Growth Strategies for Entrepreneurs

Focus on local/delayed globalization strategy

First of all, I propose a framework to share with you, that is, we want to find out where the growth comes from. We can analyze it by tree diagram and look at it from three dimensions.

The first of the growth tree is the dimension of existing customers and new customers. You will have some existing customers, and some existing customers will develop higher revenue. There is another way to find new customers.

The second dimension of growth is existing products and new products. You might modify or expand an existing product, or develop a whole new product line.

The third latitude is the region, a new region, a new country. The region I use here can mean that you are expanding at home, or it can mean expanding abroad.

Existing Customers, Existing Products, and Existing Territories, plus New Customers, New Products, and New Territories, means that eight different combinations can be found on this tree. Within your company, you can develop different strategies for different growth directions.

I've asked many companies to identify the three most important growth areas for companies. It is often seen in the senior management that everyone has a different understanding of where growth comes from. I think a tree diagram like this can help everyone come to an agreement quickly.

Why do we need to clarify where the growth points come from? This involves growth capabilities. For example, the ability to develop new customers is different from the ability we need to develop new products. For example, developing new customers requires stronger sales and marketing forces. If you develop new products, you may have stronger internal engineering design capabilities, not only designers, but also people who understand sales.

Growth drivers and growth barriers The second theoretical framework to talk about is growth drivers and growth barriers. I approached a lot of executives and asked them what is the main driver for your company to continue to grow? Not in the next six months, such as two to five years from now, what do you think is the main growth driver for your company's revenue growth?

Some executives believe that new products and services will be the main growth drivers for the company in the next two to five years. Some executives told me that the biggest advantage of our company is that our strategy is very correct, we understand who our competitors are, and the pricing is also very reasonable, which is formulated after careful research on competitors, etc. These company executives give different weights to the drivers of growth, some focusing on new products, some on new customers, and some on regional strategies.

I would also ask, what do you think is the biggest obstacle to the company's growth in the period ahead? I asked these executives to write down the top three drivers of the company and the top three barriers, and then sat down with them and exchanged them. Basically, many companies have very different views.

In many cases, the company's growth is not fast enough, which may be because the company's executives are conservative, which is a kind of growth impediment. On the other hand, the company executives have a very good strategy, they are very aware of what resources the company has, and they can match the resources well with the company's growth direction. In this case, the company's senior management may be the driving force for the company's own growth, and if the executive's lack of motivation and incorrect ideas will hinder the company's growth. Among the 50 companies I surveyed about a year ago, I found that the biggest obstacle for the company was the senior management itself. A year later, I found that the biggest obstacle became liquidity and funding sources, that is, the ability to raise funds. This means that the environment is constantly changing, and the dynamics and obstacles are not static, and need to be constantly understood and examined.

The choice of globalization strategy There are two methods of globalization strategy, one is to start globalization of the company, and the other is to delay the globalization strategy. Starbucks, for example, was established in 1971 and only entered the US market in 1996.

There are different reasons for doing this, such as if I have a large customer base in my region, I should first try to capture existing customers and build a strong home market. This is the biggest benefit of delayed globalization.

The second reason in favor of this method is that you can do your best in the local market at the start-up stage. If you enter five or six markets at the beginning, you must ensure the concentration of the company's personnel and resources, which may affect the company's growth rate. .

The third reason for delaying globalization is that companies focus on local markets, and if problems arise, they can focus their efforts to solve them quickly. Not all areas will be out of control.

A strategy of totalization can also have negative effects. What are the negative effects? The first is that you will encounter many imitators. Your entrepreneurial model is very successful, and your product is very successful. If you do not seize other markets at the beginning, you will encounter imitators. Second, if you go global as soon as possible, you can test your products in overseas markets, learn lessons, and apply them to your company's product innovation and service innovation. Let's take an example of Starbucks, which is a good company that delays globalization.

In 1988, Starbucks had 12 stores in Seattle. It first expanded to seven cities in the United States. They did not expand to seven cities at once. Expansion to 80 stores in the first five years is the goal of the new management. Fifty of the 80 stores are all within ten miles, which is a very focused strategy. But throughout the process, they have been correcting mistakes and looking for problems. They ask customers, what is their experience, how is this experience different from eating and drinking coffee in a restaurant, and they have to continuously train employees, and their salaries are different from those of fast food restaurant employees.

Everyone must think that Starbucks has developed a rapid and comprehensive development model, but it is not. They expanded cautiously step by step. In the process of their expansion, they have accumulated previous experience and applied the experience of local market development to new markets, which has brought them great benefits. By 1995, they had more than 700 stores, all within the U.S., none outside of North America.

