Seek out synergies as you expand industries
Once Youhualin had established itself in the airline sector, it moved onto airports where it could easily adapt its algorithms to optimize everything from the scheduling of aircraft gates, to fuel trucks, baggage handlers, and other ground service personal. The next obvious step was public transportation. Scheduling train drivers follows the same business rules and logic as for scheduling pilots, so the algorithm only required small modifications. The same applied to bus timetables and airline routes. Next, Youhualin ventured into supply chains. Deppon Express, one of China’s top logistics companies, needed to forecast how many items would be delivered from one site to another each day of the week. The more accurate the forecasting the better the company could match transportation capacity, for example predicting how many trucks, planes, or cubic meters of aircraft warehouse capacity would be needed. Accurate forecasting would allow transportation capacity to be arranged to ensure timely transport at reduced cost.
For its latest expansion phase, Youhualin has set its sights on intelligent manufacturing, aiming to win clients by using algorithms to help them optimize manufacturers’ production processes by increasing utilization of equipment and other resources.
Build technological capability that meets customers’ unmet needs
Youhualin wasn’t a first mover in the logistics sector. Competitors included Cainiao, launched by Alibaba, which provided intelligent scheduling services to logistics companies and had the fastest revenue growth of any other part of Alibaba Group Holding’s vast empire. Two other rapidly growing companies were JD Logistics, owned by Chinese e-commerce giant JD.com, and SF Holding, the Shenzhen-based owner of China’s biggest courier firm, SF Express. So how did Youhualin stand out in this relatively crowded field?
Despite its small size, Youhualin is a technological leader with more than 40 software copyrights and for seven patent applications, all of which has allowed it to accomplish some functions that other competitors could not. For example, traditional prioritization or weighting methods did not work for the automatic scheduling of pilots, since there were many constraints to consider. Youhualin’s competitors, which used traditional algorithms, were unable to find solutions or, if they did, it could take a long time – up to eight hours – to generate a result, which was not acceptable for business.
With its intelligent transportation scheduling, Youhualin could handle extremely complicated situations, such as multiple pick-up locations and multiple delivery locations at the same time, and plan transportation routes to achieve the lowest overall cost. This required it to consider road congestion and the specific business restrictions of stores (for example, no deliveries before or after a certain time), among other things. The transportation plan had to satisfy multiple goals simultaneously – such as using as few vehicles as possible, maximizing the load rate of each vehicle, making the route as short as possible, and achieving the lowest possible overall freight cost. Although these kinds of demands are common in business, from the perspective of the algorithms it was not that simple. No supplier in the market had been able to provide a solution before Youhualin.
A clear understanding of its customers’ needs and building the technological capability to address them has helped Youhualin succeed where others failed. And it has paid off commercially. Since it was founded in 2016, Youhualin’s revenues have grown more than 100% each year, and the trend is continuing.
So, how can multinationals learn from and engage with Chinese start-ups, like Youhualin, to accelerate the pace of innovation? Here we outline three approaches. None is a silver bullet, but each has its role in an innovator’s toolkit.