Creating Value that Lasts

Understanding what value your business generates can be a daunting task for most businesses. This is mostly because value is subjective and not tangible. Value is the perceived benefit from consuming a product or service. It is the reason someone will spend one thousand dollars on the latest iPhone while someone else would rather spend the same amount on a designer handbag. They both would give up the same amount of money on the item they expect to derive most value. Like beauty, value lies in the eyes of the beholder.

Eric Luyangi has over 7 years working in Financial Institutions overseeing first to market mobile digital Savings and Credit in Tanzania. He is enthusiastic about Business — particularly passionate about FinTech and its applications in Africa. Eric is one of Unreasonable East Africa’s mentors, helping entrepreneurs understand their customers and the value their businesses offer. He spoke to us about how businesses can create lasting value.

Understanding the Value you Provide

Understanding what your business really does helps you understand what value you are actually providing to your customer. For example, a business providing access to water for a community by setting up bore holes might find that it is providing them with more than just water but also safety to the people who previously had to walk long distances for water, facing many dangers along the way. To this person, more accessible water means safety and security.

To understand what value your business actually provides, ask yourself a few questions. How do you define your customer? Think very specifically about who actually wants the product or service you are providing. What is their age group? Where do they live? How do they spend their leisure time? What is their education level? How much do they earn? What is their financial behaviour — do they save or consume more?

“Go a step further and examine why they would choose your product/service over another?” Eric said, “Who else currently provides this product/service and how does the customer access it? What are the pain points they experience when accessing these products or services?”

Always keep the focus of the business on your customer because you will have a higher chance of succeeding if you are solving a problem. Even before starting your business, think about what your target customer currently has to go through to access the product or service in the current market. What are the customer’s current pain points? Find your niche or the added value you provide for which the customer would be willing to pay.

For example, the actual value a movie rental business provides is entertainment through the DVDs being sold. Before starting such a business, ask yourself questions like “How do people currently access these DVDs?” They probably have to go to a DVD store and make a selection from a catalogue of movies. After buying a couple of DVDs, they stack up and storage of these becomes an issue. To the customer, the pain points are the acquisition of the DVD including time, transportation and the cost of the DVD plus the storage of the DVDs as they stack up. Therefore, the value you add could be providing a convenient way for them to access the entertainment they want — exactly what Netflix or Amazon is providing. You are able to access a huge catalogue of content from wherever you are as long as you have access to the internet. Storage of the DVDs is also no longer an issue because you do not actually purchase the DVDs anymore but stream the content online.

A lot of research has to go into understanding the market, your customer and their pain-points. However, entrepreneurs are usually resource-constrained as they attempt to do this research. You could navigate this by tapping into the resources of organizations that have done the research in the areas you need information.“For example, Financial Sector Deepening has a lot of information on areas like agriculture,” said Eric, “Find out which organizations in your domains have done research in your field and use it.”

According to Eric, one of the biggest mistakes entrepreneurs make regarding value proposition is focusing more on their business idea than on their customers.

“That’s a big mistake because it is important to understand what the customer would pay for,” he said, “If you don’t have a customer, you don’t have a business.”

Creating Value that Lasts

Ask yourself what your business will look like 10 years from now. How sustainable are you? Will you still have demand or customers? While an investor will look at your financials to get a picture of your current operations, they will also be interested in knowing how sustainable your business is. Does your business grow? Whatever you do today should be done with long-term sustainability in mind.

“Building a sustainable brand isn’t easy to do,” said Eric, “Is your business relevant now and will it still be relevant in the future? Relevance is an indicator that you are providing value.”

You need to be able to adapt to an ever changing environment in order to continuously provide value to your customers. Understand your customer’s changing needs or you’ll become obsolete. Eric gives the example of the death of Nokia as a company.

“When everyone else was moving to smartphones, they were slow to react,” he said, “They failed to recognize that the consumer’s needs had changed. The customers now wanted touchscreen phones and the ability to access the internet faster.”

Constantly evaluating how relevant you are today and how relevant you’ll be in the future helps you identify what changes the organisation needs to make. It also helps you remain abreast with your customers’ changing needs for you to react to them fast enough. You must align yourself in the direction your customers are moving.

“Basing on what is happening today, predict what will affect your business model tomorrow and incorporate this into your vision for tomorrow,” said Eric.

Study trends and changes to be able to predict where the market is heading for you to be able to react fast enough. It might be a lot easier for huge companies to do this, however, as an entrepreneur of a business still growing, you will need to do this as well in order for you to continuously create value for your customers.

*We are ever so grateful to Eric for his contribution to this article!

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