Why did they grow so fast in the early days, and what was the driving force? First of all, the first major development driving force is to have a new product concept. The second driving force is senior management. They are concerned about their market and are very confident, because they have successfully grown from zero to 800 stores, so the high-level is indeed attractive, and many people believe in them. The third driving force for development is human resources. They are not looking for cheap employees, they are looking for the most suitable employees, and the turnover rate is very low.

After a while, they started thinking about globalization, they still sell the same products, but they started to focus on new areas, which is the growth of new areas.

They have several options for global expansion, starting with mergers and acquisitions. At the end of 1997 and the beginning of 1998, a British public Seattle coffee company contacted Starbucks. All of its concepts were copied from Starbucks. The purpose of this company was to develop to a certain scale and sell itself to Starbucks. Starbucks decided to buy the company.

Starbucks analyzed the global marketization strategy. He studied market opportunities, paid attention to the country's GDP growth rate, and the proportion of people who were willing to drink coffee. He did competitor analysis, etc.

Starbucks' expansion is not based on the country, but on the city, focusing on the areas where the urban population is relatively concentrated.

They established a joint venture in Japan, and Starbucks also licensed their business model to other operators. There are various forms of joint ventures, and the company's globalization strategy varies from country to country.

Let's take a look at the development characteristics of Starbucks China. Starbucks does not study China as a whole. They divide China into several regions, such as Beijing and surrounding areas, Shanghai and surrounding areas, South China, etc. The joint ventures between them and local companies are also different. They study what advantages and strengths the local Chinese joint venture partner brings to the business. Because they have to decide whether to operate directly by themselves or through a joint venture partner, and recently Starbucks' method is to re-acquire the joint venture stores and turn the joint venture stores into directly operated stores.

When Starbucks was first founded, growth was very high, but as the company got bigger, it was difficult to maintain such a high growth rate. This is the gravitational effect.

In the past three quarters, we have seen not only a decline in the growth rate of some Starbucks companies, but also zero or even negative growth. There are a lot of people who attribute any problems with the company to the bad external environment right now, the economic downturn, etc., but my view is that not only the past four quarters, but actually Starbucks Seattle headquarters started appearing as early as seven quarters ago. Problem, I think Starbucks has to find a way to keep his product competitive. Because Starbucks' philosophy is not unique, not that it cannot be copied.

There may be some market consumers who prefer Starbucks' business model, but am I willing to pay 30% more? I do not want to. And McDonald's has also entered the market, and he sells coffee at half the price of Starbucks coffee.

Looking at the profitability again, once Starbucks entered the overseas market, the profit level dropped. They want to invest in overseas expansion. They have to find out what is causing the decline in profitability, whether it is more prudent investment, or whether the business model needs to change, or whether they are entering a market that is not enough to support such high profitability.

Starbucks closed a lot of stores, this time they closed hundreds of them, they have to cut prices if they want to survive.

I will now talk about an Asian example, Baidu. Baidu's search engine business started in 2000, and after that, it expanded its product space. In the process, they also slowly faced bottlenecks. Which are? Once the company's growth rate is not as fast as before, and the stock price is reduced, it will face the departure of executives, some of whom are very talented. This is a global phenomenon. Their No. 1 obstacle is that talented senior executives will go.

At the same time, Baidu also encountered difficulties when it started to enter the global market. The first market Baidu entered was Japan. In the Japanese market, people have always paid attention to Baidu and Google. So in Japan there is already a Japanese version of Google or Baidu. Second, Google is getting smarter. Google admits that we are completely defeated by Baidu in China, so they should enter the Japanese market early, cooperate with Japanese partners, and hire the best senior management to manage their Japanese business.

I will summarize back to the previous growth framework. First of all, they all have their own special products. Whether it is Starbucks or Baidu, Starbucks has not produced completely different product lines throughout the development process. They always use their own products, What they did was to expand their existing customers, and in the early days, everyone had a drink a week, and later everyone had a drink before going to work. This is the so-called focus on existing customers, and further develop these customers to increase their frequency of consumption. Then they expand into new markets, into new regions.

Global Growth Strategy

Globalization has many drivers. Some companies expand globally in the early stages of development, mainly for the following reasons. The first saturation is the important reason. For example, when Starbucks opened 800 stores in the United States, the United States was also saturated, so he wanted to go out. The second domestic market is insufficient. For example, Israel is not a big economy. If the talents in this country want to start a business and find customers, they will immediately think of looking for companies abroad. The third reason is that even if there is a large domestic demand for products, although the Chinese market is huge, the development speed of solar energy is not as fast as that of other countries such as Spain and Germany. Therefore, if you want to increase the sales of products in the short term, you must first go out and generate revenue from other markets, hoping that the local market can keep up in a few years. The fourth important reason is that you may have an innovative product, but this innovative product is said to be illegal in China. One sports product is sports lottery, there are many online companies, they are online gambling, and they provide a lot of innovative products. If I'm in the UK and I watch the Premier League, I have a lot of options to bet on, and in North America it's illegal to bet on sports.

