Explain in detail the logic behind Li Bin's all-staff letter: NIO's "four mixed operations"

In the past two months, after organizing more than 30 internal analysis and discussion sessions on the two-year business plan, NIO has finally finalized a specific plan for organizational and business optimization in the past two weeks. Li Bin, founder, chairman and CEO of NIO, issued an internal letter to all employees on November 3, which involved organizational adjustments and resource investment directions.

 Prior to this, the news that "NIO will lay off 10%-20%" began to circulate in the market, and Li Bin's letter to all employees not only responded to external rumors, but also made in-depth thinking about the current and future development of NIO.

 In fact, as the competition in the domestic new energy vehicle market becomes increasingly fierce, the "big manufacturers" of new energy vehicles, including Weilai, Xiaopeng and Ideal, are constantly making organizational adjustments. And Li Bin also said that the core goal of NIO's adjustment this time is to "reduce fat and increase weight, reduce costs and increase efficiency". Behind this all-staff letter, what adjustments has NIO made, and how will it respond to more fierce market competition in the future?

Institutional "addition and subtraction": to reduce fat and increase thinness, reduce costs and increase efficiency

In the past period, NIO has expanded rapidly and the number of employees has increased significantly. Excessive organizational expansion has caused a decrease in human efficiency to a certain extent. At this time, NIO made organizational adjustments aimed at maintaining healthy organizational mobility.

In this open letter, Li Bin formulated a specific plan for organizational and business optimization - three guarantees, two efficiency improvements". The "three guarantees" are: first, to ensure the long-term investment in core and key technologies, and maintain the leading edge of technology and products; Second, we must ensure that sales and service capabilities can cope with fierce market competition; Third, we must ensure that 9 core products of 3 brands are launched as scheduled.

The "two efficiency improvements" include: one is to improve the efficiency of the organization, merge the departments and positions of duplicate construction, change the inefficient internal workflow and division of labor, and cancel the inefficient posts; The second is to improve resource efficiency, postponing and reducing project investment that cannot improve the company's financial performance within three years.

In fact, this is not the first time that Li Bin has shown his attitude towards the optimization of the company's organization. As early as the beginning of this year, in an all-staff letter, Li Bin said that the work tasks in 2023 will increase a lot, but the company's resource investment will only increase slightly, and NIO must tap the potential from within, especially for inefficient organizations, inefficient teams, inefficient processes, and inefficient projects, which need to be comprehensively sorted out and optimized.

At that time, Li Bin realized the problems in the team structure of NIO. "The team continues to expand, but there is still a lot of room for improvement in efficiency, with unclear responsibilities, inconsistent goals, imperfect processes, and duplicate construction." Li Bin said.

But despite this, NIO is not engaging in a simple and crude one-size-fits-all approach. After more than 30 internal analysis seminars, Li Bin believes that it is the right time to make organizational adjustments and resource investment direction adjustments at present, which is conducive to improving organizational efficiency and resource efficiency. "To qualify for the finals, we need to further improve the efficiency of execution and ensure that there are sufficient resources for critical operations." Li Bin said.

Strategic "multiplication and division": efficient execution, system optimization

NIO's painful adjustment this time has also quickly received positive feedback from the capital market. Just one day before the release of the all-staff letter, NIO's U.S. stock rose 4.5%, and on November 3, NIO's Hong Kong stock also ushered in a sharp rise, with the highest increase of more than 7%.

As we all know, in recent years, the high-end products of new power automobile brands do have enough popularity and sales, but the cost of research and development is high, and the cost of organization is not low. Leading brands, including NIO, XPeng, and Ideal, have realized the importance of reducing costs, increasing efficiency, and optimizing organizations.

Therefore, starting from 2022, Xpeng Motors is also making drastic changes to streamline and optimize its organizational structure. Since the end of last year, He Xiaopeng personally managed the automotive technical team, and found the problem of the battery cell team, so he decisively removed the team. Since the beginning of this year, Xpeng Motors has optimized 12 senior executives, and has also undergone "major surgery" on the supply side.

Li Xiang also said at the end of 2022, "Organizational upgrading is the most important exam question for enterprises to enter a larger and more difficult stage, and more than 90% of failed enterprises are not actually business problems, but the essence is that organizational capabilities cannot be adapted to scale expansion and industry changes." To this end, Li Auto will also "carry out all-round organizational adjustments".

In contrast, Li Bin's strategic optimization of NIO is the latest in terms of time, but it also seems to be more thoughtful. In the all-staff letter, Li Bin mentioned that the next two years will be the most competitive stage in the transformation period of the automotive industry, and the external environment is full of great uncertainty. This year, NIO delivered five new products and gained more than 40% of the market share in the pure electric market of more than 300,000 units, but its overall performance is still far from the expected target.

To this end, NIO will postpone or cut projects that do not improve financial performance for three years, which also means that NIO's resource investment will be adjusted in a more pragmatic and commercially efficient direction, and "long-term and short-term investment can be better balanced on the premise of ensuring investment in core technologies".

Since the second half of this year, with the gradual completion of the switch of NIO's second-generation technology platform products, its overall sales have ushered in a significant increase. According to public data, NIO sold 55,432 new vehicles in the third quarter, a year-on-year increase of 75.4%. At the same time, NIO accounts for more than 40% of the high-end pure electric market of more than 300,000 units, with an average monthly sales volume of more than 16,000 units and a monthly revenue of more than 6 billion. This undoubtedly also sends a signal that NIO has begun to enter a strong product cycle.

"But to qualify for the finals, we have to further improve the efficiency of execution and ensure that there are sufficient resources for critical operations." Li Bin said that the company has internally identified the goals, key success factors and priorities, action plans, and resources needed for each business in the next two years, and identified opportunities for organizational optimization, cost reduction and efficiency improvement.

Addition at the product and technology level, subtraction at the project and architecture, division at the resource and execution level, and multiplication at the system and strategy level, it seems that Li Bin's set of "four mixed operations" for NIO has already started, and whether NIO can win Li Bin's so-called "marathon on the muddy road" depends on the execution efficiency of each team.