Author: Chen Chunhua.
Edit: Tengyue.
*: Harvard Business Review Chinese Edition.
At present, the superposition of various influencing factors makes enterprises face unprecedented complexity, and managers try to adjust from various dimensions, such as digital transformation, practicing internal skills, poaching people externally, incubating new businesses, learning from excellent enterprises, introducing new management models and new technologies, etc., but these efforts may not really solve the problem, and managers have more anxiety about growth and the future.
The complex and changeable environment faced by enterprises today means that managers should not only link strategy with the external environment and industrial conditions, but also combine strategy with organization and people. Today's corporate strategy is a dynamic choice in the face of continuous environmental change, and at the same time a symbiotic ecological value creation process. It is even more necessary to see a core changeLand, labor, and capital are no longer the core elements, and knowledge owners allow these traditional factors of production to be transferred, aggregated, and reorganized to produce completely different values.
We found a meaningful phenomenon in the survey, some companies are not only not anxious, but they also maintain their strategic focus, can clear the fog of the environment, and achieve good business results, based on this phenomenon, and our research on organizational growth, we can conclude:Managers can find the "growth strategy" of the enterprise based on strategy formulation and organizational implementation.
Four forces that affect the survival and growth of enterprises
In the traditional method of formulating strategies, the strategy is more related to the external environment, emphasizing the role of the impact of macro environmental trends, and more emphasizing the impact of the industry in which the enterprise is located. Especially in the formulation of competitive strategy, the significance of industrial structure is very important, and the strategic design is carried out along two basic dimensions: customer value dimension and industrial value dimension. Today, digital technology plays a vital role as a key influencing factor, bringing about great changes in multiple dimensions from the macro environment, industrial structure and industrial space, customers and customer value, as well as organizations and organizational boundaries.
Therefore, we propose the combination of four forces that affect the survival and development of enterprises. That is, the external friction and driving force of the enterprise, and the gravity and self-driving force of the internal organization of the enterprise, these four forces have been accompanying the whole process of the growth life cycle of the enterprise(as shown in Figure 1).
Figure 1).External friction
External friction can arise in a variety of ways, including competitors in the same industry, undetermined industry partnerships, unfamiliar customers and market conditions, challenges from various macro environmental factors, and even capital shortages.
With the continuous growth of enterprises, new friction emerges, new competition patterns, iterations and changes in industry technology, the impact of new entrants in the industry, changes in macro environmental trends and other factors produce negative forces, resulting in changes in industry costs, profits, and growth space.
Looking back at the 40 years of development of Chinese home appliance enterprises accompanied by external friction, raw materials, industrial supporting bases, the maturity and quality of industrial workers, capital, new technology applications, digital transformation, globalization and international markets, consumption habits and cultural differences constitute the external friction of this industry, which is also the reason why the once brilliant home appliance enterprises are leaving the scene today, such as Panda Electronics, Chunlan Air Conditioning, Xiamen Electronics, etc.
External driving force
Contrary to external frictions, industrial development, technological innovation, human well-being and the birth of good, as the positive forces of the external environment, have always been the driving forces to promote the growth of enterprises.
In the industrial development cycle, the industry itself is the driving force for the survival and growth of enterprises. Even in the period of industrial recession, enterprises often get room for growth through new technological transformation or industrial transfer.
Technological innovation, especially the in-depth development of digital technology, has brought new fields and new values brought by technology, all of which have brought unlimited possibilities to enterprises.
The pursuit of human well-being, the responsibility for the development of nature and society, and the nature of altruism and goodness all combine to bring about the integration of new business value and social value, and promote the sustainable growth of enterprises. The rapid rise of new enterprises such as Xiaomi and JD.com.
Tissue gravity
Organizational gravity is not only the ballast stone of enterprise stability, but also the internal factor that makes enterprises complacent and decline. It is composed of corporate culture, management system, operating mechanism and employee behavior habits.
