Huang Weiwei is a professor at the Business School of Renmin University of Chinese, a senior management consultant of Huawei, and a reading tutor of the National Leading Readers Alliance of the President's Reading Club.
Enterprises are like living things, and there is also a life cycle phenomenon. If it is carefully divided, there are gestation periods, start-up periods, growth periods, maturity periods, stagnation periods, recession periods, and finally decline, bankruptcy, or mergers. However, the evolution of the life cycle of an enterprise is different from that of organisms, which is one-way, from birth to death; The evolution of a business can be spiraling, from prosperity to decline, and through the change of regaining the entrepreneurial spirit, drawing strength from the core values established by the founder, and regaining a new life. This process is the process of the negation of the negation of dialectics.
Why businesses are in decline.
Why businesses are in decline. Because the spontaneous evolution of enterprises tends to decline, not to prosper. So what are the spontaneous trends of evolution of enterprises? Let's try to give you a few.
One of the spontaneous trends: a spontaneous trend that deviates from customer-centricity.
Customer-centricity seems to be self-evident to enterprises, but it is impossible for enterprises to spontaneously tend to be customer-centric, and the spontaneous evolution trend of enterprises is to deviate from customer-centricity, why?
If the purpose of the enterprise is to pursue the maximization of profits and shareholder value, then the development of the enterprise will be shareholder-centric rather than customer-centric. Meeting customer needs is a means rather than an end, and when the means conflict with the end, the enterprise will sacrifice the interests of customers to ensure the interests of shareholders.
With the expansion of the scale of the enterprise, the internal division of labor continues to be refined, and the internal positions and departments are getting farther and farther away from customers, and they cannot feel the pressure of market competition and the urgency of meeting customer needs, and they are indifferent to customer complaints.
The success of a complacent business breeds complacency, and it is no longer humble to listen to customers, or even dictate to customers.
Process alienationAs the process continues to improve, bureaucratization can also breed. Gradually, the people who carry out the process forget that the purpose of improving the process and complying with the process is to better meet the needs of customers.
Technology-orientedScientists and engineers engaged in research and development often pursue technological leadership rather than creating value for customers and the commercial success of the enterprise, forgetting that the purpose of striking stones is to repair churches.
The source of human weakness and deviation from customer centricity is human nature. The motive force of human behavior is self-interested. People achieve the goal of self-interest in two ways: self-interest through self-interest, or self-interest through altruism. Customer-centricity is self-interest in an altruistic way, and only by linking the interests of customers with the interests of individuals can we stimulate the motivation and behavior of individual altruism.
Spontaneous trend 2: The impulse to diversify and expand that distracts the strategic focus of the company.
Successful companies are focused companies, and profits come from the core business, which is proven by a large number of empirical studies. But why do companies continue to expand blindly and deviate from the focus? Because there is an inherent urge to diversify and expand within the enterprise. There are many reasons for this impulse to expand, one of which is the motivation and goal of professional managers.
Managers are pursuing large business scale, because it can not only improve the prestige of professional managers, but also consolidate the position of professional managers, and also bring staggering salaries to professional managers, which will inevitably prompt professional managers to use various means to rapidly expand the scale of enterprises, especially with the help of capital markets and other financing** capital driven diversified mergers and acquisitions to expand faster than growth driven by innovation and core competencies. However, the latter type of expansion often leaves companies with years of consolidation problems and a heavy debt burden, which seriously distracts the strategic focus of the enterprise and the energy of the operators.
Spontaneous trend 3: the slack trend of declining fighting spirit.
Every business has a success story of hard work during the start-up period. But why is it so hard to keep the spirit of struggle alive for a long time? Why do employees slack off when they become rich? Borrowing from the second law of thermodynamics, it can be shown that long-term hard work cannot be achieved spontaneously. Mr. Ren Zhengfei, President of Huawei, borrowed the second law of thermodynamics to explain the slack nature of people after affluence.
He said: The second law of thermodynamics states that it is impossible for nature to automatically conduct heat from a cold object to a hot object, and that there must be power to accomplish this reversal. Human nature will be lazy after affluence, and this spontaneous tendency, human subjective initiative can change it. It is the responsibility of our organization to act against this spontaneous tendency, to take the distribution of benefits as the driving force, and to oppose the generation of laziness. The inaction of the organization will form "entropy death". We adhere to the "customer-centric, striver-oriented, long-term hard work", not a spontaneous trend, it is impossible to wait, not to advance, or to retreat.
Spontaneous trend 4: Equalization of opportunities and benefits.
The spontaneous evolution of the distribution of benefits among enterprises shows a trend of equalization. Why is the wealth distribution gap in society showing a trend of widening, while the trend of profit distribution of enterprises is showing a trend of equalization? This is determined by the distribution of individual performance in the business.
