Recently, a friend who is engaged in growth asked me whether he should consider the pricing of a product.
How to say this question?
I don’t know if we should consider this issue in the past ten years as a friend of growth. This issue will definitely need to be considered in the next ten years. In short, if you are not clear about the issue, there will always be a higher-level leader who knows it. Products and operations have become more and more integrated, and not drawing boundaries for yourself is the best choice.
In the next ten years, there will be no massive user growth, and companies will need efficiency to survive. Management will become the talent requirement for enterprises in the future, and the business environment will require that only companies with the best service to users and low operating costs can survive.
Whether it’s the market, products, operations or data, you have to care about operations. It is an essential ability to view the company from an operational perspective.
But what is business? I deliberately read a lot of information and found that the word management was first proposed in Japan, so everyone will read Japanese business knowledge. Most of the books on the market are translations of Japanese business concepts.
It’s not that there is anything wrong with Japan’s business philosophy, but it is obvious that it cannot adapt to the Internet. It is more like a real economy strategy.
Therefore, I combined the business philosophy and explained the business clearly from the perspective of decision-making. I hope that readers will first understand the business from the perspective of decision-making. This ability is closely related to all non-technical Internet people and will be used by everyone every day.
1. What is business decision-making?
Business decisions are business actions made around business goals and in order to achieve them.
1.1 Description of business decisions
Here we will expand on the explanation. First of all, business goals are business goals that need to be achieved year-to-year when the company’s direction is determined. It is directly or indirectly related to revenue, such as GMV, operating income, and net income.
The second point is business actions. In fact, as Internet people, all our business occurs online, whether it is products, operations, market launch, or media channels. Our daily work is all business actions.
You can roughly understand business actions as every action you take at your location is a business action. The implicit assumption behind this is:
Everything you do has an “opportunity cost”. If you do this thing, you will give up another thing. Or do something else later.
1.2 Scope of business decisions
How the decision should be made is actually a very complex issue. Because the granularity of decision-making can be very large or very small.
When talking about company strategy, we often say that strategy is to find a way to survive, and strategy is based on the directional choice of goals. What to choose and what not to choose is a decision-making problem.
Let’s talk about it as small as a requirements review. Choosing what to do or not to do is still a decision-making issue, so decision-making is making a choice. The complexity, the size of the decision, and what you need to think about when making a decision are completely different.
So let’s first talk about how to make short- and medium-term decisions, which are more business decisions, while long-term decisions are more strategic decisions.
2. How to make high-quality decisions
Since we are talking about short-term decisions and short- to medium-term decisions. Let’s first talk about what short- and medium-term decisions are.
There is a book called “Can You Learn Haidilao?” Why You Can’t Learn Haidilao? It doesn’t mean that the service level of service staff is difficult to learn. In fact, you can imitate it if you send undercover agents or service employees who have observed Haidilao for a long time.
But this kind of service is not sustainable…
The reason lies in Haidilao’s high-quality service. There is a series of business actions behind it to ensure that employee service is very good.
Let’s talk about it briefly. First of all, Haidilao has its own employee incentive system. Employees can step by step from grassroots waiters to store managers, and then grow to store managers of several stores. Secondly, Haidilao also has a coaching system for training in this process. , when you become a coach, you can open a new store every time you train a store manager. Finally, Haidilao has its own system of mysterious scoring judges who rate the service of each store.
We see that Haidilao actually does a lot of business operations behind the service to ensure service quality. It has profit traction, a training system, and action monitoring. These operating systems are why Haidilao can provide high-quality services compared to its competitors. s reason.
These systems cannot be completed overnight in the short term. They require long-term iterations and are more biased towards short-term and long-term business decisions.
The example of Haidilao is to illustrate what short- and medium-term decisions are and what long-term decisions are. Decisions that are usually biased towards the long term will make the company more competitive in the future and have a freer decision-making ability to choose short-term business actions. When we see a competitor make a business decision, and we cannot copy this business decision or action, we should think more about why. Why my opponent can do it but I can’t? This why is biased towards long-term business decisions.
Mid- and long-term business decisions determine the unique business actions you can make when competing with your competitors. For example, meticulous service, higher efficiency, lower costs, cheaper prices, etc.
Only long-term business decisions can allow short-term decisions to accumulate, thereby forming their own business barriers:
Business barriers must be related to time accumulation. It took your competitors a similar amount of time to get to your current status.
He must use the same time to do it, not the same resources. Long-term business decisions must not be something that competitors can speed up by accumulating resources.
Haidilao’s management of employees and stores is a short-term business decision-making, including service processes, service techniques, service details, etc. These are short-term business decisions that can be quickly iteratively modified.
