Value is a verb, and entrepreneurial valuation is the process of figuring out what others (should) value. The process is a challenging one, fraught with difficulties. If you are considering your own entrepreneurial journey, how do you start? How do you come up with a good idea? How do you know if your idea is good or if consumers would pay for it?
Entrepreneurial Valuation brings to life cutting-edge research on value theory, challenging the prevailing wisdom that entrepreneurial valuation is as simple as asking consumers what they want. In fact, consumers often don't know what they (should) want. Value is a learning process, and consumers are learning what to want over time. Entrepreneurial Valuation will teach you how to follow consumers through this value learning process until you understand them enough to lead them on their journey.
»Dr. Packard drills deeply into foundational principles of economics and psychology so that readers can profoundly and completely understand, not merely what techniques to try, but why his prescribed model of delivering value works so well. His science-based approach to value and empathy is not just irrefutably legitimate, it will also transform your ability to understand, persuade, and satisfy customers.« Dr. Brent B. Clark, College of Business Administration, University of Nebraska Omaha, USA
»Dr. Mark D. Packard argues that we have fundamentally misunderstood the concept of value and, as a result, entrepreneurs depend on luck to become successful. In this highly instructive book, Dr. Packard presents a new and better way of thinking about value and explains what it means for entrepreneurship in both theory and practice.« Dr. Per L. Bylund, Spears School of Business, Oklahoma State University, USA
Preface
Section 1: What is Value?
Chapter 1: A History of Value Theory: and where economics went wrong
This chapter provides a fairly in-depth overview of how economics has understood the concept of value over the last 2 centuries. I trace the problems that economists faced in understanding what it is and how it affects market prices. And, more to the point, I show how and where most economists went wrong.
Chapter 2: Modern Entrepreneurship Theory: and why it leads entrepreneurs astray
This chapter explains the most prominent theories of entrepreneurship and ties them to value theory. I explain how theories of value creation and value capture, as used in contemporary entrepreneurship theory, can be misleading for entrepreneurs and land them into trouble.
Chapter 3: Phenomenal Value Theory: and why it matters to you
This chapter introduces my own value theory, phenomenal value theory (PVT), which is a somewhat radical revision to the problematic 'objectivist' value concepts that pervades economics and entrepreneurship research. The subjectivist alternative of PVT recasts value as two-sided: the objective experience of benefit (increased well-being) and its subjective (consciously experienced) counterpart. I separate these carefully and show why it matters.
Section 2: The Value Learning Cycle
Chapter 4: Predictive Valuations: how we decide what we want
In this section we take a deeper dive into PVT, which comprises a 5-stage learning cycle. This chapter discusses the first stage, the formation of predictive valuations. That is, how do we (consumers) form value expectations, i.e., how much benefit we'll get from a product before we buy? This predictive process is vital for entrepreneurs to understand to better help their prospective customers envision their value proposition and want their product.
Chapter 5: Relative Value: how valuable is it really
Chapter 5 discusses stage 2 of the PVT learning cycle, with is relative value. Predictions of value are not made in isolation, but are compared to other known solutions to the same problem(s) that your value proposition is trying to solve. Thus, your product needs to be not only perceived as valuable but sufficiently more valuable than other solutions. Remember that what you'd be offering is far more uncertain to consumers at first than what they're used to.
Chapter 6: Exchange Value: how we decide what we're willing to pay
In Chapter 6 I go into some depth in explaining the process of translating relative value into what economists call willingness to pay, i.e., how much money they are willing to spend on a new solution. This process is, perhaps not surprisingly, far more complex than we've hitherto understood. Consumers have to translate their relative valuations into monetary terms. I discuss pricing strategies that make sense based on this process.
Chapter 7: The Value Experience: how we experience value
Chapter 7 describes the process by which value is experienced, where value is, in fact, determined. Value is experienced in the satisfaction of real, unmet needs (and not merely wants). I describe this experience as a two-sided process: the objective (physical) benefits gained and the subjective (conscious) experience of those benefits.
