Value is not intrinsic; it is not in things. It is within us; it is the way in which man reacts to the conditions of his environment. – Ludwig von Mises, an Austrian economist.
To successfully provide value to another person, it must take on a form they are willing to pay for. Fortunately, there is no need to reinvent the wheel – Economic Value usually takes on one of twelve standard forms:
- Product. Create a single tangible item or entity, then sell and deliver it for more than what it cost to make.
- Service. Provide help or assistance, then charge a fee for the benefits rendered.
- Shared Resource. Create a durable asset that can be used by many people, then charge for access.
- Subscription. Offer a benefit on an ongoing basis, and charge a recurring fee.
- Resale. Acquire an asset from a wholesaler, then sell that asset to a retail buyer at a higher price.
- Lease. Acquire an asset, then allow another person to use that asset for a predefined amount of time in exchange for a fee.
- Agency. Market and sell an asset or service you do not own on behalf of a third party, then collect a percentage of the transaction price as a fee.
- Audience Aggregation. Get the attention of a group of people with specific characteristics, then sell access in the form of advertising to another business looking to reach that audience.
- Loan. Lend a certain amount of money, then collect payments over a predefined period equal to the original loan plus a preset interest rate.
- Option. Offer the ability to take a predefined action for a fixed period, in exchange for a fee.
- Insurance. Take on the risk of some specific bad thing happening to the policyholder in exchange for a predefined series of payments, then pay out claims only when the wrong thing happens.
- Capital. Purchase an ownership stake in a business, then collect a corresponding portion of the profit as a one-time payout or ongoing dividend.
We will investigate these Twelve Standard Forms of Value in more detail.
This concept by the author: http://book.personalmba.com/12-standard-forms-of-value/