Posts

This Is Value Entrepreneurship – The Business Method Fueled By Entrepreneurial Economics.

/0 Comments/in /by

Entrepreneurship is the business driver – of revenue and growth, of the customer base and customer loyalty, of innovation, of cost reduction, of everything about business that constitutes success. It’s true of businesses of every scale – every firm must be entrepreneurial to succeed.

Value is the purpose of entrepreneurship. On the Mises Institute Economics For Business (E4B) website you’ll learn deep insights about value – that it’s not a thing but a feeling, that it’s the outcome of a learning process, that you can’t put a price on it, but people will pay for an expectation of value. There’s a lot to learn about value.

Combining the two in Value Entrepreneurship provides you with an understanding and a toolset to pursue new value for customers at every scale, in every firm, via every project, process and job. Value Entrepreneurship is the business system fueled by entrepreneurial economics.

Let’s first examine and prepare for entrepreneurship. Entrepreneurship is action. While MBA programs may focus on strategy and planning and finance, E4B’s alternative approach emphasizes action. Entrepreneurial action can be broken down into two components – the decision to act and the action itself.

The decision is a hypothesis. There is more uncertainty in business than can ever be resolved. You are never certain. The most you can expect is to narrow down your choices of possible actions to a small number. You develop a hypothesis of what could work based on two inputs. First, an analysis of whatever information or data is available to you that tells you something about prevailing market conditions and constraints. And second, the synthesis of your data-based conclusions with your instinct and intuition, your assessment of dynamics and what might change in the future, as well as your creativity and ideas. From analysis and synthesis, you generate hypotheses of all the things you could do that are aligned with your intent, and choose as many of those as you’re capable of implementing – that’s your capacity, which might be governed by available funding, staffing or capital goods such as your AWS service agreement.

With the decision made, you act. Decisions are hypotheses and actions are experiments. The purpose of an experiment is to generate learning. Find out what works and what doesn’t, so that you can do more of what works and abandon what doesn’t. If you run as many experiments as possible, the fittest business strategy will emerge. Complex systems theory refers to this process as explore and expand. That’s what entrepreneurship consists of: exploration followed by expansion.

We learn because action generates interaction – with customers, retailers, markets, competition, media, and the entire business ecosystem. Interaction, in turn, generates a feedback loop. Customers buy or don’t buy. They enjoy their experience, or they don’t. Or, most likely, they partially enjoy it but there are some drawbacks that the entrepreneurial business can respond to and rectify if they can properly gather the right knowledge.

That brings us to the second part of Value Entrepreneurship – the value part. We just referred to the customer’s experience. That’s what value is – an experience, subjectively felt and evaluated by customers. Value is formed and experienced entirely in the customer’s domain. As you’ll appreciate as you enter more deeply into this way of thinking, the customer is the driver of your business. Customers are the sole determinants of business success or failure. They determine what gets produced by buying or not buying – by not buying, they ensure that production stops and business resources are redeployed to new uses. 

Customers are always evaluating, and thereby producing value. They do this from the context of their own system. Let’s take an example of a consumer household and its systems (although we must emphasize that the value entrepreneurship model applies equally to the world of B2B, not just B2C). Let’s take one sub-system: food and nutrition for the family. There’s a system of deciding what to eat and drink, there’s a system of shopping, whether online or offline or both, there’s a system of storage, perhaps involving freezing, refrigeration, and room temperature. There’s a system of preparation and cooking, involving a lot of home appliances. There’s a system of cutlery and place settings, and another for washing these. Taken altogether, it’s a complex system. And it may be continuously changing. What if the family Is becoming more conscious about healthy eating? What if they start substituting lower-calorie foods for higher-calorie versions? What if they start reading ingredient labels? What if they buy more fresh food and less manufactured food? What if they discover new preparations like blenders? 

We can see the physical manifestations of these changing experiences in the market. The periphery of the supermarket where the fresh foods are sold becomes bigger and the center contracts. Healthy cookbooks appear on amazon and social media. Fresh fruit appears in more convenient packaging and new varieties flourish. New brands of healthier crackers and desserts abound.