Organizational gravity can provide a solid foundation for organizational development, and it is supposed to play a positive role, but it often plays a negative role. With the expansion of the scale of the organization, the organization needs to build a way to coordinate the actions of personnel, that is, the setting of the organizational structure, which will also bring about the "department wall", the complexity and consumption brought by the personnel, and the managers may form a bureaucratic and formalistic corporate culture, etc., at this time, the organizational gravity brings organizational slackness, reaction, resulting in organizational stagnation, and even decline.
In evaluating the reasons for GE's decline, Bill Gates credits the decline of the "corporate culture that does whatever it takes to keep digital" to blame for its decline.
Organizational self-drive
Organizational self-motivation is the internal motivation for enterprises to overcome all difficulties and seek growth. The self-motivation of the organization is first manifested in the individual entrepreneur, and its core core is the entrepreneurial spirit. The second is the core competence accumulated by the enterprise to maintain its competitive advantage in the field. Thirdly, it is the sense of crisis and the culture and ability of self-transformation that constantly break the gravity of the organization.
Just as Zhang Ruimin insisted on leading Haier to create an ecological brand, he asked Haier to "three self" and "three new" to embrace digital technology and embark on a new path. New Oriental suffered a huge impact from macro policy adjustments, and Yu Minhong led New Oriental to self-transform and come out of the trough.
The above four forces run through the whole process of enterprise survival and growth, and the understanding and application of the four forces determine the choice of enterprise cost, profit and value space, and also determine the direction of the strategy and the effect of strategy implementation. Without a clear understanding of these four forces and how they change in strength and weakness, companies that were once leading the way may also fall into decline.
The "growth strategy" consists of three basic strategies
What business leaders need to do is to make the combined effect of the four forces a positive driving force, we define this positive driving force as "growth strategy", and according to the path of the enterprise growth life cycle, as well as the essence of the growth strategy, establish the three basic strategies of the growth strategy, each strategy can be used independently, corresponding to the different stages of enterprise survival and growth, but also a progressive relationship, on the basis of the realization of the former basic strategy, the latter strategy can be better used; The combination of the three basic strategies will generate a lasting positive driving force to promote the sustainable development of the enterprise.
1.Effective business strategy
2.Customer value innovation strategy
3.Synergistic symbiosis strategy
It should be noted that because of the emergence of digital technology, some companies may use the latter two basic strategies to enter the market, but if they cannot obtain the results of the first basic strategy, it will be difficult to survive even after entering the market. Therefore, entering the market is not the same as being able to survive, and if you want to survive, the choice of the first basic strategy is the key.
1.Effective business strategy
The first strategy is an effective business strategy. Business activities are the main core content of the enterprise, through the operation, the business operator with the least resource investment to create as many products and services as possible to meet the needs of people, so as to obtain their own profits and growth.
If a company wants to survive, make a profit and grow, it is a basic premise to ensure the effectiveness of its operations. Generally speaking, the operation of an enterprise refers to the activities related to the generation of benefits and value, such as production, sales, etc., and also needs to have the ability to invest resources and pay costs, such as purchasing raw materials, hiring employees, purchasing equipment, etc.
Business management is the most basic activity of the enterprise, only to achieve the effectiveness of business activities, the enterprise can obtain real benefits, but also to show that they are recognized by customers and obtain maximum benefits, to obtain profit returns, but also to obtain the opportunity to survive in the society.
In different fields, the specific business activities of enterprises, the mode of operation, and the mode of profit and growth will be different, but through the understanding and research of the essence of management, we find that the basic elements of business are composed of the following four basic elements:Customer value, scale, cost, and profitability.
Effective business strategy refers to the process of organically combining the four basic business elements to achieve business activities and achieve performance results through plan management.
The operating results of a company are measured by sales revenue and profit, which reflect the size and profitability of the enterprise, respectively. The sales revenue is derived from the value created for the customer, and the profit is obtained by deducting the 'cost' from the income. Customer value is the starting point and foothold of business operation. In order to create customer value, companies need to invest resources, that is, pay costs. If the cost is too high for customers to pay, then they will abandon the company's product, and the company will not be able to grow sustainably because of losses. To maintain a reasonable cost, it is necessary to take advantage of the economies of scale. ”
Let's take a look at a 2011 start-up – Wisdom Tree. As of 2017, the company has served more than 1,103 colleges and universities across campuses, and more than 5 million students have taken high-quality credit courses from other schools through Wisdom Tree every year.
