Find here the China paradigm 78. In this episode, we will have a discussion on customer service software in China, how it offers online conversion solutions in China and the embedded AI solution that supports chat, App, e-mail, voice and all social media in China.
Full transcript below:
MATTHIEU DAVID: Hello everyone. I am Matthieu David, the founder of Daxue Consulting and its podcast China Paradigm where we interview entrepreneurs who have been in China or who are innovating in China and today I am with Thomas Knoop. You are the founder of Livecom which offers Omni-channel customer service in China – I’m using my own words – which helps companies to interact with clients; so all; the touchpoints they may have.
So, it’s really Omni channel and we can see from your presentation I got that you connect with all kinds of touchpoints and of course including WeChat in China. You have had more than 900 clients including and that’s what I was extremely surprised and impressed by and I told you before we started; Eleme which is well known by everyone and was named in China; how can foreign companies serve such a big Chinese company; a tech company and China Telecom as well, but you are also serving Philips and you are also serving a lot of multi-nationals which is kind of something I understand, but Eleme; I think it’s okay. We really would like to know more. So, your team is more than 200 people now. You are all over in the world; in the west, in Africa, in China, of course, and you connect – for people who listen to us – you connect the CRM and ERP of companies in order for them to interact with their clients and serve their customers to support customer service through some functions like live chat and basically all the possible touchpoints?
THOMAS KNOOP: Yes.
MATTHIEU DAVID: Thanks so much for being with us. Would you like to add anything to the presentation?
THOMAS KNOOP: No, I think you have summed it up quite well. So, yes we are a customer service software in China in the first place, but it’s also sometimes used in sales processes as we try to capture in-bound customers and start basically conversations to sell their products and currently out of the box we have more than ten or eleven communication channels. You mentioned a few like WeChat, our live chats, but then also the Western communication channels like Instagram, Facebook Messenger and actually we are the first company assigned to buy WhatsApp; WhatsApp Business Messenger, so companies can now also the same as WeChat open business accounts on WhatsApp. We also connect it to their platform; Weibo, mini-programs, WeChat; yeah all kinds of communication platforms. I think the big differentiator to understand is that we focus on in-bound traffic so that basically customers contacting the company and we are not a marketing platform where you push messages and segment people and do your marketing activities. That is the part we stay away from. We really focus on customer service software in China. It’s quite a niche.
MATTHIEU DAVID: I see. It’s not something I actually understood from your presentation. You are focusing on the first contact with the customer, which is inbound?
THOMAS KNOOP: Yeah well it can be the first contact for omni-channel customer service in China, but typically the customers already have the communication or touchpoints with the companies because they most likely bought a product, but if you use it in the sales process; we also have some customers doing that and then it is obviously sometimes the first touchpoint.
MATTHIEU DAVID: So, I don’t really… so yeah to go back on this, but I don’t really get the word ‘in-bound’ then because for me in-bound is new clients, but it seems that you are also serving relationships for existing clients, isn’t it?
THOMAS KNOOP: Yes okay so what we mean in the world of customer service software in China and marketing ‘in–bound’ is traffic that is generated from the consumers to the brand. Out-bound is most likely marketing messages produced from the brands to potential customers.
MATTHIEU DAVID: I see.
THOMAS KNOOP: We focus on the in-bound so, typically these are already customers from the brand or as I said if it is used in a sales environment then it is acquiring new customers.
MATTHIEU DAVID: I’ve got it. So, that means every time the customer comes and meets and talks or interacts by himself and not relating to a specific action from the brand; here you are, here you help?
THOMAS KNOOP: It can, but we don’t provide that solution, but obviously a lot of brands have marketing tools, they have landing pages, e-mail campaigns so typically a customer or a brand would install our product on their landing pages, for instance, and then try to engage the consumers directly one to one.
MATTHIEU DAVID: I see and I understand better now how you can interact with Ging CRM’s, Pleo because actually they complement what you do and this is in your presentation; you can work with all CRM and ARP without being in competition with them because, actually, you will not be proactive. You will actually react to an initiative or I mean action from the client.
THOMAS KNOOP: So, basically we complement basically the solution and what we say is we close the ring. You use your marketing tools to drive traffic to your landing pages or wherever you’d like to drive your traffic to and from that moment on we start to track and analyse and we start actually; based on business rules we invite those people to interact with people inside the company from the brand themselves so that they can start a relationship and start to communicate and obviously the goal is to sell a product or to close an appointment etc. etc.
MATTHIEU DAVID: I see. In the podcast, we try to really understand the way your company works and the business model. How do you price? If a company which you seem; to us somewhere in distant marketing… I would like to understand.
THOMAS KNOOP: We are a customer service software in China so that basically means it runs in the cloud. Typically you pay a yearly fee to use that and our charging model is that we count by the number of channels that you want to use and the number of people that you want to have on the platform. So, let’s say you have WeChat, Live Chat, and Facebook Messenger and you want to surf customers and those are three channels and then it’s the number of people that use the platform to handle all those interactions and that equals a yearly price.
MATTHIEU DAVID: I’ve got it. Your solution can be used from a laptop, desktop, and mobile by the companies when the people are in charge of customer service; they interact from the laptop or desktop or from the mobile as well and iPad?
THOMAS KNOOP: Typically it is a desktop application because it’s not only sending messages. Typically they also need to enter or look into a CRM and an ERP because they ask questions about delivery etc. etc. so the people that respond to customer service requests typically work in an office 8 hours a day and they do nothing else than checking the system and helping customers so they wouldn’t do that from a mobile device. It is too small and too inconvenient.
