Incorporating Value In Your Stage Gate Process


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We were excited to have Dr. John Hogan join us to identify common value leaks and show how you can seal them by incorporating "value gates" into your development process. He shared some excellent real-world examples of how firms have used this approach to substantially improve new product success.

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Incorporating Value In Your Stage Gate Process

  1. 1. Monthly Webinar Series – February 27, 2013 Incorporating Value In Your Stage Gate Process 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. 2. Sponsored by LeveragePoint the Software Solution for Value-based Pricing2
  3. 3. Today’s PresenterIncorporating Value In Your Stage Gate Process Dr. John Hogan is co-author of The Strategy and Tactics of Pricing and is a recognized thought leader and speaker on the topic of strategic pricing and value-based marketing strategies. As founder of Value Management Advisors, he works with clients in a range of industries including technology, healthcare, and manufacturing. Previously, John was a Partner at Monitor Group, a global management consulting firm, and managed corporate pricing strategies for General Motors.3
  4. 4. Agenda • The Room for Improvement in New Product Development • Using Voice of the Customer to Improve Decision Making • Building a Value-Based Development Process • Key Takeaways • Q&A4
  5. 5. A Value-based Approach to Growth The Value Disciplines Value-based Value-based Value-based Value Selling Development Marketing Pricing & Negotiation “Build profitability “Target segments “Maximize profits by “Establish a value story into new products based on value, not aligning value and and force customers to before launch” demographics” price” acknowledge it” Our Focus Today© John E. Hogan 2013 5
  6. 6. There is Room for Improvement in NPD Processes A 2013 PDMA benchmarking study found that NPD processes are successful less than 25% of the time. A key cause is the ineffective use of the right data 100 80 76% “Failure” 60 Rate 2012 40 2010 20 0 % of new products that hit Our development process is revenue targets data driven© John E. Hogan 2013 6
  7. 7. Can a Value-based Approach Improve Development Outcomes?The Stage-Gate Process Gat Business Gat Gat Testing & Gat Scoping Develop. e4 Launch e1 Case e2 e3 Validation Stage = + Data Analytics Gate = + Outputs Criteria The Four Leverage Points of the Stage-Gate Process © John E. Hogan 2013 7
  8. 8. Customer Value Data Enhances the Stage-Gate Process Since the inception of the Stage-Gate Process in the Nineties, Voice of the Customer Research has been the main source of customer data VOC Customer Value • Qualitative / Quantitative • Qualitative / Quantitative Data • Focus on attitudes, • Focus on business models / preference & usage value drivers / economics • Better in the early stages • Applicable to all stages, but Applicable (Ideation and to a lesser especially helpful for Stages degree development) business case, development and validation • Offers little guidance for • Helpful, but not sufficient Limitations pricing, business case for ideation and market launch© John E. Hogan 2013 8
  9. 9. Improving Analytics Leads to Better Decisions Customer Value data enables us to understand the profit implications of development decisions Feature Prioritization Analysis Cost Acceptable • Identifies the profit Cost potential for potential too High features Cost Cost • Improves other choices Marginal Economic • Product versions Value • Market price • Volume forecasts Feature 1 Feature 2 Feature 3© John E. Hogan 2013 9
  10. 10. Value Gates Improve Product Outcomes Gat Business Gat Gat Testing & Gat Launch Scoping Develop. e3 Validation e4 e1 Case e2 Qualitative Value Analysis Quantified Value Modeling • Articulate customer business • Refined value models and models business case • Identify target value drivers • Value features identified • Develop initial “value story” • Product versions designed Quantitative Value Analysis Launch Preparations • Develop initial value model • Value messaging • Identify key value drivers • Discount structure • Set a value-based price • Launch price • Volume forecast© John E. Hogan 2013 10
  11. 11. Building a Value-based Development Process Situation:  Comm Co, a $1B maker of communications systems, faced disruptive market changes caused by new, less expensive technologies  Company was built through acquisition leading to inconsistent development and pricing processes  Competition was eroding margins and new product success rates – leading to tighter development budgets  The management team believed that the future health of company was at risk Objective: Align the commercial process to create and capture customers value more effectively© John E. Hogan 2013 11
  12. 12. The First Step was to Diagnose the Commercial Process Upstream: • Products overdesigned for market Diagnostic Output • Ad hoc pricing did not reflect Product Marke ng Sales / Channel market conditions Market Management Product Management • Conflicting guidance given by Business Offering Market Price Account Requirement Requirement Nego a on Contrac ng Defini on Case Defini on Development Comm. Se ng Planning senior decision makers • Product variations not managed Process (well defin d e and effec ve) 3 2 2 1 1 0 4 3 1 Decision Framework 1 2 1 3 1 3 2 2 1 (aligned with strategy) Tools (managers have strategically needed decision tools) 2 2 3 3 2 1 3 1 2 Data (appropriate and accurate data 4 3 2 1 1 2 1 1 0 available) Organiza onal Enablers Down stream: Incen ves (aligned with strategy) 3 2 2 1 1 0 4 3 1 • Uncontrolled discounting Decision Rights (clearly defined and followed) 1 2 1 3 1 3 2 2 1 • Limited understanding of customer Skills (decision-makers have necessary skills) 2 2 3 3 2 1 3 1 2 value • Lack of effective value messaging Resources (appropriate to support decisions) 4 3 2 1 1 2 1 1 0 to customers • Unclear ownership of pricing© John E. Hogan 2013 12
  13. 13. Development Redesign Focused on Tools, Training, and Output Gat Business Gat Gat Testing & Gat Launch Scoping e2 Develop. e3 Validation e4 e1 Case Value Value Feature Value Value Creation Map Quantification Prioritization Messaging Selling Competitive Version Design Competitive Value Driver Pricing Price Analysis Analysis Price Setting Discountin g Financial Market Analysis Solution Product Reqmnts Reqmnts Sales & Readiness Doc. Market Opportunity Doc. Plan Doc. Brief© John E. Hogan 2013 13
  14. 14. Product and Pricing Review Group Existing decision board was divided and ineffective: • Too many non-stakeholders • Conflicting agendas • Different market views Solution required real change • Limited membership to senior stakeholders • Conducted training on new process and value-based approach • Agreed on set of strategic questions for PM’s to answer© John E. Hogan 2013 14
  15. 15. Results  Improved time to market by minimizing “reworks” caused by lack of alignment between PM’s and decision board  Margin erosion turned around and started to improve  Better alignment of the leadership team as the new pricing / product council focused on strategy and policy rather than tactical product and pricing decisions  Project manager was promoted shortly after project concluded© John E. Hogan 2013 15
  16. 16. Some Key Learnings  Customer value provides a powerful metric for improving the commercial process  Value Management tools are essential to scale the process changes and ensure consistency  Migrating to a value-based approach is effective. But don’t underestimate the degree of change required  Upstream and downstream changes must work together to deliver maximum results© John E. Hogan 2013 16
  17. 17. Our Next Webinar – March 2013 • Harry Macdivitt , Director, Axia Value Solutions • “Best Practices for Capturing Value” • March 27, 2013 – 11am EST17
  18. 18. Thanks for Watching! John E. Hogan, PhD jhogan@valuemanagement (617) 252-287618