Analysis of the "cost reduction" and efficiency increase of enterprise digitalization
Introduction: In today's slowdown of global economic development, "cost reduction and efficiency increase" are being carried out all over the world. Based on the important premise that technology is the differentiated core competitiveness of digital enterprises, it is necessary for us to re-examine "cost reduction and efficiency increase". What exactly is the "ben"?
The decade of rapid development of China's Internet industry is also the decade of high digitization of Chinese society, and digital capabilities and technological innovation capabilities are not only the mid- and back-end support capabilities of the Internet, and even more digital enterprises, but also the differentiated competitiveness that drives their development. . Through technological innovation and large-scale application, some emerging digital enterprises have quickly achieved industry-leading or even global leadership, and their technological capabilities are enabling more enterprises to develop and rise at a high speed. Therefore, the calculation of the cost cycle of digital enterprises is breaking many original rules. .
Today, when the global economic development is slowing down, "cost reduction and efficiency increase" are being carried out all over the world. Based on the important premise that technology is the differentiated core competitiveness of digital enterprises, it is necessary for us to re-examine the "cost reduction and efficiency increase". What is "Ben"? In the cost of digital enterprise, technology is the most important part of investment. It includes not only the IT procurement expenses that appear on the book, but also all aspects of investment in building the core competitiveness of technology. There are many hidden ones that can also be positive or negative. Negatively affect the cost of business development.
Therefore, under the current economic development situation, redefine "cost", especially the cost of science and technology, give new elements to the connotation behind "cost", and reasonably use the "cost" to create greater business value; improve enterprise efficiency , rather than simply reducing explicit costs and thus creating obstacles to corporate development, this is one of the most important propositions for all CEOs and corporate decision makers at this stage today.
In the past ten years, Alibaba Cloud has used technology to accompany and support the development of many digital-driven enterprises. In this process, from macro to micro, it has fully proved that all-round technical capabilities are the engine for improving the efficiency of digital enterprises. . In this article, we will present the classic cases of many enterprises in the original sound, and let us explore the cost and efficiency of the digital age from the article and the cases together.
01 What is the "cost" of increasing efficiency and reducing costs?
In the world of mathematics, there is an axiom that "derivable must be continuous, and continuous is not necessarily derivable." In the world of business management, there is also an axiom that "increasing efficiency must reduce costs, and reducing costs does not necessarily increase efficiency."
In the past, most people mentioned "cost reduction and efficiency increase". The first thing to focus on here is "cost reduction", because on the surface, "cost reduction" means "immediate results in the short term after breaking the arm to survive." ". However, companies that take "cost reduction" as their first priority goal often end up in the dilemma of "long-cycle innovation exhaustion", because "increasing efficiency" is the "purpose" in business operations. Just as the so-called "open source and cut expenditure" is not the same as the principle of "reducing expenditure and open source", the first priority of an enterprise should be development at any time.
Efficiency increase and cost reduction refers to the business results of increasing the overall revenue of the enterprise and reducing the cost of unit products through measures such as new technologies and new methods.
Efficiency increase will inevitably reduce cost, cost reduction will not necessarily increase efficiency
The goal of enterprises to implement efficiency increase and cost reduction measures is to improve business performance and achieve high-quality development of the enterprise. Its essence includes:
The overall income of the enterprise increases, and the overall optimization is pursued.
The unit product cost is reduced and the business quality is improved.
Sustainable benefit improvement, adhere to long-term development.
The core competence of the enterprise will be enhanced, and the competitive advantage will be enlarged.
Why "increase efficiency and reduce cost" instead of "reduce cost and increase efficiency"? Before cost reduction, efficiency enhancement is used to emphasize that companies should advocate development thinking and incremental thinking. Through continuous innovation in technology, business, and market, it is the correct path to increase efficiency and reduce costs to enhance the core capabilities of enterprises, increase overall revenue and reduce unit cost of goods. In practical work, if cost reduction is put ahead of efficiency increase, it is easy to orient the work machinery to simply reduce costs, and ignore the active thinking and implementation of various efficiency improvement measures.
The focus of enterprises choosing measures to increase efficiency and reduce costs is the innovation and application of new technologies and new methods in business.
For the unmeasured cost, re-understand the cost of enterprise technology
An in-depth understanding of the nature, composition and classification of enterprise technology costs is the premise of effective cost control. The cost of enterprise technology includes not only the cost of the enterprise's technology department, but also the cost of the enterprise's business department to develop its business through technological capabilities.
The cost of enterprise technology can be disassembled into 8 cost dimensions, among which: IT resource cost, labor cost, data cost and capital cost are directly related to the enterprise technology department and are explicit costs; time cost, opportunity cost, trial and error cost and sunk cost More related to enterprise business, it is a hidden cost that needs to be paid attention to.
IT resource cost: The facility cost used by enterprises to support the construction and operation and maintenance of IT systems, including: hardware cost (server, network and other equipment), software cost (software fee, authorization fee, etc.), computer room cost (data center facilities, electricity fee, etc.) , vacancy fees, etc.), service costs (cloud services, bandwidth services, etc.). The cost of self-built data centers and the use of cloud services are typical IT resource costs. Compared with self-built data centers, cloud services help to reduce the vacancy cost of resources.
Labor cost: The human resource cost invested by the enterprise around IT system construction and operation and maintenance, including: labor cost of system R&D, testing, operation and maintenance, management personnel cost, outsourcing personnel cost, etc. The adoption of new technologies and new methods will help improve human efficiency, reduce the number of personnel, and reduce labor costs.
Data cost: The cost of data collection, analysis and use by enterprises, including data acquisition, processing, analysis and search costs. Through big data, artificial intelligence and other technologies, it analyzes and processes the massive data of enterprises, converts data cost into data value, and realizes data intelligence-driven business development.
Capital cost: The expenses paid by enterprises to raise and use capital, including: capital raising cost and capital occupation cost. By converting IT asset investment expenditures into IT operational expenditures (from CAPEX to OPEX), the need for cash flow is greatly reduced and capital costs are reduced.
Opportunity cost: A firm uses certain resources to produce one commodity, but loses the cost of using these resources to produce other commodities of the highest value. By building an agile and efficient collaborative development platform, it helps to quickly verify multiple business possibilities and reduce opportunity costs.
Time cost: The cost of time used by an enterprise to engage in an activity, that is, the value of opportunities abandoned during that time period. In the ever-changing market environment, time and value creation are inseparable, so separate the time cost from the opportunity cost and focus on it. By introducing new technologies and new methods to reduce time costs, avoid being imitated and surpassed by competitors, and seize the window period of becoming stronger and bigger.
Trial and Error Costs: All the costs incurred by a company in the process of trying different ways to solve a problem. Carrying out business innovation on a mature and stable basic technology platform will help reduce the trial and error cost of new business.
Sunk costs: Costs that have been incurred and cannot be recovered by the enterprise, such as: abandoning the construction of a system in the middle, resulting in the invested cost becoming a sunk cost; the technology and manpower invested in maintaining the old system cannot be reused in the new system, resulting in sunk costs cost. Investing in sustainable technology directions can help reduce sunk costs.
How to use the correct posture to "reduce costs"? Enterprises need to establish a cost structure model from a global perspective. Like peeling an onion, peel off various "appearance problems", "confusing problems", "secondary problems", etc., directly to the "core problem" with the greatest effect; do not fall into the quagmire of partial cost reduction, use "tactics" "Strategic laziness" masks "strategic laziness".
The establishment of business-oriented cost metrics for enterprises will provide guidance for enterprises to increase efficiency and reduce costs, such as: the cost of IT expenditure per user for Internet advertising companies, the IT expenditure cost of a single order for Internet e-commerce companies, and the cost per thousand of Internet short video companies. IT costs for hours of video playback, etc.
02 Entrepreneurship is difficult, and success is not easy: thinking and practice of cost in different stages of enterprise development
"Less detours are the best shortcut to success."
A lot of research and practice show that the "S-shaped curve" theory represents a general law of the development of things. Whether it is the development of products, technologies, markets, or enterprises, they all follow the law of the S-shaped curve, that is, at the beginning, accumulate energy through continuous trial and error to pass the breaking point, and start to grow rapidly until reaching the limit point of the peak. eventually flourished and declined.
