99% of startups fail: Is decentralization the cure?

A few days ago, I wrote an article titled " Apps are dead, services are immortal ", which talked about how all services should return to their essence and the Internet is just a tool. After the article was published, it quickly spread in the entrepreneurial and investment circles, triggering widespread heated discussions among industry insiders. Some entrepreneurs also added my WeChat public account and WeChat ID in the hope of further discussing how to succeed in entrepreneurship.

After communicating with several entrepreneurs, I also have some experience. Of course, I cannot guarantee that these experiences and thoughts are completely correct. But I strongly feel that the pain of entrepreneurs lies mainly in: how to return to the essence of service! Today's article wants to talk about this topic.

First, let’s take a look at the conversation between RockHeart and an entrepreneur in the automotive service industry.

Entrepreneur: We are working on a project in the automotive aftermarket. The market does exist, but it is difficult to match the business and clients need education.

Heart of Rock: What does the automotive aftermarket mean?

Entrepreneur: The maintenance, repair, decoration and beauty, and insurance of a new car after it is purchased and registered all belong to the aftermarket.

Heart of Rock: Most of these are taken up by 4S stores, and there are also some other stores. What are the pain points of your service?

Entrepreneur: I want to cooperate with offline repair shops to do repairs and maintenance and compete with 4S stores. The biggest pain point is that the services of 4S stores are expensive.

Heart of Rock: Your main problem is that you have not been able to change the maintenance service level of the repair shop.

Entrepreneur: We can’t manage the repair shops, but their level is not that bad.

Rock Heart: That means the service quality is uncontrollable, but the service quality of 4S stores is controllable. So I think the root of your problem is that you have not changed the service quality and cost performance. The main way to change this problem is to open a car service shop yourself, provide the same controllable and standardized services as 4S stores, and the cost performance is definitely higher than that of 4S stores.

Entrepreneur: That’s right, then it will become a heavy asset.

Heart of Rock: The future of the Internet lies in how heavy you are, not how light you are. Being light means you have no competitiveness and barriers at all, and your business will inevitably fail.

Through the conversation, we found that what the entrepreneur did was nothing more than connecting car users with offline repair shops. The problem the entrepreneur encountered was that users did not buy it. He thought the reason why users did not buy it was that "they needed education." In fact, this is a big mistake. The main reason is that you cannot provide users with the most cost-effective automotive aftermarket services. There is no best product in the world, only the most cost-effective products and services.

Of course, we cannot deny that it is very difficult for entrepreneurs to directly become a "heavy" company. After all, as long as they are involved in traditional industries, it means that they have to control various details of funds and resources, which is very complicated and far more difficult than making an APP. Most entrepreneurs are currently working hard on "lightness", but it seems to be a useless effort.

Next, let’s look at the cases of Xiaomi, Meizu, and 360 special-purpose phones, which may give entrepreneurs some inspiration.

If fan marketing is the key to Xiaomi's success, then Meizu will definitely not agree, because the Meizu forum and founder Huang Zhang have always relied on this model, and Xiaomi is just learning from it. But the key is that Lei Jun found 6 partners, experts from every aspect of the Internet, marketing, hardware, etc. They have not only experience and technology, but also connections and resources to solve a series of problems in production, quality control, and R&D. Lei Jun, as an elite in the venture capital industry, is able to attract large amounts of financing for Xiaomi's entrepreneurship, solving the problem of funds. Relying on Lei Jun's personal influence and connections, it can surpass Meizu in resources and marketing.

Meizu has always been a family-owned enterprise, and Huang Zhang has always been an impulsive and emotional farmer-entrepreneur, which led to Meizu's pursuit of quality and fan marketing but still unable to develop rapidly. However, under the stimulation of Lei Jun, Meizu began to change, changing the organizational structure of the enterprise, all employees holding shares, Huang Zhang stepped out, and attracted 2 billion investment. After Meizu moved from a family-owned enterprise to a standardized startup, it immediately launched two outstanding products, MX4 and MX4PRO, and cooperated with Alibaba OS to enter the Internet service, causing a sensation in the mobile phone market.

Let's look at Zhou Hongyi's special-purpose mobile phone. What was the reason for Zhou Hongyi's failure? Wasn't 360's platform and traffic large? The reason is very simple. It was mainly because Zhou Hongyi could not control the product quality of the cooperating mobile phone manufacturers, which led to the inability to produce excellent products with the highest cost performance. So compared with the entrepreneur in the automotive aftermarket at the beginning, it is the same reason. If you can't control the quality of products and services, it doesn't make much sense to be a pimping middleman. And 360 now controls the quality of children's bracelets and the like by itself. This is also the experience after the failure of the special-purpose mobile phone.

