Strategy & Organisational Change
Our research with colleagues from the University of Miami Herbert Business School and Wenzhou-Kean University revealed that it wasn’t just luck. It was a calculated and bold strategy that was timed to perfection. Yet it was an extremely uncertain journey, punctuated by a paradox that we call the ‘complementor’s dilemma’. At its core, the question is simple but profound. Should a complementor pursue growth, and in doing so risk the support of the very platforms it depends on for that growth? Or should it temper its ambitions to remain in their good graces, but forever remain in the shadows? This was the tension that Douyin had to navigate as it transformed itself from a peripheral player to a key company in the tech ecosystem. Between 2016 and 2018, Douyin navigated the complementor’s dilemma multiple times, managing its dependency on Weibo and WeChat while pursuing its own ambitions. As a result, the social media platform’s meteoric rise was anything but linear. We detected four distinct strategies: Resisting temptation: Douyin benefited from an initial wave of popularity, generated by the success of a viral video by a Chinese comedy star. This created the temptation for Douyin to introduce its own community features, but it held back to avoid alienating partners. As a result, its trajectory mirrored that of its competitors. Strategic collaborations: Douyin collaborated with WeChat, whose own short-form video app was faltering, while weathering resistance it faced from Weibo. This selective coupling allowed
it to capture value in promising niches, without triggering outright retaliation from those larger players. Calculated confrontation: With a growing user base, Douyin picked its moment and introduced community features, signalling its intent to compete head-on with larger platforms. Ecosystem expansion: Douyin cemented its status as a focal actor by adding e-commerce through a relationship with the online shopping platform Taobao. This final strategy marked a tipping point for Douyin. It was now a sovereign ecosystem, a self-reliant network that no longer had to rely on the technical resources or users of larger competitors to succeed. Douyin had moved from a tight coupling strategy, through a progressive decoupling, to eventually building its own momentum. This ensured that the broader environment remained favourable, despite the inevitable pushback from its larger rivals. The result has been Digital ecosystems thrive on a dilemma of co-operation and competition. Platforms collaborate to grow the pie yet compete fiercely to capture value. With that in mind, Douyin’s story offers three critical lessons for emerging digital and AI start-ups hoping to navigate ecosystem politics. 1 . Collaborate with powerful platforms. Douyin’s early growth shows how powerful collaboration can be when scaling under uncertainty. Rather than building its own user network from scratch, Douyin deliberately leveraged Weibo and WeChat’s application programming interfaces (APIs), which allow transformative for Douyin. However, it is a very hard trick to pull off.
TO THE CORE
1. Many ‘complementors’, whose products or services enhance those provided by another company, struggle to scale because larger firms do not allow it. 2. Douyin, the Chinese equivalent of TikTok, overcame this challenge and grew rapidly between 2016 and 2018 using four distinct strategies. 3. It resisted the temptation to launch its own community features to avoid alienating larger partners and forged strategic collaborations with them when the opportunity arose. 4. It then picked its moment to compete with bigger competitors carefully, and cemented its status by adding e-commerce to become a self-reliant ecosystem. W hen Douyin launched in 2016, it had no customer base of its own. The Chinese counterpart to TikTok started out as a ‘complementor’ whose products or services enhanced those of another company. It relied on tech giants like WeChat and Weibo – platforms that are comparable to Facebook and Instagram in Europe – to distribute its short-form videos. And it faced a congested marketplace, with at least 40 short-form video competitors operating in China. By 2018, that dynamic had shifted dramatically. In just two years, the company had grown from 750,000 users to 208 million, challenging its former partners for dominance. Today it boasts 750 million users and continues to generate more revenue than TikTok for parent company ByteDance, which owns both firms. So how did it achieve this meteoric rise?
wbs.ac.uk | Warwick Business School
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