Produced by | Entrepreneurial Frontline

Art Design | Li Yufei

Reviewed by | Song Wen

In the first half of 2024, the most competitive industry in China was undoubtedly new energy vehicles, and the most competitive individuals were undoubtedly the bosses of new energy vehicle companies:

Yu Chengdong of Huawei called for focusing on value competition rather than price competition at the Second Future Car Pioneers Conference! "We should compete in intelligence, luxury, comfort, safety, high quality, and excellent and enjoyable user experiences."

Liu Tao, co-CEO of IM Motors, believes that "if Chinese automakers want to go further, they need not only excellent products but also support in various aspects such as production capacity, channels, and after-sales systems."

After shaking up the new energy vehicle industry, Lei Jun of Xiaomi has his own ideas about "competition," which is that "everyone should not compete on minor issues; it's not worth it!"

Regarding the current status of the automotive industry, Li Bin of NIO believes that "competition" is normal and a natural outcome of market competition. However, he also reminds the industry to avoid excessive competition on insignificant details, "Competing on price is a bit low-level; we should compete on products and value."

(Image / Li Bin, the founder and CEO of NIO, who is also the subject of the book "Integration of Digital and Reality")

No longer engaging in pure price wars is a consensus among business leaders. Where to compete? How to compete? Each company has different priorities. However, regardless, the current situation requires entrepreneurs and the enterprises they lead to continuously break through in innovation and quality.

Coincidentally, Yang Guoan, Senior Management Consultant of Tencent Group and Dean of Tencent Qingteng Academy, also mentioned his views on how Chinese entrepreneurs should correctly "compete" in his new book "Integration of Digital and Reality: How Cutting-edge Technology Reshapes Industries" during a live interview:

In a market environment with limited growth, enterprises need to replace their past growth paths and growth models. China's mainstream competition model is homogeneous competition, which can be summed up in one word: "competition." This involves competing on scale, efficiency, and cost. Against this background, entrepreneurs need to recognize a new logic: while maintaining low-cost advantages, they should also build more differentiated competitive advantages. Especially in the face of challenges brought by new technologies, entrepreneurs need to strike a balance in mindset, capital, and direction.

Currently, we are in a new era of booming cutting-edge technologies such as AI, quantum computing, and biotechnology. The value of technology is no longer limited to cost reduction and efficiency enhancement but also involves industrial restructuring, strategic layout, organizational upgrading, and leadership transformation.

Especially when AI puts all enterprises "back on the same starting line," how should entrepreneurs change their logic of "competition" in the second half of 2024? How can they achieve a high level of competition and seize opportunities in this technology-related race?

This is a question that all enterprises must answer.

1. From technological innovation to industrial innovation, countless enterprises have fallen into the "valley of death"

Over the past 20 years, many companies on the international stage have not only emerged victorious in fierce market competition through technological innovation but have also profoundly changed the industry landscape and even influenced people's lifestyles.

On the surface, most of these successful enterprises originate from technological innovation, but in fact, these successes are all built on industrial innovation.

On the Iraqi battlefield in the early 21st century, the US military frequently encountered roadside bomb attacks. In response to this threat, the US military launched the DARPA Grand Challenge in 2004. In the vast Mojave Desert, unmanned vehicles competed fiercely. Although no vehicle completed the entire journey, it gave birth to the revolutionary technology of lidar.

During the challenge, a company named Velodyne, which specialized in audio equipment, participated in the competition. The company's founder, David Hall, keenly captured the potential of lidar during the competition. He realized that the single-line fixed line of sight of traditional lidar could not meet the needs in complex environments. Therefore, after the competition, he immediately began developing new lidar technology.

Soon, Hall successfully invented 64-line mechanical rotating lidar. This radar broke through the limitations of traditional lidar and could accurately capture and restore the three-dimensional information of the surrounding environment through 360-degree rotation scanning. This innovation attracted widespread attention in the field of autonomous driving.

The rise of lidar made Velodyne a leader in the industry, and Google's self-driving prototype launched in 2009 also adopted its technology. However, as the market expanded, Velodyne began to face challenges. Due to arrogance brought about by early success, the company did not pay attention to product quality, resulting in serious quality issues with its lidar products.

At this time, Chinese lidar companies such as Hesai and RoboSense began to emerge. These companies successfully turned lidar into a mature industrial product through rapid technological iteration and large-scale production. On the basis of price advantages, they also provided better services. Domestic autonomous driving system providers stated that although domestic radars had issues, their replacement and maintenance response speed was fast, while Velodyne's after-sales service was very slow.

