What is the secret to the evergreen business foundation?
in the past two years, the global economy has undergone drastic changes, and black rhinos and gray swans that have not been seen in ten years have frequently appeared, and many entrepreneurs have fallen into confusion about the uncertain future.
In the past 5 to 10 years, Chinese society has been on an upward channel of rapid economic growth, and entrepreneurs and practitioners are familiar with this environment. Now, when we enter the adjustment period or even the downward period, everyone is starting to feel uncomfortable.
But if the timeline is extended to 20 or 40 years, this situation is actually not uncommon. Li Dongsheng, founder and chairman of TCL, who has spanned multiple economic cycles, recently visited the Frontier Thinking Forum and discussed with Zhang Peng, founder of Geek Park, on "How to travel through the cycle".
TCL Founder and Chairman Li Dongsheng and Geek Park Founder Zhang Peng Interviewed
TCL was founded more than 40 years ago. In the 1990s, it stood out in the wave of Chinese color TVs and became a representative brand of Chinese local color TVs. However, in the wave of internationalization set off by China's joining WTO in 2002, TCL once rose and fell, but eventually relied on several major strategic adjustments to overcome the crisis and became a high-tech manufacturing group today that spans the three major industries of smart terminals, semiconductor displays and new energy photovoltaic . The total annual revenue of the two major corporate entities, TCL Technology and TCL Industrial, exceeded 250 billion yuan.
The wheels of history roll forward, but the marks of the ruts are similar. From dozens of color TV companies in the early 1990s, after 10 years of rapid development and competition, only five or six competitive companies were left - similar stories reappeared in different trends such as home appliances, PCs, and mobile phones, and in the future, it is likely to reappear in today's hottest fields such as autonomous driving, new energy vehicles, and AI.
The roads Li Dongsheng walked, the pits he stepped on, and how to travel through the cycle have precious inspirational significance for entrepreneurs and practitioners who cannot see the future today.
01 Color TV has been glorious for ten years
In the 1990s, color TV was the "first son" industry after the reform and opening up of in China. It is also the industry with the most competitive, the most complete market elements, and the earliest start toward internationalization among the many industries in the Chinese market.
At that time, the competition in the color TV industry was fierce, no less than the mobile phone and mobile Internet industries in the past decade - price wars, channel games, diversification, and internationalization. It was won one round after another. In the end, five or six color TV companies including TCL, Changhong, Konka, Skyworth , Hisense and other five or six color TV companies were left to the end.
Nowadays, many people no longer understand this history, but some traces are still left on China's land. There is a Changhong Bridge on the East Third Ring Road of Chaoyang, Beijing, which was sponsored and named by Changhong Group when it was in full swing.
Li Dongsheng and his TCL are the most exciting parts of this history.
TCL It was not too early to start making color TVs. Founded in 1981, TCL made tapes in the early days and officially entered the color TV industry in 1992 and launched its own TCL ace color TV.
But by 2002, TCL had only taken less than 10 years to occupy the first place in the market share of domestic color TV brands and became a veritable "color TV king". From 1992 to 1996, TCL Electronics Group's sales grew 35 times, revenue increased 25 times and profit increased 17 times.
in Shanghai stores was no less than today's technology Internet companies. Generally speaking, even the best technology Internet companies will take as soon as 5 to 7 years from their establishment to their establishment in the industry. For example, Xiaomi was established in Beijing Zhongguancun in April 2010, and by 2015, it became the largest mobile phone brand in China with a market share of 15%.
Li Dongsheng recalled to "Geek Park" that the reason why TCL could rise rapidly at that time was mainly due to two points:
, the first is innovation in business methods. What is the secret to the evergreen business foundation? in the past two years, the global economy has undergone drastic changes, and black rhinos and gray swans that have not been seen in ten years have frequently appeared, and many entrepreneurs have fallen into confusion about the uncertain future. In the past 5 to 10 years, Chinese society has been on an upward channel of rapid economic growth, and entrepreneurs and practitioners are familiar with this environment. Now, when we enter the adjustment period or even the downward period, everyone is starting to feel uncomfortable. But if the timeline is extended to 20 or 40 years, this situation is actually not uncommon. Li Dongsheng, founder and chairman of TCL, who has spanned multiple economic cycles, recently visited the Frontier Thinking Forum and discussed with Zhang Peng, founder of Geek Park, on "How to travel through the cycle". TCL Founder and Chairman Li Dongsheng and Geek Park Founder Zhang Peng Interviewed
TCL was founded more than 40 years ago. In the 1990s, it stood out in the wave of Chinese color TVs and became a representative brand of Chinese local color TVs. However, in the wave of internationalization set off by China's joining WTO in 2002, TCL once rose and fell, but eventually relied on several major strategic adjustments to overcome the crisis and became a high-tech manufacturing group today that spans the three major industries of smart terminals, semiconductor displays and new energy photovoltaic . The total annual revenue of the two major corporate entities, TCL Technology and TCL Industrial, exceeded 250 billion yuan.