The point about value is that it is formed in the customer’s system, that system is complex, and it’s always changing. The role of the value entrepreneur is to observe the system, understand the system, fit into this system and make a contribution. It’s possible to identify gaps, maybe gaps the customer is not even aware of. Most importantly, there’s the potential to identify the system the customer will prefer and move to in the future, ideally before they get there themselves. This is value innovation – imagining and inventing the future. Whether in the present or the future, the entrepreneur’s contribution is to help the customer to feel satisfied that they’re making the best choices within their own system. Their system is life, and entrepreneurs help make the system work for them.

Entrepreneurs and entrepreneurial businesses facilitate this feeling of value – make it possible, make it robust, make it repeatable. They are rewarded by customer purchases, and value flows back to the firm as cash flow, to be reinvested in more production and more innovation. The value entrepreneurship loop is continuous. 

175. Curt Carlson: Value Creation as a Life Skill

/0 Comments/in /by

Curt Carlson has devoted his life to value creation and innovation — VC&I as he sometimes characterizes it. He has been CEO of SRI, a “pure innovation” company where the business model was to create important new innovations that positively impacted the lives of many people. Examples of his innovations are Siri (ultimately sold to Apple) and HDTV (the technology that enables the streaming so many people enjoy today).

He started a consulting company called Practice Of Innovation, which established methods of innovation available to everyone and every firm. Now he teaches at University, aiming to develop a new generation of innovators.

He talks to Economics For Business (econ4business.com) about value creation and innovation as a life skill.

Key Takeaways and Actionable Insights

Value Creation is a complex adaptive system.

Value creation is a system of many agents, components, arrangements, technologies, constraints, and unpredictable emergent outcomes. There are a challenging number of variables, and there’s a requirement for highly integrated collaboration and recursive and iterative process, utilizing adaptive feedback loops and continuous readjustment. It’s hard — and quite rare — to get right and easy to get wrong.

The essential element of value creation is the mental model.

The mental model for value creation is solving important and meaningful problems for others. It shouldn’t be about launching a new business or a new technology, but about helping others. And, since people don’t think in terms of “I have a problem to solve,” the value creator must also understand the customer’s mental model. They experience dissatisfactions. They wish things could be better. They make trade-offs. They can’t always articulate what they want. They have to learn what to want, and value creators can help them to understand what they can want in the future.

Mental models are fundamentally important to the creation of value. We all have mental models of the way we’d like the world to work. The value creator is able to identify — “get inside” — others’ mental models and see the world the way others see it. This perspective is vital — the critical first step in the value creation process.

The calculus of value is subjective.

Value can only be defined by the individual who experiences it. Individuals make a mental calculation of value – it might include some numbers and some thoughts, feelings, preferences, and ideas. They are able to make this calculation in their own mind, even though the potential costs and benefits lay in the future.

The dimensions of value are many. When evaluating the purchase of a car, for instance, the price is part of the calculation, but so is the appearance and pride of ownership, the comfort, the gas mileage, the color of the seats, the cost of maintenance, and many, many more features and attributes and functional and emotional benefits.

Despite the difficulty and complexity, people are agile and adept at making this complex calculation. Value creators must be able to appreciate how customers make the subjective calculation — the calculus of value.

The removal of barriers to the experience of value is a good way to create it.

Convenience is often highly valued by customers. It represents the removal of barriers to value – easier to operate, less time taken, less physical or mental effort required. These are all valuable. The iPhone provided a more convenient way to enter data (responsive touch screen versus traditional keypad), and this played a big part in its adoption and success. The mental model is that people want to do things that are easy to do. They don’t want the clumsiness of a tiny keyboard on a phone. They don’t want to read a 20-page user guide for a new piece of software. They don’t want packages that are difficult to open or retail stores that are crowded and hard to shop. Identifying and understanding mental models like these gives skilled value creators their competitive advantage. If barriers are perceived negatively by customers, then create value for them by getting rid of barriers.

A need is not a problem to be solved. A need is a mental model. Reframing is the tool for understanding.

Curt uses the example of the slow elevator in a prestigious office tower. Residents complain. Engineers might try to solve the problem by re-engineering the elevator for greater speed. A value creator would try to identify the mental model of the complainers. That’s reframing. They are annoyed because they feel that their valuable time is being wasted; they’re bored for a few seconds. Understanding this mental model opens up the possibility for new value approaches. Add a digital screen in the elevator with a news feed so that people can use the time to catch up on the latest headlines. Or add a mirror so that they can use the time to check their clothes and hair before going into the meeting.

