0:00 Look, this is the image of the live audio connection between Trump and Musk two days ago. Did you notice anything? Some sharp-eyed netizens noticed that in this ordinary image, the power bank seemed to look good, and immediately there were people found that this is a power bank from the brand Anker. The moment it was discovered, Anker’s stock immediately jumped 3%. Look at the results The live broadcast of the two top men on the earth gave Anker a wave of publicity But don’t just think that Anker is just a power bank company or a small accessories manufacturer. Let me tell you it is an invisible small giant in the technology circle Its products ranging from mobile phones and charging accessories to earphones, speakers, audio and video parts to "IOT" security, robots cover more than a dozen categories with
0:46 market value of more than CN¥ 40 billion or $6 billion The number of global users exceeds 100 million and is a major player in the field of consumer electronics through cross-border e-commerce, it is the largest company listed in China Most of the familiar brands are manufacturing large or expensive items such as mobile phones, automobiles, and home appliances. But Anker took a different route Starting from small piece of inconspicuous accessories like power bank charging cord and plug developing it into an ecosystem of technology products This is actually very, very rare and very, very difficult. Today Lin will talk to you about business and what is the secret of Anker Today's video is going to be amazing Some issues may not be as authoritative if I speak about them alone I invited a guest to join me. He is the founder of Anke Lin’s senior in Peking University
1:32 He has already achieved tens of billions of net worth in his early forties. Hello everyone. We will have an in-depth discussion in a moment. Have a seat This is my junior This is my senior After talking to Steven, my biggest feeling is that it doesn’t feel like he is those entrepreneur, he was really sincere in sharing Let's join Steven to experience some industry insights and his deep business thoughts from the the first-person perspective of a founder and CEO. Steven was born in 1982 to an ordinary family in Changsha, Hunan Province He has been a top student since he was a child and especially likes to study computers. In 1999, when he was 17 Steven was admitted to the Computer Science Department of Peking University. He then went to the United States for PhD but he gave up halfway through in 2006 He then entered Google Uo to this point, for most this is a standard elite route Many from Google
2:18 including my friends in Google would go skiing, rock climbing and camping in their spare time. But Steven doesn’t. He has a restless heart, which is entrepreneurship He was good at programming At that time, it was in the early stages of the e-commerce explosion. He helped a friend to write a program to automatically capture online product price information and then conduct price comparisons to automatically sell goods on Amazon. The income was very impressive But it was not enough to satisfy the restlessness in his heart. Until one time, Steven wanted to buy a replaceable computer battery on Amazon. He searched for a long time, there were roughly two options, one was the original, the rating is very high, 4.5 stars but it is very expensive at 100 dollars The other type is the white label, which has no brand. It is cheap at just over 20 dollars, but the quality is not good with low rating of 3.5 stars. He wasn't very happy with both options
3:03 What to do then? Because of such a trivial matter, Steven, as a Google programmer, went to China to integrate the supply chain in person. When we returned to China, we found that the best laptop battery we could find was in Huaqiangbei, We went directly to the factory and then we said we want the best battery cells and the best chips. How much would it cost to put them together? So the price of those laptop batteries I bought at that time was just over $20 You see, he used only $20 about the same as that of white brand battery. He managed to assemble a fairly good-quality battery which means he has filled the $20 - $100 market gap Steven thought this was an opportunity He quit his job and started a business assembled products domestically and then went overseas to sell them on Amazon
3:49 But back then, cross-border e-commerce was still very immature. I had to learn bit by bit how to register a company create tax number Customs Declaration Form The first customs declaration form in our company was filled in by myself, Really? Customs declarer You see, at this time Steven found a gap in the market and seemed to have found a solution. In fact, at that time, many companies relied on China's supply chain selling to overseas market which is basically export cannot be called overseas. I think the biggest difference between us and them is that our brand was our own at that time. We went directly overseas through online direct sales channels like Amazon and then established a brand to sell to consumers So Steven why do you think you can stand out? When we talk about 4P we can think of it as a flywheel. The first step is to have a better Product Then in the second step, you need to invest in good channels and good marketing
4:36 Place and Promotion If you do the first two steps correctly, you can sell a good amount but more importantly, you can sell this amount at a good price , so there is the fourth point, Price. When you have a good price and good volume, you make money, and then you will invest in more products. That's how the cycle starts So I think we have been in such a flywheel in the past ten years and started to spin step by step. Other people may have earned money and done other things. They didn’t invest firmly in such a 4P cycle flywheel. OK, You have the Product, you found the Price range the Place is Amazon right Because I’m familiar. What about Promotion? How can I let users know about the product? At that time, there weren’t any live streaming also not many digital bloggers to cooperate with, so there were only two common promotion methods One is SEO, you buy the search keywords.
5:22 For example, if you search for power bank on Google, Anker is placed in front. The second one is advertising. There are just two modes. You must know that Steven was working on search algorithms at Google at the time, so I naturally thought that he mainly relied on this SEO. In fact, on the contrary, I am prohibited from doing SEO in our company because there are indeed many black hat or white hat methods for doing SEO. White hat is in compliance with the rules. OK, black hat means I use various dark or gray methods. Listen, it seems that Steven should know a lot about this black hat. Actually, you will find that if a person comes easily, he will not do those difficult things. The difficult thing Steven is talking about actually refers to persistently working on the product Sounds right to you? What’s the big deal about building a company and making products Let me tell you Steven, who has been doing search on Google for so many years, he has actually realised an important truth
6:07 is that these big companies have very sophisticated search ranking mechanisms There is no room for cheating Some people will say Steven used to work at Google doing search engine, So he hack he cracked Amazon's search algorithm that's why all our products are listed on top Is that true? It’s particularly interesting. You know until 2015, we were already one of the top sellers on Amazon They had a Global Selling a meeting of the country managers of Amazon from around the world I went for a sharing session After the sharing, I asked them the same question to a room full of 40 or 50 country managers. I said, look, some people say that we are doing well at Amazon because I cracked your algorithm Do you believe it? Do you know how many of the 40 or 50 professionals in that venue voted to say they believed it? They probably didn’t believe it.
6:53 At that time, more than half of the people voted and raised their hands Really? Yes, we think you did. I told them my true experience Even though it has been almost 15 years since I left Google, I feel that sharing this knowledge at this time should not be a leak. When I first went to Google to work on search engine I saw that everyone had such a test is called One-off Experiment What is it? If we have many lights in a room they will illuminate the room very brightly. How do you know which light is the brightest? Turn off one by one and see actually each time you turn off a light you look at which light got switched off when the whole house becomes the darkest So Google will regularly conduct the test called "One-Off Experiment". Each time you turn off a module, which module has the greatest impact on searches There is one module that has consistently had the greatest impact
7:39 during the 3 or 4 years that I had been there. and its impact is the sum of all other modules. What module is it? The internal name of this module at Google is Navboost. Navboost Navboost is actually very simple. It judges whether users like the results based on the behaviour of previous users. For example, if I click on a webpage and exit, it means that the information on this webpage is not necessarily good. For example, If you click in and exit within two seconds there is a high probability that you did not find what you are looking for. If you click in, you may not go back at all. Or if you clicked in and go back after a minute or two after it means that this web page either satisfied your needs or provided you with effective information So through past user behaviour it can very well determine whether this web page has anything to do with the search terms No matter what kind of cheating algorithm when in the face of such test it will not work
8:24 That's reasonable. If I can get a lot of traffic with some simple methods then why would anyone put in their head to optimise the product and make the product, right? So at that time, I would take Amazon's user feedback very seriously. Was there any internal mechanism at that time? In fact, we have had a mechanism called VOC for many years. After each product is launched, we will seriously follow up on its user star rating. Our target star rating is usually 4.5 stars. If it didn't reach 4.5 stars the team will try to find various ways to improve this product. To put it bluntly, if users complain about something that doesn’t work, then I will optimize it For example, some female users say that this power bank is too big to fit in my small bag. Then I will specifically improve it to create a lipstick-style power bank that is small in size and beautiful. Some people say that this power bank is not compatible with Apple and Android I have to take several with me every time I go out so I will develop specifically
9:10 a universal power bank with very high compatibility. Later, many users said that the charging cable is not very durable. If you use it for a year and a half, the head may break, right? I believe many people have this problem Anker specializes in developing particularly strong charging cable At that time, there was an advertisement that was very popular and went viral. Using one car to pull another car forward and then connected the two cars in the middle was an Anker charging cable. You see, it can even drag a car, so strong and durable You see, it directly hits the pain point and solved the problem Then the product’s rating becomes high. This also makes Anker’s products more popular There is a very large amount of organic traffic on Amazon. Free traffic Finally in 2013 it became the top seller in the charging category And let me tell you, there is actually a little trick for advertising This little hack is to keep an eye on Apple
9:55 Wherever there is iPhone ads I will follow behind When you just searched iPhone Anker will pop out right after Interested in iPhone? I have the accessories here. Of course, the product is indeed good quality and elegant Slowly, it gained the favour of a group of Apple users And later, Apple also gave Anker a big boost Apple does not include an adapter when you buy new phone So Anker cooperated with Apple and entered the official Apple store becoming their official partner and has since been firmly in the top spot in developed markets. You see, Anker has been very successful in the mobile phone charging category. So what is the next step? Steven's thought on this matter has made me deeply realise what it means to be vigilant in times of stability One characteristic of consumer electronics is that our product updates and iterations are very rapid The products released last year have actually depreciated a lot this year.
