Original title: Every entrepreneur should be familiar with the four major cognitive misunderstandings in the innovation process of Chinese enterprises
The reason why great companies are great is that they have foresight and foresight. Instead of narrow thinking, there are always more or less prejudices and misunderstandings in the innovation understanding of Chinese enterprises. They may be small, but they hinder the further growth of the enterprise. How to get rid of these misunderstandings determines the growth height of the enterprise. .
Over the years, I have traveled between China and the United States for work. In daily exchanges, I have found that many Chinese entrepreneurs have varying degrees of confusion about corporate innovation. Living cases also helped me research on innovation theory.
As everyone knows, large domestic companies such as Haier and TCL have made many attempts to break through their stagnation. Their commonly used methods include restructuring, acquisitions, developing new product lines, and diversification, but it seems that none of them have been successful so far. So what is the reason? I think that before discussing the problem, we should first face up to some misunderstandings that often exist in Chinese enterprises. This is also the theme I want to talk about in this letter. I hope this letter can bring some enlightenment to all entrepreneurs.
The first misunderstanding: technological leadership can promote enterprise development
As you know, patents have been widely used as an indicator of the level of innovation output since the 1970s. , we also usually use the number of patents to measure an enterprise’s innovation capabilities. But the reality is that the number of patents in China continues to rise, but the profits that companies can make from patents are very little. For example, “From January to October 2006, the total number of patent applications in Shanghai was close to 25,000, of which more than 9,000 were invention patents, an increase of 11.6% over the same period last year. However, it is regrettable that these patents can be transformed into production, Less than 10 have been brought to market. "That's the fact. Only a few patents can bring wealth to the company, and most patents can't generate value for the company." If a company seeks development, it cannot be achieved simply by increasing the number of patents.
In addition, some companies have indeed made good use of technology patents, created new products with high use value, and have obtained good profits after being put into the market. However, as When competitors follow up, their net profits always fall quickly. The advantages of developing new products never last. Sometimes, in order to maintain a competitive advantage, companies have to conduct research and development frequently. But this will not only increase the cost of innovation, but also frequent innovation activities in the same link will cause diminishing returns, and the resulting net profit margin will also gradually decrease. It can be seen that product innovation cannot help companies get out of trouble and achieve sustainable development.
For example, Netac Technology, which started out as a SUB flash drive and was listed on the GEM, developed the world's first USB flash drive in 1999. It can be said that it is at the forefront of the times in terms of technology and products. Cutting-edge, but soon Netac Technology’s main business was impacted by well-known international brands, and also came under increasing competitive pressure from domestic peers. In order to get out of the predicament, Netac Technology launched the "Cloud USB Flash Drive" concept product in 2011. However, the domestic mobile storage industry has become saturated, product profits have continued to decline, and the entire mobile storage industry has a worrying future. Therefore, even if Netac Technology can win in technology competition and product competition, it still cannot have an optimistic prospect. After Netac Technology was listed in early 2010, its main business income for the whole year was 223 million yuan, a year-on-year decrease of 18.07%; net profit was 20.21 million yuan, a year-on-year decrease of 49.07%, which proves the dilemma faced by this U disk opener. Finally, on April 1 this year, Netac Technology announced a temporary suspension.
It can be seen that technology can only provide business innovation opportunities, and good products can only help companies achieve short-term benefits. To enable companies to maintain a longer-term competitive advantage, they cannot rely on either technology or products. . It is even more impossible for Chinese companies to achieve breakthroughs simply by relying on technological breakthroughs. Of course, technological innovation and product innovation are not without value. I just want to say that it can only be an integral part of your plan, not the dominant one.
Second misunderstanding: Simply believing in value chain theory
If someone asks, how to increase corporate profits? I believe that the answers will be varied, but they will basically not deviate from the following answers - innovating in technology, developing new products, optimizing processes, reducing costs... In fact, these answers are all directly or indirectly derived from Porter's value chain theory. .
In the past decade or so, Chinese entrepreneurs have been deeply influenced by Michael Porter’s value chain theory. In fact, to this day, Porter's value chain theory is still an important tool for us to analyze economic activities. However, one drawback of Porter's value chain is that it is a product-centered theory. Once the creation of value is no longer entirely attached to the product, developing strategies based on this theory will inevitably cause problems.
