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Guo Guangchang: Three Directions Fosun is Heading Towards

Fosun just finished our mid-year conferences in the past two weeks. Everyone reviewed the previous half year work performance. I also took this opportunity to retrospect:

 

Did we pay enough attention on important work, outstanding people, or significant business segments? What should we strengthen and what should we give up?

 

Fosun gradually formed the organizational structure of “1+N” over the past 27 years, which means “one group + multiple industrial operations”. We also proposed a strategy of building an “1+N” ecosystem based on the structure. We were on the right path in the past six months, and the more we do, the more confident we are. Fosun will keep the ecosystem strategy and maintain its strategic strength.

 

People might ask: What is the difference between Fosun's ecosystem and other internet companies’ ecosystems? Where are Fosun’s opportunities?

 

In my opinion, the internet industry has entered the second half of its cycle - the combination of industrial operations and internet. Deep industrial integration is ascendant. Therefore, companies with industrial resources like Fosun have advantages in the second half cycle. When more advanced technology is used in an industry, a synergy will spark a more vital ecosystem.

 

It is not easy to build up this ecosystem yet we have advantages. A successful methodology is very important. A simple summary of Fosun’s methodology is following the three directions:

 

Vertical Industrial Integration

 

After 27 years of industrial accumulation, we have formed industrial groups focusing on certain fields, such as Fosun Pharma, Fosun Tourism Group, Yuyuan, Fosun Fashion Group, Fosun Sports, etc. Among these industrial groups, there are many global or regional leading brands - Shanghai Henlius Biotech, the leading domestic biomedicine company; Club Med, one of the world's largest tourism resorts; Atlantis Sanya, one of the benchmark tourism destinations in China; LANVIN, one of France's oldest fashion brands; Wolverhampton, ranking the seventh on the British Premier League; Fidalidade, Portugal's largest insurance company; and Fosun United Health Insurance, the rapid growth insurance provider in China.

 

The primary task for Fosun is to support the rapid and healthy growth of these industrial groups. We encourage them to vertically integrate their respective industries.

 

To achieve the goal, firstly we need to continuously execute the strategy of “industrial operation + industrial investment”. This includes solidifying the investment capacity into industrial operation integration, to better collaborate and improve industry influence.

 

Secondly, we should regain the industrial capacity and embed it into our organizational structure to support investment, especially to leverage Fosun's industrial accumulation to turn around portfolio companies. Some companies might have some problems at different stage, but we will turn it around as long as it has great industrial DNA and adds value to Fosun’s industrial development. This is Fosun’s important capability.

 

In the meantime, customers’ demands are essential to vertical integration of the industrial operation. We must emphasize the importance of the C2M strategy in industrial operations. We need to increase infrastructure layouts to support Fosun's various industries, for example smart retail, flexible production, intelligent supply chain and etc.

 

Closed-loop Services Centering Around Customers

 

Vertical industrial groups are foundational in Fosun's strategy because they solve customers’ pain points. How can we create greater value for customers? We believe synergizing different brands and products to a closed-loop ecosystem is an effective way.

 

The closed-loop is not a simple product to pair or bundle. The essence of the loop is to increase value around the customers’ needs and lifestyles. There is no need to exist if our closed-loop service can't bring 1+1>2 effects to the customers.

 

Taking Fosun’s insurance products as an example, it has been developed rapidly in the past three years. What we are pursuing is not just the scale, but also the access of health insurance to healthcare services such as medical services, pension rehabilitation, health management and pharmaceuticals, to provide customers a complete, efficient, high quality and affordable one-stop service. In other words, what Fosun United Health Insurance customers buy is more than a policy. It’s the entire Fosun healthcare service.

 

Normally, an insurance company doesn’t insure patients, but Fosun United Health Insurance is willing to insure. Our product for breast cancer patients is a pilot attempt to “care with the disease”. We hope to reduce the recurrence rate by providing effective health management services to clients. When the customer's disease recurs, we can provide effective medical services to him or her as early as possible. Patients should be taken care better. Fosun attaches great importance to the needs of this group. This kind of closed-loop service will benefit both the customers and us.

 

Fosun's tourism ecosystem is also a great example. We have extended the traditional low-frequency travel business to high-frequency products through “Foliday” membership system. Now we have developed many popular products, including Club Med Joyview and Miniversity. In addition, we have provided a series of products and services to meet customers’ needs from dating to marriage to children. We are also building a flagship eastern fashion lifestyle with Yu Garden, to revive local high street fashion design.

 

In the future, I believe Fosun will have more closed-loop ecosystems to meet the various consumers’ needs.

 

Horizontal Ecosystem Integration

 

Finally with vertical industrial integration and closed-loop services, we need to integrate horizontally to create a "health, happiness, wealth" ecosystem. Fosun is very clear about its strategy: To create a global happiness ecosystem driven by technology, centering around the needs of family customers.

 

There are two essential tools to build up such an ecosystem: An accommodating mind and an intelligent mid-office support.

 

Many colleagues told me that Fosun’s internal industrial collaboration is not efficient enough and there are many problems. Why? I think the most important reason is mindset. There is a saying​​ “You reap what you sow”. Too many people are “counting their chickens before they are hatched” or calculating profits before completing business. How would it be successful with this kind of mindset? We should firstly get all-hands-on-deck to do things correctly and contribute together. In Fosun, you will be rewarded for business done well.

 

We have entered the era of big data and AI. It is impossible to do business without an intelligent middle-office system. Fosun has already accumulated so much data that the headquarters, core enterprises and portfolio companies ‘data need to be connected so we can share the market value.

 

Therefore, Fosun is creating a digitalized intelligent middle office. We plan to use top technologies, and anticipate the technological trends in the next decade. We will use blockchain and AI as the underlying structure to build our intelligent middle office platform.

 

Finally, I would like to emphasize Fosun has to strengthen its business development capabilities, especially joint business development. Fosun operates many different industries, some might be stronger, but Fosun wins as a team. Soccer is a game of 11 people, and maybe each individual player is not a top player, but we may be stronger than the opponent as a team. Therefore, Fosun should solidify its investment ability into industrial operations to boost integration, and regain industrial capacity to embed it into our organizational structure and therefore support investment.

 

Collaboration, cross-border, and ecosystem are the key ideas. We must achieve the construction of Fosun's ecosystem through horizontal and vertical integration, as well as closed-loop mindsets to support producing more hot-selling products in the ecosystem.

 

This is where Fosun is heading towards.