△ Add friends, please note community group purchase registration Source: Fengrui Capital (WeChat public account: freesvc) 9 minutes 26 seconds to 100 million yuan, the only snack brand among the 30 brands that exceeded 100 million yuan in half an hour; single-day transaction volume of 682 million yuan, a historical high, ranking first in the industry for 7 consecutive years; from the pre-sale on November 1 to the end of November 11, sales increased by 41% year-on-year. These are Three Squirrels' results on Singles' Day 2018. After the numbers were finalized, amidst the jubilant atmosphere at Three Squirrels' Wuhu headquarters, there was a sense of joy akin to "surviving a disaster." Behind these numbers is the most uncomfortable year in Zhang Liaoyuan's seven years of entrepreneurship. A year ago on Singles' Day, Three Squirrels' growth momentum flattened for the first time, with growth almost stagnant. Prior to that, media reports of a product exceeding mold standards also dealt a blow to the company. After six years of rapid growth, Zhang Liaoyuan realized for the first time that the company had problems. From identifying the problem, to seeing the essence of the problem, to fully awakening and finding the right path, over the past year, Three Squirrels has undergone product overhauls, organizational restructuring, value upgrades, and business model adjustments... In places invisible to outsiders, Zhang Liaoyuan led Three Squirrels in a difficult comeback battle. Very few companies that have experienced growth stagnation can lift their heads again and resume reverse growth. The day after "Double 11" ended, we chatted with Squirrel Dad Zhang Liaoyuan. He spent 4 hours and 23 minutes sharing what Three Squirrels experienced in the past year, as well as his difficulties and confidence as CEO. He also deeply reviewed the gains and losses of Three Squirrels, which sold 16 billion yuan worth of snacks over the past seven years. The entire interview was wonderful and sincere. In this interview, Squirrel Dad discussed the following topics: Part One - Core Interview Topics

  1. When a company's growth stagnates, what is the right path and how to find it?
  2. What is the secret to achieving reverse growth? How to solve problems related to people, organization, direction, positioning, products, and traffic?
  3. On the road of enterprise development, there will inevitably be detours. During difficult times, how does a CEO self-reflect and grow? Reverse growth is difficult for any enterprise. If a company can achieve reverse growth, it must have done something right, and it must have found a new path in a new stage. I call this second entrepreneurship. This year, I am sincerely happy. Last year, I felt very bad, but it can also be said to be another kind of joy—recognizing mistakes is also a joy. "Growth masks problems; people tend to find superficial reasons" What have we experienced in the past year and a half? Before the end of August 2017, our growth was still good. In August, the media reported that one of our products exceeded mold standards. In September, our growth began to stagnate, continuing through "Double 11," and even during the New Year shopping season, sales were not good. It was easy for us to associate such results with this incident, thinking it caused the stagnation. Until before May this year, including myself, we all thought so. Actually, the real reason is not like that. When everyone reviews mistakes, they tend to find superficial reasons. Or rather, at the time, they didn't know it was only a superficial reason. To this end, we did many things to try to restore our image in the minds of consumers. But reason told me that consumers are actually rational; they know our products, company, and brand are actually very good. At that time, I also felt that there must be problems within the company. This problem should have appeared earlier than the growth stagnation on "Double 11" last year. Because starting from 2017, the company's growth was not as fast as before. It's just that before the incident, growth could solve all problems and also masked all problems. As long as there was no growth, problems would be exposed. Realizing there is a problem is one thing, but finding the root problem is very difficult. For a long time, I read many books and studied the development history of domestic and foreign enterprises. The conclusion was that any enterprise will inevitably have problems when it develops to a certain stage. The annoying thing is that we sometimes don't know where the problem lies. Over the past year or so, I have been tossing and turning, starting from straightening out values, then straightening out people and organization, then thinking about the essence of the enterprise, until July 2018 when I finally woke up completely. I took many detours in the middle, but fortunately, I turned around relatively quickly. Doing business is like this: when you are doing well, you never think of the worst times. When you first see signs of trouble, you often don't take it seriously. A good entrepreneur needs to be a skilled doctor, treating "pre-disease," which is a disease that hasn't happened yet. Whatever disease may come in the future, you have to treat it now. "Rethinking Organization, Business, and Values" One trigger that made me realize there were internal problems was: in order to develop snack stores, we developed many peripheral products. In March and April 2018, I saw a bunch of things that looked bad to me, with poor quality but high purchase prices. I checked prices on 1688, and after checking prices, I checked inventory. I was shocked to find that the inventory we had built up in one or two months would take decades to sell at the current rate. I immediately felt that the company had