Tags – Instrumental Value
In business, we keep hearing about intrinsic value – fundamental or viewed value of an entity.
But, intrinsic value is not actually the market value of an item or a business. In essence, intrinsic value takes into account both tangible and intangible resources that an organisation may hold. This does not necessarily represent the information to predict the future of an organisation.
Put directly, it is quite easy to fake the intrinsic value. A single big enough success, a blip in the stock value, and we see landslides in values. But, there has to be a base value before constructing the higher level values.
And this base value is a bit harder to fake – instrumental value.
In some ways, instrumental value is over simplifying. It breaks down the value of an entity to – does it work? But, that is perfect for a business to start with.
At the end of the day, the only thing that matters is, do you have a market for your business or can you create one? And, in order to answer this question, you need to design a product or service with demand or create that demand. And, to answer the demand question, all your target audience asks is – does it work – does it solve my problem.
But, once you answer this question of – does it work – it is not the end of the potential value
Raising the Value – Intrinsic Value
And this is where intrinsic value makes a comeback.
Competing on price and value is just one of the options for businesses. And that is why we have multiple products in the market, trying to solve the same problems.
My favourite example of this is the number of companies that sell water. Put simply, water is just water – the solution to your thirst. But, if you think that way, you are missing out on the potential.
Someone figured out that people will pay more for black water and named it blk. Someone in California figured out that people will pay more for water from Fiji. There is even a company that sells Canadian air in China.
Well, it works for people. And it works to such an extent that the target audience is paying a premium for these products.
In short, think of the instrumental value before enhancing the intrinsic value of your business. And, you will stick around for longer.
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