【In-depth Insights】Gao Jianhua: A 'Market Revolution' Is About to Erupt

Over the past few years, a commercial revolution has been quietly brewing. 'Overthrow the tycoons, divide the market' has become the goal of the underdogs, and it is also the breakthrough point to awaken revolutionary consciousness in many people. Some big names waving the banner of 'Internet thinking' are using the desire of the underdogs to turn their lives around, and are planning an unprecedented market revolution. The targets of the revolution are the private entrepreneurs who have succeeded in the market over the past 30 years. Although these successful entrepreneurs currently hold various resources, the vast majority do not know how to use self-media, do not control public opinion, and thus have lost the commanding heights. Moreover, their numbers are at a great disadvantage compared to the underdog group. Therefore, as long as elite big names take the lead, arouse the enthusiasm of the underdogs, provide corresponding support, and with the help of mobile Internet technology and cheap self-media tools, they can sow the seeds of revolution. Remember, 'a single spark can start a prairie fire.' As long as a few underdogs succeed in turning their lives around, they will attract countless underdogs to join the revolutionary army, thereby subverting the original market structure, smashing the old world, and creating a new one.

Why is a 'market revolution' happening in this era? Frankly, it is because traditional enterprises have accumulated too many debts during their rapid development in the past. Many things that should have been done well were not done. Many contradictions accumulated over the years have begun to erupt intensively, and many problems that were hidden by rapid growth have been exposed. These problems were not taken seriously before, such as not taking customer experience seriously. Although they verbally emphasize customer first, not many enterprises truly provide customers with products and services of unique value based on the philosophy of altruism. This is one of the subjective reasons. Traditional business owners neglect the cultivation of employees, forget to manage people's hearts, and do not consider the actual needs of the younger generation of employees. As a result, bosses and employees gradually move toward opposition. This is the second subjective factor. Another aspect is that the stratification of Chinese society has basically taken shape. The underdog class cannot see a path to climb step by step, and they long for an opportunity to leap over the dragon gate to achieve a counterattack. It should be noted that this group has no baggage and is not afraid of losing anything. They belong to the 'proletariat,' so they can devote themselves to the revolution without hesitation. Of course, because they are the original residents of the Internet, they have an inherent advantage over traditional business owners in the application of new technologies. This is the third subjective factor.

Whether it is war or revolution, to succeed, one must find ways to destroy the enemy's will and self-confidence. So some elite big names with lofty ideals and good at leveraging resources saw this rare opportunity. By mobilizing the huge underdog class, they launched an attack on traditional forces much stronger than themselves. Although the number of underdogs who can truly achieve a counterattack is very limited, it still attracts a large number of underdogs to participate, just like the gameplay of success studies and direct selling enterprises. As long as there is a one in a thousand or one in ten thousand hope, countless people will strive. To clear the obstacles of the revolution, confuse people's thinking, make many people lose their reason, and even fall into anxiety, the elite big names invented a concept that only exists in China in the world: Internet thinking. This concept surprised the real Internet giants in Silicon Valley, because they never knew what Internet thinking was. Many experts and scholars who do not distinguish right from wrong also added fuel to the fire and surrendered one after another. Whoever does not talk about 'Internet thinking' seems to be a 'counter-revolutionary.'

As we all know, in the past 100 years, China has experienced several major revolutions, and this 'market revolution' has striking similarities in its background and logic of development to the previous major revolutions. Although the challengers themselves are members of the elite class, they can use the revolutionary passion of the underdogs to achieve their own great deeds. Of course, this revolution cannot be separated from the participation of the general public. From the current situation, the three main groups actively involved in this 'market revolution' have been mobilized. Although their starting points and purposes are different, they have formed a joint force, forming a torrent that promotes the transformation and evolution of the Chinese market. Let's take a look at the goals and pursuits of these three groups.