problems. Because peripheral products are something a normal company can easily do well, but we couldn't. The reason is simple: everyone was proud inside, and their mentality was inflated when doing things. I first thought the problem was with values. Then we spent a lot of time internally on values. Looking back now, it was incorrect. When are values important? They are important in the early stages of entrepreneurship, and also important in the middle stages, but in the middle stage, they are not the core; they should be a foundation. How big were the values at that time? To put it bluntly, we were a company oriented by values—if your values are correct, you are loyal to the company, and your attitude towards work is good, you can be promoted; performance is not the most important. Because for a long time, performance mainly relied on e-commerce dividends, and business was always growing. Everyone even easily fell into the misconception that business growth was due to their own ability. Over time, some people with not-so-strong abilities also did well. After reflecting for a while, I realized that values are the cornerstone, but business orientation is the core. When I shifted from emphasizing values to business orientation, the first thing I did was to find ways to stimulate people's motivation. However, we jumped a bit too far and internally implemented a small business unit model, similar to the Amoeba model. I hoped to turn the company into an entrepreneurial platform. We proposed many slogans, such as making everyone a striver. This itself is not wrong, but there is a prerequisite—employees must have strong business capabilities. This is very important. In May this year, I canceled it. The reason is simple: this model didn't work in our company. First, some employees were highly motivated, but they didn't know how to do it. It's like if you give a field to a farmer who doesn't know how to hoe, the field will definitely be abandoned. Second, because this small business unit model requires delegating power to the smallest business agents, it becomes difficult to communicate from top to bottom. In the end, we were stuck between advancing and retreating. The failure of this experiment was mainly my problem. My personality may overemphasize innovation and I don't like traditional business management methods, but the mainstream management methods that have existed for hundreds of years have their reasons. What should it be like? People are in a competitive relationship, with promotion as the driving force. Although traditional, it works. After my mindset changed, I repeatedly thought about one question: why do people work for your company? One driving force is the interest relationship; I want to earn more money. How to earn more money? That is to be promoted. On this chain of interests, values can exist; otherwise, they are empty. Under the new organizational system, we internally released something called "Organizational Thirteen Chapters." The company's salary and compensation increased significantly, some by as much as 40%. You don't need to think about it: if a person previously earned 100,000 yuan a year and now earns 150,000, giving them a raise will definitely make them work harder. If their abilities don't improve, they will be eliminated by themselves. This year, we also vigorously introduced many external talents. Positions include product development, IT technology, sales... Some came from Alibaba, some from Metro, and others from well-known companies in related industry chains. We benchmark against relatively large companies and recruit people with five to ten years of work experience. We offer competitive salaries and immediately decided to establish a presence in Nanjing, transforming the entire organization from a closed or regional one to a national one. Now, our entire organizational model is based on values as the cornerstone, business results as the orientation, competition as the principle, and promotion as the driving force. Before this year, I was very reluctant to bring in mature talent from outside. I overly believed in the company's growth system and was keen on turning ordinary people into extraordinary ones. There were also many misconceptions here. In the early days, it was correct not to introduce external talent. E-commerce was a new tool, and external talent didn't understand e-commerce well. There was no mature external talent to introduce, so using our own "troops" was better. But when we switched to another channel, the market changed, and our competitors became stronger. At this time, the speed of talent cultivation may not keep up with the speed of enterprise development, so we must use external forces. Maybe in a few years, we will enter the third stage, where key positions will be filled by internally trained people again. This all depends on the stage of the enterprise and the industry. Take Alibaba as an example. In its early days, Alibaba relied on the 18 founders and internet dividends. They precipitated the most important genes and values of the enterprise. If it had continued to rely on the 18 founders after ten years, there might be no Alibaba today. Jack Ma made a very correct decision in the process of talent iteration: iterating the waist-level talent. The people Alibaba now heavily uses may not have been VPs when they joined, but were general managers at the waist level. The advantage of waist-level talent is that they are brought in from outside, so they definitely have business capabilities. On the other hand, there are old-timers above and below them, so their values can be influenced. After training for seven or eight years, they have both business capabilities and value alignment. In my view, it is theoretically impossible for a person to graduate from