The Business of Assessing Value

It is a bit odd to say it, but you can’t avoid it. Not all businesses add value for their customers. To the contrary, a rather alarming number of business strategies are based on persuading us to buy stuff that we don’t need or even want. They manipulate us into making a buy and that’s it. Like buying a “pet rock”. That is a pretty interesting phenomenon. But it is not the main topic here. We are not interested to learn just how to “influence” people in a vacuum (as Bob Cialdini describes) in his book “Influence”. We are interested to add value for them.

So here is the question for us. Let’s say that we are pretty good at coming up with ideas to do things better. We may even be masters of the process of ideation (see prior post). How can we assess whether our idea will actually add value for others?

It is a critical question for several reasons. First, when we come up with ideas, we have incomplete information. It may be that something we think is new is already on offer. Or it may be that our idea doesn’t fit into the routines of others. Second, we are biased. It is human nature to think that our individual ideas are better than the ideas of others. Third, we can only assess value in relation to a basket of things that relate to our idea. What goes into the basket will have a profound effect on pricing. There may be more reasons, but these are enough for now. We need a reliable process to assess the relative value of ideas that we come up with OR risk investing our time, effort and resources in stuff that sucks.

Doing this is a two step process. Step one is about standards. Step two is about target groups. We will take a peek at both here.

I freely admit that I am terrible at cleaning my house. I do it, but for a variety of reasons, I seem unable to do it at a high level. So when I get an idea about how I can get better at this, I get excited. For example, I just recently discovered that daily scheduling of small cleaning tasks offers me a radical upgrade. Very cool. But would this idea and any others that I produce offer value to others?

Lafley and Martin would argue that I will get my head handed to me if I try to enter the global marketplace for cleaning services with my ideas. Why? Because in order to compete, I need to compete against the best in the world. I am not the best in the world at cleaning anything. Nor am I the best in the world at teaching others how to get better at cleaning. So my ideas are somewhat “ad hoc”. They do not meet the minimal standard for taking them seriously.

This may sound like a pretty high standard just to get into a market. But think about it. If you don’t have any clue about what is the best thing around, the odds of you getting broadsided by ideas that are better than yours are pretty good. So the point is to invest in some research about standards BEFORE investing in bringing your idea to the next step.

That takes us to the second step. Standards for whom? Who is my target group for sharing my idea? This is a pretty fascinating question mainly because of the word “group”. Groups do not exist as a fact of nature. Humans form groups and disband them at will. We do this whenever we fell compelled for whatever reason to “connect” with others. To identify with them.

Here is an example. Up until a week ago, very few people had heard of the satirical French magazine called “Charlie Hebdo”. And if they had heard of it, they might not approve of their rather aggressive visual images. They would not have felt a strong urge to bond with the magazine. It was obscure. But radical Islamic terrorists, alleging that they were defending the prophet, burst into the magazine office and murdered a number of people associated with the magazine. And we now have huge protests with folks holding the sign “Je suis Charlie” (I am Charlie). They have bonded just like that into a multi-national, highly engaged group. Politicians are suddenly lining up to say “me too! I am Charlie too!” Very funny. Some of these same politicians actually punish people for exercising their free speech. Humans are like that.

So part of my challenge in assessing the value of my idea is to ask what groups exist or could be created that are interested in it. So, for example, professional cleaners would scoff at my feeble efforts to schedule cleaning. Forget them. People who regularly clean — who are not professional cleaners but who do this every day — would also find my ideas to be of little value. But people who are like me — who have no idea how to keep their living quarters remotely clean — might be grateful. Hmmm … does this group exist? I doubt it. But that does not mean it cannot be formed.

And this is one of the amazing things that we are witnessing in our era. Rapid formation of groups of people who believe they have similar interests. This is how magazine mogul Felix Dennis made a fortune. Here is an example of his method

Felix noticed teenagers queueing for a Bruce Lee movie, and conceived the idea of publishing a martial arts magazine in a format that would open out into a poster for teenage bedrooms. Kung-Fu Monthly was an overnight success, eventually selling in 14 countries.

Felix saw the potential for building group loyalty and he founded a magazine to help build that group. Brilliant. The magazine had no value in itself. It had lots of value in light of the group that people wanted to belong to. He did it again and again and again and again. He died a very, very rich man. And you might argue that he was a man who really only had one great idea in his life – how to leverage group formation. Got that?

So let’s sum up. Assessing the value of any idea requires a standard to assess its value and the appropriate target group who may be interested in it. If your idea connects to something better than a group already has, you have found value.

Sounds simple. So why don’t people do this more often? Good question. One reason is that they have no confidence in their ability to sell their idea — even to people who are interested in it. That is next. Stay tuned!

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s