Entrepreneur to choose the problem

On the first day, every entrepreneur should want to understand the problem. The choice between "wide market" and "narrow market" is crucial to the true height of your business in the future.

I want to tell you:

Go it alone and monopolize the forces, it is difficult to adapt to the complex and ever-changing commercial and social development trend

Taking good ideas of your own to search for good business from others may create a big business that will create the future

When everyone is looking for "creating a blue ocean," the lonely "Red Sea" is also lacking in "oxygen material."

Prior to launching its Digital Life strategy in 2000, Apple's market capitalization was about $ 5 billion, and by the end of 2009, the company's market capitalization had exceeded 180 billion U.S. dollars. Over the past ten years, he has provided shareholders with a total return on investment of more than 3000%!

But do not you wonder? Apple Inc. sells hardware products such as Macs, iPod digital music players, iPhones and other online stores that run the iTunes Store online music store and the iTunes App Store online software store. These areas are highly competitive. In particular, the operating margins of hardware products continue to decline, and the days of many competitors are deteriorating.

You may attribute it to CEO Steve Jobs with unparalleled innovation - and innovation! In the past decade, the business community has changed dramatically. Product innovation, technological innovation, process innovation, management innovation ... ... Various discourses on innovation have been filled. What is puzzling is that innovation is not unconventional.

The ability to bring long-term value growth to the company and a first-rate shareholder return seem more difficult than raising a new idea. In fact, most people still only perceived from the perceptual Steve Jobs in the company's innovation and innovation. Or, some people are "hijacked" and embarked on "being innovative" track - which is nowadays the only popular business vocabulary. However, innovation, or innovative thinking, it came from?

Let's go back to Apple and its founder, Steve Jobs.

In November 2009, Fortune magazine named Apple CEO Steve Jobs the CEO of the Decade. Fortune magazine's comments on Steve Jobs filled with beautiful words:

In the past 10 years, Jobs has fundamentally changed the order of the three major industries: music, movies and mobile phones. Remind everyone that the industry that he changed did not include the industry in which he first set foot: computers. And that is exactly the new theory that this article will elaborate on: the theory of "wide market" and the principles of entrepreneurship and innovation derived from this theory.

The "wide market" principle is of extraordinary importance to every entrepreneur or entrepreneur who aspires to change through innovation. From the birth of an innovative business idea to the fact that innovative practice truly translates into the company's long-term growth driver of value, innovation is a combination of continuous value innovation and strong corporate execution that produces a perfect Business Innovation Practice. Therefore, considering innovative ideas and their practicality as equal importance and consideration as the prerequisite of the principle of "wide market" can make innovation worthwhile.

The Apple case reveals to us the fact that it is increasingly difficult for singles and monopolies to adapt to the ever-changing business community. Today, the business elites' awareness of innovation is gradually shifting to the company's integrated use of various business resources. Not to be "cheated" by Steve Jobs, he is by no means an obsessive "closure man"; he may be more forward-looking than anyone else to the value of incorporating others' goodies into my system.

Let us through the layers of fog, into the "wide market." First, we will summarize our basic definition of "wide market" based on the case studies of the past five years.

"Wide market"

Refers to the breakthrough of a single industry boundary and value creation model, with digital, information technology and the company's "soft exchange" ability and ability to integrate resources in a number of industries to create new value space.

"Wide market" can be seen as a virtual market space, its commercial interest depends on the company's innovative capacity. Can be large, it can be so small that it can not be seen. Such as Apple's launch of "iPod + iTunes" portfolio, sales of hardware products and online music mall service capacity has a great relationship, and vice versa. We can not simply measure the size of the market or determine how much new products and services Apple can derive from such a business structure. The "iPhone + iTunes App Store" combination is a copy and extension of a business model. It can be said that Apple's demonstrated ability in innovation is based on the fact that Jobs decisively chose the "wide market."

"Narrow market"

Refers to the space for gaining the company value which is the key point of competition in the division of industry profits and market share within an industry. It is a subordinate market and the maximization of commercial interests can be measured. Under the natural competitive result of the market, the market growth rate of a single manufacturer will gradually decline. Microsoft is different, it is focused on the PC operating system software products, which is a market base can be based on the user to upgrade the system to achieve the cycle of growth.

Jobs found the "wide market"

Is a digital technology so powerful? Using digital technology, you can achieve Apple-style innovation? Obviously not.

