Looking back on the eve of Meituan IPO: Founder Wang Xing and his infinite game

Meituan’s ups and downs, and its eventual success.

Editor’s Note: The original story was written by Zhang Peng, a long-time Chinese internet insider and observer who is also the founder of GeekPark, at a time leading up to Meituan’s listing.

Wang has been a legendary serial entrepreneur in China’s startup world. He co-founded two social networking platforms before he, taking a cue from daily deal site Groupon, eventually co-founded Meituan which has evolved from a group buying service to the largest on-demand services provider in China. 

As an entrepreneur, one of Wang’s often mentioned traits by whoever knows him enough, is his endless curiosity. He reads a lot, and wonders a whole lot more. Anything that beyond his cognition seems could interest him. It is also this incessant and tremendous curiosity that has driven him ahead all the way to this uphill and lonesome battle as a startup founder.

We’re drawing nearer to Meituan Dianping’s debut at the HK stock exchange on Sept. 20. Wang Xing, founder of Meituan, had previously held a successful investor luncheon in Hong Kong, with plenty of roadshows waiting ahead. The good news is that cornerstone investors and outsiders seem positive when it comes to Meituan.

Friends who are entrepreneurs or investors have also started discussing Meituan’s shares, its business model, and its future with great interest.

When asked about the matter, I tend to think about it from a different angle. While it’s natural to analyse Meituan IPO plans through business figures and numbers, but it’s also meaningful to think about its founder Wang Xing and why he started Meituan, his personality, his way of thinking and the way he operates his business.

As a tech startup that aims at US$50 billion and even higher valuation, it’s necessary to look at it as a marathon. In this case, understanding its founder is more important than its business figures, given that the business world is home to many variables, all constantly changing.

Now, let’s dive in and learn about Wang Xing from another perspective.

Part 1

Why is he a curious guy?

We first met Wang Xing around eight years ago, when Meituan was in its early stage. Back then, I was the Chief Editor of Business Value, and GeekPark was just a minor community for people with common hobbies. As a tough serial entrepreneur who started Xiaonei.com (now Renren.com), Fanfou.com and Meituan.com, Wang Xing stimulated my strong interest in him. So, I assigned Cheng Yuan, our journalist, to study and interview him.

Curiosity had been the most apparent quality of Wang Xing at that time. He spent two or three minutes trying the functions of Cheng’s fancy backpack and said it was “not bad” before sitting down for the interview. The whole editorial department burst into laughter when Cheng shared the story with us.

In fact, every time when he started a new discussion with me over the years, it was, in most cases, about some technology breakthrough or a certain new product. He is extremely open to new things. Although it hasn’t been trumpeted to the outside, everyone inside believes that Meituan is “a company that pursues the truth with science and technology”. This self-definition, which you may not find anywhere else in China, somehow reflects the personal character of the company’s creator.

Many people have asked me this question: how could a ‘geek’ like Wang Xing have managed to do so many ‘non-geek’ things? Because group buying or food delivery seems like a business requiring strong offline marketing and operation skills — something that does not match his style.

However, after getting to know him, we found that instead of being self-contradictory, he actually discovered a great field where he could verify his logic and explore the underlying rules. While Meituan keeps expanding its business in recent years, it has never deviated from its mission: transforming the service industry and boosting service efficiency with internet technology.

“We could transfer bits to improve efficiency when it’s impossible to transfer atoms,” said Wang Xing about the core value of mobile internet at GeekPark Innovation Festival. That remark was in fact summarized from Being Digital, a book pointing out the core value of the Internet. It argues that, compared with atoms (physical objects), bits (information) can be moved at a faster speed and a lower cost.

In Wang’s mind, Meituan Dianping is designed for more efficient bit movement among consumers, vendors and the distribution system, in order to achieve the realistic goal of “eat better and live better” in the real world. Many people may be surprised to know that Meituan Dianping employs more than 10,000  programmers, earning the title of being a technology giant in name and in fact.