university, join a company, and then work all the way to CEO and chairman, because this person will definitely become closed-minded. "When a company's growth stagnates, what is the right path?" Another insight I have is that when a company encounters difficulties and stops growing, don't think about cutting costs first, but rather about increasing revenue. Cutting costs will definitely lead to failure; increasing revenue is the only way to survive. Cutting costs means the CEO has lost confidence in the future. The biggest problem is that people's hearts will change, and everyone's fighting spirit and morale will drop. So, what is the right path? Until May this year, we hadn't yet regarded innovative products as the most important thing for the company. Sometimes, the more universal things are, the easier they are to be ignored. At that time, I positioned myself as a retailer: sell whatever sells well, and compete with others on the speed of new product launches. Under this orientation, when growth stagnated, we introduced a strategy internally called the T9 strategy, creating 9 bestsellers and launching them as quickly as possible. From May to the end of July this year, we launched a large number of new products. Many didn't sell well, and some I didn't even think were good. I felt there was a problem. These things we did were all easy things. Is doing business really that easy? This must be wrong. Was the problem before that our new product launch speed was slow? Today, with one order, everyone should develop products, and that's it? It seems too easy; no matter how I think about it, it's wrong. Then, I kept thinking about the simplest question: what is the essence of an enterprise? After thinking a lot, I finally concluded that the essence of an enterprise is innovation. What is an enterprise or a company? It's a group of people organized together. What is the meaning of this group's existence? Isn't it innovation? Then, I began to reflect: have we innovated? It seems there is no innovation. Is model innovation called innovation? No, e-commerce is a model innovation, but that's not innovation. E-commerce is just a tool. What do we ultimately want to do? My answer is to sell products. So, have we innovated our products? It seems not much; we just took others' things and changed the appearance to sell. I finally realized that the problem lies here. We surveyed consumers and looked at reviews. The feedback was that Three Squirrels' products are good, and the user experience is good. It's fun, delicious, and has good user experience. When mentioned, people remember small details like the nut opener and clip from the past, but in recent years, we haven't had such special features. When I thought about this, I understood: our growth is not as fast, the most important reason is that we are losing our core capabilities. This doesn't mean we are regressing, but that consumer needs are progressing, which means we are regressing. So we should return to our original intention and make our core capabilities bigger. Second, why did sales stagnate? To put it bluntly, the demographic dividend is gone, and the market has changed from an incremental market to a stock market. There is still business in the stock market, but it requires you to take what's in others' bowls into your own pocket. Taobao has 600 million people, but only 120 million buy snacks. There are 480 million who don't buy snacks. How do you develop? When I thought about this, I realized that our products and user experience are not good enough. Only when you are truly better can you definitely create increments in the stock market. When positioned as a retailer, we thought about expanding channels or adding more products to sell. For a while, I was particularly disgusted. It seemed like we couldn't sell our products. Previously, we were a very proud company; if you came to us for goods, we might not agree. But in April and May this year, when we were anxious, we entered any channel. We even entered channels that contributed only tens of thousands of yuan in revenue. I felt this was very problematic; the company had lost its taste. An excellent brand must not take sales too seriously, like Apple. Taking sales too seriously means your products are definitely not good. My definition of marketing is that the essence of marketing is to make sales redundant. It wasn't until July this year that I fully woke up. We need to return to our original intention. Three Squirrels should be a brand owner, not a retailer. We need to innovate, with products as the logic. Our core capability is the ability to design products and user experiences. "New R&D, New Manufacturing, Creating Products, Creating Experiences" After clarifying the direction, we focused on "creating," specifically "creating products and creating experiences." Around this "creation," our annual planning and corporate culture have changed. We proposed the Four No's work philosophy: Don't do easy things, don't do non-innovative things, don't do things without results, and don't use people who don't do things. We are becoming a completely innovation-oriented company. However, innovation does not mean creating something from nothing. The essence of innovation is the recombination of various elements and greatly highlighting its uniqueness. Moreover, our innovation must be based on marketing. I believe all product innovation is driven by marketing thinking. Steve Jobs was like this. Apple computers removed even the USB port for extreme thinness. When we created the product "Dou Mian" (trembling noodles), its unique point was numbness, but we redefined "numbness" to the point where your lips tremble, and named it "Trembling Lip Soup Noodles." We amplified the "numbness" point, even sacrificing other aspects in the