Shulou(Shulou.com)11/24 Report--

The essence of business is to make money. Making money not only means that the company can survive and pay its employees, but also means that social resources are effectively allocated under the market mechanism.

The so-called Internet thinking is like a hammer, with it, you see everything like a nail, will produce a kind of "this thing is not good, I want to use Internet thinking to transform" impulse.

By 2022, there are not many areas that have not been transformed by Internet thinking. But there are no more than two ways to transform it:

1. Free replacement of fees, loss in exchange for scale

two。 Cancel all intermediate links

Next, I will use steamed bread shop as an analogy. Let us see what kind of spectacle will appear if we use Internet thinking to transform the steamed bread shop.

01 students who have worked in Internet companies know that almost every company has a kind of job called "commercialization".

This kind of post is unique to the Internet industry. Why do you call it that? Because normal companies are inherently commercial.

For example, in the past, people sold a steamed bread at a price of 2 yuan each, and some people came to buy it and deliver it on the other. A most basic business model was formed.

But Internet companies don't follow this process. The vast majority of Internet companies do not have a business model at the beginning of their start-up.

It's like selling steamed buns in some distant foreign country. The local people didn't eat steamed bread and didn't even know what steamed bread was. You can only give them the steamed bread for free and tell them it is a kind of food. Slowly, someone in your steamed bread shop will come to buy it. Oh no, get the steamed bread.

At this stage, your steamed bread shop is already an enterprise, but it is not a business, because it does not make money at all, there is no business model, you do not know, if the steamed bread charge, there will be door-to-door buying.

So the post of "commercialization" emerges, and their task is to help you design your steamed bread shop in what way you can make money, figure out whose money you earn, and be responsible for helping you earn your money.

Specific means of commercialization, which I will talk about later.

Of course, all commercialization is based on one basic principle: steamed bread itself cannot be charged.

Steamed bread is free, and this tradition comes from Yahoo.

Yahoo was founded in 1994 as a portal with free content. As a result, it quickly got tens of millions of hits.

With so many hits, Mary Meeker, later known as the Internet Queen, valued the company at $10 billion, pointing out that for Internet companies, traffic is more important than profit, and eyeballs are more important than financial status.

Mary Meeker, the queen of the Internet, and the commercialization of Yahoo is also very smooth: although selling steamed buns does not make money, the steamed bread shop has a lot of customers every day. I can post various advertisements in the store to show them and ask the advertiser to charge.

To be fair, in Yahoo's day, free was a last resort, because even PayPal won't be available for five years. When the means of online payment are not developed, it is too difficult to collect money from users. On the contrary, collecting advertising fees from advertisers appears to be relatively feasible.

Of course, Yahoo alone is free, not enough to change the industry.

In 1995, Microsoft built a free browser IE 1.0 into Windows 95. Thus beat the charged Netscape browser and become the only leader in the browser field.

This victory let everyone see a fact: no matter how fragrant the paid steamed bread is, you can't sell it for free.

Screw your KFC Crazy Thursday, I Wallace 80 minus 100!

Later, Chris Anderson, editor-in-chief of Wired magazine, described the free model as "not an option, but an inevitable choice" in his book Free: the Future of Business.

Since then, free has become the foundation of the Internet society, and the industry has the first "Internet thinking" that can be regarded as a guiding ideology:

Free replacement fee, loss in exchange for scale.

Yahoo and Microsoft were later copied by Chinese entrepreneurs, resulting in four major portals, BAT, a series of Internet companies in China and, of course, your steamed bread shop.

Nowadays, in this industry, companies of a certain size are almost the product of the free model.

And those traditional industries that have been transformed by the Internet are affected without exception.

Such as taking a taxi, takeout, sharing bikes, coffee. What they have in common is that in the early stage of development, there must be all kinds of red packet subsidy circle users. For a steamed bread worth 2 yuan, the red packet must not be higher than 1.5 yuan, and it is best to stick a 20 yuan steamed bread coupon upside down.

Even later, the way of collecting money from users gradually appeared, and there were offline card selling services in China, telephone payment, that is, the so-called SP service, and later Alipay, but the free model has continued.

This is related to the rise of various venture capital institutions and dollar funds in China.

Here we will introduce the concept of "city dream rate".

