iflytek: leading chinese speech technology

9B16M064

IFLYTEK: LEADING CHINESE SPEECH TECHNOLOGY

Muhammad Adnan Zahid Chudhery and Renzhi Yu wrote this case under the supervision of Zhiying Liu and Jingui Xie solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com. Copyright © 2016, Richard Ivey School of Business Foundation

Version: 2016-04-14

In 2014, Qingfeng Liu, chief executive officer of iFLYTEK Company Limited (iFLYTEK), was trying to decide whether to adopt a business-to-consumer (B2C) model or continue with the existing business-tobusiness (B2B) model. Since its launch in 1999, iFLYTEK had become a proven leader in the Chinese speech technology industry. With more than 70 per cent of the domestic market, the company provided technical expertise and services for speech technology products to other companies. In 2014, the growth of iFLYTEK became stagnant, prompting the company to search for more options for expansion. Should iFLYTEK focus its efforts and expertise on research and development (R & D) and continue to provide technology services to other companies (i.e., follow the B2B model)? Or should it produce its own products based on core speech technology and sell them directly to customers (i.e., adopt the B2C model)? ANHUI USTC AND THE START OF IFLYTEK

Conducting research at the National Intelligent Computer R & D Centre, under the umbrella of the University of Science and Technology of China (USTC) in Anhui Province, Liu and his research team members achieved great success in 1998. They had finally developed a Chinese text-to-speech (TTS) system that, to their surprise, scored 3.0 out of 5.0 points in a national review. This score meant that the Chinese TTS technology had reached the standard necessary for a market application. TTS technology enabled a machine to speak, or sound out, written words — in contrast to speech recognition technology, which enabled a machine to convert spoken words into text. The process was rendered considerably more challenging using the Chinese language, compared with the Romance languages, due to the Chinese language’s complex pronunciation, the Pinyin system, the various dialects, and the differences between Chinese standard (or simplified) language and traditional language. Liu believed that a new era was beginning in intelligent speech technology, not just for him but also for his country. Liu had drawn his inspiration for the research from a 1998 talk in which Bill Gates he had stated: “Our research will position us to lead in integrating new input techniques such as speech, handwriting, and vision into our products”1 The TTS system marked the beginning of a company that aspired to one day lead the Chinese speech technology industry. Liu founded iFLYTEK in 1999 with a team of five entrepreneurs. The company was headquartered in Hefei, in Anhui Province. Liu recruited a team of 18 USTC students, determined to