formula. When it comes to creation and innovation, one thing that cannot be avoided is deeply cultivating the supply chain and participating in product R&D and manufacturing. This is also what 7-Eleven and Muji did when they faced growth crises. In the past, I didn't go deep into the supply chain and didn't talk about open collaboration. One reason is that it doesn't fit my personality; asking for help is difficult for me. However, a few years ago, when Squirrel was small, even if I asked, they might not have paid attention. Today is different. For example, AAK, the world's leading producer of specialty vegetable oils, we can now cooperate with them. Because our volume is large, it can drive their revenue. In July this year, I spent more than two weeks visiting over 20 supply chain companies. After the tour, I found that the supply chain has a foundation for innovation. The biggest complementary relationship between us and the factory side is that they have the foundation, but they haven't used it well, or they haven't enjoyed the benefits of product innovation. What the supply chain lacks is brand momentum and traffic capability, which we have. In three or four months, we cooperated with the supply side to create a batch of very innovative products. These new products sold 50 million yuan during this year's Double 11. Connecting with the factory side wasn't enough. We went further down to the general technology layer, which can be said to be the infrastructure of food. For example, DuPont, which focuses on nutrients, does basic research on the three nutritional components of protein, fat, and carbohydrates. Another example is Givaudan, the world's largest flavor and fragrance company, and AAK, which I just mentioned. We signed strategic cooperation agreements with these global companies that have general food technology. After connecting with the factory side and general technology layer companies, and digitizing the entire supply chain process, we formed a new model in "creating products": First, we have partners with the world's top general underlying technology; second, we have high-quality supply enterprises from across the country; third, we have the most members and traffic. When these things are combined, they form our new competitiveness. Next, I can do this: for example, for a bread, we form a project with suppliers, standardize the bread from R&D, process, formula, and quality control, and then let the supply chain execute. It can be detailed to the point that this bread contains Yihai Kerry flour, AAK oils, and perhaps Givaudan flavors. Thinking about it, at the beginning of 2018, I communicated with Alibaba's Zeng Ming. He told me that enterprises now have a two-year fool's period, a five-year dividend period, and generally a seven-year cycle. That makes sense. I calculated that Three Squirrels just reached its seventh year. I also thought of Xiaomi. 2016 was its seventh year. Around 2015 and 2016, Xiaomi had almost no growth. When pressure was high and external doubts were many, what did Lei Jun do? The answer is also deep cultivation of the supply chain. Now, our model is very clear: cooperate with the supply chain to build an industrial community, with the core goal of inspiring every partner to innovate products together. To achieve this goal, the relationship between us cannot be a procurement and sales relationship. We hope that in the process of supply chain digitization, raw materials are transparent, processing costs are transparent, and our sales at Three Squirrels are also transparent. We adopt a profit-sharing model. After the product is launched, we push it to the market. If we lose, we share the loss; if we earn, we split it half and half. Mine is yours, yours is mine, with no distinction between Party A and Party B. Achieving this goal will take time, maybe several years. However, once this industrial community is established, it will basically be invincible. To summarize, in 2018, we tossed and turned, changing repeatedly. The biggest gain was clarifying Three Squirrels' direction, positioning, model, and organizational form. All enterprises need to rethink these issues during transformation. Another major insight is that before finding the right path, there will definitely be detours. Now, Zhang Liaoyuan of Three Squirrels no longer minds the label of "good at marketing" from the outside. He even actively positions himself as a "marketing expert," although the term has a clichéd annoyance. In his view, in Three Squirrels' operating system, products are made under the drive of marketing. In seven years of entrepreneurship, Zhang Liaoyuan has caught up with two major eras: the dividend period from traditional retail to e-commerce, and then the new retail era when dividends disappeared and big brands woke up. Like many once-famous Taobao brands, Three Squirrels rose with the dividend period. Many Taobao brands failed at the inflection point when traffic dividends disappeared. Three Squirrels also fell into a growth dilemma. It took Three Squirrels more than a year to climb out of the slowdown and achieve reverse growth. "Online warfare is extremely fierce. If you don't grasp dynamic traffic, it means a decline in share. A cliff-like decline," Zhang Liaoyuan said. From nuts to snacks, from selling things to focusing on "creating products" and deeply cultivating the supply chain, Three Squirrels continuously innovates, makes mistakes, and changes direction. In Zhang Liaoyuan's view, no matter what stage an enterprise reaches, the two most critical things are speed and time. Part Two - Core Interview Topics
  4. Over the past 7 years, from e-commerce to omni-channel, from nuts to snacks, from selling goods to creating goods, what did Three Squirrels do right and where did it step on pitfalls?