Tell me about this Israeli company, Check Point Software, to see if early global expansion, how and when.

It was founded in 1993, and the founders of this company were very interested in firewall protection tools, when the Internet was just taking off. The main reason for the rapid development of many companies in the past was to launch the right products at the right time to meet the needs of the market. He said I want a product that is not only very technical, but also easy for customers to operate, not just to sell the product to the smartest engineers in the world, but to every ordinary person who wants to protect their data .

Secondly he told himself I had to enter the global market and get the world to notice my product. How does he do it? He continues to win many, many awards and has raised his profile by winning awards at many well-known conferences around the world.

By 2000 the company had achieved rapid growth. But it's not just that that's really surprising, it's its margins, profit as a percentage of revenue has never been lower than 40%, not gross revenue but net profit. This is a very amazing achievement. It's a testament to how creative he is and how successful he is at cost control.

What has been the main driver behind the company's success in its first 24 quarters? Will these dynamics continue over time?

The first driving force is the quality of the management team. The quality of the management team is very high. It has a good strategy, the goal is to build a secure firewall on the Internet, and it does not provide information such as entertainment. He has his own market driving team in ten different countries.

The second point is that the tax rate is very low. The Israeli government has always been very business-oriented, encouraging companies to stay in Israel and conduct R&D in Israel. Even if these companies make a lot of money, the government still gives them good tax incentives for their R&D. stay in Israel. And R&D costs in Israel are 50% lower than in Silicon Valley. In Silicon Valley in the United States, software engineers jump to a company every two years, which has never happened in Israel, so there is high loyalty, low cost, and there are very smart people, it is the perfect combination.

In addition to these, Check Point believes that customers are not only concerned with network security solutions, they want to obtain overall information technology solutions, so in addition to providing network security products, Check Point has also developed many other products like encryption products, or financial IT products, human resource management IT products, and so on. They also developed an operating platform that ensures that all software is compatible with Check Point's core software. They are good at considering problems from the customer's point of view, and constantly expand the service products they provide.

Of course, as a company, going global will have many difficulties and challenges in the beginning. You must prove to your customers why and how my products are better than other competitors.

Since 2000, due to the bursting of the Internet bubble, the growth rate has dropped a lot, and the security product market has become more and more mature. Other companies such as Cisco also develop their own network security products, so they need to find a new growth point. What started out as a single product, developed for new customers, new regions, and now they need to be transformed into multiple products, potentially going to existing markets and developing with existing customers. So they have to adjust their strategy, they have done 4 or 5 mergers and acquisitions and some of them are quite successful.

Let's talk about a Chinese company. There is a Chinese company that must expand globally at an early stage, because the local market is not that big. Suntech Solar Power Company is aimed at the global market. The founder is Shi Zhenrong, a Chinese from Australia. This company In 2002 and 2003, all the revenue came from China, but the total revenue was very low, but it quickly expanded globally, with Germany and Spain becoming the company's main target markets. Why would it do this? What is the main driving force? What is resistance?

First of all, his technology is very strong and high-tech. Second, it was backed by venture capital funds and had access to the capital market at an early stage. At that time, the stock prices of companies in the solar energy industry were very high, so it raised money at a good time, but it was not spent, so the cash reserves were very sufficient. There is also a very important motivation. He listened to the opinions of some consultants and finally chose two countries as target markets in Europe. These two countries do not have many competitors.

It wasn't long before this became a drag, as competition quickly emerged. A big problem is the ability of management, a global enterprise is not so easy to manage. Another obstacle is that the industry is capital-intensive. There is also a very important resistance here, that is, how long the government's policy support will last. There is also an external factor, what if the price of oil decreases.

From blue ocean/surplus to red ocean/loss

Why is it difficult to maintain high-speed growth in the early stage of the company? The first possibility is that this market is in the early stage of development. Some people liken it to swimming in the blue ocean. If you swim in the sea, many sharks will tear people to pieces, and the sea will become the Red Sea. In the long run, every blue ocean will become a red ocean.

Second point, this market may have very big limitations. For example, your product is a food that only Jews can eat on a certain solar term. Even if this market accounts for 100%, it is a pity that other groups of people will not have these products. purchase.

Also, your product is not suitable for very fierce competition. For example, you have a business model that requires products to be delivered through a logistics courier company, and the postal service in Mexico can say that a 60% delivery rate is not bad.

And the management team. In most cases, the management team starts out very well. They are willing to work hard and cooperate. But many times these management teams are not very adaptable to the system, and their flexibility is not high.

