Chapter 18 17. Shi Zhenrong: Dealing with internal crises is more important than dealing with external crises

Shi Zhenrong is known as the godfather of IT in Taiwan. He likes to find a point of convergence between Chinese and Western management cultures, and is brave in innovation. In 2000 and 2000, two successful rebuilding projects were carried out on Acer, which allowed Acer to maintain its vitality and further develop and grow. The two rebuildings have become classic cases of enterprise management. At present, Acer has grown into the third largest PC in the world. company. On December 18, 1944, Shi Zhenrong was born in Lukang, Changhua County, Taiwan, China; graduated from Taiwan Chiao Tung University in 1971, received a master's degree from the Institute of Electronic Engineering, and then entered the service of Universal Electronics Company, and developed Taiwan's first desktop computer In 1976, based on the ideal of promoting microprocessor technology, Shi Zhenrong and four partners Co-founded Multi-Tech International Corporation (later renamed Acer) with a registered capital of NT$1 million; in 1981, he was awarded the Taiwan Youth Entrepreneurship Model; in 1983, he was awarded the title of the first World Top Ten Outstanding Youth; in 1992, he led the first re-engineering Acer, reversed the setbacks caused by entering internationalization; in 1994, "World Executive Digest" reported on Acer's reengineering extensively, pointing out that Acer has developed a fourth internationalization model for Asian companies that is different from Japanese, American and European manufacturers. In the same year, Harvard University compiled Shi Zhenrong's experience in transforming Acer into a textbook, and rated Acer as "an outstanding case of corporate international management"; in 1995, he led the launch of the "Aspiration" multimedia home computer, which became popular all over the world; in early 1996, it was published by the American "Business Week" Selected as "The 25 Most Outstanding Business Managers in the World"; in 1997, AsiaWeek praised him as the spokesperson of Taiwanese enterprises; in 2000, he led the second reconstruction of Acer, faded out of manufacturing, and achieved brand success; in 2003, CNN News Network (CNN) TalkAsia program described him as a visionary entrepreneur who allowed Taiwan to occupy a place in the global technology map; at the end of 2004, Shi Zhenrong resigned from the chairmanship of Acer Group to lead China Smart Finance, which was spun off from Acer Group, and served as chairman and chief consultant.

Viewpoint: It is difficult to predict when a company will have a crisis.In my opinion, it is normal for an enterprise to have a crisis, and it is abnormal if there is no crisis. Therefore, it is necessary to be prepared to deal with a crisis at any time. An enterprise cannot wait for a crisis to develop its capabilities. Downsizing is to organize more efficient downsizing, not just low cost.In times of economic crisis, maintaining organizational efficiency is essential. background of the crisis In 1988, Acer, which had been established for 12 years, went public in Taiwan.At that time, Taiwan's stock market was unprecedentedly prosperous. Therefore, the listing brought abundant cash flow to the developing Acer.Against this background, Acer began large-scale internationalization, and invited Liu Yingwu, the former vice president of IBM, as the general manager of Acer to further promote the internationalization strategy.For a time, Acer's morale was high, and they were full of confidence in the future. People from all parties, including Acer, believed that Acer was about to enter a heyday.

However, behind this superficial phenomenon, there is a crisis that has not been noticed by Shi Zhenrong and Acer. The actual situation at that time was that in the IT industry, a new situation had changed, and a silent revolution in the computer industry was quietly unfolding.Taiwanese motherboard manufacturers and importers from all over the world joined hands to form an assembly alliance for compatible computers, moving from an integrated model to a division of labor and integration model to challenge old system manufacturers like Acer.Acer was surprised when they heard that these manufacturers launched "motherboard without microprocessor" and "motherboard without memory".But at the beginning, apart from being surprised, Acer didn't even take it seriously for these motherboard manufacturers that sprung up like mushrooms during the rain, thinking that they couldn't compete with system manufacturers like itself, and reprimanded them for not following the rules. However, the subsequent development proved that Acer had to take countermeasures to deal with the impact of this industrial revolution.

