VALUE CREATION

“Make something people want... There’s nothing more valuable than an unmet need that is just becoming fixable. If you find something broken that you can fix for a lot of people, you’ve found a gold mine.”

Paul Graham, founder of Y Combinator, venture capitalist and essayist at paulgraham.com

 

Every successful business creates something of value. The world is full of opportunities to make other people’s lives better in some way, and your job as a businessperson is to identify things that people don’t have enough of, then find a way to provide it.

The value you create can take on one of several different forms, but the purpose is always the same: to make someone else’s life a little bit better.

Without Value-Creation, a business can’t exist — you can’t transact with others unless you first have something to trade. The best businesses in the world are the ones that create the most value for other people.

Some businesses thrive by providing a little value to many, and others focus on providing a lot of value to only a few people. Regardless, the more real value you create for other people, the better your business will be and the more prosperous you’ll become.

Source: The Personal MBA by Josh Kaufman https://personalmba.com/value-creation/

I. ELEMENTS OF VALUE

Main material:

Elements of Value-Interactive

Secondary material:

https://hbr.org/2016/09/the-elements-of-value

II. THE CRUSADER AND THE MERCENARY RULES

The Mercenary Rule

Here’s the Mercenary Rule: don’t start a business for the money alone because it always takes more effort than you first expect.

Building or finishing anything is mostly a matter of starting over and over again, so you should find a market that interests you enough to work on it every day.

Don’t ignore “boring” businesses - if you can find something that interests you, those markets can be very attractive.

Questions:

• How interested are you in the market you’re evaluating?
• Does your mind return to the market of its own accord, or do you have to push yourself to work on it?
• How can you make the market more interesting?

Source: https://personalmba.com/mercenary-rule/

The Crusader Rule

The Crusader Rule is a reminder to evaluate new business ideas before you proceed. There’s huge difference between an interesting idea and a solid business. Remember: you have to be able to pay the bills!

It’s crucial to be objective and analyze the idea before committing to it. This is where the 10 Ways to Evaluate the Market can help you.

Questions:

• Is your idea really a viable business, or would it make a better side project?
• Are you prone to getting excited about a new idea without evaluating how attractive it really is?

Source: https://personalmba.com/crusader-rule/

III. HASSLE PREMIUM

People are almost always willing to pay for things that they believe are too much of a pain to take care of themselves. Where there’s a hassle, there’s a business opportunity: the Hassle Premium.

The more hassle a project or task involves, the more people are generally willing to pay for an easy solution, or pay someone to complete the job on their behalf.

Questions:

• Where is the hassle for your prospect or customer?
• What can you do to eliminate that hassle?

Source: https://personalmba.com/hassle-premium/

IV. TWELVE STANDARD FORMS OF VALUE

To provide value to another person, it must take on a form that they are willing to pay for. Economic Value usually takes one of the following 12 Standard Forms of Value:

1. Product - Create a single tangible item or entity, then sell and deliver it for more than what it cost to make.
2. Service - Provide help or assistance then charge a fee for the benefits rendered.
3. Shared Resource - Create a durable asset that can be used by many people, then charge for access.
4. Subscription - Offer a benefit on an ongoing basis, and charge a recurring fee.
5. Resale - Acquire an asset from a wholesaler, then sell that asset to a retail buyer at a higher price.
6. Lease - Acquire an asset, then allow another person to use that asset for a pre-defined amount of time in exchange for a fee.
7. Agency - Market and sell an asset or service you don’t own on behalf of a third-party, then collect a percentage of the transaction price as a fee.
8. Audience Aggregation - Get the attention of a group of people with certain characteristics, then sell access in the form of advertising to another business looking to reach that audience.
9. Loan - Lend a certain amount of money, then collect payments over a pre-defined period of time equal to the original loan plus a pre-defined interest rate.
10. Option - Offer the ability to take a pre-defined action for a fixed period of time in exchange for a fee.
11. Insurance - Take on the risk of some specific bad thing happening to the policy holder in exchange for a pre-defined series of payments, then pay out claims only when the bad thing actually happens.
12. Capital - Purchase an ownership stake in a business, then collect a corresponding portion of the profit as a one-time payout or ongoing dividend.

Question: 

• Which forms of value make the most sense for your market?
• Are there any forms of value you haven’t yet considered for your market? What might those offers look like?

Source: https://personalmba.com/12-standard-forms-of-value/

V. VALUE PROPOSITION CANVAS

Main Material:

https://www.b2binternational.com/research/methods/faq/what-is-the-value-proposition-canvas/

Notes:

1. Start with creating a customer profile

2. Identify your customers' jobs. Categorize the jobs into three: functional, emotional and social.

3. To identify the pains, ask what is preventing your customers from fulfilling their jobs?

4. To identify the gains, ask what will your customers expect when they fulfill their jobs.