In the stock market, pricing a stock is mainly based on the price-to-earnings ratio, that is, the share price divided by earnings per share. In every industry, the price-to-earnings ratio has a relatively stable range, and through the earning power of the enterprise, it can correspond to how much the enterprise is worth.

If you can sell 500000 steamed buns every year with a profit of 100000, and the price-to-earnings ratio of the catering industry is 30, then the market value of your steamed bread shop is 3 million.

What if your steamed bread shop hasn't begun to make a profit and can't give shareholders a financial return? Another method is called the market-to-sales ratio, which is to look at the company's sales divided by the total market capitalization.

All these are easy to calculate, but the problem is, your steamed bread is free and you don't even have an income. How can you price your steamed bread shop?

At this time, the venture capital institutions came out.

They tell you that the goal of our investment is not your present, but your future, and your ability to subvert the industry and change the world.

Although you are now free steamed bread, but ten years later, all the local people do not eat local food, all eat steamed bread, and eat every day, eat every meal, the local food culture has been transformed by your steamed bread, are you afraid of not making a lot of money?

Therefore, it doesn't matter if you don't make money, as long as your dream is big enough, you can prop up a high enough market dream rate and make your steamed bread worth hundreds of millions or billions of dollars.

You ask the investor, valuation is useless. I have no income now. I send steamed bread every day, and my family will be finished in three months.

Investors will tell you that it doesn't matter if there is no cash flow for the time being. if the investment institution has money, you can exchange it for equity.

Because they take shares, the financial returns of investment institutions often come from the valuation growth of the company, rather than from profitability. So they are not in a hurry to make money.

And this kind of so-called "can make a lot of money in the future" companies, in the past decade is mainly the Internet. Because from 2010 to now, because of the popularity of smartphones, the number of netizens in China has soared from 100 million to 1 billion, the growth ceiling of the industry has increased tenfold, and imagination has increased a hundredfold.

So in this industry, you can always see a lot of star companies that have not made a profit for seven or eight years or more, because they are still in the stage of "trading losses for scale." as long as the key user data can continue to grow exponentially, you can continue to dream of changing the world, and investors' money can expand.

But it's all based on one basis: when you make a big steamed bread shop and are ready to start making money from your customers, can you really make money?

After all, the commercial world and the free world are two different worlds.

03 free steamed bread for everyone, but if you charge two yuan, how many people are willing to buy it, it will be a question mark.

Or steamed bread continues to be free, you put a few more advertising space in the place where you wait in line to get steamed bread, you can buy steamed bread, you have to see the advertisement. At this time, it is a question how many people are willing to read the advertisement seriously. And the advertiser is not easy to fool, he will question you:

Customers who are willing to spend so much time in order to get a steamed bread certainly do not have any spending power and belong to low-value users. They will not turn into consumers even if they read the advertisement. We are not willing to put in the advertisement for the steamed bread shop. We go to the advertisement of the milk tea shop next door.

At this point, you can only think of a way.

You are as smart as you, and there is another way. You declare that steamed bread is free, but there is a charge for steamed bread stuffing, and you also have to pay for the limited noble gold steamed bread and all kinds of colorful steamed bread boxes.

Steamed bread boxes are also printed with a variety of beautiful two-dimensional little sisters, want to collect a set, you can spend money to sign it, ten boxes at a time, the explosion rate is different.

It depends on whether consumers buy it or not.

If you buy it, congratulations, you are finally starting to make money. At most, you are scolded by consumers: steamed buns or dogs. If you don't buy it, congratulations. Investors will tell you at this time that it doesn't matter if you don't make money. Get the data ready for the listing of US stocks and make a circle again!

Soon, your steamed bread shop US stocks will be on the market. Early investors cash out, and subsequent investors will start to ask you for performance. The so-called performance, either you can continue to maintain high growth, use the money raised from listing to continue to subsidize users, and continue to expand your steamed bread industry. Or you find a way to make money and make your financial statements look good.

As we said earlier, you have tried all the ways to make money, but it is useless. But the steamed bread shop has been made so big that it is impossible to double it.

At this time, you have a good idea to create false data and tell them that our paid steamed bread is selling well and consumers are not buying free steamed bread anymore.

So your stock price takes off again.