MATTHIEU DAVID: I see. Would you mind sharing; I am going back to the pricing and model. Would you mind sharing about the minimum price your association would cost for someone listening to us? When can they consider your solution?
THOMAS KNOOP: Well, our pricing or our agent pricing starts from 5000 RMB per year and that’s basically for one channel. So let’s say you want a WeChat account or you want to have a person that does the customer service there; that would basically cost you 5000 RMB in a year. Of course, there is a set-up fee and maybe some integration work so I would say typically the smallest customers that we have that basically have one agent; that is the smallest customer. You would end up with maybe 15000 RMB per year.
MATTHIEU DAVID: Okay so it can be pretty affordable, actually. You can have a small or medium enterprise working with you.
THOMAS KNOOP: Yes. It is pretty affordable. We need to be affordable because we are in China. So that means we have our own tough price competition, obviously. I would say we are still 20-25% more expensive than point competitors because actually in China there is nobody that can offer omni-channel customer service in China that we offer, but okay let’s say you find a Live Chat solution somewhere from a vendor so yeah then we would be 20-25% more expensive. We do think that the price difference, but we deliver a lot more value for that 25%.
MATTHIEU DAVID: Okay could you help us understand the story of Livecom? Where did it come from? Where did you start initially because you started the business before WeChat?
THOMAS KNOOP: Yes so basically we started in 2003 and already a long time ago and initially the company made websites. We started in the digital area. We created websites and few shops, but, basically, it was turning static brochures into a live environment. Those business owners; were happy and I said, “Wow, great I am on the Internet. You can type my name and you see my shop,” basically, but, obviously, these people were business people and I say, “Okay, but I see on my statistics that I had 100 potential customers yesterday on my website, but where are they and how do I interact with them?” That’s when we started to build our first product.
It was basically a website; Live Chat products were business owners basically could engage with the potential visitors on their website and that was the first version of Livecom in 2003. In 2008 we started to think, “
It was kind of a dating app and you could share it and you could look around and those were functions that were really promoted and you could chat, of course, and then I think half a year later; 7 months later my first business contact said, “Okay, but watch your WeChat. You have WeChat?” I said, “Yes, I have WeChat.” So, I thought, but okay it was kind of a dating app so how does this work, but anyway; so yes, I have WeChat and we added each other on WeChat and the months after that and even in the weeks after that I had more and more people start to add each other on WeChat and it became more and more a real communication tool and it was basically a replacement for WhatsApp or maybe even SMS texting because that’s what you did back in the day. Yeah and we all know the story of WeChat and how they increased their ecosystem.
I think it was somewhere in 2012; mid-2012 when I saw, “Wow, this is really getting traction” and how do I utilize this communication tool for our customers and for businesses? Well, shortly after WeChat brought their own solution. They said, “Yeah, we are going to do official accounts for brands” and then I thought, “Oh wow, this is it. This is born to be sold.” So now actually for the first time, the businesses could operate their customer service on a messaging channel and that’s when I immediately decided and said, “Okay we need to integrate this into our platform” and from there it really took off. We re-designed our product to be unified.
So, we started with live Chat, we started with e-mail and then the messaging channels came and then I said, “Okay, but this is not going to be the end.” I mean
MATTHIEU DAVID: You have talked a lot about
THOMAS KNOOP: Thinking of e-commerce and customer service environments basically you have Weibo which would be the lowest volume that we see from our customers. Obviously, there is WeChat and there is the brand on the website and then there’s a big part that unfortunately we cannot touch and those are the e-commerce platforms like Jindong, T-Mall, etc. etc. and those are all closed ecosystems and they do not allow any external vendor to connect to their systems. So, unfortunately, we cannot connect those platforms to Livecom. We would love to, but they don’t allow it.
MATTHIEU DAVID: Yeah as far as I can understand and for people who listen to us who may not be as familiar as us; people living in China about this, but I think T-Mail and JD are forcing every vendor to actually activate a chat room and to interact through their own tools within their own system and actually you cannot put any code into the website because it is a platform itself. It is as if you wanted to add a code on your Amazon space even if that doesn’t really have that kind of strong identity as T-Mall and JD. So, indeed you cannot extract information from this platform. They keep it and if you do if you find a way you will be caught at some point.
THOMAS KNOOP: Yes. It is forbidden. Basically, they don’t want it. I had a long talk recently; in recent weeks with marketing managers that say that’s all very nice and they will deliver a strategy, but we don’t have any data and they actually even force us to pay to get the data back. So, basically you are buying back your own data and we did a project for one of the customers that you mentioned; Philips and we are doing a video streaming platform for them which basically is pulling traffic from JD and T-Mall into their own video streaming platform and one-on-one products. We do the segmentation of the customer data through AI solution that supports chat, App, e-mail, voice and all social media in China and then finally when the consumer is ready to buy they go back to the platform where they came from.
So, basically, we can see that they came from Jindong. They scan the QR code on the product page of Jindong, they have a conversation with the brands. We know that. We show them the product or, actually, the brand shows them the products that are sold on Jindong because that’s also, of course, you cannot sell your products on Jindong and T-Mall; they don’t want that. So, basically, they have a couple of unit types they sell on Jindong. They have a couple of unit types that they sell on T-Mall. We can see that they try to sell a product and when the consumer is ready to buy they will redirect them back to the platform where they came from to do the purchase in the end.
