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Maximizing ROI In Product Development

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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. …

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.

Published in: Business

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  • 1. Monthly Webinar Series – January 23, 2013 Maximizing ROI In Product Development 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
  • 2. Sponsored by LeveragePoint the Software Solution for Value-based Pricing2
  • 3. Today’s PresenterMaximizing 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.3
  • 4. 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&A4
  • 5. 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 wellnow. New-to-the-world breakthrough innovations need to be measured in terms of profitability and differential value. <5>
  • 6. Innovation, Value & Pricing <6>
  • 7. Observations in Value & Pricingin 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>
  • 8. 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 InnovationsBased on Margin & EVE® <9>
  • 10. 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>
  • 11. Integrated Value Gates Opportunity Viability Gate Gate Test and Gate Post Gate 1 Development Launch Identification Assessment 2 3 Piloting 4 Launch Value Driver Value Initial Value- Define Segment Communicate dynamic refinement of value models. Identification: Impact/Cost –to- based Price Strategy & Value & Validate Track metrics, post-launch debrief; serve Analysis: Established: Pricing WTP: Identify and Structure: document value Potential service Establish first Communicateproposition; value constraints draft of value- Refine value- value messagesproposition must identified; test based price based pricing by segment be linked to at cost-to-serve based on EVE®, levels, define supporting entry- least one strong relative to value value sharing value messages level pricing customer value impact; additional position and by market structure; driver or value drivers pricing segments; define establish quick USP/UVP*; identified. moderator; formal pricing feedback on establish VOC establish structure customer WTP.and value needs sensitivity Modify EVE® (cost savings or analysis and models based on incremental market potential. initial feedback. revenues) Value to Price Development Process *USP = Unique Selling Proposition; UVP = Unique Value Proposition; VOC=Voice of Customer Source: 2004 SPG Insights – Adapted from John Hogan <11>
  • 12. Key Take-aways!Innovators should pay closer attention todifferentiation and value propositions.Monetizing the differential value of innovation helpscapture customer value through pricing.Innovation projects can be sorted on the basisof both gross margin & differential economic value.Value and pricing should be reviewed at eachgate of the NPD/Stage-gate process. <12>
  • 13. Our Next Webinar – February 2013 • Harry Macdivitt Director, Axia Value Solutions • Topic: Using “So-What” Analysis to Identify Value • February 27, 2013 – 11am EST13
  • 14. Thanks for Watching! Stephan Liozu sliozu@case.edu (484) 347-1458 @StephanLiozu sales@leveragepoint.com www.leveragepoint.com (617) 252-287614