The wheels of history roll forward, but the marks of the ruts are similar. From dozens of color TV companies in the early 1990s, after 10 years of rapid development and competition, only five or six competitive companies were left - similar stories reappeared in different trends such as home appliances, PCs, and mobile phones, and in the future, it is likely to reappear in today's hottest fields such as autonomous driving, new energy vehicles, and AI.
The roads Li Dongsheng walked, the pits he stepped on, and how to travel through the cycle have precious inspirational significance for entrepreneurs and practitioners who cannot see the future today.
01 Color TV has been glorious for ten years
In the 1990s, color TV was the "first son" industry after the reform and opening up of in China. It is also the industry with the most competitive, the most complete market elements, and the earliest start toward internationalization among the many industries in the Chinese market.
At that time, the competition in the color TV industry was fierce, no less than the mobile phone and mobile Internet industries in the past decade - price wars, channel games, diversification, and internationalization. It was won one round after another. In the end, five or six color TV companies including TCL, Changhong, Konka, Skyworth , Hisense and other five or six color TV companies were left to the end.
Nowadays, many people no longer understand this history, but some traces are still left on China's land. There is a Changhong Bridge on the East Third Ring Road of Chaoyang, Beijing, which was sponsored and named by Changhong Group when it was in full swing.
Li Dongsheng and his TCL are the most exciting parts of this history.
TCL It was not too early to start making color TVs. Founded in 1981, TCL made tapes in the early days and officially entered the color TV industry in 1992 and launched its own TCL ace color TV.
But by 2002, TCL had only taken less than 10 years to occupy the first place in the market share of domestic color TV brands and became a veritable "color TV king". From 1992 to 1996, TCL Electronics Group's sales grew 35 times, revenue increased 25 times and profit increased 17 times.
in Shanghai stores was no less than today's technology Internet companies. Generally speaking, even the best technology Internet companies will take as soon as 5 to 7 years from their establishment to their establishment in the industry. For example, Xiaomi was established in Beijing Zhongguancun in April 2010, and by 2015, it became the largest mobile phone brand in China with a market share of 15%.
Li Dongsheng recalled to "Geek Park" that the reason why TCL could rise rapidly at that time was mainly due to two points:
, the first is innovation in business methods. At that time, TCL's sales did not follow the path of a big agent, but were closely connected to the terminal and deeply distributed , which was still a very advanced concept at that time.
The second is to accurately position the product. TCL's first color TV product is 28 inches, not the mainstream 14 inches. At that time, there were fewer 28-inch and 25-inch color TVs, mainly Japanese brands, with good products but expensive prices. TCL entered the blue ocean market and used local innovative product technology to launch a series of very competitive and cost-effective products.
But what is rarely known is that not long after becoming the leader of the domestic market, TCL was in the biggest crisis since its establishment 20 years ago. The source of everything is TCL's internationalization strategy.
02 "Darkest Moment", how to get through it?
After nearly ten years of rapid development, TCL grew into a star enterprise in the Chinese market at that time, entering the top ten of the top 100 companies in the Chinese electronic industry. Its momentum is a bit similar to the current ByteDance or Xiaomi, which also made Li Dongsheng full of confidence. He began to pursue a bigger goal: the Fortune 500 in the world.
To this end, TCL has launched an international business transformation and tried to leap from a Chinese company to a multinational giant. In 2004, TCL acquired the French Thomson color TV business and the Alcatel mobile business. In the year when the merger and acquisition was completed, TCL's global color TV business achieved sales of 22.59 million units, exceeding , Samsung , and becoming the world's largest color TV company.
On April 26, 2004, Li Dongsheng and Alcatel Group Chairman Xie Ruike signed a memorandum of understanding to form a joint venture
At that time, China was in an atmosphere of rapid rise as a whole, and there was also a globalization craze in the business community. In addition to TCL, Lenovo acquired the IBM personal computer business in 2005, and Alibaba acquired all the assets of Yahoo China during the same period. These were major events in the globalization of Chinese enterprises at that time, and it was also a big step for Chinese emerging companies to take towards globalized companies.