We can also think in terms of business goals. The decisions and business actions made for the current year’s business goals are basically short-term.
2.1 View decisions from the perspective of business impact
2.1.1 Short-term demand VS short- and medium-term demand
First, we judge whether this business strategy should be implemented based on the business type, that is, whether it is a short-term strategy or a long-term strategy.
Usually long-term strategies will have the following performance in business:
1) Either the cost brought by investment is reduced once and for all;
2) Either the investment brings improvements in effects such as branding;
3) Either you reduce the cost of repeated actions. In the past, you had to do the same operational activities, such as lottery draws, once a month. Now I will make a template, and from now on, the cost of research and development will be saved;
4) Either you are solving some kind of dilemma. Sometimes you are solving the dilemma of whether user A is satisfied but user B is not satisfied. How to differentiate between user A and user B? This is a dilemma.
5) Another solution is to solve the dilemma where costs and benefits are always difficult to balance. As my scale expanded, although my income expanded, my costs also expanded rapidly.
These are the core capabilities we want to build. It is also a point that needs to be considered in terms of our short- to medium-term needs or long-term needs.
Usually, on this basis, we still need to consider the operating situation, external environment and other dimensions. If it is only from the perspective of being beneficial to the company’s development in the long term, then all business actions that can create barriers in the long term should be done.
In fact, most companies will have a certain resource tendency, so that capacity building and short-term operating actions have a business proportion of investment. If they do not invest in long-term capacity building, they will die, and if they invest too much in long-term construction, they will die.
Therefore, after analyzing the business problem or the demand raised by the business party, first analyze whether it is a short-term or long-term strategy.
The better distinction here is that the characteristics of the strategy itself can determine whether it is short-term or short- to medium-term.
What is more difficult is that some short-term strategies may imply a stage of long-term strategies.
For example, I have done several operational activities in a row. R&D needs to be re-developed each time, and testing needs to be tested each time. At this time, I will propose an iteration requirement for operational activities, and may consider building a short- to medium-term tool platform such as operational tools. , will be a better decision.
Another more difficult situation is that the short- to medium-term strategy includes a short-term strategy.
He can both build barriers and partially solve current business problems.
For example, the delivery system can be divided into delivery configuration, delivery reporting, data collection, visual delivery dashboard, etc. This is a long-term project to clearly understand the efficiency of delivery and customer acquisition, but we can split it into multiple decision-making actions. For example, first prepare the delivery configuration, which is the basis for all data sources.
Therefore, regardless of the business operation actions we consider ourselves or the operation actions given by the business side, we must consider whether the impact of this action on the business is short-term and beneficial to this year’s performance or has a long-term impact.
If it is a long-term business operation, it is not as simple as the business party putting forward requirements. It is as simple as writing a requirements document for product operations. It may be necessary to convene multiple parties to communicate, demonstrate value, plan projects and development milestones, etc., in order to start a short- to medium-term project. .
These tasks are usually led by product or product operations, and it is usually easier for them to think systematically about the company’s product system.
Therefore, when you get a demand, first check whether it is a demand that seems short-term but is actually long-term at the system level, or a demand that seems long-term but can actually be divided into short-term needs. Their corresponding methods are completely different.
2.1.2 Directly affecting business VS supporting business
The second dimension of thinking is business actions.
There are usually three major categories of business operations. The first is direct intervention, the second is internal support business, and the third is “seeing clearly” business operations.
Usually the annual business goals are short-term, and they generally support business, such as daily iteration of products, optimizing registration channels, and opening new payment methods. These are all business-oriented. This kind of demand is usually It can be completed in one to a few weeks.
Their effect on business is relatively direct. Under normal circumstances, business actions that affect the business have a higher priority than those that support business. At the same time, when making decisions, we will also look at specific quantifications.
The latter two categories belong to indirect effects on the business.
For business support actions, such as contract review required for business, the review cycle is relatively long, which has affected the speed of your customer signing. Then the support demand has seriously affected the business. Then the priority will naturally become higher.
In the face of short-, medium-, or long-term goals, the value of strategies that directly intervene in the business and strategies that support the business need to be specifically evaluated based on the business situation.
There is another type of business decision that everyone easily confuses, that is, it seems to support the needs of the business, but in essence it directly interferes with the business.
All businesses will be run by people, such as organizational structure adjustments, business process adjustments, and customer service division of labor. If the software system is not iterated accordingly, it will not be able to support the organization. In fact, it is more difficult to support the business.
These decisions are essentially decisions that directly affect business operations, but the users you face are internal personnel of the company.
