Reilly Newman | To stay in business, you must not just create value, but capture it as well.
All businesses have two sides to them:
Side A— The side that serves and creates value
Side B— The side that attempts to capture value
Side A is focused on the functional efforts of the business. On a very basic level, this is the transactional-focused side that is either providing a service to the customer or creating a product that then is used by the customer. It’s strictly the business side that simply serves the purpose that is given to your business by the market that you are in. A photographer takes photos, a plumber fixes pipes, a phone is to make calls, a car is to get you from place to place, etc.
When Side A of the business is creating value, the business will be well-known as a provider and will get by. It won’t be thriving per se, but it will be bustling. It may even be very efficient at providing the service or producing the products, and hopefully being quite profitable in the process. This state of being an efficient “well-oiled machine” may be the pinnacle for this side. It’s good, but not great.
The reason it’s not great is because there is more to business than just the transactional. There’s more to providing than a job well done. There’s more to running a business than breaking even and barely keeping your head above water. There’s more to creating value.
Side B is strategic efforts of the business. This side is more advanced because it takes more strategy, effort, and risk. Beyond creating value comes capturing the value. The functional side of the business is to create value and if it does not do this it will very soon be out of business. The art of capturing value for the sake of the business is dependent on the brand and overall experience. The power of Side B is that by capturing value you are going beyond the transaction. This inadvertently empowers the business to provide more value.
This increase of value that the business is now providing isn’t about more functional benefits, but emotional benefits. This increase is found in the subjective and adds immense value for your desired buyer. This is not only brand creation, but also leveraging brand to increase overall value through strategy.
Due to this subjectivity, this increase in value leads to further opportunities to capture value. For example, Apple’s iPhone provides virtually the same functional benefits as any other phone. However, the value that Apple is able to capture is due to its superior design, user-interaction, brand, packaging, pricing, marketing, and more. These aspects don’t have much to do with the actual value creation, but have made Apple’s value capture one of the most profitable businesses of all time. Apple’s desired audience appreciates the attention to detail and design which makes them willing to pay more for the phone. They also relate and identify with the brand which makes them more loyal. They are willing to meet the higher price point because they appreciate these things and people like them use products like this. Apple’s value capture has aligned with the internal narrative of these consumers and has helped them be able to express themselves and fortify their identities.
Side B’s focus is to increase the perceived value of Side A in order to capture it. This perception is completely subjective and relates to how the brand is seen in their eyes. It takes patience to listen to the audience and strategy to look for ways to increase this perception.
For a business to reach increased profitability and thrive, it must learn to capture value. The maturity that comes with the ability to capture value will also enable the business to pack more value into the entire brand experience. Like a healthy flywheel, this spins off more perceived value as the brand is able to provide a better overall experience thanks to its ability to capture value. This can be everything from better return policies to better packaging or more caring customer service. It can provide better and safer materials in its products or more timely service. The business can also take better care of its employees and not work them like dogs which creates better company culture and customer interactions. It makes the business healthier and happier.
With your business, think about it in the frame of these two sides. Focus on not only providing amazing value but also increasing and capturing that value through your brand — for the sake of your business, your staff, your sanity, and your customer.
