Value Creation Flashcards
Iron Law of the Markets
if you don’t have a large group of people who really want that you have to offer, chances of building a viable business are slim.
Business has five interdependent core processes:
1) Value creation
2) Marketing
3) Sales
4) Value delivery
5) Finance
Economically valuable skills
are those which directly improve one of the core processes of the business.
5 Basic Human Drivers
- Drive to Acquire — Physical objects and immaterial things (status, power, influence)
- Drive to Bond — Desire to feel valued and loved.
- Drive to Learn — Desire to satisfy curiosities.
- Drive to Defend — Desire to feel safe, protect ourselves,
- Drive to feel — Desire for new sensory stimulus, intense emotional experiences,
10 Ways to Evaluate a Market:
- Urgency
- Market Size
- Pricing Potential
- Cost of Customer Acquisition
- Cost of Value Delivery
- Uniqueness of offer
- Speed to market
- Up-front investment
- Upsell potential
- Evergreen potential — how much addtl. work is needed to continue selling after the first sale?
12 Standard Forms of Value
- Product — e.g. toothbrush
- Service —e.g. tax preparation
- Shared Resource — e.g. gyms
- Subscription — e.g. Netflix
- Resale — i.e. Retail stores e.g. Walmart
- Agency — i.e. being an agent to someone e.g. an actor’s agent
- Audience Aggregation — e.g. Facebook
- Loan — e.g. mortgage
- Lease — e.g. car lease
- Option — e.g. movie tickets, licensing rights
- Insurance — e.g. homeowners insurance
- Capital — e.g. angel investing for equity
Hassle Premium
You get to charge to save people “hassle”. This includes projects or tasks that:
- Take too much time
- Take too much effort to ensure a good result
- Involve too much confusion, complexity, or uncertainty
- Distract from other more important priorities
- Require expensive or intimidating prior experience
- Require specialized equipment or resources that are difficult to attain.
→ The more “hassle” you can remove for a customer, the more you can charge in terms of a hassle premium.
Perceived Value
determines how much your customers will be willing to pay for what your offering.
The most valuable offers do one or more of the following:
- Satisfy one or more of a customer’s core human drives
- Have an easy to visualize end-result
- Command the highest hassle premium
- Satisfy the prospect’s status seeking tendency by providing desirable social signals
Modularity (1)
- Rto the individual nature of offerings, like the standard forms of value,
- Which can then be bundled for a premium (higher perceived value)
- Or unbundled to convert prospects who might not have otherwise bought.
Modularity (2)
- Also allows companies to improve and experiment with offerings in isolation and then mix and match them based on customer feedback and response.
Iteration Cycle
- Incremental improvements that prioritize learning and feedback to make decisions on future improvements.
Iteration Cycle (2)
- Watch what’s happening. What’s working and what’s not?
- Come up with ideas of what you can do to improve
- Guess which of your ideas will work best
- Execute on the idea(s) you decide will work best.
- Measure the results of any changes in order to determine effect of changes.
- Decide whether to keep or discard changes.
- Repeat.
Go fast through iteration.
Key is to keep each iteration small, clear and quick, basing each iteration on what you learned from each previous iteration and current data/feedback.
The problem with a direct approach — aka building an end product first —
- you miss all the opportunities to get feedback and find out earlier what is going to work and not in the hands of a consumer. Ends up usually being far more costly and wasteful.
