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The secret to continuous growth: Turn on the second curve before the first curve disappears

  Charles Handy said in “Second Curve: Quadratic Growth Across the “S-Curve”: Before the first curve reaches its peak, find the second curve that drives the company’s second take-off, and when the first curve reaches When growth begins before the apex, the vision of sustainable business growth can be realized.
what is the second curve

  The discovery of the second curve theory came about by chance.
  British management guru Charles Handy was driving to Avoca when he got lost in the countryside. He asked a passerby for directions, and the passerby answered him: “You go up the mountain road, and then go down for about a mile, and you come to a creek, and on the other side of the creek is David’s pub, you certainly don’t Missed, because it’s bright red. Have you written all that down?” Charles Handy answered in the affirmative. The passerby continued: “Half a mile from Davy’s bar, you turn right up the hill, and that’s the way to Avoca.”
  It was this accidental experience that gave Charles Handy Great inspiration. Combining his own research on the “S-shaped curve” of life and his observations of countless companies over the years, Handy proposed the second curve theory of corporate growth.
  Timing is especially important when building the second curve of a business. Because “any growth curve slides past the parabolic apex, the secret to continued growth is to turn on the second curve before the first one disappears”. Handy reminds us that in an enterprise, this means reducing the number of employees and overhead, making organizational restructuring, often involving the change of senior management, and the most painful thing is to give up some cherished products and markets.
  Reality As Mr Handy ponders, “In business, the information economy is evolving into a ‘winner takes all’… If we want to have an opportunity for a future that benefits everyone rather than the privileged few, then We need to challenge the orthodoxy, dream a little bit, think outside the box, and dare to try the impossible. This is the origin of the thinking behind the second curve principle.”
  It can be seen from this, “On the way to find the second curve, successful managers must live to the death, find another way, overcome the ‘traps’ laid by success again and again, and open up a completely different path from the current one. Find the second curve for leapfrog growth.”
  Since the second curve is the life-saving straw for the sustainable operation of the enterprise, will the enterprise naturally transition from the first curve to the second curve? How can companies build the second curve?
  The progression from the first curve to the second curve is not continuous. To successfully cross the second curve and find a new leap point for an enterprise, two capabilities are required: one is business growth capability, and the other is organizational innovation capability.
  Organizational innovation capabilities must be prioritized over business growth capabilities, and leaps can be achieved, but improving organizational innovation capabilities is a very difficult task in itself. Because of this, an enterprise that can cross the discontinuity gap must be an excellent enterprise, and it needs to meet two conditions: first, it has seen the real outlet, discovered the rigid demand that can last for many years, and seized this wave; Second, the organization has a strong ability to innovate, and it can continue to iterate and evolve with the development of the business.
  In our years of service practice in China, we have found that the second-curve innovation can be divided into two layers: the first layer is “big innovation”, which opens up a new business line from scratch and adopts a new model to achieve new growth, namely Before the growth of the old business reaches the ceiling, start a second new business curve; the second layer is “small innovation”, the same business line is done with different models and methods to achieve new growth, such as replacing old business with new products kind.
  As a modern snack food brand, Qiaqia is deeply loved by consumers at home and abroad, and has become a leading brand in China’s nut roasted seeds and nuts industry, and its products are exported to more than 40 countries and regions.
  In the course of more than 20 years of development, Qiaqia has not been smooth sailing, and has encountered many business and strategic challenges, but in the end, Qiaqia has successfully crossed the discontinuous gap through the second-curve innovation and has continued to develop to today. .
  Looking back at the innovation process of Qiaqia’s second curve, it is not difficult to find that Qiaqia’s innovation includes both “big innovations” that open up new business lines and “small innovations” that reconstruct original products.
  Let’s first dismantle Qiaqia’s “small innovations”. At first, Qiaqia’s main product was the well-known melon seeds, which were called “red bag melon seeds” internally. After that, as market preferences changed, Qiaqia iteratively updated its product line. Although it was still in the melon seed category, it made a lot of innovations in taste. Instead of sticking to traditional tastes, it developed products such as pecan melon seeds. , caramel melon seeds, sea salt melon seeds and other new flavors, known as “blue bag melon seeds”.
  From “red bag melon seeds” to “blue bag melon seeds”, they are also in the melon seed business, but they are model innovations, which are “small innovations” in the second curve innovation.
  In addition to product iteration, in the process of business changes, Qiaqia’s sales model is also changing. Initially, Qiaqia sold through offline channels. With the increase in product types and changes in consumer habits, Qiaqia gradually combined online and offline channels to achieve omni-channel marketing. The transformation of this model also belongs to the “small innovation” in the innovation of the second curve.
  Later, considering the limited development potential of a single melon seed product, in order to enrich the diversity of products, Qiaqia developed a nut snack product, which was later called “Little Yellow Bag Daily Nuts”, which is a brand new business line. It is also the expansion of Qiaqia’s business scope. This kind of innovation belongs to the “big innovation” in the second curve innovation, expanding from the Guazi track to the larger nut track.
  At the same time as the “Little Yellow Bag Daily Nuts” appeared, Qiaqia also launched a new marketing model, from traditional offline supermarkets to online live broadcasts, to global cross-border cooperation, such as cooperating with nutritionists to promote the nutritional value of nuts . This kind of innovation also belongs to the “big innovation” in the second curve innovation.
Building the Second Curve of Your Business, Timing Matters

