# The Value Stick ## The Idea in Brief Strategy is about creating and capturing value. The Value Stick visualises this: at the top is Willingness-to-Pay (WTP)—the maximum a customer would pay. At the bottom is Willingness-to-Sell (WTS)—the minimum suppliers and employees would accept. Your job is to raise WTP, lower WTS, and capture the spread. That's it. Everything else is tactics. --- ## Key Concepts ### The Four Components From top to bottom: 1. **Willingness-to-Pay (WTP)** — The most a customer would pay for your product 2. **Price** — What you actually charge 3. **Cost** — What you pay suppliers and employees 4. **Willingness-to-Sell (WTS)** — The least suppliers/employees would accept The gap between WTP and Price is **customer delight** (value you give away to attract customers). The gap between Price and Cost is **firm margin** (value you capture). The gap between Cost and WTS is **supplier/employee surplus** (value you give away to attract talent and inputs). ### Only Two Ways to Create Value **Raise WTP:** Make your product more desirable. Better features, better brand, better experience. Customers will pay more because they want it more. **Lower WTS:** Make your company a better place to work or a better partner to supply. Employees accept lower wages because they love the mission. Suppliers accept lower prices because you're reliable and easy to work with. That's it. Every strategic initiative should map to one of these. ### Value Creation vs Value Capture You can create enormous value and capture none of it (compete it away through low prices). You can capture value without creating it (monopoly pricing). Sustainable strategy requires both: create value *and* build barriers that let you keep some of it. ### Complements and Value Complements raise WTP for your product. Cheap petrol makes cars more valuable. Great apps make phones more valuable. Strategic insight: invest in making complements cheaper/better, even if you don't capture that market directly. --- ## Implications **In pricing:** Price captures value; it doesn't create it. Before asking "what should we charge?", ask "how can we raise WTP?" Higher WTP gives you pricing headroom. **In operations:** Lowering cost only helps if you can keep prices stable or pass savings to customers to increase volume. Otherwise, competitors match, and margins stay flat. **In talent:** Lowering WTS for employees (making work more meaningful, culture better, flexibility higher) is an underrated strategy. You can attract better people at the same wages—or the same people at lower wages. **In strategy sessions:** Ask: "Which of our initiatives raise WTP? Which lower WTS?" If the answer is "neither," why are we doing them? --- ## Sources - [[Better, Simpler Strategy]] — Oberholzer-Gee's complete framework; the Value Stick as the organising principle for strategy - [[$100M Offers]] — Hormozi's Value Equation is WTP maximisation through offer design—outcome × certainty, minus time × effort - [[7 Powers]] — The seven powers are barriers that let you capture (not just create) value; they protect the spread between WTP and WTS