Using Value-Based Innovation for New Product Introductions - J. Briones, Ph.D. - AIPMM Webinar


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Thanks everyone who participated in this webcast from The Association of International Product Marketing and Management (AIPMM).

Dr. Jose Briones discusses a few case studies of companies selling products based on value. Quantification of value is critical to a successful product introduction and this presentation provides a basic overview of the tools to measure it.

The concept of a Value Box is introduced to visualize the value proposition of a product concept and guide the creation of a pricing strategy. An introduction to value co-creation is also discussed.

A few case studies are discussed to highlight methods for quantifying product value. These will include: B2C products like the Gillette Fusion razor, 3M's command strips, hybrid cars, pharmaceutical products, the Segway, iPad apps and B2B products like industrial adhesives and corrugated paperboard.

Key takeaways from this webinar:
• Understand a practical definition of product value and value in use.
• Learn different methods for product value quantification and when to use them
• How to commercialize a product based on the value proposition and not on price.
• A new tool, the “Product Value Box” for communication and understanding of the product value proposition

About the Speaker:
Dr. Jose A. Briones is the General Manager of SpyroTek Performance Solutions, a supplier of Innovation Management and Training Services. He has 20 years of commercial and technical experience in the manufacturing and technology industries, holding positions in the areas of marketing, innovation, sales, engineering and R&D.

Dr. Briones has been the leader in the commercialization of over 40 products in the fields of chemicals, materials, apps and cloud software in the U.S., Europe and Latin America. He has been named as inventor in 7 patents.

This webinar is for Product Managers, Product Marketers, Brand Managers, Product Owners, Directors of Product Management and Product Marketing, Marketing Managers, Business Development Managers, Innovation Managers and other product team professionals

About the Speaker:
Dr. Jose A. Briones is the General Manager of SpyroTek Performance Solutions, a supplier of Innovation Management and Training Services. He has 20 years of commercial and technical experience in the manufacturing and technology industries, holding positions in the areas of marketing, innovation, sales, engineering and R&D.

The AIPMM is the hub of all things product management. It is where product professionals go for answers. With members in over 65 countries, it is the worldwide certifying body of product team professionals.

It is the world's largest professional organization of product managers, brand managers, product marketing managers and other product team professionals who are responsible for guiding their organizations, or clients, through a constantly changing business landscape.


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Using Value-Based Innovation for New Product Introductions - J. Briones, Ph.D. - AIPMM Webinar