The company looks promising, but it is under more pressure, with products that schools, teachers, and students love, and revenue at scale, but profitability is poor, and the company can no longer rely on financing to solve problems, and the company's survival is in doubt.
After realizing the problem, they reorganized the business model, determined the business strategy of "seeing trees and winning forests", and made four adjustments around the strategy:
The first is to cancel the provincial company structure and directly establish more than 100 "course stack" teams, who are stationed in colleges and universities to work with teachers and directly undertake the digital tasks of colleges and universities.
The second is to simplify the product and service categories, select the products with the greatest customer value as the core revenue products, focus on the core products, and adjust other products and services to the free model on the premise of ensuring quality.
Third, the company's business focus revolves around 500 core customers, and its basic services cover the entire range of customers.
Fourth, strengthen the management of business plans, core business performance objectives, and the implementation of weekly target management by all employees.
With the above four points in place, the company not only serves more than 2,100 customers, but also grows rapidly, and its revenue and profitability have been raised to a new level. The team that has mastered the effective management ability helps the company overcome the bottleneck of survival and development.
2.Customer value innovation strategy
On the basis of effective operation, Wisdom Tree Network has opened the second stage of development layout, that is, customer value innovation strategy.
Achieving customer value innovation strategies requires companies to have organizational capabilities, not only to centralize management efficiency and obtain higher efficiency outputs, but also to provide input for exploration and research, and to lead industry and market changes. The embodiment of organizational capability is to ensure that the organizational system that supports the original business is activated, and that the deterministic needs are continuously explored and realized to achieve sustainable growth. At the same time, we will establish a new organizational system that is independent of the original business organization system to ensure that the business of creating new value can be carried out effectively.
The approach of Wisdom Tree Network is to establish an innovation team independent of the mature business to ensure the positions, resources and capabilities required for the new business. Although the sparrow is small, it has all kinds of organs. Let the new team have a new organizational structure and performance system, clarify the business objectives of the new business, and have the ability to independently face the market and reach customers from the beginning, so as to quickly complete a series of core tasks in the early stage of the new business, such as product iteration, business process and specification establishment, and model customer development. In 2022, the number of schools with 2,413 courses and 31.29 million students will choose courses, and the Wisdom Tree Network has also entered the rapid development channel.
In the interaction of the four forces, enterprises have been in a changing environment, even if the enterprise has a relative scale and resources, core competitiveness, but with the continuous change of internal and external forces, the existing resources and capabilities can not help enterprises cope with new changes, and may even hinder the innovation and development of enterprises because of relying on the original path.
What we found through our research,:Customer logic is more reliable than industrial logic or resource logicOn the one hand, we can grow by meeting customer needs, and on the other hand, we can grow by exploring and innovating customer needs. Therefore, the second basic strategy is the customer value innovation strategy.
Mining deterministic needs is what we usually call meeting customer needs, here we should emphasize how to continue to understand customer needs and find ways to achieve them, according to Michael Porter's focus strategy, this strategy focuses on a specific customer group, with a single, specific and more efficient service to target customers, and its requirements are more efficient, lower cost, and better effect to serve specific customer groups.
Based on Robert Lauterpen's 4C theory, namely customer, cost, convenience, and communication, we can find four ways to tap deterministic needs, that is, to produce products that customers need, pay attention to the cost of customer purchases, fully consider the convenience of customers in the purchase process, and implement effective communication with customers.
Exploring the possibility of demand is what we usually call creating new customer needs, especially the emergence of digital technology, on the one hand, it redefines the industrial space and industrial value, and breaks the industrial boundary to bring unprecedented new valueOn the other hand, the development of technology has given us more advanced service means, so that the contact points between enterprises and customers are more and more rich and diverse.
