Personal Finance

Value creation, delivery key to start-up success

Value creation
Value creation can be achieved through various ways such as offering low prices for your products or services. FILE PHOTO | NMG 

It is said that approximately 60 per cent of the business that are started every year do not live to celebrate their third birthday due to many factors discussed such as finance, access to the market, unfavourable legal framework and many others.

Though these factors have a part to play in the high failure rate, creating value for customers by finding solutions to their daily problems ranks as the main challenge encountered by many start-ups as customers don’t just buy products or services but the value they gain from the sale of the product.

Very often we encounter people who wish to venture in business but they don’t actually understand which business to pursue. On many occasions they will request you to help them identify or get business idea that they can start to implement while others will buy or look for people who can help them write business plans which can guide them in their start up journey. Though this is an important part of venture creation process where people show intention to start businesses, it is critical to note that a business is a value delivery system and therefore a business idea to be pursued must create value to the targeted customers.

Value is defined as anything that customers are willing to pay for in your product or service. Value creation can be achieved through various ways such as offering low prices for your products or services, making it convenient for customers to access a given product or service, saving customer energy and time by bringing the product or a service near to them, improving the comfortability of a given service among others. In order to succeed in your venture, the following four venture creation stages are important to budding entrepreneurs.

The first step is generation of business ideas and identifying what the customers are willing to pay for it. Every large business you come across was once an idea in some one’s mind. Therefore understanding how to generate and identify business opportunities is an important stage in business development. Business ideas may be generated from sources such as; people problems and encounters, government policies, internet, hobbies, personal experiences, creativity among others sources. As organisations exists to solve customers problems, understanding how the idea generated will create value for the targeted customers is the second step towards developing sustainable business.


Secondly, in order to create value for the customers, an entrepreneur must learn to understand people’s problems, emotions and be ready to share and empathise with their experiences and emotions. This means that the idea generated must have the capability to solve customers’ problems either through relieving the pains encountered while consuming the products or services available or create gains that was not available to the customers.

For instance, M-Pesa created value to the customer by providing a convenient way of transferring money while Lipa na M-Pesa platform relieved the pain from the customer of first withdrawing money from M-Pesa in order to pay for the goods and services.

Third, though idea-generation and value-creation are important stages in business development, it is not enough without the entrepreneur understanding how he/ she will deliver the value created to the targeted customer. Value delivery entails developing systems that will help your customers to get the product or service developed easily, conveniently and cheaply. You may choose to deliver the value by acquiring a physical business premise, an APP, a website or social media platforms. For instance, Facebook, M-Pesa or Uber deliver the value created through applications (apps) ,while musicians deliver the value of their songs through live shows, YouTube or media stations.

Fourth, while creation and delivery of the value created are important stages to an entrepreneur, he or she must earn money in order to keep the business afloat. The last stage therefore involves, capturing the value created to the customer by developing a revenue stream for the business. Though revenue streams will mostly be determined by the primary activities carried out during the value creation process, in some instances value capture will come from third parties who wish to benefit from primary activities. For instance, in the retail industry the value capture is straight forward from the sale of products and services being sold, while in the media industry, viewers don’t pay for the viewership but value is captured through advertisements determined by size of the viewers.

After the new entrepreneurs have understood how they will create, deliver and capture value, they should embark on the customer development strategies which entails moving out of the comfort zone and venturing out to meet the customers you intend to sell the products or services to in order to gather more information. This should be accompanied by listening to the customer feedback about the product or service developed in order to tailor the product according to the customer needs and also for improvement.

The writer is an entrepreneurship and innovation lecturer at Kirinyaga University.