  1. 1. © AIPMM 2013 @AIPMMAIPMM Webinar
  2. 2. © AIPMM 2013 @AIPMM
  3. 3. © AIPMM 2013 @AIPMMFounded 1998Largest Product Management professional groupProvides professional development and certification• Certified Product Manager• Certified Product Marketing Manager• Agile Certified Product Manager• Certified Innovation Leader
  4. 4. © AIPMM 2013 @AIPMM• 12-month AIPMM premium membership($175 value)Participate and Win!
  5. 5. © AIPMM 2013 @AIPMMToday’s SpeakerModerator:Hector Del Castillo, PMP, CPM, CPMMPresenter:Moderator:Hector Del Castillo, PMP, CPM, CPMMPresenter:Jose A. Briones, Ph.D.General ManagerSpyroTek Performance SolutionsEmail: brioneja@gmail.comTwitter: @Brioneja
  6. 6. © AIPMM 2013 @AIPMMToday’s SpeakerModerator:Hector Del Castillo, PMP, CPM, CPMMPresenter:Jose Briones, Ph.D.General ManagerSpyroTek Performance
  8. 8. Jose A. Briones, Ph.D.SpyroTek Performance SolutionsTwitter: @Brionejawww.Brioneja.comAIPMM Webinar April 19, 2013
  9. 9. Background In this chapter of the Beyond Stage Gateseries we describe to how use value-basedinnovation for new product introductions toincrease the probability of commercialsuccesswww.Brioneja.comTwitter: @Brioneja
  10. 10. www.Brioneja.comTwitter: @BrionejaPricing of a New Product There are multiple ways to approach pricing fora new product Cost-plus Competition-driven pricing. Customer-driven pricing Minimum Return on Investment (ROI) Cost in use analysis Value in use analysis We must move away from cost-based pricing tovalue-based pricing
  11. 11. Definition of Value Value is A measure of the magnitude of how much an unmet needis met○ Desirability○ Functionality Innovation is not a measure of the change youmake. It is a measure of the need youaddress Maslows hierarchy of needs Physiological Safety Love and Belonging Esteem Self-actualization Self-trascendencewww.Brioneja.comTwitter: @Brioneja
  12. 12. www.Brioneja.comTwitter: @BrionejaValue and Innovation Innovation exists at the intersection ofinvention and value If your new product/invention/service doesnot offer value, it is just new - not innovative.
  13. 13. www.Brioneja.comTwitter: @BrionejaHow Do We Capture Value? Value is captured through Pricing Market share Brand awareness In order to capture value, we must first beable to measure value
  14. 14. www.Brioneja.comTwitter: @Brionejawww.Brioneja.comTwitter: @BrionejaRelationship Between Innovation andValue Creation• Value Co-CreationDisruptive• Joint Value DevelopmentRadical• Value Sharing/SplitIncremental
  15. 15. Value in Use Analysis Clayton Christensen: Customers do notbuy products, they hire products to do ajob. Define the job your product is hired to doand the benefit your customer gets from it Absolute price/unit is irrelevant. Wemust compare cost in use and value inuse.Twitter:
  16. 16. 3 Types of Voice of theCustomer Unmet needs Job to be done Product featureswww.Brioneja.comTwitter: @Brioneja
  17. 17. Gillette’s Custom Plus Disposable Amazon’s price of 3Pack with 10razors/pack: $10.61 Cost/razor: $0.35Twitter:
  18. 18. Gillette’s Fusion Amazon’s price:$16.95 8 Cartridges Cost/cartridge: $2.12Twitter:
  19. 19. Gillette’s Custom Plus vs. Fusion Price of product$10.61 vs. 16.95Fusion package is 50% more expensiveThe custom plus package has 30 units vs. 8 for theFusion Cost in use$2.12. vs $0.35 per razor. Fusion has a unit product cost 6 times higher thanCustom PlusThe customer believes that the additional value in usethat the Fusion provides justifies the additional cost inuse Durability of blade Comfort Less irritation Twitter:
  20. 20. 3M Scotch® Tape Amazon price: $1.00 300’ length Cost per inch: $0.003 Cost to hang a poster: $0.01Twitter:
  21. 21. 3M Command® Strips Amazon Price: $1.95 12 strips Cost per strip: $0.15 Cost to hang a poster: $0.60Twitter:
  22. 22. Scotch Tape vs. CommandStrips Price of product $0.99 vs. $1.95 Scotch tape sells for half the price of Commander strips Using Scotch tape, the user can hang 75 posters vs. 3 for thecommand strips Cost in use $0.01 vs $0.60 to hang one poster Commander strips have a product cost twice as high asScotch tape but 60 times the cost in use to hang up aposter. Why would a customer choose to buy a product that has a cost inuse 60 times higher? The customer believes that the additional value in use thatCommander provides justifies the additional cost in use○ Less damage to walls○ Simplicity to remove○ DurabilityTwitter:
  23. 23. Economic Value Definition Reference Value (RV): The cost of the competingproduct that the customer views as the best alternativeto our product Differentiation Value: (DV) The value to the customer(both positive and negative) of any differences betweenour offering and the reference product. Economic value (EV): The price of the customer bestalternative (reference value) plus the value of whateverdifferentiates the offering from the alternative(differentiation value). EV=RV+DVTwitter:
  24. 24. Economic Value Analysis Step 1: Identify the cost in use of the competitiveproduct or process that the customer views as thebest alternative Step 2: Identify all factors that differentiate yourproduct from the competitive offering Step 3: Determine the value to the customer of thesedifferentiating factors. Sources of value can besubjective or objective. Step 4: Add up the reference value and thedifferentiation value to determine the economic value.Twitter:
  25. 25. www.Brioneja.comTwitter: @BrionejaThe Concept of “Hard” vs. “Soft” Value inUse Hard or objective value in use is value which can be readilyquantified by the customer: “cash out the door”○ Raw material savings○ Energy savings○ Reduction in spare parts cost○ Product Features Soft or subjective value in use are benefits that, while real, can notbe quickly quantified or monetized immediately by the customer.○ Improved safety○ Improved quality○ Environmental/Green benefits○ Ease of use○ User Experience (UX)
  26. 26. Value Split Value must be shared between sellerand customer Customer will not switch from alternativetechnology unless new offering carriesenough value to make the switchworthwhileTwitter:
  27. 27. PaperBoard Value SplitExampleTwitter: @Brionejawww.Brioneja.comWhat should be the price of the additive?
  28. 28. PaperBoard Value SplitTwitter:
  29. 29. Value Maximization In order to maximize value, we must determine the valuein use associated with our product by using mappingtools There is no “perfect” value analysis technique. Alltechniques will have advantages and disadvantages. The value captured by of your product will also dependon the number of players in the value chain that will splitthe value of the product Stop talking about attributes and start talking aboutbenefitsTwitter:
  30. 30. www.Brioneja.comTwitter: @Brioneja30Tools for Product Attribute ValueAnalysisLevel 1•Market Perceived Quality ProfileLevel 2•Kano AnalysisLevel 3•Conjoint Analysis
  31. 31. Market Perceived Quality Profile(MPQP) Rank the importance of attributes on a 1-10scale or by distributing a fixed number ofpoints (i.e. 100) Rank comparative performance of eachattribute Multiply performance by weight to obtainoverall product ratingTwitter:
  32. 32. MPQP ScooterTwitter:
  33. 33. MPQP SegwayTwitter:
  34. 34. MPQP Example forAdhesiveAttributes ImportanceRatingPerformanceRatingPerformanceRatingDurability 8 7 56High TemperatureResistance9 8 72High Quality 8 10 80High Water Resistance 9 6 54Low Price 10 8 80Overall Rating 342Twitter:
  35. 35. iPad vs. Competitor’sTabletsTwitter: Source: 10/29/10
  36. 36. iPad MPQP vs. CompetitionTwitter:
  37. 37. MPQP Issues Advantages Good for a first discussion with the customer and to generatea basic list of requirements when little is known about themarket Provides overall product rating comparison Disadvantages No clear differentiation between important variables “Everything is important” “We want everything” Hard to quantify usability/ease of use We need further differentiation of the importance ofattributes to achieve sub-segmentation based on realcustomer needs Kano Analysis Attribute MapTwitter:
  38. 38. Kano Analysis Kano analysis is a tool which can be used to classify and prioritizecustomer needs. Customer needs are not all of the same kind, not all have the sameimportance, and are different for different populations Kano stated that there are four types of customer needs, orreactions to product characteristics / attributes:1. The Surprise & Delight factors. These really make your product standout from the others. Example, a passenger jet that could take offvertically2. The More is Better. E.g. a jet airliner that uses a little less fuel than thecompetition.3. The must be things. Without this, youll never sell the product. E.g. A jetairliner that cannot meet airport noise regulations.4. Finally, there are the dissatisfiers, the things that cause your customersnot to like your product. E.g. a jet airliner that is uncomfortable to ride in.Twitter:
  39. 39. Kano Example: BankingTwitter:
  40. 40. Attribute MapTwitter:@Brionejawww.Brioneja.comAttribute of Product or Service, Relative to Competing OfferingsBasic Discriminator EnergizerPositiveNon Negotiable:Performs at least aswell as thecompetitionDifferentiator: Performsbetter than competitionwhere it countsExciter: Performs betterthan competitorsNegativeTolerable:Performs no worsethan thecompetitionDissatisfier: Performsbelow the level ofcompetitorsEnrager: Must be correctedat any cost( to capitalize oncompetitors negatives)NeutralSo What?: Doesnot affect thepurchasingdecision in ameaningful wayParallel: Influencessegment attitudes but isnot directly related toproduct or serviceperformance
