With the tide of reform and opening-up and China’s entry into the WTO, many Chinese enterprises and entrepreneurs were born and developed rapidly. In the era of smooth sailing, these companies enjoyed the dividends of development and gradually got used to the pace of high-speed growth and the strategy of prioritizing scale. However, as the external environment became complex and changeable, these once abundant dividends gradually disappeared, and the halo of scale was no longer present. Many companies began to face growth obstacles, even threats to their survival. Some leading enterprises, once highly acclaimed with annual revenues reaching hundreds of billions, might crumble under the weight. In this situation, many entrepreneurs unavoidably fell into anxiety and unease.
In the face of unprecedented difficulties, how can businesses maintain composure, see through the complicated situation to identify the core of the problem, and seek breakthrough strategies, thereby remaining undefeated in the future? Ram Charan and Yang Yimei, world-renowned management scholars, provide us with paths to ponder and practical plans in the face of the many challenges that Chinese enterprises and entrepreneurs encounter.
In adversity, what should be done first is to extend the time horizon and examine current difficulties from a broader perspective. Compared to the short-lived development of the past couple of decades. the global situation is becoming more intricate, economic growth is generally slowing, market competition is increasingly fierce, profit pressures are mounting, and the survival of businesses has become an immediate issue.
Why extend the consideration of time? For example, Ram Charan was born in 1939 and has lived through significant periods such as World War II, the decades-long Cold War, McCarthyism in the 1950s, the Civil Rights Movement in the 1960s, two oil crises in the 1970s with consequent stagflation and long-term economic stagnation.
Compared to Charan’s rich life experience, today’s difficulties may be manageable. Moreover, since China’s reform and opening-up in the 1970s, its GDP surged from 0.3679 trillion yuan to 121 trillion yuan in 2022, becoming the world’s second-largest economy – a feat unprecedented in the thousands of years of human history. Chinese people in this era, from a macro-historical perspective, might still consider themselves fortunate.
When facing challenges, companies need to think differently about growth and prioritize managing cash flow. In today’s complex market environment, the importance of cash flow has become increasingly prominent; it is a critical factor for a business’s survival.
The old model dependent on financing channels and traditional revenue sources may no longer be viable. Hence, we cannot simply apply past experiences to the future, as paradigm shifts have severe and profound impacts. In managing cash flow, companies must thoroughly analyze and comprehensively consider all revenue, growth, and profit indicators to ensure that each business, product, market, and customer group creates rather than consumes cash flow. Firms must also be wary of pitfalls in accounts receivable and inventory, as well as the proportion of funds tied up in these traps.
As companies pursue development, they should free themselves from the inherent obsession with scale growth, preferring to downsize if necessary to ensure normal cash flow operations. Compared to the mere pursuit of scale and revenue growth, the increase in profits and cash flow is more important and valuable. Therefore, in the current economic climate, any expansion moves that might consume significant cash flow should be treated with extreme caution.
When faced with doubts and choices on the road of business management, please consider the approach of Steve Jobs. Reflecting on 1997, when he returned to Apple, faced with severe financial tightness and the brink of bankruptcy, he did not go with the flow but made a courageous decision—reducing the product line from 26 to just 4. This example tells us: Survival is the primary task of a business; only by staying alive can there be a future.
In the context of past rapid growth, entrepreneurs’ greatest concern was setting goals too low, which seemed to limit the potential for business development. It seemed that nothing was impossible and everyone hoped to grow from grassroots entrepreneurship to a unicorn company valued at over a billion dollars in the shortest time. But now, if the mentality of speed above everything else persists, it may lead to undesired outcomes; the fastest may not achieve their goals, resulting in distorted decision-making and fostering a gambler’s rush, consuming the entire year’s budget in the first half. In reality, businesses should be steady and set “practical and feasible” goals to build team confidence and accumulate it through each small victory.
In the face of challenges, businesses need to find the root of the problem and overcome it; when facing opportunities, they need to identify the path and seize it. Only by continuously strengthening the foundation and enhancing core competitiveness can a business turn the tide in adversity. Thus, when the conditions improve, businesses will deploy their powerful capabilities and unfold their ambitious plans once again.
So, how do you create a business that can win in the future? Entrepreneurs should focus on two important areas: Talent & Technology. The importance of technology needs no further explanation—from the mobile internet to digital transformation, to the rapid development of artificial intelligence, technology’s role in driving social and economic development is evident. However, the application and innovation of technology cannot be divorced from talent. The core of most businesses is not conducting scientific research but selecting the right technology that matches business needs and creating value from it. From this perspective, it is people who set strategies; people who choose technology; and still people who apply technology and create value. It can be said that the core of business competition is the competition for talent.
Leaders must place great value on talent. Typically, leaders have a thorough understanding of business operations and are well-informed about key data and information. But when it comes to key talents in the company, many hesitate or even ask: What are key talents? These key talents are not numerous, but they decisively impact the company’s operational results and overall success or failure.
