Chapter 19 The way of enterprise evergreen stems from continuous innovation

What I want to talk about here is the issue of evergreen and innovation.Anyone who runs a business hopes to be a century-old store, but there are not many companies that can truly become a century-old store.Why is Built to Last So Difficult?First, the market environment is constantly changing. Even if you open a restaurant, if your menu is always the same, your ingredients are always the same, and the service is also the same, I think it will not take long for more and more people to patronize the restaurant. less.In the era of globalization, changes in consumer tastes can be said to be faster than in any era.Second, technology changes too fast.In the 1990s, we all know that many people made their fortunes from the BP machine and pager industry, but such products are no longer available.When I was working in the 1980s, four-way typewriters were used in the office, but within a few years, after personal computers entered the office and home, this machine was of no value.Sony's Walkman was once popular all over the world, but is now replaced by MP3.Third, new competitors are constantly entering the market and destroying companies that were originally competitive; no company dares to say that it has no competitors, and even companies like Microsoft are now being challenged by Google.Fourth, this is very important, that is, the enterprises themselves are constantly aging, and many successful enterprises fail in the end, that is, they are defeated by themselves. Willing to continue to innovate, unwilling to deny oneself, and finally disappeared.

The most important thing in running a business is to understand why the business exists.The value of an enterprise lies in creating value for customers and creating value for society.This is something to always remember.To be evergreen at any time, we must continue to create value for consumers.Simply put, it is to give customers an explanation, why should they buy my things instead of his things?As the dean of the business school, I often ask a question: Why do students choose to come to Guanghua School of Management instead of going to other schools?If we don't have a strong reason for our customers to choose our products over competitors' products, then we can't be built to last.

In this way, we encounter another problem. Generally speaking, where is the competitiveness of enterprises?You can look at some ideas of Japanese management scientist Tatsuhiro Tengmoto.In the book "Competence Building Competition", he divides the competitiveness of enterprises into two levels. The first level is superficial competitiveness, that is, what we see on the surface and in the market; the second level is deep competition. Power refers to things that ordinary customers cannot see.On the superficial level, for example, your price is cheaper and more attractive than others, your delivery date is more timely than others, and the content of your product advertisement is more shocking, etc. These are consumers—they are the ones who buy your things. people can directly see.

However, in fact, all superficial competitiveness ultimately depends on deep competitiveness.Consumers have no way to directly evaluate the deep competitiveness. In the final analysis, it is the ability to truly create value.For example, production efficiency, production cycle, product pass rate, product development cycle, etc.Do the same resources and elements create higher value for consumers than others?The products produced can be inspected before leaving the factory, and unqualified ones can not be listed on the market, and consumers can’t see them. However, if the qualified rate of production is only 70% or 80%, it means that 20% or 30% of resources are wasted. In the long run In other words, it is difficult for such an enterprise to be competitive.And these in-depth competitiveness depends on the organizational capabilities of the enterprise itself, that is, how to use different elements to create value and improve efficiency.Organizational capabilities determine the deep competitiveness of the company, then the superficial competitiveness, and finally the performance of the company, that is to say, how much money it makes and how much market share it has.

In the operation of enterprises, there are other external factors that are also very important, but these are difficult to control.For example, if the same company remains unchanged, it is because of changes in macro policies, such as interest rate adjustments and exchange rate appreciation. Exports made money before, but now they are losing money.These things are beyond human control.Only when an enterprise has deep competitiveness can it adapt to macro fluctuations.Take Japanese automobile companies as an example. The exchange rate of the yen against the U.S. dollar has appreciated from more than 300 yen in the 1970s to 100 yen in the 1990s. Why are Japanese cars still one-third of the world in the international market?The reason is that the production method represented by Toyota essentially has higher production efficiency and faster development cycle than American auto companies.