The first group is the 'reformers' in traditional enterprises. They keenly feel the trend of social evolution. As pioneers in the industry, they take the initiative to revolutionize themselves. This group consists of people in the vested interest group who have foresight and a sense of crisis.

The second group is the 'cross-border players' who have switched from other industries. These people have made money in traditional industries or the new economy, have an economic foundation, and see that some industries are still stuck in a backward era, so they come to cross-border plunder. Only in this specific historical stage is plunder legal.

The third group is the 'entrepreneurs' with no background. They are young, smart, eager to learn, have no burdens, and have no worries. They belong to the barefoot underdog class, not afraid of losing anything, so they can move forward bravely. These people often appear as industry subverters, hoping to achieve a counterattack.

It can be said that any revolution requires revolutionary soil and an atmosphere of public opinion. Why is it time for revolution now? Because three external conditions interact to bring about changes in the environment, providing the prerequisites for revolution. These three external factors are: market changes, employee changes, and technological progress. It is precisely the interaction of these three factors that produces the soil for revolution.

First, market changes: In the past 30 years, China's mainstream consumer groups have undergone two major evolutions. The first evolution was 20 years ago, when a large number of people moved from having enough to eat and wear to a moderately prosperous life. The second evolution began 5 years ago, when a large number of people moved from a moderately prosperous life to the middle class. The first evolution created a large number of large enterprises with economies of scale. They won the market with good quality and low prices by expanding scale and reducing costs. The second evolution, which began 5 years ago, is still ongoing and will inevitably create a large number of medium-sized 'hidden champions' with unique value. They target niche markets and become the favorite of a specific consumer group. This evolution will affect the change of game rules. Many people will shift from price orientation to value orientation. The final outcome is to provide high-quality, reasonably priced products to the middle class. This is an important aspect of supply-side reform, forcing many enterprises to change from serving the people to serving some people.

Second, employee changes: The main employees of many enterprises are already the post-80s and post-90s generations. Their mentality and values are fundamentally different from those of the post-60s and post-70s. These people have never been hungry since childhood, and they do not identify with hard work and endurance. They like to work smart, not stupidly, and are even less willing to work overtime. They like to take shortcuts and find ways. Faced with such a new generation of employees, the operation, management, and culture of enterprises must be adjusted, otherwise they cannot win their loyalty. So at this time, advocating employee first becomes inevitable, because without satisfied employees, there are no satisfied customers. To win market competition, enterprises need a professional and dedicated team, so bosses need to shift from focusing on customers to focusing on employees, and from focusing on things to focusing on people.

Third, technological progress: With the vigorous development of the mobile Internet, the entire social ecosystem has changed. But what exactly is the Internet? People argue endlessly. Some say the Internet is a tool, some say it is thinking, and others say it is philosophy. In fact, these definitions are not accurate. They all look at the world from one side, so they inevitably fall into the misunderstanding of the blind men and the elephant. So what exactly is the Internet? My definition is: an infrastructure with interactive media attributes and spillover characteristics. Interactive media is different from traditional one-way communication media, giving everyone the opportunity to participate. The spillover characteristic means that the Internet can integrate with many industries to form new species, just like electricity, which was initially for lighting and later used in various fields. Infrastructure is to improve efficiency and quality and improve people's lives, just like highways, high-speed rail, bridges, water, electricity, and gas. Media affects values and people's cognition, and can even rise to philosophy, and calling infrastructure a tool also seems reasonable.

It can be said that the interaction of these three objective factors led to the occurrence of the 'market revolution,' thereby promoting a reshuffle of the market. It should be noted that many successful private enterprises in the past 30 years have practiced a good set of skills, proficient in all 18 weapons, making them martial arts masters in the era of cold weapons. Although the underdogs do not know any martial arts, they have a gun. No matter how the martial arts masters gesture, as long as they fire a shot, the opponent will fall. So the martial arts masters begin to lose their significance, and the traditional advantages are completely broken. It can be said that this is a big drama of the contest between traditional forces and emerging forces. It is not clear who will win or lose. The key is who can stand on the customer's standpoint to see problems, and who can bring better complete products to customers based on the philosophy of altruism.

