however, they do not have obvious advantage over indigenous companies in
terms of design, marketing, financial strategies and HR which are more critical elements
in the localization process. As companies grow larger and more mature, they develop
faster in marketing and HR creativity, but may stagnate in other aspects due to changing
task requirements and group composition. The fight over marketing, financing and HR at
developmental and maturity phases along with dramatic group composition change in
these sectors demand more well-discussed, edified and thought over ideas compared to
other creative elements. This is when interpretation became more prominent than analysis
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according to Lester and Piore (2004). Founders and group leaders are required to
supplement precise exchange of information with open-ended, unpredictable
conversation.
After one-way variance analysis over founders’ impact on decision making and
defining nature of companies under study, founders unanimously enjoy dominating role
in decision making, and ANOVA was not significant for any of the factors except for
founders’ relations, F (3, 17) = 7.94, p=.01. The strength of relationship between
founders’ relations and founders’ impact on decision making, as assed by η2 was medium,
with developmental phase factor accounting for 58% of the variance of the dependent
variable. Follow-up tests were conducted to evaluate pairwise differences among the
means. Because the variances among the three groups ranged from .04 to 2.4, we chose
not to assume that the variances were homogeneous and conducted post hoc comparisons
with the use of Dunnett’s C test. There was a significant difference in the means between
hired employees and founders’ former colleagues as well as between hired employees
and founders’ business partners, but no significant difference in the means between
founders’ former classmates and their former colleagues, business partners or hired
employees. Compared to the environment of big and full-fledged companies, founders
tend to have more decision power within the group of former colleagues and business
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partners. Accordingly, pure engineering background founders fell short at the second and
third step as they are more experienced with analytical skills rather than communicating
with members to create tacit knowledge. A typical case is how Kaixin001, the earlier
leader in social game based SNS fell behind due to Cheng binghao’s bigotry with
technological standard.
As Figure 184 suggests, regardless of company size, interaction with users
dramatically increased at developmental phase in the creative process; however, once it
reached stability, marketing and HR sectors gradually decreased interaction with users at
maturity phase even though financing, technology and design sectors keep collecting
feedbacks from users. At the budding phase, self-assessment is the favorite idea testing
method regardless of company size. What is different is that at developmental phase,
small and medium companies still inherit the traditional flat and individual based
working ethics in idea discussion and debate process with internal testing as major
feedback collection channel. Only when the company size aggrandized substantially to
the extent that individuals can no longer make decisions based on internal discussion will
they resort to standardized user experience methodologies like user experiments or focus
group. On the contrary, big companies started to adopt scientific user experience method
from developmental phase and maintain it as integral part of their creative process.
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Figure 184. Interaction with users by developmental phase
However, it is noteworthy to mention at this point that good management over
creative process does not guarantee leading positions in the industry. In fact, Christensen
(2002:xv) argued that “precisely because these firms listened to their customers, invested
aggressively in new technologies that would provide their customers more and better
products of the sort they wanted, and because they carefully studied market trends and
systematically allocated investment capital to innovations that promised the best returns,
they lost their positions of leadership”. These early leaders are locked in the customer
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needs rather than exploring new demands and they are less likely to adopt disruptive
technology or marketing strategies like new entrants. We witnessed how Sohu White
Society learned to face the cruel truth that mini blogs have become the next big thing and
they had to reposition their social networking strategies accordingly. We also testified
how Douban decided to reallocate resources on social networking and traditional services
facing the undeniable success of social networking features that were never part of the
original plan.
6.1.3 Translating creativity into innovation
Apparently, Chinese SNS founders are in agreement that innovation is more
important for the development of the company than creativity as in a low technology
barrier market like Chinese SNS industry. It does not matter who came up with the
original idea but who can execute and apply the idea best and generate profit to sustain
future growth of the company. With the mean of homogeneity level jumped steeply from
2.8 to 5.4 then to 6.8 from budding to maturity phases, it is not difficult to observed what
interviewees termed as “guerrilla war over market and profit” at later developmental
phases when process innovation became more crucial than product innovation. However,
in order to unravel the innovation process for Chinese SNS companies, we need to start
with product innovation which was the initial focus of the innovation process. User
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experience and interface design are major focus at budding phase, while the center of
gravity gradually shifted to marketing, financial performances and HR at developmental
and maturity phases.
An important fact here is that, as Lester and Piore (2004:41) discussed, “innovations
can be identified that did not, at least initially, address a particular need or problem, or for
which the problem became apparent only after the product was in use. In such cases, the
product developer frequently starts out without really knowing what he is trying to
create”. As most interviewees emphasized, the most important thing for them was to
launch the product online as soon as possible to test the water as they had no clue how the
product would be consumed or received by Chinese users in the first place. More
importantly, the market readiness for Chinese SNS companies at budding phase was
merely 3.6 compared to 5.7 and 6.8 at developmental and maturity phases. Some
founders who have failed experience before unanimously blame the immature Internet
environment in China for their products at their first trial. This is why Christensen (2001)
suggested companies to wait until the market has emerged and become better defined,
and then enter after it has become large enough to talk about product reception and
improvement. Once companies grow big, they should affect the growth rate of the
emerging market, so that it becomes big enough, fast enough, to make a meaningful dent
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on the trajectory of profit and revenue growth.
The very notion of product innovation as problem solving seems to suggest another
dimension within the innovative process. It raises the question of how the problems that
are to be solved come to be defined at the outset (Lester & Piore, 2004). Forbes &
Weildman (2002:146) summarized key elements of product innovation process proposed
by Integrated Design for manufacturability and marketing (IDMM) is a course taught at
Stanford University as a co-operative venture of the School of Engineering and the
Graduate School of Business: 1) need-finding: the objective was not to go out and
develop something the development engineers thought the right product or to ask
customers what they wanted, but to discover their underlying unmet and perhaps non-
obvious needs. 2) a wheelbarrow full of ideas 3) prototyping-multiple and over time 4)
cross-functional team 5) detailed marketing tests.
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Figure 185. Founding team diversity by developmental phase, company size
Small companies without much experience in the industry at the budding phase
are barely equipped with balanced founding team compared to big companies and those
with previous experience in the industry. With the majority of founding teams mainly or
purely composed of engineers, in order to undertake cross-functions, they naturally give
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privilege to technology and design tasks that they are more familiar with. However, as
interviewees described, because most of their funding members shared similar
educational background and interests, it made more sense for them to work on a project
with shared vision at the very beginning rather than diverting the attention to areas that
they are not familiar with. Accordingly, rather than finding the need according to user
data or market, they design products mainly out of personal experiments and what work
best for themselves as users. No detailed marketing tests were taken until developmental
phase when the user base reached critical mass and using patterns became clearer.
This process resonates with the concept of the value network-the context proposed
by Christensen (2002:36), within which “a firm identifies and responds to customers’
needs, solves problems, procures input, reacts to competitors, and strives for profit”.
Within a value network, each firm’s competitive strategy, and particularly its past choices
of markets, determines its ability to marshal and focus the necessary resources and
capabilities to overcome the technological and organizational hurdles that impede
innovation. For example, Tencent QQ’s consistence emphasis on low-end users
determined its social architecture across all types of platforms. Wang’s firm belief in user
experience monetizing services finally led him to e-commerce based social network.
Despite Sohu’s effort to explore its social gaming scope with the creation of White
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Society, they had to switch back to its strength on information aggregation and focus on
Weibo. Moko is the virtual marketplace for Ma Yue’s creative industry network dream.
Being able to identify and utilize resources available both inside and outside of the
company is a significant part of both product and process innovation because not all
companies are big and competent enough to innovate independently in the long run. We
witnessed how different attitude and approaches to adoption and utilization of open
platform results in dramatically different product innovation performances at the
developmental phase among Chinese SNS companies. Kaixin001, Xiaonei and the later
Renren learnt the lesson that simply providing more choices and features on the site does
not necessarily lead to more enriched user experience or stronger stickiness. Without any
killer apps at hand, the conglomeration strategy simply does not work in SNS industry
with emerging alternatives surfacing every day. At the same time, reaching out to
industry peers providing supplemental services became top choice for most Chinese SNS
companies as they further developed, even giant like Tencent gave up hope on being the
ultimate one-stop social networking platform and vainly attempted to monopolize every
stage of the industry. Therefore, it is unrealistic to monopolize all four stages of design
production, sales, distribution.
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Figure 186. Internal and external collaborations change by developmental phase and
company size
Figure 186 exhibits that while internal collaborations stay relatively stable
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throughout developmental phase and across companies of different sizes, external
collaborations elevated substantially with the expansion and growth of companies. After
one-way variance analysis over collaborations and defining nature of companies under
study, the following factors influence internal and external collaborations
1) Internal collaboration
At individual level, ANOVA was not significant for any of the factors except for
founders’ overseas experience, F (2, 18) = 5.47, p=.01. The strength of relationship
between overseas experience and internal collaborations, as assed by η2 was strong, with
company size factor accounting for 38% of the variance of the dependent variable.
Follow-up tests were conducted to evaluate pairwise differences among the means.
Because the variances among the three groups ranged from .02 to 2.4, we chose not to
assume that the variances were homogeneous and conducted post hoc comparisons with
the use of Dunnett’s C test. There was a significant difference in the means between
studied abroad without working experience and educated in China as well as studied
abroad without working experience and studied abroad with working experience, but no
significant difference between educated in china and studied abroad with working
experience. Companies whose founders studied abroad without working experience enjoy
stronger internal collaboration than companies whose founders either have working
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experience abroad or purely educated in China.
At organizational level, ANOVA was not significant for any of the factors except for
company size, F (2, 18) = 5.57, p=.01. The strength of relationship between company size
and internal collaborations, as assed by η2 was strong, with company size factor
accounting for 38% of the variance of the dependent variable. Follow-up tests were
conducted to evaluate pairwise differences among the means. Because the variances
among the three groups ranged from .04 to 1.4, we chose not to assume that the variances
