Introduction: What is the key to grasping the high ground?
Industrial Thinking and Understanding
The Sixteen Character Formula: Industry oriented, Strategy oriented, Innovation oriented, Finance oriented.
A philosophical methodology: The solution to a problem often has no solution within the current hierarchical system and requires a higher-level system to find the answer. Enterprises, industries, and macroeconomics are three different hierarchical systems. Many problems faced by enterprises require answers and solutions to be found in higher-level industrial systems. Therefore, when considering enterprise issues, it is necessary to establish industry thinking and industry awareness.
Entrepreneurs should establish N industry thinking and industry awareness
- Searching for industry opportunities and avoiding industry risks along the trajectory of per capita GDP changes
- Searching for industrial opportunities along the trajectory of economic time difference
- Utilize industry preferences in listing, refinancing, and capital market valuation
- Seeking the “combination of industry and commerce” as a representative of the industry
- Seeing the general trend of industrial competition between China and foreign countries with historical foresight
- Searching for industry opportunities and avoiding industry risks along the trajectory of demographic changes
- Searching for the Golden House and Yan Ruyu from Industrial Policies
- Establish a competitive mindset of “product competition – industry chain competition – industry ecological competition”
- Insight into the Evolution Trend of Enterprises with Clear Industrial Boundaries, Fuzzy Industrial Boundaries, and Self Established Industrial Boundaries
- Industrial concentration is a historical inevitability, and industrial integration is the trend of the times
- Identify industry opportunities from problems
- Industry is’ imagined ‘
- Searching for industry opportunities and avoiding industry risks along the trajectory of per capita GDP changes
In the process of human economic evolution, reaching a per capita GDP of 3000 US dollars is an important turning point. Since the 1970s, developed countries such as the United States, Japan, and Europe have successively achieved a leap in per capita GDP of 3000-5000-10000 US dollars. Per capita GDP is a meaningful indicator. At different stages of per capita GDP, corresponding phenomena, problems, and solutions naturally arise in the economy, society, and politics. If you want to know which industries will rise and which will decline in the next stage, just look at their corresponding per capita GDP indicators. For example, before the per capita GDP was $8000, the sports industry was unlikely to rise; After exceeding $8000, the sports industry is bound to rise.
Normally, $2000 is a threshold for a country to move towards poverty or prosperity; 3000 US dollars is a key indicator; After $5000, the industrial structure will move towards advanced levels.
Along the trajectory of per capita GDP, corresponding economic and social phenomena will emerge at each stage, and industrial opportunities and risks are all present. According to this approach, we can speculate on the current and future trends and fluctuations, rise and fall, and replacement of industries, as well as opportunities and risks. Of course, every era, every country, and every region has its own characteristics and personalities. When analyzing and judging based on this approach, it cannot be absolute or stereotyped, and adjustments need to be made according to the characteristics of the era and the country.
- Searching for industrial opportunities along the trajectory of economic time difference
Due to factors such as endowments, regions, and differences in ideas, development in different countries and regions follows suit, and there is a gap between the rich and the poor. Some countries or regions develop first, and then it is the turn of other countries or regions to catch up, resulting in the phenomenon of “regional economic time difference”.
The replicable driving factors of development leading regions will eventually spread to underdeveloped regions, thereby driving rapid economic growth in these areas. The advantage of being a latecomer is that by targeting the situation of being a pioneer and taking action, the cost of exploration and learning can be greatly reduced.
The regional economic time difference between different regions in China is very significant. There are two reference frames for the development of the central and western regions: one is the developed areas along the southeast coast, and the other is countries around the world with similar or higher per capita GDP levels.
Yesterday and today in developed regions are tomorrow in developing regions. The consumption phenomena and opportunities that occurred in developed regions yesterday and today will come unexpectedly in developing regions tomorrow. The popular consumption in first tier cities today is the consumption phenomenon that will rise in second – and third tier cities tomorrow and in fourth – and fifth tier cities the day after tomorrow. Similarly, the rise and fall and opportunities are visible. Searching for industrial opportunities along the trajectory of regional economic time differences is a simple, effective, and reliable way of thinking.
*New meaning of economic time difference: look for industrial opportunities along the time difference of industrial Internet.
The industrial form based on information flow (media, publishing, education, games) and capital flow (finance, insurance, payment) will be the first to be transformed by the Internet. All industries will be Internet based, but the time sequence and rhythm of each industry’s transformation by the Internet are different.
- Utilize industry preferences in listing, refinancing, and capital market valuation
When approving IPOs and refinancing, the industry to which the company belongs, as well as the industry preferences of the government and market, will be considered. Enterprises need to clarify which industries are restricted, which industries will be encouraged, which industries are neutral (manufacturing enterprises, financial industries, engineering enterprises), which industries are openly and implicitly blocked (catering, beauty and fitness), and which processes and technologies are supported.