Nowadays, it seems that it is common to carry out international mergers and acquisitions. But in the era at that time, these events greatly boosted the confidence of the Chinese business community. After all, Thomson was the originator of the global color TV industry and the overlord of European color TV at that time. IBM was the king of the PC era, and Yahoo "opened" the Internet era.
Talking about the original intention of internationalization, Li Dongsheng recalled that there was a big background at that time, that was that China joined the WTO. "In this case, Chinese companies will no longer face domestic competition, but global competition. Even if you win a round of domestic competition, it does not mean that you can win the global competition. This strong sense of crisis drives me to go out and open up markets overseas. Only when the inside and outside battles are combined can we establish an advantage in the future competition of economic globalization ."
At this time, the opportunity quietly came. At that time, , French Thomson Company, , planned to sell its color TV business that had been losing money for years. After the assessment, Li Dongsheng believed that although international mergers and acquisitions are very risky, if this opportunity is abandoned, it means that the process of globalization will be greatly delayed.
's past success gave Li Dongsheng greater confidence and weakened risk expectations, which laid the groundwork for the subsequent setbacks. TCL quickly fell into huge losses and even faced a bankruptcy crisis for a time.
From the initial "view of all the mountains" to the subsequent severe setbacks in internationalization, the huge contrast also brought Li Dongsheng into the "darkest moment". He recalled, "I remember it was in 2005. The business and financial data I received almost every week were negative, just like a nightmare that I couldn't get out of. This would make me feel self-doubted. Are you sure you can do this?"
Li Dongsheng's most painful time was in the second half of 2005. At that time, his weight lost 20 kilograms, and his original 2-foot-8-inch waist also turned into 2-foot-5 inches. Later, he recalled in a slightly joking tone, "I used to want to lose weight but failed. After those months, I lost a lot of weight without realizing it, and I had to buy all my pants again.”
After experiencing anger, helplessness, and even despair, Li Dongsheng abandoned his blind self-confidence, leaving only the belief of fighting back and forth. He said, "At that time, from the perspective of rational business reasoning, the company could not see any hope of turning losses into profits. It was more supportive of belief, that is, it was firmly believed that there would be a way to solve the current difficulties, but it was not found for the time being. At that time, there was only one idea, and there was no way out for this battle. No matter how long or how much the price it took, I must win. As for whether the original decision was correct, I don't need to consider it anymore, because it was meaningless." Having a firm belief in
is just the first step, and the next thing is more important is "prescribe the right medicine." Then in 2006, in order to keep TCL alive, Li Dongsheng led the third major change in the company's history, from management philosophy to organizational structure, and then to corporate culture, he made drastic and comprehensive changes, and finally got through the difficulties and got back on track.
Among them, Li Dongsheng believes that there are two points that are particularly critical: , one is to maintain the cash flow of , which is also TCL's biggest challenge at that time. In this regard, TCL changed its previous development model of high-profile development and began to clean up projects that only bring scale but not profit one by one, emphasizing "efficient operation" and "focus on the sustainability of profits."
At the same time, actively strive for bank credit. Generally speaking, banks usually quickly limit or shrink when companies face difficulties in order to avoid risks. At this time, the traditional method may no longer work, and you must play cards in accordance with common sense at special moments.
At that time, Li Dongsheng was already a well-known entrepreneur in the country, but every time he went to a bank, he personally introduced TCL's development plan to relevant personnel. "I can tell you the financial data in the past three years. Look at my performance and report it to you every stage. If I don't do it, you don't add loans to me, I have nothing to say; if I do it, you have to add loans to me."
Another is to carry out rapid organizational changes and adapt to globalization. The losses of TCL in 2005 and 2006 were essentially the previous operating system and could not adapt to the development of global business. In this regard, TCL analyzed the problems one by one based on the "holographic management diamond model" to analyze nine elements, including politics, economy, and culture.
Finally, with these two key points, TCL finally turned losses into profits in 2007, achieving a net profit of 328 million yuan. This also allows it to take off its ST hat and maintain its qualifications as a listed company.
