Now forget burning lakhs of rupees on B-schools. Today’s book gives you a clear, comprehensive overview of the important business concepts in as little time as possible. The modern business practice requires little more than common sense, simple arithmetic, and knowledge of a few important ideas and principles. Josh is one of the top 100 business authors in the world, and has been featured as the #1 bestselling author in Business & Money, as ranked by Amazon.com. By the end of the book, you will be no less than a smart MBA.
Author: Josh Kaufman
Book size: 416 pages
Summary size: 10 pages
Courtesy: personalmba.com
Hi friends! I am Amrut Deshmukh the Booklet guy who is on a mission to cultivate the habit of reading amongst the youth of India. A little about today’s book now forget burning lacks of rupees on B schools. Today’s book gives you a clear comprehensive overview of the important business aspects in as little time as possible. The modern business practice requires little more than common sense, simple arithmetic and knowledge of a few important ideas and principles by the end of the book you will be no less than a smart MBA.
Chapters 1 to 3
Value Creation
Every successful business creates something of value. The world is full of opportunities to make other people’s lives better in some way, and your job as a businessperson is to identify things that people don’t have enough of, then find a way to provide it.The value you create can take on one of several different forms, but the purpose is always the same: to make someone else’s life a little bit better.Without Value-Creation, a business can’t exist — you can’t transact with others unless you first have something to trade. The best businesses in the world are the ones that create the most value for other people.Some businesses thrive by providing a little value to lot of people and some focus on providing a lot of value to only a few people. Regardless, the more real value you create for other people, the better your business will be and the more prosperous you’ll become.
There are 5 Parts of Every Business, each of which flows into the next:
- Value Creation- Discovering what people need or want, then creating it.
- Marketing- Attracting attention and building demand for what you’ve created.
- Sales- Turning prospective customers into paying customers.
- Value Delivery- Giving your customers what you’ve promised and ensuring that they’re satisfied.
- Finance- Bringing in enough money to keep going and make your effort worthwhile.
It doesn’t matter if you’re running a solo venture or a billion-dollar brand. Take any one of these five factors away, and you don’t have a business — you have something else.
- A venture that doesn’t create value for others is a hobby.
- A venture that doesn’t attract attention is a flop.
- A venture that doesn’t sell the value it creates is a non-profit.
- A venture that doesn’t deliver what it promises is a scam.
- A venture that doesn’t bring in enough money to keep operating will inevitably close.
If these five things sound simple, it’s because they are. Business is not (and has never been) rocket science — it’s simply a process of identifying a problem and finding a way to solve it in a way that benefits both parties.Anyone who tries to make business sound more complicated than this is either trying to impress you with their worldliness or sell you something you don’t need.If you’re thinking about starting a new business, defining what these processes might look like is the best place to start. If you can’t describe or diagram your business idea in terms of these core processes, you don’t understand it well enough to make it work.
Economically Valuable Skills are skills that are directly related to the 5 Parts of Every Business.Not every skill or area of knowledge is economically valuable. Some skills are primarily valuable for enjoyment or personal interest, but won’t help you improve your business. Often, if you do what you love, the money won’t necessarily follow.To increase your value in the market, focus on improving skills that are economically valuable.
There are five Core Human Drives that influence human behaviour:
- Drive to Acquire: the desire to collect material and immaterial things, like a car, or influence.
- Drive to Bond: the desire to be loved and feel valued in our relationships with others.
- Drive to Learn: the desire to satisfy our curiosity.
- Drive to Defend: the desire to protect ourselves, our loved ones and our property.
- Drive to Feel: the desire for emotional experiences like pleasure or excitement.
