Entrepreneurs should ignore the efforts after the decimal point

As entrepreneurs, we often overlook the efforts after the decimal point, but this part of the effort is the most important. The author shares relevant views and hopes to inspire you.

There are too many reasons for entrepreneurial failure, but perhaps the most common and difficult to avoid failure is to keep working after the decimal point.

It is not very meaningful for the business to grow from 1.1 to 1.2 or 1.3. It is meaningful growth for the business to grow from 1.1 to 2.1 or 3.1. However, because the growth after the decimal point is the easiest to see immediately, it is difficult for us to suppress this temptation.

I am also an entrepreneur, and I also deliberately ignore the efforts after the decimal point every day. The following are the common mistakes we make in the process of "ignoring the efforts after the decimal point".

1. Concepts come first or problems come first?

When we think about strategy, do you think about concepts first or problems first?

What is concept-first? If your startup is based on a big trend or a big buzzword, such as AI, new retail, metaverse, web3.0, OTO, etc., it is concept-first. However, concept-first is likely to be wrong.

For example, an entrepreneur of a beverage company said, "My brand concept is to lead consumption upgrades." This is nonsense, because leading consumption upgrades is not the real demand of users at all.

The biggest problem with concept-first is that it is easy for entrepreneurs to catch a hot word, but this hot word does not solve a real market demand, and entrepreneurs don’t even know what their key business is under this concept.

In addition, entrepreneurs who put concepts first tend to do things with a more speculative mentality. They lack a sense of mission, energy, effort, and stress resistance. They easily retreat when they encounter difficulties. Procrastination is a sign of the wrong trend.

Therefore, the first step in starting a business is to identify the real needs. This is the biggest pitfall of starting a business, no doubt about it. If you step on the wrong pit of needs at the beginning, everything will go wrong later.

2. Difficulty in acquiring customers is not a marketing problem, but a strategic problem

In the Internet circle, people often mention a few words such as rigid demand and high frequency.

If something is a rigid demand, it means that users have a very urgent need for it.

For example, taking a taxi is a rigid demand, ordering takeout is a rigid demand, drinking water is a rigid demand, and socializing is a rigid demand. But some things that may not necessarily be done, such as buying a speaker or snacks, are not rigid demands. Once a business hits the point of rigid demand, users are willing to spend money, and even willing to pay a higher price.

What does high frequency mean? It means that the frequency of contact between this business and users is very high and very intensive, and we have more opportunities to earn money from users.

This is the same as when we open a store. If the store only sells a single product, for example, if you open a store selling beef, it will definitely bring low-frequency consumption because the number of times a user buys beef in a week or a month is very limited.

If you open a supermarket with beef, fruit, vegetables, drinks, chili sauce and other products, the frequency of users coming to buy from you is very high. Under high frequency, users will randomly make linkage purchases, and the sales of this store will naturally increase. This is the meaning of high frequency.

In addition to "urgent need" and "high frequency", there is another very important word "mass".

If a business is aimed at the whole population, rather than a certain group of people, it is the public. The word "public" comes from the insight of Zhou Hang, the founder of Yidao, into the strategic positioning of Yidao. Yidao is positioned as a business car service, which is to provide better and higher-quality car services for business people.

Zhou Hang thought that his business was good and his service experience was good, but it was difficult to attract customers. There must be something wrong with marketing. This can be regarded as a common problem among entrepreneurs. They do not think that there is a problem with their business or strategy. They think that once they solve the sales and marketing problems, their business will be successful.

After Zhou Hang reflected on his failed business, he realized that the biggest problem for a business that is not open to the general public is that the cost of acquiring customers is too high. Yidao is positioned as a business car service, which is a professional and high-end positioning. At that time, their profit for a single business was 300 yuan, but the cost of acquiring a customer was 1,000 yuan. Not only did they not make money, they also lost 700 yuan for each order, which directly led to the failure of the business model. Therefore, the difficulty in acquiring customers is not a marketing problem, but a strategic problem.

He believes that Yidao should not have chosen a vertical group track to do business, but should have been like Didi and Kuaidi, targeting the whole society and the whole population regardless of age group and social role. In this way, the cost of acquiring customers will be lower, the number of users will increase, and the entire business will be able to run smoothly, thus forming a network effect, leaving competitors with no users and no cars to attract, so that Yidao can occupy a larger market share.

Therefore, if you are an Internet-oriented business, it is best to target the general public. This will expand your future market space, reduce customer acquisition costs, and make it easier to succeed.

3. A good strategy is not planned, but implemented

After we have figured out the strategic direction, how should we implement the strategy? At this time, you should pay attention to whether you want to pursue a perfect grand or a simple and quick one.

Perfect grandeur means being very persistent in achieving a perfect closed loop of the business; simple and quick means the core of pursuing is to quickly launch the business and get it running first. When Yidao was fighting with Didi, its persistence in perfect grandeur was clearly revealed.

For example, Yidao considers that its cars are mainly for business people, so it requires that the cars should not smell like cigarettes, and the drivers should know the way and look good.

For example, Yidao is obsessed with calculating the most perfect path for receiving orders, hoping that the driver can receive an order on the way to the company in the morning, and can also pick up one on the way home in the evening.