  41. 41. Limitations of Attribute Map and Kano The Kano model and the Attribute Map can be used tohelp identify customer segments, based on the relativepriority of each segments requirements. Disadvantages Kano analysis determines value of individual productattribute but does not provide value of specific level withinthe attribute Customers choose products based on the overallprofile of properties, rarely on one single property. Ranking of combination of properties may differ fromindividual property rankings Conjoint analysis may be needed for breaking tiesTwitter:
  42. 42. Conjoint Analysis Rather than directly ask customers what they prefer in aproduct, or what attributes they find mostimportant, Conjoint Analysis employs the more realisticcontext of respondents evaluating potential productprofiles with different combinations of attributes. By varying the combinations attributes and observingthe responses we can determine the real value of eachattribute and the magnitude of the value within eachattribute Forces the customer to make choices of what they arewilling to trade-offTwitter:
  43. 43. Types of Conjoint Strategies Conjoint Value Analysis (CVA)○ Full-profile approach: Useful for measuring upto six attributes Adaptive Conjoint Analysis (ACA)○ Respondents do not evaluate all attributes atthe same time, which helps solve the problemof "information overload" Choice-based Conjoint (CBC)○ Respondents are shown a set of products onthe screen (in full-profiles) and asked toindicate which one they would purchaseTwitter:
  44. 44. Conjoint Techniques ApplicationTwitter: @Brionejawww.Brioneja.comACA CBC CVASix or fewer attributes X X XMore than six attributes X X(a)More than nine levelsper attribute XComputerizedquestionnaire X X X(b)Paper questionnaire X(c) XInteractions XSmall sample size X XIndividual-level utilities X X
  45. 45. CVA Conjoint Analysis ExampleAttributes Product A Product B Product CDurability, years 2 2.5 1.5High TemperatureResistance, C240 220 260High Quality,Impurities/lb0.05 0.1 0.07High Water Resistance,hrs.24 48 64Price, $/lb 1.25 0.95 1.40Customers’ Rating 8 7 9Twitter: @Brionejawww.Brioneja.comThe exercise is repeated for multiple combinations and theanalyst or the computer can statistically deduce what productfeatures are most desired and which attributes have the mostimpact on choice
  46. 46. The Value Box© Concept The Value Box is a tool to assess strategy based on anoverall picture of the value space The total cost of manufacture is the lower level of the box The minimum desirable ROI targets for the product form the nextlower levels of the box. Intermediate levels are set by the cost in use of competitivetechnologies. The upper levels are set by the degree of value in use of the newproduct The right axis can be the number of players in the value chain ornumber of value sub-segmentsTwitter:
  47. 47. The Product Value Box© ConceptTwitter: @Brionejawww.Brioneja.comPrice Number of playersin the value chainTimeMinimumFloorPriceFull ValueinUse PriceCost in UseCompetingTechnologyTotal Cost ofManufacture
  48. 48. The Product Value Box© Concept for aGeneric ProductPrice Number of playersin the value chainTimeTarget Return on Investment“Hard + Soft” Value in Use Price“Hard” Value in Use PriceCost in UseCompetitive TechnologyMinimum ROIRetailerConverterManufacturerTotal Cost ofManufacture Twitter:
  49. 49. Value Box for PaperBoardExampleTwitter: @Brionejawww.Brioneja.comPriceTimeCost of Production100% Full Value in Use Capture25% Value Capture Pricing$5/lb$2.5/lb$1.3/lb50% Split Value in Use Pricing$1/lb
  50. 50. iPad Value BoxTwitter: @Brionejawww.Brioneja.comPriceTimeiPad’s Cost of ManufactureKindle DX PriceDell’s Mini 10 Netbook Price$489$399Kindle’s Price$270$279$259Archos Droid Tablet PriceiPad’s 16G Price$499
  51. 51. Pharmaceutical Pricing Return on Investment Price must compensate for entire investmentin R&D, trials – Well above cost ofproduction $700 MM to bring a new drug to market The fewer patients a drug helps, the more itcosts Value in Use Pricing What is the cost of alternative treatment? Pill vs. SurgeryTwitter:
  52. 52. The Product Value Box© Concept aConcept PharmaceuticalPriceTimeCost of Production/doseFull Cost of Surgery to Treat AilmentPrice at Full Return of Investment including R&D and Trials$50,000$30,000$10,00050% Split Value in Use Pricing$1000Twitter:
  53. 53. Hybrids vs. Non-Hybrids Is buying a hybrid car worth it? Gas savings vs. higher monthly payment Depends on○ Gas mileage difference○ Price of gasoline○ Mileage driven/yr○ Price differential of comparable modelsTwitter:
  54. 54. The Product Value Box© Concept forToyota PriusPriceTimeDiscount Pricing ApproachFull “Hard + Soft” Value in Use PriceFull “Hard” Value in Use PricePrice of Competitive Technology, 40mpg economy car$21,000$13,500$12,000(Break even hard value for customer)$11,000Twitter:
  55. 55. Value Co-Creation CaseStudy Value is co-created with customers when acustomer is able to personalize his/herexperience using a firm’s product-serviceproposition to a level that is best suited toget his/her job(s) or tasks done. – WimRampenwww.Brioneja.comTwitter: @Brioneja
  56. 56. Augmented & AlternativeCommunication Augmentative and AlternativeCommunication (AAC) refers tomethods and devices thatsupplement or replace speech andwriting when these are temporarilyor permanently impaired Until a few years ago AACcommunication devices consistedof bulky electronic boards costingover $7 K each Best known example: Stephen Hawkingwww.Brioneja.comTwitter: @Brioneja
  57. 57. Disruptive Innovation: iPad andAAC iPad apps are being used byspecial needs children, suchas those who have speechimpediments as acommunication tool New apps give a person theability to communicate basicneeds and interests throughthe use of pictured imagesand corresponding audio.www.Brioneja.comTwitter: @Brioneja
  58. 58. Features vs. UX/UI Features Images & Symbols Can add more images # of Audio Voices Can Record Voices Create phrases Can add categories Text to speech Quality of audio Automatic conjugations Word prediction In-App expansion UX/UI Usability/Navigation (UI) Customization Communication capability Visual appealwww.Brioneja.comTwitter: @Brioneja
  59. 59. Customization Customization to the individual’scommunication level and needs iscritical for usabilitywww.Brioneja.comTwitter: @Brioneja
  60. 60. AAC Apps – FeaturesAnalysiswww.Brioneja.comTwitter: @BrionejaFeaturesImages & Can add # of Audio Can Record Create Can add Text to Quality of Automatic Word in-AppSymbols more images Voices Voices Phrases categories Speech Audio Conjugations Prediction ExpansionTouchChat 10,000 Y 3 Y Y Y Y High Y Y YProloquo2Go 8,000 Y 3 Y Y Y Y High Y Y N/AExpressive 650 Y 2 Y Y Y N/A High N/A N/A N/AOne Voice 100 Y 4 Y Y Y Y High N/A N/A N/AiComunicate 10,000 Y 1 Y N/A N/A Y Low N/A N/A N/AGrace 100 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
  61. 61. UX/UI How easy is it touse, navigate? How much knowledge isrequired about programmingor manuals? How simple and intuitive is tosetup and customize to theindividual’s communicationlevel and needs? What is the level ofcommunication capabilitythat the app can provide?www.Brioneja.comTwitter: @Brioneja
  62. 62. UX/UI Capability Ratingswww.Brioneja.comTwitter: @BrionejaUser ExperienceUsability Setup Communication VisualNavigation Customization Capability AppealTouchChat Complex Complex Advanced MediumProloquo2Go Complex Complex Advanced ExcellentExpressive Easy Easy Medium ExcellentOne Voice Medium Easy Low ExcellentiComunicate Easy Minimal Entry Level LowGrace Easy Minimal Entry Level Good
  63. 63. Features vs. UX/UIwww.Brioneja.comTwitter: @BrionejaFeatures/CapabilityUX/UITouchChatProloquo2GoExpressiveiCommunicateGraceOneVoiceArea of Opportunity
  64. 64. Summary To be successful in the marketplace and createinnovations, products must deliver clear valuethat addresses unmet needs Value in use can be measured and quantified Pricing is a tool used to share the value with thecustomer The Value Box© is a new tool to facilitate themapping of the value space and determine thebest commercial strategyTwitter:
  65. 65. Contact Information Twitter: @Brionejawww.Brioneja.comTwitter: @Brioneja
  66. 66. © AIPMM 2013 @AIPMMQ&AModerator:Hector Del Castillo, PMP, CPM, CPMMPresenter:Moderator:Hector Del Castillo, PMP, CPM, CPMMPresenter:Jose A. Briones, Ph.D.General ManagerSpyroTek Performance SolutionsEmail: brioneja@gmail.comTwitter: @Brioneja
  67. 67. © AIPMM 2013 @AIPMMUpcoming CoursesCourse & Location Dates Days TimeACPM® Certification Prep Course & ExamMcLean, VA May 13, 2013 M 8:30 am – 5 pmCPM® Certification Prep Course & ExamMcLean, VA May 14-15, 2013 T, W 8:30 am – 5 pmCPMM® Certification Prep Course & ExamMcLean, VA May 16-17, 2013 Th, F 8:30 am – 5 pmRegister for these courses here: courses are available in Austin, San Jose, and Seattle.
  68. 68. © AIPMM 2013 @AIPMMUpcoming CoursesCourse & Location Dates TimeCPM® Certification Prep Course & ExamAmman, JordanSingaporeMay 6-7, 2013May 27-29, 20138 am – 5 pm8 am – 5 pmCPMM® Certification Prep Course & ExamAmman, JordanSingaporeMay 8-9, 2013May 30-Jun 1, 20138 am – 5 pm8 am – 5 pmFollow the links provided to get more information regarding these courses.
  69. 69. © AIPMM 2013 @AIPMMFor More Information About• AIPMM membership benefits• Certification courses in your area• How to prepare to take a certification exam• Defining the right product strategy &innovation strategy to grow your businessHector Del Castillo, PMP, CPM, CPMMTransforming products to wealtht for technology-based organizations.TMProduct Marketing Directorhmdelcastillo [at]
  70. 70. © AIPMM 2013 @AIPMMPlease Join Us Again!AIPMM Webinar Series:Too Busy To Plan?, Apr 26, 12 p.m. ET Product Management Talk: Informed!Newsletter: