Curated by Alibaba Business School
    Source: Hupan University

    Jack Ma-cover.png
    As people are still fighting against novel corona virus (COVID-19) on the frontlines, enterprises are starting to gradually resume operations, Jack Ma gives 3 pieces of advice to entrepreneurs as they get back to work.

    1- Those enterprises that can ensure the security of epidemic prevention and get approval from the government should gradually resume production as soon as possible. The rest should try their best to strengthen internally and to get ready to resume operations.

    2- Entrepreneurs should start to review the internal problems as soon as possible to figure out what problems you have to solve, what opportunities you have to seize. You also need to check what do you want, what do you have, what do you need to give up and what do you have to insist, in order to find out a direction in crisis and changes.

    3- Entrepreneurs should start to learn digital way of working and doing business. In the future, the enterprises will only be distinguished by whether they are using Internet technology. The ones using Internet technology will definitely survive better than those who are not.

    In addition, Jack strongly recommend an article from Inamori Kazuo: Make Depression a Launch Platform for Further Development.

    Here are some excerpts:

    When the depression storms, how should a business leader operate the enterprise? I would like to share my thoughts in 5 points:

    01
    All in Sales

    During an economic slump, all the staff should become sales. People in different positions will have unique and creative ideas. We should not waste those things during depression. We can ask all the staffs to take these ideas to our customers to test their interest.

    Apart from marketing, manufacturing and R&D departments, the corporate and back office teams also need to be involved. All the staff should unite to propose to our customers and create business opportunities until we get orders and complete the job.

    This approach is not only for satisfying our customers, but also for training the staff to master the entire business process. It is not only that the staff play roles as assistants to the sales team when visiting the customers, but also they can integrate their ideas into products and propose them to the customers. This can help all the staff think proactively during a downturn.

    It is what Kyocera did during the great depression due to the oil crisis.

    Kyocera usually has a clear division of labor in research, development, manufacturing and sales. But when the Oil Crisis happened and the orders suffered a tremendous decline, I proposed, “Let’s go all in on sales!”

    We called on everyone to do a sales job including those non-experienced production staffs. Even those shy people who used to immerse themselves in working on site had to pay visits to customers. Although they might be very nervous, they had to be very brave to propose “Is there anything we can do for you? We can do whatever you need!” All of us tried our best to win orders.

    And we got unexpected result because of this. Generally speaking, the sales teams and production teams would stand on opposite positions. For example, production department would usually blame sales department if we low too few orders and vice versa. They would usually squabble with each other.

    But if we sent production staff to sell products, they would understand that it’s not easy. Because they now had some sales experience, they could understand how difficult the sales job was, and sales would also thank production staff for their help, which would help promote harmony between the two different roles and help them to work better together to co-develop the business.

    Through an all-in sales strategy, people would achieve a common sense of purpose: even a high-tech company has to survive by selling products, this is the foundation to a company.

    Those who graduated from prestigious business school and those who were senior managers knew little about the humility required when they had to promote products to the customers. When they helped with sales, they had to act like an ordinary clerk to win over orders. Being humble in front of customers is the basic requirement for doing any business.

    I always told my employees that the fundamental attitude of sales is ‘to be the servant of customers’. We can do whatever they ask. It is impossible to gain any orders during a depression if we are lack of the spirit to serve customers.

    It’s almost impossible to operate your business well if we promote those who are lack of such front-line experience as senior leaders. No matter they are from production department, financial department or any other department, it’s very important to let them experience how difficult it is to win over real orders.

    It’s very important to let all employees especially those from outside sales department to have “the skin cut experience” to understand how difficult to get orders and to manage a business during downturn period.

    02
    All in New Product Development

    In economic slowdown, new product development is very important. The products you do not have time to focus on usually can now be worked on by all the teams in the company. The product development can help unite everyone from the technical team, to market research and operation, to production team.

    In a down time, your clients also tend to have more free time and are also looking for new products to sell. This is a perfect time to visit your clients and collect ideas and feedback from them on product improvement. Their input will help you in product development and market expansion.

    There may be engineers who have been wanting to develop new products or take on new technical challenges but were too busy to do so.

    For example, a bakery may be too busy making their bestselling cakes to try out new recipe. However, in a depression, the popular cakes are no longer sold very well and this would be an opportunity to create something new and test out new flavors or products with the customers. The down time can be a good time for innovation and take on new challenges.

    In a downturn, customers are also more willing to test out new ideas/products with you and have the time to give you more thorough feedback. This may give you inspirations and new perspective to create new products or concepts.

