SenseTime Group Limited: Business Model and Expansion

SenseTime Group Limited was founded in Hong Kong in 2014 to commercialize artificial intelligence for digital recognition of images, particularly human faces. After only three years in business, the company was profitable, with annual sales revenue of about US$100 million. In 2018, it employed over 2,000 workers and was referred to as the world’s most valuable artificial intelligence start-up, with a valuation of US$7.6 billion. China had become the largest market in the world for facial recognition technologies, with its share of global sales expected to grow from 29 per cent in 2017 to 45 per cent in 2023. And the global facial recognition market was forecast to be worth US$6.5 billion by 2021. SenseTime Group Limited aimed to empower more industries throughout the world with its artificial intelligence platform. A key question in early 2019 for the company’s co-founder and chief executive officer was how to adapt its strategy to achieve that mission in an increasingly fraught global environment.

This case is suitable for senior undergraduate- and graduate-level courses on management of innovation. Students should have taken marketing management or entrepreneurship courses and should be familiar with 4P (i.e., product, price, promotion, and place) analysis, brand management, targeting, and market segmentation. Students should also be familiar with analysis of business models, particularly those of start-ups. Students with experience using the business model canvas will find it helpful. This case concerns entrepreneurship and innovation. Particularly, the case examines how to develop a strong business model for a start-up company, and how to achieve profitability quickly by creating value for customers. The context is in deep learning of artificial intelligence, which has important applications in retail, finance, health care, and security. After working through the case and assignment questions, students will be able to<ul><li>understand the importance of applying technology to useful services to create value for customers;</li><li>become familiar with the AI industry, its key technologies, competitors, and customers;</li><li>appreciate the strategic considerations for a company using open source software versus developing its own operating system;</li><li>assess business-to-business marketing; and</li><li>analyze the political risks of a global high technology business. </li></ul>

• artificial intelligence business model