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Chen Qiyu: Consolidating Organizational Capabilities, Achieving New Growth Towards a Brighter Life

From 11 to 12 January 2022, Chen Qiyu, Co-CEO of Fosun International, pointed out the highlights and shortcomings of the previous year and put forward strategic thinking for the future of Fosun at the 2022 FosunAnnual Conference.

On 11 January 11 2022, Chen Qiyu, Co-CEO of Fosun International, presented a work report on behalf of the company's management at the 2022 FosunAnnual Conference. He first recapped the changes in the macro environment globally and in China in 2021, and then summarized the Group's business highlights in 2021, pointed out the shortcomings and pain points in business development, and then put forward six strategic thinking to bring in ideas for future development, lastly, reviewed and provided suggestions on the business development plan in 2022.

After experiencing a turbulent macro environment in 2021, Fosun is on the rise overall, with robust anti-pandemic capabilities, stronger growth capabilities, and a more solid foundation for corporate operations. Looking forward to 2022, Fosun must think and advance its work from ESG, FES, technological innovation, overseas operations, ecosystem and other dimensions, consolidate its organizational capabilities, achieve higher-quality development, and reach greater heights.

The Year of 2021

From a macro perspective, we experienced many major events and changes globally, in China and in Fosun in 2021. The changes and impacts brought about by the pandemic lasted throughout the year. In 2021, vaccine administration has commenced vigorously globally, and the overall vaccination rate is quite high. However, the "crafty" novel coronavirus has given rise to multiple variants. Various countries have stepped up their preventative measures to fight against the mutant virus, the Delta variant and the recent Omicron variant in particular.

Under such circumstances, in the past year, the Communist Party of China ushered in its centennial birthday; the national economy and people's livelihood have been very stable, and the economy has achieved good development; there are still many gambling in foreign affairs; one of the current biggest challenges is the slowing population growth and declining birth rate. Under the "triple pressure" of economic development, namely shrinking demand, supply shock, and expected downturn, we must take the initiative to build a dual circulation system.

Facing the future, China must pursue a high-quality development and actively develop high-quality enterprises that are "specialized, refined and innovative". The "dual carbon" economy will be a long-term theme in the future. China has proposed to achieve "carbon emission peak by 2030 and carbon neutrality by 2060". These two goals have a profound and immense impact on the transformation and adjustment of our economic structure.

Let’s have a look at the development trend of global enterprises, from 2011 to 2021, the top ten companies by market value globally have gradually withdrawn from energy and finance sectors. The top ten companies by market value in 2021 are mostly technology companies. In the past ten years, Apple, Microsoft, and Alphabet (Google) have risen in the rankings year by year. With a massive expansion in scale, they have achieved a ten-fold increase in market capitalisation in the past ten years. In addition, the market capitalisation of hard-core technology companies represented by Tesla, Nvidia, and TSMC has also risen rapidly. China's corporate rankings have also undergone tremendous changes in the past decade, from being dominated by companies in the finance and energy industries in 2011 to being dominated by a series of technology companies today.Hard technology companies have also become the direction of future development.

From the future standpoint, new windows of innovation have appeared from microcosm to macrocosm, from reality to virtual. mRNA technology, Tesla, Metaverse, etc., all represent the latest direction of technological progress in the industry.

Business Highlights and Shortcomings in 2021

Judging from the overall results and general trend, Fosun posted an overall upward trend in 2021. After experiencing the tempering of the pandemic, our anti-pandemic capabilities have become very robust, growth capabilities and corporate operations foundation have become more solid.

In 2021, Fosun achieved several business highlights, with the frequent launch of M-end blockbuster products, driving revenue growth and creating shareholder value, including the launch of Fosun Kite's CAR-T products, a series of biosimilars from Shanghai Henlius, and a number of technological products from Nanjing Iron and Steel to promote rapid growth in results, the remarkable sales of Laomiao’s Ancient Gold series, and the outstanding performance of Jinhui Liquor and Shede Spirits.

