Article is from WeChat public account: CEIBS Business Review (ID: ceibs-cbr) , author: Zu Lin (zero brand consultant, founder & chairman), from the title figure: Oriental IC

Appropriate risk management investment cannot be treated as a general cost, but a guarantee, which is a strategic investment of the enterprise. Only with strategic investment can an enterprise have a future.

Many Chinese entrepreneurs have a Chinese-style annoyance: they tremble every day, like walking on thin ice, but employees have no sense of crisis at all, they should eat, drink, and live …

Employees have no sense of crisis. The problem lies with the boss. The sense of crisis in building a team and the sense of crisis in an organization requires the boss to do it himself.

Companies can start from six dimensions and embed crisis response genes into corporate culture.

Catch and create key events

The first dimension is to capture and create key events.

Key events are a prerequisite for implanting crisis response DNA. Enterprises without crisis awareness need the huge impact of major crisis events in order to produce mutations in cultural genes. New genes that are passively excited are mutations; new genes that are actively excited are implanted.

For example: Traditionally companies doing pure offline business generally do not have Internet genes, or they may have gene mutations after being hit by the market, with Internet genes; or they may be actively transforming and gradually embed Internet genes.

The crisis response genes of most companies are mutated by encountering crises again and again, and only a small number of companies are implanted autonomously. U.S. companies attach great importance to proactively promoting strategic transformation and organizational change when things go smoothly, so their ability to resist risks is relatively strong.

Let’s look at Huawei’s example. In 32 years, Huawei has experienced four crises.

For the first time, it was “Huawei’s Winter” in 2002. From 1987 to 2001, Huawei’s performance increased for 13 consecutive years. In 2002, it experienced an unprecedented negative growth. At the same time, Ren Zhengfei also suffered from depression. At that time, Huawei was already a full shareholder, and employees suddenly realized that the money they invested in the company might be lost and they would be trapped.

The second crisis was the pressure of public opinion and the crisis of people ’s hearts from 2008 to 2009. In 2008, the new National Labor Law was promulgated, stipulating that enterprises should sign open-term labor contracts with employees who have worked in the company for more than ten years, that is, life-long employment and cannot dismiss employees. This directly impacted Huawei’s three major principles of human resources: cadres can go up and down, employees can go in and out, and salaries can be high or low.

Huawei’s approach is to spend money to buy out the service life of 7,000 employees and re-sign contracts. This measure was hyped by the media as Huawei challenged the Labor Law, and even the National People ’s Congress Law Working Committee spoke out, saying that Huawei ’s measure was invalid. For a while, the hearts of Huawei’s people floated and the crisis was full of crises.

The third crisis is an industry crisis under the impact of the Internet from 2013 to 2014. At that time, Ren Zhengfei was under the siege of many media. “Is boss Ren old?” “Can he adapt to Internet requirements?” Many employees think that Huawei’s business model is outdated, so they want to go to the Internet..

The fourth crisis is the Meng Wanzhou incident from 2018 to the present. Huawei is facing the encirclement of national power of the superpowers and is in danger. The crisis has not yet been lifted.

Not only Huawei, but Matsushita Kosuke, who is considered lucky in his life, has encountered three major business crises in his life.

The first time was the global economic crisis that broke out in 1929, which was superimposed with the financial crisis that occurred in Japan two years ago. The market was depressed, Panasonic’s inventory surged, and operations were in trouble.

The second time was in 1945, Panasonic was ordered to cease operations. During the Second World War, Panasonic was forced by the Japanese government and forced to produce military wooden ships and wooden planes. After the war, Panasonic was identified as the “Chaebol” by the commander-in-chief of the Allied Forces in Japan, and Panasonic waited for liquidation. Restricted freedom of movement.

The third was the Atami talks in 1966. After the 1964 Tokyo Olympics, Japan’s economy was depressed, the market was fiercely competitive, Panasonic’s sales were weak, and its agents suffered large losses. Panasonic faced a huge danger of the collapse of its sales channels.

It is gratifying that Huawei is still alive and Panasonic is a hundred years old. The reason is that they can make good use of every crisis, create a crisis as a key event in the company’s development history, build a systematic risk management mechanism, and implant crisis response DNA.

Crisis insights and behaviors of leaders

Leaders are the spiritual leaders of an enterprise. In the early days, corporate culture was an entrepreneurial culture, commonly known as “boss culture.” Leader crisis insight and crisis behavior are the second dimension of DNA implantation.

The formation of corporate culture generally goes through five stages:

The first stage is survival-oriented, which is to survive.

The second stage is a rule-oriented entrepreneur culture, commonly known as “boss culture.”

The third stage is a performance-oriented team culture, which is no longer affected by the individual capabilities and factors of entrepreneurs.

