Zhang Jindong: The Twilight of Turning from Corner to Straight

Suning Cloud Business held the "2013 Annual General Meeting and the 2014 Investor Exchange Meeting" yesterday evening. Zhang Jindong, chairman of Suning Cloud Business, said in a speech that through a series of layouts, he has seen the dawn of a turn from a turn to a straight.

Talking about the orientation of this year's strategic implementation year, Zhang Jindong said that since the marketing revolution started in 2009, Suning has experienced three stages: strategic exploration, strategic layout, and strategic implementation. Suning's strategic layout stage is like a new high-rise building next to Suning's headquarters. It can be seen clearly by everyone from the ground up. Entering the stage of strategic implementation is like building a high-rise building. The process of interior decoration can not be seen outside, but once it is renovated, it will bring a pleasing experience.

According to Suning's first-quarter financial report, Suning is currently at the most difficult moment. In the first quarter, operating income was 22.869 billion yuan, a year-on-year decrease of 15.93%, and net profit attributable to shareholders of listed companies was a loss of 433 million yuan, a decrease of 187.98% from the same period last year.

Suning once explained the first-quarter results that the decline in performance was mainly due to the slowdown of macroeconomic growth in the first quarter, the continued sluggish consumer boom, and greater external pressure on corporate development.

Regarding the challenges faced by the transformation, Zhang Jindong believes that the transformation of Suning into internet retail is a brand-new field in China and even the world's traditional retail industry in the Internet environment. There is no mature experience to refer to and learn from. For Suning, not only is the transformation of a business model, but also a transition of management and management capabilities, which not only gives Suning great opportunities for development, but also brings huge challenges.

Regarding the problems existing in the transition, Zhang Jindong did not shyly say that he must not return to the state of mind and must not have an "ostrich attitude." Through this year's Strategic Management Department established by the President's Office, he personally participated in the execution and management of major projects and focused on the optimization of supply chain, logistics, and user experience.

Zhang Jindong proposed to deepen the reform of the supply chain cooperation model, change the model dominated by the negotiation game, and shift to the commodity cooperation model driven by the transformation of user needs. Focusing on the focus of self-category products, we will focus on developing 3C and mother and child on the basis of consolidating home appliances.

In the face of external doubts and concerns, Zhang Jindong stressed that “the heart is very firm. We have already seen the dawn of a turn from a turn to a straight track.” and expressed with confidence that in the future, a series of layouts last year, now Suning is like Buds in early spring.

The following is the original speech:

Dear shareholders, media friends:

good afternoon everyone!

First of all, everyone is very welcome here. Everyone came from afar from the concern for Suning's development. He hoped that through investigation and communication, he could understand the company better and more intuitively and provide advice for the development of Suning. On behalf of Suning, I hereby express my sincere thanks to all of you. To this end, during the preparation of this general meeting of shareholders, I specifically requested that the organization be more open and have a longer period of time, so that the management of the company can speak freely and communicate in depth. It has become a conference that announces its annual development strategy to shareholder friends and the society, brainstorming and seeking common development.

As a listed public company, over the years, Suning’s transformation has been under the spotlight of public opinion. Every move has received a lot of attention. “What is Suning’s current stage of transformation? How do we go?” I believe this must be The questions that everyone here and the majority of investors want to know.

Before answering this question, I remembered a word that Buffett said: "People who focus on the stadium can win the game, and the winners won't be those who keep an eye on the scoreboard." Therefore, I will first focus on Suning's field of play and discuss the rhythm arrangement of Suning's transformation.

In simple terms, since the marketing revolution started in 2009, we have experienced three stages of strategic exploration, strategic layout and strategic implementation. The years from 2009 to 2011 are the stages of our strategic exploration. We have experienced a marketing revolution, launched Suning's e-commerce, and proposed a new ten-year development strategy of “scientific transformation and smart services”. 12 to 13 years is the stage for the establishment of our strategic layout and transformation path. Suning Appliance has changed its name to Suning Yun Merchants and put forward the development model of “E-commerce + store-shop + retail service provider”, which in turn defines the “one-piece, two-wing” Internet roadmap. Positioning to the Internet retail as the main body, taking the O2O model and the open platform as the two-wing transformation path, the Suning Internet strategy has been finalized. In the 14 years, we have positioned itself as the implementation year of the strategy, emphasizing the “Three-Effects Principle” to focus on O2O store upgrades, supply chain integration changes, and rapid improvements in user experience. With the establishment of professional talent systems and the construction of internal innovation incentive systems, we will accelerate Efficient execution.

Looking at the transformation process objectively, it is a traditional retail industry in China and even the world. It has entered a brand new field under the Internet environment. We do not have any successful experience to refer to and learn from. This is not only a transformation of the business model, but also a transformation of management and management capabilities. It is ultimately necessary to implement the transformation of our knowledge structure and talent structure. Therefore, while bringing great opportunities to us, it also brought enormous challenges to the management including me.

Especially in the 13 years when we entered an accelerated transition period, we discovered profoundly: On the one hand, we copied traditional experiences and practices in emerging professional fields. On the other hand, in terms of management mechanism, it still retains the intensive management and control, standardized copying, and major regiment operations in the chain era, and is not as compatible with the iterative innovation, internal competition, and small-group self-management of the Internet organizations.