TCL Mexican factory
Now, the globalization of TCL is a "right mistake". The so-called "correct" means that globalization itself is not wrong. International mergers and acquisitions have brought two strategic values to TCL: the first is to enter the mainstream markets of the United States and Europe, and the second is business growth, which also laid the foundation for the launch of TCL Huaxing in 2009. The so-called "mistake" means that the corporate culture, management capabilities and goals of TCL at that time did not match, which was the root cause of the crisis later.
03 From the terminal hardware company to the cornerstone of the industry
, TCL did not stop. Generally speaking, companies have just recovered from major setbacks and generally choose to "rest and recuperate". Only after the business situation is consolidated and stable will other actions be considered.
But TCL made an "amazing move". At the end of 2007, when it just turned losses into profits, it began to extend to the upstream of the industrial chain, investing 24.5 billion yuan to create Huaxing . The 24.5 billion yuan at that time was almost equivalent to all TCL's assets at that time, and was 52 times the group's net profit that year.
Many people think TCL is "betting", but Li Dongsheng thinks it is "fighting". Judging from the results, this decision did have a significant impact on the subsequent development of TCL.
Talking about the original strategic choice, Li Dongsheng said that the first was inspired by the successful surpassing Japanese companies by South Korea’s Samsung. After 2000, Korean color TV business rose, but Japanese companies declined severely. The most important reason is that Samsung and LG have the most core panel and chip capabilities.If Chinese companies want to participate in global competition, they must have upstream core capabilities, which is the fundamental reason for investing in Huaxing.
Second, the panel industry was at a low point at that time. After the international financial crisis, the investment capabilities of enterprises in countries and regions such as Japan, South Korea and Taiwan were greatly restricted. However, panels are a highly cyclical industry, and it takes about three years to make a decision to generate benefits. Therefore, it is a better choice to reversely invest in in during the trough.
In fact, behind this choice, it is not only the test of business insights and strategic logic, but also the determination of entrepreneurs. After encountering such a major setback, is the original intention of the company's head still there? For Li Dongsheng, the original intention of becoming a world-class enterprise has not changed, so TCL must extend to the upstream core link of the industrial chain.
TCL Huaxing Shenzhen t2 R&D Center
TCL The starting point for investing in Huaxing was to do a good job in color TV business. But a few years later, precisely because of this decision, TCL went from a ToC hardware company to a cornerstone company for high-tech manufacturing.
Li Dongsheng recalled that this was actually gradually formed in the development of the display industry. However, with the improvement of TCL's business competitiveness, Li Dongsheng began to realize that in the high-tech, heavy asset , and long-term panel industry, the society's demand for it will always exist, and the application fields are constantly expanding, but product technology will continue to iterate. If you can keep up with the pace of upgrading, the return on investment will be relatively stable within one cycle. At the same time, its competitive barriers are very high, which also means that the entry barrier for competitors is very high and is also the core competitiveness that supports the sustainable development of the company.
Two years after the Huaxing factory was established, TCL's strategy underwent a major change, from focusing on terminal hardware to laying out around the display panel industry. Of course, this also puts new demands on TCL. The management of enterprises such as display panels is different from the original terminal production: First of all, panels are a high-tech manufacturing industry that requires sustainable evolution of technical capabilities. At present, TCL Huaxing's patent application volume ranks among the top among domestic companies; the second is resource capabilities. These companies have heavy assets and high investment, which is a test of the business management team's ability to integrate resources; third, it is the company's strategy and business management capabilities.
At this time, TCL Huaxing's success not only has Li Dongsheng's original intention, understanding of future trends and strategic considerations for success, but also has a little luck. When Huaxing was worried about talents, Guo Taiming gave them a "God assist". Qunchuang Technology, a subsidiary of Terry Gou, merged with the well-known panel company Qimei Electronics . Many Qimei Electronics executives had no position and could only find another way out. This was tantamount to Huaxing, who was in urgent need of talents at that time.
At the same time, when the Huaxing project was put into production in 2012, it encountered industry-oriented dividends such as " home appliances to the countryside ". At the same time, the international market also began to improve and demand increased significantly, which just gave Huaxing an opportunity to climb up the volume, which also made it the world's first panel company to "mass production in the year and profit in the year". In the following 10 years, TCL Huaxing has been continuously investing, with a cumulative amount of 260 billion yuan.
Seeing this, many hard technology practitioners may have a deep impression. Making hardware seems to be a journey without an end. Every year, you have to fight a few hard battles, and more importantly, losing one or two is a fatal matter. How to break free from simple hardware competitions and build your own true "moat" is an issue that every hardware company must consider.