Velodyne's market share continued to decline. According to public data, Velodyne's market value fell by nearly 85% in 2021.

In order to seek development, Velodyne had to seek cooperation with other companies. Eventually, it accepted an investment from Baidu, a major Chinese internet company, and became an indirectly controlled subsidiary of Baidu.

At this point, the lidar market officially entered a stage dominated by Chinese enterprises. Thanks to China's leapfrog development in the new energy vehicle industry, this technological revolution initiated by an American company was ultimately carried forward by Chinese enterprises.

Yang Guoan, who has observed the process of enterprise transformation and upgrading in China for 30 years, uses two waves to represent each technological cycle:

One wave is technological innovation, such as the current AI wave, which includes many companies like OpenAI and China's "AI Four Dragons." Technological innovation and capability iteration are happening rapidly, exciting entrepreneurs and investors alike;

However, another wave after technological innovation is also crucial, called industrial innovation. The key is to see if technology can be applied to industries. If not, it's just spinning wheels. We often see that many startups receive a lot of investment at the forefront of technological innovation, and large companies also invest heavily, but later find that they cannot make money, and market enthusiasm fades.

Even for cutting-edge technologies like artificial intelligence that most people cannot understand or master, Yang Guoan believes that the logic of technology diffusion in industries has not changed qualitatively in a century: "Great companies were not great when they were first founded; they became great when they grasped that wave of technology."

After experiencing rapid expansion in the early stages of the bubble, who can cross the "valley of death," embrace technology early, and make good industrial layout will seize opportunities during the relatively stable but broader market growth period. As stated in Yang Guoan's book "Integration of Digital and Reality: How Cutting-edge Technology Reshapes Industries," the emergence of a technology is not just a standalone technology but an ecosystem built after technological breakthroughs.

Innovation is sometimes a matter of timing. If a great idea emerges at a time when the technology to realize it exists, an industrial innovation is born. In Yang Guoan's new book "Integration of Digital and Reality," there is an example of a smart farmland: entrepreneurs hope to use digital technology to construct a virtual farmland that is identical to the real world. In the past, farmers had to go to the fields to observe, touch, and feel, while smart farmland uses drones and sensors to monitor farmland area, temperature, soil, crop growth, etc. Integrating the digital world with the real world to make the real world better is digital-reality integration.

This idea sounds wonderful, but there are several important and difficult points: first, whether the series of ecological supporting equipment for smart farmland can be applied on a large scale and whether the price is affordable; second, whether there are new farmers who can operate digital equipment; third, whether the algorithms for different crop growth can accumulate sufficient data and make correct judgments; fourth, whether policies and systems can vigorously support and encourage.

Therefore, Yang Guoan emphasizes that the cycles of technological innovation and industrial innovation are not synchronized. "Technological innovation can be fast, but industrial innovation requires ecological support. Without new farmers, there won't be a large number of professional drone operators, and smart farmland will be difficult to develop."

2. Holding a good hammer and finding the most obvious nails

In the topic of digital-reality integration, many people like to compare hammers and nails. The hammer represents technology, and the nail represents the application scenario.

Should you hold a hammer and look for nails? Or hold a nail and look for a hammer? These are two different models of how cutting-edge technology reshapes industries.

Some people mock those who see everything as nails when they have a hammer in their hands; others mock those who see everything as hammers when they have a nail in their hands.

Generally speaking, in modern business, a major technology often contains multiple technologies, and the solution and improvement of a problem in an application scenario often require the comprehensive application of multiple technologies, requiring a higher level of comprehensive ability to dismantle and reconstruct technology and applications. For example, the iPhone is a decomposition and reconstruction of multiple technologies such as wireless communication technology, low-power CPU, graphical interface, capacitive touch screen, and the internet, which has brought humans into the mobile internet era and greatly changed human work and lifestyle.

There is no useless technology, only people who cannot find application scenarios. In the book, Yang Guoan cites the example of Qunhe Technology (Kujiale), an online cloud design platform for consumers. This company applied rendering technology used in the gaming industry to the home improvement industry, ultimately disrupting the home design process by generating renderings in 10 seconds and decoration plans in 3 minutes.

"Mature product technologies, such as the current internet, have very mature business models and are more driven by user-driven innovation. The starting point is unmet user needs and how technology can serve them." As Professor Yang Guoan puts it, "When you have a hammer, immediately find a nail and apply it to a specific application scenario. The more obvious the pain point of the nail, the more useful the technological hammer is."

