Chris P

www.simon-kucher.com
Monetising Innovation:
Lessons from around the world Sydney, May 8th, 2019
Chris Petzoldt
Sydney office
Level 4, 146 Arthur Street
North Sydney NSW 2060
Australia
Tel. +61 2 911 21 300
sydney@simon-kucher.com

1 Source: R&D Magazine, Bloomberg
R&D investments higher than ever
16.1
13.9
12.7
12.7
12.1
12.0
11.4
10.1
10.0
Amazon
Alphabet
Samsung
Intel
VW
Microsoft
Roche
Merck
Apple
R&D investments 2017 in bn1
Companies with highest innovation
expenditure
Global
R&D investments
2017
~$2,066bn
Chris Petzoldt Monetisation of innovation in practice.pptx 2

Source: Globlal Pricing Study 2014; n=1.615
Despite high investments poor innovation performance
72% of all new
products do not achieve
profit target
In 25% of companies
all products fail to meet
profit target
76%
74%
72%
69%
Japan
USA
Globally
DACH
New products: "flop rate"

Monetising innovation
72 4
2 9

72% don’t achieve target
What goes wrong here? A typical example
vs.

vs.
72% What goes wrong here? A typical example
 Second biggest new product flop in
2012 after the Apple iPhone map
 Disastrous sales performance for a
volume model
(2016 43k units, 2018 390 units)
 Became one of the most
important Porsche cars
 72,000 Cayenne sold in 2018

72 4
2 9

Source: Simon-Kucher & Partners
Failure category #1: "Feature Shock"

1) Source: Bolt Blog
Feature Shock
Juicero: "Unconstrained development is lethal."
$400 for a WiFi-connected juice press
$120m burned
"incredibly complicated piece of
engineering“1)
"dozens of components that are
incredibly complex and beautifully
engineered, but hopelessly expensive
to manufacture"

Failure category #2: "Minivation"

Minivation
Automotive supplier/VW: ParcAssist
Cost plus pricing
towards VW and
other OEMs: approx. €100
OEMs understand
full customer value
VW's customer price: €670

Failure category #3: "Hidden Gem"

Hidden Gem
Kodak – did not recognise they had it
1974
Kodak's Steven Sasson invented
the digital camera technology
1995
Kodak introduced its first digital
camera; only in 2001 they got
serious about that business
2012
Kodak declared bankruptcy

Failure category #4: "Undead"

1 Wikipedia; 2 MSRP Segway X2 S
Undead
Segway: Born to fail or clearly the wrong positioning
€7,524
2
1
Sales target acc. to bus. plan:
50,000 in the first year
Actual sales:
30,000 in 6 years

Undead
The graveyard of undead new products
Either the wrong answer to the right question…
OR an answer to a question nobody asked

Monetising innovations
The sad truth: Record R&D
investments; 72% flop rate; future
growth is at stake
Just four flop categories:
Feature Shock
Minivation
Undead
Hidden Gem
But: these flops can be avoided
Photocase/Jo

72 4
2 9

The nine steps framework for monetising innovations
1 2 3Have the
WTP talk
early
Segment!
One size fits
none!
The core:
Product
configuration
and bundling
4 5 6Monetisation
model:
How you charge
trumps what
you charge
Pick the winning
price strategy:
Only 3 options
Outside-in
business case:
That includes
WTP
7 8 9Value
communication:
The product
will not sell itself
Use
behavioral
pricing &
tap into
psychology
Chris Petzoldt Monetisation of innovation in practice.pptx
Maintain
your price
integrity
20

Free ground shipping
Communicate on-line with seller over chat
24x7 customer support
Early access to special deals
Price guarantee
Membership sharing
Highlight connections from Facebook
Ability to place a video call with seller
$10 off first purchase
Message with friends
Early WTP talks at a 2 sided marketplace.
Without the WTP talk you cannot prioritise & focus!
Features WTP in $
1
 From 25 to 10 features
 Clear ranking of these 10
 Principle: Focus on
winners, get rid of
losers early
 WTP methods for every
case available

Is there no WTP for higher speed?1

"Want the best"
(30%)1
"Want it now"
(40%)
"Want product
only" (10%)
"Want price only"
(20%)
Price (+/-10%)
Service programs
On-time delivery
Product performance
(end user)
Product quality (converter)
Speed of delivery
Tech support
21
15
15
14
13
13
9
Importance of needs/features in %
Needs/Features All
customers
Segments
12
19
14
21
17
8
9
18
15
19
10
10
18
10
26
8
10
21
18
10
7
36
14
13
9
10
11
7
* Segment size (value)
Segmentation in action2

