Posts

97. John Boles: How Austrian Is Your Business? Continuous Value Perception Monitoring is One Measure.

/0 Comments/in /by

With the development of the Austrian Business Paradigm and the Austrian Business Model, and tools such as the “Value Learning Process,” businesses of all kinds can utilize the deep insights of Austrian economics to further enhance how they facilitate value for their customers.

John Boles — an avid listener of the Economics for Entrepreneurs Podcast — provides an example of how he applies these insights at his accounting firm.

Download The Episode Resource Continuous Value Perception Monitoring Tool – Download

Key Takeaways & Actionable Insights

1) Improved customer understanding.

The Austrian business paradigm places the customer in first position. This contrasts with traditional business thinking that puts the firm or the product or service in first position and searches for ways (“strategies”) to sell or market that offering to a set of customers who are to be identified during the selling process.

The way to put the customer in first position is to make your top priority a deep and intimate understanding of the customer, demographically (who they are), functionally (what they do and how they do it) and emotionally (how they feel — about key issues and challenges, about vendors and service providers, about competition and every aspect of business).

The first question Austrian business practitioners ask themselves is: how deep and intimate is my customer knowledge, and can it be improved?

2) Calibrating the customer’s perception of value.

Value is a feeling that exists only in the mind of the customer. The entrepreneur’s task is to facilitate that feeling of value — ease the way for the customer to arrive at that happy state of mind. It’s imperative for entrepreneurs to try to feel what the customer feels — to sympathize with their perception of value, rather than to focus only what the firm is delivering. We must know what the customer is buying, not just what we are selling.

The tools to use are monitoring of customer behavior (what they do — for example, shopping around for alternatives — is more important than what they say); making sure you understand their rankings of features, attributes and benefits, that is, what’s most important to them; and conducting interviews about the value experience. Ask the question: is the customer’s perception of value experienced aligned with the firm’s perception of value delivered?

3) Are value adjustments indicated?

The Austrian view of the market as a process helps us think about continuous change. Customers are continuously interacting with other customers, competitors, ideas, new value propositions, environmental conditions, regulations and a plethora of marketplace changes. Consequently, their perceptions of value are in constant flux. It should not be a surprise that entrepreneurs need to make value adjustments. It may be necessary to change perceptions of absolute value (via an adjustment in the value proposition), of relative value (via an adjustment in comparison with alternative propositions), or of exchange value (via adjustment in pricing, bling terms, or discounts / rebates).

4) Communicating adjustments.

It’s easy to overlook a critical component of value adjustments: communication. The Austrian business model advocates frequent in-depth conversations with customers at every level. These conversations, while always two-way of course, can be primarily designed for outbound communication, describing the adjustments made, and why they were made and ensuring the customer understands the responsiveness of the firm; or for inbound data gathering, primarily listening in order to further increase understanding of the customer and their preferences.

Customer communication is a component of perceived value.

5) Ongoing evaluation.

The customer is always evaluating the service provider / vendor and their value proposition, through the lens of experience: did the value experience match the anticipated experience; and, if not, in what ways was it deficient? The service provider / vendor must also undertake continuous evaluation. Did the value adjustments succeed? Are more called for? What are the indicators of change?

Free Downloads & Extras From The Episode

Continuous Value Perception Monitoring + Adjustment (PDF): Get It Here

“The Austrian Business Model” (video): https://e4epod.com/model

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

69. Mark Packard’s Value Learning Process: The Two Kinds of Knowledge Entrepreneurs Must Have

/0 Comments/in /by

Mark Packard has a big insight about how entrepreneurs manage innovation. Producers don’t innovate, customers do. That may sound a little odd, but Mark’s Value Learning Process makes it clear.

Key Takeaways and Actionable Insights

Innovation is one of the keys to business success.

The world is changing at such a pace, and your customers’ preferences are changing so fast, that your business has to change at the same speed, or even faster. How to keep up is a part of the entrepreneurial challenge.

Mark Packard has a big insight about how entrepreneurs manage innovation.

Producers don’t innovate. Customers do. That may sound a little odd, but Mark’s Value Learning Process makes it clear. Customers are always looking for new value. They’re always dissatisfied, seeking to make things better for themselves. They know what’s wrong or disappointing or less than perfect with their current experience. And they’re always looking for new solutions, better ways to do things, improved experiences. If you know how to interpret their behavior and their dissatisfactions, they’ll tell you what to do.

Then, as a producer, you need to figure out how to do what the customer wants.

Two kinds of knowledge and two kinds of thinking are essential.

Entrepreneurs need to know about what customers want. Then they need the know-how to deliver the solution. Mark calls these two kinds of knowledge: Needs Knowledge and Technical Knowledge. They require two different mindsets.

Needs Knowledge and Technical Knowledge

Click the image to download the full PDF.

Mindset 1: Think like a customer.

If customers are the ones who innovate, entrepreneurs must be able to think like customers. Really think like them. Be dissatisfied. Demand better. We call the required entrepreneurial skillset “empathy”. It’s sentiment mirroring – your brain and sensory system has to be able to mirror those of the customer. You must feel the same feelings they do. It can be done. Practice it.

A big part of the economy is consumers innovating for themselves. Think like they do. Make a list of what’s most important to you. These are innovation opportunities that you know more about than anyone else. Think about how you’d like to improve your experiences in these areas. What features can you not do without? Why? Think like a customer. Start with your own problem in order to immerse yourself in the problems others want to solve.

Mindset 2: Think like a producer.

