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Innovation is a necessity for B2B companies seeking growth. Yet, even game-changing innovation requires a careful assessment of how much customer value is created and ultimately captured in price. Otherwise, your company loses precious margin and the means to sustain future innovation. Do you truly know how much value your innovations are providing to your customers? LeveragePoint is delighted once more to have noted pricing thought-leader and author, Stephan Liozu share his practical experience and techniques for monetizing the differential value of innovation. He will discuss how industry leading companies embed value management into their new product development process. Learn how to link innovation, customer value and pricing for your new products in 2013.
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Copyright © 2012 by LeveragePoint Innovations Inc. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means —
electronic, mechanical, photocopying, recording, or otherwise — without the permission of LeveragePoint Innovations Inc. This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion.
COMPANY CONFIDENTIAL
Maximizing ROI In Product Development
Monthly Webinar Series – January 23, 2013
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Sponsored by LeveragePoint the Software Solution for Value-based Pricing
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Today’s Presenter Maximizing ROI In Product Development
Dr. Stephan Liozu (www.stephanliozu.com) is the
Founder of Value Innoruption Advisors and specializes in disruptive approaches in innovation, pricing and value management. He has worked for Fortune 500 companies specializing in crafting and designing unique innovation and business strategies leading to differentiated business models. Stephan moderates brainstorming, mind mapping and creativity sessions with executives, partners and customers to generate ideas, value models, value propositions and innovation strategies. He recently earned a PhD in Management at Case Western Reserve University.
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Agenda
• The Focus On Value Management
• Trends In the New Product Development Process
• Opportunities To Improve the NPD Process and Maximize Return-on-Investment
• Key Takeaways
• Q & A
Personal Observations
Competitive pressures have increased significantly….
flat is becoming the new growth….and cost cutting is not a
sustainable strategy.
Innovation has become the name of the game!
But the ROI of innovation is being more scrutinized.
Traditional way of screening projects might not work as well
now. New-to-the-world breakthrough innovations need to be
measured in terms of profitability and differential value.
<5>
<6>
Innovation, Value & Pricing
Observations in Value & Pricing
in the New Product Development Process
• Degree of differentiation of value propositions is rarely formally
measured.
• Very little pricing research conducted up front in the process to validate
value drivers and feed the monetization process.
• Value & pricing information are not consistently managed through
gates.
• Pricing information might be part of formal documents but not dedicated
value and pricing deliverables through development stages.
• Economic value estimation is not consistently and scientifically
conducted and value drivers are rarely monetized.
• Pricing decisions are often based on legacy pricing (old generation +
%) and/or premium pricing (competition +%).
• Stage-Gate projects are traditionally evaluated/screened using
matrices combining risk/attractiveness, effort/benefit, projected
cost/projected price, volume/margin contribution, strategic fit, etc. <7>
New Product Value Assessment is Difficult
*APQC=American Productivity & Quality Center; NPD=New Product Development
Source: 2010 Stage Gate International
<8>
<9>
A New Way to Screen Innovations
Based on Margin & EVE®
Value in the NPD Process
• Successful new product development is about
– Creating unique value propositions and USP’s
– Assessing customer willingness to pay
– Getting customers to pay for it
• Start with an internal common language of value (R&D, marketing,
technology, sales, finance).
• Move considerations of value upstream in NPD process (USP’s and
UVP’s).
• Build strong & scientific value analysis into new product development
checkpoints and documents (e.g., the market requirements document) to
make it work.
• Get internal team consensus on the value quantification levels to gain
internal credibility and create belief.
• Make sure customers’ economic value gained defines and prioritizes
product and engineering requirements.
<10>
Integrated Value Gates
<11>
Gate 1 Opportunity
Identification
Viability
Assessment Gate
2 Development
Gate
3
Test and
Piloting Gate
4 Launch
Value Driver
Identification:
Identify and
document value
proposition; value
proposition must
be linked to at
least one strong
customer value
driver or
USP/UVP*;
establish VOC
and value needs
(cost savings or
incremental
revenues)
Value
Impact/Cost –to-
serve Analysis:
Potential service
constraints
identified; test
cost-to-serve
relative to value
impact; additional
value drivers
identified.
Initial Value-
based Price
Established:
Establish first
draft of value-
based price
based on EVE®,
value sharing
position and
pricing
moderator;
establish
sensitivity
analysis and
market potential.
Define Segment
Strategy &
Pricing
Structure:
Refine value-
based pricing
levels, define
value messages
by market
segments; define
formal pricing
structure
Communicate
Value & Validate
WTP:
Communicate
value messages
by segment
supporting entry-
level pricing
structure;
establish quick
feedback on
customer WTP.
Modify EVE®
models based on
initial feedback.
*USP = Unique Selling Proposition; UVP = Unique Value Proposition; VOC=Voice of Customer
Source: 2004 SPG Insights – Adapted from John Hogan
T
rack m
etr
ics, p
ost-
lau
nch
de
brie
f;
d
yn
am
ic r
efine
me
nt o
f va
lue
mo
de
ls.
Post
Launch
Value to Price Development Process
<12>
Innovators should pay closer attention to
differentiation and value propositions.
Monetizing the differential value of innovation helps
capture customer value through pricing.
Innovation projects can be sorted on the basis
of both gross margin & differential economic value.
Value and pricing should be reviewed at each
gate of the NPD/Stage-gate process.
Key Take-aways!
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Our Next Webinar – February 2013
• Harry Macdivitt
Director, Axia Value Solutions
• Topic: Using “So-What” Analysis to Identify Value
• February 27, 2013 – 11am EST
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Thanks for Watching!
www.leveragepoint.com
(617) 252-2876
Stephan Liozu
(484) 347-1458
@StephanLiozu