MATTHIEU DAVID: A question; I mean why aren’t they sent back to their own website or what we call thebrand.com?
THOMAS KNOOP: Because they don’t have the traffic. I mean Jindong and T-Mall are very good in traffic. As you know or maybe our viewers don’t know, but if a Chinese consumer is going to buy a product he is not going to Google or in China, he is not going to search for the product and then go to the brand on the website. No, he will just go to the marketplace directly because they just go and say, “Okay I need to buy something so let’s go to Taobao and search for a brand.” It is basically the e-commerce platform that is the search engine for them.
MATTHIEU DAVID: Maybe I misunderstood, but you said that Philips had its own live streaming and scanned QR codes on their packaging and they send them then to JD, right or to T-Mall back, right?
THOMAS KNOOP: Basically, if you want to do advertising on a platform you need to buy it. So, this is another thing for a brand. If you want your brand to be on the top list you pay for it. The same as on search engine marketing. So, they run marketing campaigns on the platform to attract consumers. Inside the marketing campaign is a QR code and that QR code redirects them from JD to the brand streaming platform and back to JD to do the sale because, otherwise, JD would pull the plug, basically. Because I say, if you sell it on your own platform then why would you do that?
MATTHIEU DAVID: What do you do for them because I understand they get traffic from JD.com and then they interact with live streaming and QR code. This is where you interact, right?
THOMAS KNOOP: Yes. In this project, it is actually quite unique. What they are doing is they are building real shops. It is a physical room, but it only has video cameras and like this; a video streaming solution and they sell product lines; one on one between you and me to their consumers and they are driving traffic from T-Mall, Jindong and a brand-owned website and their physical stores in China.
MATTHIEU DAVID: Where?
THOMAS KNOOP: The reason why they do that is because the marketing guy said to me, “As long as I have 250 shots in China; all over China” and in this case, it is coffee machines; he said, “I can walk into any random store and I see a salesperson there and I say, “Can you explain this coffee machine to me” and this person is a little bit shy and says, “I know how to turn it on, but I don’t know the functions of all the other 15 buttons.” So, his problem is that he has a complicated product. It is everywhere in the shops, but it is not being sold because nobody can explain and he doesn’t have the time to train 250 people all over in China because by the time he is ended with number 250 the first 100 have already left the shop and searched for a new job.
So, he said, “There is no way for me to educate my own organisation to sell my own products.” So, he said, “How do I do this?” That’s where we helped him and said, “Okay you build 5 video rooms, you drive traffic online. People use their phone; the WeChat video function to interact with your sales people, but you only need like 5 or 6 because you just drive traffic there and you occupy it all day long.” So, now we are typically a video session that would take around 15 minutes. That’s basically 4 customers per hour and you can think, “Oh, but that’s very low or very expensive.” Well, not if you compare it with 250 shops where people stand around all day and basically do nothing and not even can explain the product well.
MATTHIEU DAVID: Very interesting; so, let me try to understand in my own words. So they are at the shop and they found out that the people in the shop were not an expert as they would expect. They could have from actually their customer service software in China that could interact with them but in a live session. So, they put screens in the shops in order to interact with the visitors in the shop, but also they try to create traffic from JD to the shops. So, the product data in the shop about the consumer can create relationships with their customers and their audience and this is where you interact because, actually, the in-bound is here. They come into the shop; in-bound.
THOMAS KNOOP: Yeah.
MATTHIEU DAVID: They come into the shop and they interact with the screen and this is where Livecom, your software is acting.
THOMAS KNOOP: Yeah so basically the video is just in general for us. So, it’s one of the latest additions to our omni-channel customer service in China and the funny thing is because everything is digital and video we can actually… so now we have a physical logo here like Livecom, but for the ones that we have built, it is actually a digital logo. So, if you come from JD you will see a JD logo in the right corner, but if you come from a brand-owned website it is the brand logo inside the stream and if you come from T-Mall it is a T-Mall logo inside the stream. So, you can actually digitally and you can even change the background because we use a green wall. So, you can use a very basically personalised shopping experience, depending on where the consumer is coming from and it is the same person. It is in the same group. It is just that the digital surroundings around it are changed by the press of a button. It is super cool.
MATTHIEU DAVID: How do you develop that? Are you developers in China or for China?
THOMAS KNOOP: Yes, we have our own development team here.
MATTHIEU DAVID: It is pretty expensive in China compared to even from France and Europe. I mean developers are more expensive in China now.
THOMAS KNOOP: Yeah basically it is hard to develop customer service software in China if you use Chinese developers. So, my development team is 100% foreign and these are foreign people that want to live in China and they are still actually less demanding than the local Chinese in relation to house funding and that kind of extra or secondary parts. So, for us, for now, it’s better not only in communication and ease of doing projects, but also financially it’s better to use foreigners for this. So, in Livecom the sales part and the marketing part is 100% Chinese. The development part and the tech part is 100% European.
MATTHIEU DAVID: How Chinese is your business in terms of importance or China is important to you because I see that your offices are a bit everywhere in the world? I see that you are also providing Facebook, Messenger, WhatsApp and so on which are clearly those we don’t have in China.
THOMAS KNOOP: Actually, I have built that for Chinese companies and…
MATTHIEU DAVID: Exports?
