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Driving the second curve: new business, new technology, new benefit, new demand

  There are only two ways to achieve sustainable growth: one is that the actual demand for products is relatively stable, but the company has the ability to continuously raise prices, such as luxury goods companies; the other is to continuously achieve iterative growth through secondary growth, and continuously launch new products and services to achieve sustainable growth Growth, such as Apple’s continuous iteration of new products. It is difficult for many industries and companies to form a sustainable price increase ability, and most industries and companies generally rely on the second curve for their vision of sustainable growth.
  From the perspective of the core factors driving the second curve, “new business, new technology, new benefits, and new demands” are the main driving forces.   New business: On the one hand, it comes from business innovation and transformation, and on the other hand, it comes from the expansion of the incremental market. For example, Amazon has shown the characteristics of
  boundless growth since its establishment;
Breakthrough growth;
  new benefits: For emerging industries supported by policies in the early stage, technological improvement and cost reduction are important drivers for secondary endogenous growth, such as the endogenous growth of China’s photovoltaic industry after the introduction of subsidies;
  new demand: customer demand Structural improvement is also an important driving force for realizing the secondary growth of the industry and the company. For example, from 2013 to 2014, liquor was greatly affected by the limited consumption of Sangong, and the subsequent rise of household consumption became an important factor to promote the secondary growth of the industry.
New business: business innovation and incremental market drive secondary growth

  New business is one of the main core drivers of the second curve. Throughout the history of global business, many companies that have maintained continuous growth have basically experienced new business development.
  New businesses are roughly divided into two categories:
  one is to iterate and innovate in new products and services. For example: in technology companies, Amazon is driving the secondary growth of companies such as cloud computing, Google and Baidu are deploying artificial intelligence, and Facebook is deploying the metaverse; in consumer goods companies, giants such as Coca-Cola are constantly innovating their products; even domestic ones Real estate companies have also been seeking transformation in recent years to achieve secondary growth.
  The second is to open up new incremental markets. The most typical example is the expansion from the local market to the national market, and even to the global market. For example, Walmart started as a retail company in the southwestern United States and gradually grew into a global industry giant.
  At the beginning of its establishment in 1994, Amazon was an Internet bookstore. In 1998, it became the world’s largest Internet bookstore. Since then, the company has gradually expanded its business scope and gradually transformed from a bookstore to a comprehensive Internet store. In 2000, the company was positioned as the world’s largest Internet retailer. It has successively deployed in the fields of music, household goods, and digital products. In 2006, the company launched cloud computing services, two years ahead of Google and Amazon. In 2014, the revenue generation of the cloud computing business was disclosed for the first time. The revenue of AWS (Amazon Cloud Technology) was US$4.6 billion, accounting for more than 5% of the company’s revenue. At the end of 2016, Amazon released AmazonGo, an unmanned retail store, demonstrating the company’s technological advantages in the fields of artificial intelligence and the Internet of Things.
  Judging from Amazon’s performance, the revenue growth rate from 2012 to 2014 showed obvious continuous downward pressure. At that time, it was mainly due to the approaching ceiling of the book and audio-visual business, the growth rate of digital products and other categories of business also began to slow down, and the growth rate of third-party business declined. Phenomenon. Since then, the core business that drives Amazon’s secondary growth comes from the high-speed growth of cloud computing. Since 2015, with the rapid growth of AWS business, Amazon’s revenue growth has re-entered the upward channel.
New Technology: Technology Iteration Drives New Growth

