Chapter 86 Section 3 Gene Determination Theorem

For the last question in the previous section, the best answer is the four words "genetic".When I mentioned the role of genetics in determining the development of a company in the previous chapters, some readers felt that I was preaching fatalism.Unfortunately, the reality is cruel.A company can disbelieve in the determinism of genes, but ultimately cannot get rid of its influence. I discussed with Kai-Fu Lee and many excellent managers why it is difficult for a company to succeed in new fields after it enters a mature stage.The final conclusion is that a large company that is particularly successful in a certain field must have been optimized to adapt to this market. Its culture, way of doing things, business model, market positioning, etc. have been very adapted, or even overly adapted to its traditional market. .This makes the internal factors of the company's success gradually and deeply implanted in the company, which can be said to be the company's genes.When this company develops a branch overseas, it will first bring this gene to a new place and clone a new company.Microsoft's branch in China must still be in the style of Microsoft, and China's Google must have inherited Google's culture.At the same time, they all look like American companies, not Japanese companies.Similarly, when the company develops a new field, it will also clone a new department according to its own genes.Unfortunately, what works for an existing market may not necessarily work for a new market.

When a company has not accounted for 50% of the market and is developing at a high speed, it will not involve the issue of transformation.When a very successful multinational company needs transformation, it is after its development is very mature, just like a person in middle age.At this time, it is very difficult for a company to change just like a person.Especially when it sets foot in a field that it was not familiar with in the past, it is like a 40-year-old who has been pampered and re-enters the classroom to study from scratch with a group of 20-year-old young people. Much harder.What's more, young companies have no way out but to move forward, while mature companies always have their traditional business to rely on, and may retreat once they encounter problems.

We pointed out in the chapter "Big Blue IBM" that it is very difficult for IBM, which focuses on mainframes, systems and services, to succeed in the PC market.When IBM launched the PC after Apple, it sold 100,000 units that year, achieved sales of more than 100 million US dollars, and achieved profitability. This is an unprecedented success in business history.However, the more than 100 million US dollars is not worth IBM's contract to take over several Citibank computer systems. IBM's business model was to bundle long-term service into system sales, and it still is.It should be said that IBM's business model is a very good model.However, IBM, which is accustomed to this one-and-done business model and market, finds it difficult to promote personal computers as hard as it does home appliances.Within IBM, the sales and profits of the departments responsible for the mainframe computer business and banking software business account for the main part of IBM in almost all years, and these departments have a much higher say in the company than the PC department.Don't think that a successful multinational company is monolithic and everyone works for the benefit of the company. In fact, large companies often fight to the death for the benefit of departments.If IBM shifted its focus to the PC, it would fail internally at first.In terms of external competition, IBM's main early competitor, Compaq, had no choice but to go all out to fight.However, every time IBM encounters a little setback in the PC market, it retreats a little bit, and when it develops smoothly, it moves forward a little bit more, and so on and on.Fortunately, IBM's PC business does not conflict with its core business. Therefore, its PC division has been able to exist for more than 20 years until it was sold to Lenovo a few years ago.

Once the new business conflicts with the company's traditional business, some companies will even sacrifice the new business.One of my neighbors turned out to be a senior scientist at Bell Labs. He told me a ridiculous story that happened in Bell Labs.Decades ago, a group at Bell Labs developed a fax technology that was ten times faster than the fastest fax machine in the world at the time, but the project was stopped.The reason is that AT&T thinks it will make its voice service revenue decline.Apparently, the head of this small division doesn't have as much say in AT&T as someone in the phone service department.Today, the entire U.S. fax machine market is dominated by Japanese companies.This example is of course an extreme situation, but there were indeed many such things in AT&T back then.Even today, we can still see similar situations in other companies.

Many readers ask me why Microsoft's MSN department has not been profitable for more than ten years, while Yahoo and Google have both started to make profits in a few years and have developed better than MSN.The fundamental reason for this is that Microsoft's business model is based on selling client software, which is not suitable for the new business model of the Internet that uses advertising revenue to provide free services.Unlike IBM's situation, free services conflict with Microsoft's business model. It is conceivable that if Microsoft provides its Office software for free, its performance will plummet immediately.Not only its own internal Office department will not be willing, but even Wall Street will not agree (we will introduce the indirect but huge influence of Wall Street on the business of listed companies in a later chapter).As an investor, what Wall Street wants to see most is that IBM can do its systems and services with peace of mind, Microsoft will honestly sell PC software, and Google and Yahoo will be in charge of the Internet.The scale of business in these fields around the world is basically a constant. Competing with each other will only result in thinner profits and lower stock prices.Within Microsoft, MSN's voice is much lower than that of its operating system department and office software department.To solve this problem, Microsoft put MSN into the most authoritative operating system department last year, but with the top executive of these two departments Kevin Johnson jumped to Juniper as CEO, Microsoft will separate them again.It's hard to imagine the new MSN chief having more say within Microsoft than the leadership of the operating system and Office divisions.

