SESSION #3

Business
Understanding

Makarand Kaprekar
Integrated MBA E & FB Class 20-21
 PRODUCT

Create a single tangible item or entity, then sell and deliver it

for more than what it cost to make.

12 Forms SERVICE

Value
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.

12 Forms RESALE

Value
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 pre-defined amount of time in exchange for a fee.
 AGENCY

Market and sell an asset or service you don’t own on behalf of

a third-party, then collect a percentage of the transaction
price as a fee.

12 Forms AUDIENCE AGGREGATION

Get the attention of a group of people with certain

Value 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 pre-defined period of time equal to the original loan plus a
pre-defined interest rate.
 OPTION

Offer the ability to take a pre-defined action for a fixed period

of time in exchange for a fee.

INSURANCE

12 Forms Take on the risk of some specific bad thing happening to the
policy holder in exchange for a pre-defined series of

Value payments, then pay out claims only when the bad thing
actually 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.
 Evaluate which of the 12
values your business fulfills
 Form of Value #1: Product

A Product is a tangible form of value.

To run a product-oriented business, you must:

• Create some sort of tangible item that people
want.
• Produce that item as inexpensively as possible
while maintaining an acceptable level of quality.
• Sell as many units as possible for as high a price
as the market will bear.
• Keep enough inventory of finished product
available to fulfill orders as they come in.
Any Examples?
 Form of Value #2:
Service

A Service involves helping or assisting someone, in

exchange for a fee.

To run a Service-oriented business, you must:

• Have employees capable of a skill or ability other
people require but can’t, won’t, or don’t want to do
themselves.
• Ensure that the service is provided with
consistently high quality.
• Attract and retain paying customers.

Any Examples?
 Form of Value #3: Shared
Resource

A Shared Resource is a durable asset that you create

once, and then charge the customers for using it many
times.

To create a shared resource, you must:

• Create an asset people want to have access to.
• Serve as many users as you can without affecting
the quality of each user’s experience.
• Charge enough to maintain and improve the
shared resource over time.

Any Examples?
 Form of Value #4: Subscription
Predefined benefits on an ongoing basis in exchange for a
recurring fee.
Benefits provided can be tangible or intangible—the key
differences are:
• the expectation of additional value to be provided in the
future, and…
• that fees will be collected until the subscription is canceled.

To create a successful subscription, you must:

• Provide significant value to each subscriber on a regular
basis.
• Build a subscriber base, and continually attract new
subscribers to compensate for attrition.
• Bill customers on a recurring basis.
• Retain each subscriber as long as possible.

Any Examples?
 Form of Value #5: Resale
Resale is the acquisition of an asset from a wholesale
seller, followed by the sale of that asset to a retail
buyer at a higher price.

To provide value as a reseller, you must:

• Purchase a product as inexpensively as possible,
usually in bulk.
• Keep the product in good condition until sale—
damaged goods can’t be sold.
• Find potential purchasers of the product as quickly
as possible to keep inventory costs low.
• Sell the product for as high a markup as possible,
preferably a multiple of the purchase price.
Any Examples?
 Form of Value #6: Lease

A Lease involves the acquisition of an asset, followed by

allowing another person to use that asset for a
predefined amount of time in exchange for a fee.

To provide value via a lease, you must:

• Acquire an asset people want to use.
• Lease the asset to a paying customer on favorable
terms.
• Protect yourself from unexpected or adverse events,
including the loss or damage of the leased asset.

Any Examples?
 Form of Value #7: Agency

Agency involves the marketing and sale of an asset you

don’t own and for establishing a new relationship
between your source and a buyer, you earn
a commission or fee.

To provide value via an agency, you must:

• Find a seller who has a valuable asset.
• Establish contact and trust with potential buyers of
that asset.
• Negotiate until an agreement is reached on the terms
of sale.
• Collect the agreed-upon fee or commission from the
seller.
Any Examples?
 Form of Value #8: Audience Aggregation

Audience Aggregation revolves around collecting the

attention of a group of people with similar characteristics,
then selling access to that audience to a third party.

To provide value via an Audience Aggregation, you must:

• Identify a group of people with common
characteristics or interests.
• Create and maintain some way of consistently
attracting that group’s attention.
• Find third parties who are interested in buying the
attention of that audience.
• Sell access to that audience without alienating the
audience itself.
Any Examples?
 Form of Value #9: Loan

A Loan involves an agreement to let the borrower use a

certain amount of resources for a certain period of time.

To provide value via Loans, you must:

• Have some amount of money to lend.
• Find people who want to borrow that money.
• Set an interest rate that compensates you adequately
for the loan.
• Estimate and protect against the possibility that the
loan won’t be repaid.

Any Examples?
 Form of Value #10: Option

An Option is the ability to take a predefined action for a

fixed period of time in exchange for a fee.

To provide value via Options, you must:

• Identify some action people might want to take in the
future.
• Offer potential buyers the right to take that action
before a specified deadline.
• Convince potential buyers that the option is worth the
asking price.
• Enforce the specified deadline on taking action.

Any Examples?
 Form of Value #11: Insurance

Insurance involves the transfer of risk from the purchaser

to the seller.

To provide value via Insurance, you must:

• Create a binding legal agreement that transfers the
risk of a specific bad thing (a “loss”) happening from
the policy holder to you.
• Estimate the risk of that bad thing actually happening,
using available data.
• Collect the agreed-upon series of payments (called
“premiums”) over time.
• Pay out legitimate claims upon the policy.

Any Examples?
 Form of Value #12: Capital
Capital is the purchase of an ownership stake in a
business.

To provide value via Capital, you must:

• Have a pool of resources available to invest.
• Find a promising business in which you’d be willing to
invest.
• Estimate how much that business is currently worth,
how much it may be worth in the future, and the
probability that the business will go under, which
would result in the loss of your capital.
• Negotiate the amount of ownership you’d receive in
exchange for the amount of capital you’re investing.
Any Examples?
Bring Examples of Your own
Business in relation to 12
Forms of Value Creation