Since the 37 years of reform and opening up, China's economy has gone through four adjustment cycles, starting from the fourth quarter of 2012.

On November 8th, Mr. Yang Zhou, President of Zhiyuan Group, joined forces with NetEase's financial program "Sentinel" to pay attention to the exploration and attempts of Chinese enterprises during the economic transformation period, and analyze the thoughts and thoughts of Chinese enterprises during the transformation period from the perspective of enterprise management methods.

Host: The economic development is slowing down and the economy continues to decline. Currently, China has been advocating innovation and industrial upgrading. In the current trend, what should we do specifically for the development of our economy and enterprises?

Yang Zhou: Behind the economy lies the growth process of physical enterprises. China has become the world's second largest economy, and the entire industrial chain in China has been very perfect. Behind the sound supply chain, rapid economic growth, and China's huge market, Chinese enterprises are also developing rapidly, but there are also some problems in their development. For example, our management is relatively extensive, the level of quality management is uneven, and the resource utilization rate is low, which also brings problems such as environmental pollution.

Host: Since the reform and opening up, China has achieved tremendous economic development results. In the process of pursuing growth, excessive expansion and predatory growth are no longer applicable to us. So how should companies change their management in the pursuit of development today?

Yang Zhou: Currently, the economic development is not as fast as before, so what we entrepreneurs need to think about is how we should survive for a long time in the current economic situation. Compared to some enterprises in developed countries with a history of 100, 200, or even 300 years, the development of Chinese enterprises is currently showing a young state. Our company is currently facing early development bottlenecks. According to Charles Handy's S-shaped curve, the development process of a company is usually divided into three parts, forming a curve from initial stage, to development and growth, and then to decline. This curve is the inevitable fate of the company. However, not every enterprise must fully follow this curve to develop, prosper, and decline. The fundamental to its sustainable operation lies in whether the enterprise can introduce management methods for change and strengthen its management foundation at the appropriate time during the development process. Avoid a downward trend after the peak arrives and form a new S-shaped curve. This is what we entrepreneurs need to consider at present.

Host: Based on your answer, is the current management style and methods fundamental to the transformation of our company?

Yang Zhou: When the economic development enters a bottleneck period, the competition for enterprise development is operational capability, which is an internal skill. As a company, how to improve its internal operational capabilities is currently an urgent concern. Measured by the level of sigma, excellent companies in Europe and America can reach four sigma levels, and in simple terms, the quality level can reach 99%. In contrast, domestic first-class enterprises can generally achieve a level of 3 sigma, which means a quality level of 94%. Behind this 5% yield gap is actually a huge profit margin. That is to say, if our company can improve its operational capabilities, our profit level will also significantly increase.

Host: As you just mentioned, compared to European and American companies, there are huge differences between our company and them. How did this difference arise, and how can we make up for it?

Yang Zhou: In the past, China's economy developed rapidly, and people did not have high requirements for material quality. They only wanted to meet a basic demand, so many enterprises were able to live well. This stage can be called picking fruits on the ground. Nowadays, the Chinese economy has been developing for so many years, and the middle class in China is gradually growing. The upgrading of consumer demand is also expanding, and the requirements for quality in the mid market will become higher and higher. As a company, if we still stay at the original level and only require products to be made, rather than refined, this is no longer suitable for the current economic background. The era of picking up fruits on the ground has passed, and now higher fruits are needed. At present, the development of Chinese enterprises is in this direction.

Host: How should our company improve its internal skills and enhance the quality of its products?

Yang Zhou: Currently, when it comes to innovation and upgrading, most of the focus will be on technology and industry, such as intelligence, big data, robotics, cloud computing, etc. Returning to the perspective of management, the process of management upgrading is actually very slow, and the proposal of a management concept usually lasts for decades or hundreds of years.