THOMAS KNOOP: Yes, exports. What I see is a lot of Chinese brands going out of China and getting famous. I think of Xiaomi and DJI, Huawei; you know a lot of famous Chinese brands. The travel industry or one of our ex-customers was Thomas Cook. They went broke last week. They were bought by a Chinese company. That means that they are going to use the Thomas Cook organisation in the west to host the Chinese community because the travel industry is also going to explode because all the Chinese want to go on holiday.
So, there are a lot of Chinese companies that want to go abroad and they can’t use the traditional Chinese communication methods because I think there is maybe 1 or 2% of the people who have WeChat installed outside of China and outside of China and Facebook Messenger, WhatsApp or basically that’s it and I would say you already have 90% with those two messaging channels. So, those messaging channels can be used by Chinese companies inside China although they are not available inside China.
MATTHIEU DAVID: It’s a very interesting topic, actually. There are two topics you mentioned that we have worked on at daxue consulting which is what we call export advertising, export… they use Facebook, they use Google who buys Chinese companies and for people listening to us Facebook is public because solicited company is making 5 billion USD with Chinese companies; 10% of what they produce and also another topic which is how to drive traffic to your own website, to your own shop and not being so dependent on marketing places. We have worked on those topics which are very hard topics currently in China. Going back to your development team; how do you feel about developing a customer service software in China specifically with the actually foreign developer where you may have to use the WeChat API, you may have to use a Weibo API and all the documentation is in Chinese, how do you deal with this?
THOMAS KNOOP: You hire people that are very fluent in Chinese. So, my development team; can talk to any Chinese customer and sometimes I will bring them to a meeting and they are all shocked and there are some of them say, “Why?” So they speak natively Chinese and if you can find those people and they are here because there are a lot of young people coming to study Chinese in the universities and they get addicted to China and they want to stay and these are the people that I like to host because they are eager, they are young, they want to stay in China, they already have experience living here, they speak Chinese; maybe not on a super fluent level. That takes time, but that’s okay. These are the people that I like to hire and they are very loyal to the company.
MATTHIEU DAVID: I am with your presentation and I see offices a bit everywhere. Are they offices or are they where you can serve clients like Austria, Germany, Belgium and why so many locations?
THOMAS KNOOP: Basically, we follow the sum principle for our 24/7 support so basically on every continent, there is a support office that can support other continents in the offline hours for that continent and our sales offices and basically the sales offices are driven by sales. I mean if there is a big opportunity and the market is good in that location, then obviously we will dedicate a location for that.
MATTHIEU DAVID: I am talking more precisely actually and sorry for not being precise; the case of Philips. So, you are serving from all over the world. Your software is used all over the world by Philips?
THOMAS KNOOP: Yes, it is. Online communication by Philips is handled by our customer service software in China. Philips outsources their customer service so that means they basically have call centers all over the world to handle their customer service. So, basically, they have a training program where they train external people
MATTHIEU DAVID: Okay that makes your business very scalable and I have a very geeky question, but you are selling… when you collect information from people in China and need to host in China; the information about people in the US you need to host in the US and so it’s a two-level of complexity for China and the rest of the world because the rest of the world can easily be managed by the US, but then there is China. How do you manage those things? Moreover, if you deal with a Chinese traveler? It may be a Chinese user who has been in the US visiting a store in Philips and then going back to China.
THOMAS KNOOP: Yes, well basically what we have is the cloud running all over the world, but of course for this kind of issue it is kind of dedicated and kind of closed so that it doesn’t mean that the data is saved everywhere in the world. It is saved in a territory that the server is located, obviously and we guide the traffic as much as we can to the local instances and save the data there. If there is an integration like the customer we just mentioned; Philips or their own backend system it is up to them. So, in our context, they are responsible for any legal implication without the data. So, we need to take our hands off them and also another part of our contract is that the data is not ours. It’s our customer’s and it is their responsibility to comply with the local legal regulations.
MATTHIEU DAVID: We mentioned the Philips and I would like to go through a couple of case studies you may want to talk about. You mentioned in your PPT you sent to us or PDF. One of them that I was impressed by was Lamar so for people who are listening to us who are not living in China again; it’s a kind of delivery, right in the west. It is a delivery company, right?
THOMAS KNOOP: Yeah. Takeaway.com might also be a kind of the same concept.
MATTHIEU DAVID: Okay takeaway.com and Delivery or Uber Eats; maybe you get that delivered. So I have heard it is very big in China and very, very Chinese and they have used your solution. I think it can be a very good illustration of the tech age or the advantage you may have towards the competition. So, what do you do for them?
THOMAS KNOOP: Basically, we handle all their customer service communication on two levels. They have an app where you order your food delivery and so in-app customer service software in China is basically live on the platform as soon as you click on the customer service icon; our platform is loaded inside their app and there is an Arabic customer service part that we handle for them and those are the drivers. So, they have 400 000 thousand drivers on the road and they also have issues; they get a flat tire, broken battery or they dropped the food, etc. so they also need kind of customer service where there’s internal customer service software in China. So, somebody needs to call these customers or I need an extra driver to take my food, etc.; a lot of internal company communication can be also handled for them, but yes it’s the highest traffic that I have ever seen in any customer case in China. We didn’t really know that when we started the project. I think the slide is already a little bit outdated. I think it mentions AK, but currently, there are 150 000 orders per minute during lunchtime; 150 000 orders per minute.
MATTHIEU DAVID: 150 000.
THOMAS KNOOP: 150 000.
