Another article worth to read, it outlines what problems that...

Another article worth to read, it outlines what problems that Origin Water are facing now, I believe it gives a great reference to Fluence Corp how they need to expand in the future, this article mentined two terms - Equipment and Engineering Works, Origin Water started with an high tech - equipment sales company and then later became an equipment sales & engineering works company, the problem they are facing now is the revenue is increaseing and the profit is dropping. https://mp.weixin.qq.com/s/0R-rpe5tPngataVnlIDIBw


In the past two years,almost all the enterprises in the environmental protection circle have steppedto the bottom of the accelerator, which it has staged an environmentalprotection version of "speed of life and death".

Among the many enterprises, the fastest running is the two leadingenterprises in the circle.

You must be no stranger to this one, because when the accelerator ispressed too hard, and you suddenly find that there is no oil in the fuel tank,and the plight of the capital chain has been reported by the media a lot. Oneof the enterprises is the famous Eastern Garden.

Another leader is the protagonist we are talking about today, OriginWater. In the face of a once-in-a-lifetime opportunity to become bigger, OriginWater's accelerator also reached the bottom, but the result was not asmiserable as the Eastern Garden, but there were also problems.

Origin Water has stepped on the accelerator all the way and finally foundthat it was hanging in neutral. The investment is getting higher and higher,and the business is becoming bigger and bigger. What is confusing is that thecompany's market value has not risen but has fallen. Everyone even thinks that OriginWater is no longer the old Origin Water.

As the absolute hegemony of the environmental protection industry, OriginWater started as an innovator at the beginning, and then they have made all theway to the top of environmental protection company through their innovationproducts.

But what kind of dilemma are they facing now?

01

From Agentto Replace

Behind theblue ocean?

Wen Jianping, a scholar, has a deep technical background in the industry,which allowed him to see through the nature of the environmental protectionindustry and drive technology before starting this venture.

At the beginning of the business, the technical progress of Origin Waterwas not so smooth. At that time, many projects of Origin Water were supportedby imported films.

From the start-up to the development of the first generation of its ownmembrane, Origin Water took ten years, and this is only the first generation,which is not competitive in terms of performance or cost.

Wen Jianping realized that it is difficult to achieve rapid andsubstantial breakthroughs without the support of technology. He expectedthat if he was to rely on himself, it would take at least three years toiterate from the first-generation membrane to the second-generation membrane.At that time, the environmental protection industry had begun to gain thetraction and the market would be released quickly.

Consumption of time will definitely jeopardize the fighter planes, sointroducing capital is a necessary path, and it turns out that it is indeedcapital that has enabled Origin Water to seize the opportunity. Thecapital boosted the rapid development of Origin Water's R & D team, whichgreatly shortened the product iteration time.

From the beginning, relying on the import of foreign membrane productsfor domestic sales to the final realization of research and development andproduction, Origin Water has achieved a reversible transcendence in the MBRtechnology field.

It is simple to say, but it is not easy to do.

How does Origin Water build its own moat step by step?

The first axe: dig a thousand feet-do a little bit of extension to the line

Origin Water has made all-round breakthroughs in the field of membranetechnology. Microfiltration membrane (MF), ultrafiltration membrane (UF),ultra-low pressure selective nanofiltration membrane (NF) and reverse osmosismembrane (RO) should be fully collected. .

At the same time, the entire industry chain in the MBR field has alsobeen opened up. From the development of membrane materials to themanufacture of membrane equipment to the application of membrane technology, OriginWater has achieved one-stop service.

From the breakthrough of single-point technology to the construction of acomplete industrial chain of products, Origin Water has achieved a monopolyposition in the field of membrane water treatment. At present, thedomestic market share is as high as 75%, and the membrane process occupiesabout 15% of the water treatment industry, which means that Origin Water hasachieved a 10% market share of the entire water treatment industry through themembrane process.

The second axe: price crushing-significantly reducing costs

Membrane is a very distinctive process in the environmental protectionindustry, because it has a strong two sides, one side is excellent results,stable effluent, high discharge standards; the other side is the high price,making large projects prohibitive.

With such distinctive long and short boards, the industry has always beenskeptical of membrane technology.

Some people think that membrane technology is too limited to be appliedon a large scale, so it does not have too strong commercial value; while otherssee the opportunities brought by this limitation.

What is opportunity? The problem that can be solved is theopportunity. The bigger and more difficult the problem is, the greater theopportunity. The stability of the good process is greatly improved, thecost is greatly reduced, and its application scenarios can be greatly expanded,which is a hundred billion-level business opportunity. This is the blue oceanmarket created by technological innovation.

Origin Water's second axe solves this problem. Regardless of whetherit is a domestic product or a foreign product, Origin Water has greatlyimproved the competitiveness of its products through the first two axes, andeven achieved a counterattack on the international MBR giant US GE.

