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First, the direction of digitalization-find the essence of things from digital differences

In reality, how do we grasp the problem from the digital relationship? How to evaluate? How to manage our performance? How to promote enterprise growth?

(A) to discover the true value of the enterprise-cash profit

The real value of an enterprise is cash profit, but it is not enough to create assets, but also to generate profits, but it is not enough to have profits. We should let it generate cash donations. With these cash donations, we can generate value for shareholders. This is the business cycle diagram of the enterprise, as shown below (6- 1):

1. Three forms of corporate profits

There are actually three different ways to express the profit of an enterprise:

The first is called accounting profit, which is income minus expenditure, and it is the profit of the enterprise's official external statements. In a sense, it is a corporate tax report based on the accounting system. Accounting profit: profit = income-expenditure.

The second type is called return on investment, which is the actual profit generated by enterprise investment. Its performance is that profits are divided by capital. In this regard, shareholders are more concerned. Return on investment = profit/capital. EVA (Economic Value Added) = after-tax profit-cost of capital.

Third, the actual return on capital, also known as cash flow contribution, is the income contribution before fixed cost and capital cost.

2. Capital flow

The cash of an enterprise is divided into two parts, one is the positive cash flow motivation, that is, the total profit of output. Part of it is negative cash flow motivation, that is, fixed cost and investment.

Figure 6-2 Correctly Understanding Profit Dynamics

Negative cash means that enterprises invest in the asset development market, and enterprises need a fixed number of people, so money needs to be spent, and enterprises spend money on output. The unsatisfactory state is that the input period is too long and the output is too slow or too short. For example, in the health care industry, as soon as advertising stops, the turnover suddenly drops, and enterprises like this have no future. The ideal enterprise is cash flow management (as shown in Figure 6-2 above), with short investment period and less cash consumption, but the future growth will continue to be stable. For example, some so-called high-tech products consume a lot in the early stage, but the product life cycle is very short and the product life cycle is very large. In just a year or two, or even a few months, the turnover of Bank of China in Jiangsu can increase by hundreds or thousands. It would be nice if the cash profit could be pulled out quickly.

Zhang Zhongmou is the godfather of IT industry in Taiwan Province. A few years ago, I chatted with Zhang Zhongmou in Taiwan Province. He told me that if you invest in high-tech enterprises, you won't be able to play if you don't get your investment back within two years, and there is no gross profit of more than 70%. So if you want to jump into this industry, you must do it quickly. From positive cash profit to negative cash profit, the proportion between them depends on how your profit is generated.

Some bosses have worked all their lives without making any money. He keeps making money and investing, so he has no money. There are two stages in the catering industry. One is that per capita consumption is above 200 yuan, selling grades, and per capita consumption is below 50 yuan, selling welfare. The worst thing in the middle is that the per capita consumption is 70 to 80 yuan, which requires grades, the environment can't be bad, and the dishes can't be too bad. So eat well and decorate well. Its profit model is annual renovation, so it makes money and goes out.

3. The correct mode of profit growth

In fact, there is still a gap between profit and cash. A company said it won. Whether it is worth winning or not is the increase in net cash flow generated. Starting from scratch is the highest cost. If your first step is to seize the market, invest all kinds of resources in services, and pay a lot of cash directly in order to seize the big customers, then its output is the cash profit paid directly to you by these big customers, which should be greater than the profit. In other words, the cash value to be generated again is that these big customers roll up, unlike some health care industries, you have to generate new customers again, you have to advertise again, and it is always input and output. For example, at the beginning, it advertised 654.38+0 million, resulting in a turnover of 654.38+0 million, and then advertised below. Spending another 500,000 yuan can generate 20 million yuan, and spending another 200,000 yuan on advertising can generate a turnover of 65.438+0 billion yuan. This investment will be better.

Today, some enterprises advertise 6.5438+0 million, resulting in a turnover of 6.5438+0 million, and then advertise 2 million, so as to rise to 20 million, and the price will drop further and further. This profit model is terrible. The following figure (6-3).

6-3 The correct mode of cash profit growth

Therefore, we have to pay a huge price. This kind of win is not worthwhile, but it will make enterprises consume more assets. We say that it is not worthwhile to kill a thousand enemies and hurt 900 ourselves in a war. If you want to figure out how to escape before the battle and save your effective strength so that you can make a comeback, then fighting a war of attrition is the worst choice.

4. Profit dynamics

In short, whether it is worth winning or not, a correct profit dynamic model is that the positive cash of the total profit is greater than the negative cash. That is, the input is greater than the fixed cost and sustainability. In this case, the cash profit is worthwhile. As shown below.

(B) three levers to promote the growth of the company

Whether the positive dynamics of an enterprise are worthwhile depends on its input-output ratio. This input-output ratio is called shareholder return rate. In order to better illustrate the shareholder return rate, the following indicators of some listed companies listed on A-shares are compared together, as shown in the following table (6- 1).