Through the above cases, we can see that whether it is a large-scale entrepreneur like Xiaomi or a small entrepreneur like the automotive aftermarket, the reasons for their success and failure are similar. The most fundamental thing is how to truly control the quality of products and services and provide the most cost-effective products and services. I think achieving this goal requires several conditions: funds, resources, marketing, and users.

Currently, entrepreneurs have very poor ability to obtain funds and resources, and the cost of acquiring users is extremely high. How to solve these two problems? Heart of Rock proposes two solutions:

First, financing (funds, resources) and wisdom in a decentralized way. As an ordinary small entrepreneur, it is very difficult to get the favor of venture capital. Funds and resources are bound to be stretched, and you don’t have that much start-up capital, so you must find a solution.

Crowdfunding is a very good solution to the problem of funds and resources. This decentralized financing method has become popular in China. Of course, I cannot deny that some failed cases exist, nor can I deny that some fraudulent activities are carried out using crowdfunding (currently, the China Securities Regulatory Commission and other institutions are formulating crowdfunding regulations, and crowdfunding will have rules to follow in the future). We cannot deify crowdfunding, but we also cannot deny the role of crowdfunding in the early stages of entrepreneurship.

To explain it more simply, I will take the example of starting a business in the automotive aftermarket. I mentioned earlier that if you want to succeed in this market, you must build a car service shop with the highest cost-effectiveness, which requires a lot of start-up capital. By using crowdfunding, you can mobilize car owners around you who are dissatisfied with the service prices of 4S stores and the services of other repair shops to join the crowdfunding, and call on 1,000 car-owning families to invest 1,000 yuan each, raising a total of 1 million funds, to build a car service shop that you are satisfied with, and then you can spend 1,000 yuan in the store for repairs and maintenance within 2 years.

Crowdfunding solves the problem of start-up capital and initial consumer issues. At the same time, these 1,000 participants can also participate in the design of the service process, tell all the problems they encounter in repair and maintenance, and help the car service shop optimize its services and provide better services than 4S stores. This is the so-called "sense of participation" in Internet thinking. And these 1,000 crowdfunders are also free salesmen for the store. Using "word-of-mouth marketing", they can mobilize colleagues and friends around them to come to the store for car service, which naturally brings good profits to the store.

Therefore, crowdfunding solves a series of problems such as funding, resources, service quality control, and marketing. Of course, a series of issues such as how to legally protect the rights and interests of participants, how to hire management, and how to distribute profits and dividends also need to be carefully designed, otherwise it will fail. But we did find that through the crowdfunding model, a car service shop with the highest cost performance was built, which was a subversion of 4S stores and repair shops, and also realized the entrepreneurial dreams of 1,000 people. And it can only be achieved through a decentralized crowdfunding model. The popularity of Internet social platforms has greatly reduced the transaction costs and communication costs of crowdfunding. It is an opportunity given by this era and may also be an important direction for future corporate organizational changes. It has also been included in the scope of national research.

Second, the Internet open platform should consider decentralization to help entrepreneurs succeed. Another problem that entrepreneurs are facing is how to reduce the cost of acquiring users. Currently, BAT is talking about the Internet open platform, but it is still a centralized openness, hoping to become the center of "connecting everything". In fact, this is a kind of greed. The Internet open platform has not reduced the cost of entrepreneurs to acquire users, which also means that the future of the open platform will not be bright.

The main way to solve the cost of acquiring users for entrepreneurs is decentralization. Tencent should open up the WeChat relationship chain and WeChat payment capabilities, so that the relationship chain can be applied to any app, and output its social capabilities to partners in a more decentralized and flat way. Tencent can package WeChat payment together with entrepreneurs and obtain commissions through WeChat payment. This is the path Tencent must take in the future. The sooner Tencent understands this truth, the more chances it has to succeed in the BAT competition, because Alipay has become a payment tool for many platforms through decentralization.

Not only social networking and payment can be decentralized, but also e-commerce platforms, logistics warehousing, information services, big data, search technology, etc. all need to be decentralized to help entrepreneurs and traditional industries transform to the Internet, and BAT has become the infrastructure provider in the Internet industry chain.

Regarding how Internet open platforms help entrepreneurs in a decentralized way, I have only made simple thoughts and cannot make a more in-depth and comprehensive analysis. I will continue to explore this topic in future articles, and I also welcome entrepreneurs and Internet open platforms to communicate with me.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.