    Here is one real case.

    In the early startup phase, Beijing Pottery used to produce components for textile machineries using ceramic. The hardness of ceramic was able to withstand the friction created by the operation much better than stainless steel.

    When the oil crisis came, the textile industry went into a slump. Beijing Pottery also lost most of its orders. We then moved to the “all-in sales” and “all-in product development” two strategies.

    One of our sales went to visit a fishing tool production company and noticed that the fishing rod with a winding device, in which the contact part where the fishing line slides uses a metal guide ring. The salesperson proposed to the company to replace the metal guide ring with the more durable ceramic guide rings produced by Beijing Pottery.


    However, the guide ring on the fishing rod does not need to withstand the constant friction as the components in the text machinery. The company did not see the need to replace the metal guide ring with the more expensive ceramic ring.

    The salesperson did not give up. He visited the company a few times and explained that ceramic ring is not only more durable but also has a lower friction coefficient with the fishing line.

    The friction coefficient can affect the fishing experience particularly during the throwing and catching phases.

    The excitement of catching a fish can be quickly replaced by disappointment when your fishing line snaps due to friction. The large friction due to sudden increase in the pressure between the line and guide ring can convert to heat which can then melt the line and result in breakage of the fishing line.

    After hearing the explanation, the company management decided to do a test and the ceramic ring performed much better than the metal ring.

    The management decided to try the ceramic ring in their new production and even won a prize in the fishing contest. The fishing tool production company was very pleased and decided to switch completely to the ceramic ring.

    This new product saved Beijing Pottery at this crucial time. It even increased the sales and profit for the company. We can now see all the high end fishing rods are adopting ceramic ring in China and globally. To date, it is still a key product for Beijing Pottery.

    This example showed that the product development during the down time is not a desperate movement, rather it is to explore new markets needs built on past experience. The focus for a company in the down time should be on the development of new products and technologies.

    03
    Cut Costs Completely

    During a depression, the competition became more and more fierce. Seeing that the number of orders and unit prices continued to decline, to maintain profitability at this time, it is necessary to cut costs thoroughly. The decline in costs must be greater than the decline in prices.


    However, even if we have made great efforts to reduce costs to cut costs further, most people think it is “near impossible”. But this is wrong! When you think it’s impossible, it’s really the beginning of possible!
    Seemingly dry towels need to be twisted harder to get every last drop, more efforts must be made to reduce costs completely.

    Labor costs cannot be reduced casually, so in addition to improving everyone’s work efficiency, everything must be re-examined, and costs in all aspects must be completely reduced.

    “Is the current manufacturing method really the best? Are there any cheaper materials?” It is very important to review and improve the past practices fundamentally and make comprehensive changes resolutely. Not only “hardware” such as manufacturing equipment, but also “software” including organizational integration or dismantling, rationalization and costs reduction, must be carried out thoroughly and with determination.

    During a depression, competition is fierce and prices continue to fall. At this price, profits must still be squeezed out, and costs must be completely reduced. Profits can still be made at low prices close to the limit. If such a corporate strength can be built, because the depression won’t last indefinitely, when the economy recovers and the order is restored, the profit margin will increase rapidly.

    Efforts should be made to lower the break-even point of the entire enterprise by reducing product costs. Even if sales are halved, profits can still be made. If you can build such a corporate strength, when sales recover or rise, you will achieve a higher profit rate than in the past.

    That is to say, in a depression period, profits can still be generated under the condition of low prices and low sales. Once this muscle-type corporate physique is formed, when the economy recovers and sales resume, it will become a high-yield enterprise.

    The depression period is a good opportunity to strengthen the corporate physique. When the economy is good, there are a lot of orders, and we are too busy with these orders. Even if you want to cut costs, employees will not take it seriously, but in the depression period, all employees will be very serious and strive to reduce costs. In this sense, an economic downturn is the only opportunity for companies to completely cut costs.

    If you think about it this way, when the depression is coming, it’s a good time for companies to try and reduce costs. This is not a lasting and negative response, but a proactive response to management improvement.

    On the contrary, “because it is a depression, there is nothing we can do about losing money”. If you are at a loss what to do and do not actively respond, then even if the economy recovers, you will only make very little profit. The operation of such a company will only continue to sway like a tightrope walking.

    Seize the opportunity of a downturn and work hard with employees to thoroughly employ various measures to reduce costs, such as “keep the corridor lights half on”, “don’t keep the bathroom lights on often, and remember to turn off the lights when you leave”, continuously carry out practical measures.

