One Way To Think About Value Creation

I have been digesting a good amount of startup material lately. I’ve realized how important it is to go out and talk to customers, something that is stressed in all of the blogs and books out there, something that is essential for better understanding your actual customer as opposed to who you think the customer should be — but something that is so often looked over.

Through these customer interactions, another piece becomes equally apparent. It is this idea of value.

For many months, when people said that word, I would immediately nod my head — thinking that value is a very obvious term that everyone should know, especially as an aspiring entrepreneur — but it was this vague idea for the longest time.

The general startup content throws words like “value-add” and “value prop” out there as these phrases that everyone should get…but some of us don’t.

So — after much thinking, I have come up with one way to think about value creation for the problem you are trying to solve.

In my head, I have this image of those high-risk takers back in the day that were trying to search for oil or gold to strike rich because there was high-reward baked into the venture. These resources, given by from the earth, were, and still are, valuable to today’s society. But during that time where loads of people went out, with probably nothing to their name, to set out and find a nice golden nugget or a pool of black gold was because of their idea of value.

To them, value was directly linked to monetary gain. The market set a high price for these items, and so people went out to literally extract that value from the earth and hopefully into their pockets.

Nowadays, value can still be created through the exploration of the earth’s crust to find the next pool of oil (that’s what Exxon and others still exist), but there is another type of value that can be created from nothing. Or what seems like nothing.

This is the value of the discovery of a niche problem set within a larger industry or field.

Take the massive transportation sector for example. As a society, we have deemed it necessary to move and to move a lot. So, we have cars. Cars need roads. Cars need gas. Cars need comfortable seats and ways to smell good. Oh, also, cars need to be environmentally friendly, for some folks. Cars need to be flashy, for some folks. Cars also need to be safe.

As you can see, there are all of these needs that are driven (no pun intended) by the market. The list goes on and on, and it will continue to expand as our fascination with the mobility of our physical bodies continues to exist. (VR may take the car industry by surprise!)

It is the entrepreneur's job to find a niche problem that they are passionate enough about to put time, effort, and money into. Additionally, they need to seek opportunities to extract value from this industry by solving pressing, painful problems.

Hope this helps.

Thanks for reading.

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