Then, your steamed bread shop is targeted by short sellers, who send people to your shop door to count customers, and even count how many steamed buns each of them have bought, what style and filling they are. Then issue a short report saying that your financial statements were falsified and that no one bought your gold limited steamed bread at all.

As a result, the share price of your steamed bread shop plummeted and was ordered to be delisted.

Of course, I would like to congratulate you, at this time you have already won a name: the light of the country. Everyone is praising your great achievements in making Americans eat steamed buns filled with leeks.

And you were responsible for it and got kicked out of the company.

At this point, your first steamed bread business failed.

04 but you are not reconciled, you decide to make a comeback, this time, you want to use another kind of Internet thinking to transform the steamed bread industry.

Guazi was founded in 2015 and shouted the famous slogan: no middleman earns the difference.

This slogan, with all-pervasive elevator advertisements and patch advertisements, has been introduced into thousands of households through the mouths of Sun Honglei and Luo Yonghao.

Since then, middlemen have become the public enemy of Chinese Internet companies, a new exploiting class, which has been knocked down 10, 000 times in the BP of entrepreneurs, thus proving that their entrepreneurial projects are revolutionary and just.

In the same year, O2O tuyere blew all over the Internet industry, manicure, beauty, massage, laundry, shopping, etc., all services are telling you, do not go out, we will help you solve the last kilometer.

Whether it is overthrowing the middleman or solving the last kilometer, the underlying logic is the same: cancel all intermediate links and go straight to consumers.

This is also an embodiment of Internet thinking.

Why to cancel all the intermediate links has something to do with the nature of the Internet itself.

In the final analysis, the Internet is a means of information transmission, and with the continuous improvement of transmission speed, the transmission media are becoming more and more abundant. It can be said that the Internet naturally has the attribute of an efficiency tool, and the entire Internet industry, from its birth, has a strong color of efficiency.

So what is inefficient? That is all the intermediate links in the business model, all the mismatch of resources, and middlemen who rely on the information gap.

In fact, there is nothing wrong with this logic. after all, if there is one more link, there will be more communication costs and more waste of resources.

So kill the middleman, achieve direct docking with consumers, this idea is very Internet.

However, in the business world, the existence of everything must have its logic, and the intermediate links of various business models are no exception.

Old things can be subverted, but new things must be more efficient, experience better, and make money than old things.

Take an intermediary as an example. Why do we have to go to an intermediary to buy and sell rented houses? In essence, this industry is an industry with extremely asymmetric information and extremely scattered information.

The existence of intermediary first solves the problem of "collecting supply and demand". In the absence of an intermediary, rent seekers need to run all over the streets to ask if there is a house for rent, and house sellers have to post small advertisements all over the street. And the value of the intermediary is to help both parties save the labor costs.

In addition, the intermediary also provides a "trust guarantee" role. Of course, this reliable one has to be exchanged for an intermediary fee.

Although there are a lot of good and bad intermediaries in the actual situation, it does play this role in the whole business link.

As for the service ability and professional advice of the intermediary, they are incidental, some are the best, but most of the time they do not. The core value provided by the intermediate link is to solve the flow of supply and demand information, as well as to provide a certain trust guarantee ability.

For example, you open a steamed bread shop, which not only serves food, but also provides takeout.

But you have a takeout service, how do you let the consumers around you know? It must not be possible to issue takeout orders like the restaurant did ten years ago.

So you found the takeout platform. By participating in activities or recharging on the platform, your store gets a very high ranking, resulting in a steady stream of takeout orders.

Here, the takeout platform plays the role of "collecting supply and demand".

And consumers see that you rank at the top of the big platform, but also more willing to rest assured to buy your steamed bread, after all, the platform screened, if something goes wrong, there is a customer service can say.

At this time, the platform played the role of "trust guarantee".

And there is a delivery boy on the platform, and there is a delivery route planned by big data. As long as you hand over the steamed bread to the delivery boy, it can always help you deliver it.

At this point, the problem of the last kilometer has been solved.

Speaking of the last kilometer, a few years ago, many people thought there was an opportunity to start a business.

Use the ultimate service of the last kilometer to establish user habits, so that users will be fascinated by opening the door, and all life services can be delivered to the door. Isn't that what takeout and taxi hailing do?

But in fact, there is a big hole in it.

Because the last kilometer of service, the cost is the highest.

