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The Importance of Business Operations Over Marketing

  Don’t have illusions about marketing. The success of an enterprise is the success of operation, and marketing is only a small part of business operation. As the founder of a marketing consulting firm, it’s a bit of a job loss to say that, but it’s the reality of the moment—marketing isn’t that important.
  C’estbon, the second-ranked bottled water brand in China, does not do much advertising, and its marketing is mediocre, but it can achieve an annual revenue of more than 10 billion yuan and maintain double-digit growth in 2022.
  The most important thing in making water is the ability to organize channels, not marketing. If you study C’estbon, Coca-Cola, Nongfu Spring, and Master Kong, you will find that they have their own differences, but it is not just a single idea that can sell water. Therefore, don’t expect the marketing company to come up with a plan to make the business successful. All great companies and brands do business honestly, do organization building and channel laying, rather than relying on explosive marketing.
  Do you know who is the most sold fragrance brand on the Internet? Who is the watch brand? Who is the mouthwash brand? Who is the burger brand?
  The first one is Yin Mi, which is the brand with the largest sales volume of fragrances on the whole network. The founder Mr. Shen came to our company some time ago, and I chatted with him for a long time.
  The second brand is called Misada. I have been to this company, and this brand accounts for half of the sales of watches on the entire network.
  The third brand is Mixed, which is a mouthwash brand. I met a business owner in Shenzhen, and the sales volume of Mixed has surpassed that of Listerine.
  The fourth is Wallace, which has more than 20,000 stores across the country. It is the second largest distribution channel for Pepsi in China, and the number of stores in China is more than that of KFC and McDonald’s combined.
  Many new consumer brands that we think are particularly powerful have seen sales decline recently, and even began to go bankrupt and close stores. Why are brands we have never heard of doing so well and making money? Why do many well-known brands have no profit or even a negative profit?
  One company set itself a business goal for 2026, and the boss said, “Achieving annual tax revenue of 100 million yuan and profit of 100 million yuan.” It is the first time I heard that a brand regards the tax target as a business target, and it is also the first time I know that its profit target is not to reach 100 million yuan, but to control it below 100 million yuan. The brand is called Pangdonglai.
  Fat Donglai has never advertised, because the business is so good that other supermarkets have no business. In order to leave a way for his peers to survive, Fat Donglai closes the store every Tuesday to control profits. Countless supermarket owners across the country have tried to learn from Pang Dong Lai, but they can’t actually learn it, because the boss of Pang Dong Lai distributes 90% of the shares to employees.
  We have various ways to make a company bigger, but not necessarily by marketing.
  The company needs to establish three major advantages in its operation.
  BYD’s 2022 revenue will be 424 billion yuan, net profit will be 16.6 billion yuan, and 1.86 million new energy vehicles will be delivered throughout the year. In the first quarter of 2022, when everyone thinks that business is not good, it will continue to grow by 85% %, is the global sales champion of new energy vehicles.
  BYD also has many labels, the world’s largest mask output, the world’s largest rechargeable battery manufacturer, the world’s top five electronics OEMs, and China’s second largest energy storage equipment service provider. In 2008, Buffett took a stake in BYD under the introduction of Munger. Munger said, “Except for BYD, no company will do better than Tesla.” Is
  BYD marketing well? I think it’s bad, but it doesn’t make it king. Why must a company rely on marketing to win, and why can’t it gain advantages through business operations?
  Total cost leadership What did
  BYD do right? First of all, it achieved total cost leadership. Low prices are not a strategy, but low prices brought about by low costs are strategies.
  How to achieve total cost leadership? Vertical integration and advanced layout. Vertical integration is to kill all the upstream and downstream and do it yourself. What did BYD do? The first is to participate in upstream battery raw materials through capital. BYD’s batteries, electrodes, and electronic control technologies are self-developed and self-produced, and the entire vehicle is manufactured by itself. Auto parts such as lights, displays, multimedia, speakers, air conditioners, compressors, power distribution boxes, switch controllers, car keys, rubber, Paint… all do it yourself.
  In 2022, BYD spent 5 billion yuan to order 8 roller cargo ships. Why? Because it costs 10,000 yuan to transport an electric car from China to Europe and back to China, and BYD only makes a profit of 7,000 yuan per car, Wang Chuanfu wants to build his own fleet.
  In 2020, the world is short of chips, but BYD does not, because it acquired a company called Ningbo Zhongwei Semiconductor in 2008. That company introduced a Foxconn production line 20 years ago and was about to face bankruptcy, but was eventually acquired by Wang Chuanfu to prepare for future car manufacturing, because Ningbo Zhongwei Neng produced a chip called IG.
  What is total cost leadership? Build competitiveness through vertical integration.
  Leading technology builds barriers
  BYD has several very powerful technologies:
  one is called blade battery. There are two technical routes for electric vehicle batteries, one is called lithium iron phosphate battery, and the other is called ternary lithium battery. The core advantages of ternary lithium batteries are high energy density, strong low-temperature performance, long service life of lithium iron phosphate batteries, and high safety performance. BYD chose lithium iron phosphate batteries. When BYD developed the blade battery, it completely solved the safety problem of electric vehicles, making the word “unsafe” a thing of the past in the field of electric vehicles.
  The other is the DM-i super hybrid system. The past hybrid was fuel + electricity, with oil as the main vehicle and electricity as the supplement. DM-i super hybrid technology is based on electricity and supplemented by oil.
  Including IGBT4.0 technology. In 2008, Wang Chuanfu acquired Ningbo Zhongwei because he saw that if he wanted to build cars in the future, industrial chips and IGBT chips would be its core technologies. IGBT converts the direct current of the battery into alternating current. At present, BYD already has 40% of the remaining output that can be supplied to other automobile companies. This is BYD’s technical accumulation.
  Market Judgment by the Leader
  BYD has another special feature——Wang Chuanfu’s judgment on the market.
  At the beginning of the electric vehicle start, Wang Chuanfu had a firm belief: to run first. In an incremental market, we must first focus on quantity, not quality. Because everyone has never seen an electric car, the first electric car you buy defines your subjective impression of an electric car, and you must first run the volume and occupy the market first.
  When the stock competition started in the market, BYD started to be intelligent. At this time, BYD’s high-end car technology was very strong. Wang Chuanfu’s judgment on the market is quite powerful.
  When doing marketing, you must first consider higher-level issues.
  Many problems cannot be solved by marketing, but business operations can. I would like to share with you a sentence from Weissman, a strategy expert: the solution to a problem always depends on the solution to a higher-level problem that is adjacent to the problem.
  What is the problem at a higher level of marketing? It is business operation. If we only look at it from the perspective of marketing, many problems are unsolvable, but if we look at it from the perspective of business operation, this problem can be easily solved. Business management is a series of activities carried out to achieve the corporate vision, including talent recruitment, business management, financial management, etc. Marketing is only a part of business management.

