SUMMARY
In this episode, we continue the discussion on the subject of value creation. We dive into these two frameworks: Value Sectoring Framework and Value Focus Framework.
Value Sectoring Model
Think about where you are in the context of what you provide to your customers and clients. Place it on two axes with one of them being the connection you have with clients and the other one is the distinction that exists for you in the marketplace.
There are four levels or quadrants in this model that we need to understand:
- Commodity: It is the lowest in terms of connection and distinction so it is easily replaceable. Things like loyalty and relationships do not apply. The only things that have an influence are price and convenience.
- Connected: There is a high connection with the customers but the distinction is low. There is a sense of loyalty but despite the good connected relationship with the customers, the product or service is easily replaceable.
- Incrementalist: There is a high distinction but the connection with the customers is low. The product or service is unique but the relationship with clients does not exist. It is able to generate high profits. But once the competition enters, the only way you are going to win is to make sure you have a connected relationship.
- Valued: The final one is a step higher than the incrementalist perspective in the quadrant. This is a high connection, high distinction level which creates a valued customers and relationship. It far surpasses anything you can do as you create a values based loyalty.
Value Focus Spectrum Model
It differentiates between the potential value and the actual value and tells you where your focus should be.
- Collecting: When ideas, products and services have low potential value. It’s a place to collect data from the market to increase the potential value and realize a higher actual value.
- Continuing: If you have a high actual value but don’t have a lot of potential value, then your focus should be on maintaining relationships with the customers.
- Cultivating: If you have a high potential value but not actual value, then you need to cultivate the potential value in the marketplace using tools and strategies.
So, be brutally honest with yourself, and then work to shift the value of the products and services that you are offering. Build a strategy around it. Remember, your aim is to get high-potential, high-actual value while having a high distinction and relationship in the marketplace.
— Begin Transcript —
Hey there, Mel Abraham here, the author of the number 1 best-selling book, The Entrepreneur’s Solution, the founder of Business Breakthrough Academy where we teach you how to design a business and create a life: A life of financial freedom and peace of mind.
And welcome back to this episode of The Entrepreneur’s Solution show. We’re going to continue our talk about value creation and the value of your ideas and how to bring that:
• To your customers,
• To your team,
• To yourself in a way that’s meaningful.
That is something that’s starts to drive value.
Remember as I said, we live in a value exchange economy and if you’re not providing value, someone’s not going to pay you value in return so we need to focus on that. So, after this brief introduction, we’re going to come right back, we’re going to go into a couple of my frameworks on value creation; what I call my Value Sectoring Framework and my Value Focus Framework. To start to bring this home, bring this full circle.
And remember, every episode comes with a guidebook or tool or something to download, to help you execute and put this into your life, into your business immediately. So, make sure that you download the tool in order to get it. For this one, for this episode, you’re going to need to go to MelAbraham.com/session020. That’s session twenty. So, MelAbraham.com/session020.
If you’re not at your computer, you happen to be running, working out at the gym, driving, what have you, just go ahead and text; text MYLEGACY with no-spaces just one-word MYLEGACY to 38470. You’ll immediately get the download link so you’ll have access to the information when you get to a safe place to get access to it.
And I look forward to getting back with you right after this brief introduction. See you soon.
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All right, welcome back, this is Mel Abraham of the Entrepreneur’s Solution show and welcome back to this episode where we’re going to continue our discussion from the last episode about value and creating value for your customers.
If you recall, one of the things that I was talking about is that:
• In order for you to have a commercially viable business.
• In order for you to be successful in business.
The only way that that’s going to happen long term is that you create value in other people’s lives.
We live in what’s called the value exchange economy. A lot of people will say:
• Well, what’s the price?
• What’s the cost?
• What’s the price?
• What’s the cost?
It’s the wrong question.We shouldn’t be asking about price and cost. We need to look at it and say:
• What’s the value?
• What’s the value I give up?
• What’s the value I get?
• What’s the value you give up monetarily?
• What’s the value you give up socially?
• What’s the value you give up time-wise?
• What’s the value you give up and compare that to the value that’s created?
