In 2016, Douyin emerged as a "complementor" in China's digital ecosphere, an innovative player with zero customers of its own and dependent on tech giants Weibo and WeChat for customers to view its short-form videos. By 2018, Douyin's platform had exploded—208 million customers of its own—to challenge the tech behemoths for a major share of the country's digital sphere.
New research by Ola Henfridsson, a business technology professor in the University of Miami Patti and Allan Herbert Business School, and a team of colleagues reveals how Douyin (China's TikTok) navigated its way to such success. The study explores the risks and strategies needed to transition from a complementary or nonfocal actor to a focal actor and offers insights for other digital domains such as AI.
Henfridsson, the Schein Family Endowed Chair and associate dean of the school's online business programs, explained that transitioning from a small, complementary actor to a major one is a risky undertaking, one that requires savvy strategies, bold action, and a keen sense of timeliness.
"It's a question of being able to read the ecosystem and see with whom you can develop alliances," he said. "At the outset, you're dependent on the bigger platform for access to customers and users. Both parties are benefiting from the relationship and, as long as you're willing to play your role being a complement to the big platforms, then you will have good relationships with them.
"But if you have growth ambitions and want to become a bigger actor, then you will challenge that harmony and the asymmetric relationship with the bigger platform," Henfridsson added. "It's what we refer to as 'the complementor's dilemma': 'Should I avoid confrontation, ditch my ambitions, and be happy with my role, or risk challenging the relationship with the bigger platform I'm dependent on?'"
Henfridsson likened the notion of complementary and focal players to the car industry. If there were no cars, there would be no need for complementary services such as car insurance, car repair, car supply shops, etc. In the United States, he pointed to the iOS platform and noted that Apple thrives from having lots of complementors.
The research team included Shiyuan Liu, College of Business and Public Management, Wenzhou-Kean University, China, and Jochem T. Hummel and Joe Nandhakumar, Warwick Business School, University of Warwick, England. Their study tracked data from the development from 2013 (three years before Douyin launched) to 2020 (when TikTok was threatened with a ban by U.S. government).
When Douyin launched, there were at least 40 short-form video competitors in China. WeChat and Weibo had their own versions. "At that time, it wasn't a big thing, and it's hard to imagine that we thought of it like Twitter, but just for video," Henfridsson noted.
Then a Chinese comedy star shared a short-form video on Douyin that exploded the app's popularity.
The research identified four "episodes" in its evolution from a nonfocal to a focal actor in mid-2018.
First, owing to the popularity generated by the comedy star's video, Douyin considered introducing community-based features, but retracted from that temptation—sensing too much overlap of the user base. Episode two, it approached WeChat, which had its own short-from video app, Weishi, that wasn't very successful. WeChat welcomed Douyin as a complementor, yet Weibo tried to strangle the acquisition. Still, Douyin was growing and felt confident with Weibo's support.
Third, by 2017, Douyin had grown its unique user base to the point where it believed it could survive the battle with the focal actors and introduced new community-based features to gain more users. The fourth episode entailed adding e-commerce through a relationship with Taobao.
Now that it had added complementors to its platform, Douyin had become a sovereign system, according to Henfridsson.
"The transition is very war-like, and that's why it is so important to gauge the metrics of user engagement. How much time do you spend on the platform? Can you see changes in that trend? How many of these users overlap with other platforms? When do we have ownership of our user base?" Henfridsson said.
He noted that those metrics changed month by month as Douyin experienced its explosive growth. Henfridsson cited recent statistics indicating Douyin now has 750 million users, surpassing Weibo with 580 million. WeChat has 1.3 billion.
He highlighted the unique fusion of collaboration and competitiveness within the digital ecosystem.
"Actors kind of collaborate, but are competitors at the same time," Henfridsson said. "They have a joint interest in having the ecosystem grow, but they also want to be able to monetize that growth. That's a big difference between focal and nonfocal actor—the focal actor is in the driver's seat when it comes to monetization."
