From the consulting industry to the Internet industry to the investment industry, we found that Zhao Nan, CEO of Qingzhu, has been engaged in industry and digital-related work in the past work experience before starting a business, and its main direction in the consulting industry is the digitalization of the energy industry, and then baidu, Meituan and China Renaissance Capital have also accumulated a lot of experience related to industrial digitalization.
Since its establishment in 2019, It has been committed to becoming the largest and most efficient hotel empowerment platform in China, so in the course of the past three years, what choices have they made in retrospect? And what are the pits that have been stepped on? The following is a dry goods sharing for Zhao Nan at the GGV Fellows event, and will share with you his thoughts and practices on entrepreneurship and industrial digitalization along the way.
After 10 years of consulting + big factory experience
Why did I choose the industrial Internet track to start a business
I graduated in 2006 and my first experience was in the consulting industry, mainly in the digitalization of the energy industry. After leaving the consulting industry in 2013, he began to enter the Internet industry. The first Internet company I joined was Baidu. From 2013 to 2016, Baidu first experienced wireless traffic exceeding pc, followed by wireless advertising monetization rate also surpassed PC, in just 2 to 3 years, I experienced a comprehensive transformation from the PC era to the mobile era. Subsequently, he joined meituan, and experienced the fastest years of mobile Internet development in the years of meituan. In about 18 years, I personally judged that there were not many big entrepreneurial opportunities belonging to the mobile Internet, and the biggest entrepreneurial opportunity for the next generation would be the industrial Internet, so I began to choose to start a business in the industrial Internet track at the beginning of 19 years.
Key opportunities
Why is the opportunity for industrial digitalization already arriving?
I think there are a couple of key opportunities here.
The first opportunity is supply and demand. Today, the vast majority of industries are oversupplied. Oversupply is an important opportunity for industrial digitalization, because the main goal of industrial digitalization is to improve supply-side efficiency.
The second is that with the disappearance of the development dividend of the consumer Internet, Internet companies have begun to infiltrate from the marketing level to the supply side level, and promote the digital upgrading from the demand side to the supply side, and the demand digitization can make the direction of the supply side digitization clearer.
The third one I think is the development of AI artificial intelligence. From being only an "auxiliary person" before, it has gradually become a "replacement person", which has further accelerated the digital upgrading of the industry.
Consumer Internet vs Industrial Internet
What is the difference between consumer Internet and industrial Internet?
The theory of the AB side of the Internet, this theory was put forward by Wang Huiwen, co-founder of the US group, and I think it is still a good summary.
He divided the entire Internet industry company into two layers. The first layer is that both supply and fulfillment are online. More typical representatives like Tencent, Baidu, Toutiao, Kuaishou, etc., they are all products that belong to pure online. Then there is another layer of companies, its supply and fulfillment are offline, offline here is divided into two categories. The first type is SKU-centered supply (B1), which is to put it bluntly, some companies of physical e-commerce, such as Ali, JD.com, and Pinduoduo, which are very typical representatives. There is also a type of service centered on Localization (B2), such as Meituan, Didi, Ctrip and other companies.
On the whole, I think that whether it is A-class or B1 or B2 companies, we can call it the consumer Internet. Because whether supply and fulfillment are online or offline, more solutions are based on the matching between demand and supply, and the main value is the value of "marketing". On the basis of the "AB surface" theory, I have innovated to add the "B3" category, that is, the industrial Internet with the vertical depth of the industry, compared with B1 and B2, B3 has expanded from marketing value to the value of the whole industry chain.
What is the so-called industrial Internet?
My understanding is that on the basis of the existing mature consumer Internet, it is gradually extended to the production, manufacturing, service and supply side of products, which is the industrial Internet. The value of the industrial Internet is not only reflected in the "marketing" aspect, but also includes production, logistics, services and other aspects, and its goal is to improve the efficiency of the overall industrial chain.
Therefore, compared with the consumer Internet, the industrial Internet is first, the market space is larger, covering the entire industrial chain; the second is more deeply integrated with the real industry, which is a "digital + physical" product, composed of "bits + atoms", and is no longer a pure digital product composed of only bits.
Because of these differences between the industrial Internet and the consumer Internet, the industrial Internet has different characteristics:
1. Local network effects, rather than global network effects, are difficult to "winner takes all". There are many super giants in the field of consumer Internet, which are easy to form oligopolies; compared with the industrial Internet, it has local network effects, but it is more difficult to form a global monopoly.
2. The product iteration cycle should be longer. The consumer Internet is a purely digital product, which can be upgraded by small product iterations every week, and a large upgrade version will be launched in one or two months. However, the industrial Internet involves physical products and services, and the iteration cycle is generally longer. For example, a brand of physical products, from the concept of the proposal, to the design planning, to the finalization of materials, to the production and manufacturing, and even the implementation of installation, at least a few months or even more than a year of time, the upgrade of a generation of products is also in years.