The life cycle of the main business of an enterprise is on the S-shaped curve, which can be divided into four stages: entrepreneurship, growth, maturity and decline. The main contradictions faced by the business at each development stage are different, and the strategies for increasing efficiency and reducing costs that match the development stage are also different accordingly. Bringing more high-quality benefits through new technologies and new methods has always been a priority in the strategy of increasing efficiency and reducing costs.
At different stages of growth, enterprises will face a large number of "cost reduction traps" that have no innovative business value. If a large amount of strategic resources are invested in "pseudo-strategic" directions such as "reproducing wheels" and "self-built data centers", it will not only cause a substantial increase in labor costs, time costs, and trial-and-error costs, but also give up its own The "core competitive advantage" of the original marginal cost is gradually reduced. Enterprise management should "resolutely refuse to invest and consume strategic resources in non-strategic directions".
Entrepreneurship stage: the world's martial arts, only "fast" can not be broken
Peter Drucker once said: "Efficiency is more important than efficiency, and what is really indispensable to an enterprise is efficiency, not efficiency."
The so-called "efficiency" has two connotations, one is "increasing efficiency" and the other is "increasing effectiveness", among which: efficiency is "doing things in the right way", while effectiveness is "doing the right thing". Efficiency seeks to save time and optimize paths. Startup management should first think about how to focus on key "efficiency factors" such as "increasing efficiency", how to optimize time costs, and how to reduce trial and error costs.
Enterprises face the reality that funds, technology and personnel are relatively weak in the start-up stage. Survival and development are the main goals of this stage. From the founder's idea to determining the direction, to making a product that is recognized by the market, it requires a combination of technical capabilities that support the business to quickly create value, product capabilities for rapid iterative upgrades, and agile and efficient team organization capabilities.
It is an inevitable choice for enterprises in the entrepreneurial stage to work around "efficiency first". By efficiently completing the verification of business logic, finding the initial target customer group, obtaining project returns and obtaining new financing to support the next development of the enterprise. Business leaders lead the team to put energy and resources into production and marketing activities. On the one hand, they mobilize resources to achieve higher corporate profits and reduce trial and error costs, time costs and capital costs; on the other hand, they only do necessary construction to avoid Consumption of funds and energy such as heavy asset investment and redundant team building.
Starting a business is difficult. According to the statistics of the State Administration for Industry and Commerce, 56% of Chinese enterprises have been in existence for less than five years, with a scale of about 10 million. Through the exploration and accumulation in the entrepreneurial stage, only a few can find the survival method and business development model, and accumulate enough energy to overcome the breaking point. At this time, the enterprise can truly enter the stage of rapid growth.
Entrepreneurship is a race against time, and the efficiency of technological iteration is the development of competitiveness. A company in the domestic long video field attracted a large number of die-hard fans at the beginning of its business by virtue of its excellent content. However, its IDC-based technical architecture has encountered problems such as slow expansion and network attacks, resulting in the inaccessibility of the website for more than 72 hours and business development. damage. The public cloud brings a new option to the enterprise: cloud-native technology ensures business stability and security, and solves the technical obstacles encountered in business development. In the follow-up, the company further uses the data processing and AI products on the cloud to build a search recommendation business, and integrates data intelligence capabilities into products ahead of its peers. Compared with its peers, it reduces the time cost and quickly passes the breakthrough point in the entrepreneurial stage. Rapid growth stage.
Data capability is the competitiveness of the platform, quickly possessing data mining capabilities, and leading entrepreneurs in the same period in terms of operational efficiency. With the competition of platform e-commerce gradually entering the Red Sea area, a vertical e-commerce platform has emerged with new, trendy, cool and dazzling products. While capturing the minds of Gen Z users, it quickly occupied the market and embraced cloud native as management. The best choice for those. The platform relies on cloud native technology to create a search engine that is comparable to the search for top e-commerce products in a short period of time, and quickly achieves revenue in recommendation and advertising scenarios. At the same time, relying on the cloud native big data platform, it has a massive Data analysis ability, mining data value, leading the peers.
Growth stage: rapid growth, dependent on diminishing marginal cost
Jobs once said, "It may be easier to improve 10 times than 10%". High-quality "efficiency increase and cost reduction" is to use innovative technology to achieve "order of magnitude" efficiency improvement to achieve unit cost reduction.
Enterprises have begun to take shape in the growth stage. Based on the product market capability at the start-up stage, the enterprise can realize the marginal cost of user value creation to decrease with the increase of scale through measures such as expanding product lines and increasing the scale of users, thus enabling the rapid growth of the enterprise. Continued technical investment, personnel expansion and market expansion build a positive feedback loop of business profitability and product quality improvement, driving the company on a path of sound development.
Through unremitting efforts, the share and influence of the company's products in the market have continued to expand, and higher requirements have also been placed on product stability and user experience. By mobilizing the internal and external resources of the enterprise to meet these deep-level needs, the quality of products can be improved, such as: the ability to smoothly undertake the access of ultra-large concurrent users, the disaster recovery ability to resist equipment room-level failures, etc., to achieve the ability to separate from competitors gap, so as to firmly seize the historical opportunity period of rapid development of enterprises.
With the continuous growth of the scale of enterprise personnel, the enterprise gradually evolves from a flat organization to a hierarchical organization, so as to meet the higher requirements of business development on organizational capabilities and avoid the occurrence of small horse-drawn carts affecting the development of the enterprise.
Technology iteration lags behind business acceleration, and the shortcomings of self-built technologies will be magnified when supporting business acceleration, limiting business growth. As a travel platform in the second echelon in China, the overall market share is limited, and the technical system is mainly self-developed and self-built. In the face of large-scale failures in the industry, the overflowing traffic peak overwhelmed the travel platform, and its self-built system could not expand rapidly, missed the best window for business development, and paid a huge opportunity cost.
Enhancing system stability and disaster recovery capability will have the effect of decreasing marginal cost in business growth. A local life platform has penetrated into the daily work and life of ordinary people, and it is essential to build a disaster recovery and multi-activity system. The platform initially built a three-site disaster recovery and multi-active system with self-built IDC. In the architectural design, any two central standing resources can carry full-scale services, while daily running only 1/3 of the traffic, each center has nearly 20% of resources redundancy, and the overall IT resource cost is very high. How to improve system reliability and effectively control costs? After the platform uses the public cloud to reconstruct and upgrade the multi-active system of applications in the three places, each center only needs to prepare resources for daily traffic. In disaster recovery scenarios, the elastic capabilities of the public cloud are used to pull up resources to deal with the full amount of business. Compared with the self-built IDC Reduced IT resource costs for redundant resource reserves.
Mobilize internal and external resources to increase system capacity, and business emergencies are no longer a cost black hole for enterprise growth. In the recruitment industry, the annual spring recruiting is a "period" that military strategists must contend for. A leading recruitment platform used to build a self-built IDC to purchase IT resources in large quantities to cope with peak traffic. However, after the end of the spring recruitment, the resource utilization rate dropped and was partially idle. The huge capital cost and resource cost brought great challenges to the operation of the enterprise. In the spring recruitment this year, the platform changed its thinking and turned to the public cloud, and completed business online, stress testing and other work within 10 days. During the spring recruitment period, resources were dynamically adjusted according to the operation situation, and the manpower investment was also reduced by half compared with the self-built IDC. After the Spring Recruitment is over, steady business traffic is retained, and it has the ability to mobilize external resources to increase system capacity, and to control capital and resource costs to the extreme.
Improve the scalability of the system and build sustainable competitiveness for accelerated business growth. The League of Legends Global Finals attracted the attention of billions of players, and a large number of users flooded in on the day of the finals. The level of business is difficult to assess. To ensure stability, a large amount of redundant resources need to be reserved, and these resources are idle at other times of the year. . A leading game live broadcast platform in China solved this problem with the help of the public cloud: it completed the expansion on the cloud a few hours before the event, tracked the popularity of the event at any time, and released resources after the game. The scalability of the live broadcast platform has successfully won more users in the competition with its peers, and reduced the IT cost of supporting the event to 1/10 of the original.
