This article is from netease Cloud community
Author: Li Chao
Supply chains have been used in manufacturing since few people knew what the Internet was. In my first few years as an Internet product manager, I never heard the word “supply chain” in the community. The concept is that controlling the flow from suppliers to users through value-added processes and distribution channels is a supply chain, which begins at the source of supply and ends at the end of consumption.
And related to the term “supply chain” and “value chain”, also is the origin of the supply chain, is an American scholar named MIchael Porter in 1985, the first to contact the whole value activities of an enterprise as a whole, from the production research and development, logistics, procurement, storage, such as formation of interlocking chain, the enterprise must consider the overall efficiency, Only then can we finally improve production capacity and reduce costs. This is similar to the ecological food chain, in the “grass-rabbit-wolf-lion” chain, if we kill all the rabbits, then the grass will grow wild, wolves will starve to death because of the extinction of rabbits.
When considering low supply chain costs, “product complexity” is the deciding rabbit. When the product itself is complex, the supply chain corresponding to it is also complex, resulting in an increase in overall costs.
It has always been popular to say that “everyone is a product manager”, but in fact, “products are everywhere”. If products are products, there will be suppliers. From production to transportation, or from production to service, suppliers at different nodes form a chain.
Education and training products are no exception to their supply chain, so through the mature theory of “supply chain management”, in terms of cost control, it can be instructive to the education and training industry.
1. Price is determined by market, cost by complexity
In the field of fierce competition, enterprises have less pricing power, and the one who can win the market is usually the one who does good cost control, which is in essence the strength of supply chain management. From the perspective of supply chain management, unit cost is driven by batch and variety. The larger the batch, the lower the unit cost. The more varieties, the higher the unit cost. This theory has been tried in several industries:
Case 1- Chinese Restaurant in Silicon Valley
This is on the menu of one of the many Chinese restaurants in Silicon Valley that close in less than six months. The restaurant seats up to 30 people, two or three runners and two or three chefs, but the menu is terrifying: Routine and more than 120 kinds of characteristics, choose three, $18 (that is, the equivalent of 100 yuan), the price in most parts of China is very cheap, a lot of weight a plate of dish, a paunchy americans almost a dish can also eat, exiguous in silicon valley, this place, how cheap it is. But there are a lot of people doing it, and everyone is selling like this, so we have to set a very low price.
Case 2- Rise and fall of “Pony Crossing the River” in Education and Training Institutions
In 2013, pony Crossing the River was the largest institution in Beijing besides New Oriental in terms of revenue from 1 to 1 training. Its founders are two former Presidents of New Oriental, who trained more than 1,000 New Oriental teachers. When they started their own business, they received a large amount of investment. From 2011 to 2013, xiao Ma’s revenue doubled year by year, with the unit price reaching tens of thousands of yuan.
But as online education took off, Mr. Ma bet on online products, developing more than 100 apps and rapidly expanding to more than 900 employees, more than 200 of them in the technology development team. At the same time, low-price products are frequently launched to attract more students, but these students are difficult to transform into 1-to-1 core high-end users.
Eventually, they went bankrupt because they were insolvent.
Although these two cases belong to different industries, they have two common characteristics: there are many kinds of products and low prices, which are determined by the market, while “more” which cannot add value to the enterprise can only play a negative role.
What kind of product can be replicated in large quantities from a single variety to create economies of scale?
The answer is: standardized products, so when we think about lower complexity, we can start by asking the question of whether we want to make products of scale and cost reduction that can be standardized.
2. What is the core product of the education and training industry that has scale advantage
(1) Teachers?
We can see that in the past 20 years at least, almost all education and training institutions have followed the path of development oriented by famous teachers. Who can master teacher resources, who can get students. In such a market context, the core product of the education and training industry is actually teachers. As a product, as well as a person, a teacher has a characteristic: everyone’s lectures are different, even if they speak the same content, they will speak at different levels. Such products, we call “non-standard products”, non-standard costs have several characteristics:
First, marginal costs are jagged. For a general product, when its scale keeps expanding, its unit cost will show a downward trend (although the marginal cost of management increases with the expansion of scale, its production and marketing costs decrease with the expansion of scale). But when the teacher is a product, it does not conform to this law. For example, if an institution wants to recruit students, it first cultivates a famous teacher. In order to expand the scale of the organization, it is necessary to train another famous teacher and do another round of marketing for the new teacher. The total marginal cost will not decrease with the expansion of the scale.
Secondly, the high cost of trial and error leads to the high cost of enrollment, because each teacher is different, students need to spend more time to choose the teacher, and then register.
On these two grounds, economies of scale are hard to achieve when the core product is the teacher.
(2) Courses?
The course needs teachers. If teachers are non-standard products, can the course be standardized?
The answer is: yes.
When the product is a teacher, the pursuit is the difference between teachers, but when the product is a course, the style of play becomes the pursuit of consistency of teachers. The course itself becomes a team effort. A course is no longer entirely dependent on the teacher to prepare the lesson, explain and refine the teaching style. Teachers may only be responsible for part of the course content. For example, some teaching and research teams will make all the course content and teaching methods into standards, and then recruit teachers to conduct consistent classroom interpretation after unified training.