Because that’s truly what your customers are doing. That’s truly what your team and your employees are doing. That’s truly what’s happening.
Every decision we make is a value decision. And when we understand that and we say, “All right, if I have a product, if I have a service, how do I create value in my customers’ lives? How do I create something that they value and they value highly in my customers’ lives?”
Because when they value that highly, they’re going to pay you greatly for it and that’s the equation. That’s the perspective we ought to be looking at is coming from a place of value. You can look at it any way you want. You can sit back and say, “Well I’m … I put in my time.”
I get it. You may have worked 20 years, 30 years for the same organization but unless you’re continuing to provide value to the organization, I hate to say it, you’re not entitled to a raise. You’re not entitled to it because that’s not the economics of what’s really going on in the world. We get paid and we get compensated based upon the value we create. The value we provide.
The difference we make in people’s lives, let’s continue to make big differences in people’s lives. Then, we’ll get paid greatly for that. And so, I don’t mean to bad mouth or ridicule anyone that may be feels that way, but in one sense I want to shake them up to say, “Hey, understand how this works. Here’s the universal law, the universal economic rule.”
Value for value: Create value, you get paid value.
And the greater the value you create, the more value you get back in return. So, off my soapbox let’s move to the frameworks. The first framework I want to talk about is something called my:
Value Sectoring Model
What I want you to think about is where you are in the context of:
• What you provide to your customers?
• What you provide to your clients?
• What do you provide to the companies or the people that you serve in that process?
And I want to think about it on a two axes, if you will.
• One Is the connection you have with them, and
• The distinction that exists for you in the marketplace.
And there’s four levels that I think we need to realize and understand, become aware of where we are in that marketplace. Because once we are aware of it, then we can make some choices to transition and transcend, to move and change the way we are in the marketplace.
The first and you’ve heard me speak about this before is what I call: Commodity.
It’s low connection, I’ve got very little connection to my customers and the product or service is easily replaceable. When you think about commodities; whether it’s gas for a car. You’re just driving down the street. Gas is gas in many cases unless we’re using high performance vehicles—gas is gas. We’ll go to the cheapest provider.
This is … I’ve got no relationship with the gas station or the company. I have nothing. It’s basically a price-driven decision or a convenience-driven decision. There’s no loyalty, there’s no relationship that’s going to keep them coming back and I’m easily replaced. It is the most precarious, uncertain position you can put yourself in in a business and if we find ourselves in this position, we need to start looking at.
1. How we can increase connection and increase distinction?
Either through providing a community, doing things differently in a way that starts to create loyalty. If we don’t what ends up happening is we are always, always dealing with this concept of price-price differentials and that’s it.
The second quadrant is what I call the: Connected.
That’s where I have high-connection with the customers. I have high relationships with the customers. I have high in-effect loyalty with the customers. But still what I’m giving them as far as a product or service is easily replaceable.
Now, many of you know I’m a CPA. There’s was a time where I was doing a lot of tax work. And in some senses, the taxes … getting the tax return done is this necessary evil that we need to do because the government says that we need to file our taxes and get those taxes paid on an annual basis. And so, the clients, many of the clients would come in begrudgingly and going, “Ah, it’s tax season”.
It’s about as bad as going to the dentist. Sorry for the dentists that are out there. But it’s about as bad as that. They don’t come in happy, they don’t and they’re just scared to death about the answers they’re going to get and how much taxes they might owe. But the way they look is they have a relationship with me of trust. So, they continually come to me to do the work.
However, interestingly enough what they walk away with is a tax return. And that tax return is truly easily replaced. A lot tax accountants; all they are doing is putting it into a computer. That’s easily replaceable. We can put the information in, it spits the tax return out but for the connection that I have with them, they could go anywhere to do that.
And so, think about this and say, “Is your product or service and your relationship with your customers at the connected level?”
In other words, I have good relationships. I’ve got high connection with them but the stuff I’m giving them is easily replaceable. And so, that again puts you. What all I want to try and do remember, way back when we started talking the concept of business is about managing the downside risks—the uncertainty that exists and trying to make sure that, that we reduce that uncertainty and risks as much as possible and maximizing the upside potential.