There is also a reason that the early growth may have been built on an unreasonable basis, there is a company in North America called Webvan, which mainly does door-to-door grocery delivery, what it should do is to cooperate with existing grocery stores, because These grocers already have relationships with suppliers. Webvan said no, we have to have our own warehouse and fleet to deliver the goods, and the company went out of business in three years and owed a billion dollars.

Here I would like to introduce a company eBay, eBay is innovative, built a set of infrastructure, and finally helped the company's development, and further promote the development of the industry. It used to be a very successful company. Now eBay has a series of problems that hinder its continued growth. Unlike Starbucks, it not only has a lower growth rate, but its total growth has also decreased, and it has even become a negative number.

What were the pillars of eBay's early growth? The first is customers. The more buyers in the network, the more sellers you can attract, and the more sellers you can attract more buyers. This is a virtuous circle. eBay understands network effects very well, so it arranges many mechanisms to attract more buyers and sellers. eBay made a credit index, if someone buys something, they can rate the seller, Taobao is not the first to do it. The seller's credit rating is established through such a concept, very sensible.

Secondly, to classify products, eBay hired some product classification experts, and buyers can quickly find what they are looking for by entering keywords online.

And eBay was very successful in branding, and knew how to sell the brand. At that time, eBay did some advertising on the Internet.

Also eBay has a performance evaluation and management system. For example, if the performance of the employee is good, you can keep him, and if the performance is not good, you must let him leave. This process is very painful. Many entrepreneurs are very good at discovering talents, but once these talents cannot meet their requirements, they feel very embarrassed, and they are not quick and decisive enough.

After 1999, they began an international strategy.

What are the challenges of eBay going global? One challenge is that the American model doesn't necessarily adapt well to overseas markets. eBay is entirely a machine driven by exchanges. In some countries, people go online just to spend 15 minutes or 20 minutes looking at interesting things. In other countries, they may want to There's no way eBay can provide that kind of shopping experience.

He started out with a 5x increase, and later turned into a 2x increase. It is conceivable that the company has to double its number of employees every year, how much pressure this will put on the management, not only to increase the number of employees, but also to increase the quality employees and remove the bad factors, which is very demanding for the management. High.

Another challenge is that North American companies are reluctant to adapt, and they tend to see the rest of the world through American eyes.

Let's take a look at the growth rate of eBay's revenue. The recent situation is relatively bad, which is equivalent to a loss, which is closer to our situation at Starbucks, which means that his decline is not in the last quarter of 2008, which is the global financial crisis. When it came, the beginning of the decline started four quarters before the world financial crisis hit the world, and they are lying to themselves if they say that the lower yields are because of the financial crisis.

There is a lot of complacency for eBay management because they have been successful so they believe that success can be replicated in other markets, but that's not the case. eBay's entry into the Japanese market completely underestimated the strength of Yahoo in the Japanese market.

Yahoo Japan is the leader in the Japanese online market, accounting for the vast majority of the Japanese auction market. The way eBay entered the Japanese market was to find a joint venture partner, so eBay found NEC, the leaders in charge of the joint venture did not have any experience in networking, and they did not have much advantage over Yahoo's competitive model, because Yahoo! The commission charged is relatively low, while eBay is relatively high. He said that we did this in the United States, but the Japanese were unwilling, so eBay’s sales in Japan continued to decline. After two years of losses, eBay had to withdraw from the Japanese market. .

Let's talk about eBay's experience in China. There are also many eBay imitators in China, so eBay decided to enter China by acquiring similar companies in China. For example, eBay acquired 1/3 of eBay's shares in a very short period of time. eBay is the largest shareholder of eBay. After a period of time, eBay wants to acquire 100% of eBay's shares completely, but what they did not expect is that their competitors will squeeze out his market share in almost two years.

I think eBay didn't try very hard to understand the mentality of Chinese consumers first. They thought that what the US did in China would be fine, but he didn't think that some Chinese consumers need a good shopping experience in addition to buying things. If there is a transaction problem in the backend, eBay's backend is still in California, and it may take a long time to solve this problem.

eBay also has the view that we are 100% foreign-owned and Taobao is 100% Chinese, and the government must discriminate against us.

The reason why I analyze these reasons is because I think this example is very classic, called cultural mismatch. We must do our best to avoid the mistakes eBay made with the eBay program. Many companies have not learned lessons from similar cases, and everyone is very confident that because we have been successful in our own country, we can also succeed abroad. It is easy for many companies to ignore the importance of local culture and the mentality of local people when they go abroad. Many American companies come to China and send CEOs from the United States. If Chinese companies go overseas, you can’t simply say that leaders from Beijing are sent to the United States. Many companies do this, but this is not the right way.

div>