Most value creation challenges can be better addressed through reframing. In fact, Curt describes his innovation method as “relentless reframing”. The art of value creation is teasing out the customer’s mental model. Do it again and again, back and forth between the value creator and the customer, to get the understanding of the customer’s mental model right.

Value creation is coupled with innovation: VC&I.

The definition of innovation is not just the new idea or new product or new service. It’s the sustainability of any new solution once it’s delivered into the marketplace. Customers use it and prefer it, they pay enough for it to sustain the financial business model, they repeat their purchases and provide supportive comments and assessments. To be truly sustainable, the innovation must appeal to a lot of people, not just a few early adopters. The benefits must be greater than the costs to the user, based initially on their value calculus, and subsequently on their actual experience. And the offering must be better than competition. To get customers to change from a competitive offering, Curt says the degree of superiority must be 2X to 10X.

Curt uses the N-A-B-C process tool as a methodology for innovation teams.

On previous visits to the Economics For Business podcast, Curt has laid out the framework of his N-A-B-C model and how to use it. See our E4B graphic tool (Mises.org/E4B_175_PDF) and the Key Takeaways summary from the podcast #37 (Mises.org/E4E_37).

N = Need: Identifying and understanding the customer’s mental model, and perceiving the world as they perceive it, getting to their perspective of how the world can be improved. This is where relentless reframing applies.

A = Approach: Designing an innovative solution with a sustainable business model. The temptation is always to jump straight to the approach without truly understanding the Need, according to Curt. This always leads to error and requires a pivot.

B>C = Benefits Per Costs: This is the customer’s value calculus, very hard to get right as a result of its multi-dimensionality and combination of qualitative and quantitative measures.

C = Competition: What are the alternatives among which customers are choosing, whether direct or indirect – remembering that not buying anything is an alternative they’ll consider. Overcoming inertia requires a high degree of superiority.

Our econ4business.com toolkit (Mises.org/E4B_175_PDF) includes a full explanation of how to apply this tool.

Value Creation and Innovation is a life skill that can be taught to everyone.

Solving others’ problems is a deeply human activity. We’re all wired to do it for each other, every day. Value creation can be taught to kids of any age in school, and it can become a life skill. It can be taught to people studying any discipline in universities and colleges, from humanities to hard sciences, so that they can apply it in their field. It can be taught in every firm, whatever the line of business.

The resultant life skill is the mental model that life is about solving meaningful problems for others. It’s about understanding and appreciating others’ mental models. Reframing is the tool for gaining this understanding. Value creation is a fundamental capacity for everyone. They can make an impact on society by solving problems that matter.

Additional Resources

“N-A-B-C Innovation Process” (PDF): Mises.org/E4B_175_PDF

Curt Carlson on Innovation Champions: Mises.org/E4E_91

“Answering the Million Dollar Question (Part 1)—How Value Creation Forums Help Create Winning Research Proposals”: Mises.org/E4B_175_Article

Climbing The Value Ladder.

/0 Comments/in /by

Value is the energy that powers the economy and its growth. People relentlessly pursue better experiences in the future than are available to them in the present and their attainment of that future experience is what is meant by the term value. People assess – or e-value-ate – their experiences after the event and decide whether they were valuable to them. They anticipate better experiences in the future, and look for goods and services they believe will be able to bring them that better experience.

It’s because people demand that the future should be better than the past or present that there is any economic activity at all. It’s the reason for innovation. It’s the reason for interest rates. It’s the reason for economic growth. It’s the reason for supply chains and retail stores.

The experience of value is a good feeling. It’s satisfaction. It’s the replacement of one state of well-being for a better one. It’s calmness in place of anxiety and contentment in place of desire. It’s also a never-ending question, because value can always be improved upon and satisfaction can always be higher.

In pursuing success in markets, businesses can improve their prospects if they bear in mind the primacy of experience. Engineers are often wrapped up in products and services features and performance. Sales and marketing often focus on these same elements when making their pitch to customers. But customers don’t want features and performance or even product attributes. They want that experiential feeling of value.