The individual performance curve of enterprises in traditional industries is approximately normal, because the speed of technological progress in traditional industries is slow, and technological innovation is mostly improving, and rarely subversive, so the majority of employees who master specialized skills and knowledge are the main body of creating enterprise value, and the creative contribution of top talents accounts for a relatively small proportion. The key to value creation lies not primarily in breakthrough innovation, but in the continuous improvement of product quality, cost, delivery time and service.
But for high-tech companies, the opposite is true, with rapid technological progress, breakthrough and disruptive innovations emerging, and fierce market competition, so the value contribution of top talent is in a key position. Therefore, attaching importance to technological innovation requires changing the value distribution structure to make it conform to the distribution characteristics of individual performance (performance), and widening the distribution gap between outstanding talents, especially top talents, and ordinary employees. Otherwise, it will not stimulate the creativity of the company's employees and retain top talent.
Spontaneous trend No. 5: Profit from the tendency of porous breeding corruption.
Diversified companies or multi-operating companies often have the phenomenon of "profit out of porous", that is, there are more than one interest of senior managers. Some enterprises take advantage of diversification and expansion to set up non-main business, a variety of subsidiaries, these business entities have complex affiliations, non-standard corporate governance structures, a large number of senior managers part-time, time and energy are scattered, and profits are porous.
The top managers of enterprises lack self-discipline, abuse their power, and abuse their power for personal gain. If you introduce relatives and friends to apply for positions in the company, do not comply with the certification procedures of the company, and designate a company that has a personal relationship with you as the company's first business or outsourcing manufacturer. Enterprises are not strict in investigating and dealing with executives seeking personal gain from related-party transactions. The British historian Lord Acton once said, "Power corrupts, and absolute power corrupts absolutely." "Unchecked and unchecked power inevitably leads to corruption.
Regain the entrepreneurial spirit and get your business back on your feet.
Although the life cycle of an enterprise also follows the law of life cycle from birth, strengthening, to decline, it may also change from recession to rebirth and regrouping. That's what studying the life cycle of a business is all about. Why do companies have such different characteristics from living things? Because the company as a form of corporate organization is a legal person, it is not limited by human life, and theoretically can be continued in the succession of generations of leaders.
The question is, what is the lifeline of a sustainable business? What is the most precious thing in a business? What is something that a business can really pass on? What is something worth passing on to a business? What's the hardest thing for a business to pass on? It is the core value of entrepreneurial success, that is, the entrepreneurial spirit. This is also the reason why the leader has changed, but the business has continued.
Entrepreneurship, the founder's core values, is the spiritual pillar that protects the company. Wise managers who are ordered to turn the tide in times of crisis regard the return to entrepreneurial ideas as the starting point for their progress and change. They don't think that the current predicament of their businesses is caused by the entrepreneurial spirit, and they don't see themselves as the saviors who turn the tide and help the building to collapse. The foundation for the revival of the enterprise should be found from the glory of the enterprise, that is, to find the excellent genes of the enterprise.
When it comes to inheriting the founder's core values, the managers of Siemens AG are a prime example. In 2016, in his speech at the shareholders' meeting, Joe Keyes, then Chairman of Siemens, stressed the importance of rediscovering the core values of founder Werner von Siemens in order to keep pace with the digital age. The nine tenets that embody the philosophy of Invar Kamprad, the founder of IKEA's largest furniture manufacturer, which Kamprad calls the "Covenant", are not only believed in by the heirs of the Kamprad family, but also by generations of managers.
The legacy that the founder can leave behind is his core value and the way to his success. Technology will be updated, performance growth will stagnate or even decline, factories will become obsolete, entrepreneurial groups will grow old, and only ideas and business philosophies can last forever.
The fundamental idea of entrepreneurial success will not change, because it is based on common sense. So, it's the simplicity of thought that makes a great company. The founder's philosophy is enduring and unchanging, and the strategies, organizations, systems, and policies formed under the founder's philosophy can and should keep pace with the times. This is not a deviance, not a rejection of the founder's philosophy, but an inheritance and innovation in a changed environment.
In short, if we admit the assumption that there is a life cycle of enterprises, then the enterprise out of the decline stage of the life cycle is a process of negation of negation. The recession of the enterprise is the negation of the success of the enterprise, and the overcoming of the recession of the enterprise is the return to the origin, that is, the return to the entrepreneurial spirit, and only the origin of the entrepreneurship can negate the recession.
The life cycle of an enterprise is a kind of cycle, and if it cannot return to the origin, it will not be able to complete the virtuous cycle of the life cycle, and the result will only be decline. This also warns us that for enterprises, the most feared thing is that there is no origin, and there is no spiritual strength that can regroup in the face of recession. Therefore, our entrepreneurs, in the process of establishing an enterprise, must pay attention to the enduring spirit of enterprise, which is the guarantee of sustainable growth of the enterprise and the driving force for the enterprise to regroup when it encounters a recession.
This article is excerpted from Huang Weiwei's "Management Policy".
*: President's Reading Club.