Facing every surge, as the leader of a domestic industrial software listed company, how can I lead the enterprise through uncertainty and move forward with each wave? At the end of 2023, Dr. Huang Pei, chief editor of e-works, interviewed Mr. Zhang Chengkang, chairman and CEO of SIE Information, a leading digital service provider in China.
Source of this article: e-works (Digital Enterprise Network)
Authors of this article: Huang Pei and Liang Xi from eWorks
In 2023, China's economy will resume a "wave like development and tortuous progress", with the wave of digital economy surging and the wave of AI surging in... Faced with every surge, as the leader of a domestic industrial software listed company, how can we lead the enterprise to overcome uncertainty and move forward in waves? At the end of 2023, Dr. Huang Pei, chief editor of e-works, interviewed Mr. Zhang Chengkang, chairman and CEO of SIE Information, a leading digital service provider in China.
Deep cultivation and meticulous work, creating operational value
Maximizing operational value is a topic repeatedly mentioned by Zhang Chengkang, chairman and CEO of SIE Information in this interview.
Zhang Chengkang talked about the example of shared bicycles. "In the era of consumer Internet, when shared bicycles were just launched, everyone was discussing how to extract and realize the massive data generated in the operation of shared bicycles. Many times, the concept was very big and the idea was very rich." Zhang Chengkang pointed out that "today's bike sharing operators, the logic of operation has actually become very simple. What enterprises think is how to maximize the cost of a bike and how many times a bike is shared before the cost can be recovered. The data that enterprises most need to obtain and analyze is in which time period and where the most people use the car, just put the car on time and point by point, and do a good job of service. This business logic, like that of operating enterprises, is how to maximize the operating value with the lowest cost."
Under the leadership of Zhang Chengkang, since its establishment in 2005, SIE has steadily passed the threshold of "adult ceremony" at the age of 18. From the IT department of the United States, SIE has started from delivering pan ERP products for overseas leading software companies, developed into a 360 degree information solution provider, and now has a deep layout in the field of intelligent manufacturing, and promoted the self research and delivery of industrial management software product families, industrial Internet platforms and other products that integrate manufacturing and operation. In line with the digital wave, SIE has become a firm corporate digital enabler and industrial management software practitioner, serving more than 1500 corporate customers.
In recent years, SIE has accelerated the pace of expanding its business territory, successively acquiring Jingtong Technology, Xinguang Intelligent, Gideon Information, Emec and other companies, respectively involving ERP, intelligent manufacturing, financial management and PCB fields. After its successful listing on the Shenzhen Stock Exchange in 2017, SIE also set up an industrial fund to make investments abroad, so as to complement and improve SIE's solutions.
Making software requires pragmatism and accumulation, and requires long-term and deep level accumulation. I don't quite believe that industrial management software can suddenly 'scale up'. It's like sharing a bike, when you find that the business model is not working, you gradually need to return to reality. Operating around value will be more stable, "Zhang Chengkang emphasized." Market and operation are the two legs of an enterprise. A truly good enterprise must iterate step by step
Perseverance leads to far-reaching goals
Identify the 'wet snow' and 'long slopes' of the track
In recent years, industrial software has become a hot topic. China has successively introduced a series of policies to promote the development of the industrial software industry, and capital is surging in the industrial software market. On the other hand, it is not uncommon for industrial software companies to have high valuations. At the same time, some industrial software listed companies have incurred losses, and there are also many companies waiting for listed companies to withdraw their IPO applications.
Zhang Chengkang stated that China's industrial software market is divided into product companies and service companies. Currently, influenced by various factors, foreign software companies are continuously withdrawing from the Chinese market. In addition, some foreign software companies do not attach importance to the Chinese market due to their low contribution rate, which has brought great impact and challenges to the business and profitability of traditional IT consulting service providers.
For product companies, the research and development of products requires a significant investment of funds every year. The product R&D management capability of software enterprises in our country is relatively weak, with insufficient R&D management mechanisms, R&D talents, and R&D investment. Zhang Chengkang said, "China's software companies, like China's manufacturing industry in the past, used to be more focused on making up for losses or providing simple processing services, lacking true core technology. After increasing research and development investment, the lack of profitability will lead to a shortage of talent, and when talent is relatively weak, it will in turn lead to the inability of enterprises to develop better products, further affecting profitability and forming a vicious cycle
On the other hand, the R&D management mechanism for software products is also very important. China's R&D management is actually a market-oriented approach to managing demand and ultimately turning it into a truly powerful product. In this process, software vendors need to have sufficient market insight to avoid deviations in research and development direction. For example, some manufacturers seem to have lost themselves in the cloud and, while hoping to transform into a business model similar to Salesforce, have overlooked the insufficient acceptance of SaaS among Chinese market enterprises.
