Professor Lao Xin | Founded Kairui Management Consulting (KRC) for 16 years, specializing in business model innovation design, transformation strategy design, market value growth planning and other fields, is the "discovery - innovation - investment" business model creator.
Depth good article: 3006 words | 5 minutes to read
Before taking notes, think:
What are the key elements around the business model?
What is the key to business model sustainability?
What determines the quality of a business model?
What kind of thinking is needed for short-term growth of enterprises?
How can I multiply my conversion rate?
The first launch of the whole network, full notes, business model
First, what is the business model?
We have always said that business models have great power, what exactly is a business model? What is the "pattern" of what? In my view, the business model is the transformation of resources into economic value. Around three of these keywords, namely resources, value, and conversion, more content can be derived.
1. The password of the business model
First of all, from the perspective of resources, the key resources of the enterprise hide the genetic code of success, and innovation around this gene can be effective. Resources include natural resources, human resources and capital resources. The mastery of various resources in the enterprise is not equal, and the resources required for the smooth operation of different business models are also different. Therefore, business model innovation needs to start with the scanning of the dominant gene, centered on it, and find and structure other stakeholders that can be combined with this key resource element to create more competitive value outputs.
2. The core of the business model
Second, from a value perspective, the key to the sustainability of a business model lies in the customer value proposition. Providing value to customers is the basis for the existence of enterprises in the new economic era. With the continuous advancement of Internet technology, the world's high degree of transparency and interoperability allow consumers to access massive amounts of information, enterprises must abandon the past use of information asymmetry to drill tricks, pay attention to and serve the interests of customers. In addition, the resources at the disposal of the enterprise are limited, and the economic value, that is, the needs and desires that customers are willing to pay to meet, are unlimited. In the correspondence between the finite and the infinite, there are countless possibilities for pattern transformation and room for continuous progress.
3. The advantages and disadvantages of the business model
Finally, from the perspective of conversion, the level of resource conversion rate determines the quality of the business model. Different historical stages of human development, such as slave society, agricultural society, pre-industrial society, industrial society, electric power society, etc., have different modes of resource conversion. The more advanced the historical stage, the higher the efficiency of resource conversion. Different enterprises in different industries, and even in the same industry, also have completely different transformation models. But in general, the entire commercial society is in the process of continuous evolution, constantly evolving from low conversion rate to high conversion rate. In the advanced mode, enterprises in the backward mode will be subverted even if they have product and technological differentiation.
Second, the evolutionary view of the business model
To master the technology to make innovative business models, we also need to establish two important thinking – the evolutionary view and the system view. The view of evolution derives from biological concepts. Darwin believed that there is a struggle for survival between living things, and the adaptable survive and the unsuitable are eliminated, which is the natural choice. It is through heredity, variation and natural selection that organisms evolve and develop from low to high, from simple to complex, from few to many, simply put, "survival of the fittest".
The business world is a much faster-paced society than the biological world. Today's businesses face a more complex and unpredictable environment than in the past. Science is developing rapidly, and the cycle of products from introduction to market to maturity and recession has been greatly shortened. Enterprises must keep up with the rhythm and innovate all the time, otherwise they will be out of the game in the fierce competition.
At the same time, with the acceleration of the pace of innovation, the integration of capital and the improvement of user acceptance, enterprises can also grow explosively at a faster rate in a short period of time. The table in Figure 1-2 depicts the time it took for a startup to grow to a market capitalization of $1 billion or more over the past decade. The blue line is a log regression line that shows a decrease from about 7.5 years to less than 2.5 years.
Figure 1-2: Trends in the time it takes for startups to grow to $1 billion
Under such a fast-paced situation, the evolutionary concept in the business model is no longer "survival of the fittest", but "survival of the high". The higher the rate of conversion of resources to economic values, the more advanced the model. And this evolution is directional and irreversible, like a pawn crossing a river, constantly advancing from a low conversion rate to a high conversion rate. The progress of human society is also reflected in the continuous improvement of the conversion rate of resources to economic values, the poor industrial structure of developing countries, which refers to the large consumption of resources and the low conversion rate, and learning from developed countries to adjust and upgrade the industrial structure is to improve the efficiency of the transformation of resources into economic values.
Conversely, if the efficiency conversion from input to output is not effectively improved, then no matter how dazzling the term, it is not a real business model innovation.
