The Value Creators Podcast Episode #26. 11 New Mental Models for Business

Mental models are defined as fundamental assumptions that shape the way individuals perceive and interact with the world. When our mental models are wrong, we can’t see the world as it really is. New mental models introduce a new and better understanding. This episode of the Value Creators podcast introduces eleven fundamental mental models, ranging from understanding value as a subjective creation within the minds of customers, to the strategic accumulation of knowledge within a firm, to the pivotal role of empathy and the transformative nature of marketing as behavior. Each mental model contributes to a new holistic paradigm designed to guide entrepreneurs in creating sustained value.

Mental models contribute to the necessary shift in business mindsets towards a dynamic approach that emphasizes the continuous flow of experimentation and the ongoing refinement of knowledge through error correction. 

Resources: Hunterhastings.com

Shownotes:

• Mental models as fundamental assumptions about how the world works…
• Correct mental models lead to valid conclusions, while incorrect ones result in mistakes.

Mental Model Number 1: Value Creation Paradigm

• The customer is the creator of value.
• Challenge the traditional view of businesses creating value; instead, recognize customers as value creators – since value is subjective and is generated in their minds.

Mental Model Number 2: Customer knowledge is the source of competitive advantage

• A lasting competitive advantage for firms comes from accumulating and compounding customer knowledge and understanding..

Mental Model Number 3: Empathy as a business tool

• The tool for building customer understanding is empathy.
• Empathy is not “thinking as they think” – it is a simulation of the customer’s experience and how the customer evaluates it.
•  The simulation enables businesses to understand and address customers’ unmet needs.

Mental Model Number 4: Marketing is behavior not communication

• Marketing is not communication and persuasion.
• Marketing is behavior, an act of love towards customers.

Mental Model Number 5: Reverse the flow of design

• Design is working backwards not forwards – backward from the customer and their experiences and desires., 
• By working backwards, design ensures that customer wants are integrated seamlessly into products and services.

Mental Model Number 6: Innovation is continuous

• Innovation is not an event – it must be continuous, unceasing experimentation and improvement.
• The greatest innovation lies in innovating new business models..

Mental Model Number 7: Entrepreneurship is the only route to value creation

• The value creation process is enabled through entrepreneurship, not management.
• Entrepreneurship translates customer’s genius in sensing that things could be better (How do they know?) into innovative products or services through continuous new action.

Mental Model Number 8: Finance and Accounting should look forwards as well as backwards

• Traditional accounting can’t accommodate value creation – the intangibles that create customer value.
• Make sure your accounting balances backward-looking tracking with forward-looking economic calculation.
  

Mental Model Number 9: Rethink organization

• Don’t organize!
• Encourage self-organization and autonomy for employees interfacing with customers.
  

Mental Model Number 10: Business as a Flow

• Don’t plan!
• Adopt a continuous flow approach in business and individual work.
  

Mental Model Number 11: Unceasing knowledge Accumulation

• Constantly critique and improve knowledge through collaborative open-minded critique and error correction.