Personal MBA

The first 5 chapters summaraized very foundational business principals. It was a good refresher.

The psychology book section was very shallow and broad. Too much for my liking. It had odd aspects of self help and productivity. Both interesting and important topics, but I’d rather get deeper information in a more do used book

Defining a Business:

Every successful business creates or provides something of valuethat other people want or need,at a price they are willing to pay,in a way that satisfies the purchaser’s needs and expectations,and provides the business with sufficient revenue to make it worthwhile for the owners to continue operation.

Business has five interdependent core processes:

  1. Value creation
  2. Marketing
  3. Sales
  4. Value delivery
  5. Finance

5 Basic Human Drivers

  1. Drive to Acquire — Physical objects and immaterial things (status, power, influence)
  2. Drive to Bond — Desire to feel valued and loved. Businesses that facilitate bonding or make us feel attractive, well-liked or regarded.
  3. Drive to Learn — Desire to satisfy curiosities. All of academia, workshops, courses, etc.
  4. Drive to Defend — Desire to feel safe, protect ourselves, fam, loved ones, and property
  5. Drive to feel — Desire for new sensory stimulus, intense emotional experiences, pleasure, excitements, entertainment, and anticipation

Status seeking is also a thing // drive to acquire status

10 Ways to Evaluate a Market:

  1. Urgency
  2. Market Size
  3. Pricing Potential
  4. Cost of Customer Acquisition
  5. Cost of Value Delivery
  6. Uniqueness of offer
  7. Speed to market
  8. Up-front investment
  9. Upsell potential
  10. Evergreen potential — how much addtl. work is needed to continue selling after the first sale?

12 Standard Forms of Value

  1. Product — e.g. toothbrush
  2. Service —e.g. tax preparation
  3. Shared Resource — e.g. gyms
  4. Subscription — e.g. Netflix
  5. Resale — i.e. Retail stores e.g. Walmart
  6. Agency — i.e. being an agent to someone e.g. an actor’s agent
  7. Audience Aggregation — e.g. Facebook
  8. Loan — e.g. mortgage
  9. Lease — e.g. car lease
  10. Option — e.g. movie tickets, licensing rights
  11. Insurance — e.g. homeowners insurance
  12. Capital — e.g. angel investing for equity

4 pricing methods:

  1. Replacement cost - typically a “cost-plus” value meaning the total cost of making/replacing something plus the margin you want.
  2. Market Comparison - what are other products of similar nature priced at?
  3. Discounted cash flow/net present value - “How much is it worth if it can bring in money over time?”. Used for items that will make other people money to justify a larger upfront cost. DCF/NPV is only used to price things that can produce ongoing cash flow - this makes it a common way to price businesses when they are bought or sold.
  4. Value comparison - (usually the best way) what is the value of your product to the customer? Price accordingly.

SPIN Selling: 4 phases of successful selling:

  1. Understanding the situation
  2. Defining the problem
  3. Clarifying the short-term and long-term implications of that problem
  4. Quantifying the need- payoff or the financial and emotional benefits the customer would experience after the resolution of the problem

→ This methodology is about building trust and gaining as much information as possible in order to deliver the most amount of value to a customer (or at least deliver the right information with the right framing).

4 Methods to Increase Revenue:

  1. Increase the number of customers you serve
  2. Increase the average size of each transaction by selling more.
  3. Increase the frequency of transactions per customer
  4. Raise prices

Allowable Acquisition Cost:

How much you’re reasonably allowed to spend to try to acquire a new customer based on their LTV.

First sales can be “loss leaders” - low introductory prices to establish a relationship with a buyer.

AAC Formula: average customer LTV - Value Stream Costs - (OH / Total Customer Base) x (1 - desired PM)

  • Value Stream Costs (what it takes to create and deliver the value promised to that customer over your entire relationship with them)
  • OH / Total Customer Base represents fixed costs needed to pay to stay in business over that period of time
  • OH represents minimum ongoing resources for a business to continue operations

Four Methods of Completion

  1. Completion→ Best for tasks that only you can do particularly well
  2. Deletion→ Unimportant and unnecessary items should be deleted (as in the Eisenhower Matrix [link])
  3. Delegation→ Effective for anything a person can do 80% as well as you can. {important}*
  4. Deferment→ For non-critical and not time-dependent tasks

2 Fundamental forms of Power:

  1. Compulsion — force
  2. Influence — encourage

Power is a neutral tool (not good or bad); represents your ability to get work done through other people.

The more power you have the more you can ultimately accomplish, but it comes with great responsibility {yes!}

Communication Overhead* (important)The proportion of time you spend communicating with members of your team instead of getting productive work done.

  • The more team members you have to work with, the more you have to communicate with them to coordinate action.
  • Communication OH increases ‘geometrically’ until the total percentage of time each individual must devote to group communication approaches 100 percent.

Derek Sheane Beyond Bureaucracy:8 Symptoms of Bureaucratic Breakdown”:

  1. The invisible decision — No one knows how or where decisions are made (no transparency)
  2. Unfinished business — too many tasks are started and not carried through to completion
  3. Coordination Paralysis — Nothing can be done without checking with a host of interconnected units
  4. Nothing new — No radical ideas, inventions, or lateral thinking (possibly stemming from a lack of initiative) *
  5. Pseudo-problems — Minor issues are magnified out of proportion (probably because it’s easier to put out a fire and spending time identifying problems (or people to blame), than it is to do important work. This becomes a form of resistance)
  6. Embattled Centers — The “center” (HQ, core, etc) battles for consistency and control against local/regional units
  7. Negative Deadlines — Deadlines for work become more important than the quality of work being done [AVOID at all costs!]
  8. Input domination — Individuals react to inputs (their inbox or in-tray) as opposed to their own initiative. (reducing creativity and adding to ‘nothing new’)

The solution to Communication OH is simple, but not easy: reduce your team size as much as possible.

  • The recommendation for effective teamwork is THREE to EIGHT people. Keep teams “ELITE & SURGICAL”.

“No battle was ever won according to plan, but no battle was ever won without one…plans are useless, but planning is indispensable.

— Dwight D. Eisenhower

Gall’s Law

A complex system that works is invariably found to have evolved from a simple system that worked. The inverse proposition also appears to be true: A complex system designed from scratch never works and cannot be made to work. You have to start over, beginning with a simple system.”— John Gall, systems theorist

3 Common ways to segment customer data:

Past Performance: segmenting customers by past known actions

  • LTV calculations are a form of PP segmentation. i.e. segmenting customers by existing vs new customers

Demographics: segmenting customers by external personal characteristics

  • You can use personal information to determine who may be probable purchasers. Obviously important for things that are demographic specific i.e. gender or age-targeted products. Going deeper on demographics can reveal subgroups that are better or worse customer segments.

Psychographics: Segmenting customers by internal psychological characteristics i.e. surveys, assessments, focus groups.

  • These are attitude or worldview that influence how people see themselves and the world at large.
  • Particularly useful for crafting a marketing and sales strategy, or even going as deep as to shape the value being created and at the very least each value proposition

Humanization — The process of using data to tell a story aka translate the data into real-world examples and understanding

  • When analyzing data from a system, it’s easy to forget that it often pertains to the actions of real human beings {so KEY!}.
  • This technique will make analysis efforts more useful. It requires extra work and is KEY.