Create Value Now, Monetize Later

13 May Create Value Now, Monetize Later

Value Based Economics

 
I distinctly remember the day that I learned in one of my many business classes in college that the purpose of any business is to “maximize shareholder wealth”. The professor taught that the end goal of any company is to make more money for the owners. I operated under this premise for many years as I ventured into and navigated through the business world. Somehow, that message stuck with me and I accepted it as fact without question. Then I discovered over time that I had been dead wrong all those years. That discovery fundamentally changed the way I view the business world, from the standpoint of both a business leader and that of a consumer.

As a knowledge enthusiast, I read a lot. I believe that devouring knowledge is the best way to learn and grow in every aspect of my life. I also love to share knowledge. A while back, I was at a business lunch talking to a colleague about the ACA and changes in healthcare, a topic that I am not particularly excited about. Then the conversation turned to strategy management, a topic that I am very passionate about. I found myself in the familiar position of enthusiastically sharing my deeply held beliefs about the best way to create value for companies by aligning what people do everyday with the things that matter. When I say “enthusiastically sharing”, what I really mean is that, without even realizing it, the speed at which I was speaking accelerated rapidly, my voice went up a few octaves, and I became exponentially more animated. We’ve all experienced that feeling ourselves and also know what it’s like to be on the receiving end of such a conversation. It’s how we know that the person we are talking to profoundly believes in what they are talking about. My colleague responded with “Wow, you really geeked-out about that”. What an awesome discovery…. there is actually a term to describe that feeling.

That leads me back to a business’s purpose. Entrepreneurs create businesses that directly relate back to those things that they geek-out about. In his TedTalk, “How Great Leaders Inspire Action”, Simon Sinek points out that generating profit is not a purpose, it is a result. He goes on to talk about how smart business leaders focus on why they do what they do over what they actually do.

So, successful businesses don’t focus on maximizing shareholder wealth as their purpose, they focus on their own “why” and, hopefully, profits will result.

Much has been written about how to make money by delivering value to customers. Let’s reverse that order. Figure out first how to create value for customers, vendors, partners, and employees, then worry later about monetizing it as much as you can without degrading the value you’ve created for the customer. Value is about way more than money. It’s about how their interactions with your business make them feel.

“At Management Stack, value based economics is the business practice of prioritizing value over profit. The critical mass created by focusing on value becomes a catalyst for monetization” Craig Eversole, Entrepreneur

Great companies like Zappos have done exactly this. Part of their culture is to “WOW” customers. Employees are encouraged to give customers free surprise upgrades and offer VIP status to repeat customers. Building up a loyal customer base who actively promote Zappos in their everyday lives has allowed them to create the economies of scale they need to drive profitability.

Find your “why” and invest in creating value for those around you. The ROI will be the monetization of that value – the money will come.