In China, it must be said frankly that too many companies focus on superficial things and are used to price wars, packaging, and advertising.But these are superficial competitiveness, not deep competitiveness, and superficial competitiveness is easy to lose.To give an example, if you make some tricks on the appearance design of the mobile phone, such as setting a diamond, the mobile phone may sell very well for a period of time, but it cannot last for a long time. When it comes to deep-seated competitiveness, we must first talk about its characteristics, or the standard to measure whether an enterprise has deep-seated competitiveness.To sum it up in 12 words, it is "cannot be stolen, cannot be bought, cannot be opened, and cannot be taken away".First, "can't steal".I have been advising our company to always think about what is in Hugh's company that others cannot steal?This "stealing" is not necessarily a material "stealing", although this is a big problem faced by software companies.That is to say, what you make can be easily imitated and copied by others, so it is not competitive.Second, "can't buy it".You have to ask whether the things you make can be bought in the market?Is someone else doing better than you?For example, your computer company can develop chips, but can you do better than independent chip suppliers?If you can't do better, you are not competitive to develop it.Even talent is not necessarily the core competitiveness, because talent mobility is increasing, and elite talents have a market price. The question is who can pay the highest market price for such talents?Now many elite talents in China's software industry have been poached by companies such as Microsoft and Google. Why?Because they can pay a higher price than us, and the reason why they can afford a higher price is that these people create more value in their enterprises than in China's own enterprises.Third, "cannot be disassembled".Take a look at whether there is a high degree of complementarity among different people in our company?Do different businesses have greater value together?For example, an enterprise has four departments, or four industries, and each department and each industry has greater value when separated. Such an enterprise cannot be maintained for a long time and must be dismantled.Every enterprise has to ask, after my part of the business is split, has the efficiency improved or decreased?If the foot is raised after removing it, then you should remove it.Fourth, "can't take it away".We have to ask whether the things owned by our company belong to some individual employees?If these employees leave us, what else do we have?If not, for example, customers are all customers of the account manager. If he leaves, this customer will not come to us, so we still have no competitiveness.

These 12 characters are a standard to test whether each enterprise really has deep competitiveness.Going to McDonald's to eat is not because of anyone in McDonald's. The CEO of McDonald's has changed, the store manager has changed, and the waiters have changed. It will not affect McDonald's business. This is its core competitiveness.Here I would like to specifically recall a scene when I communicated with Wang Wenjing from UF. I said, are you afraid that your people will leave now?He said that he remembered being scared in the early days, because he sold the same things as me after he went out, but now he is not afraid anymore, even if his selling price is half lower than mine, customers will not follow him.Why?Because UFIDA has its own brand and customers have higher trust in him.In the field of financial software, it is not easy to compete with an enterprise with an existing brand, so UFIDA has something to do with establishing a good brand with it.Many of our companies have developed to a certain extent, and employees can take away their resources and customers because there is no brand.

The in-depth competitiveness of an enterprise measured earlier is actually a static in-depth competitiveness.If you look at it dynamically, things are changing.Things that cannot be stolen today can be stolen tomorrow; things that cannot be bought in the market today can be bought tomorrow; things that could not be opened in the past may be opened now; things that could not be taken away in the past The things you have may be taken away now.Why are so many software outsourced now, the original programs are written by ourselves, and now we don't need to write them ourselves?Because you can buy it now.Therefore, for an enterprise, if you want to survive, you must constantly create such things that cannot be stolen, bought, disassembled, or taken away.Every business leader must constantly test himself: How long can I maintain my current competitive advantage?Is it possible for me to survive after this period?This leads to the next question: how to maintain the continuous competitiveness of an enterprise.

There may be many reasons for continuing to have those things that cannot be stolen, bought, disassembled, or taken away, but the most fundamental point is innovation.The innovation I am talking about includes the management innovation we are going to discuss today, but as an enterprise, no matter how good the management innovation is, it is meaningless if it cannot be transformed into an innovation that creates value for customers in the end.In other words, competitiveness ultimately depends on whether the company's products make customers more satisfied, and whether customers are willing to pay a higher price for us.If this cannot be achieved, other innovations are meaningless, because the value of an enterprise is to create value for customers, not how perfect it is and how beautiful it looks.The essence of the market is whether it is good or bad, and it is up to the customer to decide, not the merchant!

We should also note that the more intense the competition in the market, the faster the loss of competitive advantage and the more difficult it is to maintain competitiveness.Innovation is the key to the sustainable existence of core competitiveness.Quoting a sentence from the American economist Schumpeter—he is the father of innovation theory, and all original ideas about enterprise innovation come from him—he said, what is innovation?Innovation is "creative destruction". Innovation means that you have to destroy your past, and innovation means that you destroy the past of existing successful companies in this industry.We know that many modern technologies have destroyed the past, computers have destroyed typewriters, and DVDs have destroyed VCRs. MP3 destroyed Walkman, this is innovation.