10:43 Because of Moore's Law We refer to such categories as 'fast-growing and fast-dying' categories Many categories actually from the moment you bought it until the moment it disappeared and no longer buys it the period is probably just 10 to 15 years For example, have you ever bought an MP3 player There may not be a few years between the first time you bought it and the last time you bought it So after thinking about this Deep down, I actually feel very anxious because the category I worked so hard to establish power bank for example The first time you bought a power bank is probably within this 10 years And I believe that with the development of charging speed of our battery technology, the last time you buy a power bank is probably 10 years Later what if this category disappear? What should we do? Did you think about making mobile phones? Actually people would ask me this every half year or every year
11:30 Why didn't you guys make mobile phones? I look at them, I have no grievance with you why are you persuading me to make mobile phones? Why didn't Steven choose to make mobile phones? Because mobile phones actually belong to a super category. What does it mean? If we divide based on the market size of a category there are roughly two paths One path is to focus on a single product category pursue categories with particularly large market sizes For example, mobile phones It has a market size of about 500 billion, which is the largest among consumer electronics PCs have 200 billion TVs - 100 billion; Tablets - 60 billion Till this point there's only one-tenth this can basically be regarded as a super category. Of course, mobile phones are the most super Another way is the category that I'm doing Its individual market size may not be very large but I can do many small and medium-sized categories. We still use mobile phone accessories as example
12:16 power bank, charging cable, adapters each of which may have a market size of 3 to 5 billion. It is obvious that Anker is actually taking this path. Every industry can be subdivided into a very small number of super categories and a large number of small and medium categories. Then in the final stage of competition in every industry, there will be clusters of companies that have created dozens of small and medium-sized categories in this industry. Large companies in this industry have either created super categories, or they have created a lot of small and medium-sized categories The total annual sales of the chip industry is about $500 billion which is relatively stable. CPU is more than $100 billion Memory is $100 billion and GPU is about $50 billion So these three super categories account for half. When you use your phone there are at least 50 or more various small chips. The category of each of these small chips may actually cost billions to hundreds of millions of dollars.
13:02 Among the top ten companies in the mid-sized categories seven are companies that focus on super categories." Like Intel, Qualcomm, AMD NVIDIA, Then there are three companies that only do small and medium categories. Now they don’t do super categories, they only do small and medium categories. OK, Everyone's positions are clearly defined Broadcom, TI, and STM. OK, It’s interesting. Last month, the CEO of TI came and met us We found that TI has done many small and medium-sized categories. On that day, its CEO said that they have 70 product teams. If we look deeper and look at the management model this kind of super category company is actually very different from many small and medium-sized category companies Those companies that can do super categories very well, like Apple and Tesla, you will find that
13:47 they actually have a very strong number one position This no.1 team will lead a small team firmly guide the direction of doing well in a very small number of super categories. Companies with many small and medium categories may essentially need a set of methodologies It is very interesting you will find that many of the underlying principles of things are very similar. In the martial arts world of JIn YOng there is a competition national finals competition During the finals there a very high prizes and attentions you can find the best people very fierce competition that's right, competition So that is our Super Category If today, for example, in Beijing Haidian District, let's have a martial arts competition this is actually regarded as a small and medium-sized category It is difficult for everyone in your team to be a top talent, right? So at this time,
14:32 you find that there is a gang that is actually very powerful. Quanzhen they have a technique called Tiangang Beidou Formation, seven people standing in that formation. The ability to combine seven positions according to a fixed method will significantly exceed the specific ability of one of them. It seems that to learn business management you should read "Jin Yong", right? The underlying logic is the same because if you think about Tiangang Beidou Formation, it is like a process-oriented organisation A product team is organized according to a set of process methods and then you ask them to follow this set of process methods to create this category. After having this idea, Anker have been trying this method since it went public in 2020. They abstracted the previous experiences into a methodology to empower these small teams, It's essentially like a consultant But what is the effect?