You love your customers. You want to please them. Develop the technical knowledge to do so. This doesn’t necessarily mean high technology. If you want them, for example, to enjoy a new kind of convenience grocery store with an organic food emphasis and lots of innovative food-to-go options, you need to know store operations, supply chain logistics, inventory management, and flexible / adaptive hiring practices. You need mastery of technical knowledge.

And while you don’t need to be a programmer, you do need knowledge of the latest technologies from a producer’s viewpoint: how do these technologies help you to deliver a better, faster, lower cost customer experience. Geeking out on these technologies is a good idea for producers.

Knowledge Compounding.

Many innovative solutions come from combining two existing pieces of knowledge. Combining needs knowledge and technical knowledge can produce a new solution to the market. Mark also talks about combining active knowledge — what we know about that’s prominent in our mind — with semi-active knowledge — what we know about that we don’t use every day or is stored away deeper in our memory that’s hidden by our recency bias.

These and other knowledge combinations can generate big ideas. In fact, Curt Carlson in episode #37 told us that combining knowledge is not just additive, it’s multiplicative. Knowledge compounds when we combine it, leading to faster innovative progress. Utilizing Mark Packard’s knowledge combination techniques is the way to get there.

Free Downloads & Extras

The Two Kinds of Knowledge Entrepreneurs Must Have: 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

55. Dr. Mark Packard On The Tools You Need To Make The Value Learning Process Work For Your Business

/0 Comments/in /by

In this week’s Economics for Entrepreneurs podcast, Dr. Mark Packard tells us more about his research into the value learning process, and reveals two tools he has developed to help business teams to learn from customers and prospects.

Key Takeaways and Actionable Insights

The Austrian economic principle of subjective value – placing value entirely in the mind of the customer – helps Austrian entrepreneurs analyze value creation from a unique viewpoint. One of these is the value learning process, a new way of thinking about how to be a critical catalyst for a customer’s value experience.

Customers learn intentionally over time, endlessly looking for new and better ways to satisfy their various needs.

Mark’s research has identified 5 stages in this value learning process, depicted in the graphic below.

Value Is A Learning Process Knowledge Map Graphic

Click on the image to download the New PDF

The 5 stages are: Predicted Value, Relative Value, Exchange Value, Experience Value and Value Assessment. Mark describes each stage at the beginning of the podcast.

Because the customer’s value learning process is intentional, it’s one the entrepreneur can monitor, measure and influence.

It’s an example of entrepreneurs learning from their customers, as those customers are conducting their valuation.

The customer is intentional, but not necessarily paying attention, when engaging in valuation.

Entrepreneurs have some work to do to track the customer’s learning process. They’re not taking note as they go. Mark talks about representationalism: how experience is a mental representation that our minds create from the stimuli that senses pick up. That could be going on while the brain’s attention is elsewhere. We’re not thinking consciously about wearing clothes or sitting on a chair, but we are experiencing those activities and we might defer our learning from them to the future, when thinking about buying new clothes or chairs.

For the entrepreneur to learn from the customer, it’s important to listen to the customers who are paying the most attention.

Don’t do your market research with customers from whom you can’t learn because they’re not paying enough attention to your value proposition or to the value experience you are interested in. Find the customers with the most highly developed need, and who are most dissatisfied with the status quo.

Dissatisfaction is a feeling that draws attention away from other distractions. It’s important to customers because it’s disconcerting, unwanted. It’s a high-learning event. In dissatisfaction, customers are finding something new about their need and how to (not) satisfy it. It’s a good time to ask them.

Dissatisfied customers are motivated to share their learning because they are searching for a better solution.

Customers are in the learning process and, if they experience dissatisfaction, they know they need to search for an alternative. Sharing dissatisfaction might result in some new learning for them. They’re willing to talk to you because you are trying to solve their problem.

Focus your research on the highest need, high dissatisfaction customer.

They’ll yield the richest research results, most likely to help you develop an effective value proposition.

When talking to these customers, it’s critical to utilize mindfulness: ensuring customers are in full experiential mode and ignoring all other distractions.

You might think of mindfulness techniques as helping with meditation. But we are able to adapt them for use in our processes of Austrian entrepreneurship. Mark uses step-by-step instructions to talk customers through a mindfulness technique to get the best information and understanding of their needs and satisfaction/dissatisfaction experiences. Entrepreneurs can use the tool at many stages of the value learning process, both at the early development stage for new concepts, and at the marketplace learning stage to tap into their experience of competitive products and services that are making them dissatisfied. We’ve created a new graphic indicating a couple of stages where they could be employed.

With the High Knowledge Customers Tool and the Mindfulness Tool, we’re providing business teams with important equipment to harness the value learning process and reap the developmental benefits of new customer knowledge.

Here is an illustration of where these two tools can be applied in the Value Learning Process. We’ll release Dr. Packard’s teaching course in the coming months, as part of our resources platform for entrepreneurs. These tools and several more will be featured in full in Dr. Packard’s new course. Give us your email address if you’d like to receive information about its release.

Items Mentioned In This Episode

Waiting List Signup for Dr. Packard’s Tools –  Click Here
Austrian Entrepreneur’s Journey Course – Click Here

Free Downloads & Extras

Tools for the Value Learning Process: 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

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.

Value Is A Learning Process Knowledge Map Graphic

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!

DOWNLOADS & EXTRAS

Value Is A Learning Process PDF: Our Free E4E Knowledge Graphic
Understanding The Mind of The Customer: Our Free E-Book

SUBSCRIBE

Apple Podcasts, Google Play, Stitcher, Spotify