Value propositions and sales pitches will be better when the experiential value is incorporated. Instead of selling today’s features, sell tomorrow’s feeling. “When you select us as your supplier you’ll feel confident in the level of service we provide. All your information requests will be immediately fulfilled, and your customer service rep will always be available. You’ll always feel that we are here, standing by to respond or help, and proactive in bringing you new ideas, and innovations.”

  • A large financial services customer would send e-mail requests to a service provider late at night, and would keep score of how many same-evening responses they received. The providers with the best response scores were graded higher. If you are in the customer service business, it pays to check your e-mail before going to bed!

How can you add more experiential value to your value proposition?

  • Would your potential client enjoy the drawing on the special knowledge level and career experience level of your team? How would they feel in the future to be in a monthly call with your top analysts or top site foremen so as to be able to learn about the latest market conditions, especially in the midst of market turmoil?
  • Is your client frustrated with the service levels or lack of responsiveness of any of their current providers? How can you make them feel like it will be better with your company’s greater commitment to service?
  • Are there any higher values that the client is pursuing above and beyond current functionality and performance? Every client – and every individual at every client – has a ladder of values they are climbing. Have you asked them about it? Do you know their higher value preferences?
www.econ4business.com

Value is always ascendant from lower to higher. Customers seek out the functional value that reassures them that a product or service that is offered “works” for them. Then they can move up to less functional attributes – like style and aesthetics, for example. At a higher level still, they think about the longer-term future: not only how will the product perform now, but how will it fit in with their future plans. Once they believe that there’s a future fit, they’ll think about high values like relationships and ethics. Ultimately, they are seeking a better world, or a more meaningful career; if you and your company and its products can help, you’re contributing to the highest level of value. The best value creators climb the ladder and find the strongest route to the top.

We Crave Value. They Give Us GDP.

/0 Comments/in /by

All human action is purposeful. Those are the words of an economist – Ludwig von Mises – not a preacher. Every one of us has goals we are working towards, many goals at many levels, from achieving lifetime status to getting our kids into a good school, to looking forward to a nice dessert after dinner. 

Economics is the science of achieving our purpose. It’s the science of choosing the right goals and choosing the right ways to achieve those goals. Economists call these ends and means. When we feel like we have chosen appropriate ends and found the right means to get there, we experience value.

Value is what we want. Value is what we crave. Value is a feeling, an experience of satisfaction, especially if the learning process to define good ends and effective means is a long one, a path of challenges and errors. Think of the value of completing a certification in some skill or profession, for example. There’s a lot of work and a lot of time that goes into it. It’s necessary to choose which certification to go for, necessary to sacrifice some things you’d rather be doing than studying or putting in workshop time or practice, it’s necessary to pass an exam or a test of some kind with all the stress and preparation that precedes it. Then you get the certification. That feeling of accomplishment, of pride, of a new pathway opening up in front of you, that’s what the economist calls value.

The purpose of every firm engaged in commerce is to generate value for customers. In reality, it’s the customer that creates the value because only the customer can experience that feeling. No customer, no value. The firm is a helper, a facilitator of value. The firm can produce the means for the customer to choose in order to pursue desired ends.

Value becomes a process – a process of interaction between producer and end-user. The end-user is learning what to want by prioritizing the importance of their own ends, comparing alternatives, weighing up opportunity costs (what would they choose if they didn’t choose this and switched to something else?), and assessing actual value in use compared to what was promised by the producer. The value learning process never stops.

Value seekers are rigorous in their evaluations. They’re willing to take time to get to the point of value. That’s why producers are constantly trying to persuade them to “buy now”, or yelling “offer ends this week” or otherwise trying to generate urgency. Value seekers are willing to save now for the future, when they believe value might be higher (they can buy something more valuable with their savings) even though our hedonistic society seems to assign more importance to immediate gratification. Value seekers are willing to make trade-offs, foregoing even attractive propositions when they are confident in their relative assessments of what’s better for them. There is self-discipline in value-seeking.

The private sector of entrepreneurial firms strives to help customers to realize value. Entrepreneurship can be defined as the creative pursuit of new customer value.