For enterprises, I think it is very important to realize that innovation should be a corporate behavior, not an individual behavior.Let's not think that innovation is just a flash of inspiration from some bright mind.Innovation is a formalized and routine operating procedure, and the innovative ability of a successful enterprise comes from the design of the entire system.Frankly speaking, Chinese companies have done relatively poorly in this regard. Looking at our current patents, nearly 2/3 of them are personal patents, not corporate patents. In the United States, the ratio is just the opposite, that is to say, 2/3 Patents are company patents.In many cases in China, innovation is still an individual behavior rather than a corporate behavior. We must realize that innovation requires continuous capital investment, and it is very important not to be willing to spend money.Unfortunately, many Chinese companies are reluctant to spend money on innovation.Let's look at the vast majority of Chinese companies, or in general, spend far more money on advertising than they spend on R&D.It costs tens of millions of yuan to sign an advertising contract with CCTV, but they feel that they have no money to invest millions of yuan in innovation and research and development. We also realize that innovation is a continuous and persistent process, and we must have enough patience. No innovation is instant.To give an example, the disposable diapers for children produced by Procter & Gamble in the 1950s and 1960s took 10 years from the beginning of research and development to the market. It was not because of product quality problems, but how to transfer the diapers. The cost of production is reduced to an acceptable level for ordinary people.For example, each diaper does not exceed 3.5 cents. If you can’t do this, the cost of a diaper is more than 10 cents, and not many people will buy your diapers. It took 10 years for Baojie to reduce the price of diapers to an acceptable level in the market.A lot of innovations may not see the results immediately, but it provides the basis for future innovations.Whether we have such a persistent mentality to do this becomes particularly important. I would also like to mention in particular that as mentioned earlier, many Chinese companies like to advertise and spend money on marketing. Now they have changed their approach, which is called "social responsibility". In fact, many of them are related to marketing activities.Marketing activities can only create superficial competitiveness, and marketing cannot create deep competitiveness.When I was talking with Minister Long Yongtu yesterday, we both talked about this issue, just like a person, if you want to be liked by others, you have to exercise to make your body very healthy; if you only rely on makeup, make appearance phenomenon, no one will really like you consistently.There is no company in the world whose foundation is evergreen through advertising. There is no other way but to innovate. Next, I want to talk about the knowledge accumulation of enterprises. Without long-term knowledge accumulation, enterprises cannot achieve innovation.We can classify knowledge from two perspectives: the first is based on the degree to which knowledge can be expressed, and the second is based on the relationship between different parts of knowledge. From the perspective of the degree of knowledge expression, academic circles generally divide knowledge into explicit knowledge and tacit knowledge, or objective knowledge and empirical knowledge.Explicit knowledge is knowledge that can be coded. This kind of knowledge is easy to transmit and teach. For example, if you write an instruction manual, everyone can operate the machine just by reading the instruction manual. That is explicit knowledge.Tacit knowledge is knowledge that cannot be accurately expressed in words and languages. It can only be experienced continuously, and it cannot be learned from books. It must be accumulated through experience.For example, it is impossible for us to drive a car just by looking at an instruction manual. To really drive a car well, we must constantly practice in practice. This is tacit knowledge, which is experiential. From the point of view of the interrelationship of knowledge, we divide knowledge into alternative knowledge and complementary knowledge.Alternative knowledge means that knowledge A does not need knowledge B, or the value created by these two knowledge can be simply added, if the value created by knowledge A is 100, and the value created by knowledge B is also 100, they The value created by the two together is 200.However, the value of complementary knowledge cannot be added. Their combined value is far greater than the value created independently, which may be a product relationship. In this way, there are four types of knowledge that enterprises can accumulate.The first type is alternative explicit knowledge, the second type is alternative tacit knowledge, the third type is complementary explicit knowledge, and the fourth type is complementary tacit knowledge.For enterprises, every type of knowledge is very important, but what really determines competitiveness is not explicit knowledge and alternative knowledge, but tacit knowledge and complementary knowledge, that is, complementary tacit knowledge.What enterprises need to accumulate most is complementary tacit knowledge. We have to ask ourselves how much we have in this regard.Here I want to emphasize, how big is the difference between an excellent company and a non-excellent one?Probably not more than 5%!Because a lot of knowledge in the enterprise is shared by everyone, this is an admission ticket, without an admission ticket you are not eligible to enter, but having an admission ticket does not mean that you will be successful.The factor that determines your success is the 5%, or even 2%, 3%, which is included in the complementary tacit knowledge.Because it is complementary, it cannot be separated or taken away with the standards I mentioned earlier. Employees with complementary knowledge are unwilling to leave the company, because a person's work efficiency in