In addition to the external impact of this industrial revolution, the more serious situation comes from within Acer.During this period, Acer has experienced more than ten years of smooth development, and the various burdens brought about by its rapid growth have become heavier and heavier. Acer's body has become more and more rigid. The failure of Acer, as well as the failure of the acquisition of the American mini computer company "Gotos" for its internationalization, brought about serious organizational expansion and huge losses. The losses, the losses far exceeded expectations.This result brought great shock to Acer up and down.Shi Zhenrong began to reflect. He later summed up five causes of Acer's serious consequences during this period: "big head syndrome" caused by too much funds, "obesity" caused by large and inappropriate organizations, and "well-being" caused by a lack of sense of crisis. Syndrome", unresponsive "dinosaur syndrome", "big pot mentality" with no separation of powers and responsibilities.

The cause has been found, and Acer needs to act and carry out a change.As Shi Zhenrong said: "When a company encounters a crisis, it must face the problem and seek ways to improve it. Only in this way can the company turn the crisis into a turning point." Based on this, Acer carried out the first major transformation in history. Acer's transformation has gone through two stages.The first is to change the organization into a multi-profit center in 1989, and to promote the "Ceremonial Change" to streamline the scale and adjust the structure.At that time, after more than ten years of rapid growth, Acer's organization seemed loose and large, with unclear rights and responsibilities and unclear rewards and punishments. As a result, some employees were unwilling to take responsibility and it was difficult to promote things.Acer employees generally felt problems with the organizational climate.Therefore, Acer held the "Celestial Change" meeting to communicate with employees, promote the flattening of the organization, promote the personnel system with performance as the evaluation standard, and distinguish the boundaries between responsibility and authorization.In order to promote this transformation, Acer made an important dismissal plan in 1991, dissuading 300 employees in Taiwan and laying off 100 employees in the United States.Immediately afterwards, Altus was merged into the US branch. After several layoffs, the company gradually stabilized. At the end of 1992, 8% of the employees in the Australian branch were dismissed, and Acer’s business units were divided into marketing-oriented RBUs ​​(regional business units) and manufacturing-oriented SBUs (strategic business units) according to the nature of their business. , this model established the basic prototype for Acer's innovative "master-slave architecture".After these changes, Acer's books began to balance.

In the second stage, starting from 1992, the operation model was revised, and the distributed management of "fast food restaurant model" and "master-slave structure" was adopted, and an innovative management structure and business philosophy were developed. The "fast food restaurant model", in simple terms, is to transform the original production system in Taiwan into the production of components in Taiwan, then sell the components to overseas business units, and the overseas business units assemble them locally in the market, so that Acer can provide The newest computers on the market, with the latest technology, speed up new product introductions and inventory turnover.

The specific situation of the decentralized management of the "master-slave structure" is that "master" refers to the many subsidiaries and related companies under the Acer family, and other companies corresponding to the "master", including Acer's headquarters, are all "slave". There is no subordinate relationship between subordinates.Shi Zhenrong let them treat them as completely independent individuals. In terms of business operations, "don't carry burdens, use resources as much as possible, and be the 'masters' of each other", and only "help each other" when it conforms to market rules. The Acer headquarters no longer issue orders, only coordinate when necessary.This master-slave architecture enabled Acer's computer accessories to be delivered flexibly nearby, adapting to the rapid development of the IT industry at that time, and Acer's reengineering project became more comprehensive and complete.

After the business model (fast food restaurant model), organizational structure (master-slave structure) and business philosophy (global brand combined with geographical location) have been adjusted and changed one by one, since the second half of 1993, Acer's overall operation has improved significantly, and the management of the manufacturing department The cost has been reduced to 1/6 of the original, the number of days of inventory turnover has been reduced by half, and the average turnover of employees has also increased several times.It was also from this year that Acer became the number one computer brand in Latin America, Southeast Asia, and the Middle East, and turned a profit in the United States, enabling Acer to enter the top ten computer brands in the world, ranking seventh.The company's business and profits have grown rapidly. From 1993 to 1995, the annual revenue growth rates were 51%, 69%, and 81%; the profit growth rates were 2436%, 207%, and 72%. It can be said that Acer Reinvention was an overall victory.

