Posts

48. Chris Casey’s Journey To A Distinctively Austrian Financial Services Business

/0 Comments/in /by

Learn how directly Austrian Economics can be applied in entrepreneurial business design. A creative founder of a financial services firm demonstrates to customers how an understanding of business cycle theory and monetary theory can be applied to investment portfolio design.

Key Takeaways & Actionable Insights

Chris Casey's Entrepreneurial Journey

Click to Download The Full Version

Innovation often emerges from the combination of existing components in new ways. 

In Chris’s case, the new combination was his knowledge of Austrian Economics – specifically Business Cycle Theory and Monetary Theory – and of Finance. He invested a great deal of time and effort in mastering both parts of this knowledge combination.

Chris Identified An Unmet Customer Need, A Dearth Of Available Solutions, And A Potential for Market Growth. 

There were a few – probably a very few – customers for a financial services offering designed with recognition of the relevant principles of Austrian economics in mind. But the fact that there was at least some customer need provided evidence of potential. Then external stimuli such as the 2008 financial crisis and the Ron Paul Presidential Campaigns caused a growth in demand.

A value proposition naturally emerged. 

For a narrow but highly receptive target audience, the value proposition that “Austrian Economics is vitally important to designing investment portfolios” proved to be very effective in generating a value anticipation.

Communication skill is a critical element. 

A value proposition doesn’t sell itself. Chris utilized – and continuously polished – his communications skills to help customers fully appreciate the direct link to their desired value: a feeling of improved financial security because the uncertainties identified by Austrian Economics are accounted for in portfolio design.

Chris’s implementation was consistent with the value proposition, and capable of delivering. 

In portfolio design, the product of Chris’s service firm, the inputs from business cycle theory and monetary theory are top-down elements. Chris added the bottom-up element of personalization of the design process to the individual customer. This is classical Austrian entrepreneurship: understand the customer’s needs, empathize with them, and customize the service so they feel individual satisfaction of idiosyncratic needs. In subjective value analysis, portfolio performance is not the sole criterion for the value experience. Customer feelings are far more significant.

Chris keeps an eye on the competitive frame of reference to maintain the uniqueness of his offering. 

Chris’s competition is not other investment advisors. It’s the general demeanor of Wall Street sales-focused firms. “Stay fully invested” and “Don’t try to time the market” are typical sales communications of these firms that don’t truly have customers’ best interests in mind. He can always utilize this contrast as a value frame of reference.

Chris’s success exemplifies the clarity that results from candid entrepreneurial self-assessment and the embrace of the entrepreneurial process. 

Self-assessment = In what field am I best resourced to enter and do business?

Entrepreneurial process = Identify opportunity by identifying customer dissatisfactions in that field.

Visit WindRock Wealth Management at https://windrockwealth.com

Free Downloads & Extras

Chris Casey’s Entrepreneurial Journey: Our Free E4E Knowledge Graphic
Understanding The Mind of The Customer: Our Free E-Book

Start Your Own Entrepreneurial Journey

Ready to put Austrian Economics knowledge from the podcast to work for your business? Start your own entrepreneurial journey.

Enjoying The Podcast? Review, Subscribe & Listen On Your Favorite Platform:

Apple Podcasts, Google Play, Stitcher, Spotify

47. John Chisholm’s Tools And Techniques For Success In The Entrepreneurial Process

/0 Comments/in /by

In this episode, Hunter Hastings talks to John Chisholm, author of Unleash Your Inner Company: Use Passion And Perseverance To Build Your Ideal Business.

John is a very successful repeat entrepreneur (he founded and grew multiple businesses in multiple fields and had multiple successful exits). He looked back on his successes and formulated a 10-step process that all entrepreneurs can follow, with a full suite of tools we can all use.

This beats the business school case study method!

Key Takeaways & Actionable Insights

Entrepreneurship is a process. Taking this view enables successful navigation over time, whatever the interim ups and downs. 

