Tao Te Ching and Wuwei Management

Chapter 36 2 "Five colors are blinding": Is diversification the way out or a dead end?
Do not blindly diversify, specialization is the way out.

The five colors are blinding. —— "Tao Te Ching" Chapter 12

Lao Tzu believes that colorful colors make people dazzled.Many companies are eager to become famous overnight and get rich quickly, especially in the period of high-speed development. Most of them are ambitious and release the rhetoric of "ranking among the top 20 in the world in ten or even twenty years", so that they blindly pursue speed, one-sidedly expand scale, and take the road of diversification.The result is often too large investment, high debt ratio, capital chain break, leading to enterprise demise or collapse.

Ma Yun once had a very classic saying, "Seeing 10 rabbits, which one do you catch? Some people catch this rabbit for a while, catch that rabbit for a while, and may not be able to catch any of them in the end. The main task of the CEO is not to look for opportunities but It’s about saying NO to opportunities. There are too many opportunities, and I can only catch one. I can only catch one rabbit. If I catch too many, everything will be lost.”

"Giant" is a typical example of "eating too much indigestion", and the first Chinese sun god to introduce CI is a specimen of "eating too much indigestion".

"When the sun rises, our love will last forever", this slogan of the sun god once swept the country.

When Helios was first established, its sales were only about 400 million yuan. By 1990, it had grown to more than 2 million yuan, and in 1991 it had reached 8 million yuan. It reached its peak in 1994, and the sales of "biojian" and "hericium erinaceus" alone reached 13 billion, accounting for 63% of similar products.Such achievements are still a myth in the health care products industry, unprecedented and unprecedented.

The sun god was once a social topic, and even led to the development of an industry.Anyone who is familiar with Guangzhou knows that there is a cable-stayed Haiyin Bridge on the Pearl River that passes through the city. In 1993, Helios, who was advancing all the way, launched a sensational outdoor advertising work: cleverly using the direction of the cables to integrate the corporate logo with the shape of the bridge.

The high degree of success of this advertising work also exceeded the expectations of the company: it not only won the highest award in the national city advertising of the year, but also became a famous scenic spot of the brand tourism line "Pearl River Night Tour".There is an example to prove the popularity of the Sun God at that time - a veteran of the Sun God recalled that at that time, Cantonese music was popular all over the country, and the Haiyin Bridge with the "Helios" logo was almost a must-see on all MTVs. One of the famous scenic spots, just like the Oriental Pearl Tower in Shanghai now.These ideas may not sound very new today, but in fact they were 10 years earlier than most companies, and they brought huge economic benefits to Helios at that time.

At this time, Huai Hanxin blew the horn of diversification. He changed the company strategy of "focusing on vertical development and supplemented by horizontal development" that he had insisted on for many years to "vertical development and horizontal development go hand in hand". Launched 20 projects including petroleum, real estate, cosmetics, computers, border trade, and hotel industries, established "economic development corporations" in Xinjiang, Yunnan, Guangdong, and Shandong successively, and carried out large-scale acquisitions and investment activities.

Afterwards, the Helios statue suddenly went into hibernation, shrinking its battle lines, dealing with infringement cases, looking for new products, and adjusting its marketing methods. Around 2000, Helios withdrew from the Guangdong "Helios" team.

Since I don’t have such a big stomach, I can’t become fat if I eat one bite, I still follow the law of development of things, take one step at a time, and move forward. Don’t run around blindly. A few catties of meat are not enough—not to mention no profit, even some savings have been used, and it is too late to regret.

On the contrary, He Xiangjian, chairman of the board of directors of Midea Group, once said: "We are not developing in the direction of diversification. We do not yet have the ability to diversify. The white goods industry is still more likely to succeed. Midea should be healthy and stable. , and develop unrestrainedly. I would rather take two steps slower than take one wrong step.”

In 1968, He Xiangjian and 23 other Shunde people raised 5000 yuan to set up a small workshop-style plastic production group, which was the predecessor of Midea Group; billion.

He Xiangjian believes that the character of being low-key and pragmatic, sober and calm, and ready to say "no" to himself at any time has helped Midea to overcome countless dangers, and it is also the core corporate cultural spirit of Midea as a "century-old store".He Xiangjian said: "One of the successes of Midea lies in its clear grasp of business philosophy and never engaging in diversification. Firstly, there are not many successful cases of diversified enterprises; secondly, Midea does not yet have the ability to engage in diversification. Third, since the 20s, Midea has made it clear that it will concentrate its resources on the specialized white goods market. This is the key factor for us to become stronger.”

He Xiangjian said: "In the early years, many people mobilized me to engage in black electricity and mobile phones. I was never tempted. If we had rashly entered the color TV and mobile phone industries, we would definitely fail now." "The market demand in China is huge. It is not easy to do a good job in white goods, not to mention that there is still a big cake in the white goods market. In the future, Midea will continue to insist on the white goods market. All acquisitions and concurrent production will focus on the white goods business to expand the scale. Expand the industry and make the regional layout more reasonable, so that we can be more sure of success in becoming a leader in white goods."

It can be seen from the DC inverter air conditioner that the white goods market is huge.It is the consensus of the entire air-conditioning industry that DC inverter air conditioners represent the future development trend. DC inverter air conditioners are still synonymous with high prices, and consumers are not enthusiastic about buying them.When DC frequency conversion can become the mainstream of the market depends mainly on the price of popular products.

The bottleneck of the price reduction of DC inverter products lies in the cost of components.There are two conditions to solve the problem of component cost, namely, the core technology of frequency conversion control and the scale of procurement of frequency conversion components.Relying on mastering the core technology of DC frequency conversion, Midea gathered 2009 world-class suppliers of frequency conversion components, including Sanyo, Panasonic, Toshiba, IR, etc., at the signing ceremony of the large purchase order of frequency conversion parts in 12, throwing out 250 Thousands of sets of DC inverter components worth billions of huge purchase orders.

Midea, which is optimistic about the prospects of the white goods market, has carried out large-scale mergers and acquisitions.Hualing, Rongshida, Little Swan... More than a dozen major acquisitions have been made, all of which have overcome the vicious circle of unacceptable conditions and come back to life, and around the main brand of Midea, they are alive and well.Up to now, Midea has engaged in more than ten mergers and acquisitions projects, involving an investment of several billion yuan, but each acquisition has been successful, which is not possible in Guangdong or even in the whole country. He Xiangjian is very proud of this.Not blindly diversifying, concentrating resources on specialized white market, so that this oriental "sacred deer" is still running forward at a steady pace.

The biggest challenge for Chinese entrepreneurs ten years ago was to seize and seize opportunities.With the further standardization of the economic legal system in the past ten years, all walks of life have entered into fierce competition, so the biggest challenge for entrepreneurs now is whether they can refuse the temptation.In the past, the competition in various industries was not fierce, and you didn't know anything, but as long as you can get in and others don't, you can easily make money.Now that the competition is fierce, specialization is very necessary, but many of our companies still use the past thinking.Specialization is not only applicable to Chinese enterprises, the development trend of globalization is definitely a path to specialization.

(End of this chapter)