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Are you capturing the value of your innovation?


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This presentation is designed to review the position of the value and pricing management dimensions within the innovation process. Pricing, value and innovation are elements of a dynamic and …

This presentation is designed to review the position of the value and pricing management dimensions within the innovation process. Pricing, value and innovation are elements of a dynamic and integrated systems that cannot be managed in parts and have a key role to play in the strategic innovation process in order to allow firms to capture the return for their investments. To view the webinar in its entirety, please visit our webinar archive:

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  • 1. Stephan M. Liozu, Ph.D.FounderAre you Capturing the Value of yourInnovation?
  • 2. Stephan Liozu, Ph. view live tweets follow #innovalue
  • 3. Revisit your overall business model, your main value proposition, andthe critical unique selling proposition of your products/services.Innovation has become the name of the game but more focus thanever on the ROI of the innovation investments!Energize the core business by creating greater differentiation andcompetitive advantage.Breakthrough thinking is required: are you challenging yourself andyour business model enough?The Business Dynamics HaveChanged for the Long Term
  • 4. Why is Differentiation so Important?
  • 5. Value & Pricing in the NPD Process• Degree of differentiation of value propositions is rarely formally measured.• Very little pricing research conducted up front in the process to validate valuedrivers and feed the monetization process.• Value & pricing information are not consistently managed through Stage Gate®.• Pricing information might be part of formal documents but not dedicated valueand pricing deliverables through Stage Gate.• Economic value estimation is not consistently and scientifically conducted andvalue drivers are rarely monetized.• Pricing decisions are often based on legacy pricing (old generation + %) and/orpremium pricing (competition +%).• Stage Gate® projects are traditionally evaluated/screened using matricescombining risk/attractiveness, effort/benefit, projected cost/projected price,volume/margin contribution, strategic fit, etc.
  • 6. The Value Discipline<6>Value Selling& NegotiationValue-basedPricingValue-basedMarketingValue-basedInnovation“Buildprofitability intoinnovationsbefore launch”“Target segmentsbased on value, &user needs, notdemographics”“Establish a valuestory and forcecustomers toacknowledge it”“Maximizeprofits byaligning valueand price”
  • 7. The Economic Value Estimation®FrameworkPositiveDifferentiationValueYour UniqueValueDeliveryCompetitiveReference ValuePrice of Next BestCompetitiveAlternativeNegativeDifferentiation ValueTotal EconomicValueValue CaptureSource: Monitor Group
  • 8. Using Cloud-based Value ModelingSoftware
  • 9. EVE® – Heavy Equipment ManufacturerReferenceCompetitiveAlternative forthis Customer =$72,500Add’l warrantycost = -$1050Increased revenue fromhigher uptime – rentalsvc = $2350Invoice processing &consistency savings =$1500Parts inventory pgrmsavings = $1250 Total OfferingEconomic Value$79,950DifferentialEconomic Value =$7,450Reference Value= $72,500Improved residualvalue = $1200Fuel economy savings= $2200
  • 10. A New Matrix to Rate InnovationProjects
  • 11. A New Approach to Categorize Projects
  • 12. Integrated Value GatesGate 1OpportunityIdentificationViabilityAssessmentGate2DevelopmentGate3Test and PilotingGate4LaunchValue DriverIdentification:Identify anddocument valueproposition; valueproposition must belinked to at leastone strong customervalue driver orUSP/UVP*; establishVOC and value needs(cost savings orincrementalrevenues)Value Impact/Cost –to-serve Analysis:Potential serviceconstraintsidentified; test cost-to-serve relative tovalue impact;additional valuedrivers identified.Initial Value-basedPrice Established:Establish first draftof value-based pricebased on EVE®,value sharingposition and pricingmoderator; establishsensitivity analysisand marketpotential.Define SegmentStrategy & PricingStructure:Refine value-basedpricing levels, definevalue messages bymarket segments;define formal pricingstructureCommunicate Value& Validate WTP:Communicate valuemessages bysegment supportingentry-level pricingstructure; establishquick feedback oncustomer WTP.Modify EVE® modelsbased on initialfeedback.Source: 2004 SPG Insights – Adapted from Paul HoganTrackmetrics,post-launchdebrief;dynamicrefinementofvaluemodels.PostLaunchValue to Price Development Process
  • 13. Key Take Aways• Successful new product development is about– Creating unique value propositions and USP’s.– Assessing customer willingness-to-pay.– Getting customers to pay for it through value-based pricing.• Start with an internal common language of value.• Move considerations of value upstream in NPD process.• Build strong & scientific value analysis into new product developmentcheckpoints and documents.• Get internal team consensus on the value quantification levels to gain internalcredibility and generate buy-in.• Make sure you include differential economic value in the screening andprioritizing of your innovation portfolio.
  • 14. Stephan M. Liozu, Ph.Dwww.stephanliozu.comsliozu@case.edu