The greatest enemy of value is government. At the base of their anti-value stance is the measurement and pursuit not of value, but of a metric the government publishes under the name of GDP. GDP is the antithesis of value, quantitative not qualitative, numbers not feelings, about prices rather than value and spending rather than value experiences. Because GDP reflects spending, and because governments have justified their intervention into the economic activities of their citizens by expressing the goal to “grow GDP”, they urge us to spend, spend, spend. When we don’t, they “stimulate”, with more government, spending (using money conjured out of thin air) aiming to encourage more personal spending. 

Worsening an already bad arrangement, government aims for inflation: the increase in prices across the board, lowering the purchasing power of every citizen. The result is less value. We buy cheaper food rather than the most healthy or nutritious food. And government encourages the Big Food producers who make the cheap, unhealthy, non-nutritious food, with subsidies (like the never-ending sugar subsidy) and programs like the Food Pyramid, and many more. Because of inflation, people invest less in their human capital of fitness and health; it’s more expensive under conditions of inflation to maintain that gym membership or buy that bike. Same with education, which is getting worse and worse, especially at k-12 level and especially in poorer neighborhoods. The scarce resource of education is assigned by zip code, not by value. In general, the government wants price inflation because it’s more value for them (they value the power they get from the money they print) and less value for us.

We get less value in foods, replaced by more cheapness 

We get less value in gasoline, they get more self-righteousness through “green” energy claims.

We get less value in transportation, via an increasingly bad experience, whether driving or taking public transportation. They get more usage by forcing it on us.

We get less value in medical care, they get more control (which they value highly) through regulation and legislation and cronyism with Big Pharma and Big Insurance.

We get less value in the landscape, and we get water rationing. They get to expand the powers of the Bureau Of Land Management.

We get less value in energy grids that don’t work, and rolling blackouts. They get monopolies they can control and to preach sermons about climate change amelioration.

Governments extract value from their citizens, and from the producers of value who serve citizens. They divert attention from their value extraction by pointing to GDP growth. There’s no need to be fooled. Pay no attention to GDP statistics. Ask yourself, is my life experience improving? Is that of my family? My community? Take your own actions to improve value for yourself. Your own subjective value creation, and value co-creation with the producers who align with your purpose, will guide you. Don’t tolerate value extraction.

Six Superior Characteristics Of The Entrepreneurial Society.

/0 Comments/in /by

We live in a political society. Politicians and the bureaucrats whom they enable hold all the power. Most people despise them.

Why? Because of their role. They exist to argue over the division of the economic pie that others produce. Politicians despise production and elevate themselves over producers. The fact that they behave badly in the performance of their role merely exacerbates the disdain in which they are held; it is not the primary cause.

The producer role is played by entrepreneurs. That’s the economic term for those who monitor what politicians call (but never truly examine) the will of the people: what people want, what they need, what they prefer, how they feel, what pleases them, and what disappoints them. Entrepreneurs gather this information by listening. They process it through their empathy – the skill of imagining what it’s like to feel what others feel – and decide whether there is a business’s opportunity there. That depends on many variables – the intensity of the need, its durability (how long will it last if unfulfilled), the viability of assembling resources and a business plan to produce a good or a service to meet the need, the likelihood of people buying the solution from one entrepreneur versus another.

Collaboration.

There are important human values at work here. There’s collaboration. People need entrepreneurs to find new ways to solve their problems or meet their needs. Entrepreneurs need customers to channel the market rewards they seek to keep their production going. This symbiosis is the essence of the market system, raising everyone’s boat through the collaboration of buying and selling.

Shared emotion.

There’s the animating emotion of wanting. Human beings act in a conscious way to improve their circumstances. They want something better than what they experience in the present. This is the energy that drives civilization all progress. Consumers want need fulfillment. Entrepreneurs want to feel the fulfillment of acting as the solution source. This is how mutual wants come into alignment in society. 

Listening.

There is listening. There is none of that in politics of course. Yet it’s the core informational input into the entrepreneurial process. The first question in that process is, “What do I know?” Entrepreneurs need continuously updated information about the market, about trends, about preferences, about available options, about pricing, about competitors, and about a thousand other things. They get it through listening. It’s a humble mindset – not dictating or declaring or asserting, not jumping to conclusions, not arguing or contradicting, not wishful thinking, just listening. 

Empathy.

