Professor Gong Yi of China Europe International Business School: the dusk of the company and the dawn of the blockchain

Author: Gong Yan

Source: Odaily Planet Daily

Gong Yu

About the author: The author of the book "Dusk of Corporate System", Professor of Entrepreneurship Management at China Europe International Business School, Director of CEIBS Venture Capital / Venture Capital Program, Ph.D. in Strategic Studies from the University of Wisconsin, USA, taught at the University of California. Professor Gong Wei has deep research in the field of lean entrepreneurship methodology, and has books such as the best-selling book "Lean Entrepreneurship Methodology" and "Value Revolution".

Professor Gong Yi's research areas include strategic transformation, lean entrepreneurship and business model innovation. His research results are mainly published in the Journal of American Management Society and other international management academic journals. He not only has academic contributions to strategic transformation and lean entrepreneurship, but also has in-depth insights into the strategic development of Chinese companies. He has taught at the China Europe International Business School, the University of California, Irvine, and the University of Wisconsin for full-time MBA, EMBA, and other executive training programs, including entrepreneurship management, global business, business strategy, and complexity.

 

"Lie Zi" has a saying: "The impermanence of the world is that things are impermanent. They are used in the first day, and they are abandoned today; they are abandoned today, and later used." Human beings, while introspecting, also inevitably have a strong thinking inertia. And path dependencies.

As we have in this era, profound changes have taken place, but in some respects, we still lag behind this era.

From: Three trends in the future

Softbank Sun Zhengyi once said a word:

“If someone asks me what the stock price of a company is in the coming year? I can't see it, but I can tell you how much the company is worth ten years later, and the problems at hand will become noise.”

The change of the power of the times is the first trend we are facing.

What happened to the dynamics of today’s times?

The power of the times has been created from the king, through the channel as the king, into the stage of the user is king.

When users demand more and more rights, we can see the underlying logic of external ROI incentives: users standing in the center of the stage, he must demand more and more rights.

His initial request may be just a voucher, but when the user's rights are getting bigger, the user will ask for a part of the company's growth, and he will ask himself to control his own data instead of letting the company control the data.

As the trend of users becoming king is evolving, there will be a lot of new logic to destroy the original business model.

The second major trend is the change in technical form.

Account book 1.0 is rooted in the industrial revolution, while book book 2.0 is closely related to today's new technology.

Today's cutting-edge technology can be summarized in three letters: A-Artificial Intelligence, B-Block Chain, C-Cloud.

We can see that the technical representatives of the account book 1.0 era are mechanical technology and hydraulic technology. Today, standing at the center of the stage is a new technical form centered on artificial intelligence, blockchain and cloud.

The third trend is the change in organizational form.

New changes have taken place in organizational form. The old man is a well-known scholar at Stanford University, Richart Scott, and has a textbook, Organization, which details the path of organizational evolution.

The first stage of the organizational evolution path is the so-called rational organization, which is the organization of the industrial age, bureaucratic system, hierarchical, and everyone is working towards the same goal – the maximization of corporate profits.

The second stage of rational organization will enter the natural organization, and the ultimate goal of natural organization is completely different from that of rational organization. Rational organization is survival, and natural organizations must enter an open system.

This book has been more than 20 years since this year. Basically, the evolution path of the whole organization is consistent with his prediction. We move from rational organization to natural organization and finally to an open system.

Unfortunately, the current corporate system does not adapt well to such profound trends. Because the company's underlying logic is double-entry bookkeeping, at the moment, we have to admit one thing, that is, in the case that the premise of the development of the company system has undergone extremely profound changes, its underlying architecture, that is, the duplex The bookkeeping did not move with it.

Cheng: The "difficulty" of double-entry bookkeeping

In 1494, the Italian mathematician Luca Pacioli used a chapter in his book "Analysis of Arithmetic, Geometry, Ratio and Proportion" to make a clear understanding of the underlying logic and underlying rules of the book for the first time. Expression:

“When merchants record business transactions, they should use the AD year as the time in each transaction, so that they always remember to follow the ethics.”

