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Written by｜Chen Duosi, Managing Director of Bairenhui Investment and former Chief Strategy Officer of Yonganxing

"If your company collapses one day, what might be the reason?" I once discussed this question with Sun Jisheng, chairman of Yonganxing. In summary, any company needs to have the following three key factors to achieve long-term success:

First, insight into the essence of business, knowing what is the business model that truly creates value;

Second, be sensitive to and actively embrace trends, and don’t be like Icarus who “uses his past advantages to fight against trends”;

Third, we must accurately identify our own position and adhere to our strategic determination, and not blindly follow the trend or be blinded by random thoughts.

If these three points cannot be achieved, any company may fall down inadvertently. These three points are also the trilogy of Yonganxing’s strategic success summarized by the author.

Strategic Positioning:

Find a suitable living space for the enterprise

Strategic positioning originates from the classic book "Positioning" by Jack Trout, the father of positioning theory, and Al Ries, the marketing guru. The book summarizes "positioning" as "a battle for the minds of users", that is, telling customers "how are we different from other competing products?", thereby helping companies gain competitive advantages in homogeneous products and services. This was rated by the American Marketing Association as "the concept with the greatest impact on American marketing in history".

The most successful example of positioning theory in marketing is Jiaduobao’s “Drink Wanglaoji if you’re afraid of getting a sore throat”.

Since Jiaduobao launched Wanglaoji canned herbal tea in 1995, it has never been able to go beyond Guangdong and Guangxi. The main reason is that consumers in the northern region are unfamiliar with the concept of herbal tea. Trout's team designed a new positioning for Jiaduobao, which is to educate consumers - what exactly is a herbal tea beverage? Since the theory of traditional Chinese medicine has a broad mass base in China, "preventing getting angry" has become a breakthrough that can be recognized by the northern market. The market response ultimately confirmed the accuracy of Jiaduobao's "positioning". The concept of "drinking herbal tea to prevent getting angry" was a hit, and Jiaduobao went all the way north and quickly captured the national market.

However, positioning should not be just a marketing concept. Positioning is not only about telling others, but more importantly, it is about knowing yourself, "Who am I? What are the limits of my ability? What can I do and to what extent?" This will help companies find their place to survive, their space to grow, and how to break through the ceiling.

The overall strategy of an enterprise is usually divided into three types: development strategy, stability strategy and contraction strategy. The enterprise development strategy emphasizes making full use of opportunities in the external environment and fully exploring the advantageous resources within the enterprise in order to achieve a higher level of development on the basis of the existing strategy. The enterprise stability strategy refers to a strategy that is limited by the business environment and internal conditions, and the business conditions that the enterprise expects to achieve during the strategic period are basically maintained at the scope and level of the strategic starting point. The enterprise contraction strategy refers to a strategy of active contraction, avoidance and transfer for enterprises that are at a competitive disadvantage, have no development or have little development potential.

The "growth strategy" that is highly praised today is not a new concept, but an example of a development strategy. In addition, growth is not the whole of a company's business strategy. Blind growth may sometimes make a company fail faster. For a company, in addition to constantly moving forward, it cannot ignore the two strategic options of "maintaining the status quo" and "retreating and avoiding".

Victory does not necessarily mean defeating the opponent. Being able to discover the weak points in the opponent's sphere of influence and gain living space is a victory; being able to hold on under the opponent's strong siege is a victory; being able to retreat in an orderly manner and preserve strength while being pursued and blocked by the opponent is a victory; being able to constantly consume the opponent and strengthen yourself in a protracted confrontation, waiting for the balance of victory to tilt towards you is also a victory.

Because of the different positioning of themselves, we see many companies with similar businesses but obvious differences, such as Alipay and WeChat Pay, Douyin and Kuaishou, Baidu and AutoNavi...

Therefore, strategic positioning is not to help enterprises achieve absolute victory, but to help enterprises find their appropriate living space and achieve relative victory at each stage. For enterprises, the key to winning through positioning lies in three aspects:

(1) Know yourself: Who am I? Who do I want to be? Who can I be?

(2) Grasp the key points of the business - What is the essence of the business? What is the bottleneck?

(3) Have strategic focus: What can be done well within the scope of resources and capabilities? What are the traps that tempt companies to disperse resources?

Know yourself:

Understand the nature of the industry and your own position

"It is easy for a man to see what he has, but difficult to see what he is." - Wittgenstein

Internet companies love disruption the most. They use the Internet's "cross-dimensional attack" method to bring new changes to traditional industries. For example, Jack Ma once said, "If banks don't change, we will change banks!"

However, not all disruptions have been successful. Some companies made a splash with overwhelming publicity based on assumed business needs, but soon left the market quietly under the education of the market. Some companies specialized in the stubborn problems of traditional industries and called themselves "heroes who killed the dragon", but unexpectedly became the new "dragon" after their victory. Some companies spread their business too far, beyond their control, blindly pursued the operating data of Internet financing and ignored the essence of business, which was in vain and left them with nothing but a mess.

The root cause is that they do not clearly understand the nature of the industry and their own position. For example, the business nature of the taxi industry is to make money by "sending passengers to their destinations." If a company creates new profit points, such as "selling passengers' personal whereabouts for profit" or "passengers are forced to spend money at designated stores even though they clearly want to go home," these two ways of making money may make more money than picking up passengers, but they are not innovation or subversion, but a crime.

The positioning of an enterprise determines its business areas and growth space. Only by accurately determining its position can it find differentiation from its competitors and thus discover its own living space in the market competition.

Yonganxing had specifically discussed the issue of company positioning long before releasing its 2017 annual report.

At that time, although Yonganxing had become the leader in the field of public bicycles invested by the domestic government, its business was still under tremendous pressure due to the challenges of emerging shared bicycles.

“Will we be disrupted in the future? Should the company abandon its original advantages and start over by following other people’s rules?”

The final discussion conclusion was written into the company's annual report.

Yonganxing should not be a "disruptor" but a "supplementer of the government's public transportation system" (excerpted from Yonganxing 2017 Annual Report). It should integrate into the society's public transportation system, become a part of it, and promote "opening up the capillaries of the existing public transportation system" rather than subverting or replacing anyone.

Because of its positioning as a "supplementer", Yonganxing deploys its vehicles in cities through government bidding, maintains a good cooperative relationship with local governments, and actively cooperates with local governments in their convenience measures and public transportation management measures. This also means that Yonganxing will never blindly deploy vehicles without limit like other shared bicycle companies, piling up operating data with the number of bicycles, and covering up the problems of the commercial nature.

When investing in shared bikes, the first thing to consider is how to make a profit. So far, the profit model of shared bikes still relies on the rental fee of a bike for a day to make a profit. If this can't even break even, then what else can make a profit? Many people may say "traffic", but the shared bike business is still a bit far from monetizing through traffic, and it can't cover the cost. Unless you don't expect this business to make money at all, treat it as a traffic entrance or application scenario for a larger ecosystem, just like the communication function of WeChat.

However, compared with the communication function of WeChat, shared bicycles are too heavy. At the same time, due to the inherent disadvantages of the shared bicycle business of "uncontrollable use and management", the deployed vehicles will quickly spread to the surrounding areas. If there is no human intervention, it will soon be unknown where in the suburbs they will spread to, which will greatly increase operating costs and make profits far away. For bicycles, if they are not profitable in the first year, it will be very difficult to make profits in the second and third years, because the way shared bicycles are used determines that the vehicles depreciate very quickly.

Therefore, Yonganxing did not need to be disrupted by the impact of shared bikes. "Even if the enemy is surrounded by thousands of enemies, I will remain unmoved." Just develop at your own pace and let it survive on its own. As expected, not long after, the two giants of shared bikes at that time, Mobike, sold itself to stop losses, and ofo left, and the market was reshuffled.

Grasp the key points of business:

Understand the nature of business

What is a "business key point"? To understand this concept, let's first look at a story.