MATTHIEU DAVID: Wow and you said they have how many drivers; like 400 000?
THOMAS KNOOP: Yes, 400 000 drivers.
MATTHIEU DAVID: I mean half a million of delivery men all over China. It is incredible. So, why do you think they chose you?
THOMAS KNOOP: I know why they chose us; because they, of course, had a solution in place, they had a local logo and actually the biggest in size of volume compared to us and a very known supplier for our customer service software in China; a Chinese vendor. They had by then around 400-450 customer service people. So, their customer service team was around 450 000, but the platform could not handle the traffic. It broke and by the time we came, it broke every day for at least an hour. So, they were losing 450 productive hours a day because everybody was sitting idle and could not do anything. So their problem was big and we came in and, of course, they had very high requirements to us.
One of the things was that everything should be encrypted in a way that it was technically impossible or at least for the first 100 years to decode or to de-encrypt it and the second requirement was that we were not allowed to store any single bit of customer information inside our platform because we are a cloud-based system. So, there is a challenge because you do customer service software in China and you have customers’ information and how do you deliver that back to customer service people without actually storing that information? So, our omni-channel customer service in China was actually built from the ground up to be able to handle this and one of the questions was, “What was your biggest success and surprise in China” and that was actually this deal. I was called in to do the final presentation to the management and I did the demo, the management did not speak English and my Chinese was also too limited to do the presentation in Chinese.
So, this is how local the company is. The senior manager does not speak English. We did the presentation, they said, “But how about the technical demands that we have? How can you ensure this?’ I said, “Well, I can tell you that it is true, but of course you cannot believe me so as I would say the best thing is to call in a technician and we will configure it right here in the product and we can connect to your platform with all the technical requirements that you have.” They actually didn’t say anything. They smiled a little bit and I said, “No, but I am really serious. I would like you to call in your technical guy because I am sure it will not take more than 10 minutes to prove it to your technical guy that this is the way we do it.”
They did and I talked to the technical guy. I said, “I need this and this and this from your platform. Can I have that? I will configure it into our product and then we can start and we can show it to your boss.” So he came back and he got it. I put it in our system. We fired it up and it worked. Yeah, that was a moment I will not ever forget. The managers looked at each other and they said, “Can you leave the room?” I said, “Yes okay.” We left the room, they called us back in 5 minutes and they said, “Okay we have seen your contracts and they are fine. It is from 15:00 in the afternoon. Please go back to your office, put the wrap up on the contract and make sure they are here before 16:30 because our CEO leaves at 17:00. He needs the job done and tomorrow morning I will bring them to the financial department so that we can process the payment. Next Monday you start.”
MATTHIEU DAVID: Wow, really?
THOMAS KNOOP: Yeah, serious. I went out and I said, “What happened here” and they said, “Well, it looks like we need to go and work for them.” I said, “But are you sure? I always thought this had a… why?” Yeah, they liked our presentation. We went back to the office, we signed the contract, we delivered it back and at 09:00 in the morning the next day, I got an SMS from the bank that the amount was transferred. It’s amazing and this is how fast it can go to China. I never ever in my complete professional life have seen something like this, but if the Chinese trust you and want to go, they go. There is nothing that can stop them. They execute and this is something that I have never ever seen anywhere else in the world.
MATTHIEU DAVID: This is one more thing is that actually Chinese companies can trust foreign customer service software in China when they deliver. So, they are not what most people think and much more are on top as well to look at different omni-channel customer service in China and listen to you. They can be very agnostic on where it comes from and very, very humble. It is a very good illustration of what I have seen as well. It is difficult for people reading the press from overseas and thinking it is a very, very good market.
THOMAS KNOOP: And what I love in Chinese people is to try and to test it for free. This is also something that in the western world is difficult to do. Typically from the western perspective people say, “Okay, we need to do work and we need to do this and it costs us money so how can we do this; maybe you pay a little bit and we give that as a discount when you decide to place the order.” Chinese people don’t really like to do that. If you prove… they want proof. They don’t want to pay for it, but if you make the upfront agreement like, “Okay, but if we prove it are you okay? Then we can proceed?’ They say yes and then it is a yes. That is my experience and I did this for two big companies in China. We didn’t do that much work for another company. We did a little bit more work, but when they saw it worked they were like immediately done, “Okay, let’s go and sign. We go.”
MATTHIEU DAVID: Is the other company China Telecom?
THOMAS KNOOP: No, that was Web international; an online education company. Have you seen the flyers for English lessons?
MATTHIEU DAVID: Okay.
THOMAS KNOOP: And we did all their online conversion solutions in China; basically they use it for marketing to drive appointments in their English lesson centers.
MATTHIEU DAVID: So, I understand that your solution was working when their solution was not working; I mean not all the time, but whenever they were not working, but then the question is why they were not able to make it work and you are able to make it work? Even technically speaking, would you be able to explain?
THOMAS KNOOP: Also a very Chinese way is they are not very well educated on customer service interaction and I see a lot of… Chinese companies do not understand that it typically costs six times more to acquire a customer than to keep a customer because of the share volume in China, a lot of companies are still… let me say they just shoot a lot of things and people will come because the volume is still growing. It is still a growing economy so there will be new consumers, new consumers, new consumers and then it’s fine. We don’t need to care too much yet about omni-channel customer service in China. So, I also see this with our vendors. They typically go only for price so they sell for the lowest price, but it is actually impossible to deliver a good after service for that price and this is where our competitors or other vendors lack. They just can’t deliver the level of customer service that we are giving our customers because we come from the West; we know customer service because that is what we do. So, one of the top things in my company is we deliver the best customer service to our customers.