  For some industries, especially the technology industry, the iterative upgrading of technology basically presents a cyclical spiral change, which will have a significant impact on the growth curve of related industries. The most typical representative is the communication industry. From 2G/3G to 4G to 5G, each technological iteration will lead related companies to enter a new growth cycle. Technological update and iteration belong to the category of endogenous growth. The periodicity of technological iteration will cause the growth curve of related industries to also show cyclical changes. Generally, when the old technology is in the mature and saturated stage, the industry growth curve is basically in the plateau period, and breakthroughs are made. The core of the secondary growth in the plateau period comes from the development of new technologies.
  The characteristics of income fluctuation in the communication industry in each communication standard application stage are very obvious. From 2011 to 2013, the 3G business basically entered the saturation stage. After that, the core factor that promoted the income of the communication industry to rise to a higher level came from the increase of 4G penetration rate. At the end of 2013, my country’s three major operators officially obtained 4G licenses. On June 6, 2019, the Ministry of Industry and Information Technology officially issued 5G commercial licenses. After the revenue of the communication industry entered the platform period from 2017 to 2018, the 5G construction cycle started another growth since 2019.
  Both 2014 and 2019 were “breaking points” in the growth curve of the communications industry. In 2014, the penetration rate of 4G users reached 7.6%, and the shipment of smartphones approached 400 million units. The 4G era of the communication industry has officially arrived. With the completion of 4G base station investment and construction, the industry’s operating income increased year by year from 2014 to 2017. However, with the 4G penetration rate approaching saturation after 2017 and the decline in related smartphone shipments, the growth curve of the entire industry has entered a plateau. In 2019, with the issuance of 5G licenses, 5G construction drives the secondary growth of the industry.
  Changes in communication technology standards have brought new growth points, created new demands for the market, and pushed the communication industry to enter a new growth stage from a trough period. From the perspective of capital expenditure of the three major operators, the capital expenditure of China Mobile, China Telecom and China Unicom has gradually increased with the promulgation of new industry standards and commercial use. The trough period of the communication industry is due to the investment window period brought about by the alternation of new and old technologies. The peak period of industry investment is the period of investment blowout brought about by the application of new communication standards. The growth of industry operating income mainly benefits from the new demand created by technological iteration.
  After the construction of the underlying infrastructure is completed, new applications and requirements gradually emerge. Judging from the number of users of China Mobile, the number of 3G users reached an inflection point of growth in December 2014, and then the number of users began to decline. Its 4G subscribers grew from 100 million at the end of 2014 to nearly 700 million at the end of 2019. At this time, the growth of 3G users has peaked, and 4G users have begun a new round of growth. The increase of end users has driven the production and sales of the industry chain related to communication equipment in the industry, thereby promoting the explosion of performance. With the start of the 5G construction cycle, the number of 5G users of China Mobile has also shown rapid growth since 2020.
New benefits: cost reduction, organic growth

  For some emerging industries, in the early stage of industrial development, external factors such as policy subsidies are often an important driver of industrial development. For example, my country’s photovoltaic and new energy vehicles and other policies encourage the development of emerging industries. The policy will be launched, but at a certain stage, the withdrawal of the policy will cause obvious pressure on related industries. Because of the policy subsidy, the industry often goes through a stage of brutal growth, and the substantial expansion of production capacity leads to the subsequent stages of overcapacity. Once the external favorable factors such as policy subsidies are withdrawn, how the industry achieves endogenous growth is crucial.

  In the post-subsidy era, the core driving force for these emerging industries to achieve the second curve is cost reduction. The reason for policy subsidies is that in the early development process of emerging industries, the scale effect is low, the technological progress is slow, and the high cost makes it difficult to expand the scale of the industry. When the industry is beginning to take shape, after the subsidy policy is withdrawn, the industry’s endogenous growth after technology maturity and cost reduction is an important driving force for the secondary growth of the industry.
  The first growth bottleneck of the photovoltaic industry was from 2011 to 2014. The “double-anti” policies in Europe and the United States caused the photovoltaic industry to develop slowly. Beginning in 2011, the U.S. Department of Commerce formally filed a case to conduct a “dual reverse” investigation on solar cells produced in China. The tax rate for Chinese PV companies that did not respond to the lawsuit is 249.96%. In the same year, the EU launched an anti-subsidy investigation on Chinese photovoltaic products. In 2013, the reduction of European subsidies reduced the growth rate of market demand, causing the photovoltaic manufacturing industry to fall into staged overcapacity, product prices fell sharply, trade protectionism rose, and my country’s photovoltaic manufacturing industry experienced setbacks.
  The second growth bottleneck was from 2018 to 2019. The policy control efforts exceeded expectations, and the industry experienced a phenomenon in which both volume and price fell. The “531 New Deal” in 2018 is mainly reflected in two aspects: “cut electricity prices and limit the scale”. In terms of electricity price reduction, the benchmark on-grid electricity prices for Class I, Class II, and Class III resource areas are adjusted to 0.5 yuan, 0.6 yuan, and 0.7 yuan per kWh respectively (tax included); in terms of limited scale, according to the actual development of the industry, there is no arrangement for 2018 Annual construction scale of ordinary photovoltaic power plants.
  Since 2015, with the introduction of favorable policies for the domestic industry and the decline in the price of the superimposed industry chain, the newly installed capacity in China has continued to increase. In the first half of 2016, the industry experienced the largest “630” rush installation in history. In 2017, driven by factors such as photovoltaic poverty alleviation, the installed capacity of distributed photovoltaics increased significantly. In 2017, China’s new distributed photovoltaic installed capacity was 19.44GW, 4.7 times that of 2016. Technological innovation, industrial upgrading, cost reduction, and affordable access to the Internet are one of the main tasks of the photovoltaic industry during the 13th Five-Year Plan period. The “Thirteenth Five-Year Plan” targets to reduce the cost of photovoltaic power generation by more than 50%, and achieve grid parity on the electricity side.
  After 2019, the reason for the secondary growth of the photovoltaic industry is that the cost has dropped significantly, and the superimposed low cost has driven the substantial expansion of external demand. After the “531” New Deal in 2018, the subsidy policy has been gradually weakened or even withdrawn. The cost of China’s photovoltaic industry has dropped significantly due to technological progress and economies of scale. The cost of photovoltaic power generation in my country is lower than the cost of other parts of the world. In some overseas markets, photovoltaics have become the cheapest source of electricity, and low cost has become the main factor driving the growth of installed capacity in overseas affordable markets.
  In terms of overseas demand, the export value of my country’s photovoltaic products increased rapidly in 2019, and the global export value exceeded 20 billion US dollars, with a year-on-year growth rate of 29%. After the short-term impact of the epidemic in 2020, rapid growth will be achieved again in 2021, with annual exports reaching US$28.4 billion.
New demand: customer structure upgrade leads the second curve