I mentioned above that neither technological innovation nor product innovation can really help companies get out of trouble, and this is the fundamental reason. Whether it is technology patents or new products, they are all innovations under the traditional product-centered value chain model. Their failure also illustrates the limitations of this theory in today's market conditions.
A typical case is Lenovo. Lenovo, which was once prosperous in the PC market, has been on the verge of losing money in recent years. Although this is related to Lenovo’s indigestion in acquiring IBM’s computer business, the main reason is that With the rapid development of mobile Internet in recent years, the PC industry as a whole has been gradually marginalized, which is why Lenovo CEO Yang Yuanqing exclaimed not long ago: "Whoever cannot keep up with the times will be the next Kodak."
Lenovo is the pride of China's manufacturing industry, but it has long adhered to product orientation, and even missed the Internet opportunity around 2000. At that time, although it established the FM365 website, which was once prosperous, it merged and acquired some websites, and had a joint venture with AOL. , but when managing and operating these websites, they use the old mechanism of the manufacturing industry and simply send out managers from the parent company to manage them. They do not implement a new incentive mechanism within the Internet subsidiaries. Failure is inevitable.
In the past two years, in the face of the opportunities and challenges of the mobile Internet, although Lenovo has been aware of the problems and has seen the lessons learned from Kodak and Nokia, it still has not fully shifted from product orientation to customer orientation. In terms of internal mechanisms and management, manufacturing culture still dominates. If there are no fundamental changes in these aspects, Lenovo's transformation still has a long way to go.
After entering the information age, although the traditional value chain model once played a positive role in the industrial revolution era, in the information age, it can no longer become the basis for formulating corporate strategies. If contemporary enterprises want to achieve long-term development, they cannot be limited to the value chain business model of the Industrial Revolution era, but must find new reference targets.
The third misunderstanding: thinking that "Chinese people are not suitable for innovation"
After reading the above failure cases and then looking at the difficulties in reality, many friends may feel discouraged. Previously, I often heard the argument that "Chinese people are not suitable for innovation." Many Western scholars believe that China's traditional culture and business management methods are a burden on China's innovation, making it difficult for Chinese companies to build innovation capabilities. Many Chinese people also believe that Chinese companies may not have the ability to innovate.
But here, I want to tell you that the Chinese people not only have the ability to innovate, but also China’s traditional culture gives Chinese companies innately strong innovation potential.
In order to present the problem more clearly, we might as well make a brief classification of corporate innovation first.
I believe that corporate innovation can be divided into two categories, one is scientific innovation and the other is business innovation. Scientific innovation refers to new discoveries about the laws of nature, including new scientific theories and new technologies. I call it original innovation. Business innovation refers to innovation that creates new value, which can be divided into two categories. One category uses its own resources and strength to meet current market needs to increase value, including new products, new production processes and cost reductions. I call it flow innovation. The other type is to promote the value of new ideas, guide other relevant members to join and combine everyone's resources and abilities to satisfy people's desires, and thereby open up new markets. I call it source innovation.
So, what is the reality of Chinese companies? In terms of innovation (technological innovation), China does have a big gap compared with Western countries. But when it comes to innovation capabilities (product, process, cost innovation), the capabilities of the Chinese people are by no means worse than those of any other country. Otherwise, the miracle of China’s economic development in the past thirty years would be unexplainable. In terms of source innovation, I believe that Chinese companies that have grown up in a profound atmosphere of traditional Chinese culture have very strong potential.
Specifically speaking, source innovation is an innovation based on new concepts and new ecosystems. For example, the birth of the automobile enabled people to establish a new concept that "the automobile is a more convenient means of transportation than a horse-drawn carriage." However, the lack of infrastructure prevented it from reflecting the new value of "more convenient than a horse-drawn carriage" at the beginning of its birth. It was not until highways, gas stations, and roadside fast food restaurants appeared one after another that the new value of cars was gradually reflected. Multiple related value chains within it have also been established: automobile value chain, road engineering value chain, gasoline value chain, fast food chain value chain, car repair value chain, etc. Therefore, the value brought by this new concept does not lie solely in the car. With the participation of various members, an ecosystem is formed, which benefits not only automobile manufacturers, but also every business in each value chain of the ecosystem.