In my opinion, software companies are currently facing a big challenge, which is that industrial software must be localized, and everyone must invest. "Zhang Chengkang emphasized," Making software really requires a craftsman spirit, and we must settle down. Through three to five years of accumulation, we can slowly have a sediment. But now that IT is developing rapidly, policy investment has also brought many temptations to software vendors. Therefore, it is particularly important for software vendors to calm down and truly work hard to create a software and product
In the process of transforming from an ERP agent service provider to a product company, SIE has anchored the field of intelligent manufacturing since 2012, adhering to the spirit of craftsmanship and concentrating on research and development. "It is very important for SIE to grasp this process. We should not only invest in research and development, but also maintain reasonable profitability."
Zhang Chengkang candidly stated, "Losing money is not scary. The key to making software is to see if it can continuously iterate and generate value, and it must have a certain degree of scalability. Because the logic of business is like what Buffett said about rolling a snowball, the most important thing is to discover wet snow and long slopes. Enterprises need to find a long enough track, and at the same time, this project must be able to meet long-term effects while maintaining stable and relatively rapid growth. The accumulation I have made today can still be done next year, and this accumulation must be valuable, rather than being useless after three years, which is particularly important for us
Nowadays, SIE is insisting on operating around values and constantly accumulating strength to handle the "wet snow" and "long slopes" that are suitable for oneself to roll. Zhang Chengkang also stressed that "although the market is relatively poor this year, we can see that SIE's financial report has been very stable".
Integrated Three Wings
Empowering Enterprises with Digital Transformation
"In addition to improving its own operational capability, SIE has always adhered to the strategy of" One Body, Three Wings "when providing services to enterprises." One Body "refers to the strategy of finding new user scenarios, applying new digital technologies, and integrating new organizational ecology to empower customers around the enterprise value or industry value."
In Zhang Chengkang's view, the development of new technologies is very rapid, and in the face of the tide of new technologies, manufacturing enterprises are no longer "waiting and relying", but actively embracing new technologies. Zhang Chengkang gave an example: "Just like how enterprises go to the cloud, their attitude towards cloud migration has evolved from five to ten years ago, when they believed that cloud migration was not secure and not suitable for industrial enterprises, to now accepting and willing to go to the cloud." Currently, the AI wave is sweeping across, and generative AI has become the biggest hotspot and trend in the capital market, with hundreds of companies emerging in the market to create industry models, and there are constantly new entrants. Many manufacturing companies are actively embracing AI and seeking ways to implement AIGC in their enterprises.
In terms of AI layout, in addition to launching Gushen AIGC middle platform and jointly exploring the implementation of Pangu manufacturing model with Huawei, SIE is more exploring the breakthrough application of subdivision scenarios. The training and deployment of models consume a huge amount of computing power, are very costly, and rely heavily on training data, "said Zhang Chengkang. The key to exploring the application of industry models in enterprises is to discover more practical application scenarios. In fact, there are not many application scenarios for AIGC in enterprises at present, and ultimately it returns to whether it can bring value to enterprises
Recently, SIE has deployed the application of AI industrial brain for customers. Based on the advanced AI model in the industry, through training and the introduction of knowledge base, it can understand and answer questions about industrial production, equipment operation, intelligent inspection, quality control and other aspects with pictures and texts, helping customers reduce learning costs and improve operational efficiency.
"In fact, there is still some gap between China's big model and real intelligence, but manufacturing enterprises can actually gain value through relatively basic applications." At present, SIE has also integrated AI industrial brain into the latest release of SIE's manufacturing operation management system SMOM V10.1 to help more enterprises transform digital intelligence.
Zhang Chengkang said that under the big waves, there are hidden waves surging, and no one can predict when the next technological wave will come. SIE will always focus on the core concept of creating value for users, deeply cultivate the needs and application scenarios of the manufacturing industry, and empower manufacturing enterprises to have a smoother and more efficient path of digital transformation.