TCL Successful experience can give some inspiration: the process of is to find a track with a wide enough and long-term value, then control the core links, and dare to invest, and match appropriate abilities.
04 Break the "100 billion curse"
With the continuous production of TCL Huaxing, TCL ushered in a big explosion in performance, with revenue exceeding 100 billion in 2014.But in the following two years, TCL fell into the "100 billion curse", its business scale hovered and its profits decreased.
00 billion yuan in revenue has always been the dream of many Chinese home appliance companies, but it has also become an indelible "nightmare". Before TCL, Haier , Midea, and Gree also encountered a bottleneck period after entering the "100 billion club". Later, through external expansion such as overseas mergers and acquisitions, Haier resolved its low growth and eventually got rid of the curse of hundreds of billions.
For that history, Li Dongsheng once reviewed that TCL mainly faced two key problems at that time: one was that the business structure was too complex. At that time, TCL's business structure was "7+3+1", with a total of 11 major business segments. Among them, it includes 7 business segments: Huaxing Semiconductor Display, Smart Display Terminals, Communications, Home Appliances, Audio, Commercial and Parts Business, as well as 3 service segments: Internet Services, Sales and Financial Holdings, 1 refers to venture capital. This also leads to the second problem. The capital structure and management structure are very complex, and the company's resources cannot be concentrated and need to be optimized urgently.
Subsequently, TCL carried out a series of reforms again, cutting off businesses that were not related to the main business, and cleared out 110 secondary companies; TCL Group one into two, and the terminal business and display business were divided into two independent enterprises. In addition, a very important step for TCL is to acquire Tianjin Zhonghuan Group for a high price of 12.5 billion in 2019, opening up the second growth curve.
From the present perspective, TCL's acquisition of Tianjin Zhonghuan is a certain accident. Around 2019, Tianjin state-owned enterprises are undergoing mixed reforms, and Tianjin Central will bid for sale.
After careful evaluation and research, based on three factors analysis, TCL decided to acquire Tianjin Zhonghuan: First, photovoltaic new energy is considered to be a promising track, because energy conservation and emission reduction have become a major trend in the global economy; Second, after several waves of sand washing in China, China's photovoltaics accounted for more than 70% of the global photovoltaic materials, and now it may reach 90%, so Chinese companies have advantages in this industry; Third, Li Dongsheng believes that Zhonghuan Semiconductor is the leader in the industry and is a good "target".
Of course, there are some small variables in the middle. In 2019, Trump said at an energy conference at Pittsburgh that "the terrible, one-sided climate agreement is a complete disaster for the United States", threatening to withdraw from the Paris climate agreement, which adds some uncertainty to the future development of photovoltaic new energy. In the last round of bidding, only TCL and a fund company were left. At the last moment of submitting the investment bidding documents, TCL raised another 500 million yuan on the basis of the 12 billion yuan bid. "Since you have made a decision to acquire Central, you must ensure that you have to win it. If you add another 500 million yuan, you should buy insurance." Finally, TCL successfully won Tianjin Central.
Zhonghuan Huanxin GPP chip
After careful observation, you can find that in fact, TCL's acquisition of Tianjin Zhonghuan is similar to investing in creating Huaxing, and both are entering a long-term and valuable field. At the same time, TCL Zhonghuan’s business is related to TCL Huaxing, and the logic, process and business model of business operations are also highly similar, and the industry synergy is very high. In just one year, TCL Central achieved exponential growth in sales performance and profits, from 17 billion and 1.4 billion to 40 billion and 4.1 billion respectively.
05 Entrepreneurs are successfully connected to
Looking back on the past 40 years, Li Dongsheng said that his development philosophy for enterprises has also changed a lot. Li Dongsheng 20 years ago was indeed full of energy, full of confidence and motivation. At that time, he was more concerned about how to make the company run faster. Now, TCL has a certain status in the global industry. At this time, he is considering more about risk and bottom-line thinking, as well as how to travel through cycles and have evergreen in the foundation. Behind this is the strategic capabilities, organizational system, etc. of the company, and whether it can support the sustainable development of the company.
No matter which stage, one of Li Dongsheng’s important experience is that he must dare to "draw his sword" when running a business. If we only make decisions based on rational analysis, we may not have today's TCL. Many companies that dare to draw their swords may die, but they also have the chance to succeed. If everyone is rational and dare not draw the sword, then Chinese companies will not be as competitive as they are today.