MATTHIEU DAVID: Yeah that explains maybe why they choose you over Chinese vendors, maybe, but why they were not able to develop internally your solution?
THOMAS KNOOP: They were not in the timeframe that they needed. Their platform was big and they needed an online conversion solution in China instantly. It sounds maybe a little bit simple the way I explained it earlier, but there is a lot of KPIs, data gathering, reporting, dash boarding, etc. connected to the product that you also need to run teams of 450 people. So that’s not something you build in a week, let’s say. I mean we have been building ten years on it; constant development so it goes quite deep; the product.
MATTHIEU DAVID: Yeah we very often underestimate the cost of time. Sometimes it’s better to actually buy from a vendor and develop internally; the cost of time and uncertainty of developing customer service software in China is going to work. I have a question as well for you because we see that you have been able to; since 2010 you told me, right? You started to reach 200 people and you get so many, famous clients. Have you gotten some funding from outside because developing software is costly?
THOMAS KNOOP: No, we didn’t. We did everything organically. So, yeah it’s tough to do that, but I think it’s my personality. I don’t like to spend other people’s money. I only spend my own money and invest it in growth. It might not go as fast maybe as some people would think, but think with external funding, but it’s just not my thing. It’s just not my thing. I did it organically.
MATTHIEU DAVID: It is all the more remarkable that again, people who are not living and working and managing businesses in China may not know, but you cannot have a loan from a bank. You cannot have any support from a bank in China except if you are a state-owned enterprise. So, you didn’t get external vending, you didn’t get support from a bank so you were basically creating with your own skills and maybe your own serving at the beginning.
THOMAS KNOOP: Yes.
MATTHIEU DAVID: It’s always very, very impressive. You are talking in your presentation about AI solution that supports chat, App, e-mail, voice, and all social media in China. You mentioned it a little bit before. I feel when I read a lot of presentations from entrepreneurs that I am talking to from the web it is a bit overstated; AI as a word. It seems to be everywhere like deep learning or whatever.
THOMAS KNOOP: The funny thing is that when I started to explain AI I said, “Sorry, I need to disappoint you all. AI does not exist.” Yes, the artificial parts exist, but the intelligence part does not exist. It is still a computer and it’s not like… it cannot learn like a human. Basically, as a human, if I hit myself here on the corner of the table, the next time I walk here I will walk a little bit further and I will not hit myself on the table. A computer will keep on hitting the corner of the table until you specifically tell the computer not to hit that corner. This is the same with AI solution that supports chat, App, e-mail, voice and all social media in China. AI has a training time. It needs to be trained. It needs to be told what to do and if you tell it to do wrong things, it will do wrong things and if you don’t tell it what to do it will do nothing because it never learned what to do.
So, what it is very strong in it is executing repetitive things that humans also do at a slower pace. So it can do it very fast and it can do it in a very big volume if it knows how to do that. If it doesn’t know how to opt do that it’s basically useless. This is how we come in. We also compare AI with rocket ship technology. I mean, it can do a lot. I can go from here to the moon and if a customer asks me, “But I want this rocket ship. Can you give that rocket ship to me?” I will say, “Yes, I can build that rocket ship for you, but as soon as you have bought it; I give you the rocket ship and say here are your keys, have fun with your rocket ship.”
MATTHIEU DAVID: You need the fuel, right?
THOMAS KNOOP: You need a pilot. This is how we compare it. You can buy the rocket ship, but it doesn’t mean you can fly to the moon. You need a pilot to operate that rocket ship to be able to fly to the moon and this is where we come in. We don’t offer any AI solution that supports chat, App, e-mail, voice and all social media in China without what we call trainers and the trainers are actually… these are multiple people and one side they are technicians who know how to press the buttons and to enter basically the data into the AI system, but on the other hand, we have native people and we call them conversation designers that in our business it is important to design online conversion solutions in China; like human communication.
So, these two together will actually on a weekly or bi-weekly basis look at the data from the customer and communicate with the customer and day, “Okay, the AI does not know how to answer this kind of question. What is your answer? What does the AI need to reply etc.?” Then we input that answer into the system and, basically, that is how you train an AI. The AI will not train itself. It needs a feedback loop. So, either it is human trainers to feedback to the AI that is not operating correctly or you can do that also through automated ways. We have an automated way in our system where basically by the gent selecting the answers we also rate the effectiveness of an answer.
So, this is also a feedback loop that we use in our reporting, but yes you are completely right; AI is very overrated. But if it’s done correctly it can operate and handle a lot. I mean for the Eleme case; we had a very simple AI solution that supports chat, App, email, voice, and all social media in China and it was only answering the hundred most asked questions, but it was 45% of the traffic for Eleme and it was handled by an AI robot because the Eleme business is very niche and very small and it goes very deep. So, most of the questions were actually on the voucher and that was perfected because it was a repetitive question and it’s always the same as one procedure; you click here, you do that and you have it and for a company that has a broad product range; a wide product range it gets more and more complicated because you need to go very wide and also very deep and that makes it hard to do. So, for some businesses, it works better than other businesses.
