We just finished talking about what is value, what is the value proposition? And how are you going to use it to your benefit. Now we're going to start talking about the sections of how to actually derive it, how to work with it. And we're going to start in that sense with basic principles of calculating your value proposition or a value statement that's relevant to your business or whatever business process that you're working with right now. So the first thing here is establishing value creation, you're going to use the value equation. But even before that, you need to know what the process is.

And what your thought is your first thought in this process is, am I actually creating value or not? In process science processes don't exist for long that do not produce value. Typically, if you have a stable process, you can assume there's some value creation going on. And it's for you as sort of the person who's doing this exercise to find what it is. But you should know, there are some occasions or especially if they're small processes or minor proxies, you're reviewing where it's actually over time to Come always, there's actually no value being created here, either because the market shift and the customers don't want it. Or, you know, the process became so convoluted over time, or confusing or complicated because this, this actually happens all the time.

And in real life examples, there's just very little or almost no value being created in it. So you always have to ask yourself the question first, is this process I'm reviewing? Or is this business I have creating value, and then try to think back to the equation to determine what that value might be? In terms of using the equation, let's think about the lemonade stand example. And I'm going to kind of talk through this very briefly here. But it's something for you to ponder.

All value exchanges happen really between two parties. Because if you think about it, even for you, as a consumer, you can calculate your own value equation saying, Oh, this will be a benefit to me. How much is it worth to me is the cost of it less or more than that, and that kind of determines your buying decisions, it actually determines all of your process decisions, so you can really kind of Think about that in your general life. But on the other side of the table, if there's money being exchanged or energy being exchanged, there's always another party. So without this could be a 30 minute lecture in itself. So I'm going to try to go over to the high level.

But think about it from the lemonade stand example where I have, let's say, a business professional or an adult and a child. And the child sells lemonade for very, very cheap. Why is this still a viable process? Well, value creation has to be on both sides. Just like a company can't sell things at a loss or it would go out of business. A consumer can't buy a bunch of benefits for way more than they cost or they would stop buying.

So if you think about now with two parties in play, customer and company, so child selling lemonade and adult buying lemonade, they both have to be making value using the same equation. When you might think how is that possible, right? But the reason that's possible is because the subjectivity and benefits so the lemonade stand example child For instance, their benefit is the potential to make a profit. And you could think, well, for five cent lemonade, let's look at the picture on the slide. How could they possibly make a profit? Well, their cost is extremely low.

And you think about maybe what the cost of actual materials lemon sugar water, but it's really the cost of their time is almost negligible because a child's opportunity costs to just making a lemonade stand when they're four or five years old. They're not really worth anything on the market yet. So relative to an adult, their time of labor is almost worth zero dollars, which means even at five cents, one could posit that there's value being created for a child because their cost for a batch of lemonade depending on how many sell is so low. Adult on the other hand, also wants to go buy lemonade, but maybe his time is worth at 100 $150 an hour $600 an hour piece of lawyer. Now if I say I'm gonna spend five cents, eliminate his benefits It is cool, refreshing lemonade. And his cost is five cents, if used to make the lemonade himself that same benefit, let's say it's worth $10 or $15.

To him in that moment, that's relative to his earning potential, his time how much time he could have spent making the lemonade. So even though that five cents is being exchanged is the same between both parties, the relative differences in their backgrounds, the value of their time, their skills, their tactile, and not their tactile, their tacit knowledge and their regular abilities, that's going to make value exchanges between parties possible. So this example is the start of a very much could be an academic excursion into how values calculated, but generally look at value propositions, look at your company's building and look at what you can offer to the marketplace at a lower cost and they could get it themselves somewhere else. What is that element, that's the search for the value proposition, and that's what we're covering here and kind of what is value basics because you're going to need to know that at high level to start understanding when you get deeper into the exercises.

So that brings us to an exercise slide where I'm going to encourage you to pause here the training and take some time to think about your own business, your own process, what are you producing? And how would you start to fit the variables are the way you think about the components of your business into the value equals benefits minus costs. And to do this, the last thing you need to remember is start by using the customers perspective. And this is going to play into what we recommend in a bid for market research and other things. But the whole point is, you are the customer and you are thinking about engaging with your business, what is the benefit you're getting? And what is the cost and it could be multiple benefits that are aggregated together and multiple costs that aggregate together the cost of their actual money, the cost of their time, the ease in which they do business with you how they interface with the company, how simple it is or how automated your processes are, you know, the competitive differentiators, like is it easier to do the same thing with a competitor for whatever So it's not a simple exercise, but organize your components from the customers perspective first into the value equation, and that's going to start really getting you into the next steps of writing down a value proposition statement.

And that wraps up basic principles. So next we'll talk about research.