Third Axe: Reservethe Future-Strategic Technology Reserve

The first two axes have made Origin Water win the moment and become thefirst leading enterprise in the environmental protection industry in one fellswoop. But the demand for technology has not stopped.

An enterprise that achieves the blue ocean miracle through technologicalbreakthroughs knows the importance of technology to corporate strategy. Ifyou stay in place, even the blue ocean you created will quickly become the redocean. Only by continuous innovation can you maintain the competitiveness ofthe enterprise.

Therefore, while Origin Water expands its business, it takes advantage ofcapital to greatly increase its R & D investment and build the mostpowerful R & D team in the environmental protection industry.

Today, what people in the industry are most afraid of is that OriginWater is not its absolute monopoly in the MBR market, but that it has alreadyreserved China's environmental protection technology for sewage treatment inthe next ten years.

In the future, China's bidding and upgrading of sewage plants willrelease a huge market every time, and Origin Water has already made enoughpreparations now.

To reserve future technology is to occupy the future market in advance.

02

BreakingWisdom

What isbehind the powerful toG ability?

The technology is a moat of clear water, but the moat is for defense. Itis not enough to have a moat. It also needs large-scale lethal weapons toattack and expand the territory.

Even with the absolute right to speak in technology, it has been moredecent in the industry than other equipment companies, but Origin Water stillfaces a big problem that its colleagues will encounter, how to achieve aqualitative leap in scale.

This is a common problem for equipment companies in the environmentalprotection industry. The reason why the scale is not large is mainly limited bythree reasons:

First, the environmental protection industry has many segments, and themarket capacity of each segment is limited;

The second is that even if the market capacity you choose is sufficientto give birth to a giant, there is fierce competition in the industry and it isdifficult for most technologies to achieve a monopoly effect;

The third is that equipment companies are in the position of downstreamsuppliers in the business ecosystem of the environmental protection industry.In many cases, whether there are orders depends on cooperation with largeengineering companies, in other words, they are subject to people.

For the first two constraints, Origin Water has solved it throughtechnological innovation. MBR is actually not a technology that can beapplied on a large scale. One of the important reasons is that it is expensive. Expensivemeans high cost, and high cost is a natural enemy of scale. In addition, theenvironmental protection industry is mainly an industry paid by the government,which is even more difficult.

Origin Water solved this big and difficult problem. The significant reduction incosts brought about by technological innovation is a crucial step for OriginWater to enter municipal engineering.

Breakthroughs in technology have helped Origin Water solve the problemsof market capacity and technological monopoly at the same time. Finally, thereis a third big problem, which is the restriction of orders.

Simply selling equipment is a good business model, and many internationalgiants are doing the same, and many investment institutions are buying it. Thereare three main reasons for this:

First, it's simple. Simplicity means high efficiency, and equipmentcompanies only need to focus on polishing and upgrading their products;

The second is that risks can be controlled. The equipment companywill not directly bear the risk of uncertainty in the project;

Third, the gross profit is high. The gross profit of the equipmentis several times that of engineering, and the cash flow is also very healthy.

But this model does not survive so well in the environmental protectionindustry.

The environmental protection industry has its own particularities,especially in the municipal area. Most of them take engineering as a carrier,and equipment companies are just supporting companies. Therefore, if thefirst link cannot be mastered, that is, the initiative of the project, thebargaining power of the equipment will be greatly reduced, and sometimes theorder will not be obtained at all.

Therefore, if Origin Water wants to grow, it must make a breakthrough inthe business model.

The next task is to get the project under control and take the initiativein order. It contains two big pieces of work:

The first is to build your own engineering capabilities.

Origin Water chose to quickly fill the shortcomings in the engineeringfield through the acquisition of Jiu'an Group. This action not only enabled OriginWater to have mature engineering capabilities, but also enabled Jiu'an Group toachieve leapfrog development.

The second is to get the government and get the order.

Municipal administration is a typical toG (G: government)business, and getting an order means getting the government. Many peoplethink of bribery when it comes to getting the government done, which is nolonger a good idea. The use of any means has its impact on theenvironment. Now that the country wants to be really good at environmentalprotection, what is the core of the government?

It really helps the government to solve the difficult problem now, thatis, the government's just need.

In terms of environmental protection, what are the problems encounteredby the government?

It is the contradiction between fast environmental protection on the onehand and not much money on environmental protection on the other. Therefore, if you want to get thegovernment, you must get the money for the certificate. This is why theenvironmental protection industry will have BOT and PPP forms. The essence ofthese forms is for the government to solve the problem of money and cannotquickly recommend the implementation of environmental projects problem.

To sum up, only by paying for the local government to solve the waterpollution problem can we get more orders from the government.

At this point, Origin Water has mastered the initiative of the project inone hand, and has almost monopolized technical capabilities in the other, andthe development of Origin Water has entered an outbreak period.

03

Dilemma isemerging

Side effectsof innovation

"Engineering works will make you or break you."