Build the ability to smoothly undertake the access of super-large concurrent users, seize the market and maintain rapid business expansion. The Spring Festival Gala Red Packet interaction is a window of opportunity for the whole people to carry out brand promotion, attract new and active users, and show the company's technical strength and muscles. Due to the ultra-high concurrency and extremely high availability of the Spring Festival Gala Red Packet interaction, a company once invested nearly 100,000 servers and large-scale bandwidth for the temporary purchase and allocation of the Spring Festival Gala Red Packet project, resulting in huge investment in IT resource costs and capital costs. After practice, I found that embracing the public cloud is the best way to interact with the Spring Festival Gala. Another leading interactive entertainment company, it took less than 4 weeks to prepare for the Spring Festival Gala red envelope project. Based on its business deployment in the public cloud, elastic expansion was performed to increase Tb-level bandwidth, hundreds of thousands of core computing resources, and dozens of Tb of CDN. As well as security protection, etc., it successfully completed tens of billions of red envelope interaction activities for the Spring Festival Gala, and achieved short-cycle high resource investment through flexible resource capabilities, achieving high business goals while controlling costs, interpreting the real efficiency increase and cost reduction.
Strictly control the cost per user to ensure the sustainable development of the business. Taking a social media as an example, when hot events such as entertainment and news break out, it will bring more than 10 times the business traffic peak. Increase the cost per user, and because the time and scale of hot events are unpredictable, even if a large amount of resources are reserved, there is still the risk of major failures, which will cause the loss of users and further increase the cost per user. Finally, the enterprise builds a hybrid cloud architecture by , which not only guarantees the ability of the business to undertake large concurrent user access, but also greatly reduces the cost per user, providing a strong guarantee for the sustainable development of the business.
Mature stage: steady development, continuous innovation to establish a competitive threshold
After the enterprise experienced rapid growth, the growth rate began to slow down and entered a mature stage with the most balanced and sufficient development. It has the characteristics of good product quality, large user scale, high organizational efficiency and refined operation. Under the perfect management system, enterprises rely on the growth potential accumulated in the entrepreneurial stage and growth stage, and their business development is pushed to the top. How to keep the enterprise in the mature stage for a long time and avoid the rapid decline of the stage is the biggest challenge faced by the enterprise in the mature stage. Strengthening the innovation ability of the enterprise, digging the product moat, and promoting the refined management are the measures that must be taken.
Enterprises in the mature stage have a full understanding of the market. They can not only launch products that meet the needs of users, but also find potential needs before customers and convert them into core competitiveness of products, so that they have the opportunity to compete with competitors in the market. competition threshold.
Enterprises in the mature stage have the ability to mobilize large-scale resources. However, in order to improve product competitiveness, they are prone to fall into the misunderstanding of large and comprehensive investment. Large and comprehensive investment cannot bring breakthrough results, it will inevitably lead to waste of resources, and will inevitably result in large but not strong results, which will damage the core competitiveness of products; high-intensity investment in the direction of the core competitiveness of enterprises, non-core capabilities Selecting excellent external resources for cooperation is a more efficient and long-term development path to increase efficiency and reduce costs.
With the maturity of the enterprise, the scale expansion will follow. At this stage, by using new technologies and new methods to improve refined management capabilities, it is often possible to better control cost input, increase output per unit cost, and prolong the existence of enterprises in the mature period.
After the business has entered a stable period, new technologies provide a lighter way to help companies expand their boundaries. A well-known digital marketing company built a global marketing platform based on public cloud global infrastructure, avoiding heavy investment in infrastructure. Every time the company starts a business in a new country, the preparation time of IT resources can be controlled within 3 hours. If the business fails to meet expectations, it will choose to release resources and shut down the business, thereby minimizing the trial and error cost of the new business. After fully understanding the characteristics of its own traffic, the company continued to seek the optimal solution in balancing resource specifications and billing models on the cloud, and continued to reduce the IT cost of a single advertisement placement, with an average annual reduction of 20% in the past three years.
With the slowdown in the growth rate of main businesses, it is difficult for mature companies to continue investing in technology in non-main businesses. A leading Internet company has invested a lot of human resources in the self-research of the underlying technology, and has achieved remarkable results in database technology. However, the database technology is far from the main business, and enterprise managers are not very aware of it. With the slowdown of business development, enterprises have reduced their investment in the self-research of underlying technologies, resulting in the loss of core database R&D personnel. The technology that was originally proud of has become a burden to the company in an instant, and problems such as frequent failures and inability to undertake business needs are serious. Affecting business development, the company finally chose to use cloud-native databases to replace self-developed technologies across the board.
Saturate investment in the core goals of mature businesses and build an insurmountable moat. A real-time strategy game ranks among the best among similar games by virtue of its core gameplay and operational strategies. However, the company's management was not satisfied with the status quo, and proposed a "player multiplication plan", and the use of more advanced technology became a necessary condition for the implementation of the plan, and the migration from IDC to the public cloud became a necessary option. After going to the cloud, the new game server startup time has been reduced from 18 days to 30 minutes, and the IT cost of a single player has been reduced by 30%; the preparation time for a market event has been shortened from 15 days before the cloud to 3 days, and the cloud computing power can be used. Real-time analysis and dynamic adjustment of promotion effect. The low cost of opening servers and efficient advertising have brought more players and higher ARPU values to the game, and also made the game firmly occupy the TOP1 position of similar games.
The rock-solid technical stability and the cost control power of excellence make the enterprise run steadily and far. A head interactive entertainment enterprise built its own storage system. After supporting the enterprise through the high-speed growth period, it could not meet the requirements of mature enterprises for stability and refined management. For example, failures such as file loss or unavailability frequently occurred, and serious Business availability is affected; newer machines cannot be used, and data tiered storage cannot be performed, resulting in the inability to implement cost-optimized solutions for enterprises. The company chose to use the public cloud instead of the self-built system: cloud-native storage products ensured stability and improved the SLA by three orders of magnitude; through refined management of data, the hierarchical storage technology was used to greatly optimize storage costs.
Carry out refined management in a quantifiable way, push the operating efficiency of the enterprise to the extreme, and maximize the value of products in the mature stage. The local life business is a business that fluctuates in IT demand on a daily basis. Abnormal weather on a certain day will lead to a surge in the number of orders on that day, which cannot be predicted in advance. Public cloud provides the possibility for such business to finely manage order IT costs. Taking a food delivery platform as an example, its business has typical tidal characteristics in the morning, middle and evening, but it remains stable during other periods of the day, and shrinks rapidly during the early morning hours. The platform holds steady-state resources on the public cloud based on the demand in the early morning. During the daytime, it is adjusted slightly based on real-time data. During the peak period, it uses elasticity to cope with uncertainty. The entire process is completely automated and adjusted based on data, which saves hundreds of millions of dollars in costs every year.
Decline stage: maintaining profitability, organizational change and technological innovation activate new business
The development space of the main business of the enterprise has peaked, but the new business has not yet been able to become a new growth engine; the long-term development of the enterprise has brought about a large and complex organization; under the long-term dominant position in the market, the enterprise has lacked the motivation and determination to change. Under these circumstances, it is easy for enterprises to gradually lose the technical ability and open attitude to grasp the changing trend of the market, which makes the enterprise go from a mature stage to a decline stage.
In the early stage of decline, enterprises still have great market influence and have certain innovation capabilities. If they cannot quickly activate organizational vitality, enterprises will experience low efficiency, low morale, and slow market response. Rapid decline in performance will be inevitable. As a result, if companies can review existing processes and methods and make positive and effective innovations, set scientific and effective goals to activate organizational vitality, they will be able to slow down the process of decline and incubate second-growth curve businesses.
In the declining stage, enterprises meet market demands by introducing new technologies and methods, streamlining organizations, and simplifying processes, so as to improve efficiency and reduce the input cost of unit products, so as to maintain the profitability of the enterprise.
The decline stage also provides a new opportunity for companies to re-emerge. Enterprises make innovations and breakthroughs in new directions by reorganizing internal and external resources, and thoroughly renovate organizational culture, processes and mechanisms that do not adapt to the external environment, and it is possible to seize new development opportunities.
