Value creation can be achieved through various ways such as offering low prices for your products or services. FILE PHOTO | NMG
It is said that approximately 60 per cent of the business that
are started every year do not live to...
celebrate their third birthday due to many factors discussed such as finance, access to the market, unfavourable legal framework and many others.
celebrate their third birthday due to many factors discussed such as finance, access to the market, unfavourable legal framework and many others.
Though
these factors have a part to play in the high failure rate, creating
value for customers by finding solutions to their daily problems ranks
as the main challenge encountered by many start-ups as customers don’t
just buy products or services but the value they gain from the sale of
the product.
Very often we encounter people who wish to
venture in business but they don’t actually understand which business
to pursue. On many occasions they will request you to help them identify
or get business idea that they can start to implement while others will
buy or look for people who can help them write business plans which can
guide them in their start up journey. Though this is an important part
of venture creation process where people show intention to start
businesses, it is critical to note that a business is a value delivery
system and therefore a business idea to be pursued must create value to
the targeted customers.
Value is defined as anything
that customers are willing to pay for in your product or service. Value
creation can be achieved through various ways such as offering low
prices for your products or services, making it convenient for customers
to access a given product or service, saving customer energy and time
by bringing the product or a service near to them, improving the
comfortability of a given service among others. In order to succeed in
your venture, the following four venture creation stages are important
to budding entrepreneurs.
The first step is generation
of business ideas and identifying what the customers are willing to pay
for it. Every large business you come across was once an idea in some
one’s mind. Therefore understanding how to generate and identify
business opportunities is an important stage in business development.
Business ideas may be generated from sources such as; people problems
and encounters, government policies, internet, hobbies, personal
experiences, creativity among others sources. As organisations exists to
solve customers problems, understanding how the idea generated will
create value for the targeted customers is the second step towards
developing sustainable business.
Secondly, in order to create value for the customers, an
entrepreneur must learn to understand people’s problems, emotions and be
ready to share and empathise with their experiences and emotions. This
means that the idea generated must have the capability to solve
customers’ problems either through relieving the pains encountered while
consuming the products or services available or create gains that was
not available to the customers.
For instance, M-Pesa
created value to the customer by providing a convenient way of
transferring money while Lipa na M-Pesa platform relieved the pain from
the customer of first withdrawing money from M-Pesa in order to pay for
the goods and services.
Third, though idea-generation
and value-creation are important stages in business development, it is
not enough without the entrepreneur understanding how he/ she will
deliver the value created to the targeted customer. Value delivery
entails developing systems that will help your customers to get the
product or service developed easily, conveniently and cheaply. You may
choose to deliver the value by acquiring a physical business premise, an
APP, a website or social media platforms. For instance, Facebook,
M-Pesa or Uber deliver the value created through applications (apps)
,while musicians deliver the value of their songs through live shows,
YouTube or media stations.
Fourth, while creation and
delivery of the value created are important stages to an entrepreneur,
he or she must earn money in order to keep the business afloat. The last
stage therefore involves, capturing the value created to the customer
by developing a revenue stream for the business. Though revenue streams
will mostly be determined by the primary activities carried out during
the value creation process, in some instances value capture will come
from third parties who wish to benefit from primary activities. For
instance, in the retail industry the value capture is straight forward
from the sale of products and services being sold, while in the media
industry, viewers don’t pay for the viewership but value is captured
through advertisements determined by size of the viewers.
After
the new entrepreneurs have understood how they will create, deliver and
capture value, they should embark on the customer development
strategies which entails moving out of the comfort zone and venturing
out to meet the customers you intend to sell the products or services to
in order to gather more information. This should be accompanied by
listening to the customer feedback about the product or service
developed in order to tailor the product according to the customer needs
and also for improvement.
The writer is an entrepreneurship and innovation lecturer at Kirinyaga University.
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