From To B to To C, or from To C to To B? The puzzle of cross-border expansion of Internet giants

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In the past two decades, there has been a global trend in the technology industry: companies operating in the consumer business (To C) generally grow faster and have higher valuations than companies operating in the enterprise business (To B). Among the five technology giants with the largest market capitalization in the United States—Apple, Microsoft, Meta, and Meta, only Microsoft is mainly engaged in enterprise business; IBM, Oracle, SAP and other powerful To B solution companies often have only Internet market value. A fraction of a giant. In fact, the “Internet” in the Web2.0 era is almost the “consumer Internet”.

However, with the penetration rate of mobile Internet reaching its peak and the ceiling of consumer business gradually approaching, most Internet companies have started to operate To B business. In China, companies such as Alibaba, Tencent, and even ByteDance have invested heavily in the “industrial Internet”, although they have not necessarily produced results. In the United States, the leader from To C to To B is Amazon, which has been fighting with Microsoft for many years in the field of cloud computing.

Interestingly, looking at the development trajectories of Microsoft and Amazon, you can find a kind of “similarity” or “mirror”: the former is based on To B, expanding to To C, focusing on games and smart hardware, and the recent acquisition of Activision Blizzard highlights this. Strategy; the latter is based on To C, expands to To B, and focuses on cloud computing. The new generation of CEOs after Jeff Bezos stepped down is from AWS. Can we call it “the same destination”?

So, who has been more efficient and performed better so far? To be fair, it’s Amazon. We only need to pay attention to the following facts to draw the above conclusion:

There are too many differences between consumers and corporate customers: the former is more emotional, has a shorter decision-making cycle, and has extremely high user experience requirements, while the latter is more rational, has a longer decision-making cycle, and does not pay much attention to user experience; the sales system for both is not universal , a brand’s appeal often doesn’t cover both seamlessly. In other words, a “big stupid elephant” can do a good job in corporate business, and even be regarded as stable and reliable by corporate customers; on the consumer side, “big stupid elephant” has almost no merit.

In 2000, the original Xbox game console released by Microsoft was such a “big dumb elephant”: it lacked industrial design, was stupid and thick, and was stuffed with cumbersome standardized hard drives and DVD drives, and even the name was a bit confusing. Such a piece of equipment is very unsuitable to be placed in the living room or living room, and it is difficult to even carry it. This alone is doomed to failure. At that time, Apple was launching one explosive consumer product after another through industrial design, but Microsoft did not learn anything from it; the growth and decline of the two sides in the next ten years has actually been half decided at this moment.

The bulky original Xbox console was stuffed with too many parts

You might retort: ​​”Instead of failing, the Xbox has sold 24 million units, giving Microsoft a great start to its gaming platform business!” Yes, that was paid for with endless pounding - Xbox The price is much lower than the production cost, which leads to a very high price/performance ratio; before the launch of the host, Microsoft FireWire acquired a number of game studios, and bought the exclusive rights of a number of games; the overwhelming advertising and marketing offensive also It shook the entire gaming industry. When the next-generation Xbox 360 console was released, Microsoft not only suffered huge losses again because of excessive costs, but also caused the “three reds of death” vicious failures due to poor quality control. Thanks to a similar mistake made by rival Sony, Microsoft’s losses have been contained to a certain extent, otherwise the Xbox series of consoles may have already ended in the second generation.

In other consumer-grade businesses, Microsoft keeps repeating a vicious cycle: poor product design leads to poor user experience, and it has to spend money (cut prices or buy partners) to solve the problem, and the same problem will be repeated in the next generation of products. appear in. Until there’s no money left to spend, or management is no longer willing to pay, the business shuts down or stalls indefinitely. Such a fate has appeared on Zune music players, Lumia mobile phones, Kinect somatosensory devices, HoloLens VR devices, and almost on the entire Microsoft gaming business.

A large amount of accumulation in enterprise-level business should have given Microsoft a certain technological advantage to constitute a “dimension reduction blow” on the consumer side - this is what many investors have been looking forward to. Unfortunately, enterprise-level business often makes Microsoft carry the burden of history and use the idea of ​​​​making enterprise products to build a consumer product ecosystem, which leads to the tragedy of Windows Phone and Microsoft’s complete withdrawal from the smartphone market.

In 2010, the smartphone market was still in the early stage of development, Android was still in its infancy, and traditional manufacturers such as Nokia failed to launch their own software ecosystems in time; while Microsoft had the accumulation of early mobile operating systems such as Windows CE and Windows Mobile, theoretically capable of The Windows ecosystem realizes the possibility of “unification” between PC and mobile.

However, the short history of Windows Phone (WP) operating system is a history of blood and tears of partners: WP7 abandoned all the application ecology of previous versions, and third-party developers must start from scratch; WP8 does not support the upgrade of most old devices , thus angering third-party hardware vendors and old users who most support WP. In 2015, the WP system was completely revised to Windows Mobile 10, and the entire application ecosystem was restarted again; but there was no difference anyway, because Microsoft had completely lost the competition in the smartphone market.