Sometimes the process can feel like stumbling through a jungle, tripping over rocks and vines, always picking yourself up again and marching onwards. Don’t expect the process map you start with to be the one you continue with. Don’t plan too far ahead. Do be adaptive. Nonetheless, the process view is a source of support during the journey.

Processes require operating tools. John Chisholm’s toolset starts at Need and Advantage. 

“All you need is a Need and Advantage.”

Need = “A real, unsatisfied customer need in an area about which you are passionate.” 

He defines Need in an Austrian way: a subjective value sought or anticipated by a customer. He defines Customer as a living breathing person (or group of people, as with a corporate customer) rather than an abstract “market need”. Unsatisfied means that the need is not addressed by currently available products and services (requiring the entrepreneur to understand customer dissatisfaction). And Real means shared by a sufficient number of customers or sufficiently intense in one or more customers to make it worthy of you to satisfy. 
 
The entrepreneur must have an advantage for satisfying that need. John’s process is aimed at establishing and extending that advantage, in spite of the fact that existing businesses will have more and better resources than you.

John offers a 10-step process for entrepreneurs to follow. 

You’ll find John’s process pretty complete, cogent, and consistent with Austrianism. We didn’t cover every step of the process in the podcast, but we did pick out two tools and one principle.

Make a STARS inventory of your resources and strengths and turn them to your advantage. 

John recommends making and continuously updating an inventory of your individual strengths. The STARS acronym stands for Skills, Technologies that you know and can use, Assets and Achievements, Relationships and Reputation, and Inner Strengths. He has wise advice on each one of these subjects, and he suggests multiple uses for the completed STARS inventory:

  • Use it to assess the fit of your strengths with the customer needs you have identified.
  • Use it to identify strengths gaps you’ll need to fill.
  • Use it to build your own self-confidence (most people under-estimate their own strengths).
  • Use it to innovate by making new combinations by pairing STARS elements in new ways.

We provide a template with directional examples here. 

Map out a logical and sequential growth path with John’s “bowling pins” methodology. 

John’s advice is to avoid tackling too large a market and too large a target customer group at the outset. Focus on a best fit intersection between your resources and customer needs. Label it. Then identify the next most logical adjacent customer need you can fill, ideally leveraging your learning from the first market. Keep on building up the map of adjacent needs to fill. When you’ve got to 10, think of them as bowling pins. Knock them down one by one, starting with the first – that’s your early focus – and ultimately completing them all. That’s your vision – the largest set of customer needs you can possibly fill.

John calls this process Upsizing A Customer Need, and notes that this bowling pin strategy is particularly persuasive to venture capitalists – they like it that you are focused, and also that you have a map to growth.

We reproduce John’s bowling pin map here.

Make the most of limited resources: Different is better than better. 

How do you overcome the fact that existing businesses in a market you are trying to enter have greater resources than you? John’s answer: focus on being different rather than better. If you can identify how to be different – with a different solution, for a different target audience (even if it is small to begin with) you’ll evade competition.

John has additional advice about scalability, network effects, partnering and other tools for growth. Listen to the complete podcast for a rich reward of process tools and methods.

Free Downloads & Extras

STARS – Your Resources: Our Free E4E Knowledge Graphic
Upsizing A Customer Need: Our Free E4E Knowledge Graphic
Understanding The Mind of The Customer: Our Free E-Book

Enjoying The Podcast? Review, Subscribe & Listen On Your Favorite Platform:

Apple Podcasts, Google Play, Stitcher, Spotify

44. Mark Packard on The Value Learning Process

/0 Comments/in /by

Entrepreneurs are redrawing the Customer Journey Map. Based on the latest knowledge from both economics and neuroscience, Dr. Mark Packard explains the five stages of the Value Learning Process on today’s episode.

Key Takeaways and Actionable Insights

To be able to adopt new ideas and successfully apply new techniques, it is sometimes necessary to discard old ones that are barriers to clear thinking. The theory and vocabulary of value illustrate one such barrier.