Behind this is his unique understanding of "entrepreneurs". In Li Dongsheng's eyes, there are not many people who can be called "entrepreneurs".
He believes that the so-called "entrepreneur" first reflects a responsibility and mission, and must have pursuits beyond money and material things. Secondly, he emphasized that entrepreneurs are associated with success and that the scale of their management business must have a large enough influence in the industry. The leader of a failed company, or the boss of a small company, is not qualified to say that he is an entrepreneur.
In this sense, you are an entrepreneur today, but it does not mean you are an entrepreneur in the future. Another thing is that entrepreneurs must also have a capability that not only enables the company to achieve performance growth at a certain stage, but also can develop continuously and travel through cycles.
At the end of the interview, Li Dongsheng also gave his own advice to the young entrepreneurs today, "Your biggest advantage is that you are young and can withstand setbacks and failures. The advice I give is not to have burdens, not to be afraid of failure, try boldly, and move forward hard, and there will definitely be opportunities. If you can't catch this time, you can catch it next time. If you work hard, you will definitely catch it."
”After experiencing anger, helplessness, and even despair, Li Dongsheng abandoned his blind self-confidence, leaving only the belief of fighting back and forth. He said, "At that time, from the perspective of rational business reasoning, the company could not see any hope of turning losses into profits. It was more supportive of belief, that is, it was firmly believed that there would be a way to solve the current difficulties, but it was not found for the time being. At that time, there was only one idea, and there was no way out for this battle. No matter how long or how much the price it took, I must win. As for whether the original decision was correct, I don't need to consider it anymore, because it was meaningless." Having a firm belief in
is just the first step, and the next thing is more important is "prescribe the right medicine." Then in 2006, in order to keep TCL alive, Li Dongsheng led the third major change in the company's history, from management philosophy to organizational structure, and then to corporate culture, he made drastic and comprehensive changes, and finally got through the difficulties and got back on track.
Among them, Li Dongsheng believes that there are two points that are particularly critical: , one is to maintain the cash flow of , which is also TCL's biggest challenge at that time. In this regard, TCL changed its previous development model of high-profile development and began to clean up projects that only bring scale but not profit one by one, emphasizing "efficient operation" and "focus on the sustainability of profits."
At the same time, actively strive for bank credit. Generally speaking, banks usually quickly limit or shrink when companies face difficulties in order to avoid risks. At this time, the traditional method may no longer work, and you must play cards in accordance with common sense at special moments.
At that time, Li Dongsheng was already a well-known entrepreneur in the country, but every time he went to a bank, he personally introduced TCL's development plan to relevant personnel. "I can tell you the financial data in the past three years. Look at my performance and report it to you every stage. If I don't do it, you don't add loans to me, I have nothing to say; if I do it, you have to add loans to me."
Another is to carry out rapid organizational changes and adapt to globalization. The losses of TCL in 2005 and 2006 were essentially the previous operating system and could not adapt to the development of global business. In this regard, TCL analyzed the problems one by one based on the "holographic management diamond model" to analyze nine elements, including politics, economy, and culture.
Finally, with these two key points, TCL finally turned losses into profits in 2007, achieving a net profit of 328 million yuan. This also allows it to take off its ST hat and maintain its qualifications as a listed company.
TCL Mexican factory
Now, the globalization of TCL is a "right mistake". The so-called "correct" means that globalization itself is not wrong. International mergers and acquisitions have brought two strategic values to TCL: the first is to enter the mainstream markets of the United States and Europe, and the second is business growth, which also laid the foundation for the launch of TCL Huaxing in 2009. The so-called "mistake" means that the corporate culture, management capabilities and goals of TCL at that time did not match, which was the root cause of the crisis later.
03 From the terminal hardware company to the cornerstone of the industry
, TCL did not stop. Generally speaking, companies have just recovered from major setbacks and generally choose to "rest and recuperate". Only after the business situation is consolidated and stable will other actions be considered.
But TCL made an "amazing move". At the end of 2007, when it just turned losses into profits, it began to extend to the upstream of the industrial chain, investing 24.5 billion yuan to create Huaxing . The 24.5 billion yuan at that time was almost equivalent to all TCL's assets at that time, and was 52 times the group's net profit that year.
Many people think TCL is "betting", but Li Dongsheng thinks it is "fighting". Judging from the results, this decision did have a significant impact on the subsequent development of TCL.