Facing the unexpected market revolution, many people feel caught off guard, especially the bosses of traditional enterprises. They were doing well in the past, but why did things change all of a sudden? Will the cheese really disappear? So many people fall into anxiety. Facing the mysterious Internet thinking, they do not know what it means (in fact, those who talk about Internet thinking all day do not know the definition either). Many industry leaders have bowed their heads and invited the new Internet nobles to come on stage to tell them what Internet thinking is. This time, the bosses of traditional enterprises have changed from teachers who stood on the stage to students who sit in the audience.

It can be said that the big names holding high the banner of Internet thinking clearly have the upper hand in the first round, becoming spiritual godfathers who profit more than entrepreneurs and investors. They are the real beneficiaries of the mass entrepreneurship and innovation movement. But how long they can stay hot depends on how many of the underdog believers they lead can carve out a path in the next three years and achieve remarkable success. If these big names cannot mass-produce underdog counterattackers and produce a group of influential new nobles, then the underdog counterattack becomes a beautiful fairy tale.

In the next three years, we will see reformers, cross-border players, and innovators fighting in the market. Who will win the final victory depends on the perseverance and determination of each force. Currently, the innovators have the highest morale and are on the offensive side. The cross-border players are carefully laying out their plans and waiting for an opportunity to attack. The reformers are a very small group among many traditional enterprises and are currently on the defensive side. Each of the three forces has its own advantages. The reformers have resources, funds, talent, and market. The cross-border players have resources, funds, talent, and ideas. The innovators have ideas, ambitions, pressure, and venture capital. It can be said that a well-matched Romance of the Three Kingdoms is about to be staged. In the end, whoever seizes the commanding heights first will be able to fight from top to bottom and achieve a winner-take-all outcome.

I would like to focus on how traditional enterprises can survive, grow, and even achieve breakthroughs in this market revolution. Let's review how you achieved success. Was it not by seizing the opportunity of China's transition from a planned economy to a quasi-market economy 20 (30) years ago? You stood out and became the leaders in the 1.0 era of the primary stage of the market economy. Because every social transformation brings opportunities and challenges. This time, it is from a quasi-market economy to a market economy, that is, from the primary stage to the intermediate stage of the market economy. So some people will fall behind, and some will stand out and become the leaders in the 2.0 era of the market economy.

My personal prediction is that there are three paths for traditional enterprises, and it depends on how everyone chooses. The first path is for ambitious traditional enterprises to use this market revolution to turn crises into opportunities, achieve leaps and transformations with external forces, especially to make up for the lesson of marketing. Many large enterprises, even with hundreds of billions in revenue, still remain in the sales state, relying on human wave tactics and wolf-like teams to conquer the world. Only by entering the marketing state can they hope to become a member of monopolistic competition. Of course, for such enterprises, the most challenging thing is how to do top-level design well, no longer cross the river by feeling the stones, return to the essence and core of business, adjust management and operation ideas based on the philosophy of altruism, actively embrace the mobile Internet, and be ahead of entrepreneurs and challengers in management philosophy, or at least at the same level as entrepreneurs and cross-border players. These enterprises account for about 1% of the industry.

The second path is for traditional enterprises that have ambition and want to become bigger and stronger, but their resources and capabilities are insufficient to support them becoming industry leaders. They can only be in the second tier. They face the choice of improving their business status to become a brand with certain value, able to lead in a regional market or a niche market, and then become the target of acquisition by national big brands. This path is a good outcome for both employees and bosses. Of course, the hardest hurdle for these people is to change their thinking, because many people have always treated their enterprise as a son, but now they need to treat it as a pig and not be reluctant to sell. These enterprises account for about 20% of the industry.