Capital market valuations have more significant industry differences. Some industries are always undervalued, such as steel. Some industries always overestimate, such as the Internet and biological industry. Some industries always have a moderate valuation. Some industries are sometimes high and sometimes low, such as securities, Baijiu and real estate. The difference in industry valuation means that the same income and profit create different or even vastly different shareholder values. So be cautious of entering the wrong industry: it’s better to be a black chicken in an overvalued industry than a phoenix in an undervalued industry!
How to leverage industry preferences? Firstly, describe your company based on industry preferences; Secondly, choose the industry direction, transformation direction, and fundraising direction based on industry preferences; Thirdly, choose the listing market and strategy based on industry preferences; Fourth, industries that are restricted from going public or those with illusions about going public should be eliminated early, and alternative financing paths should be explored, or flexible strategies should be adopted in a timely manner to bypass going public; Fifth, investors or PE institutions should choose their investment targets based on the industry preferences of the issuance review and capital market valuation.
- Seeking industry integration as a representative of the industry (industry+)
Many people think that running a business cannot be fully utilized, and the pattern cannot be opened up. But through the thinking of “combining production and production”, consciously connecting all aspects, the pattern of the enterprise is opened up accordingly. For example, the combination of industry and finance, industry and government, industry and media, industry and academia, and production areas
The most powerful and influential identity is’ representing the industry ‘, and the selling point is’ industry’ rather than ‘enterprise’. By grasping the Archimedean pivot of ‘industry’, it is possible to leverage various forces and resources in society to start turning for you. If managed properly, the enterprise is expected to move towards a development situation of rising high, opening up and closing up, commanding the wind and rain, and finding opportunities on both sides.
- Seeing the general trend of industrial competition between China and foreign countries with historical foresight
Under the historical trend of westward decline and eastward rise, Chinese enterprises are facing the historical opportunity of “leveraging China to seek global development”. Today’s tea, Baijiu, Chinese food, drama and other products with Chinese characteristics will have world markets and users in the future, and these industries will become global industries. Even in industries such as clothing, jewelry, women’s bags, and leather shoes, which have long held a leading position in Europe, world-class Chinese brands will emerge in the future.
In the past 30 years, the mainstream trend of so-called globalization has been global Americanization; In the next 30 years, the mainstream trend of globalization will definitely be global Sinicization. In this historical trend, the next 30 years will be a period of difficulties, crises, and bankruptcy reorganization for the Fortune 500 companies in Europe, America, and Japan. It will also be a period of 30 years for more and more Chinese companies to develop into world-class enterprises and gradually enter the Fortune 500.
- Searching for industry opportunities and avoiding industry risks along the trajectory of demographic changes
- Characteristics of China’s Population Structure
(1) Large population size: Dominating China is equivalent to dominating the world. No matter how fast the Chinese economy is, it cannot be overheated. The total population of the United States, Europe, and Japan is only 1.1 billion, while China has 1.4 billion, so we cannot view the development of the Chinese economy from the perspective of the United States, Europe, and Japan. The large market in China determines that Chinese enterprises must also be large.
(2) The fertility level has begun to decline: from an annual birth rate of 25 million in the 1980s to the current 15 million. Policies should be relaxed, and the future young workforce will significantly decrease. If the company is in the service industry, there will be great pressure in the future. Since 2015, the labor force has started to decline.
(3) The demographic dividend in our country has come to an end: the contribution of the demographic dividend to China’s economic growth from 1982 to 2000 was about 26.8%. In 2013, the demographic dividend gradually disappeared, and in 2015, the absolute number of labor force decreased.
(4) The Lewis turning point is approaching: from the wave of migrant workers to the shortage of migrant workers, the average age of China’s population was 34 years old in 2014, and it is expected to reach 46-50 years old by 2030.
(5) Gender imbalance: After the 2000s, for every 100 girls born, 117-120 boys are born. Girls have become a scarce resource, and there are more lesbian women than gay men. Cross border marriage will be a major business, and Vietnam and Russia will definitely become import markets for Chinese brides in the future.
(6) Aging is intensifying: by 2020, the population aged 60 will reach 1/4. The silver hair industry has considerable opportunities.
The intergenerational differences between the two populations are very obvious
The post-70s generation pursues material effects, the post-80s generation pursues formal expression, and the post-90s generation only yearns for brilliance. The rapid development of China has led to significant differences in people’s lives and consumption concepts across different eras, resulting in a stratification of consumption in the Chinese market. In the future, mainstream values will prevail, rather than non mainstream values gradually becoming mainstream.
- Searching for “Golden House” and “Beauty Like Jade” from Government Industrial Policies
Policy Gold Rush Roadmap: (1) Running Department; (2) Numerous supportive policies; (3) Local policies that compete fiercely; (4) Lesser known international policies; (5) A low-key and covert overseas policy. The state supports enterprises to go global, and now most overseas mergers and acquisitions are basically funded by the state.
China’s grand strategy: “Two Belt” versus “Two Oceans”. The most important thing for the United States is the two oceans, while China is implementing the the Belt and Road strategy, which integrates the population and economic scale of a region as a whole. There are many opportunities.