And there is the core entrepreneurial skill of empathy. How can we understand what others feel they need to make their lives better? We all have consciousness but we are not gifted with experiencing the consciousness of others. To be an entrepreneur, it’s necessary to overcome that cognitive barrier. How? It’s a mental modeling process. Entrepreneurs build a mental model of how others – customers – think and feel. It’s not their own mental model, so humility again comes into play – the humility of trying to understand and appreciate another’s point of view. It’s a kind of self-sacrifice – sacrificing one’s own ego in order to feel the way another person feels. 

Sacrifice.

In fact, sacrifice is fundamental to successful entrepreneurship. It takes mental sacrifice to understand others’ needs. Then it requires the sacrifice of time and resources in production to design, assemble and produce the goods and services which will become the value proposition to the customer. To serve others with economic offers and innovation is an ethic of devoting one’s present to the future satisfaction of customers. It’s for this sacrifice, when successful in the eyes of the customer, that the entrepreneur is rewarded. 

Value.

The result is an ever-increasing pool of value. In entrepreneurial economics, value is the customer experience that transpires when the offer made by the entrepreneur is successful in making the customer feel better. Value is a feeling, a good feeling. Entrepreneurs aim to generate value – only the customer can actually create it via their own experience. The more value the entrepreneur generates, the better the customer experience and the greater the ultimate reward to the entrepreneur. The mutuality is self-reinforcing. The whole society is raised up.

A Better Society.

Imagine what society would be like if it were entrepreneurial and not political. It would be characterized by the values of collaboration, emotional sharing, listening, empathy and sacrifice. It would be productive, because entrepreneurs always figure out how to generate more value with less input and fewer resources. It would be about a growing pie for all rather than a political fight over the division and redistribution of the pie. The entrepreneurial society would be much superior to the political society. Let’s work to create it.

The New Role Of The Firm is Captured In The 4V’s Business Model.

/0 Comments/in /by

Source code is original writing, describing a system that can be executed by a computer. It’s a facilitating device.

The source code embedded in the research paper Subjective Value In Entrepreneurship by Professors Per Bylund and Mark Packard provides the executable description for a business system and a business model. And it does not require a computer to execute – an entrepreneur can do it.

This particular source code defines a new business model for the firm on two vectors:

  • Redefining value: value is subjective not objective. It exists as a feeling in the mind of the consumer or customer. It has nothing to do with any quantifiable amount whether measured in dollars or some other metric.
  • Redefining the role of the customer: since value is a feeling in their minds, it follows that they, not firms, create value. There is no value without consumption. 

These two redefinitions require a third: the redefinition of the role of the firm. If firms don’t create value, what is their role in value generation?

The firm pursues new economic value on the consumer’s behalf, by identifying potential value, presenting the opportunity for value to the consumer and making it as easy as possible to experience it, and helping the consumer to assess the new experience and make adjustments and improvements if they’re called for.

This new role for the firm can be captured in the 4V’s business model.

V1: Value Scouting

In the past we have classified firms’ contribution to the economy and society in terms of output (what they make or assemble and sell)  or in terms of accounting (revenue and profits). But now we can view them differently through the new lens of how they enable consumers to experience new and increasing value.

Consumers can assess their own value experiences, and they may be able to identify (although not always articulate) those elements of the value experience that are especially valuable, and those that fall short. The genius of the consumer is always to be seeking new and better value experiences, but they don’t always know where to look to find them. They recognize their own dissatisfaction but are not necessarily the ones to source or design a new solution.

In one of his annual CEO letters, Jeff Bezos said this:

It’s critical to ask customers what they want, listen carefully to their answers, and figure out a plan to provide it thoughtfully and quickly (speed matters in business!). No business could thrive without that kind of customer obsession. But it’s also not enough. 

If listening to customers is not enough, what is missing?

The biggest needle movers will be things that customers don’t know to ask for. We must invent on their behalf. We have to tap into our own inner imagination about what’s possible.

This is the essence of the Value Scout role of the modern firm: the capability to identify value potential based in customer needs yet not well-articulated by them. The resource to tap into to accomplish this impossible-sounding task is dissatisfaction. Customers don’t always know what they want, but they do know what they are unhappy about or less than satisfied with. The great economist Ludwig von Mises called this feeling “unease”. It’s non-specific but it’s an open-ended request for help to make things better in some way. 