The language of business schools and many business books is that firms and entrepreneurs create value. That terminology implies that value is somehow embedded in the product or service the firm designs and markets, and that value is formed in the firm’s domain.

The business world has made a little progress in the last few years by opening up to the idea that value is somehow co-created by the provider and the customer. In co-creation, customers’ own usage of the service causes the value to be realized, and their comments, criticisms and suggestions become useful feedback to the provider to further improve the offering.

But we have known since 1871 that value actually lies entirely in the customer’s domain. Carl Menger wrote:

“Value is a judgment economizing men make about the importance of the goods at their disposal for the maintenance of their lives and well-being. Hence value does not exist outside the consciousness of men.”

Now, Mark Packard sheds more light on exactly how value forms and develops “in the consciousness of men” – or, as we would say today, in the customer’s experience.

Mark introduces the concept of value learning. This is the mental process through which the customer advances in response to a value proposition from an entrepreneur or a brand. It’s important for entrepreneurs to understand, monitor and measure the customer’s value learning. There are five stages, illustrated by our Knowledge Map Graphic below.

Predicted Value

Customers evaluate an offering that’s available to them with a mental prediction: I think that this offering might be valuable to me (i.e. make me feel I am improving my circumstances / make me feel better / help me towards my goal). Predictive value is translated into a price one is willing to pay for that experience. This willingness to pay is then compared to the price of the product. It’s a yes or a no.

Entrepreneurial action: Manage predictions strategically. Persuade customers that the predicted value is worth the cost, but don’t overhype your product. Identify those customers whose predicted value relative to your price is positive. These are your only current target (unless or until you redesign your value proposition).

Relative Value

The customer’s next cognitive action is to identify whether the predicted value is high or low relative to alternatives. These alternatives include not just other products in your industry (if any), but all other ways your customer might also satisfy the need that your product addresses. For example, one alternative is to keep their dollars in their wallet, if they think they can satisfy their own need for themselves at a lower cost (all in). The predicted value of your offering must be greater than all alternatives in their perception.

Entrepreneurial action: Calibrate your offering to the customer’s relative value calculation using price, features and benefits.

Exchange Value

If the customer’s Relative Value perception is sufficiently positive, they’ll exchange dollars with you. But remember to account for the customer’s uncertainty. If the relative value is comparable between alternatives, customers will generally prefer the more familiar (certain) value over your uncertain offering.

Entrepreneurial action: Use price discovery techniques to align price and relative value.

Value Experience

The customer uses or consumes the product or service. They’re generating feelings and perceptions as they do so, either positive or negative. Many of these are in response to a mental comparison with Predicted Value – is the experience better or worse than predicted?

Entrepreneurial action: Monitor the customer’s perceived experience. Be aware of variables in circumstances (time, place, mood, competitive environment) that can change their perceptions. You may need to guide the customer’s first consumption experience(s) to ensure proper use and optimal experience.

Value Assessment

The customer, either concurrently or subsequently, makes a mental value assessment based on their experience. Good or bad? Better or worse than predicted? Does my assessment result in predicted value for a repeat purchase or subscription?

Entrepreneurial action: Measure. This is the stage where measurement becomes useful. Find a measurement that works for you. It could be in sales dollars, purchase volume trends, or customer satisfaction metrics. Such metrics are mere approximations, however, and are neither precise nor set in stone. Be careful how you interpret measured results.

This value learning process is mutual. The customer is always evaluating and re-evaluating and the entrepreneur must keep pace in service, relationship management and innovation. It’s a never-ending cycle of value.

In future podcast episodes, Mark will share some of the new tools he has developed to help entrepreneurs master the cycle. Follow Mark on Twitter to keep updated between now and then!

SUBSCRIBE

Apple Podcasts, Google Play, Stitcher, Spotify

DOWNLOADS & EXTRAS

Understanding The Mind of The Customer: Our Free E-Book

Value Is A Learning Process PDF: Download

39 Rick Rule: Deep Understanding of Markets Opens a Pathway to Entrepreneurial Leadership

/0 Comments/in /by

Rick Rule is CEO at Sprott US Holdings. His lifetime focus on natural resources finance enabled him to carve a unique pathway to entrepreneurial success. Like many entrepreneurial journeys, Rick’s had some twists and turns. Here are some of the key stages.