15:19 It is bad very bad. First, we stood by it for 3 years there was no PDT at the beginning, we called it the Product Team PDT. PDT is Product Development Team. It expanded all the way to the mid of 2022. We had about 27 product teams. That year, the number one of one of our business units left, and then I continued his work and went straight to the PDT. After working with those people for two or three months, I had a strong feeling. I felt that the reality was far from when in conference room whwn they explained it to us so well Can you give me a few examples or scenarios? For example, defining the product Multiple PDT products are significantly conflicting with each other At that time, there was a particularly impressive example. After we realized this, we actually started to reduce the number of teams from the fourth quarter of 2022. But because we have always considered ourselves a company that values kindness and cooperation
16:05 we don’t want to cut them all off with one stroke. In some cases, we talk to the team look, you believe in this category, and you told us this will work Then let the company turn you into an independent company Like a spin off. Our spin off The company gives you a multi-million investment so that you can start to make products first and then go for financing. Based on the level of confidence he usually expresses to you you would definitely think he would agree, right? But he rejected it Actually in the end, either he didn’t believe in this category or he didn’t believe that he could do well in this category independently. It's not as if we can simply expand the category and find people with experience and past success in that category and then it will succeed The multi millions lesson fee has made Steven realised that
16:51 experience is not the most important thing. What is the most important thing? Let's take a moment to listen for free to the business insights learned by the big players I think this is the most profound thing I've learnt in 2022 That is, you find that if the people are wrong, especially if the leader is wrong then no matter how powerful the formation is Meaning the PDT leader In other words, leader is the eye of that formation, because he is the one who directs the formation to operate. We need to find many people in charge of PDT So you find that for companies that do small and medium-sized categories, finding no.1 in every categories becomes extremely important What a painful realisation I think this concept if everyone directly says that the No. 1 is very important, everyone will think it's obvious But it really seems that after practical experience... When it comes to common sense
17:36 If you haven't step into a pitfall and have not paid painful lesson you won't have particularly strong feelings for it Now lesson learnt What do you think this No. 1 position should be like? Or what kind of person are you looking for if not experience? We now find that what is more reliable than experience is values. Values The characteristics of a person. What characteristics does this person need? Steven summarised it. First Principle , Seek Ultimate What does it mean? In its early years Anker's values were called being reasonable, which means how to think about problems, strive for excellence, and grow together Sounds normal right Steven, he thought the same way before, but after experiencing various "pitfalls", He had new thoughts. We divided the pursuit of excellence into three steps. The first step is called surpassing yesterday's self and the second step is called surpassing the best peers.