2.1.3 Development required vs. development not required
First determine the priority of decision-making from the long-term, short-term and business perspectives. Long-term needs can be split into short-term needs, or short-term needs are actually part of the long-term needs of the underlying support operations. We need to conduct a more rigorous review, in addition, if the requirements or decisions are split into multiple small requirements. We can judge whether it can be achieved without development.
If a requirement can be supported by the current system or non-software system, then the priority is not to develop it, but to operate it manually first. This is especially suitable for teams with heavy offline business, or teams with physical delivery. It is not applicable to games, tools, such as search, AR, VR, IM, etc., or enterprise SaaS software systems.
Of course, these systems can also be split into multiple small subsystems to reduce experimental costs.
For example, the education company where I worked previously developed a teaching system. In fact, there is no need to develop it immediately. You can let your own courses and students use it for a period of time. During this period, various problems will be exposed, and the product and operation assumptions are different from the actual operation. Operating for a period of time and then developing it will avoid many problems and verify the actual value of the business.
2.2 Decision-making based on user value
Looking at problems from the perspective of user value is usually the most commonly used perspective in product, operation and other positions. He looks at the core first:
1) Are the business actions or decisions made useful to users?
2) If it is useful, how useful is it?
One is from a qualitative perspective, and the other is from a quantitative perspective. Let’s talk about the qualitative perspective first, looking at decisions from the perspective of user value.
2.2.1 Whether to strengthen the core value of the product
The core of the product is to meet a certain core demand, and on the basis of this demand, we will continue to expand new segmented groups, segmented fields and segmented functions. Therefore, the core satisfying function of a product is actually the most competitive and vital.
This means that at this stage, the current technology implementation or supply can already meet the needs of most people. Let’s give a few examples:
The core function of Amap is navigation. Based on this function, more and more people are using it, and it has begun to subdivide categories according to the group, such as local life, refueling, hotel reservations, real-time public transportation, etc. The later differentiated needs are more to meet segmented groups and segmented scenarios.
Meituan’s core function is to deliver meals prepared by restaurants to one place. But is it only possible for meals or restaurants to deliver an item to a location designated by the user? In fact, this is not the case. For example, medicines, fresh vegetables, office documents, etc. all have this scenario.
Then Meituan has another flash delivery business. Even considering the time scenario, it will be delivered as fast as 1 hour. In fact, users have the greatest demand for meals delivered to a certain location, and the number of people is also the largest.
When we make business decisions, whether it is operations or products, we need to consider whether your decision is close to the core needs of your business or operation.
For example, if we are in the takeout business, better estimating the arrival time and better estimating the peak meal ordering is better than saying that I provide a new medicine delivery function. Because the former strengthens our core functions and core user value.
For example, for a physical product oven, if you add a timed reminder and you can choose to prompt music when it arrives, there is no saying that adding a steam baking function is closer to the core function.
Just now we sent items to a designated place, or sent a product to a certain place at a certain point in time. This involves the second question. It is to look at decisions from the perspective of the business model.
2.2.2 Whether to change the business model
Going back to the food delivery example just now, if what we do is to add more takeout restaurants to the platform, provide better order delivery, better delivery estimates, and after-sales experience, then will these change our business model? , in fact, there is no such thing. We are all iterating on the business chain. We haven’t changed the business model.
This complex judgment means that the business process and model are still the same model, but I have added new segmentation channels, such as local recommendation, which I have not used before, or added the method of user recommendation to acquire users, or I have added Promote users who have not been reached before.
For example, I used to work in first- and second-tier cities, but now I am moving to third- and fourth-tier cities. This is an adjustment to the business. It is not easy to weigh, but it still does not change the business chain.
For another example, the users I just talked about are still this wave of users. I added more consumption scenarios. For example, in e-commerce, I introduced more product types. For example, to sell women’s fashion, I started selling women’s sportswear. In other words, I used to deliver food, but now I start delivering items to users via flash delivery. These are all ways to modify business offerings.
These business decisions are more complex and require more considerations than directly iterating the user value of the business itself. For example, after the channel is established, users’ value perception and even after-sales service need to keep up.
For example, if entering new supply means that procurement and business need to communicate with more suppliers, etc. But it’s still not the most difficult type of business decision-making problem.
The hardest operating trade-off is starting a new business from scratch. It is partially coupled with your business. Let’s give an example:
For example, if Didi launches private cars and premium car models, is it a brand new business in decision-making analysis? Obviously not. When I take an online ride-hailing ride, I will find that some drivers have reduced their rights to run express trains. I once The express bus we took was a business 7-seat express bus.
