I’ve recently been hearing the Value Proposition phrase a lot and found a great example of getting the concept down from the world of abstract ideas to a concrete calculation.
On Amazon’s 2020 letter to shareholders Jeff Bezos calculates roughly how much value Amazon created in 2020 through some simple calculations.
For shareholders, Amazon’s net income.
For employees, their wages and benefits.
For third-party sellers, their estimated profits from selling on Amazon.
For consumers, (average time saved per year * hourly wage - cost of Prime subscription) * number of Prime subscribers.
For AWS customers, savings from operating in the cloud.
Sometimes we lose the forest for the trees and come up with complex theories of how much value something is creating for customers. I think it’s a good idea to come back to simplicity and make some ballpark estimations using time saved, money saved, money made, cost.
Let’s say you save your customer 4 hours a month on some task, multiply that time by a reasonable hourly wage, probably better to go low, subtract how much you charge and there you go, you now have a lower bound estimation on how much value you’re creating. If you can provide such widget or service profitably then you have a winning combination, where you’re creating value both for your organization and for your customers.
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