And all I’m trying to do is identify this so you can minimize the risk and the uncertainty here is that the product or service you are providing although you have a good connected relationship with the customers is easily replaceable.
On the other hand, you could be in a situation where we call it, what I call the: Incrementalist.
Where I don’t have a lot of connection with them but I have a high distinction. In other words, my product or service is unique and that’s what they come to me for. I have no relationship them so they’re not coming for the warm and fuzzies. They’re not coming for
• The relationship,
• The dialogue,
• The socialization,
• The connection.
They’re coming because I’m the only one that has that type of product and that there’s a very unique or distinct element to the product or service that’s being delivered in that marketplace and that’s why they’re coming to it.
It’s actually a better place to be I think in the sense than the connected place and certainly better than commodity because you have distinction which means that you don’t have the competitive environment and the competitive risks that you might have if you had an easily replaceable product.
However, what you’re going to be challenged with is if you have high distinction which means typically you have high margins, high profits because you’re unique in the marketplace—competition’s going to enter in. And the only way that you’re going to stave-off the competition and keep them at bay is to make sure that you have a connected relationship with your customers—connected at a deep level.
So, even if you’re in the incrementalist perspective in that quadrant, we want to strive to move up our connection to create what I call a valued customer, a valued relationship because now I’m at a high connection, high distinction.
When you decide and you look at your products and services and say, “How do I deliver to them in a way that connects me with the customers at a emotional values, deep level and do it with distinction, uniqueness and differentiation that separates me from the competition?”
Now all of a sudden, now all of a sudden that starts to really-really drive some of the things that are going to … and your customers are going to look at things totally differently because of the relationship you have with them and they’re saying: 1. “I get this uniqueness and I have this relationship.”
I can tell you this—we, my wife and I will frequent a certain hotel. We go there for brunch on a regular basis, right on the water on the beach. We typically have the same, the same waiter who sees us there. They are uniquely distinct in their food, in their location, in the ambience and the environment but the connection that they have with us because when we come in and they greet us and they know us, they call us by our names. We have the same waiter who knows what we want and we have a dog, we’ve got a relationship.
That creates what I call values based loyalty—far surpasses anything you can do.
So, no matter what it is you’re delivering: product or service, the key is to look at it and say, “Where am I?”
Be brutally honest to say, “I’m at a commodity place, incrementalist, connected” and no matter where you find yourself, what we want to do is strive to be valued, strive to be valued. Come up with the strategy that’s going to move you up the hierarchy of connection and down the line of distinction that will make a huge difference.
So now, given that let’s look at this next framework because I think when you put these two together you’ll start to understand how this plays out. And we’ll talk about some other things. I talk about it in my Business Breakthrough Academy.
• Training: We teach it at the live event.
• Strategy Canvasing: Of how do you get that distinction.
There’s beyond the scope of what I can do here but there are tools and things that will help you do this. But, let’s talk about what I call the Value Focus Spectrum.
And the value focus spectrum what I want to try to differentiate between is what the potential value is compared to what the actual value is.
And this could be perceived value spectrum but the value focus spectrum is how I look at this. The first is this—this concept of collecting. If what I am, what I’m delivering—my idea, my product, my service in the environment has very low potential value and very low actual value. Really, it’s probably not a place we want to operate in.
It’s a place where we want to collect data. We want to look at the marketplace, see what the market’s telling you. So, we can then increase our potential value where then we can realize a higher actual value. We don’t want a plain and low potential, low actual value space. Just like a commodity space. So, ask yourself those questions as you start to look at what it is you’re doing.
And then if you’re looking at this and saying, “Well I’ve got a high actual value but I don’t have a lot of potential value” then where your focus needs to be is on maintaining the relationships with the customers because this may be your bread and butter.
Remember, I talked about A, B and C customers at one—my high priority and everything. This is where probably most of your B customers are and that we want to maintain it because it’s foundational in our business as we move forward.
Alternatively, if I have high potential value but not actual value then it’s about cultivating. We just haven’t realized the value yet. What tools, what strategies, what tactics, what team do we need to put in place to cultivate the potential value in this marketplace—from this customer base to make it actual value?
