Witnessing history: The two ecosystems of Alibaba and Tencent are about to break. How should other companies respond?

Under the shadow of giants, how do “ecological” companies survive?

Witnessing history: The two ecosystems of Alibaba and Tencent are about to break. How should other companies respond?

A source said yesterday that Alibaba and Tencent are considering opening up their ecosystems. Alibaba’s initial measures may include introducing Tencent’s WeChat Pay to Taobao and Tmall; both parties are making separate plans to relax restrictions.

As soon as the news came out, Alibaba’s US stocks rose more than 3% before the market, and Tencent Holdings’ ADR rose by 3.76% before the market. Alibaba previously listed several small programs on Tencent’s WeChat: Xianyu, 1688 and Hema Bazaar. It can be seen that the two companies are exploring how to cooperate in depth.

For a long time, Alibaba and Tencent have been kings in their own ecosystems, and the barriers have been strong. The two have been competing with each other and have been involved in each other’s field, but each time ended in failure. Now that the two companies can reach a cooperation and complete the first opening of the ecosystem to each other, this is undoubtedly good news for users. The two Internet giants can also continue to cultivate in their areas of expertise.

But in fact, under the shadow of giants, only 0.01% of companies can form an ecosystem, and the remaining 99.99% of companies are “ecological” companies. How they survive is also a question of great concern.

When everyone is generally concerned about super ecological enterprises such as Tencent and Alibaba , most of the long-tailed, “ecology” enterprises have their own ways of working. They are growing, shrinking, or stagnating in their own fields. Based on their own culture and ability foundation, entrepreneurs are making their own choices. 

Many of these “ecologically” companies are the first batch of companies that have grown up in China. They have completed the original accumulation and selected the company’s track. However, in scenarios such as the mobile Internet, the rise of the new generation, and technological changes, they Faced with new choices. 

Regardless of the starting point, the  key to enterprise evolution is to “move”

China Europe Business Review (hereinafter referred to as CBR) : Why do Chinese companies need a set of evolutionary algorithms? What value can evolutionary algorithms bring to them? 

Shi Wei : The relationship between Chinese companies and the environment is quite tense. There are currently four major environmental changes. 

The first is technological development and the industrial revolution related to it. Many Chinese companies have a relatively weak technical foundation in the past. The biggest worry for these companies is that they may not be able to get on the high-tech train; or if they do, they are thrown off. 

The second is the changes in the global supply chain brought about by “reverse globalization”. The relatively large impacts on Chinese companies are pure labor-intensive industries and high-tech industries. China’s demographic dividend is declining, labor costs are rising, and some industries will be transferred to places such as India and Vietnam; high-tech involves competition between countries, and the struggle for inhibition and anti-inhibition will become stronger. 

However, there is another type of industry in China that is relatively safe. They have a certain technological content, but they are not the most cutting-edge technology, nor are they labor-intensive. Although these industries do not have particularly high technological content, they require engineers and management. Southeast Asian countries have no competitive advantage in these fields, and the United States also lacks a large supply of engineers. Therefore, the intermediate industries such as home appliances, furniture, small electromechanical, and some equipment industries are all doing well. 

The third is that China’s economy is entering the era of quality economy from economies of scale. Market increments are getting less and less, and competition in the stock market is very fierce. This is what we see today in the furniture, building materials, and home appliance markets. Under the double cycle, many export-oriented furniture in Guangdong were transferred to the domestic market, and market supply increased and competition further intensified. 

Fourth, the connection mechanism between enterprises and customers has changed. The demand and consumption philosophy of young consumers is very different from their father and brother. The integration of multiple scenarios, the fragmentation of channels and media, and the increasing difficulty of corporate marketing, makes it difficult to efficiently obtain customer traffic. At present, only a few companies have adapted to this change. 

Witnessing history: The two ecosystems of Alibaba and Tencent are about to break. How should other companies respond?

Industry and market changes have brought three major pain points to entrepreneurs. 

The first is the pain of strategy, that is, where is the future development direction, how to arrange the growth path, and how to match the strategy and corporate capabilities? This means that companies need to transition from opportunistic growth in the past to capability-based growth, which is a topic of the times. 