In 1945, Japan was defeated in the war. The entire Japanese archipelago is devastated, the economy has suffered a devastating blow, and raw materials are scarce. The Japanese market is also very small, and if products are produced in large quantities, it will cause inventory buildup. Therefore, Toyota has found ways to carry out small-scale production. But after World War II, most of Japan's workers were housewives. To help these lower level workers produce faster, Toyota introduced many standardized management methods, such as 5S and visual and simplified process operations, gradually forming the TPS Toyota production system. This also created Toyota's leading position in the world from the 1950s to around 2014, mainly due to excellent corporate management.

General Electric has experienced a hundred years of trials and hardships since its establishment. In the 1990s, Jack Welch of General Electric introduced the Six Sigma method from Motorola. As Six Sigma, Motorola uses it more to solve quality problems, while Jack Welch introduces Six Sigma into the operation management system of the entire enterprise. Through five years of effort, we have helped General Electric's market valuation double several times. This is also a typical example of how management methods bring enterprise development to a new level.

Host: From what you just mentioned, we can also see that the changes in management methods have a great impact on injecting new vitality into the enterprise. So how should our enterprise apply management methods such as Six Sigma and Lean?

Yang Zhou: In terms of management methods, one is lean management based on Toyota's production system, and the other is originated from Motorola and promoted in General Electric's Six Sigma management. The implementation paths of these two methods are different, with Six Sigma emphasizing more on logical management.

Host: China's industrial chain is very complete, and we have a large number of small and medium-sized enterprises. So, what are the differences in management between China's top 500 excellent enterprises and ordinary small and medium-sized enterprises?

Yang Zhou: In terms of enterprise classification, there is a phenomenon of 1.0, 2.0, and 3.0 coexisting in Chinese enterprises. The scale and management level of enterprises are uneven. For small and medium-sized enterprises, we can learn about management in Germany. I have been to many countries and visited Germany multiple times. During the process of communication, I found that there are many "invisible champions" in Germany. These enterprises may not necessarily be very large in scale, but they have typically focused on a small segmented field for decades or even centuries. These enterprises focus on a field or a type of product, achieving the ultimate in it. At this time, they can achieve a high level of market share in this segmented field, and their technology is irreplaceable.

Host: This is like the craftsmanship spirit we have often talked about recently, achieving the ultimate and perfection of something.

Yang Zhou: Our government has repeatedly emphasized the "craftsmanship spirit" this year, and entrepreneurs are also discussing the "craftsmanship spirit". This is also what we strongly advocate in our management and operation philosophy, to focus on doing one thing well. The same is true in management, such as Toyota's TPS management system, which has been in use for decades since the 1950s. They have never stopped using this method, continuously subdividing and refining this management method, ultimately taking root and forming the company's own culture. This is also a manifestation of the spirit of craftsmanship.

Host: Next, let's talk about large enterprises, such as Haier and Gree, which are well-known to everyone. Can they serve as representatives of two enterprises that voluntarily engage in transformation and upgrading?

Yang Zhou: On the one hand, Haier has continuously transformed its organizational structure and made a lot of optimization in management. At the beginning of 2000, Haier introduced lean management and Six Sigma management, which had not been interrupted for more than a decade. In fact, many of our companies are doing such things, but some of them soon fade or give up. Continuous promotion like Haier is a very pragmatic approach.

Dong Mingzhu, the Iron Lady of Gree, believes that: What does enterprise development rely on? Technology? Marketing? None of this is true. I believe it is management ability. Without management, we talk about innovation, technology, and quality. Without management ability, how can we control quality? How can we improve quality level? These all rely on excellent management to achieve. Technological innovation requires a good environment, and without such a complete management system, we can give them a relaxed and respected environment What technological innovations can they bring to the environment? So, I believe that management is a very comprehensive ability, and every point of an enterprise cannot be separated from management

Host: Large enterprises often have complicated systems and personnel, so what kind of management transformation should they make?

Yang Zhou: General Electric is a great example, with approximately 300000 employees worldwide, and their department walls are also very severe. After introducing the Six Sigma method, General Electric emphasized breaking departmental walls and advocating borderless teamwork. When there is a project, a cross departmental project team is formed, where members share the same goal and work together to solve problems. In such communication, it is often easier to engage in informal communication, which is also beneficial for cross departmental members to understand each other. Having been influenced by this culture has led to a better understanding between departments, invisibly improving the efficiency of the organization.