  Charles Handy has long reminded us, “Before the first curve reaches its peak, find the second curve that drives the company’s second take-off, and the second curve must begin to grow before the first curve reaches its peak, making up for the investment in the second curve. If the resources (money, time and energy) are consumed, then the vision of sustainable growth of the enterprise can be realized.”
  Business owners often ask me: When will the second curve be created? Every time I hear this question, I will first understand his main business. When I found out that his main business is only tens of millions of yuan and the volume is still very small, I usually advise not to spend too much time thinking about the second curve, because this is not a good time.
  The Chinese market is so big, and each industry has a market of several trillion yuan or a few billion yuan. If you only achieve tens of millions of yuan, it shows that your organizational innovation ability is still weak. The top priority at this time is to improve organizational innovation capabilities and make first-curve businesses strong, thereby increasing market share.

  The rush to build the second curve at this time distracts the entrepreneur, wastes valuable survival time, takes up the few cash flows, and puts the company in a dangerous situation.
  Once a company has market share, branding, consumer loyalty and organizational capabilities, it is most appropriate to build a second curve.
  In order to provide enterprises with a landing method, we have further studied the second curve theory: the second curve is composed of two curves, the explicit curve (business growth) and the implicit curve (organizational innovation).
  The dominant curve, that is, the business growth curve, consists of countless business growth points, such as new business models, new product categories, and new user groups. Many innovative business curves start from one business growth point.
  The implicit curve is the organizational innovation curve. In order to support new business growth, organizations need to innovate and iterate continuously, such as how to improve personnel capabilities under the new model, how to make management mechanisms more agile, and how to iterate and develop culture. These organizational innovation points are connected together to form an organizational innovation strategy Implicit curve.
  There are not a few companies that can achieve staged success, but only a very few can truly successfully complete business transformation and achieve sustained growth. Because most companies fall into a misunderstanding in the process of development – focusing only on the explicit curve of business growth and ignoring the implicit curve of organizational innovation.
Growth Path: “Winner is King”

  Everything has a life cycle, and businesses are no exception. For enterprises, death is inevitable, but how to break this curse and extend the life cycle of enterprises? How to make a business healthier during its lifetime? How to make the enterprise have more social value, employees have a sense of belonging, and bosses have a sense of achievement? How to become a truly good company in this era? There are only two words for the way out: Growth! As long as it can grow sustainably, a business can naturally last forever.
  What is good growth? There are two mainstream growth paths in the market: one is to achieve scale expansion through the power of capital; the other is to achieve continuous growth through the power of organization. The former seems to grow rapidly, but it is actually very slow; the latter seems to grow slowly, but it is actually faster. Why does this strange phenomenon occur?
Growth Path 1: Leveraging Capital – Fast is Slow

  In operation, many enterprises will be troubled by the increasingly fierce homogeneous competition. In order to quickly establish their own advantages, enterprises will use the power of capital to rapidly expand their business scale, so as to occupy the market and obtain profits.
  Leverage capital – fast is slow. To put it simply, first find a business that can be replicated, then use capital leverage to continuously expand the business volume, increase market share, and wait until the business encounters a bottleneck before developing the endogenous power of the organization. This growth method relies more on the promotion of capital, ignoring the endogenous strength of the organization, and is relatively fragile. The business on the tuyere that relies on capital to fly up, in the end, mostly chicken feathers.
  In November 2020, a debt collection turmoil against the long-term rental apartment brand “Danke Apartment” on the Internet attracted widespread attention.
  Danke Apartment was established in 2015. It is an online apartment rental platform for urban senior white-collar workers. It mainly provides high-quality housing and convenient rental services for young white-collar workers. In January 2020, Eggshell Apartments went on the market in the United States. In the five years from its establishment to its listing, Danke Apartment has gone through 7 rounds of financing, with a total financing of 6 billion yuan. With the support of capital, Danke Apartment has quickly accumulated more than 400,000 housing resources and upgraded it with the purpose of providing a better environment for tenants, and of course, to increase housing rents and obtain higher returns.
  Due to the high rent, Danke Apartment has added the financial service of “rental loan” in the leasing link. Tenants can apply for a rent loan through Eggshell Apartments, pay a one-time deposit and rent for a year or more. Even if the applicant’s own conditions do not match, they can also apply for the guarantee of the eggshell apartment. Then, Eggshell Apartment will settle the rent to the landlord by monthly or quarterly payment according to the housing lease contract.
  It seems reasonable, but in fact there are huge loopholes. As an intermediate platform, Eggshell Apartment holds a large number of rents paid by tenants to landlords. Eggshells who are accustomed to capital-heavy gameplay do not have a clear financial system to reasonably plan the capital in their opponents. So the landlord’s money was used by the company to expand the “site”, but due to the delay in revenue, the eggshell apartment was unable to pay the landlord’s due rent, and the capital chain broke. The landlord who could not get the rent had to clear the tenant, and after the tenant was swept out of the house, he still needed to repay the loan for personal credit investigation. The conflict between the landlord, the tenant, the financial institution, and the eggshell apartment intensified.
  So far, the brand image of Danke Apartment has plummeted, and its stock price has also fallen, to the brink of bankruptcy.
  The model of relying too much on capital and leveraging capital to ripen the business, although it develops rapidly in the short term, will not last long because it neglects the building of the company’s operational and organizational capabilities. For this type of enterprise, leveraging capital is like drinking poison to quench thirst. Behind the seemingly rapid development is the Achilles heel of its own lack of active hematopoiesis. It seems to grow rapidly, but it is actually very slow.
Growth Path 2: Leveraging the Organization – Slow is Fast

