a strategist must learn to be a value creator that means you know what value is and how to create it at a fundamental level value is created when a problem is solved solving bigger and more complex problems and you will create greater value in this video I'll show you three ways you can think of value so you can develop an edge in your business and grow it in the long run one the economic value value as defined by the school of Economics is the maximum price uh or amount of money that someone is willing to pay for a good or service what's important in this concept is that value is tied to making choices which is fundamental in strategy where you have to make a combined set of choices economic value occurs when someone is willing to give up spending their money on one thing in favor of spending uh on your product or service it's an allocation of limited finite resources of an individual to your offer therefore economic value can be measured by the most someone is willing to give uh to buy the thing that you sell here the value is the max an individual is willing to pay for your product and is commonly referred to as willingness to pay this is the reason that price increases can only take you so far you hit a ceiling on someone's willingness to pay at some point you need to add more benefits to the existing product or create a new product and therefore new value by solving more problems two the value stick the value stick concept was developed by f Felix over Hol zeg Felix's underlying principle is that companies that achieve enduring financial success create substantial value for their customers their employees or their suppliers value creation is defined as a difference between a customer's willingness to pay and the supplier or employes willingness to sell the difference between the willingness to pay and the willingness to sell is the length of the value stick willingness to sell is at the bottom of the stick and it relates to the least supplier is willing to sell and willingness to pay is at the top of the stick and relates to the most a customer is willing to pay this means that there's only two ways a business can create value which is by one increasing the willingness to pay for a customer and two lowering the willing to sell uh for a supplier and employee willingness to pay is driven by things like product inovation and network effects and improve how much a customer pays on the other hand willing to sell is your by things like employee happiness input Supply costs and productivity this means when you think about how to grow your business you have to ask the questions what will help me sell more how can I attract the best talent how can I partner with my suppliers and improve efficiency a value focused leader looks at every strategic move through the lens of value creation this means you will only pursue an idea if it has a meaningful impact on willingness to pay or willingness to sell three the value equation more popular in recent years is Alex Hero's concept of the value equation which he describes in his book $100 million offers he distills the concept of value into a literal equation which is value equals dream outcome times perceived likelihood of achievement divided by time delay times effort so let's take a look at each of these four component parts dream outcome which you want to increase is the deeper feeling or experience that a prospect has envisioned in their mind for example your dream outcome is Financial Freedom so that you can work from anywhere at your own time perceive likelihood of achievement which is something you also want to increase is How likely you feel you will get the result if you buy this particular product or service and it represents your level of certainty for example you're confident this person will help you get Financial Freedom because they did it before or they helped others like you do the same time delay which is something you want to decrease is a time between a customer buying and receiving the promised benefit which means the shorter the time the higher the value of your product the Nuance here is that it may take a long time to get the outcome but you can introduce short-term wins uh along the way to make the journey itself feel good for example if the product or service will help you create Financial Freedom in 12 months uh you will still value it because every month you'll see tangible progress like uh a product launch and your initial set of customers and the testimonials to give you effort which you want to decrease is the work the customer needs to do to get the dream outcome which means if it makes things easy for the customer then the value of your product is higher for example if you want to create a new side hustle you might end up paying more for one-on-one coaching will help tailor advice to your specific situation versus maybe a self-paced course which you have to figure it out yourself the value equation gives us four levers we can use to improve our value for our customers such that if you do all four together you can create um massive value and therefore charge higher prices this creates uh win-win situation because if you do one or all four of the components you'll help the customer get results uh and you yourself in turn uh are able to charge higher prices because you're creating more value there are many ways to Define and talk about value so I've tried to distill this down to the three ways which are the most useful for strategist the first which is economic value is more academic and goes into value Theory the second which is the value stick is a Hybrid Theory and practical and the third which is the value equation is probably the most practical way to think of value creation each of the three ways gives you a different lens on how to look at Value and create more of it which by extension will help you be a more valuable strategist thanks and see you [Music] soon oh