But looking back at Didi at that time, it was "very crude", even to the point that the billing model was not right and the future business model was not clearly thought out. But he was very clear that he had to constantly match users and drivers to reach transactions and launch the product first, and in the end he did outperform the entire market.

Zhou Hang also consulted Professor Zeng Ming of Yahoo China on this question. Professor Zeng’s point of view is that all good strategies in the future are not planned, but implemented. Because now we are facing a completely uncertain world, you can’t even predict the situation three months later.

For example, you are the founder of an animation company and you recruit a large number of original artists to the company due to business expansion. However, just after the personnel contract was signed, AI was upgraded, ChatGPT appeared, and software such as Midjourney that can quickly generate original paintings emerged, and the original artist position became unnecessary. You could not have predicted this three months before the software launched this function.

The future is completely uncertain, so we cannot plan the future as if it were certain, and think about how you should proceed step by step in the future. You should get on the road first, run first, and then look at the scenery on the road, and use it as your compass and navigator.

4. Do subtraction and ignore the efforts after the decimal point

When Yidao was doing marketing, it did a lot of innovative and interesting marketing and user experience.

For example, users can enjoy Beaver’s manicure in the private car; they can also buy books directly in the private car.

But Zhou Hang later recalled that these actions were meaningless and could not change the fundamental strategic situation. They were just efforts after the decimal point. It was not very meaningful to increase your business from 1.1 to 1.2 or 1.3. Only businesses that can increase your business from 1.1 to 2.1 or 3.1 are meaningful.

How can we achieve the iteration from 1.1 to 2.1 instead of getting stuck in the meaningless iteration from 1.1 to 1.2? The key is to learn how to do subtraction and make strategic trade-offs.

Good companies are good at subtraction, bad companies are good at addition

Why do we do subtraction? Because no matter how rich or big a company is, the resources it can use are limited.

Everyone can understand that small companies have limited resources and cannot do many businesses, but the situation of large companies may be even more serious than that of small companies.

Because the KPIs of large companies are different. For example, we took over a well-known, international, and leading dairy company. The first-year goal they set for the new business was to sell 2 billion in the Chinese market. To achieve a 2 billion scale, the resources of the marketing department are scarce no matter how you calculate it. You don’t think that I can do a lot of things desperately if I have a budget of 500 million to spend. Therefore, large companies have to do more subtraction.

Moreover, when a company opens up multiple business lines instead of subtraction, some of your fronts will definitely fail. The biggest impact will be on your company's morale, which will ultimately affect your ability to start again.

So how do you do the subtraction? You can’t just cut off all the business lines. The difficulty here is that you can only identify and keep the key businesses if you have a deep understanding of the business.

Let's take the example of online taxi-hailing. What do you think is the essence of this business? Its essence is that more people need to register the software on both the driver and user sides. This will prevent the situation where too many drivers find that there are no users, and too many users find that they can't get a taxi and uninstall the software.

The online taxi business can only be established when both ends have sufficient scale, which is what Wang Huiwen of Meituan calls the "two-sided network effect". The key to achieving both more drivers and more passengers at the same time is to lower prices and engage in a subsidy war.

Compared to 30 yuan, passengers are definitely more willing to spend 3 yuan to take a taxi, so they will definitely come to your app. With more passengers, there will be more opportunities to make money, and naturally there will be more drivers.

The reason why Didi was able to outperform the entire market back then was because it grasped the essence of the online taxi-hailing business, obtained the largest financing, and launched a subsidy war across the entire industry.

5. Beware of Flat Jigsaw Puzzle Strategies

Once the key strategies have been grasped and appropriate subtractions have been made, the next thing to pay attention to is to be wary of flat puzzle-type strategies when pursuing market growth.

The flat puzzle strategy is that after you accomplish one thing, you will copy the team and business model of that thing to the next business, and repeat this process. However, this seemingly easy, relaxed, and efficient approach will put you under tremendous strategic management pressure when multiple wars are launched at the same time, and you will be attacked from all sides.

Apple is the company with the best strategic performance. You can see its restraint in its business. There is no doubt that as the world's most profitable company and one of the world's leading companies, Apple has sufficient funds, sufficient technology, and sufficient brand power. However, it rarely gets involved in new industries to promote new products. For example, it does not build cars and has not launched Internet TV on a large scale.

But the great thing about a company like Apple, which has a restrained strategy, is that once it decides to enter the market, it will take up most of the market.

Like when it launched Airpods and entered the headphone market, Apple was able to gain a large market share in a crowded market by solving two pain points in the industry:

One is that the earphones on the market are all pseudo-wireless, and the left and right ears still need to be connected by wires, while Airpods do not need to be connected by wires; the other is that the charging method of earphones on the market is still some distance away from providing users with a convenient and lightweight experience. They solved this problem.

To sum up

Be wary of pursuing a popular big concept, but focus on a real problem. Don't pursue perfection, but do it first and talk about it later; learn to ignore the efforts after the decimal point, work hard to do subtraction, and be wary of the two-dimensional puzzle strategy.

*Content quoted from "Re-understanding Entrepreneurship".

Author: General Liang

WeChat public account: General Liang