The scale of C-end has been expanded, user satisfaction has been improved, and deeper insight into customer needs has been developed. We have made progress in domestic and overseas investment layout, and in the health, happiness, wealth and intelligent manufacturing segments, including a series of effective mergers and acquisitions such as Antejin, EV Changxing, Sergio Rossi, Bankhaus Lampe, etc. to promote the development of various industries. Our brand image has continued to improve and ESG rating has been upgraded to "AA", and the Rural Doctors Program has continued to make greater impact. We have also stood on the front line in flood control and the fight against the pandemic in Henan and Xi'an.

In 2021, the Group has established four major top-priority committees to be fully initiated in four aspects: ecosystem, overseas operations, technological innovation, and FES. The functions of intelligent technologies have been upgraded, and the interconnected industries have begun to bear fruit. Organizational capabilities have also been improved significantly in 2021. The management support mechanism, and the members of key positions and committees have been continuously improved.

At the same time, there were some shortcomings in business development in 2021. First of all, the Group's overall technological investment was not balanced, management efficiency was poor, and technological innovation output was insufficient. Some achievements have been made in financial ratings and we hope that it will be further improved. From the perspective of business development, the systematic construction of various business segments emerged successively. For instance, Nanjing Iron and Steel performed very well in the construction of the operation system, but most enterprises fell short in the construction of the operation system. The Group's market capitalization was unsatisfactory. The talent training system is not yet completed and lacks international talents. The Internet operation capability and development are still in nascent stage, and the talent team and application of intelligent technology are insufficient.

Six Key Strategic Thinking

With the mission of "creating happier lives for families worldwide" and the vision of "rooted in China, creating a global happiness ecosystem fulfilling the needs of one billion families in health, happiness and wealth",Fosun upholds the values of “Self-improvement, Teamwork, Performance, and Contribution to Society”, uses the "1+2+7" strategy to build an innovation-driven C2M consumer AIoT group, practicing industry operations and investment, FC2M ecosystem, globalization 2.0, innovation-driven strategy and other strategies, serving one billion families worldwide.

We aim to achieve the core strategic goal of "ten-fold growth in ten years". Against the backdrop of a large corporation with rich resources, the biggest challenge is the lack of organizational capacity. Therefore, we have proposed six key strategic thinking.

Thought One, is to understand ESG (environmental, social and governance), whether it is an opportunity or a risk for enterprises. In today's social environment, the survival and development of enterprises in the future is inseparable from the general direction of ESG. With the global rising trend of ESG governance advocacy, many outstanding companies have continued to develop. In China, General Secretary Xi Jinping proposed that "lucid waters and lush mountains are invaluable assets", and China's environmental governance has entered a major cycle.

Does Fosun regard ESG as a risk or an opportunity? We are already actively responding, and we believe that health, happiness, intelligent manufacturing BG, banking and insurance BG, technology and finance BG and other aspects will center on the development and growth of ESG, and more initiatives will be involved.

Thought Two, is to create a FES system.Fosun's development is inseparable from "diversification". GE and Johnson & Johnson, two important representatives of global diversified companies, announced their spin-offs in 2021. What is the reason behind this? Under Jack Welch’s management, GE's market capitalization peaked in 2000, and GE has underperformed since then. Let's look at another company, Danaher has become the most outstanding diversified enterprise in the world all thanks to a solid DBS business system.

The inspiration brought to us by Danaher’s DBS: a company must constantly strengthen its strategic direction, optimize its strategy, and have an excellent organization and talent management system. The key is to have a refined business management system.

The core DBS system includes growth, lean, and organization. These three elements help companies enter the industry that they desire and develop business, which is an extraordinary fundamental function. When an organization has this kind of ability to select business with the greatest value to develop, it will gradually be able to form today's paradigm.

This paradigm also supports the development of diversified industrial investment, mergers and acquisitions + operation model, and it is essential for Fosun to establish this system. After planning for a period of time, we have started to build the Fosun FES system. In addition to growth, lean management and organization, Fosun's FES system also emphasizes entrepreneurial spirit and ecosystem. Such systems, toolboxes, case libraries and expert database should be rooted in all Fosun's businesses to quickly initiate our twin-driver of entrepreneurial organization and ecosystem multiplier growth, and fully integrate sustainable development, multi-business development, and internal interconnection. FES is the link between Fosun's ecosystem and talents with the entrepreneurial spirit and a system that helps Fosun's ecosystem and entrepreneurs succeed.