Whenever a group of people have an unmet drive, a market will form to satisfy it.The more drives your offer connects with, the more attractive your offer will become.Status Seeking is a universal phenomenon: In general, we like to be associated with people and organisations that we think are powerful, important, exclusive, or exhibit other high-status qualities or behaviours. We also like to ensure other people are aware of our status: for proof, examine what people post on their Facebook profiles.Status Seeking is a fact of human life: it’s not necessarily bad or something to be a avoided. On the contrary: Status Seeking can motivate people to accomplish amazing things. In the words of Alain de Botton, a philosopher and social critic, “If one felt successful, there’d be so little incentive to be successful.”As a business professional, it’s important to understand that status considerations are present in every level of the Core Human Drives. When you make an offer to a new prospect, they will automatically and unconsciously examine how your offer will influence their social status. Consciously building Social Signals into your offer is almost always an effective way to increase its appeal to your target market.If you’re thinking of starting a new business or expanding an existing business into a new market, it pays to do some research before you leap.
The 10 Ways to Evaluate a Market provide a back-of-the-napkin method you can use to identify the attractiveness of any potential market. Rate each of the 10 factors below on a scale of 0 to 10, where zero is extremely unattractive and 10 is extremely attractive. When in doubt, be conservative in your estimate:
- Urgency— how badly do people want or need this right now? (Renting an old movie is typically low urgency; seeing a new picture on opening night is high urgency, since it only happens once.)
- Market Size— How many people are actively purchasing things like this? (The market for underwater basket weaving courses is very small; the market for cancer cures is massive.)
- Pricing Potential— what is the highest average price a purchaser would be willing to spend for a solution? (Lollipops sell for $0.05; aircraft carriers sell for billions.)
- Cost of Customer Acquisition— how easy is it to acquire a new customer? On average, how much will it cost to generate a sale, both in money and effort? (Restaurants built on interstate highways spend little to bring in new customers. Government contractors can spend millions landing procurement deals.)
- Cost of Value-Delivery— how much would it cost to create and deliver the value offered, both in money and effort? (Delivering files via the Internet is almost free; inventing a product and building a factory costs millions.)
- Uniqueness of Offer— how unique is your offer versus competing offerings in the market, and how easy is it for potential competitors to copy you? (There are many hair salons, but very few companies that offer private space travel.)
- Speed to Market— how quickly can you create something to sell? (You can offer to mow a neighbour’s lawn in minutes; opening a bank can take years.)
- Up-Front Investment— how much will you have to invest before you’re ready to sell? (To be a housekeeper, all you need is a set of inexpensive cleaning products. To mine for gold, you need millions to purchase land and excavating equipment.)
- Up-Sell Potential— are there related secondary offers that you could also present to purchasing customers? (Customers who purchase razors need shaving cream and extra blades as well; buy a Frisbee, and you won’t need another unless you lose it.)
- Evergreen Potential— once the initial offer has been created, how much additional work will you have to put into it in order to continue selling? (Business consulting requires ongoing work to get paid; a book can be produced once, then sold over and over as-is.)
When you’re done with your assessment, add up the score. If the score is 50 or below, move onto another idea—there are better places to invest your energy and resources. If the score is 75 or above, you have a very promising idea—full speed ahead.Anything between 50 and 75 has the potential to pay the bills, but won’t be a home run without a huge investment of energy and resources, so plan accordingly.
The Hidden Benefit of Competition
When two markets are equally attractive, you should enter the one WITH competition. The Hidden Benefit of Competition is knowing from the start that there’s market of paying customers. Become a customer of the competition to learn from them.
Chapters 4 to 10
The Crusader Rule
The Crusader Rule is a reminder to evaluate new business ideas before you proceed. There’s huge difference between an interesting idea and a solid business. Remember: you have to be able to pay the bills!
Standard Forms of Value
To provide value to another person, it must take on a form that they are willing to pay for. Economic Value usually takes one of the following Standard Forms of Value:
- Product- Create a single tangible item or entity, then sell and deliver it for more than what it costs 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.
- Option- Offer the ability to take a pre-defined action for a fixed period of time in exchange for a fee.
- Capital- Purchase an ownership stake in a business, then collect a corresponding portion of the profit as a one-time payout or ongoing dividend.