For example, the mineral water bottles currently on the market are round, we changed it to a triangle, is this considered a business model innovation? After mastering the evolutionary thinking, it can be quickly judged that because the conversion rate from resources to economic values has not increased, this amount can only be innovation in products or processes. This kind of innovation does not necessarily bring direct benefits, and the early days can be traced back to the electric lamp dispute between Swan and Thomas Edison, and there have been a large number of recent cases of technology leaders collapsing in commercial competition.
Third, the system view of the business model
So, how can we multiply the conversion rate of resources? This leads to the system view.
In the new economic era, enterprises are no longer isolated individuals, and their neighboring partners are not just shallow connections and linear buying and selling relationships, but a deeply interconnected, ecosystem-like networked multi-layer relationship.
What is a mesh multi-layer relationship?
For a simple example, in China, when adult men and women fall in love, it is a one-line connection relationship, but once they enter marriage and have children, the families behind each other also become in-laws, and the single-line connection begins to become intertwined and becomes a complex network system.
In the commercial society, Taobao, as we know it, is also completely different from the counter in the physical business, but an ecosystem embedded in thousands of enterprises, in which a variety of ecological roles coexist and coexist. For example, Taobao girls, they do not have a direct contractual relationship with Taobao itself. But this ecosystem provides a display platform for Tao girls, provides a marketing platform for merchants to find online models and promote stores, and for consumers, it can not only stimulate purchases, but also a platform for learning clothing and fashion entertainment.
How important is the creation of this ecosystem to the enterprise? We can return to a long-standing debate, that is, whether the operating effects of a business are determined by the environment or by themselves. Those who choose the former will often behave very negatively, because everything is determined by the external environment, and the enterprise cannot change. Those who choose the latter believe that internal factors can affect external factors and emphasize their own efforts to improve business results. However, the same company in different environments, the operating results are indeed different. In fact, these are two typical approaches that contrast the individual and the environment.
In the new economic era, business model theory eliminates the binary antagonism of the individual and the environment, and replaces it with systems thinking. It believes that even if the enterprise itself does not change much, as long as it can reconstruct its relationship with the environment and build a suitable ecosystem, it can also greatly improve the quality and effect of the company's operation.
To make it easier to understand this concept, consider the case of the round-tailed stork.
The round-tailed stork was originally a very common bird in Bermuda. After the end of World War II, Bermuda was regarded as a treasure of development by real estate developers because of its beautiful environment. By the early 1950s, overexploitation and invasion of alien species had brought the round-tailed stork to near extinction. Biologist David Wingate is trying to restore the island's entire ecosystem and save the rare round-tailed stork. At this time, he faced two major problems: the dense, round-tailed crane-like nesting cedar forest had been replaced by ornamental trees and had disappeared. Second, the alien species, the land crab, has devastated the round-tailed stork's food sedge.
Initially, David Wingate took a one-line approach, including artificial nesting and planting sedge and cedar trees. But artificial nests can only ensure that the round-tailed stork does not become extinct, and it cannot make it prosperous. The new sedges are preyed upon by land crabs, and the young cedar trees are uprooted by the typhoon. Is it difficult for the round-tailed stork to escape the doom of extinction after all? David Wingate eventually came up with a systematic solution, introducing two new species, casuarina, which he planted before the cedar tree to withstand typhoons, and night heron, a natural enemy of land crabs, to retake rations for the round-tailed stork. After the direction was adjusted, the round-tailed stork had to live, have to eat, and multiplied again.
If you compare the round-tailed stork to a company, it used to be a big company in the market, but due to changes in the environment, the company quickly declined. In this regard, the most classic example is Nokia, as the mobile phone overlord of the planet, it finally reached the result of the failure to be acquired by Microsoft. When it was acquired by Microsoft, Nokia's executives said a very sad sentence: We did nothing wrong, but we failed.
According to traditional thinking, many people will advise companies to adapt to the environment and change themselves. But just as the round-tailed stork can't give up on sedges and cedar trees, the company's original genes dictated that it was difficult to make fundamental changes. The second way is for the government to lend a hand and implement "artificial breeding", but this method can only prevent the company from sudden death, but it cannot really help it get back on the growth track. The third way is to restore the competitive environment that enterprises are once familiar with, but the environment has changed, evolution is one-way, and the historical torrent is irreversible.
David Wingate's ultimate success was to introduce two new partners to the Roundtail Crane, refactoring its ecosystem. The system view of the business model is the same, the core of which is to build a business ecosystem formed by enterprises and customers and other stakeholders to seek their own sustainable development.