Efficiency is something that Wang has always stressed. Back in 2010 and 2011 when the company was going through hard times, the market leaders were Lashou.com and a couple of aggressive competitors, although Meituan was the initiator of group buying in China. After calculating input-to-output ratio, he believed that inefficient and indiscriminate investment was not a smart choice, and that every decision on expansion must be made with the “support of science”, i.e. population, Taobao consumption index, number of KFC stores and cinemas and other indicators should be considered to determine a city-specific input-to-output ratio before an expansion is implemented or shelved.

In the second half of 2011, when most players of group buying found it hard to raise money as investors began to lose faith in the industry, Meituan, who always stressed efficiency, had maintained sufficient funds.

Besides rational thinking, efficiency is more dependent on technology. Obviously, Wang’s curiosity about technology has connection with its significant role in the company’s growth. For example, it is particularly important for Meituan to use the correct technology to manage a delivery staff of more than 500,000, boost delivery efficiency and reduce the cost. Another example is AI technology, which has been applied to support Meituan’s dispatch system in order to assign orders to the best-positioned delivery man and plan the most efficient route. Wang believes that as these technologies have become the must-have tools for players in the industry, efficiency becomes the only thing that determines if his company can spend the fund more effectively and gain a larger market share.

Meituan Dianping has recently engaged in unmanned takeout delivery study and experiment. I know that Wang has long been a fan of self-driving cars. For him, autonomous delivery is more than just a fabulous technology. According to inside information, Meituan aims to create a tool that breaks the efficiency limit of its delivery team with this technology.

“Wang has been thinking about if we have to boost the number of delivery men proportionally as the market multiplies; and if yes, how to manage the expanded delivery team more efficiently. He also asked if we can find other more efficient ways instead of gaining the market share simply by enlarging the delivery team. For instance, we could achieve higher efficiency by combining delivery men and robots, and make that mode one of our core competitive strengths,” said the person in charge of Meituan’s autonomous vehicle division.

For that reason, I think, Wang Xing’s curiosity about technology can’t be superficially interpreted as just a hobby. It is the higher efficiency that he is really after.

A prototype of Meituan’s autonomous delivery car (Photo/Weibo account of Meituan Dianping)

Part 2

‘Infinity’ and ‘Game’

In the interview eight years ago, Wang mentioned SpaceX, a company that shocked him to the core but was little known about at the time. Wang was so astonished that this private corporation built by Musk could leverage the power of technology and efficiency to solve problems — that long bothered NASA — more effectively in a safer manner and at a lower cost.

“You can see their firm’s faith in the power of technology that not only can change a business sector, but also the entire world,” said Wang.

I always think of Wang as a “technologist”, who believes to his core that the world can be changed by the ongoing evolution of efficiency and free market competition because of technology advancement. This belief often brings him a considerable reward. Such inherent “DNA” of thinking is helpful for others to understand his behaviours and exceptional business mind.

As Meituan stretches its tentacles to different sectors, many have asked Wang, where is the boundary?

As to the question, Wang had offered his answer to Song Wei, a journalist with Caijing Magazine. He said that there were too many people concerned about the boundary instead of the core. He suggested that people should not restrain them in terms of boundaries as the concept of “boundary” was not that simple. Meituan would keep trying new areas as long as it has a clear core sector.

In his speech at GeekPark a couple of years ago, Wang mentioned Finite and Infinite Games, a book by James Carse which discussed these two kinds of ‘games’. Finite games are played within boundaries, have their starting and finishing points, and you play them to win. Infinite games, on the other hand, are about the boundaries themselves, do not have any starting or ending points and there is no ultimate winner. The aim is to involve more players to continue the game.

This book, Mr Wang said, influenced him a lot and people have begun to refer to Meituan Dianping as “Wang Xing’s infinite game” since the speech. Nevertheless, I think people have remained at the superficial meaning of “infinity”. They haven’t realized that Wang has redefined “game” in his own way.

In his mind, the “infinite game” is a process in which the world is changed based on higher efficiency due to technology, and commercial benefits are certainly the reward for those driving the process. Only by having this perception can an organization really participate in an infinite game rather than a finite war in a given market.

It’s important for us not to misunderstand it as something illusive or spiritual, otherwise, it would lead to a fundamentally different business idea and completely opposite methodologies.