Key Takeaways and Actionable Insights

Find out early what you love. Rick enjoyed the outdoors, nature and therefore natural resources, the associated science of efficient and effective use of natural resources, and finance. All of us have a combination of likes and preferences that may stimulate us but may not initially appear to present us with an entrepreneurial recipe. But as Curt Carlson explained in episode #34, combining knowledge from different people and fields can result in compounding insights.

Rick Rule's Entrepreneurial Leadership

Click the image to download the Full PDF

Combine Knowledge In New Ways. Rick combined natural resource science with principles of corporate finance, specifically debt and equity finance for extractive industries. As a result of the special properties of natural resource markets, and firms’ needs for customized financing, an opportunity niche emerged. Rick’s application of his special combination of knowledge placed him in a competitively advantaged position.

Learn By (Hard) Experience. Rick learned not to confuse a bull market with brains, as he puts it. He did business through a complete commodity market cycle in the 1970’s through the early 80’s, experiencing volatility and ups and downs first hand. Theory is no substitute for experience. Nevertheless, his knowledge of Austrian Business Cycle Theory, Austrian Price Theory (“the cure for high prices is high prices, and the cure for low prices is low prices”) granted him a superior perspective in interpreting market signals.

Develop Deep Market And Customer Understanding. In his focus market, Rick developed a business segmentation that focused on participant firms of a defined size (<$250MM market cap). He studied those customers and understood their circumstances. The consequence of limited information flow (data about these firms did not flow easily between conventional market analysts), was that the firms had limited access to capital. Rick was able to overcome these information gaps, making him a preferred supplier of scarce finance.

Identify A Need You Can Fill For Your Carefully Selected Audience In Your Carefully Selected Market Segment. The business model came together in a way that Rick describes as “lender of last resort to high-quality management teams in high-quality companies that were not popular” and were therefore capital constrained. In addition, Rick’s understanding of business cycles and commodity prices further strengthened his confidence in lending when others would not, the market rewards for which turned out to be high.

Combine Empathy, Trust and Courage. Rick confirmed the E4E emphasis on empathy as an important skill for entrepreneurs – primarily, in his case, empathy for the customers whom he financed. He sought to combine empathy with trust: in a market where information is scarce, it is imperative to have trust in the sources. “Without trust,” says Rick, “I have no information, and therefore I can not make decisions.” The third emotional attribute he identified is courage – the courage to have the conviction that your model indicating a future upcycle or price rise is well constructed, and not to second-guess it during the time that the trade is underwater.

We’ve summarized these journey milestones – and the Austrian foundations underlying them – in this free PDF download. 

DOWNLOADS & EXTRAS

The Rick Rule’s Path to Entrepreneurial Leadership PDF: Our Free E4E Knowledge Graphic

SUBSCRIBE

Apple Podcasts, Google Play, Stitcher, Spotify

35. Chris Wilton’s Recipe for Success

/0 Comments/in /by

Is there a recipe for entrepreneurial success? Chris Wilton has established a successful and growing catering business, and the recipe he developed has some ingredients that every entrepreneur can utilize.

Key Takeaways and Actionable Insights

Economists (e.g. Murray Rothbard in Man Economy and State) often talk about the recipe that entrepreneurs develop for business growth and success. They don’t quite mean it literally — a fixed proportion of ingredients combined in the same way and the same sequence every time for the same result — but the analogy is nevertheless useful. Recipes are plans entrepreneurs utilize to advance from one step to the next in pursuing their goals.

A recipe is intellectual property — software if you will. Sometimes it’s opensource, sometimes it’s proprietary. When a chef utilizes a recipe, even one that is well known, both the chef and the customer anticipate something unique: Mary makes the best chocolate cake! Lots of people make chocolate cake, and they might use the same ingredients as Mary, but, in the subjective view of a customer, no one’s result is as good as Mary’s.