Host: There is an old saying that the spring river water heating duck is a prophet. Each industry needs to make progress on its own. As a service-oriented consulting enterprise, how should we transform our own management?

Yang Zhou: As our consulting and training industry, China is a very large market, but looking at it, there is not an internationally renowned brand, which is caused by many factors. We lack a deep understanding of enterprise operations, and it is difficult for the core consulting team to have a large-scale talent gathering due to some regional limitations. Our management team comes from six different regions around the world, with people from different regions participating in the management and operation of the entire team, combining a global perspective with a localized perspective.

Our first priority in operation is to understand our customers, because only by understanding them and satisfying them can we improve our service quality. Secondly, when managing internal teams, we emphasize the "three no principles", namely no manufacturing, no outflow, and no tolerance. So when it comes to our domestic enterprises, some of them may not have a deep understanding of operations, some may lack professional talent for guidance, and some may have communication problems. For enterprises, the current market environment is a great one. How can we improve our skills, help these enterprises that need to provide transformation consulting, and help them overcome difficulties, establish one-stop service capabilities, and grow and progress together with customers? This is also what we are constantly exploring.

So everyone will also see that our overseas study tours are also rapidly expanding, including various aspects of enterprise operations, such as Germany, the United States, Japan, Singapore, and Israel. We are all opening up these routes. Including our outsourcing of talent cultivation in future enterprises, our assistance in the establishment and research of corporate universities, the establishment of a complete talent cultivation system, and consulting on excellent operation systems. The modularization of products is also constantly enriched according to the company's current positioning, which will also lay a good foundation for our future development. Our enterprise will show an upward trend in the short term, but in the overall context, it will show stable development in the future. But talent shortage is a major problem faced by enterprises.

Host: When a newcomer comes to our company, does he have access to any projects or modules other than his own job?

Yang Zhou: We use a matrix based project management method internally, usually with one employee as the leader and the rest of the relevant people joining in on a project. When a new project is launched, the project leader will change according to the different projects, and many people will join in the process. Therefore, in a company, employees in a department are not simply limited to a certain aspect of work, but also involve multiple aspects of the company's affairs, comprehensively improving themselves through a large amount of practice.

Host: We also learned that from the 19th to 20th of this month, the 6th International Excellent Operations Annual Conference will be held at the Suzhou International Expo Center. Many entrepreneurs, industry leaders, and experts will also participate in this event. Is there anything we can learn from among these enterprises?

Yang Zhou: The theme of our annual meeting this year is "Gathering global wisdom to explore the path of new craftsmen", which is also revolved around the current economic situation. Although everyone is talking about transformation now, there is no clear path to how to do so. At present, we need to promote the spirit of craftsmanship, and new craftsmen are not equal to craftsmen. The spirit of craftsmanship is focused on achieving the ultimate in things, while the new spirit of craftsmanship refers to combining the needs of the market on the basis of focus and extreme to adapt to current changes, with the ultimate goal of meeting the needs of customers. This is what any enterprise that wants to achieve long-term development needs to do.

Host: Is our company currently at a similar stage to Japan and Germany in the past?

Yang Zhou: Enterprises in Japan and Germany are developing faster than those in China, so China can refer to them to some extent. Although history is similar, it is not exactly the same. China also needs to strengthen its product awareness and improve product quality.

Host: Although the economy is currently in a cold winter stage, we need to have confidence and hope. Thank you very much for Mr. Yang Zhou's sharing. Now we invite Mr. Yang Zhou to provide some effective and constructive suggestions for everyone.

Yang Zhou: Thank you very much for your participation and watching. We hope everyone can communicate more. We are also promoting communication across the entire industry and industry. The International Association for Excellence in Operations is an open platform that will hold the 6th International Excellence in Operations Annual Conference from 19th to 20th this month at the Suzhou International Expo Center. If you have time, you can come to the site to learn and communicate. If time and space are inconvenient, it's okay. NetEase will also live stream the entire event on the day of the conference. We hope everyone can participate more.