Delta 4 theory , Value and Kunal Shah
I watched a talk from Kunal Shah who happens to be the founder of Freecharge and CRED.
In the talk which I will be linking below, he proposes a new framework through which you can look at a product or a startup and have an Idea if the startup will generate or erode wealth.
This was a very interesting topic because we are seeing a lot of startups being overvalued, and we are shocked to find out that Wework is failing or Uber is yet to make a dollar in revenue.
I try to refrain from gross generalizations but Kunal’s idea will serve as a metric for products that only advertise themselves as solving problems.
Let me start off by saying that we live in a convenience economy , meaning we as a consumer of a service or product decide when we want,how we want and where we prefer to have it.
The start-up view or the conventional business view is still stuck in the idea of creating piece of value or solving a problem.
What Kunal argues is that there is and will always be a problem and not all those startups who set out to solve the problem tend to succeed.
He outlines the Delta 4 theory which is when comparing two products or experiences if one product achieves the median score of 4 compared to the other the former will generate wealth.
Whereas if a product scored less than 4 in the comparison to an existing product or service that product will most likely erode wealth.
He gives the example of the Indian railway ticketing experience where the comparison was between buying a ticket from a counter(offline ) and through the website. Obviously, online ticketing was far more convenient and efficient.
There is also a comparison of buying shirts online and this experience does not consistently achieve a delta score of 4.
Most of the time we get caught up in solving problems or coming up with innovative ideas will generate wealth but this rule might give us a perspective when comparing two ideas or product.
Kunal also goes indetail about how there exists a UBP(Unique Bragging Point) which will make sure a product sells just by word of mouth.
As an entrepreneur and someone who is looking to get into product design this talk was immensely valuable.I urge you all to watch this video.
Peace.
