Your sales funnel equation

In the American Express OpenForum, author Braden Kelley explore an equation he calls “the innovation equation”. You can read the full article here.

But calling this equation an innovation equation falls far short of what it really is (in my opinion). I think this equation is brilliant but it is so much MORE about your sales funnel. In a way, it’s your entire business model summarized in one small sentence.

Kelley’s equation is this:

Innovation = Value Creation x Friction Reduction x Value Translation

In short, he says that your innovation is the result you get when you combine the value you create for customers (what benefits do they enjoy when they buy from you?), the ease with which they interact with your business (how simple is it for your customers to buy, use, and benefit from your product or service?), and the way that you communicate your value with your buyers (how do you express your value to your sales funnel contacts?).

I agree that this is an innovation equation but I truly think it’s much more. It’s a business model equation; it’s a sales funnel equation. It’s a way for an entrepreneur to sit down and think about how they’ll sell to customers.

Understanding these three elements is a huge step toward starting a business.If you’re a business owner who is just getting started in business, and you’re not sure yet what you want to do and how you’re going to do it, start with this equation. Work through each of the three elements listed above and you’ll end up with some significant headway in understanding your business opportunity.

If you run an existing business, this is a useful way to re-evaluate your business: Are you adding as much value as you can? Are you reducing friction? Are you communicating your value effectively? Chances are, if your business is struggling, the problem exists in one of these three areas.

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