Talking about the original strategic choice, Li Dongsheng said that the first was inspired by the successful surpassing Japanese companies by South Korea’s Samsung. After 2000, Korean color TV business rose, but Japanese companies declined severely. The most important reason is that Samsung and LG have the most core panel and chip capabilities.If Chinese companies want to participate in global competition, they must have upstream core capabilities, which is the fundamental reason for investing in Huaxing.
Second, the panel industry was at a low point at that time. After the international financial crisis, the investment capabilities of enterprises in countries and regions such as Japan, South Korea and Taiwan were greatly restricted. However, panels are a highly cyclical industry, and it takes about three years to make a decision to generate benefits. Therefore, it is a better choice to reversely invest in in during the trough.
In fact, behind this choice, it is not only the test of business insights and strategic logic, but also the determination of entrepreneurs. After encountering such a major setback, is the original intention of the company's head still there? For Li Dongsheng, the original intention of becoming a world-class enterprise has not changed, so TCL must extend to the upstream core link of the industrial chain.
TCL Huaxing Shenzhen t2 R&D Center
TCL The starting point for investing in Huaxing was to do a good job in color TV business. But a few years later, precisely because of this decision, TCL went from a ToC hardware company to a cornerstone company for high-tech manufacturing.
Li Dongsheng recalled that this was actually gradually formed in the development of the display industry. However, with the improvement of TCL's business competitiveness, Li Dongsheng began to realize that in the high-tech, heavy asset , and long-term panel industry, the society's demand for it will always exist, and the application fields are constantly expanding, but product technology will continue to iterate. If you can keep up with the pace of upgrading, the return on investment will be relatively stable within one cycle. At the same time, its competitive barriers are very high, which also means that the entry barrier for competitors is very high and is also the core competitiveness that supports the sustainable development of the company.
Two years after the Huaxing factory was established, TCL's strategy underwent a major change, from focusing on terminal hardware to laying out around the display panel industry. Of course, this also puts new demands on TCL. The management of enterprises such as display panels is different from the original terminal production: First of all, panels are a high-tech manufacturing industry that requires sustainable evolution of technical capabilities. At present, TCL Huaxing's patent application volume ranks among the top among domestic companies; the second is resource capabilities. These companies have heavy assets and high investment, which is a test of the business management team's ability to integrate resources; third, it is the company's strategy and business management capabilities.
At this time, TCL Huaxing's success not only has Li Dongsheng's original intention, understanding of future trends and strategic considerations for success, but also has a little luck. When Huaxing was worried about talents, Guo Taiming gave them a "God assist". Qunchuang Technology, a subsidiary of Terry Gou, merged with the well-known panel company Qimei Electronics . Many Qimei Electronics executives had no position and could only find another way out. This was tantamount to Huaxing, who was in urgent need of talents at that time.
At the same time, when the Huaxing project was put into production in 2012, it encountered industry-oriented dividends such as " home appliances to the countryside ". At the same time, the international market also began to improve and demand increased significantly, which just gave Huaxing an opportunity to climb up the volume, which also made it the world's first panel company to "mass production in the year and profit in the year". In the following 10 years, TCL Huaxing has been continuously investing, with a cumulative amount of 260 billion yuan.
Seeing this, many hard technology practitioners may have a deep impression. Making hardware seems to be a journey without an end. Every year, you have to fight a few hard battles, and more importantly, losing one or two is a fatal matter. How to break free from simple hardware competitions and build your own true "moat" is an issue that every hardware company must consider.
TCL Successful experience can give some inspiration: the process of is to find a track with a wide enough and long-term value, then control the core links, and dare to invest, and match appropriate abilities.
04 Break the "100 billion curse"
With the continuous production of TCL Huaxing, TCL ushered in a big explosion in performance, with revenue exceeding 100 billion in 2014.But in the following two years, TCL fell into the "100 billion curse", its business scale hovered and its profits decreased.
00 billion yuan in revenue has always been the dream of many Chinese home appliance companies, but it has also become an indelible "nightmare". Before TCL, Haier , Midea, and Gree also encountered a bottleneck period after entering the "100 billion club". Later, through external expansion such as overseas mergers and acquisitions, Haier resolved its low growth and eventually got rid of the curse of hundreds of billions.