The second is the pain of learning. Frankly speaking, there are very few teachers and courses in business schools that can provide effective methods to entrepreneurs today. There are some quacks outside the school, who talk about a bunch of fashionable concepts that are not easy to operate, and even talk about ideas but not methods. It is quite difficult for entrepreneurs to find good learning products. 

There is also a type of management concept, which is not problematic in itself, but may only be suitable for a very small number of companies, such as the current popular ecological strategy. Only 0.01% of the companies that can be ecological in the industry may be, and the remaining 99.99% of the companies are “ecological” companies. How they survive is the key issue. 

The third is the pain of heart power, that is, lack of mental power and insufficient driving force. In the past, many private entrepreneurs, especially those born in the 50s, 60s, and 70s, most of them have deep memories of poverty and hunger, and have a strong impulse to wealth. This is their basic motivation when starting a business. 

When the wealth problem is basically solved, entrepreneurs need to shift from wealth-driven to mission-driven. However, on the one hand, the road ahead is more risky, more invested, and more uncertain; on the other hand, many entrepreneurs are also ordinary people and like a relaxed and comfortable life. Therefore, the proportion of entrepreneurs who lack mission motivation is not low. 

Thinking and analyzing these backgrounds, I sorted out and conceived the enterprise evolution algorithm ( Figure 1 ) and the long-term strategy map ( Figure 2 ), trying to provide these companies with a global vision and system thinking. This set of algorithms and maps is applicable to three types of companies: companies that have completed the original accumulation, surpassed the entrepreneurial period, and found their own main track; technology-catch-up companies, which have the driving force to transform into capable companies; and have long-term strategies An enterprise with intentions and industrial thinking. 

Witnessing history: The two ecosystems of Alibaba and Tencent are about to break. How should other companies respond?
Witnessing history: The two ecosystems of Alibaba and Tencent are about to break. How should other companies respond?

CBR : “Evolution” is aimed at organisms and organisms, while a company is an organization. Why is the introduction of this concept and what is the value of understanding the long-term strategic map?

Shi Wei : I think the enterprise is also a living body. One of the main ideas of the evolutionary perspective is to attach importance to the relationship between the population and the external environment, and the survival of the fittest. “Fitness” means adapting to the environment, and now the environment is uncertain, how to adapt to the environment is a very important strategic issue.

As a complex life body, an enterprise needs to continuously develop its structure and functions in the process of adapting to the environment and interacting with the environment, improving the enterprise development model, and continuing the life of the enterprise organization. Evolution requires intervention, that is, strategic adjustment and management improvement. Evolution cannot be accomplished overnight. It is a long-term process of repeated, ups and downs, from quantitative change to qualitative change, then quantitative change to qualitative change ( Figure 3 ). 

Witnessing history: The two ecosystems of Alibaba and Tencent are about to break. How should other companies respond?

At the beginning of evolution, the starting point is not a problem. The key is to move and embark on the evolutionary journey. Chinese enterprises, especially many private enterprises, have a low starting point, poor foundation, no technical content, and low added value. But once these companies embark on the road of iteration, they actually begin to evolve and grow. 

What needs to be explained is that growth, iteration, and evolution are not necessarily disruptive innovations. 99% of corporate evolution does not start with disruptive innovations. For most companies, disruptive innovation is out of reach, just as Homo sapiens does not evolve into humans in a day. 

Digitization is not a decisive variable for corporate evolution

CBR : What variables should the corporate evolution model include? Since it is an algorithm model, how do you start? 

Shi Wei : The enterprise evolution algorithm includes three levels: customer value evolution, survival and development model evolution, and organizational function evolution; it includes six variables: increment, iteration, strategy, resource density, ability, and vitality. Labor density) is the hub, linking the two levels of strategy and organization. 

After an enterprise chooses its business area and determines its business model, where does its evolution begin? My answer is the increase in customer value. Increment is change, which includes both the differentiated innovation of a new generation of products and services, as well as the reduction in customer costs. 

