Comprehending value creation

What precisely do you mean by value and how do you calculate it right? How do you ascertain value based on your customers’ perceptions and expectations? And how do you then create this value? Let’s look at a few basic steps to understand what value creation precisely means and also how do we work towards developing it.

What is of value to the client or a customer?

To begin with, understand your target group and then understand as to what they are primarily looking for - equivalent returns or is it savings on the cost of the product? Or is it more about the product that meets their immediate requirements? And then look at what is of value to your business.

Value creation also means that besides understanding your customers’ needs, you also need to know what shall work or not work for your business model.

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A business is the value it creates

Market analysis and product life cycle –

Assess and study the market that your product caters to, look into the problem that needs to be solved in the space. It is never about the market size; it is about providing the required solution to fill in an existing gap. Now invest in the research and development of a minimum viable product, and once it is ready, test it.

Always test the product first, take the necessary feedback, make the changes based on the feedback before introducing the product in the market.

Do not build the entire product and then launch it, work on it in stages, understand your customer life cycle and then slowly and gradually build upon it.

Evaluating margins and profitability

The initial period of the company should always be about growth and not about the profit. In fact, all the profit earned in the first few stages should be invested back in the business; the primary focus should be on the unit economics – growing from 10 customers to 100 customers to one million, and on the investment required for it.

Unless you are a traditional business where the business plan is concentrated on selling the product at a relatively comfortable margin, and on basic organic growth.

Maintaining consistency and developing a foresight

Once your business has developed a concrete base and reached a certain level of measured success, hire a robust product, marketing and sales teams to support you to advance at a rapid pace. Once this is in place, work towards raising a round of funds; when you are confident about your business structure, you will need the monetary investments to help you further broaden your horizon.

A round of investment, besides giving you a financial backing shall also give you an add on credibility that shall help diversify at a much swifter pace.

Create room for exigencies

The pandemic has forced us to create a room for unprecedented occurrences. This will be in the form of a plan B which could be having a second business strategy in place or doing a necessary pivot subjected to the circumstances.

Or a safer way to go about this is having a nest in place from the beginning, a fund that you could dip into during emergencies; this will definitely help you to sustain if not grow during a challenging phase, without having to make a critical decision with long term consequences.

On a parallel note, value creation also has a hierarchy – employees, customers, competitors. If you have proficient employees, you will be able to create the right product and deliver the right value which shall lead to the provision of all your customers’ needs and expectations.

This will help you grow faster, leading to not just meeting your competitors at an equal level but also outgrowing them, hence leading to constant growth in numerous ways. So, to summarise this - understand, analyse, evaluate, build, sustain, and grow!