Later, Shi Zhenrong warned when talking about this change, "It is unpredictable when a company will have a crisis. In my opinion, it is normal for a company to have a crisis, and it is abnormal if there is no crisis. Just like the reason why human beings build strong houses is to prevent natural disasters, not for good weather. Wind and rain are normal, so it is not unusual for enterprises to encounter strong winds and waves. Since we know not to wait for the wind and rain to hit before building houses, enterprises You can’t wait for a crisis to develop before you develop capabilities.” For every business operator, I’m afraid this is a valuable insight that needs to be used for reference.

Viewpoint: Change management is dealing with internal business crises, and unexpected situations are crises.Both have to face the reality that change management deals with long-term crises, while crisis management is short-term.Face the reality and deal with it quickly. If the short-term crisis is not dealt with immediately, it will turn into a very large impact, and even slowly kill the enterprise. If your main business only contributes a small profit, if your organization is so large that the chairman does not know how many companies there are, then change yourself, otherwise the crisis will come to you.

background of the crisis In 2000, after undergoing the first reform in 1991, Acer has grown rapidly and steadily for nearly 10 years, and has become a veritable IT company. The practice of dividing the enterprise into five groups (Hongdian Group, Mingqi Group, Acer Group, Acer Semiconductor Group, and Hongwang Group) has resulted in uneven distribution of resources in operations, making Acer's growth almost stagnant and gaining The profits are not ideal, and they rely on selling the stocks of companies that have successfully reinvested in the past to make ends meet.In extreme cases, 80% of Acer's profits come from outside its main business.Take Acer’s sub-group, which has always been in good financial condition, as an example. Of its NT$8 billion in profits that year, only NT$1.3 billion came from its own business, and the remaining 80% came from its past investment in stocks.However, income outside the main business is not the driving force for the growth of the company after all, and it is also easily affected by external conditions, making profits unstable.Acer encountered the second growth limit in history, and faced many difficulties at that time. The first is the coexistence of private brands and OEMs, which increases the complexity of management and conflicts between resources and operations.When major manufacturers consider orders, they will inevitably have concerns about Acer's growing private brand.For many years, Acer's OEM customers have been mainly IBM, and it is just the opposite of other OEM companies to diversify their customer sources and increase the volume.At the same time, self-owned brands need to invest a lot of resources in product development, marketing and services, but because Acer still has OEM business, it cannot fully exert its strength in this field.The coexistence of its own brand and OEM makes Acer gradually fall behind professional OEMs in terms of competitiveness. Let's look at the "21in21" policy with ambitious goals.Acer once formulated the "21in21" plan of "21 listed companies in the world in the 21st century". There are corresponding sub-subsidiaries, and even Shi Zhenrong once said that he did not know how many subsidiaries Acer Group has.And "everyone wants 21in21, but whether the business scope of these 'little Acer's' overlaps, whether they can operate independently forever, and whether the leaders can control them are all questions. The result is very unfortunate."The layout looks beautiful, but fragmented and poorly implemented, this further reveals the weakness of the entanglement between the OEM and the brand and the inability to integrate the group's resources.Some Acer executives took Hongdian's strategy as an example, thinking that the strategy was set well.But "Hongdian was the first to deploy in information home appliances, and also has customers from large manufacturers, who have everything. But such a beautiful layout is only useful if it has to be implemented."This situation made Shi Zhenrong realize, "When some people are not responsible and the organization can't handle it, let everyone think that this can continue, and of course there will be problems in the end." In addition to the coexistence of Acer's own brand and OEM, the rise of OEM companies after the emergence of large-scale production and the prevalence of outsourcing in the IT industry, the competitiveness surpassed Acer, and the excessive expansion of the five sub-groups led to repeated investment, which made Acer In addition to the further decline in product prices and profits, at that time, Internet companies were prevalent, and Acer also joined the Internet industry accordingly. However, with the bursting of the Internet bubble, Acer also suffered a lot. The huge Acer was stagnant. Shi Zhenrong was not satisfied with the performance of several of the sub-group leaders at that time, and once said the important words "if you can't change the brain, replace it".But he is also very clear, "The growth of any business will have a certain limit, and it is difficult to break through. If you want to break through the limit of growth, you must do two things, one is long-term investment, and the other is change management." Acer has to time for change.Based on the success of the first reconstruction, Shi Zhenrong decided to carry out a real second reconstruction of Acer.Aiming at the problems faced by Acer in various aspects, Shi Zhenrong launched a series of reconstruction measures: First, integrate internal resources.Shi Zhenrong mobilized all of Acer's troops and resources as much as possible to fight against the outside world.If there is not enough troops, we will strictly guard our positions in countries with weak market strength; Acer, which has obvious advantages in the Southeast Asian market, will act as the vanguard of operations; reduce the company’s troops in the United States, and set aside "bullet money" to invest in mainland China to improve resources , Training talents.And adopt the strategy that 50% of the shares of companies in various regions are controlled by Acer headquarters, and the other 50% of the shares are linked to the performance of companies in various regions. fight. Second, separate the private label and OEM business.Acer's own brand and OEM business have coexisted, and Acer has existed for 10 years. The adverse consequences of the conflict between them have been quite serious. In this reform, Shi Zhenrong first performed a major operation on Acer, and his actions were neat. At the end of 2000, Acer split the group into two independent parts: design OEM and own brand.Shi Zhenrong took over the post and took full control of Acer's operations as the chairman.At the same time, cancel all sub-groups under Acer to simplify the process, eliminate duplication of investment, and reduce investment in non-core businesses.Acer's organizational model is finally divided into research and development service business (DMS) and brand operation business (ABO). "After the split, the design and foundry business will operate independently. Not only can it avoid conflict with Acer's own brand business, but it can also focus on its own field. In the short term, it will help expand the scale and improve cost and speed. In the long run, there will be opportunities Expanding to product lines other than PCs will create more room for growth.” Shi Zhenrong is full of confidence. Third, divest non-core business assets.For Hongdian’s NT$8 billion profit, only NT$1.3 billion comes from its own business. Shi Zhenrong is determined to make a radical change. Acer slowly withdraws from past non-core business investments in exchange for funds to focus on the development of Hongdian’s main business. Others The same is basically true for the sub-groups, which have largely sold off non-core business assets in order to develop corresponding main businesses. Fourth, lay out new Hongdian.Shi Zhenrong brought Acer Computer from the manufacturing industry to the marketing service industry, and divided the operation direction into three aspects: marketing of information products, e-commerce, and high-tech investment.Among them, the expansion of e-commerce and active expansion in mainland China are Shi Zhenrong’s core business. He once said, “The market in mainland China is at least dozens of times larger than that in Taiwan. It is three times as simple. Acer will face challenges from the market, but the bigger challenge comes from e-commerce, and what I want to do is e-commerce that does not exist in the world.” For high-tech investment, it is independent according to the principle of venture capital Operation: More than 50% of the equity is held by Acer. If it is necessary for Acer’s business, it will be bought by Acer as a whole in the future; if it is not bought by the whole, it will be considered for independent listing and financing. After secondary reconstruction, Acer was able to concentrate its superior forces and go into battle lightly. In 2002, Acer's total revenue reached NT$444.3 billion, and in 2003 it reached NT$541.1 billion. In 2004, the overall sales of Acer computers ranked fifth in the world; the shipment of notebook computers in the second quarter jumped to the first place in Western Europe, replacing the new HP as the king. In December 2004, Shi Zhenrong retired and handed over the baton smoothly. Looking back on this change, Shi Zhenrong warned: "Change management is a little different from crisis management. Change management is to deal with internal business crises. External changes affect the internal and highlight internal problems; unexpected situations are crises. , is an emergency. Both have to face the reality. Change management is to deal with long-term crises, while crisis management is short-term. It is necessary to face the reality and deal with them quickly. If short-term crises are not dealt with immediately, they will have great impact. The impact of the impact, and even make the enterprise gradually fatal." Obviously, dealing with internal business crises is more important than crises caused by external sudden factors.