The emperors of all dynasties feared rebellion the most, not corrupt officials or refugees from disasters, but rebellion, because it would directly lead to the change of the throne. Among all rebellions, there is no need to worry about military riots or civil riots. Without the household registration system, post station system, and bureaucratic system, they cannot cause any big waves. Only the powerful people who hold military and political power can suddenly organize a large-scale rebel army, especially the princes who have established their own country, which is even more threatening.

After experiencing the "Seven Kingdoms Rebellion" during the reign of Emperor Jing of Han, an important decree was issued during the reign of Emperor Wu of Han - the "Enfeoffment Order", which can be said to be a classic example of "grasping the key points of business". For the princes, the confidence to rebel comes from strong strength, and the essence of strong strength is determined by the amount of land in the princely state - the more land, the more people can be supported, and the more people, the more taxes and troops. This decree grasped this key point. The areas under the jurisdiction of the princes were previously inherited only by their eldest sons, but now they are jointly inherited by the eldest son, second son, and third son of the princes. It requires the princes to be divided into several countries, so that the descendants of the princes can share the fiefdom in turn until the land is exhausted. This resulted in the princely states being divided into smaller and smaller ones, and the princes were no longer able to resist the central government.

Therefore, to grasp the key points of the business, the key is to understand the essence of the business.

Yonganxing is engaged in shared travel business. What are the key points of the shared travel business?

The author defines shared travel as "providing the right to use (not ownership) transportation resources, and non-exclusive use of services in space or time". In a broad sense, all services that are not in a specific relationship between the provider and the user are shared, including civil aviation, high-speed rail, buses, taxis, public bicycles, shared bicycles, time-sharing rental cars, and idle vehicle sharing. Therefore, the key point of shared travel is not "stimulating idle private transportation capacity" but "the technology to control the allocation of usage rights".

Strategic focus:

Steady Progress

In the process of running a business, there will be various temptations. Business owners often find it difficult to resist the temptation to make quick money, so they do whatever is popular and follow the trend.

To win through positioning, we must not only find our own position and grasp the key points of the business, but also be able to resist temptation and move forward firmly.

Ren Zhengfei said, "It is not easy for a person to accomplish one thing in his lifetime." Huawei, which does not engage in finance or real estate speculation, has been able to develop to this point in industry, largely due to its persistence in sticking to one path and "continuously charging at one entrance" for 28 years.

Similarly, when Yonganxing was at its peak in the field of public bicycles, it faced challenges from shared bicycles led by Mobike and ofo. Their momentum was so great that they instantly became the outlet of the entire society. Countless capital poured into this emerging industry. Some people even joked that "the only factor limiting the development of shared bicycles is that there are not enough colors to distinguish different companies."

Yongan Bicycle did not ignore this trend and also launched 50,000 shared bicycles to test the waters, but ultimately resisted the temptation of financing and burning money in the shared bicycle industry and stuck to its core business and normal profit model.

However, business focus does not mean rejecting business diversification. When talking about business diversification, we have to mention a legendary company - Yamaha.

Yamaha's founder, Torakusu Yamaha, was originally a repairman. One day in 1887, a school's American organ broke down, and Yamaha was asked to repair it. In that era, the organ was still a rarity, and many people had never even seen one. Yamaha studied and repaired it, and he actually repaired the organ, and learned how to make it, making Japan's first domestically produced organ. So Yamaha set up a company to manufacture this kind of organ, which was the predecessor of Yamaha - Nippon Musical Instrument Manufacturing Co., Ltd. Since then, the company's business has expanded rapidly, involving Western musical instruments, electronic musical instruments, and various extended businesses of music, including recording equipment, music post-production, various home theaters, and so on. Today, Yamaha has become a comprehensive musical instrument manufacturer, material and semiconductor manufacturer, and expert in architectural acoustics, and its achievements in music can be said to be second to none.