  5. Three Squirrels has grown for 7 consecutive years. What did it do to escape the fate of Taobao brands?
  6. What did Three Squirrels learn from brands like Apple, 7-Eleven, Muji, Want Want, Qiaqia, Li Ning, and Uniqlo? The History of the Decline of Taobao Brands Feng Xiaorui: In the first few years of Double 11, the top five were basically dominated by Taobao brands. In recent years, many once-popular Taobao brands have gradually disappeared. Why is that? Zhang Liaoyuan: The rise of Taobao brands was mainly due to e-commerce dividends. It's like a train station suddenly appeared at your doorstep. You made some tea eggs and sold them, and suddenly you became the first or second best seller. Those who originally made tea eggs professionally elsewhere found your business was good and also went to sell at the train station at your doorstep. You would likely die. This is why when ZARA and Uniqlo started selling on Tmall, many clothing Taobao brands couldn't survive: their categories were already crowded with giants, with too many and too strong competitors. The cosmetics industry is the same. Big brands have stronger consumer mindshare. If Taobao brands can't give users a stronger perception, they will be very difficult. In addition, for e-commerce brands, besides having good products, they also need to find categories with high traffic. That is, if you only do a very niche category or scenario, you will often be beaten by high-traffic ones. Because the basic logic is that high traffic eats low traffic, high frequency beats low frequency, and high average order value beats low average order value. For example, if Three Squirrels still only did nuts today and didn't do snacks, we would very likely have been eaten by others. Because the traffic pool for the nut category is not big enough. Many times, consumers online are not looking for a specific brand, but for the product they search for. Theoretically, our product categories must at least reach a certain scale to support nuts. Feng Xiaorui: As a typical representative of Taobao brands, Three Squirrels has not declined over the years, but has achieved the industry's first place in "Double 11" for seven consecutive years. What exactly did Three Squirrels do right? Zhang Liaoyuan: Indeed, in history, no Taobao brand has been able to resume growth within a year after it stopped growing, and no Taobao brand has dared to announce its Double 11 results so arrogantly and proudly after losing that title. We are an exception. Over the past 6 years or so, the internal and external environment has been changing rapidly. Basically, at every stage, we were racing against speed and time, doing things around the relationship between speed and time, and the relationship between traffic and products. Feng Xiaorui: How has Three Squirrels' strategy changed over the years? Zhang Liaoyuan: I am very focused in what I do. From 2012 to October 2015, we did not enter any distribution or offline channels. No matter how big the distributor was, I didn't do it. I only focused on doing the online part well. It wasn't until 2018 that we formally and comprehensively entered offline. Before 2015, Three Squirrels only did nuts, not other categories. In May 2015, we entered the snack field. When we first started snacks, we only launched 20 products, ensuring each was a bestseller. It wasn't until 2016 that we gradually expanded varieties. From 2016 to 2017, one of the mistakes we made was expanding categories too quickly, not matching traffic. Or rather, when expanding more varieties, the creation of each product was not extreme enough. These would dilute traffic and also bring a bad impact on customers' minds. This was a big problem in 2017, and we are still adjusting. People have limited energy; you must take one step at a time. Before taking the next step, you need to take stock of your resources, assets, and traffic. When we first started, traffic came "inexplicably." When the nut category couldn't hold up, we made 20 snacks. When 20 snacks couldn't hold up, we launched 50. Now the situation is different. The traffic dividend has ended. In a stock market, we must put our focus back on products. Feng Xiaorui: From nuts to snacks, Three Squirrels grew horizontally, targeting a broader range of needs for a type of person? Zhang Liaoyuan: Mainly to maintain traffic. The reason clothing Taobao brands later failed, besides the strong competitors just mentioned, is that during the period of abundant traffic dividends, they didn't quickly focus on products to occupy traffic sources and capture consumers' minds. When smart people like Uniqlo and ZARA came to Tmall, their product lines could meet the needs of more people, and traffic would naturally flow there. Online competition is extremely fierce. Traffic is dynamic. No growth means decline, and it's a cliff-like decline, giving you no time to breathe. Unlike offline, where the store you open can't be taken away by others, it climbs slowly and falls slowly. Online economy is traffic economy. Speed and time are very important. How much mindshare your traffic can build is also important. The "Sick" Aspects of Offline Stores and IP Feng Xiaorui: In September 2016, Squirrel opened its first offline snack store. Now it has nearly 50 stores. It has gone through expansion, iteration, and also experienced Dad going to smash the store. Is doing offline the same as Dad expected back then? Compared to playing online, what are the difficulties? Zhang Liaoyuan: Overall, offline has great potential. We are now doing omni-channel: creating products online, selling products offline. However, offline business is heavy. It's not something we internet people can do well with just enthusiasm. Take the snack store as an example. At first, we were overly optimistic, even our slogans were optimistic. Then we found that even standardizing the decoration plan was extremely difficult. I