The same market is a completely different thing in the eyes of different companies.Personal microcomputers are viewed very differently by Apple than by Microsoft.Strictly speaking, Apple is not actually a computer company, but a consumer electronics company that focuses on innovation.In Apple's eyes, computers are just a new type of electronic product. Of course, Apple should make it as new and cool as possible.Under this premise, Apple creates a relaxed environment for engineers to encourage innovation, and its product managers value product quality.These are all good parts of apple genes.Of course, everything has two sides. An overly loose environment may cause a lot of unnecessary exploration and do a lot of things that are not helpful to users.Only focusing on the fashion of the product may ignore the basic needs of users.A typical example is Apple's one-button mouse. Although it is cool, it is not as easy to use as Microsoft's two-button/three-button mouse.In the 1980s, when Mackintosh had done a very good job and was ahead of the IBM-PC running Microsoft DOS by a whole generation, Apple under the leadership of Jobs was still trying to add functions to it, and finally brought the original world The world's best PC, the Macintosh, became more and more closed, making it nearly dead in competition with Microsoft.Gates' understanding of PCs is completely different from that of Apple. In his view, computers are a tool that changes people's lives, and he regards "making computers popular in every family" as his mission. Products change people's lives.For Microsoft, function is more important than fashion, so its process of developing Windows is a strictly top-down process.A large team is responsible for a group of functions in the menu, and each small team is responsible for one of the functions.Under this strict division of labor, people's innovation is limited, but it ensures that the products are unpretentious, can be developed on time, and can meet the needs of users.

A company's products and services may continue to change as the market changes, but the company's genes are difficult to change.Some readers may think that Apple has successfully transformed from PCs, to iPods, and then to iPhones, and Apple's genes have changed.That's true on the face of it, Apple has changed a lot.But its inner place hasn't changed at all.Although it is a completely different market from PC to iPod to iPhone, Apple's business model has not changed at all.As an innovative consumer electronics company, like other similar companies, hardware and software must be sold together as a whole, and cannot be sold separately. The value of software must be realized through the sale of hardware.Therefore, although Apple suffered from self-enclosed losses more than ten years ago, when Apple launched the iPod more than ten years later, it was still a relatively closed product. It had to use Apple's own set of iTunes software to install music and videos from the PC. into the iPod.Today, Apple has launched the iPhone, the coolest mobile phone in the world, which is still a closed system.Some readers asked me, since the core of the iPhone operating system is also open-source Unix, why doesn't it create an open-system mobile phone alliance?The reason is simple, because this is not Apple's business model.Apple's genes determine that it must earn software money through hardware.Innovation is the most critical gene of Apple, otherwise its meaning of existence is not great.As for where to innovate, Apple doesn't care.As long as there is room for innovation on the PC, it won't give up on that market.From the iMac desktop all-in-one machine launched two years ago to the MacBook Air ultra-thin notebook launched this year, both are refreshing products.Therefore, Apple is still Apple, it does not become a Sony just because it makes an iPod, and it becomes a Nokia just because it makes a mobile phone.

Recently, with the advent of Google's smartphones based on the Android open source operating system.Nokia, the world's largest mobile phone maker, has announced that it may open up Symbian, the operating system for its smartphones.However, I personally predict that Nokia will not be able to do this, or it will not be done thoroughly.It will open some source code, the purpose is to let others make software for it, not to help others make compatible Nokia mobile phones.Because it chooses the latter path, it cuts off its own source of income.Nokia is different from Microsoft. The latter does not make mobile phone hardware itself, but makes money by simply selling mobile phone operating systems. The more mobile phone merchants in the world that adopt its operating system, the better.Nokia is in the field of mobile phones what Apple was in the field of microcomputers 20 years ago. In the final analysis, it still depends on the mobile phone itself to make money. If it sells more mobile phones of other brands, it sells less of its own.This is also due to the genes of Nokia as a mobile phone manufacturer. Google is different, it never wants to make money for hardware, but just hopes that people will use its search through hardware.So it wants as many manufacturers as possible to adopt its Android mobile operating system.Since Nokia and Google have different genes and different business models, their practices in the field of mobile phones will be different, and of course the final results will also be different.

It is so difficult to transgene within the IT field, but it is even more difficult to enter the IT field from a non-IT field.We can now understand why General Motors can't get rid of the fixed thinking mode of "developing the automobile industry".Although General Motors had a good layout after entering the field of electronics and communications in the 1980s, it inevitably fell into the curse of itself and could not extricate itself. A company's genes are not as tangible (under a microscope) as a person's genes.It is a company's corporate culture (way of doing things), management methods, product market positioning, business models and marketing methods that have evolved in the market competition to adapt to the market.In the early days of a company, when everything is still a blank sheet of paper, its genes may still change.Sequoia Ventures believes that a company's genes are finalized within one month of its establishment. This may be a bit exaggerated, but the possibility of a well-established company changing its genes is very small.The more successful companies are, the easier it is to believe that their inherent genes are the best.

The company's genes play such a big role that many multinational companies cannot escape Norwich's fate by changing their genes.This is actually a good thing for the entire industry and our world.Just like everything in nature is constantly developing from birth to death, so should a company or an industry.Human civilization and technology are constantly improving, and if the old ones do not go away, the new ones will not come in. Only by removing those huge dinosaurs that hinder our progress can we provide a new space for human development.From this perspective, the decline and demise of a former multinational company may be its last contribution to our society.

Of course, the world is so big that there must be some companies that have successfully improved their genes and successfully transformed themselves.In the following chapters, we will introduce how Nokia changed from a wood factory to the world's largest mobile phone manufacturer, how General Electric changed from an electronics company to a cross-industry business giant mainly based on the banking industry, and how 3M became a Evergreens in the general field. When a new information technology industry is just formed, it always has multiple competitors that can compete with each other.However, once a leading company emerges, it may become a game-changer in the industry and turn it into an irreversible advantage in business, quickly occupying the global market.In the IT industry, this process is usually much faster than we think.However, once a company occupies more than half of the global market, it has to find new growth points.At this time, the multinational company is no longer the vigorous company that year, and its inherent genes make its transformation very difficult.If it is lucky enough to transform successfully, it will gain new life again, otherwise it will be eliminated by the wave of technological revolution. Science and technology are undoubtedly the main driving force for the advancement of society in our era.The waves of technological revolutions have brought out the winners standing on the cusp of the waves, and buried the losers who could not keep up with the waves.