18:25 This is very reasonable. You first surpass yourself and then surpass your peers. Then the third step was called Surpassing the most fundamental needs of consumers This sounds a bit difficult you will subconsciously think that it is getting more and more difficult. Yes Level one, two, and three It sounds reasonable But in fact, after 4-5 years of practice we found that an organisation that wanted to surpass itself is not able to create things that exceed the essential needs of consumers If I always want to be better than yesterday’s self, it will be difficult for me to achieve the same feeling as having a breakthrough When you always think about overtaking, it is actually difficult for you to really think clearly about where the correct direction is. The third level of the staircase should actually be an extension of the first two levels which are more certain and positioned on the right And usually what you create is an improved version of the product
19:11 This is why you see that most of Anker’s products today are improved products However, the part on surpassing essential needs of consumers If it actually on the left like a mountain that seems to have no road at all. So you must dare to take great risks to climb this road that no one seems to have climbed before. Only such a road can take you to the top of the mountain that exceeds the most essential needs of consumers. We have changed the pursuit of excellence to the pursuit of ultimate We do not want the surpass OK. We only need to transcend the most essential needs of consumers. We changed being reasonable to First Principle We don't want people making arguments for their case Let’s sit down and talk together about how to create the best customer value. For example, when Elon Musk built an electric car 15 or 20 years ago, everyone told him that it is not possible
19:57 Yes Why? Because you bought the battery for $50k-60k it was impossible to sell the car. Then Elon Musk didn't stop here. He asked how he did he get the $50k to buy the battery. They found that it was material cost plus processing cost plus supply chain profit If you put them all together, you will get the $50k. In fact, what cannot be changed is the material cost or what is more difficult to change is the material cost. So after he finished the calculation, he found that the material cost was actually only $5,000. 15 years ago, processing cost and profit accounted for $45k, So if he could integrate it vertically reduce the number of suppliers, including increasing the volume larger scale the large-scale effect he said that he would have the opportunity to reduce $45k to $5k This is a return to the fundamental principles
20:42 setting aside the superficial facts And then using the foundational principles to assemble this problem and then finds that this part can be changed That is, if you want to create a brand new thing instead of improving one or if you want to operate something then you must have enough First Principle and strive for ultimate We call it a creator. For example, I ask a question on behalf of these creators if they have their own ideas, they may want First Principle To "pursue the ultimate", he may choose to start a business on his own vs. he may also join an environment that welcomes creators. Choosing How to choose That's right Startup companies will definitely have many benefits you have a lot of room for imagination. The right to make free decisions. Usually people think that this can bring the greatest benefits. But when we look at the consumer electronics chain the value chain is especially long It's unlike creating a website
21:29 an APP, with only 3-5 people working to launch it Put it this way We are now a company with more than 5,000 people. We have about 100 different positions. For a startup company I need to find good people one by one for so many functions and put them together to form an efficiently run company it is often very risky, so we joke that it's not nine failures and one success it may be ninety-nine defeats and one win. Of course, a very important point in the end is profit-sharing Right Let's see how he share the profit Because if you think about it, if I talk so much the product is manufactured finally most of the money is taken away by the company or by shareholders, or by me, then everyone will definitely think that you are deceiving us, Our company has always said that whoever creates value should be allocated first We learned from Mr. Ren Zhengfei of Huawei He said that value creation determines value distribution.
22:17 So we say that in a small and medium-sized category platform based company the value is created by those who are specifically working on small and medium-sized categories So we will definitely allocate more value to them. How to measure this specifically ? Let me talk about a ratio first. OK All the money earned is divided into 7:3, 7:3, or even 7.5:2.5. All the money earned refers to the company's profit. We have defined a word called residual value. OK Because profit in the conventional sense is actually what is left for shareholders, that’s right. Then we add back the money taken by employees. This part is called residual value. Essentially, this company deducts all your expenses leaving you with the distributable profits It's fun for us We find that for product companies the ratio of their remaining value to total revenue often indicates how outstanding the company is.
23:04 f the ratio is higher it demonstrates stronger irreplaceability That's right So we found that if you look at first-class product companies like Apple and Huawei Apple has close to 30%, Huawei has more than 30%, In fact, some very respectable peers in China actually have a residual value of 30% We would say this is a first-class product company, and then with a residual value of 20% we say it is a second-class product company, which is us now I was just about to ask Anker's This is true We are now 19.5 You are too modest This is true, the number doesn't lie I only have 20% of residual value now, so I am a second-class company. But this is also very consistent with my choices in the past ten years, because you want to make improvements because I have been making improvements in the past ten years so I'm just a second-class that's how far it could go But when we upgraded our values last year,
23:51 we were very clear that we must become a first-class company. We must change from a company that does improvement to a company that does creation. So the new mission and vision is called Ignite Possibilities Through Ultimate Innovation Ignite Possibilities Through Ultimate Innovation Then the vision is to create a paradise for creators that inspire each other and build a brand loved by global consumers. OK This is the residual value that Steven said. we mentioned about 3:7 7.5:2.5 the big part here is 7, 7.5 which is to be distributed to the creators, We see that our employees' income has been steadily increasing year by year. Can you disclose this? Just looking at 2024 there are already 400-500 employees whose incomes exceed 1 million
24:37 and is growing very rapidly For those who could stay for over 2 years the annual income in 2024 is 20% higher than 2023 This is quite Every year, before profits we actually set aside a large sum of money for operating results sharing, distributing it to everyone A bonus pool. Yes, bonus pool the growth rate of our bonus pool is significantly faster than the growth rate of our profits. Another approach is to allocate a new option pool for each major industry direction in our strategic focus OK This pool is distributed among all employees of the company Yes Front desk will get tpp Those who work on products will get more In other words, the cost of this pool is very low The cost is close to zero, meaning you don't have to spend a lot of money to acquire it. The investment during the business process is also covered by the company So you don’t actually have to take too many risks.
