Truman: "As the conclusion of the 'Unit Model' course series, this lesson (Economies of Scale)is the brightest pearl on the crown of Yitang's five-step business analysis framework, and has profoundly influenced the key strategies I have used to run Yitang over the past two years."
Yitang / Complete Five-Step Method System (Key Assumptions + Business Milestones + 5 Advanced Stages of the Five-Step Method + Implementation) The in-depth operating system for Step 2 "Solution / Product Core" + Step 3 "Business Model / Unit Model".
Part A: Product Core (Step 2 of the Five-Step Method)
Core Definition
Product Core = User willing to choose your product's minimum solution.
4 Key Terms:
| Term | Meaning |
|---|---|
| User | Specific to a certain group of people + a specific scenario |
| Willing to choose | Not just usage, but voting with their feet + choosing to pay |
| Minimum | Strip away all non-core elements |
| Solution | The way to solve the user's specific problem |
3 Principles
| Principle | Truman's Reminder |
|---|---|
| Tool Principle | The product core is only a tool for studying product value,not the product itself |
| Layered Principle | All levels of a company can think using the product core framework (SKU / business line / company) |
| Precision Principle | Strive to pursue a state that is neither too big nor too small, just right |
L3-L6 Proficiency Levels
| Level | Course | Capability |
|---|---|---|
| L3 Strip out the minimum core | Practical Exercise 1 | Conscious thinking + stripping |
| L4 Professionally evaluate the core | Practical Exercise 2 | Evaluate strength + find the precise core |
| L5 Rapidly iterate the core | Practical Exercise 3 | Dynamic iteration + repeated verification |
| L6 Fully apply the core | (Future course) | Fully migrate to product / growth / moat decision-making |
Truman's 3 Opening Cases
Chain burger restaurant + Communication module + Braised food shop — How to explore product value in a very fast, agile, and smart way.
(See the original document for specific deductions; the core of all cases is stripping out core conversion rates + value hypotheses + low-cost testing)
Product Core vs Unit Model vs Unit Conversion Rate
产品内核 = 单元模型「价值部分」的关键转化率
↓
影响这个关键转化率的因果关系
↓
价值足够(转化率过关)= 单元模型有信心跑通的「必要条件」
Truman emphasizes:The product core is about stripping out the "core value" part of the business model, verifying it in advance, and avoiding major trial-and-error costs and business failures.
L3 Tool: Product Core Canvas
[用户 + 场景]
↓
[核心问题/任务]
↓
[核心转化率指标]
↓
[影响转化率的关键要素]
↓
[决定性要素 ≈ 产品内核]
L4 Find the precise core
3 Common Misconceptions:
- Too large — Treating the entire product as the core (counting packaging / service / appearance all as part of it)
- Too small — Reducing it to only one feature point (ignoring the compound nature of experience)
- Misaligned — The stripped core is not the real core that influences user choice
L4 Training:
- Verify with extreme user interviews (most loving vs most hating)
- Verify with A/B testing (changes in conversion rate after removing a certain element)
- Verify with price elasticity (whether users still choose it after a 50% price cut / 200% price increase)
L5 Dynamically iterate the core
Core mindset:The product core is not fixed, it must evolve along with users / scenarios / the times.
Iteration Drivers:
- User evolution(From Early Adopters to Late Majority, the required core differs)
- Competitive impact(When competitors have similar cores, you need a new core)
- Emergence of new technologies(AI has changed the possibilities of the core)
- Scenario upgrade(From PC to mobile, the form of the core changes)
Part B: Unit Model (Step 3 of the Five-Step Method)
Core Definition
Unit Model = A minimum operating unit in a business model that can reflect the cost-revenue relationship.
Examples:
- "A cosmetic product" (single SKU model)
- "A food delivery order" (per-order model)
- "One hour of nail service" (per-service model)
- "A gashapon machine" (single-device model)
- "A business district" (single-business-district model)
- "An ad placement order / user" (single customer acquisition model)
Truman:"The unit model is the most important ROI model within a company."