The fourth stage is an innovation-oriented corporate culture that forms the organizational power of an innovative culture.

The fifth stage is a vision-oriented competitive culture, and culture becomes the core competitiveness of an enterprise.

Using crisis events to implant new cultural genes is shaping the team culture and then becoming the organizational culture and vision culture.

Using crisis events to implant crisis response genes, leaders ’crisis insights and behaviors are key. Leaders need to judge the seriousness and urgency of the situation from the strategic height and the height of corporate life and death, including qualitative judgment, strategic determination, strategic actions and systematic actions.

In qualitative judgment, entrepreneurs should make a declaration of “a major crisis is coming” and call on all employees to enter a crisis response state. Entrepreneurs should not be afraid of danger, they must have sufficient strategic determination, calm, self-confidence, and give people confidence and strength. In strategic measures, we must make major decisions to turn the tide. In order to resolve the threat, we must be methodical, systematic, and logical, structured, and convincing in systematic actions.

Let ’s look at a key event, implantExamples of crisis response genes.

Suntory does not make beer. Founded in 1899, Japan’s Suntory Co., Ltd. first produced and sold wine. In 1923, it began to produce whiskey, setting a precedent for Japanese wine culture. As Suntory has a strong position in the Japanese liquor market, making a lot of money, this situation continues, and Suntory began to lose its fighting spirit and sense of crisis.

Suntory ’s leadership was aware of this issue, and entered the fiercely competitive beer industry in 1962. It competed with the three traditional brands of Asahi, Kirin and Sapporo, and its market share gradually increased from zero. In the past 20 years, it has been maintained at about 10%, ranking fourth.

Entering a potentially unprofitable industry to stimulate a sense of crisis for employees is rare globally.

The crisis performance of leaders has the most direct and far-reaching impact on teams and organizations.

Back to Huawei’s four crises.

In March 2001, when Huawei’s development momentum was very good, Ren Zhengfei published an article in “Huawei’s Winter” in the company’s internal journal, warning everyone not to be blindly optimistic and to live in peace. This paper-backed article is not only a wake-up call for Huawei, but also suitable for the entire industry. The subsequent burst of the Internet bubble made this article widely circulated, and “Winter” has since surpassed the season and has become synonymous with “Crisis”.

It’s not enough to say that the crisis actions of leaders must also be transformed into an organization’s crisis management mechanism.

The first crisis of “Huawei’s Winter” in 2002, Huawei spent by luck: Emerson in the United States purchased Huawei’s communications power business for about 6 billion yuan, which objectively saved Huawei.

In the second crisis, facing the pressure of public opinion and the crisis of people ’s hearts from 2008 to 2009, Huawei internally launched a “struggler culture” discussion and established a “customer-centric, struggling-oriented, Huawei has survived this crisis of heart and defended the company’s core values ​​by relying on a “deep beach, low weir” and “a long hole and a long hole” culture.

The third crisis, that is, the industry crisis under the impact of the Internet from 2013 to 2014, Ren Zhengfei used the “Iron Pipe” and “Water” to locate the relationship between mobile communication equipment and the Internet, using strategic determination to calm the entire team to respond to the Internet .

The fourth crisis, the Meng Wanzhou incident from 2018 to the present, Huawei has made personnel adjustments in time to make up for the work of Meng Wanzhou, and at the same timeStable global suppliers, Ren Zhengfei personally came forward, explained rationally, and maintained sufficient restraint, confidence and manners.

At present, Huawei has extracted a clear view of risk: companies are like plants, and the deeper they are rooted, the stronger they become.

Let’s see how Kosuke Matsushita weathered three major business crises.

The first crisis, the global economic crisis of 1929, Panasonic’s measures were: halving production, reducing attendance by half, not firing any employee, and selling all employees. In less than a month, the inventory was sold out, and orders increased sharply.

In the second crisis, Panasonic was ordered to cease operations in 1945. Later, due to mass protests, the company was identified as a “non-treasury” and restarted operations. In 1946, Kosuke Matsushita founded the PHP Research Institute to study how to achieve peace and happiness through prosperity.

The third crisis was the Atami talks in 1966. Facing the grim situation, Kosuke Matsushita re-appointed Chairman and Chief Operating Officer, reformed the marketing system and rectified marketing channels, eliminated cross-borders, achieved price stability, regained the trust of agency owners, and launched installment business , Opened the consumer finance business.

Today, the world-famous management concepts of “all-person management”, “life-time employment”, “reservoir-style management” and “common survival and common prosperity” are all precipitated by enterprises in the process of responding to crisis. Spiritual wealth.

Establish a crisis response mechanism

Establishing a crisis response mechanism is the third dimension for companies to implant crisis response DNA.