With the help of advanced technology to support downlink business, release resources to invest in innovative direction. Although a national-level product with a DAU of over 100 million has entered a period of decline, it is still the company's largest cash cow business. A 15-person operation and maintenance team maintains the IDC dual-active structure, resulting in a lack of resource support for other innovative products in the company. However, a major natural disaster caused a power outage in computer room A, and computer room B could only carry half of the traffic, causing hundreds of millions of yuan in losses within 10 hours of the emergency repair of computer room A. After the incident, the company decided to establish a multi-active architecture of IDC + public cloud. The new architecture is more stable and easier to maintain. It can carry all traffic with the elasticity of the public cloud. At the same time, the size of the operation and maintenance team has been reduced from 15 to 4. In the follow-up, the company also began to continue to invest more technical resources in the direction of business innovation.
Improve the quality and cost of products in the decline period, and maintain high-quality business development. A well-known domestic media product has a history of 20 years. Due to the typical event-driven characteristics of the use of media products by the public in recent years, the self-built IDC architecture of this product cannot meet the elastic requirements, resulting in multiple downtime accidents. After the enterprise invested a lot of R&D manpower and failed to build its own elastic resource pool, it finally chose to distribute the steady-state business on its own IDC and public cloud. Elastic resource pool. This solution not only significantly optimizes personnel efficiency, but also greatly improves product stability, reducing annual downtime by 95%. The misunderstanding of some enterprises is: when looking at their own costs, they only consider the explicit IT resource costs, ignoring the input of labor costs, trial and error costs and sunk costs; but this well-known media has a good combination of self-research capabilities and external resources, avoiding the inefficient repetitive wheel building, and ensuring the high-quality development of the business.
03 Going through the cycle, sustainable development: thinking and practice of cost development in the second curve of enterprises
Those who can go through the cycle are insisting on long-termism. Only by continuous innovation can we avoid mediocrity and stay ahead.
A complete enterprise life cycle development process follows the S-curve law, that is: starting from entrepreneurship, going through rapid growth to maturity, and finally ending in decline, it is a continuous development process and the "first curve" of enterprise development. How to break the end of the first curve and become a long-lasting enterprise? The second curve principle provides the answer, establishing a second S-shaped curve through business innovation, enabling companies to break free from the constraints of relying on a single business life cycle. By making the second curve business, the enterprise has the ability to cross the development limit of the life cycle of a single product, making it possible for the enterprise to last forever.
When the first curve business is on the rise, the second curve business will be deployed. The coexistence of the two curves enables the business of the first curve to provide time and financial support for the development of the business of the second curve, and can also reduce the trial and error cost and time cost of the enterprise.
Apple used the second curve principle very well. After the success of the Mac computer, it launched the iPod business and succeeded again; when the iPod business quickly occupied the market, it planned to launch the new iPhone business and it was a great success. . Compared with Nokia's mobile phone business, at the peak of its historical performance in 2007, it did not make large-scale investment in the smartphone business, and missed the market window when the smartphone business became the second curve. In the end, Nokia ended up selling the mobile phone business.
Be prepared for danger in times of peace, overcome path dependence and develop new business
The continuous emergence of new technologies and new ideas has promoted the rapid development of modern society. User needs are constantly upgraded in the rapid changes, and the life cycle of new products is also getting shorter and shorter. For the exploration and practice of new business directions, it is necessary to have a new perspective and method, and be particularly vigilant against the path dependence of successful old businesses, including: thinking mode, technology selection, product definition and team organization. Because the methods and paths that have made a company successful in the past not only cannot guarantee the company's continued success, but are also likely to be the biggest obstacle to the development of new businesses.
The business development of the second curve requires a new team to bring new thinking and new methods, openly absorb the advantages of internal and external resources of the enterprise for our use, and support measures such as organizational incentive mechanisms to encourage innovation, overcome the path dependence brought by the inertia of the enterprise, and support new Business breakthrough growth.
The second curve business is started in the rising stage of the enterprise, which helps the second curve business to break down earlier than the arrival of the first curve business limit. In the process, the enterprise trial and error cost, time cost, sunk cost, IT resource cost and capital cost are reduced.
Inert thinking is the biggest obstacle to business innovation. A domestic audio and video company started its business overseas when the domestic business growth slowed down. The company chose to reuse domestic technical solutions to build its own IDC overseas, but it incorrectly estimated the complexity of overseas IDC construction and spent a huge amount of money. , and the delivery schedule is also it seriously affected the development speed of overseas business, and eventually led to a serious imbalance between the input and output of overseas business, and the executives were forced to decide to suspend the continued expansion of overseas business.
Business innovation requires opening the ceiling of imagination. A short video business gave up the domestic self-built model during the overseas trip, and used public cloud resources in different regions around the world to support the rapid trial and error of the business and the rapid growth of the user scale. It seized the time window for the rapid development of overseas short videos and used the lowest The cost and the shortest time helped the product cross the "death gap" in the early stage, and it took two years to complete the top list in the Apple and Google stores.
Accelerate the company's second-curve business development with external forces. After being silent for two years, a well-known game company has created a phenomenal game masterpiece. With its excellent visual effects and game quality, it has quickly gained hundreds of millions of players and billions of dollars in revenue, relying on the global resources of the public cloud. The ability to realize the simultaneous online service of 10,000 servers in five regions around the world with zero failure provides a strong guarantee for the rapid development of the business.
Moving forward with a heavy load, breaking through the darkest moment of new business development
There are not many companies that start to deploy new businesses when the company is in the rising stage, and explore the second curve. Most enterprises are immersed in a state of rapid development and good profit returns. Only when the development of the enterprise begins to decline, do they realize that they need to establish a new business direction and are forced to start exploring new businesses.
At this time, the main business of the enterprise provides continuous resources and time support for the new business. Breakthrough development of new business. Under such circumstances, the new business needs to focus on and make use of the external superior resources of the enterprise, seize market opportunities, and make every effort to break through the darkest moment of new business development, so that the enterprise can be reborn.
It is difficult to break through the siege of development by moving forward with a heavy load. A domestic information platform used to be a leader in the industry. Due to the continuous shrinking of the business in recent years, the size of the technical team has continued to decrease, and there is no manpower to upgrade and iterate on the infrastructure and technical architecture. When a phenomenon-level product is successfully incubated, Users grow at a rate of ten times every day, which has caused a great impact on the self-built infrastructure and technical architecture. Frequent database downtime and unavailability of services have seriously affected the user experience and version iteration speed, resulting in The project missed the best opportunity to break the game quickly.
Pack lightly to get through the darkest moments. A leading social platform has incubated a phenomenon-level product. The innovative AI gameplay of the product has caused viral spread among users. The explosive growth of user scale has brought a lot of GPU resource requirements. The resource reserve of the enterprise cannot carry the business. With the rapid development of cloud computing, in order to shorten the delivery cycle and ensure the business priority while controlling the cost input, it was decided to use public cloud resources to carry the load, which finally successfully guaranteed the rapid development of the business.
04 Summary
Digital capability is already the most important productive force for enterprise development. The level of investment in technology and the method of investment are an important subject that enterprise decision makers must study.
The essence of efficiency increase and cost reduction is the increase of the overall profit of the enterprise, the reduction of the unit product cost, the improvement of sustainable benefits and the enhancement of the core competence of the enterprise. In addition to the explicit costs of IT resource cost, labor cost, data cost, and capital occupation, the technology cost investment of enterprises, the invisible investment of time cost, opportunity cost, trial and error cost and sunk cost are also very important, and comprehensive and comprehensive reduction These costs, and then the improvement of efficiency is the essence of the high-quality development of enterprises.
The technological capabilities represented by cloud computing are increasingly becoming the core of enterprise competitiveness. The technology generation gap between cloud and non-cloud environments is gradually forming. More and more emerging technologies are being developed and deployed on the basis of cloud. The battlefield of innovation must be born in the cloud. Cloud computing is the representative of advanced technology, the most important scientific and technological productivity, a tool to break the technological inertia of enterprises, a new kinetic energy to accelerate enterprises to pass through the development cycle, and a powerful tool for enterprises to achieve comprehensive efficiency improvement and cost reduction.
Compared with the total cost of technology invested by enterprises, especially labor costs, time costs and trial and error costs, cloud can undoubtedly greatly shorten the cycle, while bringing better stability, providing updated technical capabilities and better customer experience. .
Cloud is not an IT strategy for a digital enterprise, but an enterprise-level development strategy. Cloud brings a reduction in comprehensive cost and a substantial increase in cost utilization. In the future, more and more enterprises will evolve into cloud-native enterprises, relying on cloud technology, AI, data and other capabilities to innovate and achieve optimal results. It can promote faster innovation and development of enterprises and promote higher-quality social progress at low cost.