were homogeneous and conducted post hoc comparisons with the use of Dunnett’s C test.
There was a significant difference in the means between small and medium as well as
small and big companies, but no significant difference between medium and big
companies. Internal collaborations tend to be stronger in small companies compared to
medium and big companies.
2) External collaboration
At individual level, ANOVA was not significant for any of the factors except for
company size, F (2, 18) = 8.15, p=.00. The strength of relationship between company size
and external collaborations, as assed by η2 was strong, with company size factor
accounting for 48% of the variance of the dependent variable. Follow-up tests were
conducted to evaluate pairwise differences among the means. Because the variances
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among the three groups ranged from .12 to 3.4, we chose not to assume that the variances
were homogeneous and conducted post hoc comparisons with the use of Dunnett’s C test.
There was a significant difference in the means between small and medium as well as
small and big companies, but no significant difference between medium and big
companies. Medium and large companies have more expansive external collaborations
than small companies.
At group level, ANOVA was not significant for any of the factors except for
company size, F (2, 18) = 9.71, p=.01. The strength of relationship between company size
and external collaborations, as assed by η2 was strong, with company size factor
accounting for 52% of the variance of the dependent variable. Follow-up tests were
conducted to evaluate pairwise differences among the means. Because the variances
among the three groups ranged from .25 to 2.6, we chose not to assume that the variances
were homogeneous and conducted post hoc comparisons with the use of Dunnett’s C test.
There was a significant difference in the means between small and medium as well as
small and big companies, but no significant difference between medium and big
companies. External collaborations tend to be stronger in big and medium companies
than small ones.
At the organizational level, ANOVA was not significant for any of the factors
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except for company size, F (2, 18) = 9.27, p=.00. The strength of relationship between
company size and external collaborations, as assed by η2 was strong, with company size
factor accounting for 50% of the variance of the dependent variable. Follow-up tests were
conducted to evaluate pairwise differences among the means. Because the variances
among the three groups ranged from .04 to 1.4, we chose not to assume that the variances
were homogeneous and conducted post hoc comparisons with the use of Dunnett’s C test.
There was a significant difference in the means between small and medium as well as
small and big companies, but no significant difference between medium and big
companies. External collaborations tend to be stronger in big and medium companies
than small ones.
Accordingly, small companies whose founders studied abroad without working
experience possess strong internal cohesion in the innovation process as they are more
self-dependent and execute ideas and decisions faster with a more manageable core team.
On the one hand, without resources advantage as medium and big companies, they have
to utilize what is available at hand. The need for external collaboration was not urgent at
the budding phase as the most important task is to crystallize their creative plans and
construct basic structure of the company. On the other hand, without working or Chinese
market experience, founders who are fresh out of school may not possess strong network
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in the industry which requires long-term accumulation. But for medium and large
companies, external collaboration is the most convenient way to save time and energy in
product innovation and market expansion at the budding phase. Meanwhile, it has also
been a strategy operated by the company for long time. Thus, they are more familiar with
the route.
A closer look at external collaborators suggest that most small companies do not
have any external collaborators at the budding phase, while medium and big companies
chose industry peers providing supplemental services over research institute, universities
or industry peers providing similar services at this phase. Industry peers providing
supplemental services is everyone’s top choice at developmental and maturity phase
regardless of company size. At these stages, although still scarce, companies started to
reach out to universities, while only giant like Tencent managed to set up its own
research institute and devote to R&D. Almost zero collaboration occurs between these
major Chinese SNS companies other than personal experience exchange. The only
exception was the tagging service link between Douban and first version of Fanfou, yet
services provided by these two companies are supplemental to each other rather than
competitive. This phenomenon reflects how fierce the competition is in each subcategory
of Chinese SNS that no company can afford losing user base by sharing platform.
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Moreover, most collaboration with university remains at the level of on-campus
recruitment for cheap labor rather than R&D cooperation. These companies believe that
university graduates understand their users better and can contribute to better user
experience and marketing strategies which can propel growth quickly. This is more
important than improving R&D as marketing and financial performance became the
focus of innovation when companies enter developmental and mature phases.
Choices made at each stage have a profound impact on the next developmental
phase. And as the commander in chief at budding phase, founders’ entrepreneurial spirit
and capability set the tone for the development of Chinese SNS companies. As Drucker
(2002:113) put it, “what all the successful entrepreneurs I have met have in common is
not a certain kind of personality but a commitment to the systematic practice of
innovation”. According to Drucker, innovation is the specific function of
entrepreneurship, whether in an existing business, a public service institution, or a new
venture started by a lone individual in the family kitchen. It is the means why which the
entrepreneur either creates new wealth-producing resources or endows existing resources
with enhanced potential for creating wealth. Lester and Piore (2004:118) further added
that new management of innovation is to “increase the flexibility of the firm and to
accelerate the speed with which it can adapt to rapid and unforeseen changes in its
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environment”. This further requires founders to be sensitive to changes in the industry
and reconfigure the company to face the challenge.
To begin with, founders need to have a good knowledge of the industry, strength and
weakness of the company. Accordingly, founders with successful experience spirit in the
past enjoy an advantage compared to less experienced ones. This is why WE, Hengzhi,
Qzone and Xiaonei under the leadership of Chen did not travel a tortuous path throughout
the developmental trajectory as their founders have stepped into every corner of the
industry and knew what to expect. It is worth noticing here that entrepreneurial spirit is a
critical component of previous experience as ultimately the company has to break even.
We have witnessed how Sohu White Society did not make the daylight even under the
guidance of chief editor with strong artistic and operational skills. More importantly,
founders should make best use of the advantages and bypass the disadvantages. We have
seen how Kaixin001 gradually lost its leading position in the subcategory due to
insufficient understanding of its company and how it achieved success. We have also
seen the painful transformation of Sohu White Society realizing their competitive
advantage is not in social games but information aggregation.
Secondly, founders need to learn from failures and understand that less experienced
ones are not necessarily always the underdog. Wang Xing’s ups and downs in the
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industry proved that by eagerly learning from previous failures, founders can establish a
well-rounded understanding of determining factors in innovation process and
successfully translate creativity into innovation. Thomke (2001:199-200) reminded us
that failures should not be confused with mistakes. Failures may actually benefit
innovation process if treated correctly.
1) Organize for rapid experimentation. Examine and, if necessary, revamp
entrenched routines, organizational boundaries, and incentives to encourage rapid
experimentation Consider using small development groups that contain key people
with all the knowledge required to iterate rapidly
2) Fail early and often, but avoid mistakes
3) Anticipate and exploit early information, recognize the full value of front-loading
Acknowledge the trade-off between cost and fidelity
4) Combine new and traditional technologies. Do not assume that a new technology
will necessarily replace an established one
Wang learned to debuild up a more diverse founding team and devote more energy to
marketing and financing skills from the failure of Xiaonei; then he learnt user
segmentation and focus on niche market from Hainei; from Fanfou he learnt to stay away
from political imbroglio and focus on the real profit generator: e-commerce plus social
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networking. With all these precious lessons, he finally successfully launched Meituan
which not only meet users’ demand of functionality, but also manage to generate profits
so that the company does not heavily rely on venture capital for its own good in future
development. However, the timeliness of learning from failures is kernel as well.
Although Cheng binghao finally recognized the importance of open platform and adopted
it, key third-party developers have already migrated to other platforms and it was just too
late to install the right solution.
Thirdly, founders may serve as the chief technology officer at the budding phase
when translating creativity into innovation was more acute, but with the development of
companies, they need to transform themselves to fit the new role of manager and
entrepreneur and turn innovation into profits. Clenching with his intelligentsia taste for
five years, Yang Bo finally realized that Douban cannot only be a small group mecca,
therefore, reconstruct it to allow more space for revenue is the only way for long-term
development. Sohu even made a bolder move to transit into mini blog based services
realizing that entertainment based social networking has become insufficient to meet
current market demand. Even tenacious geek like Cheng binghao started to acknowledge
his role transition in the development of Kaixin001, he had to cultivate marketing and
financial outlook outside of his technology box.
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6.1.4 Creative imitators’ advantage and limitations
As Shenkar (2010) proposed, creative imitators enjoy an advantage entering low-
technology barrier frontier with their ability to quickly adapt to new market demand after
observing the experience of early entrants. Most Chinese SNS companies accumulated
large user base shortly after budding phase by reconfiguring their products and marketing
approaches to fit into Chinese reality. However, Christensen (2002) and Shenkar (2010)
both reminded us that creative imitators also face difficulties keeping the momentum in
innovation process. First of all, with rising homogeneity level, they face the
differentiation challenge. As we have seen, most entertainment based SNSs in China
possess similar features and even interfaces, accordingly, they found it hard to compete
with all-encompassing giants like Tencent QQ after entering developmental phase. What
remained competitive are those SNSs that have aimed at a niche market from the very
beginning, e.g. Hengzhi, Moko, WE and Douban. However, the niche market trajectory
should be used cautiously as squaring themselves into specific strategies and categories
may limit its future options. Investing in a particular strategy or infrastructure may lower
its incentive to follow another course of action that might prove more promising.
For example, when Kaixin001 tried to expand its services to e-commerce, online
video streaming, they sadly found out that users seldom touch these new functions but
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stay in their safe zone. Shenkar (2010) believed that this expansion strategy does not
always work because established firms tend to maximize rather than optimize their
services. During 2009 to 2010, almost all SNSs in China started to build up
multifunctional platforms striving to cover all new areas in the industry. Unfortunately,
they failed to realize that without building up an infrastructure to host multiple functions
from the onset as what Tencent QQ did, these functions are rootless and almost
impossible to distract users from existing sites they have been accustomed to use for a
long time.
Secondly, imitator may not experience difficulty exploring and cultivating new
markets, but turning popularity into profit is a totally different story. Christensen (2002)
pointed out that a key determinant of the probability of an innovative effort’s commercial
success is the degree to which it addresses the well-understood needs of known actors
within the value network. Chinese SNSs were innovative in terms of utilizing mobile
platform from the beginning, and bundle features and applications with personalized
decorations, both of which well suited the Chinese context, however, advertising and
product placement are still major revenue generator. Venture capital does not guarantee
profit-making capability and even big firms like Sohu experienced difficulty breaking
even in the fierce competition. a solid business model is still fundamental to revenue
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making capability.