Under such a mechanism, the quality and content of a class are not directly related to the teacher’s level and teaching preference. If it is necessary to expand the scale, recruit new teachers and carry out the same training on the job, it is cheaper than training a famous teacher. In comparison, if you want to make a scale, it is indeed more feasible to take courses as the core product.
(3) Service?
In addition to standardized courses, the service also includes a series of services and concerns about after-class tutoring, learning attitude and status of students. As we have said in the course, it is possible to standardize services. Although it is not easy to achieve service standardization, there have been successful routines, such as defining service content, service mode and language. In the teaching and training industry, after-school tutoring is the most common service. The popular “two-teacher model” (one is in charge of online teaching and the other is in charge of after-school tutoring) is an attempt to standardize the service.
For example, the maternal and child organization “Fruit of Love” has done a good job in service standardization. It has a mature training mechanism for matrons, which disintegrates matrons’ work into service items, and each service item has gone through unified training and examination. In the family to provide maternity care services, maternity care every day to do work, the organization has a unified work list for follow-up management. Because the service can be standardized, the fruit of love does not provide interview, a large number of good reputation in the community formed a resonance, so that the agency grew up quickly.
To sum up, courses and services can become standardized products of education and training institutions, so they can be selected as core products if they want to do large-scale business. But if you choose only one of them, which one is more suitable for core products, courses or services?
My advice: serve.
What is the core product? Ask the parents what they are buying. Only the products that are closer to the fundamental purpose of parents’ purchase can make parents’ decision to buy more quickly, which is the essence of reducing the cost of enrollment. When the enrollment cost is small, the enrollment number can grow more rapidly. Under the premise of product standardization, such rapid growth can finally form economies of scale.
What are parents buying? On the surface, it looks like a famous teacher or service, but the fundamental motivation is to improve students’ grades or grow. Teach culture industry due to the nature of “accounting settlement, slow carry forward”, parents often need to one-time pay for a semester or even half a year’s tuition, this will have a problem: when parents pay, do not know whether the students can get promoted because of these courses, then support parents to pay for direct motivation is “trust”. Products that are closer to what parents want are more likely to be trusted.
The service is “a series of services centering on the improvement of students’ scores”. Compared with only selling courses, adding after-school services is more guaranteed for the improvement of students’ scores. Therefore, service is more suitable as the core product of education and training products.
3. The attempt of standardized curriculum
At present, many organizations have realized the importance of standardized curriculum, but the specific methods are still being explored. I will also list a few industry attempts:
[New Oriental — Class Mode] The English course will be divided into listening, speaking, reading, writing and other links, and different teachers will teach different links. The characteristic of this method is that each teacher is not liked by more than 60% of students, and students are not dependent on teachers. However, due to the competition of co-teaching the same group of students, multiple teachers will constantly improve their teaching level, and the last several parts of the class can maintain a relatively consistent level.
[Xueresi-Unified Teaching and Research] The teaching and research team will make unified planning of the teaching content and methods to form standardized classroom products, and then recruit teachers for unified training and relatively consistent teaching deduction.
[Xueda – Standardized sales of speech] Not to promote teachers, but standardized classroom products to recommend speech, teachers also have a standardized framework for constraints.
In general, the main way to try to standardize the curriculum is to change the curriculum from a single person to a team work, so as to reduce the differentiation and importance of teachers.
4. Summarize the reduction of complexity from supply chain to education and training products
According to the concept of supply chain, the reduction of product complexity needs to be simplified from three aspects: product line, product model and accessories. What are they when it comes to education and training products?
(1) Product line is equivalent to service line category. More than 100 APPS in the example of “crossing the river with a pony” mentioned in the article are equivalent to more than 100 product lines. Startups tend to “put Apple in different baskets,” but when it comes to getting bigger and stronger, they end up running only a few core product lines for the long term. (It took a lot of product line cuts and a famous product line cross for Jobs to turn around a moribund Apple.)
(2) The product model is equivalent to the teaching level of the teacher. If there are different levels of teaching in an institution, which is equivalent to different types of courses, students need to make repeated auditions to confirm that the right teacher is available.
(3) Accessories are equivalent to education and training services. We provide services, not to make him feel “comprehensive service”, but to improve students’ performance or growth as the goal, otherwise even if the investment of a lot of costs to provide services, if the structure is still ineffective, eventually parents will not renew the fee. And “renewal rate” is the main research point to evaluate whether the education and training products are reliable. A education and training institution with low renewal rate is doomed to decline. The solution is to provide key services that affect the learning effect, which needs to be solved by education and training institutions according to user positioning and continuous attempts.
To sum up, in product management, we should strive for small and beautiful, so as to reduce the overall operating cost. And by “small,” I don’t mean a niche market, but a reduction in the complexity of product lines, product models, and accessories. As long as such “small”, can make scale.
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