2019.07.02 / Viewpoint

No sunset industry, only sunset mentality

A few days ago, I went to Suzhou and Hangzhou on a business trip to exchange views on the company's operation and future development direction of the industry with several business owners in traditional manufacturing sectors. After talking with the business owners of different industries in different age group, I have a great feeling, that is: "there is no sunset industry, only sunset mentality"!

An old man in his 60s, with eyes shining with enthusiasm.

A magnificent young man standing upright, murmuring lines that restrict himself.

The dramatic differences lead to a very different business development for all.

Three years ago, a business owner in his 60s, engaged in the most traditional mechanical equipment manufacturing industry that many people think is not futuristic. Although the industry is full of challenges and competition, he is full of energy and has ideas for the brand experience vision, and also respect professional advice, and more willing to systematically plan and invest in the transformation from industrial manufacturing to brand service. So today, after we have worked with his company for three years, not only has the company doubled its performance in the export market, but the plant has also been expanded to twice its original size.

Another young entrepreneur, who is in the manufacturing business of large-scale machinery and equipment, puts all his thoughts on sales and cost control every day, never thinking about the company's development direction and goals. He said that he had to wait for more cases, he had to wait for the company to be profitable, he had to wait for time, he had to wait ... There are many things he wait for, and then he considers the company's development goals. As a result, after two years of entrepreneurship, his company is still struggling to survive in the Red Sea market.

Whether the company can continue to develop depends largely on the thinking dimension and cognitive ability of the leader. When an enterprise or industry develops into a mature or recessive period and encounters operational difficulties, business owner sees that the revenue is stagnating or even continues to decline, and will try to control costs, optimize management, development channels, R & D technology, expansion, marketing and so on. I believe many people are looking for the answer to the same question. What exactly is innovation?" “What should be done to bring growth to the business?”

I think that innovation for managers requires a thinking ability, so that they can see another possibility beyond the current market competition and industry status. With the rapid development of technology and the turbulent market competition, managers in the VUCA era must have a broad vision and a correct attitude to see the new value curve.

Under the logic of traditional industrialization, companies pursue standardization and large-scale production, using "increasing efficiency" and "reducing costs" as the strategic direction for profit. In this regard, Japanese companies are doing extremely well. 5S, JIT, LP all originated from Japanese companies, but when the market becomes saturated, the homogenization competition becomes more and more tense, and consumer purchase interest has gradually went from more functions to a more emotional feel, or even self-fulfilling stage. If you still focus on the traditional thinking of cost structure, you will inevitably fall into the dilemma of low-price competition in the market, or even be ruthlessly eliminated by the times.

It is relatively easy when a modern startup company starts looking for innovative opportunities, its personnel, organization, and processes have been created in accordance with the target users and the market. But for established companies on a larger scale, when the top management of the business is faced with increasingly severe market competition and declining profit rate, and wants to start looking for the next innovation breakthrough, the original internal rigid and change-resistantance members, as well as the prejudice shaped by past successful experience, will become the resistance of to the business transformation.

I have seen many companies failing in transformation because the majority of their time and energy are focused on product and technology research, the design and adjustment of performance indicators and reward and punishment systems. They rarely pay attention to dealing with complex human issues in the process. The core of successful "innovation" should be "humanity". First of all, companies should actively deal with the problem of "people" in the face of change and innovation transformation, alleviate everyone's fears, and at the same time build up everyone's confidence. On the other hand, in order to successfully break through the dilemma of pursuing low-cost competition, we must also focus on creating "customer value" that is greatly improved, and transform technological innovation into customer value innovation. Most customers like a product not because they like the technology itself or it’s function, but because they think it looks good, easy to use, interesting and effective. Business should "use technology as an accelerator", make good use of technology, and provide the right products and good services to the right customers at the right time. The most important thing is to let customers feel the overall different experience you bring.

Three keys to a successful business transformation

1. User Experience Vision

2. Humanized process

3. Tools and guidelines

When looking for breakthroughs in innovation, we must not only look at market reports of quantitative data, the team must also participate and collect first-hand user information in person, listen, observe, and experience to truly understand the world from the customer's point of view, , so as to focus on those areas that have not been satisfied, especially the customer needs that were not seen or understood before. When we find the potential customer needs, we should have the courage to challenge the industry hypothesis, put forward new questions, and then from the perspective of user experience, build a new business model, break the trade-off between the old value cost curve, and create a new value cost boundary.

Many companies feel that the current economic environment is more difficult than in the 2008 financial turmoil, and consumers have no demand and no desire. However, objective data tells us that Chinese consumers have consumed more than one trillion yuan overseas since 2015, and the total amount of Haitao in 2018 also exceeded 1 trillion yuan. Therefore, it is not that consumers have no demand, but that most local businesses are seriously homogenized and cannot inspire users' desires. Most Chinese brands cannot occupy the minds of mainstream users. Until today, countless Chinese companies are still fighting the promotion and price wars which directly leads to the meager profits of the company, so that the company is unable to carry out product innovation and brand building.

In China's new economy today, companies are faced with two choices, either adjust their mentality and strategy, learn from companies such as Apple and Starbucks, work hard to grow the brand, and reach another level; or continue to stay in the same place until your business is eliminated.