Figure 187. Business model readiness by company size, start-up experience
Small companies are less likely to come up with solid business model across all
levels compared to medium and big companies. However, they have better ability to
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execute business model at organizational level. Meanwhile, although newcomers in the
industry enjoy the attacker’s advantage at individual level, when it comes to execution of
the ideas at organizational level, they fell short compared to experienced peers who had
successful experience before. A closer look at Figure 188 suggests that those companies
who have well-planned and executed business models are also the ones that manage to
perform well in revenue making. Most founders avoid talking about their business
models and financial performances at the budding phase by suggesting that improving
user-experience is the most important thing at the current stage and making money is
perceived natural outcome. However, the majority realized that the process may not go so
smoothly as they expected due to various reasons. Most typical ones are free Internet
culture in China, users’ consumption patterns, incongruous value system between SNS
companies and advertisers, changing user base or dropping user numbers, disruptive
features in the industry that squeeze out living space for incumbents.
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Figure 188. Business model readiness and revenue by company names
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The inability to design sounding business plan and make profit will ultimately hurt
companies’ financing ability, which is detrimental given the immaturity of VC
environment in Chinese market. Hippel, Thomke & Sonnack (2001:33) gave two reasons
why product developers cannot come up with breakthroughs more regularly. “They fail
primarily for two reasons. First, companies face strong incentives to focus on the short
term. Second, developers simply don’t know how to achieve breakthroughs, because
there is usually no effective system in place to guide them and support their efforts”.
Apart from a few lucky ones who encountered patient VCs or possess strong financial
backup, most Chinese SNS companies are under VC’s pressure to gain fast investment
return or at least prove the ability to make money. More importantly, with rampant
marketing struggle in the industry, one can lose its stand fast than a blink. Accordingly,
occupying the market and turn the advantage into profits within short time tops their
survival skills. This leaves little space for radical innovation that requires repetitive test
and trial and may turn out in vain. Even companies that have already gone public are
constantly facing profit-making pressure, consequently, Tencent QQ seldom research and
develop radical innovation inside company but leave it to their Research Institute based
on collaboration with universities. At the same time, less than 2% of these companies
have employee training programs either from inside the firm or from outside experts to
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guide their innovation efforts, while most of the time, developers have to rely on
themselves or internal discussion to pave way through. Time allocation on talent
recruitment and retention only emerged as significant in later periods.
After one-way variance analysis over time allocation on innovative elements and
defining nature of companies under study, the following factors contribute to time
allocation patterns.
1) Developmental phase
At individual level, ANOVA was not significant for any of the innovative elements
except for time allocation on HR, F (2, 18) = 9.35, p=.01. The strength of relationship
between developmental phase and time allocation on HR, as assed by η2 was medium,
with developmental phase factor accounting for 51% of the variance of the dependent
variable. Follow-up tests were conducted to evaluate pairwise differences among the
means. Because the variances among the three groups ranged from .14 to 2.7, we chose
not to assume that the variances were homogeneous and conducted post hoc comparisons
with the use of Dunnett’s C test. There was a significant difference in the means between
budding and developing as well as budding and maturity phase, but no significant
difference in the means between developing and maturity phase. More energy and time
was spent on talent recruitment and retention at the developing and maturity phases
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compared to budding phase.
At the group level, ANOVA was not significant for any of the innovative elements
except for time allocation on marketing and HR. For marketing, F (2, 18) = 9.44, p=.00.
The strength of relationship between developmental phase and time allocation on HR, as
assed by η2 was medium, with developmental phase factor accounting for 51% of the
variance of the dependent variable. Follow-up tests were conducted to evaluate pairwise
differences among the means. Because the variances among the three groups ranged
from .02 to 2.1, we chose not to assume that the variances were homogeneous and
conducted post hoc comparisons with the use of Dunnett’s C test. There was a significant
difference in means between budding and developing as well as budding and maturity
phase, but no significant different in means between developing and maturity phase.
Marketing occupies more time at latter phases compared to budding phase. For HR, F
(2,18) = 12.52, p=.00. The strength of relationship between developmental phase and
time allocation on HR, as assed by η2 was medium, with developmental phase factor
accounting for 58% of the variance of the dependent variable. Follow-up tests were
conducted to evaluate pairwise differences among the means. Because the variances
among the three groups ranged from .10to 2.5, we chose not to assume that the variances
were homogeneous and conducted post hoc comparisons with the use of Dunnett’s C test.
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There was a significant difference in the means between budding and developing as well
as budding and maturity phase, but no significant different in means between developing
and maturity phase. HR occupies more time at latter phases compared to budding phase.
At the organizational level, ANOVA was not significant for any of the innovative
elements except for time allocation on HR, F (2, 18) = 13.24, p=.01. The strength of
relationship between developmental phase and time allocation on HR, as assed by η2 was
medium, with developmental phase factor accounting for 53% of the variance of the
dependent variable. Follow-up tests were conducted to evaluate pairwise differences
among the means. Because the variances among the three groups ranged from .12 to 3.4,
we chose not to assume that the variances were homogeneous and conducted post hoc
comparisons with the use of Dunnett’s C test. There was a significant difference in the
means between budding and developing as well as budding and maturity phase, but no
significant different in means between developing and maturity phase. HR occupies more
time at latter phases compared to budding phase.
2) Company size
At the individual level, ANOVA was not significant for any of the innovative
elements except for time allocation on HR, F (2, 18) = 16.76, p=.00. The strength of
relationship between company size and time allocation on HR, as assed by η2 was
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medium, with developmental phase factor accounting for 65% of the variance of the
dependent variable. Follow-up tests were conducted to evaluate pairwise differences
among the means. Because the variances among the three groups ranged from .12 to 3.6,
we chose not to assume that the variances were homogeneous and conducted post hoc
comparisons with the use of Dunnett’s C test. There was a significant difference in the
means between small and big companies, but no significant difference between small and
medium or medium and big companies. Big companies are more devoted to HR than
small companies.
At group level, ANOVA was not significant for any of the innovative elements
except for time allocation on marketing and HR. For marketing, F (2, 18) = 5.32, p=.01.
The strength of relationship between company size and time allocation on HR, as assed
by η2 was medium, with developmental phase factor accounting for 34% of the variance
of the dependent variable. Follow-up tests were conducted to evaluate pairwise
differences among the means. Because the variances among the three groups ranged
from .02 to 2.1, we chose not to assume that the variances were homogeneous and
conducted post hoc comparisons with the use of Dunnett’s C test. There was a significant
difference in the means between small and big companies, but no significant difference
between small and medium or medium and big companies. Big companies are more
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devoted to marketing than small companies. For HR, F (2, 18) = 23.94, p=.00. The
strength of relationship between company size and time allocation on HR, as assed by η2
was medium, with developmental phase factor accounting for 72% of the variance of the
dependent variable. Follow-up tests were conducted to evaluate pairwise differences
among the means. Because the variances among the three groups ranged from .40 to 2.4,
we chose not to assume that the variances were homogeneous and conducted post hoc
comparisons with the use of Dunnett’s C test. There was a significant difference in the
means between small and big companies, but no significant difference between small and
medium or medium and big companies. Big companies are more devoted to HR than
small companies.
At the organizational level, ANOVA was not significant for any of the innovative
elements except for time allocation on HR, F (2, 18) = 10.81, p=.01. The strength of
relationship between company size and time allocation on HR, as assed by η2 was
medium, with developmental phase factor accounting for 55% of the variance of the
dependent variable. Follow-up tests were conducted to evaluate pairwise differences
among the means. Because the variances among the three groups ranged from .12 to 3.6,
we chose not to assume that the variances were homogeneous and conducted post hoc
comparisons with the use of Dunnett’s C test. There was a significant difference in the
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means between small and big companies, but no significant difference between small and
medium or medium and big companies. Big companies are more devoted to HR than
small companies.