Sometimes a small step in customer value means a big step in technological innovation. As an example of industrial products, TSMC ’s wafer process has progressed from 7 nanometers to 5 nanometers, and it will soon be 3 nanometers and 2 nanometers. Every seemingly small change will trigger major innovations in equipment and processes. 

Witnessing history: The two ecosystems of Alibaba and Tencent are about to break. How should other companies respond?

The increase in customer value stems from changes in customer needs, and grasping this variable basically handles the relationship with the environment. 

The realization of customer value increment means customer value iteration. Iteration is very difficult. Taking Huawei mobile phones as an example, the progress has not been smooth in the first few years. The rise of Xiaomi mobile phones has had a great impact on Huawei, and Xiaomi has inspired Huawei’s bloodliness. Huawei mobile phones have finally entered the evolutionary track, such as Mate10, Mate20, Mate30, Mate40…the generation is better than the generation. This is iteration. Increment and iteration are the basic ways of business evolution. 

CBR: When Chinese companies shift from opportunistic growth to capability growth, which capabilities are most critical? 

Shi Wei : Speaking of corporate capabilities, I proposed a new concept related to it, called resource density, which is the hub concept of the entire algorithm. Resource density includes capital, technology, data, human resource density, etc. The most important of which is human resource density, which is the amount of labor input per unit of product, also called labor density. 

Labor density depends on the number of laborers, labor hours, labor patterns, labor intensity, etc. In the era of knowledge economy, the labor density of technology-catch-up enterprises is mainly related to labor intensity. The labor intensity can be decomposed into cognitive density and behavior density. 

Cognitive density is the depth, precision, and detail of thinking about a problem. Think deeply, and the cognitive density of everything surpasses that of others, and the company is sure to succeed, so the evolution of the company must be implemented at the cognitive level. Behavior density is the intensity and frequency of actions, which means that the execution is in place. To improve the density of organizational cognition and action density depends on human resource development and effective organizational learning. They are the main way to improve organizational capabilities. 

Organizational function includes organizational ability and organizational vitality. Ability + vitality = vitality, that is, dynamic competitiveness. Ability is the quality of the enterprise itself. For example, Latin American volleyball players jump high, smash the ball very hard, and have particularly good abilities. Vitality is the state in which abilities and resources are stimulated. The Chinese women’s volleyball team has won several times, especially the two championships of Chen Zhonghe Times, mainly due to the vitality of the team. Ability can’t make up, but vitality can be adjusted. Vitality is the internal strength of an enterprise, and organizational structure, operating procedures, and corporate culture are all related to vitality. 

Most Chinese companies are technologically lacking. Our advantage is the demographic dividend and engineer dividend. Therefore, we use labor density, especially the density of high-level labor and knowledge labor, to explain the factors and development mysteries of Chinese companies’ future growth. 

Witnessing history: The two ecosystems of Alibaba and Tencent are about to break. How should other companies respond?

CBR : In the past two years, the business community has mentioned digital transformation more frequently. In which part of the evolutionary algorithm do you think digitalization should be, and which variable should it belong to? 

Shi Wei : Digitization is a means of enterprise growth and evolution. Digitization is an important content and form of enterprise evolution in today’s era, which is reflected in three levels: customer value, business methods, and organizational functions. Digitization is very important, but it is not yet a decisive variable in the evolution of enterprises. 

Some entrepreneurs often lack some methods and patience in motivating people, so they always feel that people can’t do it. They always hope that there is a technology that can cure all diseases. There is also this tendency in digitalization. However, without cognitive density and behavioral density, what is the use of data? Some telecom giants have massive amounts of big data, but none of the fastest-evolving industries and companies have them. Therefore, the data is important, but not the fans number of channels data. 

CBR : On the whole, the enterprise evolutionary algorithm is more suitable for traditional enterprises. Is it suitable for Internet enterprises? 

Shi Wei : Most Internet companies are still at the stage of capital assistance, with strong capital dividends or capital market valuation dividends. From a long-term perspective, they need to further build customer value advantages. For example, Pinduoduo ‘s customer value is cheap, but it is cheap because of huge subsidies. When the capital dividend is exhausted, whether it can build a competitive supply chain and whether it can continue to meet customer needs at a lower price depends on its organizational ability and vitality. 