25:24 Finally, when results are achieved the company will repurchase based on a multiple of the profits In fact, we did the first repurchase in 2021. At that time, we repurchased more than 100 million. We just made an announcement to repurchase the second tranche of more than 300 million, Which is allocating to these creators When they create profitable business, they will take the corresponding proportion, so they are quite happy It is a good way to exit. Because frankly The company may not be able to exit after listed Yes You definitely understand right? In this way, The company can reliably convert it into cash As long as you can create a good product, Did you come up with this yourself or did you learn from elsewhere? It's actually a comparison because you find that all real estate companies are doing this When it launches a new project, it will allocate a certain amount of shares to its project team. I was originally a very homely person, and I rarely go out
26:10 We realised that my biggest conflict isn't that I can't execute specific business tasks, but rather the contradiction between the numerous business opportunities I have and my current insufficient of high-value creators In other words, we have many, many categories. We all feel that this category is worth doing and should be done. But there is no one to do it So why don't we take this opportunity So I'm taking advantage of this stage to share our thought hoping to attract some like-minded people. Anker wants to expand to more categories From your perspective which categories have more opportunities? We think there are opportunities in many categories. First of all, we are a toC company that is, we are engaged in consumer products Let us use the things you use around you today as an example. We can roughly classify it into three stages. For example, in the first stage, it is a non-adjustable stage.
26:55 For example, today’s chair looks like it cannot be adjusted. OK. Then the second stage is called adjustable For example, an ergonomic chair initially only 2-3 adjustments can be made Now you find that there are already more than a dozen places that can be adjusted. But let me ask a question, do you adjust it frequently? Not often It's the same for everyone because when you sit on the chair, you are mostly working or talking your thoughts are actually spent on your life. You are not spending it on this one item. So although it can be adjusted most of the time you won't. Another example, toilet The earliest toilet was actually a flush button. Then the smart toilet you have at home now has more than a dozen buttons. Although it can be adjusted but usually you'd be using your phone The third stage is more natural we call it adaptive adjustment Meaning when you sit on the toilet, you don’t need to adjust it
27:41 It can sense your status and adjust itself Adaptive adjustment It is actually the ultimate form of the objects around us. Why was it not adaptive in the past. In other words, how can it become adaptive? It can first sense your state and then determine what you actually want based on that perception In fact, the various sensors for perception have only begun to develop greatly in the past five or ten years And the truly efficient judgments and algorithms for personalization have actually progressed very rapidly in the past few years. So on this basis, we feel that there are many categories are worth redoing, so there are a lot of opportunities here. So you see, skilled at identifying opportunities think from a first-person perspective, and do things with an attitude of pursuing ultimate This is a trait of a creator that I observed from my interactions with Steven
28:28 For creators they can work with Anker to create new categories. For Anker, they have to follow the path of many small and medium-sized platform companies like Procter & Gamble and Texas Instruments. They are willing to share profit Isn’t this a win-win situation Sounds quite good right I think having the opportunity to communicate with entrepreneurs who have firsthand experience like generals who have been on the battlefield this opportunity is quite rare The content of this interview may seemed to be a bit long But I've been thinking and moving back and forth I really can't bear to delete a lot of it So those of you who have made it to this point I really appreciate your patience and I hope you can gain something and have that enlightening moment If you have any thoughts or feedbacks on this format do let us know That's it for today. Bye! Look at our setup We have 3 directors Can't hide this belly now
29:14 Thank you. Come. Cheers Thank you Thank you.