Figure 189. Innovation concerns for founders by developmental phase and company size
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Figure 189 further demonstrates that talent, R&D, team cohesion and political
intervention seldom bother founders at budding phase across all types of companies. On
the contrary, marketing and financial well-being are pains in the neck for them
throughout their developmental trajectory. However, to improve these two key areas,
founders inevitably recognized the importance of talents and R&D, even though these
two are more crucial for big companies rather than small and medium ones.Chart.6.1.8
exhibits that once gliding through the most unpredictable developing phase, financial
well-being became less urgent for both financial group and company as a whole even
though marketing remains crucial. The pressure is even less for big companies compared
to small and medium ones. Nonetheless, the issue of talents and R&D dramatically
elevated for all types of companies in later development.
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Figure 190. Innovation concerns for SNS companies at group and organizational level
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As Brenznitz & Murphree (2011) pointed out, the university system in China
provides the R&D and workforce with high skills but limited capabilities in team
management and in conducting in-depth long-term R&D. These limitations, coupled with
an institutional environment infused with structured uncertainty and already titled against
taking on long-term high-risk projects, further dampen business appetite to conduct
novel-product-innovation R&D activities. However, the ready supply of large numbers of
highly skilled graduates allows IT companies in Beijing to conduct sophisticated second-
generation, localization, and components R&D. Thus, the university system is critical to
the success of both the industry and its development around business models that rely on
second generation innovation and the localization or indigenization of foreign
technologies, concepts, and IT services. Even so, when the entertainment-based SNS
industry as a whole hits rocks, most interviewees pinpointed that creative imitation may
not be sufficient as well-trained technical workers and innovators with independent
thinking capacity are still scare in China.
But the educational system is not the only factor to blame given that apart from the
founding mechanism at the budding phase, few rewards systems were spotted in the
industry for average employees other than the regular promotion system. Welbourne &
Andres (1996) conducted a study of five-year survival rate of 136 companies that made
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initial public offerings in 1988 revealed that those companies that emphasized the
importance of their people and offered rewards to everyone, not just senior management,
survived at a much higher rate than those did not. Medium and small companies do not
even have any training programs to offer their employees as they are too busy dealing
with all types of pressures and the easiest way out is to alternate failed employees with
promising new ones. The same rule works for Chinese SNS. Only those who have
systematic talent recruitment, training and reward system ready stand out in the fierce
competition. Although all SNS companies understood the significance, not all of them are
resourceful enough to fulfill this goal. Yet small or budding ones can compensate
financial bonus with other incentives like employee achievement awards, on-site
recognition and promotion.