this company is not as good as The method is brought to another enterprise: because it is silent, it is not easy to be stolen, imitated, or copied.If we reorganize the employees of China's best enterprises into new enterprises, the efficiency after the reorganization will definitely not be as high as that of the original enterprises, because most of the tacit knowledge they have accumulated through experience has disappeared.So, is our enterprise proactive and patient in accumulating complementary tacit knowledge? To give an example, everyone knows that Panasonic is a very good company. In the 1980s, Panasonic launched a fully automatic household toaster.For such a new product to be successful in the market, the quality of the baked bread must not be inferior to that of the bread available in the market, otherwise it will be of no value.But they have been designing for a long time but have not solved the quality problem. The baked bread is always unsatisfactory, the color is different, and the taste is not very good. The reason is not clear.When they learned that the bread of Osaka International Hotel is the best bread in Osaka, they sent a development team of eight people to Osaka International Hotel for two months as an intern. They learned how to bake bread from the masters there, and finally understood the true quality of bread. It depends on the process of kneading dough. They mastered this tacit knowledge, and then applied it to the design of the machine, and finally achieved success, making the toaster the most profitable small appliance of Panasonic.Why are the dumplings made by machines in the market not as good as those made by hand?It may be the same reason. The manufacturers of our dumpling machines have not mastered the tacit knowledge of making dumplings. In our enterprise, such as the software industry, the knowledge among your sales staff, financial staff, and technical staff should be highly complementary, and most of them are tacit.If a technical person does not understand some basic knowledge of enterprise management, what the salesperson is talking about, what the financial person is thinking, I do not believe that he can compile an ERP software that makes an enterprise feel very good to use, so establish complementary The tacit knowledge of sex is very important. The competitiveness of an enterprise must ultimately be reflected in profits.But where does the real profit come from?In fact, it comes from your innovation - product innovation, process innovation and so on.But innovation is not technical refurbishment, but you use the same resources to create products that consumers are willing to pay higher prices, or use fewer resources and lower costs to produce products of the same quality; innovation must withstand The test of the market and the test of consumers are like the diapers produced by Procter & Gamble mentioned above.Of course, the innovation of any enterprise is faced with uncertainty. If there is no uncertainty and risk, innovation will not make money.In a word, profit comes from innovation and uncertainty.Only the innovation of the most discerning entrepreneurs can become the growth point of corporate profits. On this occasion, I think it is necessary to repeat the judgment on innovation of Chinese enterprises that I said on another occasion.I emphasize innovation and emphasize uncertainty.In fact, our Chinese companies have been busy innovating and coping with uncertainty.So, what is the difference between Chinese companies and Western companies?That is, Western companies are mainly faced with market uncertainty and technological uncertainty; while our Chinese companies have to spend too much energy and time focusing on policy uncertainty and responding to policy changes.The innovations of Western companies are mainly product innovations, technological innovations, and business model innovations, that is, how to produce higher value for consumers; while Chinese companies spend a lot of time on system innovation, such as how to carry out property rights reform and whether bonuses can be provided. Issues, whether stock options can be used, etc., and do not take into account product innovation.In the era of global competition, it is impossible to go on like this for a long time, because consumers care about the value you create for him, not how busy you are.Of course, after several years of reforms, especially after joining the WTO, the institutional environment of Chinese enterprises has been greatly improved. Compared with the past, Chinese enterprises now seem to have more time and energy to study market uncertainties , engaged in product innovation. In my hometown, I heard such a saying when I was a child, that is, "A jujube is not dead for three years, and a peach is not alive for four years."A jujube tree does not produce leaves or produce dates for three years. You think it is dead, but it is not dead. It may come back to life in the fourth year.If you plant a peach tree and see its lush branches and leaves for four consecutive years, you think it is alive, but in the fifth year, you may find that it suddenly died.Why is there such a difference?Because the roots of these two trees are different, the roots of the jujube tree are very deep, so it is not easy to die; the roots of the peach tree are very shallow, so once the external climate changes, it will be difficult for it to continue to survive.I hope Chinese enterprises are jujube trees, not peach trees.We should not pursue short-term booming and make too many superficial articles, but focus on long-term development, deepen our roots, and build real deep-seated competitiveness.Now, enterprises are paying more and more attention to risk control. In fact, building deep competitiveness is the best risk control.Any successful company in the world has times of crisis. In fact, only companies that have passed the test of crisis and death can be called mature companies.So don't be sad even if you encounter difficulties in business, this is the moment to shape a great company.Because of this kind of difficulty, you will be forced to continue to innovate and build your core competitiveness.