Deconstruction and reconstruction behind product operations: Why was P&G's brand empire "dismembered"? Why can Toutiao become a platform?

1. Unbundle

I mentioned a point in the article "Five more small outlets and their logic, predicting the sixth small outlet", which aroused the interest of many people at that time. That point is called:
Unbundling the facilities. For example, "mini KTV" is a type of hardware facility disintegration.

In fact, before this, I have used the concept of Unbundle in three articles.

• "A War on Retention Rate | The Business Origin of Content Entrepreneurship "
• "Is there a record in the world that continues to be updated after its release? | All products will become service-oriented》

In the above two articles, I mentioned respectively that the existence of magazines and albums is itself the result of being limited by ancient hardware conditions.

After breaking through the limitations of magazines as a paper medium, even if 42 chapters only publish one article per week, it can still be an excellent "weekly"; after breaking through the limitations of records as hardware CDs, even if there is only one single, it can still be a complete and independent excellent "album".

In "How to Create a Billion-Dollar Internet Consumer Brand? In the article "The Big Brands of the Future", I mentioned that big brands like Procter & Gamble are being unbundled by countless small independent brands:

In 2014 alone, P&G invested $2 billion in product research and development, $10 billion in advertising , and through strong channel control, its matrix of more than 100 private brands occupied the vast majority of people's shelf space.

This has been the tried and tested winning formula for all traditional fast-moving consumer goods brands over the past few decades:

1) Invest heavily in R&D

2) Invest heavily in advertising

3) Invest heavily in channels

That’s all. It is with this crushing strategy that P&G's sales doubled almost every decade between 1960 and 2010, and today its market value has exceeded US$200 billion.

(P&G being dismembered)

But what is the essence of the above Unbundles?

It’s a change in channels.

All companies are pursuing development and growth. The approach of traditional companies is to capture a group of users and continuously provide more products or services to this group of people.

What Internet companies do is to make a good product or service and continuously acquire more users.

Why is there such a difference?

Because for traditional enterprises, channels are core assets and cost centers, so traditional enterprises do things around channels.

The population that can be reached through offline channels is relatively fixed, so the rational choice is to do more around the channel population that has already been captured.

But in the Internet era, the cost of channels is close to zero, so companies are focusing more on users.

For example, for fast-moving consumer goods merchants, the location and number of shelves are fixed. To maximize the conversion rate of the shelves, what needs to be done is to try to make each product meet the needs of the most people. Therefore, many products are multifunctional. For example, shampoo must have functions such as anti-dandruff, hair conditioning, hair care, and anti-hair loss.

The benefit of this is that one product can satisfy every potential user who walks into the mall, thereby maximizing the product's purchase conversion rate (for them, a product that is worth 80 points to every user is better than a product that is worth 60 points to some users and 100 points to others).

However, in order to take into account different user groups, certain problems will also arise:

1. Certain users pay a premium for product features they don’t need;
2. Certain users are not receiving the most effective solution to their needs.

By using online channels, new brands can solve these two problems well.

For example, another classic example is newspapers and magazines.

In the past, newspapers and magazines were also distributed through offline channels. In order to meet the needs of everyone as much as possible, it was necessary to set up various columns including sports, cars , business, entertainment, politics, etc.

So, what often happened in the past was that a person would buy a newspaper and end up consuming only the few pages that interested them.

But if I'm only interested in the sports section, why should I pay a premium for the other sections?

So, this is why various more in-depth vertical media are emerging now.

This is the typical difference between making products around channels and making products around people.

Regarding offline channels, traditional merchants pursue using a product that meets the "greatest common divisor" to solve the "union" of user needs. As for online channels, companies today are pursuing an "ultimate" product that meets the most urgent needs of a specific user group.

What online channels bring is the opportunity to reach a large number of specific user groups at low cost. This was unimaginable before.

Having said that, we can continue to extend the scope of unbundle.

First of all, from the user's perspective, time fragmentation is also a kind of unbundle.

Services that previously required a whole period of time to consume have become fragmented. For example, reading on the subway, or playing Honor of Kings during breaks in meetings.

The splitting of geographic attributes is also a kind of unbundling.

Consumption that previously required going to a fixed place has become more accessible. For example, the convenience store downstairs, and the mini KTV in the shopping mall.

The independence of service processes is also a kind of unbundling.

Previously fully integrated continuous processes can also be transformed into parallel services. For example, in a hospital, is it possible to separate testing, diagnosis, treatment, and prescription drugs into three different physical institutions to provide services?

Therefore, changes in online channels and improvements in consumption levels have subtly made people more consciously pursue the maximum satisfaction of personal needs in the most efficient way.

The reason behind this is that spiritual needs are higher than material needs, and time costs are higher than monetary costs.

Following this line of thought, we can also discover many existing opportunities.

2. Rebundle

As many things are unbundled, there will also be opportunities for new ways of organizing individual things. (For example, break up each magazine and then reassemble them using vertical theme dimensions)

So we see that NetEase Cloud Music organizes various singles to become a music platform; Toutiao organizes various single news to become a news platform; and JD.com organizes various independent products to become an e-commerce platform.

These platforms have the possibility of rebundling due to the unbundling of online channels (releasing more dimensional attributes of products or services). In turn, because of these rebundling platforms, the unbundled content/products/services have more diffusibility.

The biggest benefit of rebundling is that it can effectively spread the user acquisition cost and improve the conversion rate of cross-product sales. (I believe this is also the reason why most vertical e-commerce companies have no chance, while real platform-based e-commerce companies survive)

Finally, after rebundling similar products, platform-based companies will inevitably rebundle services around the population.

For example, JD.com’s home delivery business, and Toutiao’s Neihan Duanzi, Douyin and other products.

For these platforms, it seems that the only way is to attract customers first, then expand product categories, and finally operate their own business. After all, as we mentioned, growth is the original sin of business.

But how can companies avoid the situation where long-term unity will lead to separation and long-term separation will lead to unity?

There is a relatively niche business theory called the hub theory. In fact, it is very simple to explain. It is to make the shared basic service part the center of the wheel, and let the countless product departments in the outer circle operate independently with this as the center.

Now, the whole society is in the process of detailed division of labor, and this process is the process of continuous construction of infrastructure. In fact, every company is like a small society, so I believe the same is true within the company. It is necessary to build infrastructure, empower other products and business parts, and let each product department operate like a startup .

I call this "platform-based self-operation", and the effect will be better if combined with the investment of industrial funds. Tencent has done a good job in this regard a long time ago, Xiaomi is also good, and Meituan and Toutiao have also recently caught up.

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The author of this article @Qu Kai is compiled and published by (Qinggua Media). Please indicate the author information and source when reprinting! Site Map