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How Businesses Work

Clive Lancaster

13 Nov 2024 — 1 min read

Every business relies on five essential components: Value Creation, Marketing, Sales, Value Delivery, and Finance. In this post, we’ll provide a brief overview of each of these key areas.

Value Creation
Value creation involves analyzing market attractiveness and understanding what drives people to value products or services. This includes using tools like the 10 Market Evaluation Questions to assess potential, understanding human desires through the 4 core drives and 12 forms of economic value, and transforming ideas into viable offerings. Techniques like testing assumptions, building prototypes, launching minimum viable products, and refining through “iteration cycles” are essential here.

Marketing
Marketing is about capturing your prospects' attention by aligning your offer with their existing needs and desires. It includes framing your offer to spark interest—using visuals, hooks, or incentives like free gifts—and focusing resources on profitable customer segments. Effective marketing ensures your limited resources go towards attracting and retaining the right audience.

Sales
Sales is the art of exchanging value, built on trust and mutual benefit. It involves setting appropriate pricing, designing compelling proposals, having fallback options, and removing purchase barriers. Successful sales connect with customers’ needs and present solutions that resonate.

Value Delivery
Satisfied customers return and recommend your business to others, amplifying your impact. Value delivery focuses on increasing satisfaction by mapping out the customer experience, identifying ways to streamline, and optimizing your delivery process to maximize impact and scale.

Finance
Finance is about tracking the flow of money in and out of the business. Understanding key financial metrics like sufficiency, profitability, and Customer Lifetime Value (CLV) allows you to allocate resources wisely. Essential concepts include opportunity costs, sunk costs, and the time value of money—all helping to assess whether your efforts are yielding the desired outcomes.

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Read more

How to Create a Winning Product Strategy

How to Create and Define a Problem Statement in Product Management

The Art of Prioritization: Comparing Popular Prioritization Frameworks

AI Eval Playbook: A Product Manager’s Guide to Testing Smart Systems