Business development cannot be achieved without the cultivation and exploration of excellent talent. Regardless of the size of the company, the leadership must be actively involved in the growth process of talents, which is crucial for the company’s sustained competitiveness. Taking Jack Welch’s tenure at General Electric as an example, despite a workforce of 300,000, he maintained a list of 600 candidates (about 2% of the total number of employees), observing and testing these potential leaders at various opportunities. Welch would reassess this list quarterly, adjusting their positions and responsibilities timely, providing them with challenges and opportunities for growth.
When recruiting talent, focus on the following four key points:
- Learning Ability: A rapidly changing era requires everyone and every organization to adapt to new challenges, mastering new knowledge and skills. Curiosity and the application of learned knowledge to practice are keys to sustaining the motivation to learn. As Confucius once said: “One who knows is not as good as one who loves it, and one who loves is not as good as one who enjoys it”. The talent required by enterprises must not only have a positive learning attitude but also be able to practically apply what they have learned, and continuously gain experience from practice to promote personal and corporate growth.
- Leadership: No matter how capable an individual is, it’s hard to lead a company to success alone. Enterprises are like team sports in competitions, where excellent team leadership determines the team’s combat effectiveness. Leaders need the ability to unite the team, motivate them, and fully harness the team’s enthusiasm. Whether a team leader can balance the differences across departments and communication levels, find common goals and win-win strategies, is an important criterion for evaluation.
- Execution: An ideal team member has not only grand visions but can also translate ideas into actions. Amazon founder Jeff Bezos believes that companies need “doers” rather than mere “dreamers”. Those daring to innovate and follow through with execution can truly drive a company forward.
Steve Jobs once quoted the famous maxim: “Stay Hungry, Stay Foolish”, meaning we should always maintain a thirst for knowledge and humility for growth. This hunger signifies an inner drive for relentless pursuit of knowledge, personal growth, and value creation.
For example, Elon Musk had a string of successful startups in his early 30s and could have chosen to enjoy his wealth, but he chose to continue challenging himself in industries such as rocket manufacturing, new energy vehicles, hyperloops, and brain-computer interfaces, all highly challenging. Musk’s so-called “craziness” is actually born out of contemplation of human destiny and a profound pursuit of the meaning of life. In evaluating and understanding talent, we need to delve into the deeper motivations behind their actions, because internal motivation is the key to overcoming difficulties and achieving breakthroughs.
The issue arises in how to lead the digital transformation. Digital transformation has become key to our work and research. In exploring how to help enterprises achieve digital transformation, we realize that many entrepreneurs don’t come from a digital technology background, so they may feel uneasy about the process, even questioning whether they have the ability to lead their company’s digital transformation.
In this regard, Ram Charan suggested that the survival and development of a business depend on digital transformation, hence as corporate leaders, it’s essential to learn and master necessary skills. Jack Welch once had to catch up on financial knowledge to adapt to a senior executive position, which shows the importance of learning. Given that digital transformation is an issue all companies must face, entrepreneurs need to learn related knowledge to successfully lead their company through the transformation.
Confronted by technological advancements and unfamiliar concepts, many entrepreneurs born in the 50s, 60s, and even some in the 70s may harbor doubts. However, learning digital technologies is not an insurmountable barrier. Charan himself, as an experienced strategic advisor, realized the necessity of learning when adapting to new roles and sought advice from professors at Stanford University. If Charan can learn, even more reason for the younger generation to believe in their own potential.
The key for entrepreneurs in the process of learning digitalization is not to delve into theoretical definitions or technical principles but to focus on the practical application of digitalization as an advanced productive force. Emphasis should be placed on understanding the practicality of digitalization, mastering how to apply it effectively in actual work, and maximizing its potential.
The true purpose of enterprises driving digital transformation is to continuously explore advanced digital means to solve operational business challenges and management pain points, ultimately striving to create more value for customers, employees, and the entire enterprise. After all, who better than the entrepreneur themselves to deeply understand what their business needs? With such awareness, entrepreneurs will naturally possess enough confidence.
When it comes to personal growth, we all regard it as important, but usually face an obvious challenge—lack of time. As our most valuable resource, once time has passed, it cannot be recovered, and no amount of money can buy it back. To face this challenge, how can we create time for ourselves and accelerate personal growth? A former student, who became CEO of a global enterprise before age 40, offered us three secrets:
- Recruit top talent: If there are elite individuals in the team who can stand on their own, their presence will greatly reduce your burden and save you valuable time.
- Quick adjustments: For those members who are not suited to their current job, take swift action. This does not necessarily mean layoffs but could also involve adjusting duty allocations, positions, team structure, or reporting systems. Avoiding the issue will consume much of your time and energy.
- Plan ahead: Conduct a review every six months, decide which tasks can be delegated, and assign responsibility and handover processes within six months to help them prepare. By doing so, leaders can create more time for themselves, thus remaining composed and thinking at a higher level about how to make a greater contribution to the organization. During this process, the leader’s personal growth is also rapidly enhanced.
In the new era and under new circumstances, enterprises and entrepreneurs face both challenges and opportunities. Those who wait passively, complain, and respond passively may face severe blows or even be eliminated by the market; while those who effectively deal with short-term problems while planning for the future and laying the groundwork for long-term development may well stand out and become industry leaders.