Private cars and Youxiang are more like specifying better service quality standards in the supply chain, separating out the high-quality service drivers and specifying higher prices, and finding high-quality passengers who are willing to pay a higher price from the user side.
At this time, I added a screen to play advertisements in the car. Many students who took taxis in Beijing must have taken this kind of online taxis. So at this time, are they still operating on the original business process? Not anymore. At this time, his customers became merchants who needed to advertise. The customer acquisition channel has also become sales to attract advertisements, while the supply side has become passengers who watch advertisements.
But if I regard this screen as just an entertainment tool for users to digest their itinerary, then it becomes a business decision to expand into more subdivisions of the original business.
Although it just adds a screen to the car, the positioning is different, and the business decisions are completely different.
2.2.3 Whether decisions can be quantified and user value can be quantified
When making business decisions that strengthen the core value of a product or change the business model cannot be weighed, the most commonly used method is to quantify estimates or quantify needs.
User value = user group size ✖️Frequency of use ✖️Demand intensity
Therefore, when making decisions, you can estimate the number of people, such as the number of people in a certain channel or the number of people in a certain function, so you can roughly know how many people will be affected. The second is how many times users will use it and how many users will actually use this function. Having users who need it and having users use it after development are two different things.
For large functions, I personally suggest that you still conduct user interviews or accumulate users in daily life, and use some small sample sizes to speculate on changes in large sample sizes. This is an estimate method.
Secondly, for function transformation, we can make inferences through the click distribution of the layout. This is also a way.
Again, we can make inferences based on physical boundaries. For example, if your product is a food delivery product, users will usually only order 1 or 2 takeaways a day, and at most they will order takeaways for breakfast, and no more. This is determined by the real world.
For example, if you ride a shared bicycle twice in a hotspot area, once to and from get off work, you can know the approximate usage of its functions.
In short, quantitative estimation is a very important method for weighing priorities among multiple requirements. We can also quantify its impact on core business indicators and ultimately decide on priorities.
2.3 From the perspective of transaction model
The above mentioned large business models in terms of business, we can also make trade-offs on certain functions or operational strategies by looking at the transaction model.
2.3.1 Is the user’s revenue thinking comprehensive?
Lower the price
Regarding user operations, the types of benefits we can provide to users are also diverse. We give priority to whether this demand can bring cash income. Or whether it can make delivery costs lower for users. If it is lower, it will actually allow more users to use it.
The second is to help users save time, such as the reminder function, or I shorten the order dispatch time, optimize the scheduling algorithm, and reduce the user’s usage time. This is also a demand that users have a strong perception of.
The third is the value of safety and personal safety. Many people think that the probability of safety is low, so many products do not consider the value of safety when thinking about it. In fact, safety is a major prerequisite for transactions to occur, such as the safety of financial products, travel The safety, even the food safety of a restaurant you go to. The probability of it happening is low, but once it does, the damage rate will be very high.
The value of security = the probability of a security incident ✖️The degree of security breach
Most safe business decisions will reduce the probability of security incidents to a state where operations are acceptable and costs are acceptable. Of course, if costs are controllable, it is best to eliminate security incidents 100%. choose.
Being perceived, users subjectively think it is valuable, but in fact it may not be valuable. For example, a function is valuable, but users do not perceive it. We can give an example of perceived value. I don’t know if you have all been to Beijing Universal. There is a game project called “Light Photography Starts”. After entering, you will first play a video of Spielberg and Zhang Yimou. There are actually two The meaning is, firstly, to prepare you emotionally for the following programs, and secondly, it can make the waiting of users less obvious. It is a transit link. The users in the front are playing the project, and the users behind are queuing up. In this way, once the previous games are played, At the end, these users can start the game directly in the atmosphere of video rendering.
The same design scheme has also been used in Universal’s “Minions War”, “Snatch the Fire” and “Forbidden Journey”. In addition to the normal queuing, there is a long plot road in front of the game. The purpose is to make the queuing less Boring, let users enter the game state and make value perception.
For example, some of the security algorithms behind them may have prevented many things from happening, which is valuable, but users did not perceive it because the security incident did not happen after all. That also requires users to perceive things like text messages or reports, or summarization, etc. For example, the annual report of some software is because the transfer of value in daily use is imperceptible. At this time, I will give you a report so that you can know the value of the APP.
2.3.2 Judgment from implementation cost
When it comes to the cost of business decision-making requirements, people usually consider development costs. In fact, in addition to development costs, there are many dimensions to consider costs.