The crisis is coming suddenly. How can we deal with it calmly?

Business Continuity Plan (BCP) can guide companies through the crisis steadily. Generally, it is carried out in four stages: one is to formulate an action plan to ensure the safety of employees, the other is to formulate an action plan to prevent the second occurrence of the crisis, the third is to formulate an action plan to restore business, and the fourth is to formulate an action plan to ensure business continuity.

The avian flu outbreak has occurred almost every few years since it was first detected in Mexico in 2009. But the virus is constantly mutating and can be controlled if a vaccine is available. So, how can companies protect employees before a vaccine is developed?

This requires an effective business continuation plan when there is no epidemic. (BCP) . For example, senior officials at a certain level of Panasonic Corporation carry carry-on emergency medicines with them, including preventive medicines against bird flu and SARS, and all medicines must be replaced when they expire.

Almost every Japanese company has strategic materials configured based on the business continuity plan, including masks, medical alcohol, protective clothing, etc. Some items that are not valued in China are also in the strategic inventory. And “the company’s leadership should not travel on the same flight”, which seems to be a national leader’s risk prevention guidelines, is also observed in many multinational groups.

For another example, after the Great Tohoku Earthquake in March 2011, the Japanese automobile industry was hit hard. Due to the interruption of the supply of parts and components, most of the vehicle production lines were shut down. 37%. In May of that year, it was restored to 50% of the previous year, and in June it was only 70%.

After this epic natural disaster, Japanese auto companies conducted a thorough census of all vehicle factories and their Tier 1, Tier 3, and Tier 3 suppliers, which took about two years to complete. For the adjustment of factory location, all factories must be kept away from the coastline, nuclear power plants and other locations and facilities with major safety risks.

Regular risk management

Forging business plans into organizational capabilities is the fourth dimension for companies to implant crisis response DNA.

Enterprises can build risk management mechanisms from three major aspects: First, strategic risk management mechanisms. Any strategic activities cannot escape the risks that accompany them. Strategic risk management mainly targets business investment, major business reforms, strategic cooperation, and corporate mergers and acquisitions. Expand. The second is the business risk management mechanism, which is mainly targeted at sales risks and quality risks. The third is crisis managementManagement mechanism, focusing on major quality issues, corporate scandals and disasters.

In order to improve the robustness of risk response, these three mechanisms need to complement each other.

To systematically build an enterprise’s risk management mechanism, it includes the establishment of a risk management committee, the formulation of policies and benchmarks for risk management, the periodic assessment of corporate risks, the preparation of risk management plans each year, the regular implementation of risk management supervision, There are six steps to implement corrective and corrective measures thoroughly after the risk management inspection.

Building the necessary strategic reserves

Another important aspect of risk management is ensuring the necessary strategic reserves. In addition to the safety stocks in the normal period, the company also needs to establish strategic stocks in extraordinary periods, such as: strategic materials, safety necessities, and daily necessities required to maintain production for one month.

In December 2019, I led a delegation of Chinese invisible champions to Japan for training. There is a company called Senju Metal Industry Co., Ltd. which specializes in the production of soldering materials. After experiencing earthquakes, floods and other disasters, Senju Metals has maintained sufficient inventory of copper, tin and diesel, and built its own power generation system. These inventories can ensure that the company can continue production for one month without external supply.

Almost every Japanese company now has strategic materials based on business continuity plans, including masks, medical alcohol, protective clothing, and some drugs. Some items that are not valued in China are also among them. .

Japan is a country with many disasters and hardships. Japanese companies have indeed experienced more disaster crises than we have, which has also created their strict risk management mechanism.

The establishment of the necessary strategic reserves is the fifth dimension of crisis response DNA.

Promote tissue metabolism actively

The sixth dimension of embedding crisis response DNA into corporate culture is to actively promote the organization’s metabolism.

Specifically, it is necessary to maintain the crisis awareness and crisis ability of the workforce, maintain the struggler culture, normalize recruitment, pay special attention to the introduction of new forces, carry out the elimination system every year, and continue to promote organizational change.

Risk management requires investment, and a formal budget must be made. On the scale of sustainable management of an enterprise, one end is risk. If the countermeasures are not sufficient, it will directly cause operating losses; the other end is costs. If the countermeasures are to be adequate, human, financial and material resources are required.

The significance of investing resources in risk management is to offset possible risk losses with limited resources. Appropriate risk management investment is a guarantee, and cannot be treated just as general costs. This is a strategic investment. Only with strategic investment can we have a future. ^

Article is from WeChat public account: CEIBS Business Review (ID: ceibs-cbr) , author: Zu Lin (zero brand consultant, founder & chairman)