Hassle Premium
People are almost always willing to pay for things that they believe are too much of a pain to take care of themselves. Where there’s a hassle, there’s a business opportunity: The Hassle Premium.
The project or task in question may:
- Take too much time to complete.
- Require too much effort.
- Distract from other priorities.
- Involve too much confusion, uncertainty, or complexity.
- Require prior experience.
- Require specialised resources or equipment that’s difficult to obtain.
The more hassle a project or task involves, the more people are generally willing to pay for an easy solution, or pay someone to complete the job on their behalf.
Perceived Value
Perceived Value determines how much your customers will be willing to pay for your offer.The less attractive the End Result, and the bigger the involvement it takes to the user to get the benefit, the lower the perceived value will be.Create forms of value with the least end-user effort and best End Result possible to have the highest perceived value.
Feedback
Feedback helps you understand how well is your offering meeting your potential customers’ needs before development is complete, which allows you to make changes before you start selling.
Here are a few tips to maximize the value of Feedback:
- Listen to real potential customers instead of friends and family.
- Ask open-ended questions.
- Steady yourself, and keep calm. No one likes hearing that their offer sucks.
- Take what you hear with a grain of salt. The worst response isn’t empathetic dislike; it’s total apathy.
- Give potential customers the chance to preorder. If they are willing to buy from you, that’s a green light!
If no one is willing to preorder you should ask them why, to find out about their Barriers of Purchase.
Economic Values
As you develop your offering, one of your first priorities should be to find out what your potential customers value more than the buying power of the dollars in their wallets. Assuming the promised benefits of the offering are appealing, there are nine common Economic Values that people typically consider when evaluating a potential purchase. They are:
- Efficacy — how well does it work?
- Speed — how quickly does it work?
- Reliability — can I depend on it to do what I want?
- Ease of Use — how much effort does it require?
- Flexibility — how many things does it do?
- Status — how does this affect the way others perceive me?
- Aesthetic Appeal — how attractive or otherwise aesthetically pleasing it is?
- Emotion — how does it make me feel?
- Cost — how much do I have to give up to get this?
Almost every offer can be thought of in terms of improving either convenience or fidelity. It’s incredibly difficult to optimize for both fidelity and convenience at the same time, so the most successful offerings try to provide the most convenience or fidelity among all competing offerings.If you’re craving pizza, a table at the original Pizzeria Uno in Chicago is high fidelity; Dominos home delivery is convenient. Accordingly, Pizzeria Uno benefits more from making the dining experience remarkable, while Dominos benefits more from delivering decent pizza as fast as possible.The tradeoffs that are made in the development of new offerings are what give each option its unique identity. Here’s an example from the apparel business: Old Navy, Banana Republic, and Gap are owned by the same company, Gap Inc. All three lines make the same types of clothing—shirts, pants, and so on — but offering different tradeoffs.Instead of attempting to make a single clothing line that’s designed to appeal to everyone (which is impossible, since everyone wants something different), the company focused each line around a specific tradeoff. Old Navy emphasises functionality (efficacy) and low cost. Gap emphasises style and fashion at a moderate cost. Banana Republic emphasises aesthetics and status at a premium cost.Each line has its own identity and appeals to a different type of potential customer, even though the clothes may be manufactured using the same processes and the revenues flow to the coffers of the same company.
Marketing
Offering value is not enough. If no one knows (or cares) about what you have to offer, it doesn’t matter how much value you create. Without Marketing, no business can survive – people who don’t know you exist can’t purchase what you have to offer, and people who aren’t interested in what you have to offer won’t become paying customers.Marketing is the art and science of finding prospects – people who are actively interested in what you have to offer. The best businesses in the world find ways to attract the attention of qualified prospects quickly and inexpensively. The more prospects you entice, the better off your business will be.
Marketing is not the same thing as selling. While “direct marketing” strategies often minimize the time between attracting attention and asking for the sale, marketing and selling are two different things.Marketing is about getting noticed; Sales is about closing the deal.