  Business logic is greater than all marketing theories and methods. No matter which positioning theory or marketing method, when you find that it does not meet your cognition, you can find the answer from the perspective of business management.
  For example, Nanchengxiang used to make electric stove skewers, which has already occupied consumers’ minds. Why didn’t they suddenly do it? Because when the environment changes, companies have to consider what to do next. It turned out that making money by making electric oven skewers was because at that time Beijing could place outside, and 100 square meters could be placed into 300 square meters, which made money. Later, Beijing canceled the outside display, so it could not make money. Afterwards, Nan Chengxiang made whatever the customers wanted to eat, including wontons, rice bowls, and milk tea, and finally became the king of fast food.
  Several principles that need to be followed in business operations
  Establishing advantages
  BYD’s operation started without any advantages. In 1997, BYD got its first chance. At that time, the financial turmoil was raging, and there was a problem with the supply of nickel-chromium batteries from Japan’s Sanyo. BYD quickly occupied 40% of the global rechargeable battery market share, and then became the world’s largest supplier of rechargeable batteries. This advantage was gradually established.
  In 2003, BYD acquired Qinchuan Automobile, a car company that was about to go bankrupt, and a mobile phone OEM. Why? Because there are two places where batteries are used, one is for future electric vehicles and the other is for mobile phones, BYD will also do downstream work. The acquisition of Ningbo Zhongwei in 2008 and the purchase of ships later were all business actions by BYD to gradually build up its advantages.
  Maintaining an advantage
  Take Xiaoma Song as an example. Xiaoma Song himself is the early advantage of Xiaoma Song, because he became famous in the official account in his early years. I’m off to set up a consulting firm and probably get business soon. How to maintain the advantage? If we cannot cultivate employees who can replace Xiao Ma Song, the advantages will disappear with the decline of my personal intelligence and energy. Therefore, we must use standardized production processes, production methods, and creative methods to train employees so that this company will no longer be Relying on Xiao Ma Song’s personal intelligence, but relying on collective combat and systematic operation methods to maintain advantages.
  Don’t do things that you are not good at, don’t do things that are beyond your ability, and use your own advantages to gain more profits.
  Let’s take a look at how some mobile phone companies take advantage of their advantages: Apple first made computers and electronic products, and later made MP3. It is the first electronic product to make MP3 into a relatively small personal interface, because it has such Samsung has a gene for electronic products; Huawei originally made communication products, and its technology is very powerful; OPPO and VIVO originally made battery products, continuing their original advantages; Xiaomi started with system software. I started to do it, and then entered the mobile phone field. I also entered the mobile phone industry with certain advantages.
  Dyson originally made vacuum cleaners, then made mobile phone dryers, and then made electric fans and hair dryers. Many people think that this is a category expansion, but it is not. Why doesn’t it make rice cookers and expand small appliances? Because the high-speed motor is its core advantage, it has accumulated 6,000 patents for this. Vacuum cleaners, hand dryers, electric fans, and hair dryers all have technical advantages in this area.
  How to Obtain Excellent Business Performance There is a very famous paper in the history of
  business management – “How to Obtain Excellent Business Performance” written by Michael Porter, which puts forward two methods to obtain excellent business performance.
  The first is to improve operating efficiency. Improving operating efficiency refers to doing better in a set of identical operating activities.
  Take the catering industry as an example. For example, if you do Meituan, I also do Meituan; if you do Douyin, I do Douyin; But I am more efficient than you in all links, so I make more money than you. Nanchengxiang is like this, which is called doing better than others in a group of the same business activities.
  You have to believe that in any field, there is always someone who can do better than you, and someone who is more efficient than you. Through continuous improvement, any work we do today will be the worst day in the future. Because tomorrow is better than today, and the day after tomorrow is better than tomorrow. This is continuous improvement.
  The second is called building strategic barriers. You have to determine a business direction, and then use a set of unique business activities to form barriers that are difficult to imitate.
  Nanchengxiang was established in 1998. Its positioning is based on the full-time community fast food in the urban area of ​​Beijing. With such a direction, we must conduct unique business activities based on this direction.
  For example, while others select sites for multiple sectors, Nanchengxiang only works in the community. In the community, you can cook breakfast, lunch, dinner, and supper, 365 days a year, and you can do it all the time. Nanchengxiang established a strategic barrier with such a set of unique business activities.
  Why do we think marketing is important? Because marketing is the most direct expression of an enterprise that we can see. You only see a company’s marketing is successful, and you mistakenly think that marketing is the magic weapon for this company. But in fact, many well-known brands are either not making money or have closed their stores. Only those companies that operate in a down-to-earth manner are left to the end.

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