creating value for entrepreneurs

Creating ValueMohammad Tawfik

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Creating Value

Mohammad Tawfik

Reference:The Personal MBABy: Josh Kaufman

http://personalmba.com/

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

The value you create can take on one of several diferent forms, but the purpose is always the

same: to make someone else’s life a little bit better.

Roughly defined, a business is a repeatable process that:

1. Creates and delivers something of value . . .

2. That other people want or need . . .

3. At a price they’re willing to pay . . .

4. In a way that satisfies the customer’s needs and expectations . . .

5. So that the business brings in enough profit to make it worthwhile for the owners to continue

operation.

A venture that doesn’t create value for others is a hobby.

A venture that doesn’t attract attention is a flop.

A venture that doesn’t sell the value it creates is a nonproit.

A venture that doesn’t deliver what it promises is a scam.

A venture that doesn’t bring in enough money to keep operating will inevitably close.

The FIVE-PARTS of business

Every business is fundamentally a collection of five Interdependent processes, each of which

flows into the next:

1. Value Creation. Discovering what people need or want, then creating it.

2. Marketing. Attracting attention and building demand for what you’ve created.

3. Sales. Turning prospective customers into paying customers.

4. Value Delivery. Giving your customers what you’ve promised and ensuring that they’re

satisifed.

5. Finance. Bringing in enough money to keep going and make your effort worthwhile.

Don’t go around saying the world owes you a

living. The world owes you nothing, it was here first.

—MARK TWAIN,

AMERICAN NOVELIST

Market matters most; neither a stellar team nor fantastic product will redeem a bad

market.

Markets that don’t exist don’t care how smart you are.

MARC ANDREESSEN, VENTURE CAPITALIST AND

FOUNDER OF NETSCAPE AND NING.COM

What may drive customers to you?

According to Harvard Business School professors Paul

Lawrence and Nitin Nohria, the authors of "Driven: How Human Nature Shapes Our Choices",

all human beings have four Core Human Drives that have

a profound inlfuence on our decisions and actions:

The Drive to Acquire.

The desire to obtain or collect physical objects, as well as immaterial qualities like status, power, and

inlfuence.

Businesses built on the drive to acquire include retailers, investment brokerages, and political

consulting companies.

Companies that promise to make us wealthy, famous, influential, or powerful connect to this

drive.

The Drive to Bond.

The desire to feel valued and loved by forming relationships with others, either platonic or

romantic.

Businesses built on the drive to bond include restaurants, conferences, and dating services.

Companies that promise to make us attractive, well liked, or highly regarded connect to this drive.

The Drive to Learn.

The desire to satisfy our curiosity.

Businesses built on the drive to learn include academic programs, book publishers, and training

workshops.

Companies that promise to make us more knowledgeable or competent connect to this drive.

The Drive to Defend.

The desire to protect ourselves, our loved ones,and our property.

Businesses built on the drive to defend include home alarm systems, insurance products, martial

arts training, and legal services.

Companies that promise to keep us safe, eliminate a problem, or prevent bad things from

happening connect to this drive.

Twelve Standard Forms of Value

Value is not intrinsic; it is not in things. It is within us; it is the way in

which man reacts to the conditions of his environment.

—LUDWIG VON MISES, AUSTRIAN ECONOMIST

1. Product. Create a single tangible item or entity, then sell and deliver it for more than what it cost to

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 beneit 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 predefined 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 predefined period of time equal to the original loan plus a predeined interest

10. Option. Ofer the ability to take a predefined action for a fixed period of time in exchange for a

11. Insurance. Take on the risk of some specific bad thing happening to the policy holder in

exchange for a predefined 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.

The Iteration Cycle is a process you can use to make anything better over time

Iteration has six major steps

WIGWAM method:

1. Watch—What’s happening? What’s working and what’s not?

2. Ideate—What could you improve? What are your options?

3. Guess—Based on what you’ve learned so far, which of your ideas do you think will make the

biggest impact?

4. Which?—Decide which change to make.

5. Act—Actually make the change.

6. Measure—What happened? Was the change positive or negative?

Should you keep the change, or go back to how things were before this iteration?

Feedback

1. Get Feedback from real potential customers instead of friends and family.

Your inner circle typically wants you to succeed and wants to maintain a good relationship with

you, so it’s likely that they’ll unintentionally sugarcoat their Feedback.

For best results, be sure to get plenty of Feedback from people who aren’t personally invested in you

or your project.

2. Ask open-ended questions.

When collecting Feedback, you should be listening more than you talk. Have a few open-

ended questions prepared to give the conversation a bit of structure, but otherwise encourage the other person to do most of the

talking.

Short who/what/when/where/why/how questions typically work best.

Watch what they do, and compare their actions with what they say

3. Steady yourself, and keep calm.

Asking for genuine Feedback (the only useful kind) requires thick skin—no one likes hearing

their baby is ugly.

Try not to get ofended or defensive if someone doesn’t like what you’ve created; they’re doing

you a great service.

4. Take what you hear with a grain of salt.

Even the most discouraging Feedback contains crucial pieces of information that can help you

make your offering better.

The worst response you can get when asking for Feedback isn’t emphatic dislike: it’s total apathy.

If no one seems to care about what you’ve created, you don’t have a viable business idea.

5. Give potential customers the opportunity to preorder.

One of the most important pieces of Feedback you can receive during the iteration process is the

other person’s willingness to actually purchase what you’re creating.

It’s one thing for a person to say that they’d purchase something and quite another for them to be willing to pull out their wallet or credit card and place a real order. You can do this even if the ofer

isn’t ready yet—a tactic called Shadow Testing

Assuming the promised beneits of the ofering are appealing, there are nine common Economic

Values that people typically consider when evaluating a potential purchase. They are:

1. Eficacy—How well does it work?

2. Speed—How quickly does it work?

3. Reliability—Can I depend on it to do what I want?

4. Ease of Use—How much efort does it require?

5. Flexibility—How many things does it do?

6. Status—How does this afect the way others perceive me?

7. Aesthetic Appeal—How attractive or otherwise aesthetically pleasing is it?

8. Emotion—How does it make me feel?

9. Cost—How much do I have to give up to get this?

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