China A-share listed companies in 2007

listed company

fish roe/berry/egg

Profit/sales

Sales revenue

Sales revenue/total assets

Total assets/net assets

Main net profit (ten million)

Sales revenue

(ten million)

total assets

(ten million)

net asset

(ten million)

Bank of China

13.24%

3 1. 12%

0.030 1

14. 1 150

5623

18067

599555

42477

Vanke real estate

16.55%

1.36%

3.5493

3.4 187

484

35527

10009

2928

Hebei Xin public

13.00%

1 1.89%

0.4 129

2.6483

600

5043

122 14

46 12

China Eastern

20.49%

1.35%

0.6483

23.4526

4353

67 14

286

China Oil and Gas Company Limited

19.87%

16. 12%

0.8400

1.4676

13457

83504

99409

67737

Shanshan stock

7.2 1%

5. 16%

0.5572

2.5064

1 1

2 18

392

156

TCL group co., ltd. (abbreviation of TCL Corporation)

1 1.38%

1.0 1%

1.8908

5.94 19

3906

2066

348

Nanjing-Shanghai Expressway

10. 19%

30. 15%

0.2047

1.65 12

160

53 1

2594

157 1

Septwolves

8.55%

10. 12%

0.6022

1.4022

nine

146

104

Suning appliance

3 1.69%

3.65%

2.4740

3.5 102

147

40 15

1623

462

Aucma

- 129. 12%

-33.9 1%

0.6235

6. 1078

-56

164

263

As can be seen from this table, some shareholders have high returns, such as Suning Appliance 3 1.69%, and of course some have low returns, such as Shanshan, which is only 7.2 1%, and the worst is Aucma, which is-129%.

1. Steering wheel: shareholder return rate

Shareholders' rate of return is the steering wheel of enterprises. So, what determines the shareholder return rate? Shareholders' rate of return depends on competition first. The higher the degree of competition, the lower the return rate of shareholders. Competition is related to the industry, and secondly to the means of this enterprise.

Shareholders' rate of return also depends on factors such as net profit and market indicators. There are three levers that can promote the growth of the company. For example, driving is not difficult, as long as well-trained people can drive. But people who can't drive will find it difficult to drive. Actually, driving a car is as difficult as flying a plane. They are always determined by three levers: the car is the brake, the accelerator, the clutch, and then a steering wheel, called the shareholder return rate, and the other three things are the levers for manipulation.

2. Three levers

Whether a car drives well depends on the seamless connection between the three. A novice driver froze when driving, because his clutch and throttle didn't match, and he would turn off at every turn. The same is true of flying a plane and doing business. Shareholders' rate of return is the direction, and the infinite combination of three levers is the key.

Among these three levers, the first one is the market lever, that is, the net profit rate of sales, which is also commonly known as the throttle. The greater the throttle, the greater the momentum. The second lever is called total assets turnover rate, also called clutch. The third leverage is called financial leverage, which controls more assets with less capital, also called braking.

A steering wheel is the rate of return of shareholders, where to go, the purpose is in the steering wheel, the purpose of driving is in the steering wheel, and the throttle of driving is in the sales profit rate, that is, the throttle of the enterprise and the net profit of sales. The car rushed out as soon as it stepped on the gas pedal slightly, which is a good product combination of the enterprise. The truth of doing business by car is to see what road you are on, how to drive, what road you are driving on, whether it is on ice, snow, gravel, mud, or mountains. This is the same as doing business. Can you manage it? The bigger the company, the more critical the total asset turnover rate. For example, the utilization rate of assets in traditional manufacturing industry is the key. Whether you can make money depends on whether you can use assets.

3. Capital turnover rate

The greater the financial leverage of an enterprise, the more attention should be paid to the asset turnover rate (as shown in Figure 6-5). For example, in real estate companies, braking skills are very important. Some people put their feet on the accelerator, brake all the way, and then stop. But every foot comes at a price. Brake lightly, so people can't feel the brakes, so stop. It's called leveling. Why are so many companies prone to bankruptcy? Its lure lies in the net profit of sales, more than 25%, and its life lies in the turnover rate of total assets. A real estate company's project will take at least two years to complete. If it is commercial real estate, it needs to mature, and there is a stage, but its death is financial leverage. It raised a lot of money, and many small real estate companies died because there were no new financing channels.

Figure 6-5

4. The proportion of the three levers

Therefore, whether an enterprise is well managed is closely related to the three levers, and the ratio between these three levers becomes the key. Different enterprises have different proportions. Anhui Construction Bank, some innovative enterprises, such as clothing industry, and some clothing enterprises emphasize design, so its first lever is very important. The second lever is very important for enterprises that make gears or large equipment. The third lever of real estate companies is very important. Therefore, different formats have different concerns. These three levers determine how the enterprise should operate. As a leader, when making decisions, you can see whether these factors can determine the growth of the enterprise.