The decade of rapid development of China's Internet industry is also the decade of high digitization of Chinese society, and digital capabilities and technological innovation capabilities are not only the mid- and back-end support capabilities of the Internet, and even more digital enterprises, but also the differentiated competitiveness that drives their development. . Through technological innovation and large-scale application, some emerging digital enterprises have quickly achieved industry-leading or even global leadership, and their technological capabilities are enabling more enterprises to develop and rise at a high speed. Therefore, the calculation of the cost cycle of digital enterprises is breaking many original rules. .
Today, when the global economic development is slowing down, "cost reduction and efficiency increase" are being carried out all over the world. Based on the important premise that technology is the differentiated core competitiveness of digital enterprises, it is necessary for us to re-examine the "cost reduction and efficiency increase". What is "Ben"? In the cost of digital enterprise, technology is the most important part of investment. It includes not only the IT procurement expenses that appear on the book, but also all aspects of investment in building the core competitiveness of technology. There are many hidden ones that can also be positive or negative. Negatively affect the cost of business development.
Therefore, under the current economic development situation, redefine "cost", especially the cost of science and technology, give new elements to the connotation behind "cost", and reasonably use the "cost" to create greater business value; improve enterprise efficiency , rather than simply reducing explicit costs and thus creating obstacles to corporate development, this is one of the most important propositions for all CEOs and corporate decision makers at this stage today.
In the past ten years, Alibaba Cloud has used technology to accompany and support the development of many digital-driven enterprises. In this process, from macro to micro, it has fully proved that all-round technical capabilities are the engine for improving the efficiency of digital enterprises. . In this article, we will present the classic cases of many enterprises in the original sound, and let us explore the cost and efficiency of the digital age from the article and the cases together.
01 What is the "cost" of increasing efficiency and reducing costs?
In the world of mathematics, there is an axiom that "derivable must be continuous, and continuous is not necessarily derivable." In the world of business management, there is also an axiom that "increasing efficiency must reduce costs, and reducing costs does not necessarily increase efficiency."
In the past, most people mentioned "cost reduction and efficiency increase". The first thing to focus on here is "cost reduction", because on the surface, "cost reduction" means "immediate results in the short term after breaking the arm to survive." ". However, companies that take "cost reduction" as their first priority goal often end up in the dilemma of "long-cycle innovation exhaustion", because "increasing efficiency" is the "purpose" in business operations. Just as the so-called "open source and cut expenditure" is not the same as the principle of "reducing expenditure and open source", the first priority of an enterprise should be development at any time.
Efficiency increase and cost reduction refers to the business results of increasing the overall revenue of the enterprise and reducing the cost of unit products through measures such as new technologies and new methods.
Efficiency increase will inevitably reduce cost, cost reduction will not necessarily increase efficiency
The goal of enterprises to implement efficiency increase and cost reduction measures is to improve business performance and achieve high-quality development of the enterprise. Its essence includes:
The overall income of the enterprise increases, and the overall optimization is pursued.
The unit product cost is reduced and the business quality is improved.
Sustainable benefit improvement, adhere to long-term development.
The core competence of the enterprise will be enhanced, and the competitive advantage will be enlarged.
Why "increase efficiency and reduce cost" instead of "reduce cost and increase efficiency"? Before cost reduction, efficiency enhancement is used to emphasize that companies should advocate development thinking and incremental thinking. Through continuous innovation in technology, business, and market, it is the correct path to increase efficiency and reduce costs to enhance the core capabilities of enterprises, increase overall revenue and reduce unit cost of goods. In practical work, if cost reduction is put ahead of efficiency increase, it is easy to orient the work machinery to simply reduce costs, and ignore the active thinking and implementation of various efficiency improvement measures.
The focus of enterprises choosing measures to increase efficiency and reduce costs is the innovation and application of new technologies and new methods in business.
For the unmeasured cost, re-understand the cost of enterprise technology
An in-depth understanding of the nature, composition and classification of enterprise technology costs is the premise of effective cost control. The cost of enterprise technology includes not only the cost of the enterprise's technology department, but also the cost of the enterprise's business department to develop its business through technological capabilities.
The cost of enterprise technology can be disassembled into 8 cost dimensions, among which: IT resource cost, labor cost, data cost and capital cost are directly related to the enterprise technology department and are explicit costs; time cost, opportunity cost, trial and error cost and sunk cost More related to enterprise business, it is a hidden cost that needs to be paid attention to.
IT resource cost: The facility cost used by enterprises to support the construction and operation and maintenance of IT systems, including: hardware cost (server, network and other equipment), software cost (software fee, authorization fee, etc.), computer room cost (data center facilities, electricity fee, etc.) , vacancy fees, etc.), service costs (cloud services, bandwidth services, etc.). The cost of self-built data centers and the use of cloud services are typical IT resource costs. Compared with self-built data centers, cloud services help to reduce the vacancy cost of resources.
Labor cost: The human resource cost invested by the enterprise around IT system construction and operation and maintenance, including: labor cost of system R&D, testing, operation and maintenance, management personnel cost, outsourcing personnel cost, etc. The adoption of new technologies and new methods will help improve human efficiency, reduce the number of personnel, and reduce labor costs.
Data cost: The cost of data collection, analysis and use by enterprises, including data acquisition, processing, analysis and search costs. Through big data, artificial intelligence and other technologies, it analyzes and processes the massive data of enterprises, converts data cost into data value, and realizes data intelligence-driven business development.
Capital cost: The expenses paid by enterprises to raise and use capital, including: capital raising cost and capital occupation cost. By converting IT asset investment expenditures into IT operational expenditures (from CAPEX to OPEX), the need for cash flow is greatly reduced and capital costs are reduced.
Opportunity cost: A firm uses certain resources to produce one commodity, but loses the cost of using these resources to produce other commodities of the highest value. By building an agile and efficient collaborative development platform, it helps to quickly verify multiple business possibilities and reduce opportunity costs.
Time cost: The cost of time used by an enterprise to engage in an activity, that is, the value of opportunities abandoned during that time period. In the ever-changing market environment, time and value creation are inseparable, so separate the time cost from the opportunity cost and focus on it. By introducing new technologies and new methods to reduce time costs, avoid being imitated and surpassed by competitors, and seize the window period of becoming stronger and bigger.
Trial and Error Costs: All the costs incurred by a company in the process of trying different ways to solve a problem. Carrying out business innovation on a mature and stable basic technology platform will help reduce the trial and error cost of new business.
Sunk costs: Costs that have been incurred and cannot be recovered by the enterprise, such as: abandoning the construction of a system in the middle, resulting in the invested cost becoming a sunk cost; the technology and manpower invested in maintaining the old system cannot be reused in the new system, resulting in sunk costs cost. Investing in sustainable technology directions can help reduce sunk costs.
How to use the correct posture to "reduce costs"? Enterprises need to establish a cost structure model from a global perspective. Like peeling an onion, peel off various "appearance problems", "confusing problems", "secondary problems", etc., directly to the "core problem" with the greatest effect; do not fall into the quagmire of partial cost reduction, use "tactics" "Strategic laziness" masks "strategic laziness".
The establishment of business-oriented cost metrics for enterprises will provide guidance for enterprises to increase efficiency and reduce costs, such as: the cost of IT expenditure per user for Internet advertising companies, the IT expenditure cost of a single order for Internet e-commerce companies, and the cost per thousand of Internet short video companies. IT costs for hours of video playback, etc.
02 Entrepreneurship is difficult, and success is not easy: thinking and practice of cost in different stages of enterprise development
"Less detours are the best shortcut to success."
A lot of research and practice show that the "S-shaped curve" theory represents a general law of the development of things. Whether it is the development of products, technologies, markets, or enterprises, they all follow the law of the S-shaped curve, that is, at the beginning, accumulate energy through continuous trial and error to pass the breaking point, and start to grow rapidly until reaching the limit point of the peak. eventually flourished and declined.
The life cycle of the main business of an enterprise is on the S-shaped curve, which can be divided into four stages: entrepreneurship, growth, maturity and decline. The main contradictions faced by the business at each development stage are different, and the strategies for increasing efficiency and reducing costs that match the development stage are also different accordingly. Bringing more high-quality benefits through new technologies and new methods has always been a priority in the strategy of increasing efficiency and reducing costs.