To get a result, Mary has to combine hardware with the software, and perhaps there is an edge there. We might call that the capital structure that is perfectly tuned to Mary’s purpose and matches her skills. Perhaps it’s even possible to assemble superior ingredients — a special and better kind of chocolate for example.

Mary might also need collaborators. She certainly needs customers to subjectively evaluate her cake.

We’ve probably tortured the analogy enough at this point. But hopefully, we got you thinking about the role of the entrepreneur in assembling resources in order to produce something that the customer values.

In this week’s podcast, Chris Wilton of Wilton’s Catering gave us his recipe for a successful and growing business. We’ve captured it in the accompanying PDF, linked below.

Chris Wilton Recipe for Entrepreneurial Success

Click the image for the full PDF

Here are some of the headlines:

Start with self-assessment: The one universal attribute of entrepreneurship that everyone seems to agree on is: it’s hard. It requires creativity but also discipline, determination and grit. It’s important to have examined your own disposition before you embark on the entrepreneur’s journey. Passion and drive are mandatory. (There’s a self-assessment tool, and a journey map.)

Identify a market and a customer: Chris Wilton knew his industry, and worked hard to pick the right beachhead customer. The beachhead customer is the first adopter who will be your customer-partner in getting your business off to a good start. Chris chose a nearby university with a highly developed and diverse set of catering needs, where he could develop his unique style of food and service.

Plan, plan, plan: Prior to launch, Chris spent months developing a detailed plan. Working from the customer (what are their needs — identified by multiple, frequent, in-depth customer conversations) backward through on-site service and set-up, delivery, capital equipment, real estate, raw material procurement, recipes, hiring and training and operating manuals. Chris’s time allocation and effort in planning was intensive. And it paid off.

Develop a customer experience, not just a service: Chris is totally focused on delivering a delightful customer experience, which entails a lot of empathic listening to the customer to understand what they expect, and then disciplined and detailed execution at every event and every meal, including the customer experience orientation and training of staff. After the event, always ask and listen for customer reactions. Was the experience good? How could it be better?

Innovate, innovate, innovate: You evaluate so that you can innovate. Innovation is continuous improvement — always looking for something new and better that will create new value for customers. A new or improved recipe, better preparation methods, improved staff training — it’s all innovation when it’s done to elevate the customer experience. One of Chris’s technique’s is sampling events where he can try new things, give away his food for free, and get feedback that he can use to perfect the innovation.

What’s the end-result? For Chris, it’s happiness. He loves and enjoys what he is doing, and he brings happiness to customers, to the attendees at customer events, and to his employees. That’s the great fulfillment of entrepreneurship.

DOWNLOAD

PDF icon Download Chris Wilton’s Recipe for Entrepreneurial Success PDF (141 KB)

SUBSCRIBE

Apple Podcasts, Google Play, Stitcher, Spotify

34. Peter Klein on Pricing

/0 Comments/in /by

Pricing is fundamental to business success – to generating transactions, to cash flow and to profitable operations. There’s a lot of uncertainty for entrepreneurs in the pricing process, and economics is a good source of clarity. In fact, Peter Klein tells us that economics used to be called price theory, recognizing this fundamental role of pricing in economic exchanges.

Key Takeaways and Actionable Insights

Austrian economics offers a special way of thinking about pricing that is helpful for entrepreneurs. Here is a 12-point list of pricing fundamentals.

The Process of Pricing Discovery

Click to download the full PDF.

1. Consumers set prices. This insight establishes the right entrepreneurial mindset: the entrepreneur can’t control pricing and shouldn’t try to. It only leads to  frustration. Act on the basis of the consumer as the determiner of market prices.

2. Consumers don’t set or negotiate the price in every transaction. They are the determiners in the medium and long term. If sufficient numbers of them don’t feel they experience value at the price they’re asked to pay, they won’t buy and the entrepreneur will not be able to generate the revenue that’s called for in their business model. They’ll have to change their price, or their offering or their valued proposition.