  Leading companies in various industries in China have one thing in common: the reason why leading companies can become industry leaders is the persistence of “the leftover is king”. Keep moving forward on the right path, and eventually become the industry leader as more and more peers fail due to the market or their own reasons. Of course, in the process, new competitors will continue to emerge, seemingly menacing, but also facing the test of time.
  Qiaqia is my customer. In the past 20 years, it has always adhered to the mission of “providing consumers with safe, fresh and delicious nut snack food”, and has gradually grown into a leading brand in the industry. The core secret is to do the right thing for a long time: Adhering to product quality and attaching importance to food safety, products have undergone more than 200 rigorous inspections before reaching consumers. It is this kind of persistence that allows Qiaqia to take a 54% market share in the field of packaged melon seeds, and to sink its products to every township, and even the grocery store in the village, and once became the king of offline channels.
  Entering the Internet era, Qiaqia began to face the strong impact of online e-commerce. Take the three squirrels founded in 2012 as an example. With the help of the bonus period of Taobao platform, they spent huge sums of money on marketing and quickly seized the online snack market.
  Intense market competition forced Qiaqia to start reform and transformation. In 2015, Chairman Chen Xianbao returned and personally led the team to carry out the transformation to create the second curve.
  1. Adjust the organizational structure: select and appoint young cadres.
  Qiaqia established a business unit with categories as the center, and expanded the responsibilities and rights of the business unit, proposed “earn and spend by yourself”, and vigorously encouraged and supported innovation. In the first year after the reform, many innovative products were hatched, and “blue bag melon seeds” was born at this time.
  It is worth mentioning that the sales level has undergone a flat reform, the original four major business centers of east, west, north, south and south have been cancelled, and the 18 sales areas under the original business center have been merged into 12 BUs (business units), which are directly connected with the headquarters. . The flattening reform of the sales division is also to devolve more resources and powers to the end market and speed up the execution of decision-making.
  2. Cultural change: return to Day 1 (the first day of starting a business).
  Advocating the wolf-like culture of you chasing after me, “the capable, let the mediocre”, the team regained the state of the first day of entrepreneurship.
  3. Performance reform: all-round, multi-level performance PK (competition).
  Through all-round and multi-level performance PK, the organization and team have been activated, and a group of outstanding young cadres have been trained.
  The transformation quickly paid off. On the one hand, the organization is reactivated; on the other hand, the development of new businesses is flourishing. According to Shell Investment data, Qiaqia’s nut revenue in 2015 was only 21 million yuan, and it has grown rapidly to 825 million yuan in 2019.
  Why is Qiaqia able to cross different business waves and achieve second-curve innovation?
  There are three reasons: first, people who know Chen Xianbao can feel the entrepreneurial spirit that is always on the forefront, and his willingness is very strong; secondly, strategically, he always insists on doing difficult and correct things, and insists on doing long-term things. A matter of value; in the end, the organization is always upgrading and iterating, giving young people more opportunities. This is the growth path of Qiaqia’s “slow is fast”.
  The growth path of “slow is fast” has a very important principle: insist on doing the right thing. That is to say, after the business has developed to a certain scale, don’t rush to expand rapidly, but invest a lot of time and resources in long-term things such as cultural construction, talent training, and technology improvement. Entrepreneurs should focus on the business in one hand and the team in the other, and at the same time maintain the operation of cash flow. If things go on like this, with the extension of the time line, other leading companies that rely on capital have died out, but companies that have always insisted on doing the right thing can survive with solid core competitiveness. This is the so-called “leftover is king” .
  Of course, without the support of the organization, the growth of the enterprise does not require the empowerment of capital. On the contrary, when the business of the enterprise matures and the organization develops to a certain level, it will need capital to detonate the growth.
  Always insist on doing the right thing with long-term value, develop the power of the organization, and then use the power of capital to help the company take off, and your company will be more likely to become an industry leader.

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