  How to meet the needs of new customers is also one of the important factors driving the secondary growth of the industry and the company. On the one hand, when the existing customers reach a certain saturation, developing new customers will be an important way to drive the industry and the company to break through the market ceiling. For example, most consumer goods companies are developing young customers to cater to and meet the needs of young consumers; on the other hand, changes in customer structure are also an important way to achieve secondary growth in reversal of predicament, especially some customers are government departments. Companies and industries face greater policy uncertainty. A typical case is the impact on the liquor industry from 2013-2014 restricting the consumption of San Gong.
  2009-2012 was the first boom cycle of the liquor industry, and the strong economic recovery drove the consumption of liquor by political and commercial enterprises. From the demand side, in 2009, the state issued a 4 trillion plan to stimulate the economy, and the demand for fixed asset investment and real estate investment was hot, which in turn drove strong political and business consumption, and high-end wine and sub-high-end wine fully benefited. From the perspective of supply, the industry’s production capacity has expanded significantly. Wine companies such as Yanghe, Gujing, and Kouzijiao have used local political and commercial resources to deeply cultivate the local market, and have accelerated their breakthroughs in markets outside the province through refined management. Driven by high profits, capital has added to the liquor industry through self-built wineries, mergers and acquisitions, and dealers joining, and channels and social inventory have gradually increased.
  The period from the end of 2012 to 2014 was the trough period of the liquor industry. After the liquor plasticizer incident broke out at the end of 2012, the demand for the liquor industry fell to the bottom. From 2013 to 2014, the restrictions on “three public” consumption further squeezed the government consumption of liquor, and the demand for official consumption of liquor showed a cliff-like decline, aggravating the industry’s self-efficacy of liquor plasticization. Demand declines following the event.
  There are two situations in the troubled industry: one is the downturn of the industry caused by the combined force of macroeconomics, industrial policies, and industry supply and demand; the other is affected by the occasional black swan event. The plasticizer incident of Jiuguijiu at the end of 2012 was a typical black swan event that caused the industry to fall into trouble; the predicament of the liquor industry from 2013 to 2014 was the result of the synergy of macroeconomics, industrial policies, and industry supply and demand.
  After 2015, the liquor industry started a new round of growth. On the one hand, the main reasons for driving the growth are that the impact of the plasticizer incident has subsided, and on the other hand, the demand structure has been driven by consumption upgrades, replacing government consumption as the main demand support.
  From the life cycle of the liquor industry, it can be found that the change in demand structure is the core factor driving the second curve. The liquor industry has experienced two boom stages: 2009-2012 and 2015-2018. From 2013 to 2014, under the blow of multiple incidents such as the plasticizer scandal and the restriction of three public consumption, the market demand continued to decline, and the industry entered a period of deep adjustment. After 2015, under the trend of consumption upgrading, mid-to-high-end liquor has shifted from official and business consumption to residential consumption, and the new demand has driven the secondary growth of the industry.
  Since 2015, the boom of the liquor industry has come from the improvement of the industry’s supply and demand structure. On the one hand, the supply has been cleared, and after three years of deep reshuffle, the share of small and medium-sized enterprises has dropped sharply, gradually withdrawing from the market, and the industry concentration has increased; on the other hand, the income of residents has increased, the middle class has risen, and consumption upgrades have driven personal consumption and business consumption to replace government consumption. become the main force. In addition, the industry’s inventory has been cleared, which is sensitive to the response of demand recovery, and the improvement of the supply and demand pattern has opened the upward cycle of the liquor industry.
  Since 2015, with the upgrading of consumption and the improvement of industrial concentration, mid-to-high-end liquor took the lead out of the haze. In 2015, the profit growth rate of the liquor industry began to turn positive, gradually getting rid of the negative impact of the plasticizer incident and restricting government consumption. The logic of the market rebound at this stage is still in the recovery of the industry’s overall prosperity, and the rebound is relatively limited. Since 2016, with the continuous improvement of the industry structure, consumption upgrades and the increase of industry concentration, companies represented by leading companies have entered a stage of accelerated rebound.

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