Attention
The most important rule of Marketing: Attention is limited. People are expert at filtering, because they can’t pay attention to everything.To be noticed you need to find a way to be more interesting or useful than your competition.You don’t want_ just_ Attention. You want the attention of prospects who will ultimately purchase from you.Business is about making sales, not winning a popularity contest.
Remarkability
Being Remarkable is the best way to attract Attention. It makes your offering worth noticing and talking about.You should design your offer to be Remarkable in order to pique your prospect’s curiosity.Aim for the edges, that’s where remarkability is.
Preoccupation
In order to earn the Attention of a prospect, you must divert their attention from what they’re already doing. It’s best to assume your prospects begin in a state of Preoccupation: they’re doing something else.The best way to break a potential prospect’s Preoccupation is to provoke a feeling of curiosity, surprise, or concern.The stronger and more emotionally compelling the stimuli, the easier it is to attract attention.
End Result
Marketing works better when it focuses on the End Result. People don’t buy books, they buy knowledge.It’s more comfortable to focus on features, on what your offer does, but it’s more effective to focus on benefits, what your offer provides. The End Result is usually an experience related to a Core Human Drive.
Chapters 11 to 18
Sales
“People don’t like to be sold, but they love to buy.”
Every successful business ultimately sells what it has to offer. Having millions of prospects isn’t enough if no one ultimately pulls out their wallet and says, “I’ll take one.” The Sales process begins with a prospect and ends with a paying customer.No sale, no business.The best businesses in the world earn the trust of their prospects and help them understand why the offer is worth paying for. No one wants to make a bad decision or be taken advantage of, so Sales mostly consists of helping the prospect understand what’s important and convincing them you’re capable of actually delivering on what you promise.The end of the Sales process is an excited new customer and more cash in the bank.
Transaction
A Transaction is an exchange of value between two or more parties.
Sales are the only point where resources flow into the business, so Transactions are critical.You can only transact with things that are Economically Valuable.The goal is to make the first profitable Transaction as quickly as possible, because that’s when you transition from a project to a business.
Trust
Without Trust, no Transaction will take place.Building a trustworthy Reputation over time through honesty and fair dealing is the best way to build Trust.The easier both parties can verify that the other party is trustworthy, the easier it is to make a Transaction.
Pricing Uncertainty Principle
The Pricing Uncertainty Principle states that all prices are arbitrary and malleable. Pricing is an executive decision. You can charge whatever you want!The key is being able to support the asking price for a customer to accept it. You must be able to provide a Reason Why the price is worth paying.Keep in mind that, in general, people prefer to pay as little as possible for what they want.
Value Delivery
“A satisfied customer is the best business strategy of all.”
Every successful business actually delivers what it promises to its customers. There’s a term for a person who takes other people’s money without delivering equivalent value: “scam artist.”Value-Delivery involves everything necessary to ensure every paying customer is a happy customer: order processing, inventory management, delivery/fulfilment, troubleshooting, customer support, etc. Without Value-Delivery, you don’t have a business.The best businesses in the world deliver the value they’ve promised to their customers in a way that surpasses the customer’s expectations. Customers like to get the benefits of their purchases quickly, reliably, and consistently.The more happy customers a business creates, the more likely it is that those customers will purchase from the company again. Happy customers also increase the likelihood that they’ll tell others about what you do, improving your Reputation and bringing in even more potential customers.Successful businesses satisfy their customers most of the time in a changing environment. Unsuccessful businesses fail to make their customers happy, lose them, and eventually fail.
Value Stream
A Value Stream is the set of all steps from the start of your value creation until the delivery of the end result to your customer. The Value Stream is basically the combination of your Value Creation and Value Delivery processes. It’s best to try to make your Value Stream as small and efficient as possible.When I worked at Procter & Gamble, one of the most fascinating things about my job was understanding how products were created and delivered. Here’s a quick look at how a bottle of Dawn dishwashing detergent is made:
- Raw materials are delivered to the factory.
- The materials are combined to create dishwashing liquid, which is stored in large vats.