Chapter 8: Assessment Valuations: how we learn from our value experiences
The final stage of the value learning cycle, assessment valuation, is the process learning from what was experienced. In short, the subjective experience is compared to the consumer's predictive valuation and updates their 'value knowledge', thereby altering their preferences with the new knowledge. Note that only the subjective aspect of the experience can be used in this assessment.
Section 3: Learning from Your Customers
Chapter 9:
In Section 3 we turn to the entrepreneurial learning process-how do you, the entrepreneur, figure out what consumers do or, more importantly, should want? In Chapter 9 I explain simulated empathy theory, which I've developed in my research. Entrepreneurs cannot literally know what consumers want in a complete sense because that knowledge/understanding is tacit or incommunicable. Instead, entrepreneur must figure out what their customers want through 'entrepreneurial empathy'. I explain what empathy is (a counterfactual mental simulation through which another's experience is imaginatively reproduced), how it works, and how you can increase your 'empathic accuracy'.
Chapter 10: Learning through Communication: and the many pitfalls
Because the value experience is tacit, those experiences, as well as needs experiences, cannot be communicated. However, according to simulated empathy theory (Chapter 9), empathy is generated from one's knowledge about another's experience. Thus, to empathically understand what your customers need-what would be truly valuable to them-you have to first learn as much as you can about their experience. This chapter, Chapter 10, examines the theory of communication and what we can learn about what can and can't be communicated, how misunderstanding happens, and what can be done to avoid it.
Chapter 11: Learning from Observation: and its limitations
Because consumers are, themselves, only learning what to want-we don't have some innate knowledge of what we should want (as Steve Jobs said, customers don't know what they want until you show it to them)-relying on what they tell you they want can lead you into the so-called 'innovator's dilemma'. In Chapter 11, I show how insights that customers themselves don't yet realize can be gleaned from ethnographic or observational study. Watch your customer when and as they experience the need(s) you're interested in. How do they solve that need now? What problems do they have with their current solutions?
Chapter 12: Learning from Yourself: you are, after all, a consumer too
In the final chapter of Section 3, I turn to one of the most important customers to learn from-yourself. User entrepreneurship and innovation are far more successful on average than innovating for another. In this chapter I explain why and how you can leverage your own personal experience to increase your empathic accuracy and devise better entrepreneurial ideas.
Section 4: Delivering Real Value
Chapter 13: Innovating a Value Proposition: how do I solve customers' problems once I've found them?
So far I've discussed the most advanced research on how to discover what consumers needs really are. But once you've figured out the problem, how do you devise and deliver the best possible solution to that problem? Section 4 deals with this question. In Chapter 13 I discuss the leading research on creativity and innovation to discuss strategies for creative problem solving.
Chapter 14: Managing Value Uncertainty: both yours and your customers
Once you have a solution, you now have the challenge of selling it to customers. But if the solution is good, shouldn't it sell itself? Not necessarily! Good solutions fail quite often because consumers don't see or understand the value of it. Recognizing the consumer value learning process helps us understand some things about what entrepreneurs can do to help consumers better predict the value your proposition would deliver.
Chapter 15: Value and its Diffusion: and what you can do to facilitate it
In Chapter 15 I talk diffusion and pricing strategies. Do you want to price the product as high as possible? I put forth my research on diffusion as an uncertainty mitigation process and how entrepreneurs can use strategic pricing and other strategies to get over the diffusion 'chasm' that so many new ideas fall into.
Section 5: Understanding Entrepreneurial Economics
Chapter 16: The Market Process: and how to make it work for you
In this final section I turn to understanding how markets and economies work. Chapter 16 explains market process theory-how markets evolve in a continuous learning process. I focus in particular on the role of the entrepreneur within this process to guide entrepreneurs in what to expect on their entrepreneurial journey.
Chapter 17: Understanding the Barriers to Your Success: and what you can do about them
Chapter 17 looks at some of the most important impediments to entrepreneurial success, including regulations, competition, and uncertainty.
Chapter 18: How to Learn More
In this final chapter I take entrepreneurs on a quick guided tour of some of the resources they have available to them to learn more about entrepreneurial economics. It's a rabbit hole!
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