How to Make Business to Be a Living Company
By Qianqian Zhou
As a correspondent, I'm from nbdpress (Qianqian Zhou, hereinafter referred to as Zhou) , and I am lucky to have chance to communicate with Mr. Song Guangrong, Senior Director, Asia Pacific Sales and Operation of Bosch Security and Safety Systems (hereinafter referred to as Mr. Song), and it maybe bring some inspiration for professional managers or entrepreneurs. The followings are the details of communication between us.
The long-lasting and thriving enterprises usually show some distinguishing features, such as sound finance condition, not only focusing on marketing and sales for short term but also on strategic systems and corresponding organizational structure for long term, crisis sense, core competence, continuous stake for future.
Zhou: Many managers think finance structure is very important for a living company, then how to influence is it for a living company?
Mr. Song: Those living companies that experienced crises, most of them, have common ground of comparative stable and conservative finance policy and structure. They don’t achieve rapid development by being heavily in debt; those companies are also confident and stable in the pursuit of profit not being marked ups and downs very much. They can organically combine capital allocation and strategic purpose.
Microsoft Corporation is an excellent case. It not only was not being in debt, but had cash of us$ 50 billion. The giant in software industry get more invincible in period of slump in IT industry. Microsoft always handle with ease at battle of fund consumption in booming industry, whether it invest by itself for R & D or directly get competitors by M & A.
Throughout the history of enterprises’ development, we can find that those enterprises are used to become a living company, and their conservative finance policy and structure is usually criticized, even ridiculed; the criterions they embrace are that stability and soundness is first forever, and it’s also the premise for sustainability of business development. Obviously, nobody knows what happens tomorrow because the weather might militate against it; only those enterprises being in good situation in finance have better and more opportunities for survival when crisis comes.
Zhou: For a company, what is more important, “path following” or “looking up at the road”?
Mr. Song: Enterprises that can successfully spend “severe winter” must be satisfied in their operation; they are used to have a good performance in marketing and sales, also have they strategic systems and corresponding organizational structure for their development for long term. Under good circumstance of market economy, most of enterprises just engage to race against time, get market shares, diversify development direction; they always make path following, and forget to look up at the road.
As the author of <the living company>, noted scholar in economy and management field, Arie de Geus mentions ”Although the living companies that spent many severe winters experienced baptism of wars, depression, and technological & political reform, they seem to be always able to spread their tentacles and calmly face what happen in future.” In a word, they are good at study and adapt themselves to environment. They are very sensitive to environment, and able to move with the times.
Zhou: Is the winter awareness very important for a living company?
Mr. Song: In the past, Chinese enterprises also faced various challenges as intensification of competition, adjustment of policies, partial finance crisis, but they’ve not experienced real economic crisis; Compare to the multinational companies who once experienced severe winter of economy many times and became survivors of disasters, they are clearly lack of enough winter awareness. However, it is very important for them to have the awareness.
” Bill Gates always lays stress on “Forever, it is just 18 months for Microsoft to be insolvency”, Liu Chuanzhi also points out, “We always try to establish a system so that our operators do not take a nap; if so, our competitors will have chance to win.”
Through the vivid examples, we easily find those living companies who ride the whirlwind for long term in their industries all have strong crisis awareness; that responds with the old Chinese saying “living in hard condition, died in easy one”. Obviously, whether yesterday or today, even future, only those companies save against a rainy day and have winter awareness could become living companies.
Zhou: Could you talk about the competence of a living company, especially on the core competence?
Mr. Song: Up to this day, those enterprises with history of 50 year even 100 year still keep super strong competence, holding important places in multiple industries, why? The key lie in the core competence of those ones.
The onset of the global financial crisis in 2018, we can understand the importance of core competence for business by looking back on the operation and condition of those industrial giant such as Gree, Lenovo, HUAWEI and so on at that time.
Obviously, for a company, the key for its business value and sustainability lies in the core competence that it hold.
Zhou: What is your viewpoint on “continuous stake for future” about a company?
Mr. Song: Why can some enterprises always grasp opportunities and others can’t? After a certain researches, we draw a conclusion that the transformation and upgrading of leading enterprises usually occur under circumstance of two kind of situation; new technology appears in place of old one, such as digital technique replacing analog one in field of mobile telecommunication, digital cameras instead of traditional film one in realm of personal photography; furthermore, rising of new commerce mode makes traditional commerce mode declining, as large-size special chain stores effecting on general department stores, internet-based commerce influencing on traditional commerce, lean manufacturing instead of traditional manufacturing and so forth.
The sluggish and short-sighted enterprises always pay for the pain they cause when every industry transformation takes place since arising of important new technique and commerce mode. Microsoft almost killed itself because of its earlier wrong judgement when internet era came. Apple turned a blind eye to opened and component-based operation mode in field of PC result in its withdrawal from market mainstream once.
Clearly, facing to increasingly complicated and volatile business environment, the companies, even though they were the most successful present, must also have multiply strings to their bow to cope with sudden changes. That continuous attention and input on fresh business and mode would greatly strengthen strategic resilience for enterprises undoubtedly, further increasing rate of success on strategy transition of enterprises. And those companies who are not willing to stake for future, just addict themselves to present success would be doomed to fail someday in future.
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