Interestingly, since Satya Nadella took over as CEO in 2014, Microsoft’s various consumer businesses have seen varying degrees of recovery. Does this mean the new management is better at the consumer business, or a consumer-oriented makeover of the corporate culture? uncertain. There are two more reasonable explanations: First, Microsoft has paid so long for tuition, and it has finally reached a critical point of quantitative change to qualitative change, and it has begun to understand how to serve consumers; second, cloud computing has created huge profits for Microsoft and cash flow, improved team morale, and enabled the consumer business to obtain more resources and more relaxed conditions. If in the next 3-5 years, Microsoft’s various consumer businesses can continue to achieve good results, we can say that its “from To B to To C” expansion has achieved an overall victory.

Conversely, why is Amazon’s expansion from To C to To B so much faster and less expensive? The luck factor is important, and this success may not be broadly guiding – Google and Meta’s expansion of the To B business has been far less efficient. However, Amazon’s success still has a lot to learn, the core driving force of which can be called “the natural vitality of consumer Internet companies”.

Consumer Internet is a business with the lowest marginal cost and the highest scale effect and network effect in human history. Therefore, consumer Internet companies must be “fast companies” and attach great importance to the efficiency of product iteration and customer service in order to survive in the competition. It must be pointed out that enterprise-level business does not necessarily require a “fast company”, and many enterprise customers value stability far more than efficiency. However, in the new field of cloud computing, rapid response means formulating technical standards, mastering the right to speak, and shaping customer usage habits.

In the summer of 2003, AWS director Andy Jassy put forward the initial concept of cloud computing, and in 2005, it took less than two years to test AWS basic cloud services in a small range; The capabilities of the “computation” trinity are fully formed. It is hard for us to imagine that any company outside the consumer Internet industry can achieve such high efficiency in such an important business!

Strictly speaking, Google’s expansion efficiency in cloud computing business is not low: announced in 2008, began to provide storage services in 2010, began to provide computing services in 2012-13, and has been stable in the global public cloud IaaS & PaaS market since 2016 the top three. In contrast, IBM only entered cloud services through acquisitions in 2013, and Oracle did not provide public cloud services until 2016; the slow response speed made the two traditional software giants permanently lose the opportunity to lead the cloud computing market . The situation is similar in China, where Alibaba was the first to embrace the cloud computing trend, followed by Tencent; among traditional information technology companies, only Huawei responded in a timely manner.

Thinking from another angle, the reason why consumer Internet companies are more efficient is not only due to the characteristics of the industry itself, but also because of the development stage of the enterprise. Back then, when Microsoft and Oracle were founded, they used to be “fast companies”. famous! In the initial stage of any enterprise, the organizational structure is always relatively flat, the management is always aware of crisis, and the internal friction of the department is not too serious. As an organization expands, bureaucracy inevitably arises, and management and early employees gradually become complacent and path-dependent. Will the Internet industry in twenty years be as inefficient as today’s traditional software industry? Maybe not twenty years?

AWS claims that it succeeds because it can serve its customers better, and it boils down to what Jeff Bezos calls a “day-one mindset”: focus on the customer, avoid bureaucracy, incubate new capabilities, and embrace without fear of failure , flexible organizational structure, based on small creative teams, prioritizing long-term value over short-term value, etc. Is the above “day one thinking” specific to Amazon? Obviously not. Any startup will probably have a “day one mindset” at the initial stage of success; as the organizational structure expands, it will inevitably shift to a “second day mindset.” In fact, many Amazon employees are also complaining about the bureaucracy and the organization is not functioning well, and similar complaints may increase in the future.

In China, many investors have desperately advocated that “new generation companies” such as ByteDance, Pinduoduo, and Kuaishou have superb execution or organizational efficiency, far stronger than “previous generation giants” such as Tencent, Alibaba, and Baidu; The brutal storms of 2021 have shattered half of the above myths. Even if the myth were true, it’s not hard to explain that a 10-year-old company is more organizationally efficient than a 20-year-old company, and the former is likely to have all the troubles of the latter.

The “Amazon Day One Thinking” by Jeff Bezos

Having said that, we cannot completely use “different stages of development” to explain the efficiency differences between enterprises. Among the five tech giants, Apple and Microsoft were founded in the 1970s, Amazon and Alphabet were founded in the 1990s, and Meta was founded in the 2000s; however, we cannot see that Meta is organized more efficiently than Amazon or Apple. In a nutshell, age is just one of many variables that affect a business’ efficiency. Consumer Internet is the fastest-growing and most volatile industry in the past two decades, and companies in this industry will of course receive a certain “efficiency bonus”. As for which industry will get the “efficiency bonus” next, that’s beyond the scope of this article.

It is worth emphasizing that efficiency or responsiveness are never the only things that make or break business competition. Whether in the consumer or enterprise market, customers sometimes prefer rapid product iterations and are willing to accept the defects of new products; sometimes they prefer “slower but more stable” products, and even pay a premium for them. However, in most cases, it is relatively easy for a “fast company” to slow down, and a “slow company” to increase the speed is more difficult. Perhaps this can explain to a certain extent why the expansion from the To C business to the To B business is slightly easier than the reverse expansion.