The first is the cost of hardware. For example, I need to store a lot of data. A friend asked me before why some hardware recording products cannot be sent with cloud storage.
In fact, this is a trade-off issue, that is, the cost of the free storage space is less than the increase in recording product sales profits caused by the free storage. This is appropriate.
The second is the cost of trial and error. For example, some requirements are not fault-tolerant. I am experimenting with a content review mechanism. If there is a problem, it may have a huge impact. This does not mean that the priority of this requirement is not high. Some manual decisions may need to be made. Promoting and stabilizing this demand has become the top priority.
The third is opportunity cost. If I make an open-screen advertisement, users may be disgusted, but it will give me benefits. If I attract traffic to category A in the advertising position, I cannot attract traffic to category B.
The fourth is maintenance cost, such as IM automatic reply. As the business develops, the content of the conversation needs to be continuously maintained. It is not a once and for all thing. I need to keep iterating.
2.3.3 Judgment from decision-making model
So we finally summarize the business decision-making method as a whole, starting from when we receive a demand or we have a lot of ideas for the business. We need to analyze step by step and finally make a decision. The dimensions of thinking are as follows:
1. We need to first see whether it is valuable to the business in the long term or short term for the business goals. Long-term value requires a more rigorous review to decide whether to invest resources.
2. In the short term, you need to first determine whether it is a strategy to intervene in the business or to support internal strategies. In terms of support, we make two decisions on user value and transaction model to see whether it will really affect the business, and quantitatively analyze the impact to make trade-offs.
3. If it is to intervene in the business, then check whether development is definitely needed or whether it can be run in a non-software form first. If development is definitely needed, then further decision-making will be made.
3.1 First check whether it strengthens the core value of the product. If so, then check whether it will change channels or supply, or change the overall business model.
3.2 Then do a quantitative value analysis and quantitatively estimate how much has changed. to decide which business actions take priority.
4. After judging the user value, look at the content of the user value itself:
4.1 Judge the value of this need in terms of money, time, safety, and perception.
4.2 After judging the demand itself, weigh the input and output from the cost of implementation. The only thing that needs to be considered separately is the security requirements, to consider the cost of implementation and the probability of occurrence. Security is a bottom-line requirement, which is different from business issues.
3. How to promote decision-making
No matter how good a business strategy is, it has no value if it cannot be implemented.
3.1 Decision-making is close to the core direction
The company’s resources are allocated from the top down, so it is best for our business actions to be consistent with the direction of the leadership, so that it is easier to obtain resources. Most of all business strategies require resources. If it is consistent with the core direction, the priority will be high.
3.2 Decision-making must be based on interests
Your business decision itself is the best way to promote the common interests of your partners. For example, as a product, it not only conforms to your product plan, but also empowers and improves efficiency for the business department. Then it will be easy to advance.
For another example, if you are engaged in the operation of attracting new customers, and the other party is engaged in industrial research and has KPIs for attracting new customers, then it will be easier to promote the business operations. On the contrary, if the other party has KPIs in other directions, it will be difficult for you to promote it. Another example is that you want to do data. Precipitate, see the data clearly, the other party has business KPI pressure, and he is not willing to invest in infrastructure.
If there is no way to achieve related interests, such as the business side or the business side of the industry and research, it is best to guide the other party to co-construct or participate together, such as early communication and involving the other party in the plan planning stage in advance. This will also make it easier to move forward.
3.3 Decisions must be explained clearly
How to ensure that the decision-making is not deviated, because there will definitely be many people asking about a decision that has been made, but the R&D does not agree with it, saying that the cost is too high and needs to be cut. However, due to the cut demand, a very different solution has been cut. Operations and products feel that the upper limit of this plan cannot achieve the effect. What should I do? At this time, the most important thing is to return to the product manager himself. The product manager’s responsibility is to study the problem clearly and fully expose it. If you make a decision today, and the decision is logically rigorous and the facts are clear, and R&D still doesn’t approve of your decision after you make it, it must be a certain link in it, and you have not fully exposed its importance. Come out and let everyone accept it. You need to communicate these points that R&D does not agree with and expose the problems.
If after tearing down you find that the minimum MVP cost is still very high, it is likely that there is something wrong with your teardown, if not.
Let everyone know what the current minimum available range is. This is your bottom line. The bottom line is that if you compromise again, the thing will not achieve the expected results after it goes online. First, let the R&D team understand the bottom line. After understanding the bottom line, if you find that it still cannot be recognized, then you can only find ways to research it. Clear and fully exposed. If you can’t reach an agreement at this time, then you can only evaluate to see if there is a problem with the organizational collaboration or with your own way of thinking.