This kind of morality is the spirit of contract. We now have a very close relationship between the whole contract spirit and the logic of the contract and the double-entry bookkeeping method. In a sense, this is an institutionalized starting point.

1. The “challenge” faced by double-entry bookkeeping

But today, we find that double-entry bookkeeping faces great challenges.

Its first challenge is that double-entry bookkeeping cannot record the entire process leading to this result.

Because it is not a process book, it can't record the thousands of actions and thousands of decisions behind the results.

The second challenge, which is the bottleneck of today's double-entry bookkeeping – double-entry bookkeeping does not have a complete record of the ROI of internal employees and the ROI of external users.

ROI is the return on investment. The rate of return is based on the output of the behavior and the outcome of the final outcome. Because this book only records the results, there is no record behavior, so the result is that this account book is difficult to reflect the ROI of each employee inside, nor can it reflect the ROI of each user.

We can only estimate this, but we can't measure it accurately, and this brings us a dilemma.

2. Internal incentives

What is the underlying logic behind this dilemma?

We know that the measure of double-entry bookkeeping is often in units of years and is non-continuous. Therefore, its measurement must be inaccurate.

For example, each employee's contribution per month varies, but his monthly basic salary does not change. Then the calculation and incentive of the internal ROI can only be basically determined by the superior leader.

This leads to two particularly large problems in our internal incentives: the first is the “black box effect” of incentives.

The incentive is basically like a black box. How do the final incentive results of A and B be assessed? You cannot decompose and calculate accurately.

On the second question, the granularity of the stimulus is very coarse.

This kind of incentive has no problem for our generation, because we have come from a shortage of economy and are particularly hard-working.

But the thinking of a new generation of workers is a game thinking, and it is a timely feedback. His request for feedback is not that I will do a certain job after one year. You give me some incentives. Their demands are now and immediately.

Therefore, the constraints of the underlying ledger lead to inaccurate measurement of the internal ROI (return on investment), which leads to the centralization and inaccuracy of internal incentives. This centralization and inaccurate excitation creates the "black box effect" of the stimulus and the coarse graininess of the stimulus.

3. External incentive dilemma

There is also a problem with the external ROI.

What is the external ROI? How do we motivate users?

For example, Internet companies, the most common incentive is that old users bring a new user and give him a coupon.

But the problem with this is that the company's growth has nothing to do with the user.

However, those early users may often play a more critical role than internal employees, but what did the people get in the middle of the incentive process? There are two things, one is a coupon, and the other is a point.

Points are of course valuable, but can't the points solve the problem? Points are not a timely feedback.

Aside from the issue of timeliness, there is a more fundamental flaw in points: you can't get the growth premium of this company, and ultimately the growth of this company has nothing to do with you.

Therefore, the integral system is a classic stock thinking, not an incremental thinking.

4, the information is not equal

Why do you encounter the dilemma of these incentives?

The problem of double-entry bookkeeping, that is, book-book 1.0, is attributed to an important concept in economics: information asymmetry.

Every user has private information. Private information means that in the transaction, no one can fully grasp all the private information of other people.

Information is distributed among many participants who tend to hide their true information and use private information to maximize their personal interests.

The information asymmetry of the parties to the transaction, the parties to the contract, and the players are closely related to the private information.

What does information asymmetry lead to? Economic theory tells us that it leads to two consequences, one called moral trap and one called reverse selection.

For example, in the scene of buying insurance, what kind of people are most inclined to buy critical illness insurance? The person most likely to suffer from serious illness.

From a probabilistic point of view, the person with the greater probability of being seriously ill will buy a higher risk, and after buying this insurance, his behavior will change.

Because he bought insurance, he no longer cares for himself, no longer pays attention to his diet, and treats his body at will. This is the second situation called reverse selection.

Therefore, information asymmetry often leads to moral traps and adverse selection, which will lead us to the challenge of today.

When information asymmetry occurs, in the context of our traditional corporate architecture, each manager will bring a performance measurement problem: how do you do causal analysis between the person's behavior and results, and do it accurately Measure.

And if you do an accurate measure, first, there is a boundary of the measure. Second, many measures are costly.