Thought Three, is to drive by science andinnovation. Fosun has set up a Science and Technology & Innovation Committee to integrate industry characteristics and use technology to create products and solutions to solve unmet needs. The market serves as a starting point, we must first find out the greatest unmet needs in each market segment of health, happiness, wealth, and intelligent manufacturing, and then use technology to solve these problems with the support of funds, technology, talents and mechanism. Health, happiness, wealth, and intelligent manufacturing should focus on new drugs, medical devices, wine industry, cosmetics, technology and finance, new materials, new energy vehicles, carbon neutrality and other fields, leveraging on technology to solve unmet needs, and create blockbuster, high value product.

Thought Four, is to firmly embrace globalization. In the future, what kind of globalization capabilities are needed to match overseas operations with Fosun's overall plan? The first stage of Fosun's globalization is investment; the second stage is dual-headquarters operation; the third stage is to implement global operations, each business must carry out in-depth development globally and must have investment BD, R&D, supply chain, sales and marketing, localized organizational talents and a global organizational talent system. After the establishment of Fosun Overseas Operation Committee, Fosun is firmly embracing the ability to carry out in-depth development of various businesses globally.

Thought Five,is todevelop Fosunecological map. An ecosystem must be diverse, and species diversity is a foundation of an ecosystem. With such good foundation, Fosun can further be connected to the external ecosystem. Focusing on the needs of family customers, Fosun aims at creating systematic products and solutions of Fosun’s ecosystem for family customers.

Thought Six, is organizationalcapacity enhancement.

Outlook in 2022

In such environment in 2022, we must forecast the pandemic situation and achieve growth.

From the perspective of various businesses, in terms ofthe health BG, we must uphold innovation to launch more scientific and technological products, adhere to the path of internationalization and globalization; accelerate the launch of new products and strengthen the construction of overseas sales and marketing systems. Regardingthe happiness BG, we must develop the industrial layout according to the C-end consumers and improve its strategic play, building a moat through technological innovation; seize opportunities in overseas business recovery and growth; improve brand and product matrix, etc. Regardingthe banking and insurance BG, we must maintain our focus on mainstream markets, seize breakthrough opportunities in mature markets, enter new markets with innovative models, explore financial technologies, and further optimize investment work and investment strategies. Regardingthe intelligent manufacturing BG, we must connect with global resources, build a leading, open and dynamic global innovation network and global industrial ecosystem, and integrate C2M, technological innovation, FES and global investment. Regarding the technology and finance BG, we must improve customer service, supporting strategies, organizational talents and mechanisms.

In terms ofFosun Hive AMC, we should continue to promote the Hive model and simultaneously seize opportunities in the market dominated by idle and existing resources. Industrial investment must iterate the Hive style, and industry operations must be consolidated. Regardingthe investment AMC, we must implement the twin-driver of investment + operations, and focus on the four targets of high technology, high growth, high gross profit, and high repurchase rate. In terms of operations, Fosun must implement globalization, digitization, lean management and customer operations. Regardingthe industrial Internet AMC, we must strengthen the construction of organizational capacity, perform well in incubation projects, and continuously upgrade the top-priority strategy.

Human resources, finance, intelligent technology, industry operations, risk control, board secretary office/strategy/regional office, strategic empowerment, quality operation process AT and other lines of Foun’s functional departments should also deploy different focuses. Fosun Trade is a "special force" quickly formed by Fosun against the anti-pandemic background and a special force that quickly implemented a globalisation layout. The development of Fosun Trade has been verified by its operations in 2021. The next step is to actively carry out globalization and actively promote internal integration and interconnection.

As we enter the third year of the pandemic in 2022, it is the time for Fosun to drive new growth and reach greater development heights. On the occasion of Fosun's 30th anniversary, we will definitely set greater goals this year, build a stronger organization, and develop a greater blueprint.

Once again thank you all for your hard work in 2021!

Best wishes and good health to all in 2022. Thank you!