smashed two stores for this reason. In management, we attempted to bring our excellent user experience offline through our values. Opening two stores was fine, but opening 20 stores was not. Third, we once cared too much about the IP image of the store, ignoring its basic function as a store—selling products. This is wrong. When over-focusing on IP, customers' first impression is particularly good, but it can't last. Because after all, we are not providing a place for fun. There are plenty of fun places in shopping malls. Why must they come to you? At the same time, over-caring about IP image weakens product display. However, we rely on products to maintain continuous stickiness with customers. These are the three "sick" aspects of offline stores we summarized. Feng Xiaorui: How will you adjust next? Zhang Liaoyuan: The fourth-generation offline store will be very different—IP as a supplement, products as the main focus. Each store's business area will be controlled at around 200 square meters (previously often over 300 square meters). This way, we calculate that each store will have about 10% net profit, annual sales of 8 million yuan, and sales per square meter of about 30,000 yuan. We are also researching the fifth-generation store, which will emphasize product innovation and experience, allowing users to try products without burden and with pleasure. Now many stores let you try food, but you are resistant inside. Either the staff makes you feel pressured, or the food you are given has been exposed to the air for who knows how long. In this regard, Apple stores are very worth learning from. Before Apple stores were born, many stores selling phones were reluctant to display real phones, putting a phone model for you to touch. What kind of experience is that? The birth of Apple stores completely changed this. They decorated the store simply, elegantly, and beautifully, placed real phones there. When you see them, you naturally want to touch and experience them without any psychological burden. Although many mobile phone offline experience stores are like this now, the appearance of Apple stores was definitely a disruptive and great invention. Feng Xiaorui: When you particularly emphasized IP that year, did anyone in the company object? Zhang Liaoyuan: No, basically I had the final say. I'm not used to others pointing out my mistakes, but I will admit and correct my mistakes myself. In 2016, IP was very hot. I felt that Three Squirrels had IP attributes that others didn't, so I highlighted it. When it was over-highlighted, it evolved into a core strategy. For a while, we were trapped in it, treating IP as a lifeline, thinking that only by doing IP well would the brand be good. This is definitely wrong. However, whether it's the layout of Squirrel Town or the Three Squirrels animated series, there is no problem at present. IP can serve as a brand embellishment, as icing on the cake. Now we are very clear: Three Squirrels is not an IP brand; it is a product brand that just uses IP. The positioning of the two is different. Feng Xiaorui: So Three Squirrels will not become Disney; it may be more like Nestlé? Zhang Liaoyuan: Yes, we are still a product brand, but we have taken a differentiated route in communication, achieving brand communication through IP. Feng Xiaorui: Speaking of brand communication, do you mind outsiders saying you only know how to do marketing? Zhang Liaoyuan: Now I don't mind. Marketing expert = product expert. Actually, we have a misunderstanding of marketing, thinking it is sales. Marketing is not sales; it is insight into consumer needs and creating products consumers like through innovative means. Steve Jobs' greatest contribution to Apple was also marketing and products. Two years ago, I would have minded. Because at that time, I had other pursuits, such as management. I once wanted to become a management expert, and then spent a lot of time on organizational building and value building, relaxing on products and user experience. In 2017, problems all surfaced. It can be said that in these 7 years of entrepreneurship, my biggest mistake was overestimating the role of organization. Now I am very sure that for Three Squirrels, good products and experience are above all else. With good products and experience, growth is not a worry. Management is not my core competency; marketing is. Now I position myself as a marketing expert and product expert, not a management expert. Entrepreneurs just need to maximize their core advantages; don't always think about learning other strengths. "Only entrepreneurs who have experienced two eras can be called entrepreneurs" Feng Xiaorui: As you said, the e-commerce dividend seems to have passed. What is the future trend of the snack industry? Zhang Liaoyuan: The product innovation we are doing is the future trend. Any enterprise in its development process must cross eras to complete transformation in order to sustain development. If you succeed in your first entrepreneurship, you must have encountered dividends. With dividends, even pigs can fly. Only entrepreneurs who have experienced two eras can be called entrepreneurs. China's earliest private enterprises, such as Fool's Melon Seeds, did not cross into the new era. Qiaqia, Laiyifen, Want Want, and Daliyuan encountered the era when China's material scarcity and retail channels were just starting, and channels supported them. Among them, Qiaqia and Laiyifen did not do as well as Want Want and Daliyuan because nuts are a small category. When switching to the e-commerce era, they all failed to seize the opportunity. The e-commerce era was bound to produce snack brands, and we came. However, e-commerce has now reached a high level. No matter what you do, sustained growth is possible, but at most, it's just creating increments in a stock market. Annual growth of 10% or 5% is possible, but more is difficult. What's next? We can