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Conclusion
The research design and analyses of this project show that the manifestation and
practices of digital creativity and innovation vary at different developmental phases and
analytical levels. The ability to accumulate and employ internal and external resources so
as to establish networks among policy makers, industrial peers, talent and research
incubators and users is the ultimate barometer of innovation model and vitality.
Consequently, founders and founding team play a decisive role in the process with
regards to maintain team diversity, domain relevant skills and finalize strategic decisions.
Venture capital is a more eminent problem for Chinese companies than political
intervention. However, sustainability and sufficiency of venture capital cannot substitute
solid business model and profit-making competence as the ultimate driving force of
innovation potential at later developmental phases. Usability and sociability are not only
the touchstone of companies’ interaction richness with users and product innovation
efforts, but also the fundamental for business success. Accordingly, in response to the
specific user demographics, user behavior, site infrastructure, social, political, economic
and cultural realities in China, Chinese SNS companies are more focused on divergent
rather than convergent innovation. They are more experienced with customized features,
social element monetization, interaction richness. Instead of extrapolating American
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paradigms to the domestic environment, Chinese SNS companies undertake different
creative and innovation mission and generate creativity and innovation patterns
entrenched in the Chinese context.
The study was designed to answer the following questions: to what extent are
Chinese SNS companies influenced by American models; what types of innovation are
achieved by Chinese SNS industry; shaping force of creative and innovation process;
determinants in creativity-innovation transition; the role of entrepreneurs in the
innovation process; the relation between usability, sociability and business success. Two
lines of research were conducted to meet the goal. Through content analysis on
longitudinal face-to-face interview with founders and managers at different sectors within
leading Chinese SNS firms, we were able to identify that the core asset of Chinese SNS
companies are entrenched in domestic cultural, social and economic reality. The heavier
influence over design and financial strategies dwindle as companies develop. Proprietary
nature, company size and founders’ overseas experience are key indicators on the level of
American influence. Individual case studies on each firm further revealed that the ability
to localize product and service are key manifestations of creativity and innovation for
these Chinese SNS companies. It is also decisive to revenue generation capabilities. We
also identified fundamental creative practices from interview materials that domain
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relevant skills are crucial in the creative process, especially for the areas of technology,
HR and marketing. Developmental phase and founders’ overseas/start-up experience
determine how well they perform in those domains. Team diversity and founders were
identified as most decisive in the creativity-innovation transition. Venture capital and
founders were further proved to be driving force in the innovation process. Individual
case studies further demonstrate that entrepreneurs as founders of Chinese SNS
companies play critical role in making decisions, transferring knowledge, directing
innovation process through trials and errors, assisting developmental phases transition.
Both content analysis and individual case studies confirmed that user demographic and
behavior, site infrastructure, financial environment, political intervention are shaping
force of creative and innovation process in China.
Based on surveys distributed to users of these leading Chinese SNS firms, univariate,
correlation and multi-linear regression tests were run to analyze the data collected. We
were able to claim usability as moderately significant indicator of business success, while
sociability is strongly significant indicator of business success. Game-specific sociability
is also strong predictor of business success for entertainment based SNS companies. The
weight of each item within the scales was measured to reveal positive and negative
correlations and developmental trajectory, founders’ background was proved key
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determinant on usability and sociability performance. Individual case studies revealed
that based on production innovation typology for digital content services, Chinese SNS
companies are good at divergence rather than convergence. And this pattern is consistent
within items in usability and sociability scales that Chinese SNS companies managed to
achieve high scores on. Case studies reinforced the finding that improving sociability and
usability is the ultimate business model for Chinese SNS companies. It is the original
impetus of creative efforts and guides creative-innovation transition. It is through the
creation, improvement and reinvention of these two elements that Chinese SNS
companies extend and utilize internal, external resources and respond to environmental
changes accordingly.
These findings suggest that Chinese SNS companies are not simply imitators and the
actual effect of American influence is limited to certain areas with a time frame.
Marketing, technology and human resource practices are deeply rooted in domestic
environment throughout the developmental trajectory. Even in the areas of design and
financial strategies, the American model is more affective to small, transnational-network
based companies, especially with founders who studied abroad with Master’s degree but
without working experience. As early adopters of innovation in the United States,
transferring American models to China provided this group of founders and companies
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with easy entry point to the industry. Nevertheless, they must adapt to local context in
order to stay relevant in the competition and this is why American impact decreases
dramatically as these companies escalated from budding to developmental phase.
Consequently, in order to capture ideas from various sources as the first step of
creative process, Chinese SNS companies at the budding phase combine the essence of
successful models in the U.S with their local knowledge. As companies grow into
developmental and maturity phases, previous working experience in the SNS industry
and local knowledge became more significant factors facilitating the next two creative
steps. Domain relevant skills are decisive on keeping ideas alive and imagining new uses
of old ideas. Technological, human resource and marketing skills are proven to be most
influential factors at these two creative stages. Constant interaction with users to collect
feedback and allow users to take the control is the bedrock to improve performances in
these three domains. Companies at the budding phase are less versatile due to limited
resources while companies at the maturity phase are crippled by rising level of
bureaucracy. Consequently, companies at developmental phase are most interactive and
productive. Furthermore, companies with founders who only studied abroad with no
working experience is left behind in the creative process compared to those with working
experience regardless of where they were educated. The major hiderance is inability to
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convey objectives to team members in an actionable fashion. They are fairly good at
completing analytical tasks when problems and solutions are identifiable and explicable,
but fall short on interpretive tasks that require interpersonal negotiations and group
coordination when solutions and results are ambiguous and involve experiments. In other
words, it takes rounds of testing and reevaluation to understand what counts as a good
idea and this effort requires two conditions: leaders preclude presumptions and fixed
models, quick responses to new changes in the environment.
Team diversity is the first significant determinant in the creativity-innovation
transition. Most Chinese SNS companies started off with a founding ream purely
composed of engineers, yet the ability to put together a dynamic marketing and sales
team determines their performance and prowess in the industry when they enter
developmental and maturity phases. Venture capital sustainability and sufficiency is the
second significant indicator in whether creativity can be translated into innovation.
Without mature financial and incubation system at both state and individual levels,
networking capability based on previous experience in the industry becomes critical for
the capital accumulation process. At the same time, Chinese SNS companies are more
eager to utilize foreign capital market to leverage financial performance due to stricter
regulations on domestic stock market. Throughout individual, group and organizational
DIGITAL CREATIVITY 386