MATTHIEU DAVID: I am going to be a bit geeky again, but in your slide talking about conversational AI solution that supports chat, App, e-mail, voice, and all social media in China, actually and I believe it’s mainly about chatbots interacting in an automatic way with people asking questions. You are saying the AI provider on WhatsApp or Google; how performant can it be? How effective can it be in China to use WhatsApp and Google; US providers?
THOMAS KNOOP: Actually Google is… well, those two are actual examples. Out platform actually uses any AI which is the same as any omni-channel customer service in China who have made the same decision with the AI as for many AI providers coming and they were spending hundreds of millions a year on AI development and me compared to them it’s a very small company. I am not going to develop my own AI solution that supports chat, App, e-mail, voice and all social media in China. What I am going to develop is how are my customers making use of that technology in my business which is customer service software in China?
That’s why I said I am going to build a connector to all of those AI’s; we put the content in our platform, you use one of the AI’s and through the live system you can use any of the omni-channel customer services in China and this is the mix and match that we actually do. So, as an example, there is Google and Baidu, but we also have an outside perspective made of Chinese AI providers. We use their API’s to communicate and the content itself is stored in our platform. Now to answer your question on how effective is for instance, Google in China; actually, they are a very, very high performance on Mandarin NRP. So, Natural Language Processing is an excellent rating from Google, surprisingly. Facebook not at all. So, Google for Mandarin text; you can for sure use it in China. Of course, there are connectivity issues, but the Mandarin NRP itself is very strong.
MATTHIEU DAVID: Because when you use – I don’t know if you can call that a library from Google or from AI software – their server is outside of China, right so that is why you say the connectivity is an issue. What about Chinese AI providers? What do they bring to you on how good they are compared to Google, for instance?
THOMAS KNOOP: Not too much because basically, there is what you use… in our customer service software in China what we use from an AI provider is the Natural Language Processing so the NRP. Yeah, the text recognition, basically. It is quite similar. One of the biggest issues that we see and are also by any of the Chinese vendors is if you are in Canton area; Hong Kong or Shenzhen area people speak Cantonese and English in one sentence and this messes the AI completely up because it doesn’t know if it needs to do a Natural Language Processing in Mandarin, in Cantonese or in English and all of the AI systems still have a lot of problems with that. So, our Hong Kong customers; are one of the first questions that they ask when they come to us. “Oh, you also have an AI. Can your AI do a mixed language processing?” Actually, we don’t offer our own AI. We use one of the AIs outside and then that is still an issue.
MATTHIEU DAVID: That’s a very interesting point. I am not going to tell you the name because I just have a device from Amazon and it is going to speak to me if I call its names, but this one has a problem too when I speak English or French or Chinese. It could not… I have to pick a language and I think for people who travel a lot; that may be an issue with voice recognition. That is a very niche segment and a segment which maybe is going to use more voice recognition than others; the early adopters. Talking about AI and chatbots; commercial AI what I would like you to summarise is you collect all the communication the agents have with the customers and you are going to analyze them through coding so match learning, deep learning or whatever we called it and you are going to find patterns and those patterns you are going to extract them and after you are going to check of relevance, but this check could be manual; the validation?
THOMAS KNOOP: Correct. So, basically, what we do after a certain amount of time we run a report and we just make a top list of not answered questions by the AI solution that supports chat, App, e-mail, voice, and all social media in China. So, basically that’s a top 10, top 20, top 30 or whatever you would like to have and these top 10 questions that are not answered by the AI; we will ask the brand basically or our customer., “Okay, what kind of answer do we need to put into the system on these questions?” This you do on a repetitive basis. So, every week, every two weeks you are able to generate a top 10 and if you keep on doing this your AI will respond better and better because you are putting more than one knowledge into the system. This is how we train the AI solution that supports chat, App, e-mail, voice and all social media in China.
MATTHIEU DAVID: I see. Okay, and you mentioned to another topic which was supporting the exports and the management of customers for Chinese companies. In a more practical way, they don’t have access to Facebook or whatever new software is not providing the agents. So, how do they organise this customer service software in China? Do they have offices with VPN in China? What have you seen so far?
THOMAS KNOOP: Typically, they outsource that kind of labor to outside China; Malaysia, Singapore and maybe not because that is expensive; Vietnam and basically low-level countries, but what Americans used to do 20 years ago with the Indians; all customer service was based in India. You see a lot from China that goes to the Philippines and that kind of English speaking country that still have low-level costs or they do it inside China. That is also possible and then yes, they can use registered VPN’s and that is not a problem. Many people think you cannot have access to Facebook inside a company. It is actually possible, but you just need to register your VPN and yes it is costly, but it is legal to do.
MATTHIEU DAVID: How much does it cost?
THOMAS KNOOP: From what I have heard 20-30 000 RMB, per month.
MATTHIEU DAVID: To have your own VPN?
THOMAS KNOOP: Yes, to have a dedicated line, registered VPN from here to typically Hong Kong because that is the shortest distance.
MATTHIEU DAVID: I would have a lot more questions; maybe we can invite you again, but it is already soon going to be one hour. We are now finished with a couple of questions on; typical questions we have for everyone for the interview. The first one is what books inspired you most in your entrepreneur journey and more necessarily about China as an entrepreneur?
THOMAS KNOOP: Yeah, I think the things that inspired me most were the books from EO; the accelerator program and that they all go on scaling, bootstrapping, cash management, how you handle your cash in a company. It is not specifically for China as you said, but it’s just how you can basically organically in most of the case grow your own company.
MATTHIEU DAVID: What do you read to be up to date on China; China business, China whatever to the news?
