P01 · Lesson 1 of 2 · 10 min · 4 hands-on tasks
What a Business Really Does
Every business is a machine that creates value for customers and keeps a slice of it. Here's how to see that machine.
🎬 Situation
Maya just quit her office job to open a coffee cart outside a busy train station. Her friends ask: "So how will you actually make money?"
She says "I'll sell coffee", but that's not quite the answer. To understand any business, from a coffee cart to Apple, you need one simple picture.
🎮 Play
This is the value stick. Move the sliders and watch who gains what on every latte Maya sells.
- Customer's gain: $2.00
- Your profit per latte: $2.50
- Supplier's gain: $0.75
- Total value created: $5.25
Everyone wins: the customer gets more than they pay for, and you earn a profit.
Notice three things:
- When the price goes above what the customer would pay, the sale disappears and nobody gains.
- Moving the price only moves value between Maya and her customers.
- Raising the top (better coffee) or lowering the cost grows the total.
🏷️ Name it
Business schools call this the value stick, and it explains every business in the world:
| Part of the stick | What it means | For Maya |
|---|---|---|
| Willingness to pay | The most a customer would pay | $6 |
| Price | What they actually pay | $4 |
| Cost | What it costs to make | $1.50 |
| Supplier's minimum | The least suppliers would accept for their part | $0.75 |
- Value created = willingness to pay − cost. This is the size of the pie.
- Customer's gain = willingness to pay − price. This is why people buy.
- Profit = price − cost. This is the business's slice, the value it captures.
So the job of a business is to create value and capture some of it. Great companies do both: their products are worth far more to customers than they cost to make, and enough of that value comes back as profit to keep improving.
🖍️ Like you're five: you make a lemonade that your friend thinks is worth 5 stickers. It costs you 1 sticker of lemons. You trade it for 3 stickers. Your friend is happy (they "saved" 2), and you're happy (you earned 2). You both won, because the lemonade was worth more than the lemons.
Real life: some famous companies choose to give most of the value to customers. A warehouse store with rock-bottom prices keeps a thin slice per item but sells huge volumes, and customers keep coming back. A luxury brand does the opposite: it raises willingness to pay so high (through design, status and story) that a big slice is left over even at a high price.
🔨 Do it: 4 tasks
0 / 4 doneTask 1 of 4 · The customer's gain
A commuter would happily pay up to $6 for Maya's latte. Maya charges $4. It costs her $1.50 to make.
How much does the customer gain on each latte?
Task 2 of 4 · Maya's profit
Same latte: customers would pay up to $6, the price is $4, and it costs $1.50 to make.
How much profit does Maya make per latte?
Task 3 of 4 · Make the pie bigger
Which move creates more total value, instead of just moving value between Maya and her customers?
Task 4 of 4 · Build the value stick
Put the value stick in order, from the top down.
Tap two items to swap them, or use the arrows.
🧩 Case: A rival cart opens across the street
⭐ VIPMaya's latte sells for $4, costs her $1.50, and regulars say they'd pay up to $6. On Monday a new cart opens across the street selling lattes for $3.50. Its coffee is fine, but not as good as Maya's.
What's your first move?
What would you do? VIP members make the call, see what happens next across 2 decisions, and get the expert debrief.
🔁 Remember it
What is the total value created by one sale?
If a price is higher than what a customer would pay, what happens?
Raising your price by $1 (and still making the sale)...
A business creates value (what customers would pay minus what it costs to make) and captures part of it through its price.
📅 Use it Monday
Pick one thing you bought this week. Estimate three numbers: the most you'd have paid, the price, and roughly what it cost to make. Where's the value going: to you, or to the company? Then try it on your own work: what could make customers willing to pay more?
Create a free account to track your progress.