After all, it is the last kilometer, all enter the house, the service object must be scattered, one-to-one service, there is no room for economies of scale to play.

But in terms of returns, it is not necessarily high. After all, for urban users, it doesn't make much difference whether many services enter the home or not. Now city life is very convenient, whether it is dry cleaners, manicure shops, pedicure shops or massage parlors, starting from home, half an hour round trip within the walking radius, basically can be found.

And for an ordinary person, how much is half an hour worth? You can do the math for yourself.

In the simplest and most crude algorithm, dividing your monthly salary by 352 is your half-hour price (22 working days, 8 hours a day), and all door-to-door services with a premium of more than this number are not very cost-effective.

Then there is no need to mention how much profit space there can be in the middle.

Just like if you open a steamed bread shop and cooperate with the takeout platform, it has to draw a service charge for each order, almost three to five yuan, after all, the intermediate link is definitely not free.

But steamed bread is a cheap thing, one or two pieces, ten is only twenty yuan. No matter how big the appetite of a family of three is, it is impossible to eat ten steamed buns for breakfast, right?

If you replace it with Shandong steamed bread, maybe one will be enough.

Originally, the unit price of customers is not high, and the cost of steamed bread is relatively transparent. Except for the skin or stuffing, no one will buy it when it is expensive. If you add a percentage, you won't make a profit.

So if you leave it open, you can figure out a truth: I'm the only one who sells steamed buns, so why do I have to deliver food to the door and roll myself? If you want to eat, why don't you come downstairs and buy it?

This is the paradox of the logic of "canceling all intermediate links".

Whether a middleman is needed and whether it needs to be served to the last kilometer is actually a very complicated process of cost argumentation.

Why do various new consumer brands like to use Mini Program e-commerce and DTC model? It is because the advertising fees of e-commerce platforms and the rents of offline stores are ridiculously expensive.

The reason why electric car brands don't use 4S stores to sell cars is that they can't build so many cars with limited production capacity and don't need 4S stores to help them sell.

Taxi hailing and takeout can support the last kilometer because the consumption frequency is high enough to be used every day, which can establish user habits and produce sufficient economies of scale.

As long as the intermediate link can set up a business model, it has the value of existence. If the cancellation of the intermediate link will lead to a rise in costs, then the cancellation is not sustainable.

In my opinion, the so-called Internet thinking to transform everything, to some extent, is a kind of dogmatism.

Internet thinking can transform many things, but not everything can be transformed. It can transform the retail side, but it is difficult to transform the manufacturing side. It can create demand, but it is impossible to turn a pseudo demand into a real demand.

Moreover, most of the time, it is not Internet thinking that transforms everything at all, but capital changes everything. The Internet can't keep unprofitable companies alive, but investors can. The Internet can't get everyone to start drinking coffee and buying vegetables on App, but spending money on subsidies can.

In the past decade, many bubbles have burst and companies have failed. In the final analysis, the story is simple.

If you hold a hammer and see that everything is a nail, then the real world will certainly let you down.

The essence of business is to make money.

Making money not only means that the company can survive and pay its employees, but also means that social resources are effectively allocated under the market mechanism.

On the contrary, if a company continues to lose money but survives, it means that the market mechanism is distorted and resources that should be fully utilized flow to areas where value cannot be brought into play.

Or back to the steamed bread shop, if your steamed bread is spread out in the wilderness, and you can't find a resident in a radius of five kilometers, it means a waste of resources. And capital forcibly extends the life of your steamed bread, which strengthens this kind of waste.

Even if you develop steamed bread stuffed with abalone ginseng wing belly filling under the blessing of capital, provide door-to-door service for beautiful takeaways to deliver steamed bread, and promise that the comprehensive profit margin of steamed bread will not exceed 5%, your steamed bread shop should not survive.

The steamed bread shop that really should live is the kind that can meet the needs of the three meals in the neighborhood and make the passing office workers no longer enter the company hungry. Even if everyone needs to go downstairs and cross the road to eat, even if steamed bread is ordinary white flour steamed bread, miscellaneous grain steamed bread and meat steamed bread.

In the final analysis, how can there be so many complicated Internet thinking, isn't it just the matter of buying a steamed bread?

This article is from the official account of Wechat: IC Lab (ID:InsightPlusClub), author: IC Lab

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