At different stages of growth, enterprises will face a large number of "cost reduction traps" that have no innovative business value. If a large amount of strategic resources are invested in "pseudo-strategic" directions such as "reproducing wheels" and "self-built data centers", it will not only cause a substantial increase in labor costs, time costs, and trial-and-error costs, but also give up its own The "core competitive advantage" of the original marginal cost is gradually reduced. Enterprise management should "resolutely refuse to invest and consume strategic resources in non-strategic directions".
Entrepreneurship stage: the world's martial arts, only "fast" can not be broken
Peter Drucker once said: "Efficiency is more important than efficiency, and what is really indispensable to an enterprise is efficiency, not efficiency."
The so-called "efficiency" has two connotations, one is "increasing efficiency" and the other is "increasing effectiveness", among which: efficiency is "doing things in the right way", while effectiveness is "doing the right thing". Efficiency seeks to save time and optimize paths. Startup management should first think about how to focus on key "efficiency factors" such as "increasing efficiency", how to optimize time costs, and how to reduce trial and error costs.
Enterprises face the reality that funds, technology and personnel are relatively weak in the start-up stage. Survival and development are the main goals of this stage. From the founder's idea to determining the direction, to making a product that is recognized by the market, it requires a combination of technical capabilities that support the business to quickly create value, product capabilities for rapid iterative upgrades, and agile and efficient team organization capabilities.
It is an inevitable choice for enterprises in the entrepreneurial stage to work around "efficiency first". By efficiently completing the verification of business logic, finding the initial target customer group, obtaining project returns and obtaining new financing to support the next development of the enterprise. Business leaders lead the team to put energy and resources into production and marketing activities. On the one hand, they mobilize resources to achieve higher corporate profits and reduce trial and error costs, time costs and capital costs; on the other hand, they only do necessary construction to avoid Consumption of funds and energy such as heavy asset investment and redundant team building.
Starting a business is difficult. According to the statistics of the State Administration for Industry and Commerce, 56% of Chinese enterprises have been in existence for less than five years, with a scale of about 10 million. Through the exploration and accumulation in the entrepreneurial stage, only a few can find the survival method and business development model, and accumulate enough energy to overcome the breaking point. At this time, the enterprise can truly enter the stage of rapid growth.
Entrepreneurship is a race against time, and the efficiency of technological iteration is the development of competitiveness. A company in the domestic long video field attracted a large number of die-hard fans at the beginning of its business by virtue of its excellent content. However, its IDC-based technical architecture has encountered problems such as slow expansion and network attacks, resulting in the inaccessibility of the website for more than 72 hours and business development. damage. The public cloud brings a new option to the enterprise: cloud-native technology ensures business stability and security, and solves the technical obstacles encountered in business development. In the follow-up, the company further uses the data processing and AI products on the cloud to build a search recommendation business, and integrates data intelligence capabilities into products ahead of its peers. Compared with its peers, it reduces the time cost and quickly passes the breakthrough point in the entrepreneurial stage. Rapid growth stage.
Data capability is the competitiveness of the platform, quickly possessing data mining capabilities, and leading entrepreneurs in the same period in terms of operational efficiency. With the competition of platform e-commerce gradually entering the Red Sea area, a vertical e-commerce platform has emerged with new, trendy, cool and dazzling products. While capturing the minds of Gen Z users, it quickly occupied the market and embraced cloud native as management. The best choice for those. The platform relies on cloud native technology to create a search engine that is comparable to the search for top e-commerce products in a short period of time, and quickly achieves revenue in recommendation and advertising scenarios. At the same time, relying on the cloud native big data platform, it has a massive Data analysis ability, mining data value, leading the peers.
Growth stage: rapid growth, dependent on diminishing marginal cost
Jobs once said, "It may be easier to improve 10 times than 10%". High-quality "efficiency increase and cost reduction" is to use innovative technology to achieve "order of magnitude" efficiency improvement to achieve unit cost reduction.
Enterprises have begun to take shape in the growth stage. Based on the product market capability at the start-up stage, the enterprise can realize the marginal cost of user value creation to decrease with the increase of scale through measures such as expanding product lines and increasing the scale of users, thus enabling the rapid growth of the enterprise. Continued technical investment, personnel expansion and market expansion build a positive feedback loop of business profitability and product quality improvement, driving the company on a path of sound development.
Through unremitting efforts, the share and influence of the company's products in the market have continued to expand, and higher requirements have also been placed on product stability and user experience. By mobilizing the internal and external resources of the enterprise to meet these deep-level needs, the quality of products can be improved, such as: the ability to smoothly undertake the access of ultra-large concurrent users, the disaster recovery ability to resist equipment room-level failures, etc., to achieve the ability to separate from competitors gap, so as to firmly seize the historical opportunity period of rapid development of enterprises.
With the continuous growth of the scale of enterprise personnel, the enterprise gradually evolves from a flat organization to a hierarchical organization, so as to meet the higher requirements of business development on organizational capabilities and avoid the occurrence of small horse-drawn carts affecting the development of the enterprise.
Technology iteration lags behind business acceleration, and the shortcomings of self-built technologies will be magnified when supporting business acceleration, limiting business growth. As a travel platform in the second echelon in China, the overall market share is limited, and the technical system is mainly self-developed and self-built. In the face of large-scale failures in the industry, the overflowing traffic peak overwhelmed the travel platform, and its self-built system could not expand rapidly, missed the best window for business development, and paid a huge opportunity cost.
Enhancing system stability and disaster recovery capability will have the effect of decreasing marginal cost in business growth. A local life platform has penetrated into the daily work and life of ordinary people, and it is essential to build a disaster recovery and multi-activity system. The platform initially built a three-site disaster recovery and multi-active system with self-built IDC. In the architectural design, any two central standing resources can carry full-scale services, while daily running only 1/3 of the traffic, each center has nearly 20% of resources redundancy, and the overall IT resource cost is very high. How to improve system reliability and effectively control costs? After the platform uses the public cloud to reconstruct and upgrade the multi-active system of applications in the three places, each center only needs to prepare resources for daily traffic. In disaster recovery scenarios, the elastic capabilities of the public cloud are used to pull up resources to deal with the full amount of business. Compared with the self-built IDC Reduced IT resource costs for redundant resource reserves.
Mobilize internal and external resources to increase system capacity, and business emergencies are no longer a cost black hole for enterprise growth. In the recruitment industry, the annual spring recruiting is a "period" that military strategists must contend for. A leading recruitment platform used to build a self-built IDC to purchase IT resources in large quantities to cope with peak traffic. However, after the end of the spring recruitment, the resource utilization rate dropped and was partially idle. The huge capital cost and resource cost brought great challenges to the operation of the enterprise. In the spring recruitment this year, the platform changed its thinking and turned to the public cloud, and completed business online, stress testing and other work within 10 days. During the spring recruitment period, resources were dynamically adjusted according to the operation situation, and the manpower investment was also reduced by half compared with the self-built IDC. After the Spring Recruitment is over, steady business traffic is retained, and it has the ability to mobilize external resources to increase system capacity, and to control capital and resource costs to the extreme.
Improve the scalability of the system and build sustainable competitiveness for accelerated business growth. The League of Legends Global Finals attracted the attention of billions of players, and a large number of users flooded in on the day of the finals. The level of business is difficult to assess. To ensure stability, a large amount of redundant resources need to be reserved, and these resources are idle at other times of the year. . A leading game live broadcast platform in China solved this problem with the help of the public cloud: it completed the expansion on the cloud a few hours before the event, tracked the popularity of the event at any time, and released resources after the game. The scalability of the live broadcast platform has successfully won more users in the competition with its peers, and reduced the IT cost of supporting the event to 1/10 of the original.
