2018 was a harsh and cold year with the global economy undergoing multiple challenges. How will the 50-year-old Midea Group confront the unstable economic climate for 2019? On the 16th of January, the Midea Group Annual Business Conference 2019 with the theme, “Reborn at 50” was held in Guangzhou. More than 1,400 core employees from more than 20 countries around the world participated in the conference. In the face of all these changes, Midea Group called on its global employees to reflect deeply, face problems, embrace changes, and look to the future.
Paul Fang, chairman of Midea Group, delivered a speech at the meeting. The following is a summary of the speech:
This year, Midea is 50 years old. Can we be born again? If there is rebirth then we will have a future. To be reborn is easier said than done. The world is undergoing the biggest change in the past 100 years. How can Midea be reborn? Change is the only solution.
In 2018, all that we have experienced was tough and real!
In 2018, there have been all kinds of sudden and overwhelming changes, unpredictable variables and random events mean that chaos has become the norm. Only by experiencing a business cycle can we understand its full power and in order to become sustainable, we must be able to take advantage of and mitigate the risks that it poses. Excellent companies are successful in different cycles.
The cold reality of 2018 carries a message for us with some hard and simple truths. When a crisis arrives, when the market drops, the mistakes we make are caused by ourselves. The core reason for our problems are, as the popular saying goes, "the issue lies with the management team".
Some of our management are too settled in their comfort zone and are unwilling to change. Today, we are facing tremendous changes, but we still use the thinking and methodology from 10 years ago to deal with them. How can we make opportunities? How can you reduce errors? How can we achieve good results?
the only certainty is uncertainty
This is the age of VUCA - Volatility, Uncertainty, Complexity, and Ambiguity. How do we respond to changes and take swift and appropriate actions? How do we foresee changes and make rapid adjustments? We need to implement three basic strategies :
First, leadership – we must be able to pull back before it is too late and cut one’s arm to save the body.
Second, deal with adversity – we must make rapid adjustments on the way that we manage and organize our resources.
Third, execution – we must be both fast and decisive.
Competition has never been so complex –The change in the year of 2018 is greater than the change in the entire decade from 1998 to 2008. IT constantly advances, business models innovate, technology changes, the digital era has arrived, industrial structure changes and undergoes paradigm shifts, demographics change, trends shift, and always there is the emergence of new competitors.
The disruption of the competition and scape is inevitable. New products, services, business models, and competitors will all provide users with equivalent or better value for lower prices. We all must consider, who are our competitors? Why are the research and development teams of hundreds of people not able to develop highly-sought-after products? Is our value chain still competitive? Can we please ask ourselves why are we not changing already? What are we afraid of?
Companies that stick to old methods and the old ways of thinking are caught in the doldrums. The current and direction of times have changed. Are we first to know? Last to know? Or did we not know at all?
What are our predictions for the future and what pathway should we follow? We need to see the way forward and be committed to change.
Midea at 50, Must be Reborn
Change is the simplest solution to counter challenges and complicated situations. Midea’s most precious asset is that it dares to change. Over the past 50 years, Midea has never been afraid of change. Now more than ever, before winter has arrived is the time to be proactive. But what should we change?
1. Business model transformation
Generally speaking, the value proposition (products & services) and profitability (cost structure & revenue) need to be changed. Currently, Midea R&D and production is dictated by supply and the products are being sold to customers through marketing and promotions. Midea should reform this business model and drive R&D and production to concentrate on customer needs.
2. Our growth model requires change.
In order to achieve inner growth we need to undergo metamorphosis, from economies of scale to network externalities, from traditional marketing methods to big data and focusing more on personalized user experience.
3. Innovation will decide if Midea can remain competitive into the future.
We will increase investment into Research and Development, develop our ability to create innovative products, IoT, explore new business models, search for new areas for growth, seize the chance to get ahead in digitalization, conduct mechanical and organizational restructuring, team renewal, etc. We can only survive if we innovate.
4. We need to drive digital transformation to alter the existing business model.
Utilizing technology such as ABC (AI, Big data, Cloud computing) and IoT to realize data-centered growth, using smart operations, to lower costs & increase efficiency (reduce, innovate, eliminate, increase), improving our consumer's experience and improving our operational capabilities by driving efficiency and strengthening our core business.
5. Winter is coming, and we need to confront it head-on.
There are no best times, no worst times, only the best actions and the best of yourself. Our competition is ruthless, we must improve upon our previous performance, we must do better than the others. Our daily work focuses on the three strategies of 'leading products, efficiency-driven and global operations’ providing us with financial stability. We must continue to accumulate core technologies and innovate to create user value.
6. If we break our inertia can we create change.
Everyone says they want to change, but why don’t they? Every day we are held back by our own inertia, we are settled in our comfort zone, can we really change? Midea constantly re-evaluates itself, we are adopting the values and mindset of youth. Today, there are over 400 students of the “Voyager Program” sitting here. To you, young people, I say you should be ready to rush forward from the back row. Talent is never lacking, what is lacking are the mechanisms and insight to make appropriate use of such talent.
Change is born of every single one’s desire, and change will only come from the drive of everyone at Midea. In 2012 we broke our arm to survive but as time went on it grew back stronger, and therefore breaking out of our inertia can deliver change.
Only by changing can we be reborn.
Change, starts today.
Over the mountains, the view is simply magnificent.