 

Part 3

Another methodology

After all the capital whirlwinds that have raised group buying, O2O and sharing economy over the past years, China’s entrepreneurs and investors in the technology community have developed some standard ideas. A commonly accepted course has been developed: find a large enough market – obtain sufficient funds – create a leading startup or a monopolistic company – get listed or become a member of the club of giants.

According to Wang’s definition, the above process appears to be a “finite game”. It has a clear boundary and way of realization, in addition to an evident result. The goal is simple: try to be the remaining one or the winner within a certain boundary and exploit business value as the company monopolizing the industry.

Given today’s business and technical environment, I believe Wang has noticed the flaws of such finite games.

First, a large part of boundaries is nothing more than wishful assumptions, which involves a lot of risk as technology advances and the “industry mechanics system” changes. Who would have predicted that Douyin and Kuaishou could steal time from users of Youku and Tencent Video? Who would have known that bike sharing platforms could cut down daily orders of car-hailing platforms? And who would have expected that Pinduoduo could grow into a potential competitor of Alibaba in the rural market in just three years? Wang Xing was among those who first perceived these indistinctive boundaries.

Second, while monopolization is an effective way to gain benefits, it’s surely not the essence of the business world. Besides, although money burning drastically improves the efficiency of gaining monopolistic market shares, you will certainly pay for it someday.

An example is Didi, a virtual monopoly in the car-hailing sector, which has also been challenged recently by a few newcomers. Facing unfavorable market conditions, either local challenges depending on geological boundaries or division of customer groups, or the threat due to “total war” triggered by the weapon of efficiency pursued by Meituan Dianping, Didi has been limited to collect value in a much prolonged period of return, with the potential of systematic risk increased for Didi as a monopoly.

The very reason for this problem is that technology and the Internet have been deeply integrated with our society. They have transformed the world. At a time when traditional business methods of the real economy are unable to tackle emerging “environmental variables”, finite games are basically impossible unless getting listed is the only target. I bet Wang knows well that investors are still possible to play finite games, but it would be increasingly dangerous for startups to develop their strategies with the orientation of playing finite games.

In his in-house talk with Hu Weiwei after Meituan’s acquisition of Mobike, Wang pointed out that they had overstressed a larger market share but overlooked the importance of higher operation efficiency during the campaign of bike sharing. This probably was the real problem of the sector.

China’s internet market today is no longer a blue sea that has nurtured Baidu, Alibaba and Tencent (BAT). Any new startup trying to attract traffic and rise quickly would have to exert much greater energy than BAT did years ago. At this moment, it’s more evident that “the core value of a business lies in efficiency”. Ever since his early days as an entrepreneur, Wang Xing has believed that it is important to gain market share efficiently. That said, it’s merely a limited definition of efficiency. What’s more significant is that they could gain market share and create value through efficient work.

Wang’s idea of “infinite game” is nourishing another business idea and, according to his practices on Meituan, I think it’s reasonable to summarize his methodology as follows:

 

Take the pursuit of higher efficiency as the core target;

Use technology as the driver of higher efficiency;

Take problem solving as the only way to create value; and

Regard market competition as the growth process of the organization’s value

 

From this point of view, the “long-term mobile battle” highlighting efficiency is inevitable. Apparently, Wang Xing wouldn’t stop at a finite game of takeout delivery only. Instead, he organizes small teams to engage in any business related to life service to first verify whether the business is profitable. If yes, he will put in huge investment and eventually take a large part of the cake; if no, he will leave it immediately.

The above paragraph explains the four-step cycle of “exploration, development, maturation and change” indicated in Wang’s in-house talk. It is under this guidance that Meituan has entered new areas like hotel room booking, movie ticket booking and car-hailing.

 

Part 4

Change is the result of a prolonged battle

In all sectors Meituan has set foot in, Wang should and could not expect to win a “quick war”. Instead, he should aim to lead the others in efficiency. In fact, maintaining a healthy growth of market share at very low margins by increasing efficiency is the most effective shield against the attack of giants.

A genius like Wang would have understood that the current level of traffic and funds of Meituan as a startup could not guarantee victory against giants in a critical battle. It should play an infinite game with limited resources, trying to expand the room for growth and increasing resource utilization rate to its limit with a technologist mind, and fight back with mobility as in a rapid march. During the process, time and environmental variables certainly are the guardian deities of agile companies.