Why learn it
3 typical situations (all lead to losing money)
| Situation | Performance |
|---|---|
| Too many blind spots | Used to looking at overall financial statements, lacking details on per-SKU / per-sales / per-fulfillment / per-business-district performance |
| Hindsight | Charging ahead full steam, only discovering the unit model does not hold up at all when losses are severe |
| Static optimism | Rapidly expanding after good data from 1-2 stores, opening in 15 cities after breaking even at 1 tested school |
Survey data: Over 50% of money-losing cases are caused by incomplete unit models.
6 Proficiency Levels of Unit Models
| Level | Course | Capability |
|---|---|---|
| L1 | (Cognition module) | Know the concept |
| L2 | (Cognition module) | Distinguish the 15 classic blunders |
| L3 Select the core model | Practical Exercise 1 | Find the core unit + replication granularity |
| L4 Build a complete model | Practical Exercise 2 | Identify all key items without omissions |
| L5 Find accurate baseline values | Practical Exercise 3 | Plug in specific data |
| L6 Dynamic prediction model | Practical Exercise 4 | Dynamic tension between economies of scale / diseconomies of scale |
15 Classic Blunders (L2 Required Reading)
(See the original cognition module document for the specific 15 cases. Each is a typical example of losing money caused by missing unit models)
L3 Tool: Top Ten Unit Models
(Specific list to be completed; the core method is to categorize each common business model and match it with the optimal unit granularity)
Truman's one-liner + 3 key words:
"Whichever unit you replicate, count that one; whichever metric is the vaguest, keep a close eye on that one!"
3 Examples (L3):
- Lighting business — Find the core SKU unit
- Southeast Asia shipping containers — Cross-border fulfillment unit
- Shared car rental — Which is the most intangible: vehicles, users, or cities?
L4 Build a complete model (no key items missed)
Unit economics = Revenue - Variable costs - Allocated fixed costs
Complete checklist (using e-commerce SKU as an example):
| Revenue side | Variable cost side | Fixed cost side |
|---|---|---|
| Average order value | Cost of goods sold (BOM) | R&D amortization |
| Repurchase rate | Packaging | Platform fees |
| Return rate (net revenue) | Logistics | Warehouse rent |
| Value-added services | Return losses | Brand advertising |
| Referral rebates | Customer service labor | Team salaries |
| After-sales maintenance |
L4 key focus:Breadth(Identify all key items).
L5 Pin down baseline values (depth)
Core: Plug in real data to make business judgments.
3 types of data sources:
- Industry benchmarks(36Kr / iResearch / financial reports of leading listed companies)
- Comparable competitors(Benchmark against key parameters)
- Own test data(Real values obtained from MVP runs)
Judge 3 questions:
- Should we do it?(Is the unit economics viable?)
- Should we pivot?(If the data is poor, which variable is the root cause?)
- Should we scale?(Is the data replicable? How many cities?)
L6 Dynamic forecasting model — Economies of scale vs Diseconomies of scale
Truman:"This is currently Yitang's most complex chart, summarized in 2021, and is worth 100,000 yuan."
Economies of scale (the bigger, the easier to operate)
Typical factors:
- Network effects (more users → greater value)
- Brand effects (larger scale → higher trust)
- Data flywheel (more data → better algorithms → better experience)
- Supply chain bargaining power (larger batches → lower unit cost)
- Centralized procurement advantage (Walmart)
- Amortization of fixed costs (SaaS)
Diseconomies of scale (the bigger, the harder to operate)
Typical factors:
- Reliance on labor (rising management difficulty)
- Service radius (physical constraints)
- Personalized customization (difficult to standardize)
- Cross-regional coordination costs
- Frontline decision fatigue
- Cultural dilution
Truman L6 chart
[规模经济要素] 左 ← 对抗 → 右 [规模不经济要素]
↓ ↓
规模越大越好做 规模越大越难做
↓ ↓
高集中度 低集中度
Application:
- When designing a business model:Proactively strengthen the left side + Proactively reduce the right side
- When choosing a track:Prioritize businesses with a strong left side + weak right side business
- When adjusting business direction: dynamically optimize the adversarial outcomes on the left and right sides
Related courses
"This diagram contains a large amount of information. If you have not studied Unit Economics L6, be sure to go through it completely twice."