THOMAS KNOOP: Yeah, I… typically these are newsletters and that’s more about the broader stuff and there are many, many companies and probably also you have your own newsletter with news and I subscribe to a couple of them that I think are interesting and the rest for me is – because I am a tech commentator – there is a lot of tech news; Tech Asia and Tech Note and those kinds of groups that also offer news and information.
MATTHIEU DAVID: What book on China then more specifically would you recommend, if any?
THOMAS KNOOP: Yes, if any. Basically, I would recommend people to just come here to invest a little bit more and experience it yourself. Why; because to be honest, any book that is published is already outdated. This is the pace of China. I mean before you write a book it costs you 6 months before you publish it and then you redact it etc. you are already a year at least. So, a book; personally, I will never recommend a book on China because it is going to be a little outdated.
MATTHIEU DAVID: It’s already history about China.
THOMAS KNOOP: Yes, of course.
MATTHIEU DAVID: What productivity tool do you like to use as a CEO?
THOMAS KNOOP: Yeah, here in the company we use a lot of Trello and Wrike and basically kind of project management kind of tools.
MATTHIEU DAVID: Trello and?
THOMAS KNOOP: Wrike.
MATTHIEU DAVID: How do you spell it?
THOMAS KNOOP: Wrike.
MATTHIEU DAVID: What do they do?
THOMAS KNOOP: That is a project management tool for software development companies. So, you create a task and schedule it; the time and you have dependencies on people. You can notify each other etc. and another one that people just brought in is Quip; Q-U-I-P and this is a very interesting collaboration kind of set where basically your projects are documents, but you can use everything in a document, So, you can do an Excel sheet, a Word document, a timeline, a chat; it’s all connected to the same kind of documents with your project, basically. It’s also interesting.
MATTHIEU DAVID: Is it like Slack?
THOMAS KNOOP: Actually I have never used Slack so I cannot compare, but people here inside the company are very enthusiastic about Quip.
MATTHIEU DAVID: If you had some extra time, what idea would you like to work on?
THOMAS KNOOP: I don’t need extra time to work on things that I like. I am already doing customer service software in China. That’s my life. Yeah, I love working on the system that we have and doing new things and yeah, as we just discussed with the AI; I have an AI team here and I am constantly pushing them that it’s not good enough although they are very happy of the results with their AI, it is not good enough., I love doing that; pushing because it’s not about the hype and thinking that something is… it really needs to translate to useable things on the work floor, basically and you know; it needs to work for our customers in a way that you just press that button and it works. This is what I love to do.
MATTHIEU DAVID: What is the most surprising experience you have had so far in China?
THOMAS KNOOP: Yeah, this is the case we discussed earlier on, without a doubt.
MATTHIEU DAVID: Okay. What unexpected success have you witnessed? It is not necessarily about your success in customer service software in China, but I will give you an example of expecting like going to be successful. It is for me, for instance, an unexpected success. What have you witnessed in the Chinese economy you would not have thought it would be that successful?
THOMAS KNOOP: Yeah, I would say the digital; the adaptation of the digital environment. It is so high. I never expected that because typically you would think that China is outdated etc. and you know ten years ago when I came to China people came to me and said, “Okay, but what are you going to do in the rice fields where the cows still cloud the fields?” Yeah, it’s not like that. It’s so far and adaptation is so fast. You have to try new things and now I just see that the west is standing still, basically. The west is still debating about an app for banking for 3, 4, 5 years. To me now, that sounds very crazy.
MATTHIEU DAVID: I agree. It’s all the more surprising like when I arrived in China in 2009 people were paying cash when they were being delivered from the Internet; to the delivery man in cash because they don’t want to give their credit card online. That’s how far we were ten years ago. What unexpected failure have you witnessed recently or over your stay in China? To give you an example of an unexpected failure; when I arrived in China I didn’t expect Carpou to leave China.
THOMAS KNOOP: Exactly that. Some of my customers that were here like Atos from the UK; a fashion brand; they built an organisation, they had 200 people here on the ground and we were helping them with all their customer service software in China and we were running everything inside China and then suddenly they needed to leave because they weren’t making any profit and the CEO just said, “Okay, we are going to shut it down.” That happened to me a couple of times in my China experience and that was very unexpected and it was a new experience for me that brands actually also can leave China.
That was new and there are more examples, obviously, so actually that’s not large anymore, but it was a risk to the company that brands just stopped their operations. So, they don’t end the relationship because they are not satisfied, but it became a new factor that they just shut down business here and that was actually; most of my customers left because – at least 95% of the customers had left – they shut down a business. That was something I’ve never experienced before at that kind of rate.
MATTHIEU DAVID: Yeah, it is not surprising that they had to leave China. Actually, they had been successful before. It is not like they always lost money, but just they have not understood the changes from market to digital systems and markets from small farmers in the city and the O2O environment in China has changed too fast. Thanks for your time.
THOMAS KNOOP: Thank you for the invitation.
MATTHIEU DAVID: You are welcome and hopefully all who have been listening to us liked the show and if you liked it you can like as well on your phone by some 5 stars or good comments on whatever you use to listen to us. It could be China Paradigm on iTunes, it could be Spotify; any app to listen to podcasts or to watch the video. Thank you, everyone, for listening and thanks to Thomas for being with us.
THOMAS KNOOP: Thank you. Bye.
MATTHIEU DAVID: Bye.
China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.
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