The remainder is king
Promote sustainable development of enterprises
Running a business is a protracted battle. At present, continuous disruptive changes have become the new normal, and the industrial software market is experiencing fierce competition and changes. Faced with the transition from an incremental market to a stock market, or the possibility of entering a reduced volume market in the future, Zhang Chengkang said, "In a market with poor performance, the leftovers are king. Only by maintaining a relatively good operating state and profitability, after this stage, the market will return and concentrate on excellent enterprises, and the leftovers are the most valuable. The most important thing is whether you are still at the table
Zhang Chengkang said that the essence of a company is management, "just like the giant bike sharing company Mobike, which had a market value of tens of billions of yuan but was eventually acquired and gradually withdrawn from the market. Therefore, what we need to solve is eight words:" open source, cost saving, quality assurance, and efficiency improvement ".
Zhang Chengkang pointed out that to achieve open source, the first step is to consider what customers need and how to solve their problems. When making software, we must return to the market, deeply understand customer needs and pain points, and use digital technology and some ecosystems to help enterprises solve problems. This also reflects the value of the three wings of unity
On the road of self-developed industrial management software, SIE chose to focus on the core needs of customers and constantly optimize and innovate in the process of application and practice.
For example, in the creation of manufacturing operation solutions, the iterative process of SIE Intelligent Manufacturing has always been accompanied by the development of manufacturing enterprises' pursuit of competitive advantage. From improving the efficiency of "production execution" and establishing "cost advantages" to supporting "comprehensive business advantages" through balanced manufacturing operations from orders to delivery; Then, through the development of "cluster" resource interconnection and complementarity, establish "industrial symbiosis advantages". SIE has also expanded from launching industrial management software products with S-MES as the core for discrete manufacturing enterprises to SMOM, an industrial management software product family with integrated manufacturing and operation, to creating Gushen MBM, a product in the era of intelligent manufacturing 3.0, to support enterprise IT to respond quickly to changes and upgrades; Support integrated management and control of multiple business formats and groups; Support the integrated cooperation of industrial clusters and help enterprises form competitive advantages in industrial clusters.
Zhang Chengkang especially mentioned that in SIE's manufacturing operation solutions, the manufacturing operation analysis platform SMI built around user value has been favored by manufacturing enterprises. The SMI platform can help enterprises build a one-stop data management and analysis platform from a single factory workshop's line edge kanban to a group level unified operation, allowing enterprises to truly obtain data value and achieve data-driven management and decision-making. On the other hand, the small product line of SMI platform has also brought considerable profits to SIE.
In addition, the Gushen industrial Internet platform built by SIE was successfully selected into the list of new cross industry and cross domain industrial Internet platforms in 2023 this year, becoming the first national "double cross" platform locally cultivated in Guangzhou. Zhang Chengkang said that being selected as a national "double cross" platform not only means that SIE's contributions in the field of industrial Internet over the years have been recognized by the country. On the other hand, SIE also hopes to precipitate industry knowhow through Gushen Industrial Internet Platform, go deep into industrial clusters, practically serve enterprises on the industrial chain, and help enterprises create maximum value.
At present, SIE has cooperated with Foshan Bureau of Industry and Information Technology to build an industrial Internet platform for small household appliance industry cluster, which conforms to the chain transformation trend of "large leading small" in manufacturing industry and enables SMEs in the industrial chain supply chain to coordinate transformation. In the application, small home appliance enterprises can obtain order information, achieve shared design, and find cooperation opportunities through this platform. At the same time, enterprises can also obtain the corresponding knowledge base on the platform in a relatively simple way, realizing simple applications such as production management and warehouse management, thereby connecting the upstream and downstream of the industrial chain and forming an industrial cluster effect. This approach is actually very practical and ultimately returns to value, "said Zhang Chengkang.
Strive for excellence and perfection
Strengthen the 'hardcore' strength
In 2023, global economic growth will be sluggish, and the outbreak of trade wars, financial wars, and various geopolitical conflicts will have a certain negative impact on economic development. The Chinese economy seems to have not recovered as expected, "even though many investors are not optimistic about the Chinese market, I am still relatively optimistic in my heart," said Zhang Chengkang.