For that history, Li Dongsheng once reviewed that TCL mainly faced two key problems at that time: one was that the business structure was too complex. At that time, TCL's business structure was "7+3+1", with a total of 11 major business segments. Among them, it includes 7 business segments: Huaxing Semiconductor Display, Smart Display Terminals, Communications, Home Appliances, Audio, Commercial and Parts Business, as well as 3 service segments: Internet Services, Sales and Financial Holdings, 1 refers to venture capital. This also leads to the second problem. The capital structure and management structure are very complex, and the company's resources cannot be concentrated and need to be optimized urgently.
Subsequently, TCL carried out a series of reforms again, cutting off businesses that were not related to the main business, and cleared out 110 secondary companies; TCL Group one into two, and the terminal business and display business were divided into two independent enterprises. In addition, a very important step for TCL is to acquire Tianjin Zhonghuan Group for a high price of 12.5 billion in 2019, opening up the second growth curve.
From the present perspective, TCL's acquisition of Tianjin Zhonghuan is a certain accident. Around 2019, Tianjin state-owned enterprises are undergoing mixed reforms, and Tianjin Central will bid for sale.
After careful evaluation and research, based on three factors analysis, TCL decided to acquire Tianjin Zhonghuan: First, photovoltaic new energy is considered to be a promising track, because energy conservation and emission reduction have become a major trend in the global economy; Second, after several waves of sand washing in China, China's photovoltaics accounted for more than 70% of the global photovoltaic materials, and now it may reach 90%, so Chinese companies have advantages in this industry; Third, Li Dongsheng believes that Zhonghuan Semiconductor is the leader in the industry and is a good "target".
Of course, there are some small variables in the middle. In 2019, Trump said at an energy conference at Pittsburgh that "the terrible, one-sided climate agreement is a complete disaster for the United States", threatening to withdraw from the Paris climate agreement, which adds some uncertainty to the future development of photovoltaic new energy. In the last round of bidding, only TCL and a fund company were left. At the last moment of submitting the investment bidding documents, TCL raised another 500 million yuan on the basis of the 12 billion yuan bid. "Since you have made a decision to acquire Central, you must ensure that you have to win it. If you add another 500 million yuan, you should buy insurance." Finally, TCL successfully won Tianjin Central.
Zhonghuan Huanxin GPP chip
After careful observation, you can find that in fact, TCL's acquisition of Tianjin Zhonghuan is similar to investing in creating Huaxing, and both are entering a long-term and valuable field. At the same time, TCL Zhonghuan’s business is related to TCL Huaxing, and the logic, process and business model of business operations are also highly similar, and the industry synergy is very high. In just one year, TCL Central achieved exponential growth in sales performance and profits, from 17 billion and 1.4 billion to 40 billion and 4.1 billion respectively.
05 Entrepreneurs are successfully connected to
Looking back on the past 40 years, Li Dongsheng said that his development philosophy for enterprises has also changed a lot. Li Dongsheng 20 years ago was indeed full of energy, full of confidence and motivation. At that time, he was more concerned about how to make the company run faster. Now, TCL has a certain status in the global industry. At this time, he is considering more about risk and bottom-line thinking, as well as how to travel through cycles and have evergreen in the foundation. Behind this is the strategic capabilities, organizational system, etc. of the company, and whether it can support the sustainable development of the company.
No matter which stage, one of Li Dongsheng’s important experience is that he must dare to "draw his sword" when running a business. If we only make decisions based on rational analysis, we may not have today's TCL. Many companies that dare to draw their swords may die, but they also have the chance to succeed. If everyone is rational and dare not draw the sword, then Chinese companies will not be as competitive as they are today.
Behind this is his unique understanding of "entrepreneurs". In Li Dongsheng's eyes, there are not many people who can be called "entrepreneurs".
He believes that the so-called "entrepreneur" first reflects a responsibility and mission, and must have pursuits beyond money and material things. Secondly, he emphasized that entrepreneurs are associated with success and that the scale of their management business must have a large enough influence in the industry. The leader of a failed company, or the boss of a small company, is not qualified to say that he is an entrepreneur.
In this sense, you are an entrepreneur today, but it does not mean you are an entrepreneur in the future. Another thing is that entrepreneurs must also have a capability that not only enables the company to achieve performance growth at a certain stage, but also can develop continuously and travel through cycles.
At the end of the interview, Li Dongsheng also gave his own advice to the young entrepreneurs today, "Your biggest advantage is that you are young and can withstand setbacks and failures. The advice I give is not to have burdens, not to be afraid of failure, try boldly, and move forward hard, and there will definitely be opportunities. If you can't catch this time, you can catch it next time. If you work hard, you will definitely catch it."
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