This can not only help enterprises better serve customers, but also have a deeper understanding of customer pain points, potential, undiscovered needs, and customer insights will become more and more accurate. In our 2019 article "Customerism: The Strategic Logic of the Digital Age", we proposed the "RIIF Strategic Model of Customerism". Exploring the needs of possibilities requires companies to ask themselves four questions:
Do you know what your customers are expecting?
Can you bring imagination to your customers?
What technological advancements in the future will have an impact on your field?
Do you have the determination and ability to break the mold and apply radical techniques?
3.Synergistic symbiosis strategy
The tide of digitalization has broken through the barriers between industries, connecting different elements in an unprecedented way, and people use "digital penetration" as a metaphor for the breakthrough and integration of digital technology to industry boundaries, and digital technology has created a completely different ecological space, so that many industries have obtained a higher-level, originally did not have a value space.
Synergy and symbiosis is the basic way of survival of enterprises in the digital era, and the strategy of synergy and symbiosis was born in response. The fundamental reason is that digital technology has changed the way enterprise value flows, promoting enterprises from the only carrier of providing customer value to creating value between enterprises, industrial partners and customers at multiple customer value connection nodes.
Synergy and symbiosis can be divided into three situations, one is the overall effect of synergy and symbiosis within the organization, through production, marketing, technology, management and other links to create value but work together.
The second is the external synergy and symbiosis of the organization, which allows the organization to share resources and capabilities with other enterprises in the value network to obtain greater growth space than as an independent enterprise.
The third refers to the synergy and symbiosis between different organizations, and enterprises in different industries and fields create new value that has never been seen in the original industry or field through mutual collaboration and co-creation.
In the article "Rethinking the Industry: Ecological Space in the Digital Age", we identified three dimensions of ecological space, namely the "3D model of ecological space" (as shown in Figure 2).
Figure 2) Today's companies can have a completely different value space from the original industry sector:
"New value" in the ecological field - while focusing on the main waterway, we will explore the opportunities of the extension of the main waterway with the help of the linkage effect and open up new fields.
Ecological niche domain value - the combination of physical and digital elements of the enterprise, the combination of offline and online, and the integration of "real" and "virtual" to generate new value.
"Ecological time domain" value - enterprises have the ability to iterate on their own, constantly update their business models, and not only live well in the present, but also achieve long-term development.
In the actual development of enterprises, the development of the main channel needs to focus on the in-depth value mining of the industry, do a good job in the physical value and current competitiveness, and at the same time, it must also have the ability to extend new areas outside the main channel and expand the virtual value and long-term value of future development.
In this process, the competitive strategy and the symbiosis strategy complement each other, not only to play the role of core competitive advantages, but also to continuously iterate to generate new value creation capabilitiesIt is necessary not only to return to the essence of the industry and the laws of the market, but also to master the ability of digital technology to expand new value.
We call this new organizational structure capability "organizational three-dimensional structure", that is, "build its own digital ecological structure, digital organizational structure and digital business structure around customer value consensus, so as to shape its own digital operation activities, digital business activities and digital industry activities, and then optimize the direction and efficiency of customer value flow, so as to achieve the purpose of better creating customer value".
The three-dimensional structure is:"Business-customer dimension", "operation-organization dimension", and "industry-partner dimension".。The core of the organization is customer-centric, and enterprises need to reconstruct their management structure around the digital business activities carried out by customers, so as to better coordinate business partners and industry partners, and ultimately create and realize digital customer value (as shown in Figure 3), which is also the three-dimensional structure of the organization's digital transformation. With the help of digital technology, enterprises can reshape the organizational structure, business structure, and ecological structure to realize value activities around customers within the organization, outside the organization, and across organizations, thereby creating new growth space.
Figure 3) Enterprises need a symbiotic culture to implement a synergistic symbiosis strategy. In the book "Symbiosis: The Path to the Evolution of Future Enterprise Organizations", we put forward the concept of "symbiotic organization" and proposed the fourfold realm of building a symbiotic organization, the first of which is symbiotic belief.