level, team diversity and previous start-up experience are key determinants on the amount
and sustainability of venture capital.
More importantly, founders play a critical role in shaping the innovation path. They
need to first of all possess good knowledge of the industry. Knowing facts and trends of
the industry is only preliminary requirement, knowing where and how to locate resources
so as to convert ideas into actions is the fundamental capability. Secondly, founders play
decisive roles in decision making process, and the clout stays stable from budding to
maturity phases. Their ability to make right choices at transitional moments set the tone
for innovation performance along the developmental trajectory. Thirdly, founders need to
learn from failures and turn them into added value that leads to innovation. This not only
requires reflexivity but also response immediacy. Last but not the least, founders must
adjust their role from single to multiple function leader. For Chinese SNS, the biggest
challenge is how to switch the role as pure engineer at the budding phase to organization
manager at developmental and maturity phase compiling a balanced team that undertakes
ever-changing marketing and financial challenges in the industry.
The creative and innovative processes of Chinese SNS are shaped by shared
problems with American counterparts and contextual specific factors. Dropping user
numbers and limited revenue generation sources are pain in the neck for both Chinese
DIGITAL CREATIVITY 387

and American SNS companies. Yet, Chinese SNS companies are facing different
challenges in the following aspects. First of all, senior and rural users fail to drive user
growth in China as in the United States. But more Chinese users are experienced mobile
platform users and consume social media on both web and mobile devices. Social game
has become the cash cow as Chinese users are more addicted to social games and are
willing to pay for them. Chinese users are more tolerant to intrusive messages thus more
accustomed to viral marketing. Secondly, in terms of site infrastructure, the majority of
Chinese SNS fail to provide a real open platform for third party developers, and this
directly affect product innovation and networking ability among different sectors in the
industrial chain. Throughout the innovation process from individual to maturity phases,
the high homogeneity level in SNS industry makes marketing and sales top priority at all
time. Concerns over talent recruitment and retention increased substantially moving on to
later developmental phases while concerns over financial performance decreased with the
maturity of business model. Thirdly, when it comes to social and political factors,
Chinese users have distinctive networking patterns. They prefer self-presentation to two-
way communication, and they are more interested in following celebrities and opinion
leaders rather than real-life friends over the social space. Without mature financial milieu
and supportive venture capital mechanism in domestic market, the dynamic of venture
DIGITAL CREATIVITY 388