The third path is the one that many traditional enterprises are least willing to choose, but in the end, they are forced to choose it helplessly. That is to exit market competition. While the enterprise is still worth money, either sell it as a whole as soon as possible, or sell assets and close down, cashing in the hard-earned money to reduce losses, because these assets will become less valuable the longer they are held. For these enterprises, the hardest hurdle is emotional acceptance and face, and they are unwilling to retreat. If someone says, 'I just don't want to exit, I want to hold on,' what will happen? Maybe they can hold on for a few years, but in the end, they will definitely exit naked, returning to where they came from. In fact, from a realistic perspective, there is nothing wrong with this. The boss can retreat completely, transforming from an entrepreneur to a capitalist, from personally managing an enterprise to becoming an investor, using money to make money. These enterprises will account for about 80% of the industry. Some people may find it unimaginable. If so many enterprises close, what about the employees? Don't worry. As the 1% of leaders continue to grow, they will not only merge and integrate the second-tier enterprises, but also absorb a large number of employees. As the saying goes, 'Iron camps, flowing soldiers.' Good employees do not have to worry about not having good jobs.

According to the objective laws of the market economy, the development of any industry will go through four stages: from primary competition to disorderly competition, then to perfect competition, and finally to monopolistic competition. The definition of monopolistic competition is limited choices, each with its own characteristics, the entire industry enters a stable state, competition intensity decreases, and the industry shifts from meager profit to substantial profit, and everyone can live a good life. (See figure below)

According to the normal rhythm, it generally takes 20 or even 30 years for all industries to complete the evolution of these four stages. Why? Because of China's special national conditions. As we all know, local protectionism is an inevitable product of the GDP assessment system, and the survival of the fittest mechanism has been artificially interfered with in the Chinese market. For Internet entrepreneurs, few rely on their own funds to develop. Driven by capital, entrepreneurs have to do top-level design well, make business plans in place, and consider various problems and potential risks comprehensively. This is completely different from the traditional enterprise development approach of crossing the river by feeling the stones. It can be said that the only role of venture capital is to help start-up enterprises quickly transform from primary competition to monopolistic competition, avoid long-term attrition warfare, directly skip disorderly competition and perfect competition, and accelerate the standardization process of start-up enterprises.

For traditional enterprises, no matter which path they choose, they must have the ideological preparation for a second venture. After all, the times are different, and the original gameplay is outdated. The more successful in the past, the greater the difficulty of transformation, because the more successful, the more stubborn, and the more they believe that everything they did in the past is right. Hence the saying: 'Success is the father of failure!' The reasons for past success may become the root of tomorrow's failure. Therefore, in the face of this fierce market revolution, traditional enterprises must have a zero-based mentality, learn and practice with a humble heart, master the rules of the market economy as soon as possible, and enhance their competitiveness. With core competitiveness, there is market value. Specifically, we might start from the following three aspects:

1. Establish niche thinking

First, establish niche thinking, give up the past mentality of serving the people, and change to serving only some people. Only then can you focus, establish a base in a specific market segment, and become a brand with dominance, pricing power, and voice. It should be noted that the rule of the market economy is to give consumers choice. Enterprises must use different products to meet the needs of different groups. Once an enterprise has niche thinking, it can reduce variables and cultivate intensively. Specifically, through strategic planning or business model design methodology, find the laws of the market, discover unmet customer needs, design differentiated complete products based on unmet customer needs, and give customers a reason to buy. These are the areas where traditional enterprises have not done well in the past.