Product configuration is more science than art!3
Simon-Kucher approach:
Identify leaders, fillers and killers … … and build packages
24

Source: Simon-Kucher & Partners project database
Telco: Bundling of music does not reflect customer needs
Simon-Kucher
project example
3
Other
38%
25%
19%
6%
6%
6%
Surfing
Socialising
Video streaming
Music streaming
Email
Current provider bundling Actual customer preferences
Preferred options:

Source: Simon-Kucher & Partners project database
Telco: Bundling: Improved profit through elimination of killers
Simon-Kucher
project example
3
Current provider bundling Financial performance
Subscribers +5%
Profit +10%

How you charge is more important than how much!4

Powerful monetisation models
COLOURBOX/-
Alternative
Metric
Subscription
model
Pay as you
go/XaaS
Dynamic
Pricing
Auctions Freemium
4

Source : Project by Simon-Kucher & Partners
Pick the winning pricing strategy: Only 3 options!
Penetrate Maximise Skim
5

0%
5%
10%
15%
20%
25%
30%
35%
Profits Market share Volume Product mix Volume
growth
Revenues Cost
reduction
CEO
CMO
Sales Director
CFO
Procurement
KAM
Product Manager
Pricing
Marketing
Source : Project by Simon-Kucher & Partners
Pick the winning pricing strategy: Align on goals!
Relative importance
5

Smart offer design – take into account your customers'
irrational behaviour
ARPU (Ø revenue per user)
from new subscribers $70 $96 +36%
MRR (monthly recurring rev.)
from new subscribers $175k $225k +29%
Basic
(58%)
$49
Basic
(43%)
$49
Standard
(30%)
$79
Standard
(41%)
$99
Advanced
(12%) $149
Advanced
(14%) $199
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Before
re-design
After
re-design% of new
subscribers
New tier:
Premium (2%) $299
8

Avoid knee-jerk repricing!9
Board member
In our organisation you have to come up
with at least three measures what can be
done apart from price decreases before
we even think about decreasing prices.
This simple rule had the highest impact.
Everybody understood.
32

The nine steps framework for monetising innovations
1 2 3Have the
WTP talk
early
Segment!
One size fits
none!
The core:
Product
configuration
and bundling
4 5 6Monetisation
model:
How you charge
trumps what
you charge
Pick the winning
price strategy:
Only 3 options
Outside-in
business case:
That includes
WTP
7 8 9Value
communication:
The product
will not sell itself
Use
behavioral
pricing &
tap into
psychology
Maintain
your price
integrity
33

72 4
2 9

Ralf Drews,
former President of Dräger Safety
1. Creating a monetising innovation type of
process is relatively simple.
2. But deploying it and making sure it stays in
place for every new product can be like
climbing the Mount Everest.

We help to develop, implement and make it stick
Pharma
industry

72 4
2 9

There are three kinds
of companies:
Those who make things happen,
those who watch things happen,
and those who wonder what happened.

www.monetizinginnovation.com
monetizinginnovation@simon-kucher.com
#MonetizingInnovation, @MadhavanSF

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& Partners
on par with
Boston Consulting
Group
McKinsey &
Company
1
...
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Financial Times
Simon-Kucher
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on par with
McKinsey &
Company
1
Boston Consulting
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McKinsey &
Company
Boston Consulting
Group
...
...
41

Simon-Kucher focuses on the revenue side of the profit
equation
Digitisation
 Digital strategies
 Business model
transformation
 Customer-centric
digital approach
 Digital offerings
 Digital monetisation
model and pricing
 Go-to-market
strategies
 Big Data analytics
Transformation
 Effective and
sustainable strategy
implementation
 End-to-end corporate
transformation
towards commercial
excellence
 Transformation of
pricing and sales
organisations
 Monitoring and KPI
systems
 Change management
Strategy
 Growth strategies
 Competition strategies
 New business models
 Monetisation strategies
 Scenario planning
 Market due diligence
Marketing
 Market/customer segmentation
 Portfolio design
 Branding and value communication
 Digital marketing
 Marketing efficiency and effectiveness
 CRM
Pricing
 Pricing excellence programs
 Pricing strategies for products,
business units and companies
 Innovative price and revenue models
 Launch and post launch pricing
 Pricing organisation and processes
Sales
 Sales organisation and efficiency
 Omni-channel strategies
 Sales force effectiveness
 Key Account Management
 Channel management,
discount/bonus systems
42

Simon-Kucher – delivering best value to customers across
industries
43

Chris P

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