understand it as new retail, which simply means the integration of online and offline. This is actually an opportunity for industrial upgrading based on the internet. Some enterprises go from offline to online, such as Daliyuan and Want Want. Some go from online to offline integration, such as Three Squirrels. I think going from online to offline will be more efficient. Feng Xiaorui: Now there are two modes of product production: own factories and OEM factories. Three Squirrels cooperates with OEM factories. How do you ensure food quality and safety? Zhang Liaoyuan: It still depends on the quality management system. Quality is made by people. Theoretically, the motivation of an OEM factory owner is definitely stronger than that of a self-owned factory manager, because if they don't do well, I won't play with them anymore. This is a forced interest. In addition, I repeatedly talk about digital supply chain. This is the ultimate way of quality control. Every supply and demand, quality system is fully digitized. Even if the OEM factory is thousands of miles away, it can be controlled. Before achieving this, we inspect every batch of goods. We already have the largest testing center in China's food industry. Feng Xiaorui: According to this logic, does it mean that in the future, social division of labor will be very obvious? Some people do branding and front-end traffic, and some specialize in manufacturing. Zhang Liaoyuan: Yes, open, collaborative, and divided. The future industry chain will definitely move towards collaboration. One person can't do everything. Think about how many high-quality manufacturing companies are behind Apple. Some are dedicated to OEM, and their quality systems are unquestionable. If everyone is still entangled in the OEM issue, the thinking itself is problematic. However, many Chinese OEM factories haven't figured this out yet. I often tell supply enterprises that they can focus on OEM or even ODM, but some waist-level enterprises still think OEM is a shameful thing and insist on making a small brand with great effort. What's the point? Is Foxconn shameful? It actually makes a lot of money and has done many remarkable innovations. The biggest problem in many Chinese industries is that there are too many brands. In the future, many brands will die. "All 'speed' is to gain more time than others" Feng Xiaorui: If you turn Three Squirrels into a business school case, what do you think can inspire others? Zhang Liaoyuan: The transformation after the entrepreneurial dividend ends should be inspiring to everyone. Transformation seems simple, but when you actually do it, you may really make mistakes, even continuously. In addition, in the process of brand evolution, believe in positioning, but don't be superstitious about positioning. In the internet era, due to the uncertainty of traffic, the core keywords of the entire business environment are speed and time. Speed means being fast, very fast. Strive for traffic quickly, become the first quickly, and "kill" others even faster. All "speed" is to gain more time than others. With this time, you can break out. If you don't put these two things first, all positioning, branding, and products are nonsense. Feng Xiaorui: Can you give an example? Zhang Liaoyuan: As soon as Three Squirrels went online, it aimed to become the first in the nut industry as quickly as possible. Because only by becoming first can you leverage all resources. On Double 11 in 2012, when we had only over 5 million yuan in our account, we spent over 1 million yuan to become the first in the nut industry on Double 11, squeezing out the then nut category leader New Brother. Many entrepreneurs often say they are a brand as soon as they appear. But in an era of fierce competition, the first step of a brand is to sell goods. Without sales and traffic, there is no brand. Without speed and time, brand is out of the question. Feng Xiaorui: After New Brother, which competitors has Three Squirrels been paying attention to? Zhang Liaoyuan: After rushing to the top online, you also need to look at competitors outside the online world, such as Qiaqia, Laiyifen, and Bestore, which will move online. Time is critical. You must do bigger than them before they wake up. We have been running fast until 2016, when we ran to 5 billion yuan (annual sales) and felt secure. At that time, the offline players were all at 3 billion. If I had only done 1 billion, when they came online, we wouldn't have been able to fight. Today, we are still running fast. Growth is very important to us because the benchmark has changed again. Companies like Want Want and Daliyuan with annual sales of 20 billion yuan, if they study e-commerce a little, they can move quickly. In the context of new retail, the way to reach the C-end may change significantly. Any new thing that emerges, we may be at a disadvantage at any time. So we must have a sense of crisis, strive for time, and quickly become a company of Daliyuan's scale. After conquering the national market, what's next? I think it's to see what foreign brands are doing. Feng Xiaorui: Imported snacks have been quite popular in the Chinese market in recent years. What impact will this have on domestic brands like Three Squirrels? Zhang Liaoyuan: In the past few years, the pressure from imported snacks has not been too great. Because the vast majority of imported snacks have not been localized, most Chinese consumers don't recognize them. At least many people can't understand the English instructions. If one day, imported snacks like Mondelez do deep localization in China, the pressure will be great. However, this path is not easy. Most international brands are confused about how to understand the Chinese market. Feng Xiaorui: What's the difficulty? Zhang Liaoyuan: Now, the way to build a brand in China has changed. Foreign brands must adjust their product structure, communication channels, and