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Micro-chipped truck tires win campus entrepreneurs top prize
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THE Chinese government has been encouraging bright young things to start up their own businesses as part of a national initiative to make the country more innovative.
To most people, startup businesses are linked to industries like the Internet, biotechnology, entertainment or fashion. But truck tires?
What might seem a bit unusual was the award winner at a recent competition held at Jiao Tong University’s Antai College of Business and Management. Fourteen groups of MBA students from universities around China competed for the prize of the best business model for a startup company. The seven judges were mostly drawn from investors with business acumen.
The home team, which formed a startup called Dache Captain, won the championship with a business model and execution plan to monitor and maintain tires on buses and large commercial trucks.
Chang Rui, leader of the team, said he worked in tire business for 10 years before beginning studies at Jiao Tong for an MBA.
“Before entering Antai, I had already thought about monitoring tires because customers I met needed ways to improve their operations and reduce the risk of tire failures,” Chang told Shanghai Daily. “I discussed the problem with my classmates and they became partners in this project.”
Tires mean a boring subject to most people, but when tires suddenly burst on the road, serious accidents can occur. Tires cost money, and keeping them in top running condition helps profitability.
In short, the students needed a way to monitor tire temperature and pressure to diagnose problems before they become serious. Their solution: install chips in the tires to transmit data back to a computer or mobile phone for analysis.
Chang said the market for such a system is vast. Many logistics companies operate with large fleets of trucks. With proper maintenance, the service life of tires can be extended by 20 percent and rate of flat tires decreased by 50 percent, he said. The cost of the chips and digital monitoring adds about 8 percent to the price of a tire.
Using Chang’s ties in the tire industry, Dache purchased a tire distribution company four months ago. Seventeen local fleet companies have signed contracts with the new business and 3.5 million yuan (US$525,600) of “intelligent tires” have already been sold, Chang said.
Dache is aiming to expand beyond Shanghai. Chang said there are about 30 million large commercial vehicles operating in China, requiring some 480 million tires a year. The market is currently valued at around 600 billion yuan.
Small but solid
Qu Weidong, founder of investment company Eastern Forest Capital and one of the seven judges in the Antai College competition, told Shanghai Daily that Dache Captain won first prize because its focus was small but solid.
“Investors love programs with point-cuts small enough so that you can concentrate all your strength on them,” Qu said. “Those who want to cover everything are not my favorite.”
No doubt he may have been referring to another contest team that defined itself as a traditional handicrafts business spread across an e-commerce platform, museum and an interactive education agency.
Qu said Dache’s business structure is strong, with management that includes experienced executives from tire or automobile companies and a strong finance manager.
Most startup companies in China don’t succeed, for various reasons. Lack of funds. Poor business models. Insufficient management experience.
Several of the judges quoted Yu Minhong, co-founder of the English training company New Oriental, who said that 70 percent of the market demand described by startup businesses is fabricated.
One of the contest entries seemed to fit in that category. The team’s entry was a company simplifying mobile phone applications for senior citizens so they can read news and navigate with maps.
Yuan Yue, the founder of an incubator program and one of the judges, said the thrust of the startup was wrong.
“An application that could help old people quickly find places for singing or dancing would have been more convincing for me,” Yuan said. “Reading news and navigating with mobile phones are not the needs of most senior citizens.”
Judges reminded competitors and the audience that startups are a serious undertaking that requires dedicated thought, time and money.
“Entrepreneurs have to do research and market surveys,” said Qu, “Otherwise they could well end up wasting their own money and money that may be invested by family or friends.”
Business schools, he said, must teach practical skills in entrepreneurship.
“If the schools are not capable of doing it, they should outsource the task to professionals, like investors, so that students aren’t led in the wrong direction,” he said.
Yu Gang, another judge, said not everybody is suitable for startups.
“Startups should not be viewed as an escape from an unsatisfactory job or life,” he said. “It’s a long, tough marathon rather than a short sprint. Entrepreneurship requires leadership and creativity. Not all people have that.”
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