- Plastic bottles are blown into shape using molds, then filled with the liquid and capped.
- Adhesive labels are applied to each bottle.
- Each bottle is inspected, boxed, then loaded onto a pallet.
It’s a textbook example of a value-creation process, which begins with raw materials and ends with finished product, ready to be shipped. Here’s what happens next:
- Pallets are wrapped, stacked, and stored for shipment in a warehouse.
- When orders from customers are placed, pallets are moved into position for loading on a truck.
- A truck picks up the pallets and delivers it to the customer’s closest distribution center.
- The customer puts the pallets on a delivery truck.
- The truck delivers the pallet to a store that needs additional inventory.
- The store unwraps the pallet, unboxes the product, and transfers it to the shelf, where it will remain until purchased by the consumer.
That’s a lot of steps for a little bottle of dish soap. Those steps are worth studying.
The best way to understand your Value Stream is to diagram it. Creating a complete diagram of your entire Value Stream takes effort, but it can help you streamline your process, making the entire system perform better.In general, try to make your Value Stream as small and efficient as possible. The shorter and more streamlined your Value Stream, the easier it is to manage, and the more effectively you’ll be able to deliver value.
Expectation Effect
A customer’s perception of quality relies on expectations and performance. After a purchase is made, the performance of the offering must surpass the expectations for the customer to be satisfied. If performance is better than expectations, the perception of the offering will be high. Do whatever you can to provide something that unexpectedly delights your customers.
Zappos has perfected the art of selling shoes online.Selling shoes over the Internet is a tough business — customers can’t try them on, and no one wants to be stuck with shoes they don’t like and will never wear. To compensate, Zappos applies classic Risk Reversal to every order—they offer free shipping and free no-questions-asked returns if you don’t like the products you order. Those two policies eliminate the risk of making a bad purchase, so customers are more willing to try them out.
That’s not, however, the reason Zappos has developed such a solid reputation in this market. The secret lies in an unexpected benefit the company doesn’t advertise.When you order from Zappos, it’s very likely that you’ll receive a pleasant surprise: your shoes will arrive the next day, several days ahead of schedule. Zappos could easily advertise “free expedited shipping,” but they don’t — the surprise is far more valuable.
A customer’s perception of quality relies on two criteria: expectations and performance. You can characterise this relationship in the form of a quasi-equation, which I call the Expectation Effect:
Quality = Performance – Expectations
When you perform well above your customers’ expectations, they’ll be satisfied with the experience.
Finance
In my experience, people enjoy learning about Value-Creation, Marketing, Sales, and Value-Delivery – they’re easy to understand and visualize. When it comes to Finance, however, eyes glaze over. Finance conjures up associations of “bean counting,” mathematical formulae, and spreadsheets overflowing with numbers. It doesn’t have to be that way – finance is quite easy to understand if you focus on what’s most important.Finance is the art and science of watching the money flowing into and out of a business, then deciding whether or not it’s enough to keep going. It’s really not any more complicated than that. Yes, there can be fancy models and jargon, but ultimately you’re using numbers to decide whether or not your business is operating the way you intended, and whether or not it’s enough.
Every successful business must bring in a certain amount of money to keep going. If you’re creating value, marketing, selling, and delivering value, there’s money flowing into and out of the business every day. In order to continue to exist, every business must bring in Sufficient revenue to justify all of the time and effort that goes into running the operation.Everyone has bills to pay and groceries to buy, so the people involved in the business need to consistently make enough money to justify the time and energy they’re investing, or they’ll quit and do something else. Accordingly, every business must capture some amount of the value it creates as revenue, which is used to pay expenses and compensate the people who make the business run.
Now that you have got a fair idea of the contents of the book. I would strongly recommend you to buy the book from the given link. The Personal MBA is a must read book for businessmen and entrepreneurs.
Disclaimer:
Courtesy to the book publisher and author who worked to spread book’s knowledge. This summary is in no way to claim rights but a mere contribution to cultivate reading habit among youth and motivate them to buy the book.
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