In general, this model is more suitable for the traditional real economy, rather than directly targeting the virtual economy. 

Witnessing history: The two ecosystems of Alibaba and Tencent are about to break. How should other companies respond?

The boundary of core talents is the boundary of enterprise development

CBR : Is the company currently undergoing digital transformation a traditional company as defined by you, or is it a part of the virtual economy? 

Shi Wei : In the foreseeable time, it is impossible for most enterprises to become a virtual economy. Ali and Tencent are both super-large platform-based companies, but the platform itself is not borderless, and it is impossible to incorporate all corporate forms into the platform. This means that most companies are actually in a relatively independent state of survival and development under the background of industrial ecology. 

However, not all companies that cannot be ecologically or platform-oriented must be ecologically and platform-independently. Companies can form their own small ecology, and grow several pieces of business based on customer resources and technology horizontally; vertically, upstream and downstream industries Basically, you can also grow a few pieces of business. In this way, a cluster-like business structure that is crisscross and relatively related can be formed. I summarize this business expansion model as ecological expansion. 

For example, Shenzhen’s Lixun Precision , connectors, optical modules, and acoustic modules are all vertically integrated businesses, while extending them from computers to mobile phones, wearable devices, automobiles and other fields. Many products are multiplied and developed based on customer resources and precision manufacturing. 

Witnessing history: The two ecosystems of Alibaba and Tencent are about to break. How should other companies respond?

CBR : Cluster development is an interesting concept, but where is the boundary of cluster development? Which companies should do it themselves, and which should cooperate with the upstream and downstream of the industry chain? Including the incident of Huawei’s chip being “stuck”, does it have to invest in the truly cutting-edge technology? 

Shi Wei : Huawei is an example, not representative. Under the normal international order, there is a horizontal division of labor among enterprises in the electronics and chip industries. Upstream and downstream so multi-ring section, all businesses can not do it yourself. Moreover, the chip itself is a super industry, and vertical integration is often beyond the capabilities of enterprises. 

The limitation of cluster growth mainly comes from core talents. The so-called core talents mainly refer to the leading talents in business operations who can act on their own. Talents in developed countries are more socialized. For example, Amazon’s core talent required, it is possible to find in the community to get . But in China, such talents are scarce, and it is very difficult to meet, find and cultivate them internally. Not all companies can find and cultivate core talents, and these people are the boundaries of corporate development. 

For example, Xiaomi has adopted an ecological expansion model that cooperates with mature external entrepreneurs. An important condition for the cluster development of Xiaomi is that the main business is sufficiently prominent, the mobile phone market performs well, the Xiaomi brand is valuable, and other entrepreneurs or entrepreneurs are willing to join the Xiaomi ecosystem. In addition, Lei Jun himself has an influence, and the company has strong empowerment capabilities. 

Witnessing history: The two ecosystems of Alibaba and Tencent are about to break. How should other companies respond?

CBR : What is the position of corporate leaders in the corporate evolutionary algorithm? 

Shi Wei : Leaders are a key variable in the evolution of enterprises. I put forward the concept of evolutionary leadership. Evolutionary leadership must first have mission and pursuit; second, must have long-term goals and strategies; third, must have practical wisdom, that is, the ability to make things-there will be many difficulties in evolution, and it must lead the team to win battles. ; The fourth is to have an ordinary personality; if you are not an ordinary person, you cannot understand the happiness, anger, sorrow, and joy of ordinary people, and there will be a gap with the team, and it is impossible to form a highly integrated team. 

Many entrepreneurs have a heroic personality and always act like a hero, so the enterprise is not far away from accidents. We have seen many famous corporate leaders who are very ordinary people, but they have long adhered to the “four haves” mentioned above and have made extraordinary achievements. 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/witnessing-history-the-two-ecosystems-of-alibaba-and-tencent-are-about-to-break-how-should-other-companies-respond/
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