interaction methods. In the past, it was simple: after product R&D, broadcast a few CCTV ads, and distribute goods through channels like Carrefour and 7-Eleven. Now, many ads are done in vain. What is our model? To summarize, the first-generation model is called building the brand through sales, eliminating premium, and letting consumers know the brand through sales. Internet channels are naturally cheaper. Once users eat it, they establish a connection with us. If they think it's good, they will come back to buy. For example, when we promote Dou Mian, if we invest 10 million in advertising, maybe few people will see it. I sell 1 million buckets at cost price, and quickly reach 1 million users, and it's effective reach. It's hard to imagine brands like Mondelez coming to China and crazily discounting at low prices, even selling at cost. In today's era when traffic dividends have disappeared, building the brand through sales hasn't changed, but one more thing has been added: building the brand through products. That is, making products more extreme to form brand mindshare. Take daily nuts as an example. They are still the same dried fruits and nuts, but we use dry-wet separation packaging to prevent moisture from affecting each other, ensuring the crispness of nuts and the softness of dried fruits. Feng Xiaorui: Is there a ceiling for product and experience upgrades? Zhang Liaoyuan: Upgrading itself should have no ceiling; it depends on whether you can do it. Many years ago, people worried about how phones and cars could be upgraded further. Look at them now; they are still upgrading. If you think it's difficult to upgrade and there's no room, then there's a ceiling. If you think it's not difficult, you can create anything. Feng Xiaorui: What user experiences of Three Squirrels are you proud of? Zhang Liaoyuan: For example, don't underestimate the various experience packs we put in our packages, such as nut openers, wet wipes, toothpicks, and in the future, breath mints and mouthwash. These little things are really important. First, they are invisible marketing; users are directly moved. Second, we create a scenario where users will get used to this consumption style in the future: after eating Three Squirrels, I don't need to find wet wipes and toothpicks myself. It becomes part of the Three Squirrels product. These experience packs with wet wipes and toothpicks cost us an additional 200 million yuan each year. But I told the finance department, don't think about cutting costs to remove this 200 million; it will definitely create added value for us. Isn't the so-called brand about providing value to users? In the past, added value was flaunted through advertising, but today, what we need to do is hit the heart directly. Brand experience is above all else. "Find your passion, and success is not far away" Feng Xiaorui: You are the leading snack brand, but the largest volume is on Alibaba. Outsiders may think you are fragile. Zhang Liaoyuan: I don't have that feeling. We are the first Tmall brand to reach 20 million fans. Alibaba also depends on us. Our brand is also strong on the Alibaba platform. It can be said that we helped Alibaba support the snack category. I have never worried about the issue of dependence. When you do well enough, the platform has no reason to do anything to you. My current layout of omni-channel is for the company's development needs, not to deliberately reduce dependence on the platform. The platform also clearly knows its role. Feng Xiaorui: Many entrepreneurs feel that corporate culture is very vague and difficult to implement, but Squirrel's corporate culture is very good. Is there any methodology? Zhang Liaoyuan: It's both difficult and not difficult. Who you (the founder) are is very important. What is true cannot be false, and what is false cannot be true. On this basis, do things that young people can understand and hear. Then repeat and repeat. Of course, this is also related to the company's business model and industry. Feng Xiaorui: So, looking back, what kind of person are you? Zhang Liaoyuan: I am a person who values ideals. I oppose rationality. I almost never make decisions rationally. In fact, anyone with marketing talent is idealistic, even a bit extreme and emotional. Steve Jobs was such a person. Rational people couldn't have made Apple. At that time, Apple laptops removed even the USB port for extreme thinness. This is very extreme and disruptive. Idealistic people are not easily excited, but easily亢奋 (excited). When I have a creative idea or a good idea, I can wake up laughing. When a good product is made, I hope to see it as soon as possible, even waiting at the door for it. I tell my team, if you don't have this impatience for the product you plan, then you don't have passion. I found this passion many years ago. When I was at Zhan's, I both opened a store selling nuts and was responsible for the supermarket business of nuts. After delivering goods to supermarkets, I would go to nearby supermarkets several times a day to check if the product display was good, if the items on the shelves were fewer, and how many were sold. This is an intrinsic driving force. I went too many times a day, and finally, I was embarrassed to go to that supermarket again. When selling nuts in the store, I was also very excited. When a person has a passion for something, success is not far away. Feng Xiaorui: Have you suffered from your own nature? Many people follow their own temperament, but when they suddenly suffer a loss, they may no longer follow their temperament. This is the growth path of most people. Zhang Liaoyuan: Fortunately, I haven't suffered in this regard. I am relatively flexible. My principle is to follow the trend but not go with the flow. That is, conform to the general trend, but don't be complicit. Don't touch the bottom line. Star: New Distribution Won't miss any message! -END-