For founders and business owners, understanding the types of value you can create is crucial. It not only helps you focus your efforts but also guides you in building sustainable, impactful businesses. Below, we dive into 12 forms of value, explaining how to create them, showcasing examples of companies that excelled or faltered, and revealing hidden dangers and tips to overcome them.
1. Product A product is a tangible item created and sold for more than it costs to produce. Successful products meet a real need or solve a problem.
- How to Create: Start by identifying customer pain points and researching what they need but cannot find. Use design thinking to create a prototype, test it with potential customers, and refine it until it aligns with their needs.
- Best Example: Apple’s iPhone revolutionized communication by addressing consumer demand for a compact, powerful smartphone.
- Worst Example: Google Glass failed due to unclear use cases, high cost, and poor public reception.
- Pros: Products are scalable and can generate high margins if successful.
- Cons: They require high upfront costs and careful inventory management.
- Hidden Dangers: Overengineering or investing too much before validating demand.
- Secret Tip: Launch a minimum viable product (MVP) to test the market and iterate quickly based on customer feedback.
2. Service Providing assistance or expertise in exchange for a fee is a service. Personal involvement is often required, making customer satisfaction essential.
- How to Create: Identify a skill, knowledge, or ability you possess that others find valuable. Focus on building relationships and delivering exceptional results.
- Best Example: McKinsey & Company’s consulting services are trusted globally for their strategic expertise.
- Worst Example: Theranos promised groundbreaking healthcare services but failed to deliver, leading to scandal.
- Pros: Services require lower initial investment and offer direct customer engagement.
- Cons: Scaling services can be challenging, as it often requires hiring and training staff.
- Hidden Dangers: Burnout from over-reliance on the founder’s involvement.
- Secret Tip: Develop repeatable processes and train a team to deliver consistent quality.
3. Shared Resource Create a durable asset that multiple people can access for a fee, such as shared office spaces or software platforms.
- How to Create: Focus on resources that solve recurring problems for a target group. For example, co-working spaces address the need for flexible, professional work environments.
- Best Example: WeWork’s initial success in shared office spaces offered startups affordable, flexible options.
- Worst Example: WeWork’s overexpansion and financial mismanagement demonstrated the risks of unchecked growth.
- Pros: Recurring revenue and high utility for users.
- Cons: High initial investment and operational complexity.
- Hidden Dangers: Misjudging demand or overcommitting resources.
- Secret Tip: Start with a small-scale offering and expand only when there is clear demand.
4. Subscription Provide ongoing benefits in exchange for recurring fees, ensuring steady income and customer retention.
- How to Create: Build a subscription model around a product or service that offers consistent, valuable updates or content. Examples include software subscriptions or streaming services.
- Best Example: Netflix consistently attracts subscribers with fresh and engaging content.
- Worst Example: MoviePass’s unsustainable pricing strategy led to bankruptcy.
- Pros: Predictable revenue and enhanced customer loyalty.
- Cons: Maintaining customer interest can be resource-intensive.
- Hidden Dangers: Churn from dissatisfied subscribers or lack of fresh offerings.
- Secret Tip: Regularly update your service or product to provide ongoing value and incentives for loyalty.
5. Resale Purchase an asset at a lower price and sell it at a higher price, relying on sourcing and marketing expertise.
- How to Create: Establish relationships with reliable suppliers and focus on effective marketing to attract customers.
- Best Example: Amazon’s early days as a bookseller showed the power of combining resale with e-commerce.
- Worst Example: Overstocked inventory that doesn’t sell can quickly erode profits.
- Pros: Straightforward business model with potentially high turnover.
- Cons: Susceptibility to price wars and supply chain disruptions.
- Hidden Dangers: Thin profit margins in competitive markets.
- Secret Tip: Use data analytics to optimize pricing and inventory levels.
6. Lease Allow customers to use an asset for a specified period in exchange for a fee, often applied to vehicles, equipment, or real estate.
- How to Create: Invest in durable, high-demand assets and structure attractive lease terms. Ensure maintenance and customer service are top-notch.
- Best Example: Hertz’s car rental services provide accessible travel options worldwide.