Zhang Chengkang mentioned, "After three years of epidemic, when China just opened up this year, enterprises were generally optimistic, including SIE. The plans made at the beginning of the new year were optimistic, and they made adequate preparations and deployment in advance for this year's market. The cost increase caused by early deployment has made many enterprises' profitability worse this year."
Secondly, after the opening up this year, most of China's manufacturing enterprises overestimated the position of China's manufacturing industry in the world. During the epidemic, the world's production capacity did not reach 50%, and China's manufacturing industry went against the trend and enjoyed some opportunities. Starting from the second half of last year, with the complete opening up of production capacity in Europe, America, Southeast Asia, and other regions, the advantages of China's manufacturing industry have become less apparent.
Zhang Chengkang also pointed out that some European and American companies have started to prevent supply chain risks after decoupling, which has reduced the market share of Chinese manufacturing enterprises and is also one of the important reasons for the decline in profits of manufacturing enterprises this year.
But in Zhang Chengkang's view, starting from the third quarter of this year, the electricity consumption of large-scale manufacturing industries has increased, and the amount of chip procurement has begun to increase. Meanwhile, after more than half a year of baptism, the international exchanges of enterprises have gradually become normal. From these phenomena, it can be seen that after eliminating some enterprises, some capable and competitive enterprises will stand out and gain more market share. Zhang Chengkang optimistically stated, 'What the market lacks the most is confidence. In another six months, the market should return to a relatively normal state, and the rest will be king.'.
For SIE itself, during this period of time, it considered how to improve efficiency internally, how to create new value externally, and how to strengthen its own strength in many ways.
Zhang Chengkang said, "It's not easy to practice internal skills in the market, so you can jump higher if you squat down." This year, SIE introduced Huawei's LTC, and launched and deployed end-to-end process system reform from clues to business opportunities to orders to payment collection. SIE is also about to launch IPD to improve the efficiency of R&D management, lay the foundation for achieving excellent operation, and prepare for the rise of the market in the future.
On the market side, SIE has also formulated several strategies:
Firstly, the focus is on investment in central state-owned enterprises. Currently, software localization and service localization have become important trends. Zhang Chengkang mentioned that "in the past, 90% of SIE's customers were private enterprises, and SIE hopes to achieve breakthroughs and expansion in the service of central state-owned enterprises, so that central state-owned enterprises can become a new business growth point." At present, SIE has established a special corps of central state-owned enterprises, and has won customers such as Hangzhou Turbine Works and XCMG Group. SIE has also acquired Sinobo to improve its layout.
Secondly, it is necessary to increase continuous investment in self-developed products. Zhang Chengkang mentioned that "at present, most of SIE's financing funds for listing are invested in the R&D of industrial management software, and this investment will be continuous. SIE also hopes to have greater output from talents to products".
The third is to accelerate the pace of internationalization. With the development of enterprises going to sea and the the Belt and Road, Chinese manufacturing enterprises going to sea has become one of the current important trends. Zhang Chengkang said, "China's industrial software application scenarios are very rich, and there is no lack of competitiveness in the world." SIE has also formulated an overseas strategy, hoping to go out and empower Chinese enterprises going to sea and domestic and foreign enterprises in the industrial chain.
The fourth is to further build and optimize the ecological partner system. As one of Huawei's important ecological partners, SIE also hopes to deepen ecological cooperation with Huawei in AI, infrastructure and other aspects.
As the pilot of the digital era, Zhang Chengkang is also full of confidence in the future development of SIE. Based on the current layout, I am quite confident that we can maintain a certain level of growth and continuously improve our business scale and quality every year.
postscript
Zhang Chengkang stated that intelligent manufacturing is the key to achieving transformation and upgrading in the manufacturing industry, and manufacturing ultimately needs to solve the problem of intelligence. Zhang Chengkang has repeatedly mentioned the "scissors gap principle" in the digital age. With the development of digitization and intelligence, on the one hand, the labor cost of enterprises continues to rise over time; On the other hand, the cost of intelligence continues to decrease over time. When the curve of labor cost and intelligence cost reaches the intersection point, digitalization and intelligence will usher in an explosion.
In the view of eWorks, in the management software industry, Zhang Chengkang is a young leader who focuses on the operation of enterprises and has always maintained a relatively calm view of this market. It is believed that under the leadership of Zhang Chengkang, in the face of every unknown surge, SIE will break the waves and move forward with a steady posture.
