Chapter 102 foreword

When our society enters the age of civilization, business always develops along with the progress of productivity.Earning money was originally not the purpose of human activities but a means of survival, but with the development of society today, it seems that it has increasingly become the purpose of many people, groups (such as companies) and even school activities.Philosophers can disagree and shout that people are putting the cart before the horse, but they can't stop the trend.Therefore, the development of technology and productivity in our society must be linked with business.Only when a technology or a product is proven to be commercially successful can it be truly accepted by our society.

In business, the most important thing is the business model. We have mentioned its importance many times in the previous chapters.All successful large companies have good business models. The rise of many large companies is not due to technological innovation but the transformation of business models.Many of the successful IT giants we mentioned earlier have innovated in their business models. Taking AT&T as an example, at the end of the 19th century, it knew how to only charge service fees and not charge scary high installation fees, which itself was a remarkable revolution in business models.It is precisely because most of the installation fees are eliminated for users that the telephone in the United States has been popularized in all households in a few decades.China Telecom didn't understand this truth, and the threshold of a high initial installation fee stopped most people who wanted to install phones. This problem was basically solved until ten years ago.

Although the rise of Intel is mainly due to the progress of semiconductor technology, it also has innovations in business models.In the era when IBM dominated the computer industry, every component of the computer was developed by itself. So did IBM, and so did DEC and HP.If it cost 10 million US dollars to develop a CPU chip 40 years ago, these three companies spent 30 million US dollars.At this time, Intel stood up and said, I spent 10 million US dollars to develop chips, and then sold them to you at 5 million each. IBM, DEC and HP all felt that it was cheaper than developing by themselves, so they accepted it.However, Intel's processors sold three companies and earned 15 million yuan. After excluding costs, they made a profit of 5 million yuan, so they developed.

Usually, a good business model is so simple that even a layman can see it clearly at a glance. The changes in the business models of AT&T and Intel are as simple as that.Conversely, if a business model can't be spelled out for hours, it's either not right at all or it's a scam.Buffett recently talked about such a thing. Two years ago, a financial company promoted financial derivative products to him. He spent a whole day reading their hundreds of pages of business reports (Prospectus), but he still couldn’t understand the financial derivative products. How it works and makes money, and finally it concluded that there must be ghosts in it.It turns out he was right.Sequoia Ventures will politely persuade entrepreneurs who cannot explain their business models clearly within a few minutes.

The business models of Microsoft and Oracle are also simple and couldn't be simpler. There are only three words - "sell software".Readers may ask, isn't software sold before?Indeed, the previous software was really not for sale. (Of course, it is not pirated.) In the IBM era, computer companies developed both hardware and software, and the value of software was realized through hardware. There was no independent software company. IBM puts the price of the software into the service fee it charges every year.This kind of service fee is very similar to the protection fee, which is charged whether the service is needed or not.Oracle has changed this charging method. It charges users a one-time software fee, and then users come to it when they have something to do, and they don’t need to pay service fees if they have nothing to do. This reduces the cost of users, and Oracle’s database grabs IBM’s market. .Apple may have appeared too early, following IBM's business model in which the value of software is reflected through hardware, and eventually lost to Microsoft, which sells software, in the field of microcomputers.

Conversely, a company without a good business model will not last long. This is the case for many Internet companies in the Internet bubble era. Although they have developed some technologies and applications, they do not know how to make money, so they rise quickly and decline faster. . Among all business models, the most ideal is a model that can make money automatically like a money printing machine.In this chapter, we introduce three successful models, Google's advertising system, Ebay's e-commerce system and Dell's computer direct selling system.