Faced with the problems and challenges, at the beginning of this year, we decided on the overall working ideas and direction of the year with the implementation of strategy and the "three-effect rule":

The first is ideological understanding. First of all, we must zero our mentality, correctly assess our own capabilities, objectively look at the laws of the industry, and reconstruct our own capabilities with a professional perspective; second, we must not have the "ostrich mentality", whitewash, and turn a blind eye to problems. However, it must not be arrogant. Because in the traditional retail industry in China, we took the lead in transition, and we have already gone through a process of exploration and formed a profound understanding of our future development and a foundation for our capabilities. Therefore, we should strengthen our confidence and overcome difficulties.

The second is from organizational management. First of all, we must focus on the strategic objectives. I set up the Strategic Management Department at the president’s office to personally grasp the implementation of major projects, continue to promote the smooth progress of the core project areas, and ensure rapid efficiency. At the same time, a project-centric working mechanism was established within the company to break through organizational barriers and strengthen cross-system collaboration. Followed by advocating bold and independent innovation and self-management by employees, the Bank launched a series of reform measures including the independent operation of the business department and the internal entrepreneurial mechanism of the employees. At the beginning of the year, it established eight independent companies including logistics, Red Kids, Finance, and PPTV. Professional teams do professional things, which in turn increases the flexibility and responsiveness of key businesses. The third is that we actively explore internal competition mechanisms, such as operating the self-operated and open platforms completely independently, encouraging internal marketing teams and third-party merchants to compete on the same platform, and forcing internal capabilities in user experience and supply chain operations.

The third is the transformation of the deep knowledge structure and talent structure. First, we continued to increase the precision introduction of industry-leading talents in an open manner. At the same time, we introduced a large number of professional mid-level backbones such as product managers, software architects, category experts, and logistics talents. Followed by strengthening the training of existing talents, knowledge reconstruction and capacity assessment. On this basis, the restructuring of Suning's talent team is realized, the team introduced is fully empowered, and the existing team promotes the transformation.

The work I just mentioned may not be as exciting as the one-year events of 13 years, but just as the famous management master Drucker once said: “It is absurd to think of management as a vigorous undertaking. Subjective delusion, because the truth of management is a boring, even tedious daily work." The phase of the layout is like the second phase of the building that is being built next to it. When it rises, everyone can see it clearly. As we enter the strategy implementation stage, our focus this year is to focus on projects and products. With a down-to-earth attitude, we will treat every detail of management and each user's experience. This is like the stage of interior renovation of the building, although it cannot be seen outside. What changes, but once the construction is over, it will bring a pleasing experience.

Next, I would like to brief the shareholders and friends on our next stage of development. The essence of Internet retailing is to use Internet technology to enhance the core competitiveness of retail, and ultimately reflect the supply chain, logistics and user experience.

In terms of supply chain, first of all, we need to profoundly change the cooperation model of the supply chain, change the model that was dominated by the negotiation game in the past, and transition to the pattern of commodity cooperation driven by user demand. Under the traditional environment of production-driven markets, the use of a fixed sales model for suppliers and retailers has not worked out in the context of Internet retailing. The zero supply relationship is not a negotiating relationship. The interests of both parties are not realized at the negotiation table. Instead, they must jointly understand and grasp the needs of users, operate the market, and serve users. The development of Internet technology, the application of big data, and the means of social marketing have provided us with such realistic conditions. Through the first quarter of trials, we are advancing work in this area, such as TCL Moda Mobile Phone and Meitu Mobile Phone, through the long-term accumulation of member data, access traffic, order information and other in-depth data mining, to achieve accurate demand forecasting And order-driven, through innovative marketing, custom marketing, group purchase pre-sales and other marketing methods, has achieved remarkable results. On the other hand, we are restructuring strategic cooperation with some important supply partners to establish a new cooperation model. For example, we are actively planning the establishment of an independent joint business unit with some suppliers such as Samsung. Product demand, order forecasting, joint promotion, open up the entire value chain. Recently, we launched the "Mobile Phone Family Plan", "STV Plan", "S Plus Air-Conditioning" and other major initiatives. It is a strategic project based on deep-seated changes in the supply chain.

Second, we have formulated a clear and focused self-employment strategy, namely, "consolidate large appliances, highlight 3C, and nurture mothers and children." Large household appliances have always been Suning's traditional dominant category. This year we will further consolidate through strategies such as strategic cooperation with home appliance manufacturers, outsourcing customization, after-sales services, and expansion of second- and third-tier cities, and continue to open up the gap with our competitors. 3C is the category with the strongest drainage capacity in the stores, especially the communication products. It has multiple strategic meanings such as fast replacement, strong demand for experience, and large value for entrance. At the same time, with the advent of the 4G era, wearable devices, smart homes, and car networking Product innovation, communication product category will enter a new round of large-scale development of the golden period. In this context, Suning will carry out more strategic cooperation with the three major operators, and actively combine the "Suning Connect" mobile resale opportunities, as well as the advantages of PPTV content and integrated marketing, so that the communications category as a 3C category The core of the build. With the opening of the national policy, the maternal and child market will open up further, and the female group will also have a good complementarity with the existing user groups of Suning, which is also the basis for our extension to department stores and daily necessities. Home appliances and the third-highest fist category cultivated after 3C, the purpose of setting up an independent company for red children is also to respond more flexibly to market demands and consolidate the position of the first baby brand in China.