While making pianos, Yamaha accumulated rich experience in woodworking, so it entered the furniture industry by the way. The old houses were all wooden structures, so building houses became part of Yamaha's job, and in this way Yamaha got involved in the real estate industry. On the other hand, Yamaha, who had rich experience in woodworking, was also assigned by the government to manufacture wooden propellers for aircraft during World War II. After the propeller was built, it needed an aircraft engine for testing and acceptance, but the quality of aircraft engines in that era was worrying. Yamaha, who often repaired engines, mastered the engine manufacturing process and entered the engine industry. Later, relying on the accumulation of engine technology, Yamaha began to manufacture motorcycles, cars, and yachts. In the process of building yachts, Yamaha mastered the manufacturing technology of fiberglass, which can be used to make bathtubs and swimming pools, so Yamaha successfully entered the bathroom industry. Because it often deals with water treatment, it also started to make water purifiers. At the same time, because of the research on algae reproduction, it entered the field of biochemistry and made cell picking and imaging systems.

Yamaha is not confined to one industry, but continuously learns and absorbs knowledge in various fields and successfully transforms it into the driving force for corporate development.

The Yamaha case tells us that the basis of business diversification is the focus on capabilities. Business is just a carrier of capabilities. As long as the required capabilities are close, the business can be expanded at will. Therefore, diversified business is to expand along the capabilities and expand as the capabilities improve.

Yonganxing's diversification also follows the same logic. Yonganxing entered the government-invested public bicycle business in 2010. At that time, its two main competitors in the future public bicycle field, Hangzhou Jintong Public Bicycle Technology Co., Ltd. and Zhonglu Co., Ltd., had already entered the industry in 2009 and 2008 respectively. But six years later, Yonganxing became the first in the industry. Starting from the public bicycle business, to shared bicycles, to shared cars, online car-hailing... Yonganxing's business covers all areas of shared travel.

The essence of shared travel is the technology that controls the distribution of usage rights. Therefore, in 2019, Yongan Bicycle acquired Changzhou Kexin Yongan Electronic Lock Co., Ltd.

However, simple electronic locks are not smart locks. The difference between them is that electronic locks, password locks, magnetic card locks, etc. can only input but not output. Only door locks that can realize real-time human-computer interaction are smart door locks.

The function of traditional door locks is to open and close doors, while smart door locks can realize human-computer interaction, and door locks are given more new smart application scenarios.

For example, according to historical data, this family goes out every morning (for morning exercise, breakfast or shopping), but one morning, the door of this family did not open as usual, and the door of this family was opened and closed from the outside at 8 o'clock last night, and has not been opened again for 24 hours. Should an alarm message be sent to confirm whether the owner of this family has had an accident and needs help?

What does this application scenario remind us of? It is the application scenario of monitoring left-behind elderly people.

Therefore, Yonganxing wrote in the company's 2019 annual report that the company would "extend its business into smart life" and even directly stated that "the proportion of China's elderly population is currently increasing, and home safety and home-based elderly care will become the mainstream. Yonganxing will launch a variety of home safety and home-based elderly care service products based on its own Internet of Things big data technology. These products, combined with Yonganxing's offline service capabilities, will form Yonganxing's distinctive home safety and home-based elderly care service platform products. These artificial intelligence products, combined with the Yonganxing App, will provide communities, nursing homes and individual families with convenient and considerate services." This is an extension of business expansion based on capacity enhancement.

Strategy requires determination, both to resist temptations outside the strategy and to control the timing and rhythm within the strategy. Mr. Sun Jisheng often says, "Go slowly, it's faster." This is reflected in Yonganxing's strategy, which is to not be greedy for success and rush forward, but to take steady steps. Every time it enters a new business, it first conducts a pilot to verify whether the business model is correct. After it is confirmed, it will invest heavily. This control of the timing and rhythm within the strategy is the secret of Buffett becoming the world's richest man. The success of investment does not lie in making a lot of money in one go, but in making money continuously for a long time. Buffett's annual investment return rate of 20% is not too high, but as long as it is maintained for 40 years, he can become the world's richest man. This is exactly "positioning wins, steady progress leads to long-term success."