2. Return to the essence of business

Second, return to the essence of business, which is to create unique value for target customers. Whether you are a manufacturing enterprise or a distribution enterprise, you must establish the concept of creating value for customers. Without value, you will inevitably be eliminated. In fact, no matter how the market changes, the essence of business has never changed, and the logic of business has not changed either. Perhaps many people think that plans cannot keep up with changes, but this is misleading. Plans cannot keep up with changes because the core laws have not been found, and they have not dug deep. Once you touch the core of business, many things are eternal, unchanging, and predictable. For example, after people's basic needs for clothing, food, housing, and transportation are met, what will they care about? It must be happiness and health. This is a concept I have been talking about for ten years, but only a very few people have listened, and only a handful of enterprises have put it into action. In the next five years, the Chinese market will be led by the middle class. Whoever grasps the pulse of the middle class will be the leader. This view is completely different from 'those who win the underdogs win the world.'

3. Pay attention to managing people's hearts

Third, pay attention to managing people's hearts. Without satisfied employees, there are no satisfied customers. Create a relatively relaxed environment and implement humanized management to stimulate employees' sense of ownership and let everyone work hard for their own interests. In other words, linking employees' personal interests with the company's collective interests is the true essence of management. The well-known 'HP Way' is based on this concept: we believe that every employee has the desire to do their job well. As long as the company provides a suitable stage, employees will definitely go all out. Everything is employee-centered, building a stage for employees to showcase their talents, and management becomes very simple and practical. In fact, only when employees are satisfied will they have a strong sense of identity and loyalty to the enterprise, and in the end, they will create value for the enterprise.

China's IT and Internet enterprises are ahead of other industries in managing people's hearts because they were the first to connect with Silicon Valley, good at learning Silicon Valley's advanced concepts, equality culture, and management philosophy, thus winning the love of young people. I have been there myself, so I deeply feel the same. It can be said that emphasizing employee first is a sustainable development thinking logic for enterprises, making the enterprise stand higher and see farther. The company cares about employees, makes employees satisfied, employees will strive hard, and customers will feel the professionalism and dedication of employees.

In short, in this well-matched contest, who can seize the commanding heights and who can enter the state of monopolistic competition first is still unknown. It depends on ideological power and action power. Those who do not recognize the arrival of the market revolution will definitely be eliminated. Those who recognize the arrival of the market revolution but do not act quickly will also be eliminated. From the perspective of public opinion, entrepreneurs are currently in a favorable position, but do not be blindly optimistic. Don't forget a simple truth: when most people are speculating in stocks, the stock market is about to have problems; when most people are speculating in real estate, the real estate market is about to have problems; and when most people are starting businesses, the market is about to have problems, because in any field, as long as you violate natural laws and encourage everyone to go in the same direction, it is a problem in itself.

Ten years ago, I wrote in a book: The future is an era of platform victory. Because at that time, there were not many platforms, and the Chinese market urgently needed platforms to regulate the market. It should be noted that the value of platform-based enterprises lies in aggregation. Through the Internet, many scattered small enterprises and discrete small customers can be linked, eliminating the problems caused by information asymmetry and solving the mutual distrust caused by insufficient integrity in the Chinese market, especially suitable for the long-tail market. In the mainstream market, once it enters a state of monopolistic competition, the value of platform-based enterprises will decline, because customers already know how to choose, and monopolistic competitive enterprises also have awe for customers. The market will enter the next stable state, finally forming a market pattern similar to developed countries.

Today's Chinese market is still in a very impetuous state. People like shallow thinking and fast food culture, especially the underdog class, who want to use it immediately, win with one move, and get rich overnight. So the big names with keen senses naturally become the favorites of these people. They see a rare market opportunity and know how to cater to and guide the underdog class, arousing their desire to turn over. If the underdogs succeed in their counterattack under the leadership of the big names, then these big names will naturally become the leaders after the success of the revolution, the winners of this great revolution. What will be the outcome? The good show is still ahead, let's wait and see.

Author | Gao Jianhua, former Assistant President and Chief Knowledge Officer (CKO) of HP China; former China Market Director of Apple Computer; currently Chief Consultant of Beijing Yangweizhongyong Management Consulting Co., Ltd.

Source: Gao Jianhua Winning in Top-Level Design (ID: gjh16880)

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