In fact, we will find that sometimes there is a high price for performance and the measure of the correlation between behavior and outcome.

5. Trilateral game problem

Since there is always a cost of measurement and a boundary of measurement, there has been a three-way game in business history.

A company has three core stakeholders, one is a shareholder, one is an employee, and one is a user.

What problems will arise between the three? In the trilateral game, who should be ranked first?

In fact, the trilateral game of shareholders, employees, and users is a problem that cannot be solved by traditional corporate institutions in the history of modern business.

  • The first shareholder?

A well-known manager, General Electric's Jack Welch once put forward a slogan: Maximize the interests of shareholders.

With the development of GM's performance, with the development of Jack Welch's personal influence, it finally became the general principle of the American business community. The premise and foundation of the company's existence is to create the largest shareholder. value. And this assertion formed a consensus in the American business community and then spread to the world.

No one has ever questioned the other two ends behind this logic—what should employees and users be placed in?

However, the challenges and challenges of maximizing the interests of shareholders broke out after the global financial crisis in 2008. Since then, the reflection and reconstruction of the maximization of shareholders' interests has become a top priority.

Professor Roger Martin, Dean of the University of Toronto's Lotman School of Business, gave a complete analysis of the quarterly report of General Electric in the Jack Welch era.

He summed up Jack Welch's 48 quarterly reports from December 31, 1989 to September 30, 2001, reaching and exceeding analysts' expectations of 46, or 96% of the time to reach or exceed. Analyst's expectations.

However, can we find such a good "shooter" on a global scale, hitting 46 times in 48 times.

Everyone is very curious about how Jack Welch did it?

His approach was actually very simple. At that time, 60% of GE's profits came from the financial industry, not the physical industry, so a large chunk of its assets were financial assets.

What to do when there is a missing piece in this quarter? Selling a little other assets, after two days, buy it back and make a change, this is the truth at the time. And from a general point of view, the operation is simple and effective.

Therefore, it can be achieved or exceeded in a quarter and a quarter.

From this example, we can see that in this game, the so-called maximization of shareholders' interests often conflicts with the interests of users and employees.

  • User first?

Now none of these big Internet companies are not the first to say users, such as Alibaba, Amazon, Facebook, Google.

Google has a very famous saying: "User-centric, everything else will come."

But let's think about it. After these appearances, are these companies really putting users first? If you really put the user first, will Facebook have today's data problems?

What is the core model of this company? It is to realize the realization of various commercializations by concentrating, integrating, cleaning and packaging the user's data.

  • The first employee?

Then change one dimension, the employee first?

There are a lot of companies claiming to put employees first, but again, let's put aside the noise of the surface, to see those companies that put employees first, and how many of them put employees first?

One of the companies gave the staff a particularly nice name, saying that its employees are partners.

Each of our employees, including our front desk counters, is our partner. This company is called Wal-Mart.

However, most of its employees do not even get basic medical insurance. This has become a social problem in the United States. All American society is responsible for the responsibility of this company. Most employees do not get the most basic medical insurance. In the end, their medical insurance is solved by the American society.

So those companies that seem to associate employees as partners really regard employees as partners? There is a huge gap between employees and shareholders or management.

How do we solve this problem? In the end, shareholders are first, or users first, or employees first?

Turn: blockchain is the answer

To solve these problems and dilemmas, we have an answer: blockchain.

The blockchain is a new technology. Its essence is a book. This book is called the book version 2.0. It can bring us two fundamental changes.

First, precise incentives for effective behavior.

Block-based ledgers enable accurate measurements and incentives that directly correlate behavior with results.

Second, an accurate calculation of the internal/external ROI (return on investment).

Today's blockchain-based books are able to accurately calculate internal and external returns, solving the two bottlenecks we have mentioned earlier (incentives of "black box" and incentive coarse-grained).

Of course, any new technology has bottlenecks. I just said that for some scenarios, it may break through the dilemma of our original book 1.0 and accurately measure and correlate the results of internal employees and user behavior.