This is the most spoken sentence in the environmental protectionindustry, and it is also the most suitable sentence to describe the entireenvironmental protection industry.

Of course, Origin Water did not have a major crisis. The most obviouscomparison is that the Eastern Gardens also running on Nadan's Dragon and TigerRankings have been trapped, and the radical of Nathan in engineering hasdragged down their small bodies.

Although it is not as miserable as the friend businessmen next door, theplight of Origin Water has also been exposed very clearly. If no change ismade, it may only be a matter of time before you reach the status of friendbusinessmen.

In a popular word in the market, the water is not cool, and has changed from ahigh-tech company to an engineering company.

What reflects this is the decline in the efficiency of making money by OriginWater.

As the first white horse stock in the environmental protection sector onGEM, the first outbreak of Origin Water was a large number of equipment sales.At that time, the profit was extremely high.

An internal friend who once was in Origin Water revealed that thecompany's gross profit could reach 70% in the past. Investors saw profits everyyear and couldn't close their happy lips. Now, with the increase ofengineering business, the company's gross profit is declining rapidly, and more importantly, thefunding pressure is also increasing day by day. A large amount of advances andborrowings have made Origin Water's body heavier and heavier, and theinvestor's face has changed.

This also directly caused another problem, the market value of OriginWater did not rise but fell. In recent years, Origin Water's performancehas doubled, and its profit has doubled, but the market value has shrunk, andhas shrunk sharply, from the peak of 60 billion to 28 billion today.

The bigger and bigger the business, the more money it earns. This is agood thing, but in the market's view, Origin Water no longer makes money.

What is making money?

Originally investing 100 earns 30 and investing 1000 earns 300, but nowinvesting 10,000 earns 500. Compared with before and after, the investmentincreased (the business became larger), but the ability to make money droppedsharply, and the marginal income decreased sharply. This is a big problemfor businesses. In addition, with the increase of investment, the pressure ofcash flow is amplified, and the stability of funds is also a huge problem.

Wen Jianping is also aware of this problem, so he has recently emphasizedin public that Origin Water should return to the main focus of the mainbusiness, but this sentence is to comfort the market or really want to reducethe project to return to the main business. Only Wen Jianping himself is themost clear.

Leaving aside market concerns and our inherent prejudice, how to make theright choice in the end may be a big problem for Origin Water's strategy atthis stage.

04

How tochoose a strategy

Equipmentand engineering is not 1 of 2

1. Equipment and Engineering 2 of 1, traditional logic behind

The spell that equipment companies will disappear when they doengineering has always existed, so equipment and engineering are often aquestion of two choices.

The reason why such a selection dilemma arises is that the most importantthing behind it is from equipment or a high-tech company to an engineeringcompany, which will lead to two negative problems for the company:

The first is the decrease in the use of funds;

The second is an increase in the risk of repayment;

As long as the project is involved, the two are almost simultaneousrisks, which is also the direct cause of a major crisis in the company'soperating risks. Therefore, in the face of such a dilemma, equipmentcompanies generally choose to touch projects as little as possible.

This is the logic that has always existed and defaulted in the industry.

2. What exactly is the basis for strategic decision-making

The company's development will go through three stages: the start-upperiod, the growth period, and the transition period. Each period willface strategic adjustments. This is a must-answer for all entrepreneurs. If theanswer is correct, the company will usher in a new wave of development. If theanswer is incorrect, the company will enter a depression or even die.

Facing the choice of strategy, is there a ruler or a basis that canprovide a reference for decision-making?

Really, there are laws in the business world. Regardless of theindustry, there is a fundamental consideration in the choice of business:

effectiveness.

This efficiency is not only an internal comparison, but also a benchmarkagainst the best companies in the industry.

GE in the United States is a typical diversified company. Strategicchoices are often a problem. One of its wisdom in decision-making isrecognized by the business community, that is, if its own business fails toachieve the top three in its industry, it must be cut off.

Behind this is the rule of efficiency used to guide decision-making.

This ruler of efficiency is also applicable in the environmentalprotection industry. Is equipment and engineering chosen as one of two? It depends on whether the two sectors involvedin the company can achieve the position of the industry head.

Rather than simply cut down the project because of the low efficiency ofthe project. If the competitiveness of the project is thetop three in the industry, it is completely fine. In addition, the synergyeffect of the project on the equipment is obvious. This synergy effect willalso bring efficiency Promotion.

Conversely, if we decide to cut down the project, it must be because wecan't do the project well, and we can't get the position of the industryleader.

In the business world, there are too many things that change, and thereare many factors that interfere with us, but one of these things is constant,that is, efficiency, high efficiency enterprises give priority to survival.

The success or failure of an enterprise is ultimately about efficiency. Thecompany can survive if you are ahead of your competitors by 10%; the companycan expand if you are ahead of your competitors by 30%; the company can grow rapidlyif you can overturn your competitors several times.