The symbiotic belief is simple and in accordance with the laws of nature, and we "understand love, respect, and harmony from the laws of nature, so we are sure."'Self-restraint', 'neutralization and altruism', 'Commitment to growth'Establish three traits of symbiotic beliefs for symbiotic organizations". These three characteristics can enable enterprises to assume the responsibility of value symbiosis of a wider range of stakeholders, find a symbiosis model, and have the ability to promote the collaborative growth of stakeholders, create the common value of enterprises, business and society, and thus obtain the sustainable growth of the enterprise itself.
Enterprises need to use a synergistic and symbiotic strategy to turn external friction into a driving force for business growth, and Actually Home does just that.
In 2013, Internet home furnishing companies such as Aibee Chao, Tuba Rabbit and Qeeka Home obtained abundant capital and developed rapidly. For the success of the offline model of home building materials enterprises, this is undoubtedly a huge impact, as the traditional home furnishing enterprises among the best, especially feel the Internet technology, consumer behavior changes, and capital and other external friction highlighted, they need to find a way to break through.
However, they are well aware of their own advantages and disadvantages, traditional store operations, and merchants who have cooperated for many years are their advantages, but their understanding of Internet technology, new business models and the ability to control them are insufficient. On the one hand, they empowered B-end ecological partners through digital technology platform links, including stores, factories, distributors, shopping guides, logistics service providers, etc., and on the other hand, they provided C-end consumers with a series of services such as product selection, in-store experience, out-of-store decision-making, and home service.
As of 2022, the digital operation platform "Dongwo" has achieved platform transactions of 35.7 billion yuan, with more than 12 million annual active users, and 560 cooperative stores have entered "Dongwo", of which 40% are from Easyhome and the other 60% are from other stores. Similarly, more than half of the 60,000 dealers on the "cave nest" are not related to the home. We have built a symbiotic culture and value space with peers, industrial partners, and stakeholders.
Through digital transformation, the home has extended from the B-end business to the C-end service, expanded the complete value space of online and offline integration from offline physical stores, transformed from the home building materials chain model to the S2B2C industry service platform, and shifted from only operating a value space of "field" to operating two new value spaces of "people" and "goods".
Organizational value reconstruction is a major challenge for the digital transformation of the company. To meet the challenge, the company has reinvented itself in six areas.
The first is to break the organizational structure of the traditional division of functions. The organizational structure is constructed around the three aspects of "B", "C" and "S" of the "S2B2C" model, that is, the three-dimensional structure of the organization. There are only three departments in the branch, the first chain department, the service department, and the comprehensive management department.
The second is to break the traditional linear process model. Adopt a blockchain model, where all C-side departments are customer-oriented, and each battle team has to serve a class of customers, similar to a legion. Take the customer as the block and the comprehensive ability of the employee as the chain to build the internal setting of the department.
The third is the reconstruction of job roles. Hook up to the boss and down to the customer.
The fourth is to promote the improvement of human efficiency with digital systems. With the advancement of digital systems, the back-office financial staff has been reduced by 42%, and the human system has been reduced by 33%, and the human efficiency is 37 times.
Fifth, gig platforms. Put the company's external services on the platform, and employees can take orders on the platform. When we went to investigate, we went to see the garden on the roof of the headquarters, and an employee who particularly likes to raise flowers took the order to take care of the company's garden. Actually Home proposes a policy to motivate employees based on a one-year property cost reduction of half of the property cost reduction as a bonus.
Sixth, adhere to the guidance of corporate culture for a long time and advocate employees to work for themselves.
The essence of the growth strategy
In an environment where technology is constantly evolving, permeating all areas and bringing constant change and complexity, what businesses need to do is to maintain growth against all odds.
Only growth can cope with changes, solve the problem of survival and development, solve the problem of survival with effective management, obtain growth through customer value innovation, and obtain the value space for sustainable growth through synergy and symbiosis, which runs through the efficient fit of organization and strategy.
Today, in the reality that industry and organizational boundaries are constantly being broken, business managers only need to grasp the main line of growth to find space for survival and development. These three basic strategic categories make up the growth strategy (as shown in Figure 4).
Figure 4) The essence of growth strategy is the integration of strategy and organization, and strategy is no longer a resource model, but a capability model. Enterprises with the ability to grow will get the space for sustainable growth. (End of this article).