    It may seem like a trivial matter, but working with employees to cut expenses step by step but substantially, it is this kind of effort that is the most practical and effective way to build a high-yield enterprise.

    04
    Keep High Productivity

    It’s very important to keep productivity high during the depression. With the decrease of orders due to depression, there are fewer jobs to be done than in the past. If the same number of people still produce, the production efficiency of manufacturing will be reduced, and the working atmosphere in the workshop will be relaxed.

    In this case, the redundant workers should be removed from the production line to maintain the tension at the manufacturing site. In the past, it took a lot of effort to improve the production efficiency. How to maintain it in a downturn, I have racked my brains.

    This happened during the oil crisis.

    As mentioned above, many enterprises fired employees at that time. At that time, I considered that employees could not be unemployed in any way, but orders dropped sharply in a short period of time. If they were still done by the original number of people, they would not be able to maintain the high production efficiency in the past. Once the operation efficiency drops, it is not easy to restore the original high productivity.

    Based on this idea, at that time, I decided that since the order was reduced to 1 / 3, the personnel at the manufacturing site would also be reduced to 1 / 3, and the remaining 2 / 3 personnel would be removed from the production line to engage in the maintenance of production equipment, the painting of walls, the renovation of flower beds and other beautification of the factory environment. At the same time, we hold philosophy training courses to let employees learn my business philosophy from the foundation again, so that all employees in the enterprise can master the common way of thinking.

    That is to say, when we reduce production due to depression, we must never reduce production efficiency. We should not only maintain high productivity, but also do the factory environmental beautification work that we didn’t have time to take into account in the past, and organize philosophy learning activities to unify the understanding of organizational direction, which will become the driving force for enterprises to leap forward again.

    Of course, two thirds of the people do not produce, but our enterprise must survive. As mentioned above, the enterprise must have sufficient internal retention. In order to build a high-yield system for enterprises, we must ensure sufficient internal retention so that we can overcome the crisis, which should not be forgotten.

    05
    Build good relationship

    An economic slowdown is an excellent opportunity to build good interpersonal relationships inside a group.

    When situations are difficult, the interpersonal relationship in the company will be tested to tell whether the relationship of sharing pains and happiness together has been established.

    In this sense, depression is an excellent opportunity to adjust and rebuild good relationship among staff in a company. It is very important to take this opportunity to strive to build a better corporate culture.

    I have always emphasized that the most important thing in running a business is the relationship between the managers and the employees. Managers must take care of the employees, and employees must understand the managers, both sides need to help each other and to support each other. Such relationship must be established. It is not like the rival relationship between the capitalist and the laborer. The employers and the employees must hold the same point of view and jointly seek the development of the enterprise. This is the corporate culture that should be formed.

    Hence I always use every opportunity to talk to the employees and try to make everyone think the same way. We also host drinking parties for the staff. They would sit together, toast each other, have heart-to-heart conversations and seek mutual understanding. I always try to create these opportunities to talk to the employees.

    Even if I have made such efforts, once the company encountered a depression, I can’t just say good words. “You’ll need to work harder, the expenses for your team will be reduced, your salaries will not be increased, and you will not get your bonus. Please bear with me, etc.” Harsh sentences like this will have to be said under this situation.

    Some managers used to think that they have become a member of their employees group. And assume that the employees would understand the company’s difficulties and would work together with them. So they require the staff to work harder and demand them to make self-sacrifice during the depression. Unexpectedly, the employees don’t accept the requirement, and resist it, until then that the managers realize the good relationship within the company has not been fully established yet, and they all feel surprised to see such outcome.

    When a depression comes, people are supposed to work together to overcome the difficulties. But often at this time, employees would choose to betray the companies, leading to the division of the company and even its collapse. Such things often happen.

    When symptoms of chaos slightly show up in a company, managers shall start to reflect on it seriously. They shall think about how to rebuild the trust with employees and have candid conversation with employees to exchange for ideas. It is very important for managers to think hard about the issue.

    These problems will not show up when the economy is good, but only when people are in trouble. At this time, we shall not only feel pity for the bad relationship in the company, but should thoroughly think about how to improve and what to learn from the lessons to improve.

    I hope that my experience and the measures I have mentioned, can bring you some inspiration. I hope that China, which leads the development of the world economy, can continue to grow steadily.

    * This article was excerpted from the keynote speech “the great wisdom of leap in depression” made by Inamori Kazuo, the “Saint of operation” of Japan, at the Shenyang report conference on Management Philosophy of Inamori Kazuo in 2016.

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