Build the ability to smoothly undertake the access of super-large concurrent users, seize the market and maintain rapid business expansion. The Spring Festival Gala Red Packet interaction is a window of opportunity for the whole people to carry out brand promotion, attract new and active users, and show the company's technical strength and muscles. Due to the ultra-high concurrency and extremely high availability of the Spring Festival Gala Red Packet interaction, a company once invested nearly 100,000 servers and large-scale bandwidth for the temporary purchase and allocation of the Spring Festival Gala Red Packet project, resulting in huge investment in IT resource costs and capital costs. After practice, I found that embracing the public cloud is the best way to interact with the Spring Festival Gala. Another leading interactive entertainment company, it took less than 4 weeks to prepare for the Spring Festival Gala red envelope project. Based on its business deployment in the public cloud, elastic expansion was performed to increase Tb-level bandwidth, hundreds of thousands of core computing resources, and dozens of Tb of CDN. As well as security protection, etc., it successfully completed tens of billions of red envelope interaction activities for the Spring Festival Gala, and achieved short-cycle high resource investment through flexible resource capabilities, achieving high business goals while controlling costs, interpreting the real efficiency increase and cost reduction.
Strictly control the cost per user to ensure the sustainable development of the business. Taking a social media as an example, when hot events such as entertainment and news break out, it will bring more than 10 times the business traffic peak. Increase the cost per user, and because the time and scale of hot events are unpredictable, even if a large amount of resources are reserved, there is still the risk of major failures, which will cause the loss of users and further increase the cost per user. Finally, the enterprise builds a hybrid cloud architecture by , which not only guarantees the ability of the business to undertake large concurrent user access, but also greatly reduces the cost per user, providing a strong guarantee for the sustainable development of the business.
Mature stage: steady development, continuous innovation to establish a competitive threshold
After the enterprise experienced rapid growth, the growth rate began to slow down and entered a mature stage with the most balanced and sufficient development. It has the characteristics of good product quality, large user scale, high organizational efficiency and refined operation. Under the perfect management system, enterprises rely on the growth potential accumulated in the entrepreneurial stage and growth stage, and their business development is pushed to the top. How to keep the enterprise in the mature stage for a long time and avoid the rapid decline of the stage is the biggest challenge faced by the enterprise in the mature stage. Strengthening the innovation ability of the enterprise, digging the product moat, and promoting the refined management are the measures that must be taken.
Enterprises in the mature stage have a full understanding of the market. They can not only launch products that meet the needs of users, but also find potential needs before customers and convert them into core competitiveness of products, so that they have the opportunity to compete with competitors in the market. competition threshold.
Enterprises in the mature stage have the ability to mobilize large-scale resources. However, in order to improve product competitiveness, they are prone to fall into the misunderstanding of large and comprehensive investment. Large and comprehensive investment cannot bring breakthrough results, it will inevitably lead to waste of resources, and will inevitably result in large but not strong results, which will damage the core competitiveness of products; high-intensity investment in the direction of the core competitiveness of enterprises, non-core capabilities Selecting excellent external resources for cooperation is a more efficient and long-term development path to increase efficiency and reduce costs.
With the maturity of the enterprise, the scale expansion will follow. At this stage, by using new technologies and new methods to improve refined management capabilities, it is often possible to better control cost input, increase output per unit cost, and prolong the existence of enterprises in the mature period.
After the business has entered a stable period, new technologies provide a lighter way to help companies expand their boundaries. A well-known digital marketing company built a global marketing platform based on public cloud global infrastructure, avoiding heavy investment in infrastructure. Every time the company starts a business in a new country, the preparation time of IT resources can be controlled within 3 hours. If the business fails to meet expectations, it will choose to release resources and shut down the business, thereby minimizing the trial and error cost of the new business. After fully understanding the characteristics of its own traffic, the company continued to seek the optimal solution in balancing resource specifications and billing models on the cloud, and continued to reduce the IT cost of a single advertisement placement, with an average annual reduction of 20% in the past three years.
With the slowdown in the growth rate of main businesses, it is difficult for mature companies to continue investing in technology in non-main businesses. A leading Internet company has invested a lot of human resources in the self-research of the underlying technology, and has achieved remarkable results in database technology. However, the database technology is far from the main business, and enterprise managers are not very aware of it. With the slowdown of business development, enterprises have reduced their investment in the self-research of underlying technologies, resulting in the loss of core database R&D personnel. The technology that was originally proud of has become a burden to the company in an instant, and problems such as frequent failures and inability to undertake business needs are serious. Affecting business development, the company finally chose to use cloud-native databases to replace self-developed technologies across the board.
Saturate investment in the core goals of mature businesses and build an insurmountable moat. A real-time strategy game ranks among the best among similar games by virtue of its core gameplay and operational strategies. However, the company's management was not satisfied with the status quo, and proposed a "player multiplication plan", and the use of more advanced technology became a necessary condition for the implementation of the plan, and the migration from IDC to the public cloud became a necessary option. After going to the cloud, the new game server startup time has been reduced from 18 days to 30 minutes, and the IT cost of a single player has been reduced by 30%; the preparation time for a market event has been shortened from 15 days before the cloud to 3 days, and the cloud computing power can be used. Real-time analysis and dynamic adjustment of promotion effect. The low cost of opening servers and efficient advertising have brought more players and higher ARPU values to the game, and also made the game firmly occupy the TOP1 position of similar games.
The rock-solid technical stability and the cost control power of excellence make the enterprise run steadily and far. A head interactive entertainment enterprise built its own storage system. After supporting the enterprise through the high-speed growth period, it could not meet the requirements of mature enterprises for stability and refined management. For example, failures such as file loss or unavailability frequently occurred, and serious Business availability is affected; newer machines cannot be used, and data tiered storage cannot be performed, resulting in the inability to implement cost-optimized solutions for enterprises. The company chose to use the public cloud instead of the self-built system: cloud-native storage products ensured stability and improved the SLA by three orders of magnitude; through refined management of data, the hierarchical storage technology was used to greatly optimize storage costs.
Carry out refined management in a quantifiable way, push the operating efficiency of the enterprise to the extreme, and maximize the value of products in the mature stage. The local life business is a business that fluctuates in IT demand on a daily basis. Abnormal weather on a certain day will lead to a surge in the number of orders on that day, which cannot be predicted in advance. Public cloud provides the possibility for such business to finely manage order IT costs. Taking a food delivery platform as an example, its business has typical tidal characteristics in the morning, middle and evening, but it remains stable during other periods of the day, and shrinks rapidly during the early morning hours. The platform holds steady-state resources on the public cloud based on the demand in the early morning. During the daytime, it is adjusted slightly based on real-time data. During the peak period, it uses elasticity to cope with uncertainty. The entire process is completely automated and adjusted based on data, which saves hundreds of millions of dollars in costs every year.
Decline stage: maintaining profitability, organizational change and technological innovation activate new business
The development space of the main business of the enterprise has peaked, but the new business has not yet been able to become a new growth engine; the long-term development of the enterprise has brought about a large and complex organization; under the long-term dominant position in the market, the enterprise has lacked the motivation and determination to change. Under these circumstances, it is easy for enterprises to gradually lose the technical ability and open attitude to grasp the changing trend of the market, which makes the enterprise go from a mature stage to a decline stage.
In the early stage of decline, enterprises still have great market influence and have certain innovation capabilities. If they cannot quickly activate organizational vitality, enterprises will experience low efficiency, low morale, and slow market response. Rapid decline in performance will be inevitable. As a result, if companies can review existing processes and methods and make positive and effective innovations, set scientific and effective goals to activate organizational vitality, they will be able to slow down the process of decline and incubate second-growth curve businesses.
In the declining stage, enterprises meet market demands by introducing new technologies and methods, streamlining organizations, and simplifying processes, so as to improve efficiency and reduce the input cost of unit products, so as to maintain the profitability of the enterprise.
The decline stage also provides a new opportunity for companies to re-emerge. Enterprises make innovations and breakthroughs in new directions by reorganizing internal and external resources, and thoroughly renovate organizational culture, processes and mechanisms that do not adapt to the external environment, and it is possible to seize new development opportunities.
With the help of advanced technology to support downlink business, release resources to invest in innovative direction. Although a national-level product with a DAU of over 100 million has entered a period of decline, it is still the company's largest cash cow business. A 15-person operation and maintenance team maintains the IDC dual-active structure, resulting in a lack of resource support for other innovative products in the company. However, a major natural disaster caused a power outage in computer room A, and computer room B could only carry half of the traffic, causing hundreds of millions of yuan in losses within 10 hours of the emergency repair of computer room A. After the incident, the company decided to establish a multi-active architecture of IDC + public cloud. The new architecture is more stable and easier to maintain. It can carry all traffic with the elasticity of the public cloud. At the same time, the size of the operation and maintenance team has been reduced from 15 to 4. In the follow-up, the company also began to continue to invest more technical resources in the direction of business innovation.