capitalist and start-up companies plays a decisive role on the conceiving and execution of
innovation at the group and organizational levels. Although content censorship does exist
in social space, it is milder than conventional online venues and it is less detrimental than
fickle regulations on industrial rules as the latter has more direct impact on business
model. Concerns over political factors only became relevant at maturity phase when SNS
companies are more enmeshed in the network of power game with state-owned enterprise
and policy makers. They are requested to fulfill more corporate citizenship and economic
responsibilities at maturity phase.
Accordingly, Chinese SNS companies achieved better performance in divergence
rather than converge in product innovation process. Fusion is the weakest link meaning
that they simply lay out as many components as possible to feed in growing demands on
diverse services, yet few companies manage to integrate different sources to improve user
experience and provide killer applications. This imbalance between component and
source recombination is also shaped by preference over internal to external collaboration.
The majority of medium and small size SNS companies are limited to cooperation with
supplemental sectors in the industrial chain, and they seldom collaborate with industry
peers or university and research institutions. Only established firms at maturity phase like
Sohu and Tencent enjoy expansive external network and dedicated university-industry
DIGITAL CREATIVITY 389

link. Tencent is the only company that owns its own research institute and recruits talents
from university to conduct R&D. For the vast majority of Chinese SNS, these
infrastructure and connections are still luxury and the key benefit they get out of the
university-industry link is cheap labors. Chinese SNS companies excel in the following
aspects: providing personalized and customized features, and these services have become
major revenue booster; integrating mobile and web features with user-friendly
synchronization and added-value services; heavier reliance on social games and more
diverse monetization strategies; more inter-application interactivity and source
integration.
These efforts in providing better usability and sociability pay off in bringing
business success. Usability turns out to be moderately significant predictor of business
success. Chinese SNS excel at providing confidence in using the system, frequent and
easy usage. Companies at developmental phase with founders who studied and worked
abroad plus successful start-up experience lead usability performance chart. SNSE
achieved higher level of usability than IK. Sociability is strongly significant predictor of
business success. Interaction richness, self-presentation, benefits and reciprocity, support
for formal interaction and system performance have strong positive correlation with
business success. Social climate has moderate negative correlation with business success.
DIGITAL CREATIVITY 390

The people element is not a significant indicator on business success. SNSE provide
higher level of sociability than IK. However, the advantage of SNSE dwindles gradually
for medium and small size companies with the dominance of Tencent in entertainment
real. This result has two implications: 1) popularity does not necessarily lead to business
success, constantly updated interactive features with monetization efforts are needed to
explore and retain the wealth of large user base; 2) Chinese SNS users are not on the
platform seeking for emotional support or open communication. Goal-driven and
recreational activities are main force on the social platform and major revenue generator.
For SNSE in particular, game specific sociability is a strong significant indicator of
business success. inter-applet interactivity, perceived playfulness, inherent sociability and
stickiness have strong positive correlation to business success. Multi-play asynchronicity
has moderate positive effect on business success. Symbolic physicality has moderate
negative effect on business success. This implies that Chinese SNS users are on the site
looking for dramatically different experience from offline life that they are not willing to
consume features extrapolating everyday rules and activities to the social platform. This
is exactly why SNSE companies proffering diverse and creative virtual goods are long-
time winner in the fierce competition.
It is important to notice that monetizing social games, providing alternative
DIGITAL CREATIVITY 391

advertising and product placement strategies across different sources are integral parts of
sociability. Maintaining user stickiness through consumption based benefits and
reciprocity does the double duty of generating sociability and liquidating business model.
Venture capital is by no means the panacea to self-sustainability. Demand for solid
business model and competence to generate profit escalated substantially as companies
move onto developmental and maturity phases. This is also a two-way communication
process that requires regular interaction with third party-developers and users so as to
incorporate user innovation into the spectrum. Accordingly, the management and design
of open platform on social networking sites is a barometer on whether the company can
synchronize sociability and business model construction processes.
The dynamic between Chinese SNS industry and American influence suggests that
creativity is multi-dimensional and we should not privilege technology and design
elements simply because they are more visible. Creativity in human resource, financial
strategies, marketing and sales performance are equally significant thus need to be
incorporated into our understanding of creative process. The weight of each element in
the creative process is contextualized and varies at different developmental phases. More
importantly, the production of novel and useful ideas defined by the social context
include both bold and minor changes on previous inventions and the intensity of changes
DIGITAL CREATIVITY 392

is highly dependent on the nature of industry under examination. In the case of social
networking site, the core technology has already been well diffused by the time it reached
China thus more crucial creative task became how to reconfigure it to better serve
Chinese users’ social networking demands based on available internal and external
resources. Consequently, instead of looking for one master indicator on creativity or
innovation, we should always understand these two concepts and their execution in the
specific social, cultural and economic context.
The transition from creativity to innovation is a learning process full of trials and
errors. The need to combine studies on analytical and interpretive dimensions suggested
by Lester and Piore (2004) should not only be applied to creative but innovation process
as well. Founders as entrepreneurs play a decisive role in this process. Founders do not
necessarily qualify as entrepreneurs in the first place. How they adjust the roles to
confront multiple requirements moving from individual to group and organizational
levels is inherent part of both creative and innovation process. Accordingly, our
examination on the role of entrepreneurs should not be centralized around their
management strategies or personality, but their background and experience in the
industry. More importantly, how their conceptions of creativity and innovation change in
response to the learning process, as their understanding of creativity and innovation has
DIGITAL CREATIVITY 393

profound implications on the actual practice within the company setting. This is to say
that we need to bring in the variable from the onset of the creative loop instead of only
examining it at the innovation phase.
More specifically for study on product innovation in digital content services,
measurement of usability and sociability provided by social networking sites is only the
first step to identify manifestations, and we need to go one step further to examine how
these efforts correlate with site performance and business success. Social networking
sites depend on the latter two to create solid business model and continue their usability
and sociability practices. Furthermore, we need to identify items that improve site
performance and profit generation capabilities based on the difference in emphasis across
different social platforms. Game specific sociability is decisive in overall performance
and business success for entertainment based SNS. The capability to provide benefits and
reciprocity, support for formal interaction and self-presentation determines business
success for information and knowledge seeking based SNS. According to the product
innovation typology, the contribution weight of convergence and divergence to
sociability varies dramatically for different types of SNS companies and divergence turns
out to be the touchstone on the tenacity of innovation practices and business success. At
the same time, we should analyze what elements lead to divergent performance in
DIGITAL CREATIVITY 394