"IPod + iTunes" essentially provides a new "product + service" business model, which is different from the traditional manufacturing after-sales service, completely get rid of the concept of added value, more and more companies are aware of this model To enhance the company's value is crucial. For Apple, the strategy to extend the life of your iPod is not about technology and product updates, nor is it about trying to improve your after-sales service, but by leveraging a huge pool of third-party software developers. Many existing products and services through the combination of softswitch, business model innovation through the establishment of a new supply portfolio, so that Apple can keep the lead in the fierce competition in the industry, the formation of a full market competition Under the conditions of seller monopoly power, this is the best effect of business model innovation. In this business model, the iTunes online store that exists as a service forms a very significant role in boosting iPod sales, extending product life, and enhancing customer loyalty while making profits for itself. The profit margin obtained by iPod hardware products Also far above the industry average.

Wide and narrow space gap

In the past five years, we have analyzed and researched business cases that are called "innovation" examples. This includes failure cases that are considered "excellent" but do not really transform into business value. We refer to the views of scholars such as Joseph Schumpeter and Clayton M. Christensen. When we try to analyze the actual cases of innovation in various theories, we come to the conclusion that there has been a radically changed business community in this era. We urgently need a new set of tools and tools to explain and inspire valuable business innovation.

The scope of business activities is the company's business space, its size determines the size of the company. In Apple's case, when Jobs decided to make a closed system, he confined the company to a "niche market," while the "Win-Tel coalition" approach created a big market.

Let us look at an example of a drinking water company. Its goal is to become the world's largest producer of pure drinking pure water. We can figure out that if we calculate the maximum annual income of a company based on 1 liter of pure water per person per day, it is easy to figure it out. This situation can lead to a gradual decline in the value of the investment if the current annual income of the company is close to maximizing its revenue. This example is not rigorous, but it illustrates the impact of the range of business activities defined by the company's goals on the long-term growth of the company.

In the traditional commercial society, the range of commercial activities of the company exists in the scope of the industry. The overall market capacity of a single industry often determines the company's income and value maximization, which is a market that can be predicted. In fact, due to the existence of full competition in the market, it is very difficult for a single company in the industry to easily obtain monopoly power and the scope of its commercial activities will be greatly reduced. Its real market position mainly depends on the company's own endowment of resources, including technologies, brands, raw materials and other resources of exclusive significance. In this way, the company will consolidate the competitiveness of the company by continuously improving its vertical integration capability. As Peter F. Drucker points out, the company's strategy is to outline the future direction of a business based on the resources owned by the company - at that time, the company's strategy plans how managers can improve their resource endowments.

In the late 1970s, Apple Computer became the perfect PC product for consumers with its superior industrial design. However, Apple Computer has been an alternative to the PC industry for more than two decades. The company's disruptive technology line, whether it is a Macintosh computer or a Mac OS, is not compatible with the popular Pentium® and Windows operating systems. Apple Inc. paid a heavy price for its own maverick technology line, and Apple Computer's global market share slipped from a top 20% to less than 3%.

Today, Apple offers us a completely new business paradigm. The "iPod + iTunes" combination gives us another look at the range of corporate business activities. This near horizontal integration business model does not involve any hardware manufacturing process, it does not involve record and entertainment industry. Between products and services, Apple's commercial reach spans multiple industry boundaries such as digital product manufacturing, internet services, record industry, software and information technology. This fully reflects some new features in today's commercial society: digitalization, informatization, service-oriented, cultural and integrated.

Because knowledge informatization completely stifles the aestheticism of technology, managers must jump out of the core competencies and think about how to set up a new business system. This becomes the source of the flood of thinking that the business model replaces the corporate strategy.

With regard to the scope of the company's business activities, the new challenges are as follows: 1) Whether the company can survive in a single industrial space, such as whether steel companies can continue to ride the market with first-class steelmaking technology. 2) Do all companies have to rebuild their business systems with new business rules? 3) How can companies build value bonds between different industries in an infinity commercial space, making it a well-established and commercially viable business system?

Contrasting with Jobs In the two phases of Apple's management, we call the closed-system PC market in the early stages "a narrow market," and the market created by the second-stage business model a "broad market." Our research shows that "narrow market" and "wide market" are the contradictory choices most startup companies face when choosing the scope of their business activities. Apple's experience shows that "wide market" has created a completely different environment for development.

Sort out the industrial value chain

Those who want to create a promising company through innovation need to learn from the very beginning how to shape the company's goals from an industrial value chain perspective. By doing so, it will help start-ups establish a resource-based development approach and shape the corporate goal of becoming a resource-integrated company.