1. Accurate incentives for effective behavior

How to do it? Our book version 2.0 and book version 1.0 are essentially different in four dimensions.

Based on the blockchain technology, the centralized measurement method of the double-entry bookkeeping method will become the distributed of the blockchain, and the non-continuous way will also become the record and feedback of timeliness.

2. Accurate calculation of internal/external ROI

In the account book 2.0 era, the three sides of the game between shareholders, users, and employees, the boundaries of these three sides will be opened, the roles of shareholders, users, and employees will cross, and the final three-sided game will become a trinity.

In this era, if you can unleash the value of your core users, these core users may become your most capable and unpaid employees. At the same time, he follows the company's growth and gains a growth premium, essentially becoming Your shareholders.

Since the power of the individual is infinitely magnified, if you can find an organization that organizes the power of the individual and ultimately leverages, the boundaries between users, shareholders, and employees will become increasingly blurred.

Is there a trilateral game to the Trinity that is being practiced? This is also a problem with internal ROI.

And the revolution of the external ROI, there are already many companies are quietly realized.

Everyone is familiar with it, and it represents the new power of the rise of the car: Wei Lai.

As a major shareholder, Wei Li of Weilai made a promise that the users with Weilai will eventually get Li Bin to cut out some of the stocks from his personal shares. In a sense, it means that you bought this car, and you become a shareholder of Weilai, and will enjoy its growth space and premium.

It does not use the concept of blockchain throughout the process, but the logic behind this promise is blockchain thinking.

This is a meaningful step. Because in the match between Weilai and Tesla, if it can't find a fission way to incite the user, it basically has no chance of winning. But if you do this, there will at least be a probability.

He: Inferences full of "Twilight"

Finally, let's return to the beginning of this article. Our future is experiencing three trends: changes in the dynamics of the times, changes in technological forms, and changes in organizational form. And when we seriously think about how blockchain thinking can be empowered in these three trends, we can see several interesting inferences.

The first inference is from the trilateral game to the Trinity.

The classic three-sided game can't find a solution in the original company structure.

No matter how you rank, in the company structure, the three-way game will always exist.

In the new organizational form based on the blockchain, the three-way game will likely become a trinity. On the one hand, he is a user, on the other hand he may become the most capable and non-paid employee in the organization. First, you can eventually share the company's premiums and bonuses.

The second inference, scale effect vs network effect vs fission effect.

In the era of industrialization, one of the underlying logics is the scale effect. The larger the scale effect, the faster the cost declines, and the higher the market share, which is a positive cycle.

So in the industrial age, the scale effect is the driving force for the development of the entire organization.

When we entered the Internet era, we added a second effect on the basis of the original scale effect. We call it the network effect.

Internet organizations not only have the logic of scale effect, but also have the logic of network effect.

What is the network effect? Whenever a new user joins, the value of the original first to Nth users increases, which is called the network effect.

Network effects and scale effects are two completely different effects, but all come back to bring about a serious social consequence: widening the gap between rich and poor.

The scale effect has aggravated the gap between the rich and the poor, and the network effect has further aggravated the gap between the rich and the poor on the basis of the scale effect. Because of a world of network effects, it is also a world of winners.

We hope that the blockchain and the fission effects of individual users corresponding to the blockchain can hedge the network effect, which is of course a good wish.

If the final blockchain evolves into a centralized approach, it will also become a driving force for the gap between the rich and the poor. This will be very reluctant to see.

Under the impetus of new technologies, the gap between the rich and the poor has accumulated to an inflection point. At this time, there may be collapses, and so-called brittle breakpoints may occur, which will cost every member of the whole society.

Therefore, we hope that the power of the individual is stimulated, and the fission effect brought about by the individual power can hedge the centralized network effect and bring benefits to the whole society, instead of worsening the result of the evolution of the existing technology.

The third inference, deconstruction and reconstruction.

Our existing overall organization will face deconstruction and reconstruction, such as communication, coordination, cooperation, incentives, conflict resolution, alliance, value network, etc. will all face deconstruction and reconstruction.

Therefore, we can fully think that perhaps the company system has reached dusk, but the new dawn is also coming.

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