- Worst Example: Leasing companies that fail to maintain assets lose customer trust.
- Pros: Generates steady income with lower customer acquisition costs.
- Cons: High maintenance and asset depreciation.
- Hidden Dangers: Underestimating the costs of repairs and replacements.
- Secret Tip: Offer long-term leases with discounts to ensure stable income streams.
7. Agency Market and sell assets or services on behalf of others, earning a percentage of the transaction as commission.
- How to Create: Build a reputation for delivering results and focus on building a strong network of clients and suppliers.
- Best Example: Real estate agencies thrive on connecting buyers and sellers efficiently.
- Worst Example: Agencies with poor communication or lack of expertise fail to retain clients.
- Pros: Low startup costs and high flexibility.
- Cons: Income depends on consistent deal flow.
- Hidden Dangers: Reputation risk from underperforming campaigns.
- Secret Tip: Use case studies and testimonials to demonstrate your value to prospective clients.
8. Audience Aggregation Build a platform that captures the attention of a target group, then monetize access to that audience, usually through advertising.
- How to Create: Develop engaging content that attracts and retains a specific demographic. Social media platforms and blogs often excel at this.
- Best Example: Instagram monetizes its large user base through targeted ads.
- Worst Example: Platforms that fail to moderate content risk losing user trust.
- Pros: High scalability and diverse revenue streams.
- Cons: Dependence on audience engagement and changing algorithms.
- Hidden Dangers: Over-reliance on a single platform for traffic.
- Secret Tip: Diversify revenue streams and create unique content that builds loyalty.
9. Loan Lend money to others and earn interest over a predefined period, requiring careful risk management.
- How to Create: Offer clear terms and conduct thorough assessments of borrower reliability.
- Best Example: PayPal’s small business loans help entrepreneurs thrive while generating interest revenue.
- Worst Example: Predatory lending practices lead to legal issues and reputational harm.
- Pros: Predictable income with defined timelines.
- Cons: Risk of defaults during economic downturns.
- Hidden Dangers: Underestimating repayment risks or market volatility.
- Secret Tip: Create a financial buffer to protect against loan defaults.
10. Option Offer the ability to take a specific action within a set timeframe in exchange for a fee, often seen in financial markets or real estate.
- How to Create: Clearly define terms and ensure flexibility and transparency for users.
- Best Example: Stock options allow employees to benefit from company growth.
- Worst Example: Poorly structured options lead to financial losses or disputes.
- Pros: Offers flexibility with potentially high returns.
- Cons: Complexity and risk.
- Hidden Dangers: Mispricing or mismanaging options.
- Secret Tip: Use data to guide pricing and manage risks effectively.
11. Insurance Take on risk in exchange for regular payments, paying claims only if specific events occur.
- How to Create: Use data and actuarial science to assess risks accurately and set premiums that balance affordability and profitability.
- Best Example: GEICO’s customer-friendly approach builds trust while managing risk effectively.
- Worst Example: Insurers that mishandle claims lose credibility and customers.
- Pros: Stable, recurring revenue.
- Cons: Exposure to large payouts in rare but costly events.
- Hidden Dangers: Underestimating aggregate risk during crises.
- Secret Tip: Diversify risk by covering a wide range of scenarios and customer segments.
12. Capital Invest in a business to earn returns through profits, dividends, or equity appreciation.
- How to Create: Research high-potential businesses or startups. Perform thorough due diligence to assess risks and growth potential.
- Best Example: Sequoia Capital’s early investments in tech giants like Google and Apple yielded extraordinary returns.
- Worst Example: Investing in unproven or overhyped ventures can lead to significant losses.
- Pros: High returns on successful investments.
- Cons: High risk and potential illiquidity.
- Hidden Dangers: Failing to diversify investments across sectors and stages.
- Secret Tip: Balance your portfolio with a mix of high-risk and stable investments.
Conclusion: The Blueprint for Value Creation The 12 forms of value provide a comprehensive guide for founders and business owners to create impactful businesses. Each form has its unique opportunities, challenges, and nuances. By understanding these, you can align your efforts with what customers truly value, navigate potential pitfalls, and build a resilient and thriving enterprise.