This is why Yang Guoan upgraded Yang Wuhuan 1.0 to Yang Wuhuan 2.0. The starting points of Yang Wuhuan 1.0 and 2.0 are different:

Version 1.0 of Yang Wuhuan focuses on strategic-driven digital and intellectual innovation, emphasizing how mature technologies can play a role in existing industrial structures, mainly helping enterprises achieve internal cost reduction, efficiency enhancement, and user experience improvement.

Version 2.0 of Yang Wuhuan focuses on digital-reality technology, emphasizing how cutting-edge technologies with greater uncertainty can reshape industries, helping enterprises make new strategic layouts and build ecosystems.

Whether it's Kujiale, the smart terminal XReal mentioned in the book, the smart agriculture pioneer XAG, the traditional manufacturing transformation player Trina Solar, or the new energy vehicle representative NIO, these enterprises are typical technology-intensive enterprises. The key to the development of technology-intensive enterprises lies in introducing new and unique products or services. Business scenarios are often customized and differentiated. Once they have differentiated technological advantages and solutions, their profits are high, and they value differentiation more than price competition.

In human technological history, many great inventions have only become great businesses and been applied to work and life after two or three decades, or even longer.

In Yang Guoan's view, clarifying the development logic driven by technology is far more important than the ultimate success or failure of an enterprise.

3. AI brings everyone back to the starting line, and entrepreneurs who know how to use AI well are "scarce resources"

When a new technological cycle comes, the principle for enterprises to maintain their prosperity remains unchanged: "You need to start early and last long," which often depends on the leader's judgment of technology and grasp of the rhythm.

Over the past 30 years, Yang Guoan's research topic has always been: how to help enterprises achieve sustained success. In his book "Integration of Digital and Reality: How Technology Reshapes Industries," "transformational leadership" is a thread that runs through both Yang Wuhuan 1.0 and 2.0. "The entrepreneurial spirit of adventure, exploration, and creation out of nothing is the most scarce resource in an economy and the core driving force in every technological cycle in human history."

Based on his experience as a senior management consultant at Tencent for 15 years and earlier as a management professor at CEIBS, Yang Guoan is accustomed to examining industrial changes and social trends in this era with a probing eye. In recent years, facing various uncertainties, how entrepreneurs should view, handle, and overcome inner confusion and anxiety has become one of Yang Guoan's key concerns.

Yang Guoan asked every entrepreneur: What role do you play in each transformation?

Almost everyone answered: an architect.

What is an architect?

The meaning of architecture is that they need to design the entire process, collect key data, use algorithms, and apply them to specific fields.

Yang Guoan once explained to the media: "It's a bit like a CPU, a central processing unit." The architect is the brain of the enterprise.

A roadmap for technology-enabled industrial innovation in the entrepreneur's brain is particularly important.

After two years of in-depth visits and investigations, Yang Guoan has drawn a new roadmap for the integration of digital and reality among Chinese enterprises under the wave of artificial intelligence: Yang Wuhuan 2.0 theory, encompassing digital-reality technology, industrial restructuring, strategic layout, organizational upgrading, and transformational leadership.

Yang Guoan believes that the theoretical framework of "Yang Wuhuan" is his "algorithm," which is continuously iterating through the analysis of more enterprise cases. "When I can't solve an enterprise's problem, I go and study, find patterns, and summarize a framework. Then I come back to coach more entrepreneurs." This is precisely the closed loop of the theoretical upgrade of "Yang Wuhuan."

During his tenure as Dean of Tencent Qingteng Academy, more than 700 entrepreneurs from cutting-edge technology, catering, education, healthcare, bioscience, and manufacturing industries have continuously refined this "algorithm."

When asked about how Qingteng facilitates entrepreneurs' collaborative learning, Yang Guoan used 17 words: "Break through internal and external limitations and traverse long and short cycles."

"In the past 45 years, Chinese entrepreneurs have sailed smoothly with few major cycles encountered. However, with the advent of the AI era, this survival of the fittest will continue to accelerate. This is also a key idea behind Qingteng's approach to entrepreneur learning: to help entrepreneurs traverse long and short cycles, avoid managing 21st-century enterprises with 20th-century experience, and encourage entrepreneurs to go out and visit the world or conduct in-depth reviews of past cases from other enterprises."

From this perspective, "Integration of Digital and Reality" by Yang Guoan, produced by Qingteng, is a staged achievement of Qingteng's insight into business, serving as a recorder and witness of the times. Its goal is to help entrepreneurs gain a deeper understanding and insight into digital-reality technology, enabling them to better integrate technology into the development of their own businesses based on the pain points of their industries and the needs of their enterprises.

Tang Daosheng, Senior Vice President of Tencent Group, said when recommending the book: "Starting early and enduring are the sentiments we have felt at