Jiangyuan Investment Zhou Hui： How leading enterprises are subverted by emerging enterprises？ Three big coffee letters of recommendation

Howard Marx bluntly said in Value Calculus: "The success or failure of investment mainly depends on whether the judgment of profitability is correct." And the core of this accurate judgment is the depth of cognition. Charlie Munger also emphasized that the essence of "being worthy" of what you want is to make cognition match value.

In a rapidly changing world, no one can judge the future based on the present; Even the most powerful people in this era are also confined to this era. Only by lengthening time, talking to people hundreds or even thousands of years ago and talking about everything in the universe can we break through our limited cognition and enhance our cognition. And the tool of dialogue is reading.

The smart people you can see from all walks of life have one thing in common, that is, they love reading and insist on reading. To make investment, it is necessary to observe things from a longer time and space by reading books, find out the unchangeable changes, deeply understand the first principles of things and discover the investment value.

In the autumn of October and the cool autumn wind, Venture Capital Exchange joined hands with a group of investors to share their favorite books with readers and friends, and traveled through time and space along the fingertips to find the high point of cognition. This is the sixth issue, and we invite Zhou Hui, a partner of Jiangyuan Investment, to share it.

"Innovator’s Dilemma" by Clayton M. clayton christensen.

Recommendation:As a professor at Harvard Business School, christensen put forward the theory of "subversive innovation" through the cases of hard disk, automobile and other industries. He pointed out that leading enterprises often pay too much attention to mainstream market demand and rely on continuous innovation, while ignoring destructive technologies (such as simpler and cheaper products) in low-end or emerging markets, and are eventually subverted.

Frames such as "technology oversupply" and "value network" constructed in the book can help readers understand the underlying logic of market changes, and are especially suitable for identifying innovation opportunities that seem to be "non-mainstream" but may reshape the industry.

For venture capital institutions, this book provides a counterintuitive investment perspective-the real disruptor is not necessarily the most technologically advanced enterprise, but the innovator who can accurately capture the "non-consumer" demand and reconstruct the value chain. For example, when the mainstream market pursues high performance, emerging enterprises gradually erode the share of the original giants by meeting the demand of mass users for cost performance (such as Pinduoduo’s penetration into the sinking market). This enlightens us that in the process of understanding the enterprise, we should not only look at the technical indicators, but also analyze whether the product can break the existing competitive dimension and form a "dimension reduction blow".

In addition, the book emphasizes that "the resource allocation process determines the enterprise’s ability", which also reminds us to pay attention to the organizational flexibility of the invested enterprises and avoid missing the transformation opportunities due to path dependence.

Editor: Yue Yanan

Proofreading:Liu Rongzhi