Improve the quality and cost of products in the decline period, and maintain high-quality business development. A well-known domestic media product has a history of 20 years. Due to the typical event-driven characteristics of the use of media products by the public in recent years, the self-built IDC architecture of this product cannot meet the elastic requirements, resulting in multiple downtime accidents. After the enterprise invested a lot of R&D manpower and failed to build its own elastic resource pool, it finally chose to distribute the steady-state business on its own IDC and public cloud. Elastic resource pool. This solution not only significantly optimizes personnel efficiency, but also greatly improves product stability, reducing annual downtime by 95%. The misunderstanding of some enterprises is: when looking at their own costs, they only consider the explicit IT resource costs, ignoring the input of labor costs, trial and error costs and sunk costs; but this well-known media has a good combination of self-research capabilities and external resources, avoiding the inefficient repetitive wheel building, and ensuring the high-quality development of the business.
03 Going through the cycle, sustainable development: thinking and practice of cost development in the second curve of enterprises
Those who can go through the cycle are insisting on long-termism. Only by continuous innovation can we avoid mediocrity and stay ahead.
A complete enterprise life cycle development process follows the S-curve law, that is: starting from entrepreneurship, going through rapid growth to maturity, and finally ending in decline, it is a continuous development process and the "first curve" of enterprise development. How to break the end of the first curve and become a long-lasting enterprise? The second curve principle provides the answer, establishing a second S-shaped curve through business innovation, enabling companies to break free from the constraints of relying on a single business life cycle. By making the second curve business, the enterprise has the ability to cross the development limit of the life cycle of a single product, making it possible for the enterprise to last forever.
When the first curve business is on the rise, the second curve business will be deployed. The coexistence of the two curves enables the business of the first curve to provide time and financial support for the development of the business of the second curve, and can also reduce the trial and error cost and time cost of the enterprise.
Apple used the second curve principle very well. After the success of the Mac computer, it launched the iPod business and succeeded again; when the iPod business quickly occupied the market, it planned to launch the new iPhone business and it was a great success. . Compared with Nokia's mobile phone business, at the peak of its historical performance in 2007, it did not make large-scale investment in the smartphone business, and missed the market window when the smartphone business became the second curve. In the end, Nokia ended up selling the mobile phone business.
Be prepared for danger in times of peace, overcome path dependence and develop new business
The continuous emergence of new technologies and new ideas has promoted the rapid development of modern society. User needs are constantly upgraded in the rapid changes, and the life cycle of new products is also getting shorter and shorter. For the exploration and practice of new business directions, it is necessary to have a new perspective and method, and be particularly vigilant against the path dependence of successful old businesses, including: thinking mode, technology selection, product definition and team organization. Because the methods and paths that have made a company successful in the past not only cannot guarantee the company's continued success, but are also likely to be the biggest obstacle to the development of new businesses.
The business development of the second curve requires a new team to bring new thinking and new methods, openly absorb the advantages of internal and external resources of the enterprise for our use, and support measures such as organizational incentive mechanisms to encourage innovation, overcome the path dependence brought by the inertia of the enterprise, and support new Business breakthrough growth.
The second curve business is started in the rising stage of the enterprise, which helps the second curve business to break down earlier than the arrival of the first curve business limit. In the process, the enterprise trial and error cost, time cost, sunk cost, IT resource cost and capital cost are reduced.
Inert thinking is the biggest obstacle to business innovation. A domestic audio and video company started its business overseas when the domestic business growth slowed down. The company chose to reuse domestic technical solutions to build its own IDC overseas, but it incorrectly estimated the complexity of overseas IDC construction and spent a huge amount of money. , and the delivery schedule is also it seriously affected the development speed of overseas business, and eventually led to a serious imbalance between the input and output of overseas business, and the executives were forced to decide to suspend the continued expansion of overseas business.
Business innovation requires opening the ceiling of imagination. A short video business gave up the domestic self-built model during the overseas trip, and used public cloud resources in different regions around the world to support the rapid trial and error of the business and the rapid growth of the user scale. It seized the time window for the rapid development of overseas short videos and used the lowest The cost and the shortest time helped the product cross the "death gap" in the early stage, and it took two years to complete the top list in the Apple and Google stores.
Accelerate the company's second-curve business development with external forces. After being silent for two years, a well-known game company has created a phenomenal game masterpiece. With its excellent visual effects and game quality, it has quickly gained hundreds of millions of players and billions of dollars in revenue, relying on the global resources of the public cloud. The ability to realize the simultaneous online service of 10,000 servers in five regions around the world with zero failure provides a strong guarantee for the rapid development of the business.
Moving forward with a heavy load, breaking through the darkest moment of new business development
There are not many companies that start to deploy new businesses when the company is in the rising stage, and explore the second curve. Most enterprises are immersed in a state of rapid development and good profit returns. Only when the development of the enterprise begins to decline, do they realize that they need to establish a new business direction and are forced to start exploring new businesses.
At this time, the main business of the enterprise provides continuous resources and time support for the new business. Breakthrough development of new business. Under such circumstances, the new business needs to focus on and make use of the external superior resources of the enterprise, seize market opportunities, and make every effort to break through the darkest moment of new business development, so that the enterprise can be reborn.
It is difficult to break through the siege of development by moving forward with a heavy load. A domestic information platform used to be a leader in the industry. Due to the continuous shrinking of the business in recent years, the size of the technical team has continued to decrease, and there is no manpower to upgrade and iterate on the infrastructure and technical architecture. When a phenomenon-level product is successfully incubated, Users grow at a rate of ten times every day, which has caused a great impact on the self-built infrastructure and technical architecture. Frequent database downtime and unavailability of services have seriously affected the user experience and version iteration speed, resulting in The project missed the best opportunity to break the game quickly.
Pack lightly to get through the darkest moments. A leading social platform has incubated a phenomenon-level product. The innovative AI gameplay of the product has caused viral spread among users. The explosive growth of user scale has brought a lot of GPU resource requirements. The resource reserve of the enterprise cannot carry the business. With the rapid development of cloud computing, in order to shorten the delivery cycle and ensure the business priority while controlling the cost input, it was decided to use public cloud resources to carry the load, which finally successfully guaranteed the rapid development of the business.
04 Summary
Digital capability is already the most important productive force for enterprise development. The level of investment in technology and the method of investment are an important subject that enterprise decision makers must study.
The essence of efficiency increase and cost reduction is the increase of the overall profit of the enterprise, the reduction of the unit product cost, the improvement of sustainable benefits and the enhancement of the core competence of the enterprise. In addition to the explicit costs of IT resource cost, labor cost, data cost, and capital occupation, the technology cost investment of enterprises, the invisible investment of time cost, opportunity cost, trial and error cost and sunk cost are also very important, and comprehensive and comprehensive reduction These costs, and then the improvement of efficiency is the essence of the high-quality development of enterprises.
The technological capabilities represented by cloud computing are increasingly becoming the core of enterprise competitiveness. The technology generation gap between cloud and non-cloud environments is gradually forming. More and more emerging technologies are being developed and deployed on the basis of cloud. The battlefield of innovation must be born in the cloud. Cloud computing is the representative of advanced technology, the most important scientific and technological productivity, a tool to break the technological inertia of enterprises, a new kinetic energy to accelerate enterprises to pass through the development cycle, and a powerful tool for enterprises to achieve comprehensive efficiency improvement and cost reduction.
Compared with the total cost of technology invested by enterprises, especially labor costs, time costs and trial and error costs, cloud can undoubtedly greatly shorten the cycle, while bringing better stability, providing updated technical capabilities and better customer experience. .
Cloud is not an IT strategy for a digital enterprise, but an enterprise-level development strategy. Cloud brings a reduction in comprehensive cost and a substantial increase in cost utilization. In the future, more and more enterprises will evolve into cloud-native enterprises, relying on cloud technology, AI, data and other capabilities to innovate and achieve optimal results. It can promote faster innovation and development of enterprises and promote higher-quality social progress at low cost.
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