"If you can understand this diagram at once, you will gain much clearer insight when you look at listed companies and companies stuck at the ten to twenty million yuan revenue level."
Related endgame prediction
Yitang / Advanced Business Prediction (Industry Canvas + Concentration + Cases) and the L6 section of this course are two perspectives of the same underlying logic:
单元模型 L6(规模经济 vs 规模不经济)
↓
集中度高 / 低 / 高→低 / 低→高 4 种演化
↓
4 种操盘策略(结束战斗 / 百花齐放 / 赢者通吃 / 早期起步)
III. Candy: Unit Economics Calculation Excel Template
Unit economics calculation template.xlsx — Feishu / Excel universal template, can be copied and used directly.
Fields (typical SKU model example):
| Category | Field | Value | Notes |
|---|---|---|---|
| Revenue | Average order value | ? | |
| Revenue | Number of repeat purchases | ? | Within 12 months |
| Revenue | Net revenue | = Average order value × Number of purchases × (1 - Return rate) | |
| Variable costs | BOM | ? | |
| Variable costs | Logistics | ? | |
| Variable costs | Packaging | ? | |
| Fixed costs | Labor amortization | ? | Monthly salary / Monthly order volume |
| Fixed costs | Platform fees | ? | |
| Profit | = Net revenue - Variable costs - Fixed costs |
How to use:
- Copy the template
- Fill in the key items of your business (L4)
- Fill in actual data or industry benchmark values (L5)
- Calculate unit profit
- Simulate dynamics under scale changes (L6)
IV. Case Collection
Case 1: 40+ cases in the business model candy
(Added in the 2024 second delivery of this course, specific list to be organized)
Case 2: LeKe research (gym unit economics)
Unit economics: 1 LeKe store
Key items:
- Monthly card average order value + Renewal rate + Conversion rate (revenue side)
- Coach class fees + Venue rent + Renovation amortization (cost side)
- Business district covered by a single store + Population density (scale ceiling)
Special points of LeKe:24-hour unattended model → Significantly reduces the "labor" item in diseconomies of scale → There is room for increased concentration.
See also
- Yitang / Complete Five-Step Method System (Key Assumptions + Business Milestones + Five-Step Method 5 Advanced Modules + Implementation) — Complete Five-Step Method system
- Yitang / Complete Demand Analysis System (4 Stages of Decompose-Push-Evaluate-Calculate + JTBD) — Demand analysis (Step 1 of the Five-Step Method)
- Yitang / Advanced Business Prediction (Industry Canvas + Concentration + Cases) — Industry canvas + Concentration (corresponding perspective of L6 economies of scale)
- Yitang / Complete 66-Page Notes on Wang Huiwen's Tsinghua Product Course — Wang Huiwen's Tsinghua course:Scale effect is the gravity of the business world
- Yitang Opportunity Prediction Methodology — Cognitive framework for opportunity prediction
- Yitang / Complete Scientific ROI Decision-Making System (4 main lessons + 5 Candy case collections) — ROI decision system
- Personal memory user_role — Product manager + Entrepreneur
Relationship with existing Skills
This wiki is a deep expansion of yitang-master-business-model (Skill), covering:
- Complete training for Product Core L3-L6
- Complete training for Unit Economics L2-L6
- L6 dynamic adversarial diagram of economies / diseconomies of scale (Yitang's most complex diagram in 2021)
- Excel calculation template