- Establish a competitive mindset of “product competition industry chain competition industry ecological competition”
For example, in the home appliance industry, Changhong TCL、 Midea, Haier, and the competition are quite fierce. In 2000, the competition between Gome and Suning shifted from product production to sales competition, as well as competition in the industrial chain; Afterwards, it evolved into a competition between JD.com and Taobao, creating a brand new online business ecosystem.
The key to competition in industrial ecology lies in values. It may be slow at the beginning, but once it is exported, it will be very advantageous. Starting from the product, transitioning to the layout of the industrial chain, and then to the layout of the entire industrial ecosystem.
King of Seven: Using industrial ecology as the survival and development model, core capabilities, and resource integration platform for enterprises.
To establish a name; Secondly, it is necessary to establish industry standards; Thirdly, make a statement and turn the company’s growth history into a case study that can be published in top tier journals; Fourth, carpet scan talents, establish a red list, and recruit talents for the industry; Five must establish trust; Six must establish schools and build business schools within the industry; Seven must cultivate virtue.
- Insight into the evolution trend of “clear industrial boundaries – fuzzy industrial boundaries – self established industrial boundaries”
Regarding industrial boundaries, traditional and clearly defined industry concepts need to be thoroughly examined by enterprises in their industry selection and business planning. Nowadays, the boundaries of industries are becoming increasingly blurred, and the phenomena of industry cross-border, industry mix and match, and industry integration are becoming more and more common, even becoming a major trend of enterprises winning by surprise and rising strongly. In the face of this trend, a trajectory has emerged in the industry selection and business structure evolution of enterprises, namely: from clear industry boundaries to fuzzy industry boundaries to self established industry boundaries. Many times, ‘the so-called industry is up to you to draw’, the key depends on your dreams, preferences, business models, and technological routes. At the same time, the biggest threat to industry competition does not necessarily come from within the industry, but often from other industries, or even from a mix of bizarre industries.
In an era where companies can establish their own industrial boundaries, they should expand their industrial thinking and business structure from four directions: knowledge databases, core competencies, regional economic capabilities, and customer base.
- Industrial concentration is a historical inevitability, and industrial integration is the trend of the times
The evolution of industries can be divided into four stages: start-up, scaling, agglomeration, and balance and alliance. The evolution of industries is inevitable and unavoidable. Most industries in China are still in the process of scaling up and clustering. All enterprises must go through these four periods, and if they do not become rulers, they will be ruled. If some companies are not doing well now, the best option is to sell them.
To control an industry, one must first achieve at least one-third of the industry share. In addition, mergers and acquisitions are a long-term tracking process, and we must always consider how much value I will create if I buy at this point in time, and value it at any time.
In the context of poor economic conditions and sluggish capital markets, there is a historic opportunity for industrial mergers and acquisitions and integration.
- Identify industry opportunities from problems
The problem is the real industry opportunity, the bigger the problem, the greater the opportunity it creates. In the process of human economic development, every major crisis and problem that arises gives birth to new industrial opportunities.
In the 30 years of reform and opening up, various problems in the Chinese economy have been constantly criticized, but the Chinese economy has created one economic miracle after another. The problem is not wrong, the problem is the source of opportunity. Without a problem, there is no driving force for industrial development.
The most realistic way to solve today’s problems in China is to believe in the power of the private market. It is not to destroy the old world, but to accelerate the construction of a new world and let a new world naturally and smoothly replace the old world.
Breaking the monopoly and opening up to private capital is the only way. A series of reforms such as state-owned enterprise reform, financial reform, medical reform, railway reform, education reform, and cultural reform are imperative, which will give birth to the largest industrial opportunities in China in the future. Reform is the biggest dividend. Everywhere there are problems, everywhere there are opportunities, where to change, where to rise! Not changing is the biggest problem!
- Industry is’ imagined ‘
Looking back at human history, great industries are all “imagined”. Dreams and imagination, innovation and creativity, are the most profound and fundamental driving forces for the birth, replacement and evolution of industries. These “imagined” industries give us more thoughts:
Firstly, the future is not based on predictions, but on assumptions, imagination, and even dreams.
Secondly, the success of great enterprises is essentially the formation of climate and industry. Automobiles have triggered changes in the social system, containers have triggered changes in the social system, and the sports industry has triggered changes in the social system. Each one has become a climate, and then one by one, it has risen to become a major industry.
Thirdly, “entrepreneurs” are regarded as the soul of the market economy, and industrial innovation is the highest level of entrepreneurial innovation. Most entrepreneurs who have had a significant impact on history are pioneers of emerging industries, and the birth of most emerging industries is basically done by a few innovative entrepreneurs.
The difference between mediocre businessmen and excellent businessmen is that the former do business that others have done before, while the latter can come up with a new business or turn an old business into a brand new one.
Steve Jobs once said, “Creation is nothing more than connecting things, and even the most incredible ideas are usually just new combinations of existing things
Industries are ‘imagined’, not ‘chosen’. The industry positioning, business model, and career development of enterprises should not be limited by existing industry divisions and classifications. Do not confine yourself to a narrow and self imposed world, as there are infinite possibilities in the world. Nothing is impossible。