usability and sociability. In the case of Chinese SNS, we found that developmental phase,
founders’ background are key indicators. More indicators should be explored from
studying other sectors of digital content services in other social and cultural contexts.
We learnt from the Chinese SNS lesson that it is a more practical and effective
strategy to focus on specific domains at different developmental phases instead of hitting
out to all directions. Similarly, instead of chasing ever-changing user demands by stuffing
the space with as many features as possible, companies should examine competitive
advantage first based on primary using patterns and feed those needs with customized
services through source and component integration. Reconfiguring site structure without
understanding users’ fundamental needs is simply counterproductive and may even
shutter existing user base. Being a good listener to users’ demand not only indicates
serving their technological or interaction needs, but satiating their consumption needs by
monetizing social and self-presentation features.
Social networking sites need to be utility and constructed as an open platform to
assimilate more external resources. The hope of monopolizing the market through
vertical integration is not feasible in the field of social media. Networking capability is
the ultimate determinant on the overall performance of social networking site. Only by
weaving a well-rounded web of research and development, talent retention and cross-
DIGITAL CREATIVITY 395

learning could SNS companies acquire sustainable creativity and innovation competence.
Despite the significance of venture capital at the budding phase, companies should
always privilege shared goals and values to the amount of venture capital offered in the
selection process. More importantly, bear in mind that a solid business model is always
the only way out to self-sustainability and venture capital can never be fuel delivered in
the snow.
Policy makers should provide social networking industry with a more supportive
financial environment. In the case of China, even if it is too daunting to persuade state-
owned banks to assist the developmental of social media, at least they can encourage
non-state owned commercial banks to facilitate the process. The bottom line is that the
government should recognize the equally important role of creative imitation given social
and economic reality in China and walk out of radical innovation indulgence. For stable
and sustainable development of social media industry, policy makers should stipulate
more consistent and long-term regulations so that companies could have sufficient time
strategizing and cultivating business plans. More importantly, apart from encouraging
cross-industry cooperation, policy makers should facilitate industry and university
collaboration to serve both talent cultivation and employment purposes. The continuous
supply of creative people is the innermost drive of innovation process.
DIGITAL CREATIVITY 396

The digital creativity and innovation in Chinese SNS industry has its own
manifestations embedded in the social, cultural and economic realities. Its success and
failures serve as invaluable experience for their American progenitors. Instead of slashing
the Chinese experience as counterfeits, American SNS companies should initiate
networking with their Chinese counterparts and exchange knowledge. Mark Zuckberg
has already put China on his agenda as he believes that only by encompassing the 1.6
billion population could Facebook claim itself a global social network. He visited Baidu
in 2012 and has started learning Mandarin on daily base (TechCrunch, 2010). Facebook
even sent out recruitment news to top Chinese universities offering 200,000 US dollars
per year with working visa or even green card application sponsorship in 2012
accumulating talent pool (Netease, 2012). Facebook already absorbed some of the
Chinese experience in the new look of time line including more customized profile or
background setting, integrating more sources on its own platform and amplifying the role
of social games. Yet they may run into the same dead alley of providing too many
features without organic fusion.
In terms of entering the Chinese market, the embarrassing situation that Groupon
and Zynga experienced in China set the alarm for latecomers. Both companies chose the
giant Tencent QQ as strategic partner in China. The expansion speed of Groupon in
DIGITAL CREATIVITY 397

China was too fast and the defensive alliance from local SNS companies were so strong
that Tencent had to cut off the server only 24 hours after Groupon China made its debut
in February 2011. Despite the effort of providing salary four times higher than industry
average and purchasing local companies, Groupon China has been a puppet of Tencent
and bears no competitive advantage in the segment. Zynga enjoys more freedom in the
cooperation with Tencent compared to Groupon China though severely less than with
Facebook. Instead of sharing 30% of revenue with the platform like the cooperation with
Facebook, Zynga has to share up to 60% of its revenue with Tencent in China and
comply with its open-platform agreement. Although Zynga devoted substantial amount of
time and energy to localizing its products in China, compared to local third-party
developers, it is merely another small game company striving to win contract with
industry leaders.
Conventional wisdom of acquisition, partnership with local industry leaders, hiring
indigenous talents and localizing products or services do not solve the China problem for
SNS leaders in America. Instead of singing the old song of political intervention in China,
it would be more helpful to learn the creative and innovation process practiced by
Chinese SNS companies and catch up with more localized innovation efforts. No matter
how different user behaviors or social context are, the ultimate goal of SNS companies is
DIGITAL CREATIVITY 398

always to provide better social networking experience for users and generate profits out
of the exercise. To fulfill that goal, innovators at the company level should start social
networking initiative among themselves and activate the creative loop from the first step.
The creative and innovation trajectory of Chinese SNS companies reiterates the
importance of a network perspective towards innovation studies. Both internal and
external sources that contribute to each developmental phase need to be incorporated into
the research scope. More importantly, we need to study innovation at individual, team
and organizational levels along the developmental trajectory so as to trace changing
manifestations and practices in the process. At the same time, the case of Chinese SNS
companies further emphasizes the significance of comparative approach towards the
theorization and analyses of innovation studies. Moreover, our understanding and
measurement of creativity and innovation should be contextualized to examine cultural,
social, economic and political specificities.

DIGITAL CREATIVITY 399

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Acknowledgement
This dissertation is a quintessence of my five years’ intellectual conversation and interaction
with my advisor Manuel Castells. We sailed through the exploration on my ultimate interest in
new media technology, communication power and social changes in different cultural
environments. I can hardly imagine myself dedicated to this engaging yet challenging project
without his support and inspiration. Along this choppy journey of completing the dissertation,
my committee members Ernest Wilson, Jonathan Taplin, Jay Wang and Sarah Banet-Weiser
shaped my thoughts on the subject by providing me with multi-disciplinary perspectives. At the
same time, I would like to give special thanks to all the founders of managers at Chinese SNS
companies that I interviewed. Thank you all for sharing your innovation path and creative
thoughts with me generously. I owe my heartfelt gratitude to their insights. I wrote the
dissertation while expecting for my baby and finished it taking care of the newborn. I could not
have achieved any of these without unconditional love and support from my mother who
sacrificed her personal life helping me out with the baby. She has been doing this for me in the
past 27 years of my life as an unsung hero, but now she deserves the space for recognition in my
dissertation. Last but not the least, to my ultimate inner drive and muse: my dear little angel
Priscilla, this is mama’s first gift to you and a three hundred page thank you note to god for
bringing you to mama. You are the best thing ever happened in my life.

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