It should be noted that although the technological product of automobiles is used as an example above, source innovation does not necessarily rely on new technologies, but the establishment of new concepts and new ecosystems is the key. It is entirely possible for a company to succeed in the market even if it lacks innovative capabilities.
Therefore, although there are shortcomings in technological innovation, the comprehensive innovation ability of the Chinese people is no worse than that of any other country. As long as they fully tap their own potential, they can achieve success through the comprehensive use of source innovation and flow innovation. In China, many companies have achieved success through source innovation methods, such as Wanda, Sina, Alibaba, etc. Their success, as well as the innovative wisdom they demonstrated in their success, is enough to bring confidence to other Chinese companies.
The fourth misunderstanding: Opposing imitation and innovation
As we all know, the Chinese people are very capable of imitation, but the Chinese are often criticized for being unable to innovate. In order to enhance their own innovation capabilities, some entrepreneurs have gone to the other extreme, abandoning many successful models instead of imitating them and insisting on finding a new way. However, the effect of this is not good.
In my opinion, the ability to imitate and the ability to innovate have never been opposed to each other. On the contrary, it turns out that excellent imitation capabilities can help companies move towards source innovation better and faster. Many famous innovative companies such as Microsoft, Google, and Apple have achieved success through creative imitation.
In the past ten years or so, many successful Internet companies in China, such as Baidu, Tencent, Ctrip, NetEase, Sohu, etc., have also achieved success in China's business environment by imitating successful cases in the United States.
Here, I would like to take a look at the Sina Weibo case:
As we all know, Twitter and Fanfou actually developed social networking and microblogging businesses earlier than Sina , but due to conflicts between uploaded content and government propaganda policies, both Fanfou and the Chinese Twitter clone website were shut down in 2009. Sina seized this opportunity and took the lead in promoting Sina Weibo in August 2009. Later, Tencent, NetEase, and Sohu also launched Weibo services. If Sina had just completely copied the model of Twitter and Fanfou, it would definitely not be as successful as it is today with major websites chasing after them.
The key to the success of Sina Weibo is that it imitates while adding "creative ideas" that are suitable for its own situation. Previously, Sina Blog allowed Sina to establish good relationships with celebrities, sports circles, and entrepreneurial celebrities. Therefore, when Sina established a platform with Sina Weibo, it persuaded these celebrities and celebrities to join in opening Weibo and authenticated their real names. The entry of celebrities quickly attracted ordinary users to join, which in turn created a network effect and caused more stars and celebrities to join. This mutual network effect has made Sina Weibo the fastest growing company, and many former Fanfou users have moved to Sina Weibo.
Because users of Weibo services tend to only choose a single platform, Sina Weibo relied on its own advantages to establish a large-scale two-sided market first and became the market leader.
It is reported that by the end of 2011, Sina Weibo users had exceeded 300 million. As of the end of February 2012, 130,565 companies had opened Sina Weibo. Sina CEO and President Cao Guowei pointed out that the number of corporate microblogs is expected to reach 1 million in 2012. The domestic Weibo market is tending to recognize Sina Weibo’s leadership. The reason why so many corporate users have joined Weibo is because companies have already discovered the business opportunities hidden in the Weibo platform. They found that conducting targeted marketing activities on Weibo is not only low-cost, but also effective. By establishing corporate Weibo to interact with netizens, they can also promote corporate information and understand audience needs. The commercial value of Weibo, a new media platform, has gradually been recognized and favored in marketing and communication in the new era.
It can be seen that Sina Weibo has moved from a one-way market of information dissemination to a two-sided market of interaction. Although it was born out of the Twitter and Fanfou models, it did not stop at its inherent model, but through mobilization Its own superior resources have reshaped Weibo’s personality. So I think it's a creative imitation, and a successful imitation.
In fact, we can not only imitate other people’s business models, but also imitate other people’s products. As long as you can make good use of your own advantages while imitating, give new characteristics to the imitation objects, supplement the deficiencies of the imitation objects, and successfully establish a two-sided market and ecosystem, it is possible to achieve market success.
Among the above four misunderstandings, the first two are misunderstandings in direction, and the last two are misunderstandings in concept, but they are both the most common problems in the innovation of Chinese enterprises.
(Editor: Chen Yang)