3. Growth and expansion are relatively slower. For example, a chain brand wants to cover the whole country, the stores are to be opened one by one, and the process of store renovation, transformation and opening is indispensable, and it is impossible to have an exponential outbreak in the short term like the consumer Internet.
4. Irreversible. Consumer Internet products are reversible, such as bugs after the line can be immediately rolled back or patched upgrades, the cost is also very low; but the industrial Internet is irreversible, a generation of products if the hardware is defective it is difficult to rebuild, the cost is also extremely high.
Today, most of you are entrepreneurs, how do you view these characteristics of the industrial Internet? Personally, I think that for an entrepreneur who starts from scratch, it is actually more difficult to form a monopoly, but it is a good thing. Why? Because if this industry is very easy to monopolize, then today's companies that have more resource advantages and more technological advantages than us may quickly crush us. But if you say that in an industry where it is more difficult to form a monopoly, as a company that has grown from scratch, you can gradually build your own barriers in the process.
After borrowing the industry's east wind, what should I do?
Here I borrow the classic three questions of strategic thinking:
One, who are your customers
Second, what are the key needs of customers
Three, your business model
These three questions are the methodologies I learned during my time at meituan. These key questions you think clearly, often your entire business model will also be clear. These questions seem very simple, but not many entrepreneurs think clearly at the beginning, or forget the answers to these questions while running during the startup process. I think that "keeping the original intention" is to constantly introspect yourself and recall these key issues.
Choose a large and wide track
Select the appropriate entry point
According to the classic three questions of strategic thinking, we first clarify who our customers are? What are the key requirements? We see that there is a big gap between small and medium-sized hotel merchants and leading hotel chain groups in terms of ability, their attention is low, and there are very few service providers that can help them, but the volume of this part of the business is very huge. We believe that this is a blue ocean market, if we can provide value enhancement to this part of the customer, it will be a very large market opportunity and space. Therefore, we have thought clearly about our mission and vision from the beginning. Our mission is to help hotels improve their overall revenue while improving the guest experience. So we think that both hotels and consumers are our customers. We did not position ourselves as a brand chain group, but positioned ourselves as a platform empowered by hotels, we just wanted to help those small and medium-sized businesses that no one had helped before, so that they could become better.
Go with the flow, win-win for all parties
The choice of business model is closely related to the era and environment in which it is located, so the successful business model 10 years ago may not work today, so it is necessary to follow the trend.
Let's start with a comparison. In the hotel industry, the current highest market value of China's hotel group is Huazhu, which is about 10 billion US dollars in market value, this company was established in 2005. Let's take a look at what some of the key external factors looked like at the point in time it was founded, and what these external factors look like today.
When Huazhu was founded in 2005, the growth rate of the number of hotel rooms was very high, even exceeding 180%. From 2005 to 15 years, it was basically above 40%, so Huazhu was facing an incremental market at that time. More hotels need to go to new openings, and making standardized products at this time is the right choice for the time. The second point is that the online penetration rate of the entire hotel at that time was relatively low, that is, the proportion of people booking hotels through online was relatively low, so at this time, at the entire business level, the proportion of offline operation investment must be high.
But in this day and age, let's look at it again. The first is that the room growth rate of the whole market is now very low, basically below 10%, and at this time we will face our main customer group is the stock of customers. So today we think that the greater opportunity lies in non-standardized products; the second is that the proportion of orders on the entire line is getting higher and higher, in this case, we must have a change in operation, who can better play online digital marketing, who can occupy this opportunity; the third is, because more booking behavior data is online, so business decisions also need to be based on online data. For example, we are now based on the entire consumer booking data, to do some intelligent pricing, this thing may be impossible in 2005, 06 years, there is no opportunity.
So we say, go with the flow and choose the most suitable entry point according to the external environment.
On the merchant side and the consumer side, everyone must be satisfied with your products, and at the same time, we can have a more successful business model to continue to make profits, which is a three-way win-win situation.
One of the most important things in the three-way win-win situation is that you need to understand what the needs of two different customers are. The needs of hotel owners are to make more money and worry less. The consumer's demand is to live safely, cleanly and safely. One looks more at the economic return of the business itself, the other looks at the occupancy experience, but there will be a contradiction between the two, if I invest more money to upgrade this product, it is possible that consumers will be very satisfied, but the return on investment may decline. As a startup, having more revenue is necessary to ensure that our company can go on for a long time, but if you just look at the short-term benefits and returns, you may lose the long-term brand value in the minds of consumers.
In the face of this problem, we are thinking about whether we can do a corresponding demand and product layering for the needs of consumers and merchants at both ends, some products are around meeting the needs of merchants, can be seen as B2B products, some products are around meeting consumer needs, by helping cooperative merchants and then improve the consumer experience, can be seen as B2B2C products.