3. A price holds only for one transaction. Just because it was the right price to get one consumer to transact at one moment in time and one context, does not mean it will hold for the future. Just because it is the sticker price or asking price does not mean the consumer has no alternative but to pay it.

4. That’s why Austrian Economics sees pricing as a dynamic and creative discovery process. The entrepreneur is charged with discovering the price the consumer is willing to pay now, in the future, in different circumstances and different contexts.

5. Price discovery goes further – to the design of specific packages of product / service and experiences. What will the consumer pay for the product now, with no waiting? What will they pay for same-day delivery? What will they pay for the product / service in a special physical location – is a newly-released movie in a luxury theater valued more than a 3-month old movie on a streaming service? Is a coffee in a cafe where the consumer can sit for a while more valued than a take-away cup?

6. The creativity and dynamism of pricing extends to promotions and discounts, including coupons, loyalty bonuses and time-based offers (10% off until midnight!)

7. The key to getting this creative and dynamic discovery process right is a deep knowledge of the consumer and their individual preferences. Senior discounts might be effective when they’re offered at a time of day that works for the retired seniors and not for working people. Coupon offers are effective for people with the time and inclination to collect and clip them, but wasted on consumers who feel too busy for such efforts. The smart entrepreneur exercises price segmentation.

8. The same principles apply to B2B pricing, although it might not be apparent in the entrepreneur’s subjective experience. The entrepreneur might feel that a retailer or wholesaler or customer to whom he or she is selling makes a take-it-or-leave-it offer on the price they are willing to pay. But the creative dynamism of discovery applies – the entrepreneur experiments with different packages of service levels, contract duration and other variables to find the right value combination that works best for both parties.

9. Once prices are discovered, the entrepreneur assembles resources to facilitate a profit at the prevailing price. This process is fundamental to Austrian price theory, yet the opposite of the typical business school scenario of cost-plus pricing. Business schools often get things backwards.

10. Entrepreneurs discover many ways to manage costs in the supply chain to meet the price the market dictates. One we talked about was channel management. For example, in the burgeoning Direct To Consumer (DTC) business model, entrepreneurs have eliminated the costs of doing business with physical wholesalers and brick-and-mortar retailers. Often the consumer is willing to pay an unchanged price. Alternatively, the entrepreneur can offer greater value via a lower price, as is the case with Warby Parker in the eyeglasses business, as well as many other innovative DTC brands.

11. The key to this process is simply to treat what accounting defines as “costs” as prices that are upstream from the entrepreneur. All prices can be discovered, negotiated or re-channeled. It may not seem that way to the entrepreneur who is buying from a seller with asymmetric negotiating power. But the dynamism, creativity and innovation of the price discovery process is always available and always on the entrepreneur’s side. The only prices we know are historical. All prices in the future are to be discovered and creatively negotiated.

12. Sometimes the creative solution is for buyers to organize themselves in a way that brings new negotiating power. Peter Klein used open source software as an example – users who are uncomfortable with the sticker prices of Microsoft or Oracle create an alternative service with an alternative price.

In summary

A price is the outcome of a single transaction – it does not necessarily hold for future transactions.

Prices are determined by the consumer – in the medium to long term.

Ultimately, the consumer also determines prices further up the value chain because all intermediate prices must contribute towards a cost-of-goods that is less than the price the consumer is willing to pay.

Entrepreneurs take control when they consider pricing as a dynamic, creative discovery process. Creativity spans pricing segmentation (different prices for different customers on different occasions in different contexts), pricing objectives (one transaction, multiple transactions, long term loyalty, etc) and product-service-price repackaging.

In all cases, deep knowledge and understanding of customers and vendors yields the understanding that informs effective creativity and discovery, and experimentation yields new knowledge.

DOWNLOAD

PDF icon Download The Process of Pricing Discovery PDF (141 KB)

SUBSCRIBE

Apple Podcasts, Google Play, Stitcher, Spotify