Because what we really need to look at is again just like we did in the last one, we want to be in that upper quadrant where we have, we are looking at marketplaces and ideas and products and services that have high actual value, high potential value and
• That’s where we commit our resources.
• That’s where we commit our time.
• That’s where we dedicate and invest more and more to move forward.
So, what I invite you to do now is to look at the products and services that you’re thinking of offering or that you’re already offering, or the ideas that you have and ask yourself. And be … again, if you’re not brutally honest in these evaluation processes, it doesn’t serve you. Because sooner or later the truth will come out and the market will slap you in the face and say, “Hey, there’s really no value here”.
So, you’re better off being brutally honest with yourself and not blinded by the desire to put something out there and you believing that it’s got value in the market, doesn’t perceive a value.
So, being brutally honest with yourself and say
• Do I have something that has high potential value?
• How do I realize that potential value?
• What do I need to cultivate it?
• What are the things that I need to do to bring that value to life?
• Is it something that I have actual value in?
That we’re already realizing the value but we don’t have potential value. We don’t have any growth there.
• Well, what can I do to grow it?
• How can I do what’s called add value to it to grow it?
– By bundling, by adding services, by doing other things that customers might want that increases the potential value far greater than what you’re already realizing.
And we’ve got the guidebook like I said with the last episode. There’s a guidebook that allows you to go through and helps you ask those questions, answer those questions and come up with some of the answers.
If you haven’t got the guidebook, remember you go to MelAbraham.com/session020 and that will get you access to downloading the guidebook. Every episode, like I said is a working episode.
• I want to give you strategy.
• I want to give you tactics.
• I want to give you tools.
• I want you to go out and execute, execute, execute.
Your success, your success is all going to be based on execution. The majority of failures are failures in execution, failures in taking action, concerted actions staying with it.
So, here’s the thing with this:
1. Download the guidebook.
2. Look at what it is you’re offering.
3. Look at what it is you’re trying to offer.
4. Look at the ideas that you’re evaluating.
5. Figure out whether you’ve got high potential, high actual, where you are in that spectrum.
6. Figure out if you got distinction in the marketplace.
7. How you get distinction?
8. How do you get connection with your marketplace?
Because if I know that I can get, think about it. If I know that I can get high-potential, high-actual value by committing my resources and then at the same time create distinction in the marketplace while creating connection in the marketplace then you are going to fly. Your business is going to grow like crazy and that’s the place to be.
So, hope you found this helpful. I know it’s a lot of information and I don’t have the time to go as in-depth that I could in a workshop but we will get a chance at some point to go deeper hopefully with me. But in the meantime, if you found this of value and you want to stay with me I’ve got a lot more stuff coming up. We’re going to keep doing some of this.
Make sure that you subscribe to these episodes so you get notified immediately of a new episode. And if you got someone that is in business, looking to be in business, looking to create more success and financial freedom and peace of mind, go ahead and share this with a friend. Why not?
Let’s do this because I think, I think the society is hungry for a new way and the entrepreneurship path is the vehicle to allow people to get that peace of mind and financial freedom. And to the extent that I can serve, to the extent that I can give those tools, give some guidance, be there to be the mentor and be the guide; I feel blessed and honored to do that. So, share this with a friend.
If you have a question for me about wealth, about success, about business, about entrepreneurship, about anything just go ahead and go to AskMelNow.com and leave me your message. And we’ll probably bring … in-fact the next episode I’m going to be answering some of the questions that came through on that line.
I’ll answer your questions on one of the upcoming episodes and move forward. Again, you can get the download or the guidebook at MelAbraham.com/session020 or you can text MYLEGACY one-word, MYLEGACY no-spaces to 38470 and you’ll get the download link then.
I hope you found this enjoyable. I hope you found it valuable.
Go out there, make a difference. Go out there, build your business. Be bold, be vibrant, be energetic. Go out there and live your life your way.
So until we get a chance to see each other in the next episode,
May your vision be grand, your journey epic and your legacy significant!
See you soon. Cheers. Bye!!
— End Transcript —
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Like this? Please share it and help a few more people bring their dreams out of the darkness and give life to them again. Cheers, Mel
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