In the real world, as a monopoly makes more profits, it will have a weaker sense of crisis and a higher risk of functional degradation. This is almost an objective law. Even great companies in our history could only try to resist this “friction”. It is quite necessary for a startup to postpone the sense of gratification by exploring new boundaries and maintain high levels of efficiency and excitement.

In my opinion, Meituan is akin to Xiaomi on some level. For the latter, it had to smash the bottleneck of user acquisition in the traditional business model if it wanted to make breakthroughs in the big picture at the time. Either the trust built on a reasonable product price, or the brand energy generated by cultivating the sense of participation, was a way to realize higher efficiency, which then enabled the eco-chain mode, making it possible to explore boundaries outside the cellphone and attain more value from the Internet mode. For Meituan and Xiaomi, the idea of infinite games was the only way to get them out of the dilemma and get around the dangerous zone of “low efficient monopoly”.

Both of the two companies were founded in 2010 and sensitive to change. The strong and independent mind of their founders shaped them into “novel companies” distinguished from “endpoint” oriented companies. The pursuit of higher efficiency at the bottom was the reason why they could come up with innovative business ideas.

In fact, a more typical example is Amazon, of the company Wang Xing admires most. Who would have known 20 years ago that Bezos’s business empire could become what it is today? Initially an online bookstore, Amazon has grown into the world’s largest online retailer, which not only produces cloud service giant AWS, but also drives development of AI technology, which in turn helps explore its new boundaries. Even though he was not accepted by everyone, Bezos refused to halt the process of expanding Amazon’s boundaries with higher efficiency despite continuously losing money for 20 years. When Amazon is finally accepted by the market and valued at 200 times the initial amount, those companies which once triumphed in “finite games” have long been forgotten.

Generally, we tend to follow one single standard way of business. However, we should not be acting blind in front of the huge success of Amazon and the rise of Xiaomi and Meituan. They are solid proof that our world is not a boring and rigid one. Regarding this point, new generations of enterprises who firmly believe in the power of technology and the true value of business have taught us an important lesson.

Learning from them, you may find yourself with a broader horizon when you look at the world with a firm belief in science and technology, as well as values of the free market. You may notice some opportunities that others will either ignore or give up.

 

Part 5

Embracing the destiny — “think about it on the way”

In the end, let’s go back to a moment that was helpful in shaping Wang Xing’s world outlook when he was younger.

In his first speech at GeekPark, Wang told a story. It was in 1997 when he went to study at the Department of Electronic Engineering at Tsinghua University, with the recommendation of Longyan No.1 Middle School in Fujian. In a routine welcome event, each of the newcomers could throw a question to their seniors, who would give a serious answer no matter what was asked.

”What do you think is the meaning of life?” asked Wang Xing, seriously, while his peers were interested in food and romantic relationship.

The serious question resulted in awkwardness, and everyone turned to Wang’s elder sister, who came to Tsinghua two years before him, in a way implying that “this kid is so weird, it’s better for you to tackle his questions”. “You’d better think about that on your way,” she replied after pondering for a while.

Wang told me that he agreed with the answer. I think that is another great perspective for us to learn about him. When he wants the organization to “pursue the truth with the help of science and technology” (finding rules to improve efficiency), and he is OK with “thinking on the way” and can even find joy in it, then it’s really suitable for him to control an infinite game.

“It’s ridiculous to tell someone’s future. You don’t listen to them depicting the future. You look at their past. People are built to be continuous. They won’t change suddenly,” said Wang in the interview eight years ago. It was these very words that persuaded me to give a cover to him, a non-mainstream entrepreneur back then, under the title of All about Wang Xing.

“The young man created Xiaonei.com, Fanfou.com and Meituan.com. He is so different from the near-perfect entrepreneurs of the previous generation…but in this era, maybe he can change the world if he is given an arena.”

Wang Xing has used eight years to prove the introduction of this cover story. Why not let him write the upcoming chapters?

The author’s limited knowledge may lead to insufficient support to the perspectives presented in the article, which therefore does not constitute any suggestions or advice on investment. Readers are advised to make independent decisions.

Editor: Elaine Huang, Ben Jiang