In the past, we thought that we could become a chain brand group with 10,000-20,000, but now we think that in fact, these 10,000 and 20,000 chain brands are only one layer of my product layer, and I can output my marketing ability and operational ability to more small and medium-sized customers and non-brand customers through SAAS, and can serve more than 100,000 customers, which is the so-called empowerment.
Build core competencies around customer needs
Achieve breakthrough innovation
When we build our own capabilities, we do not use the so-called brand as the core capability, but decompose the entire ability into several pieces.
The first is digital marketing capabilities. For all customers, marketing must be the primary need, making money is the primary need of all customers, so our core ability is to build the ability of digital marketing, this ability must be a very important grasp of your customer acquisition, today you tell the boss that after you cooperate with me, I can help you make money, almost no boss can refuse. To achieve a sustained leadership in digital marketing capabilities, it is necessary to parallel the public domain and the private domain. For public domain traffic, it is necessary to follow the trend, because the super traffic platform is constantly shifting, from the earliest BAT era to the present, many new super traffic platforms have emerged, and there will be new platforms in the future. As an entrepreneur of the digitalization of the industry, what we need to do is that we always embrace the latest trends. The other is the private domain, and I think that private domain traffic is based on scenario-based requirements to do conversion retention. One of my views is that we do private domain traffic, don't try to turn private domain traffic into the so-called public domain traffic, that is to say, if we are doing such an industry that is digitalized and verticalized today, we must always remember that the traffic you have is simply not the same as these super platforms, so we regard public domain traffic as a big traffic pool for us, we constantly convert public domain traffic over, we want to enter this part of the traffic into our own reservoir, and find ways to keep it.
The second capability is the digitization of operations. We want to digitize the day-to-day operation management of our stores. We want to help hotels streamline their staff and replace them through the system. Here we have also made innovative breakthroughs in the industry. We were thinking about how we could break the old way of relying on human replication, relying on atomic replication, so we came up with a model called 1+1. Today, with the emergence of more digital marketing, it is also very difficult to let a store manager master the latest digital marketing capabilities. So we wondered if we could deconstruct the role of this store manager. We divide his capabilities into two parts, one is the ability to be online, such as the ability to market, and the other is the ability to be offline. Therefore, we now have two operating consultants to support each of our cooperative stores, one person is responsible for online, about 50 stores, and the other offline consultant covers almost 15 stores, so here we list a formula, that is, 1/15+1/50, two people through 1+1, can get better results than the original one. So in this matter, we abstract what we are doing, that is, based on our understanding of the roles and models in the original entire industry, and think in a different way. It's an attempt to do this at the entire operational level by embedding digital tools into the process, through specialized division of labor and collaboration, to achieve both an efficient approach and to make the whole thing more professional.
The third point is ecological services. When we gather more merchants, we can have better bargaining power at the level of the entire supply chain, and we can support these small and medium-sized customers in talent and financial services, so that our entire service surface will be further extended and wider.
The last one is branding. If you can meet the needs of my To C, then we give you the branding authorization, but if you can't meet it, no problem, in fact, you are one of my To B empowered customers.
Advice for those interested in becoming digital innovators in the industry
Based on my practice of industrial digitalization in recent years, I think two keywords are very important.
The first is convergence. The industrial Internet is "industry + Internet", so it requires talent and experience in two completely different industries. We need to integrate two different industries, and even two people in different industries, which includes everyone's way of thinking, working methods, and professional ability to integrate and complement, this thing is actually a very difficult thing. I think whoever can do this integration well can become the king of the subdivision field.
The second is innovation. People in the original traditional industry, because of the slow iterative growth rate of the entire industry itself, will often be more willing to continue the original way of working and thinking. This kind of breakthrough thinking is actually not enough, so in fact, what we have to do is to make innovative breakthroughs based on the industry. If you really want to do this industry, you have to understand every aspect of this industry, not just float on the surface.
Finally, I would like to give some advice to future innovators who are interested in investing in the digitalization of the industry.
The first sentence is "the water is big and the fish is big, choose a large and wide track".
What is big and wide? "Big" means that the ceiling of the industry is high enough, and "wide" means that you can not only do a certain link in the industrial chain, but can extend to many links, then it will inevitably be able to produce a larger company, which is the first suggestion.
The second point is that everyone should "choose the entry point that suits you best."
There is nothing good or bad about the entry point, only whether it is suitable or not, and then "single point breakthrough, horizontal extension".
The third piece of advice is to do the hard and right things.
"The harder and right things are, the more barriers there are." Because I believe that most of the simple things have been done by the predecessors, what is left to us must be these difficult bones, but the more difficult these bones, once you gnaw it down, others can't do it, this is your own barrier.
The fourth sentence is "long-term patience.")
Because the industrial Internet is not like the consumer Internet, it is easy to achieve ten times a hundred times, or even a thousand times the growth, so we need to have longer patience to do this. We must uphold long-termism and be able to do it continuously.
Well, that's all I'm sharing today. Thank you.
*The views expressed in this article are for informational purposes only and do not represent the position of the Agency.