What’s the entrepreneur’s value solution for unease? Jeff Bezos suggests wandering:

No customer was asking for Echo. This was definitely us wandering. Market research doesn’t help. If you had gone to a customer in 2013 and said “Would you like a black, always-on cylinder in your kitchen about the size of a Pringles can that you can talk to and ask questions, that also turns on your lights and plays music?” I guarantee you they’d have looked at you strangely and said, “No, thank you.”

Since that first-generation Echo, customers have purchased more than 100 million Alexa-enabled devices. 

Another way to think about new value creation opportunities is to stretch the analogy of service. Services are eating the economy. Services represent around 77% OF US GDP and 65% of world GDP. And goods are just a physical embodiment of the services they can help deliver – like the black cylinder in the kitchen that Bezos referred to. 

Why are services so pervasive? It’s reasonable to assume that people crave service. A good thought experiment  is to ask, if people could have more servants, what would they have them do? Alexa is a servant who is always on call, will answer many questions, connect the user to further services, and generally facilitate a more convenient life. A life with servants. The apps on smartphones are like digital servants, and will be more so in the future as they become more intelligent and more digitally augmented. What will we ask them to do for us?

V2: Value Process Facilitation

The second role of the firm today, complementary to the value scout role, is to act as value facilitator.

It’s the consumer / end user who creates value. Firms compete to facilitate the consumer’s act of value creation. To bring the means of experiencing value up to the point where the consumer merely has to say yes to it, to press the button, to make the exchange. Everything else has been done for them in the lowest cost, most convenient, most technologically advanced and most attractively designed manner.

In the Economics For Business entrepreneurial process map, the value facilitation steps are Design and Assembly. Design is the transformation of the imaginary constructs that come from Value Scouting – i.e. an imagined solution to a customer’s unease or dissatisfaction – to a detailed plan for implementation and the assembly of resources to execute and bring the solution to market.

Design is rigorous. Assembly is exacting. Value facilitation requires unflagging effort to remove all barriers, both perceptual and functional, that might impede the customer’s decision to experience a firm’s offering. You can think of it in terms of customer work: how much work do they have to do to avail themselves of your product or service. Is the “servant’ you are providing doing all the work, or leaving some to the potential user? Customers are finding more and more that there are servants and services available to do more and more of the work, so if your offering falls below their emerging standard of convenience, you might meet market resistance.

V3: Value Monitoring

Once the customer has made the decision to experience the service the firm is providing, the firm’s role switches again. Value creation is now entirely in the customer’s hands. The role of the firm is to monitor the experience, and the customer’s assessment of the value of that experience. 

Value monitoring can be quite challenging. Can a representative of your firm be present to observe the consumption experience? If you are operating a sports venue or a theater, or a transportation service or a delivery service, that’s possible. Make sure your employees are trained to observe and report back what they see, and make sure they feel encouraged and rewarded to be accurate observers and reporters. 

If you are operating a website or e-commerce business, you can certainly digitally observe the clicks, time spent browsing, and other behaviors that might constitute part of a value experience. 

These observations are, of course, of behavior, not feelings. Don’t make the mistake of confusing one with the other. To understand feelings of satisfaction or dissatisfaction with the experience, it’s necessary to either ask questions to empathically diagnose customer feelings, or to use inductive reasoning from the behavioral data to translate it into what you think may be the feelings at work, and then find a way to verify your theory with further testing. The connection between behavioral data and feelings is very hard to make. It’s a core skill of entrepreneurial business, and requires effort and continued investment in developing the skill.

V4: Value Agility

The identification of customer feelings about their value experience leads to adjustment of the features of the service and/or of its delivery, or adjustment in value communication so that the customer’s expectations are a closer match for their actual experience. It is the agility of firms as service  providers to adjust rapidly upon the receipt of experiential data from customers and to introduce continuous innovation into the market that marks out the most successful competitors. 

Customers’ value creation never ceases. Their dissatisfaction is never completely eased. They always seek betterment. Value agility matches the customers’ continuous discovery of new needs, and identification of new possibilities, with a flow of new innovation generated in response by the entrepreneurial firm. As many productive resources as possible should be dedicated to agile innovation and as few as possible to maintaining the status quo. 

Value agility is the ultimate commercial proposition.