These three levers are the key to manipulate the profit model of enterprises, and also the key to manipulate the enterprise model. But unfortunately, most people are unconscious and don't know that enterprises still have profit models. Now the profit model of enterprises is just like the formation of playing football. Some enterprises went bankrupt because of the poor combination of profit models. When it's time to refuel, it won't refuel, and when it's time to manage, the clutch is not easy to step on, and the car often shuts down. Being an enterprise can't turn off the fire. You can drive slowly, but you can't turn off the engine. A considerable number of enterprise products are basically not innovative. In the era of extremely developed large industries, the energy efficiency of machinery and equipment is getting higher and higher, and products tend to be standardized. The management and control ability of an enterprise is the management ability of the enterprise, that is, the growth of the enterprise.

5. The factors that determine the three levers

The factor determined by the three levers is the net profit rate of sales, which is actually related to its product structure, gross profit margin, market and total assets turnover rate, including inventory turnover rate, inventory turnover rate, account period of accounts receivable and cash flow (Figure 6-6). Financial leverage is related to accounts payable, debt assets, current liabilities and net cash liabilities.

Figure 6-6

Therefore, leaders should turn these three levers into actions to control the enterprise model. As we all know, in a car, these three levers are actually interlocking with the operating system of the whole car, and the three levers must be connected to all systems of the enterprise. The following figure shows the complete company-level performance indicator framework (6-7).

Figure 6-7

Enterprises should use such a control system to become the performance controller of the whole company. Many enterprises have made mistakes in performance management. They write down what they want to do in the post, and then find the corresponding indicators. Today, too many professional managers cut the management of the whole enterprise into pieces of tofu, and too many experts turn the pieces of the enterprise into very sharp pieces. Experts can be found, but the problem is that enterprises do not run separately from each other, but as a system. The key to the operation of this system is to connect one direction with three levers, and put these three levers together in various positions.

6. The assessment of employees should be linked to the rate of return of shareholders.

Since the return on shareholders is our direction, the three levers are the result of our manipulation and should be deepened. When evaluating each department and position, it is not what you are doing, but what you should do. This is the most important direction of the company. For example, a cashier should keep a good account, which is the most basic requirement.

Case 1

The cashier of an enterprise put four checks in the drawer, but not in the bank. He said he was too tired to walk, and he wouldn't walk tomorrow, and he couldn't cash it until the day after tomorrow. However, the company was unable to pay RMB 200,000 that day, which caused strong dissatisfaction from customers.

Then the cashier's work is very important and the key to improve the company's cash operation. In fact, it is linked to the final shareholder return rate. So some people are not very clear about what he should do and what he is doing. Most people write an indicator for this cashier, that is, the accounts should be remembered clearly in time. In fact, this is the minimum requirement for him. What he should do is to ensure the effectiveness of the funds of the whole company. So what is being done is different from what should be done. Managers of enterprises can better assess and control employees only from the perspective of what employees should do. Assessment is not an end, the most important thing is control. The operation of the steering wheel and the manipulation of the three levers should be extended to all parts of the enterprise, so as to control the whole enterprise.

Today, we have too many professionals and experts to cut the whole enterprise into pieces. One part is well done, and often the other part is sacrificed. Whether an enterprise runs well is about whether its whole system runs well, not what it is. For example, some enterprises and some industries are over-marketed.

Case 2

China pharmaceutical industry, sales gross profit margin is not low, Ningxia Communications Bank is over 40%, but its net profit is very low, only within 10%. With such a low net profit, there is no way to support the research and development of new drugs in pharmaceutical companies, resulting in most domestic pharmaceutical companies being generic drugs. It is very bad to change the batch number, name, packaging and a new product. This is related to the profit orientation of the industry. The average gross profit margin of American pharmaceutical industry is below 25%, so as to support the long-term development of a new drug. Their new drug development will take 10 to 15 years. However, this model of our enterprise today is problematic, and the problem of the model determines the management mechanism of the enterprise.

7. Establish the concept of total profit management.

In short, the company's hierarchical performance indicators, from the return on shareholders to the return on total capital, to the net profit from sales, and then to the ability to make money and manage money, the total asset turnover rate determines the overall operation ability of the enterprise. Accounts receivable, inventory, the turnover rate of fixed assets, the growth of operating income, and the backlog period of funds began to become an indicator. Another financial lever becomes a quick ratio. With these indicators, these indicators can be extended to the functions of various departments.

Nowadays, department managers like to fight, and the intersection of two departments often becomes the focus of contradictions between companies. The intersection of the two departments must be the difficulty of management, and everyone's ass determines his head. Why is this happening? Because we are all assessing what employees are doing, everyone has their own sphere of influence. If enterprises want to do well, they must not have this sphere of influence, but break their functions and strengthen their processes. The core orientation of the process is the customer. Therefore, there are two problems that need to be solved in the current enterprises: the first is to have a sense of superiority and the supremacy of power, because there is always nothing wrong with listening to superiors, so private enterprises are too servile; The second problem is egoism, that is, one's sphere of influence. To break these two rules, a key problem is to break functional management and establish process management, the core of which is customer orientation. The process of all companies, to break through the department, is to let all the donkeys sit on a stool.

How can you put your ass on the stool? The most important thing is to instill the idea of overall benefit management and establish the concept of profit management, so that this line can be connected. This is the so-called concept of overall benefit management.