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Value Propositions - CDMA meeting 2006
This document discusses developing value propositions in business-to-business (B2B) markets. It emphasizes the importance of understanding applications within specialty industrial markets, defining value from the customer's perspective, and benchmarking products against competitors. The presentation also provides a checklist for capturing value and discusses organizational processes like using cross-functional teams and focusing resources on key projects.
Value Propositions - CDMA meeting 2006
- 1. 1 Value Propositions inB2B Markets ■ Consumer vs. Industrial Markets ■ Commodity vs. Specialty Industrial Markets ■ Picking markets / applications ■ Defining value and market needs ■ Competitive Benchmarking ■ Value Capture Checklist ■ Organizational & Process Issues ■ Summary Agenda Sudhir Hublikar Vice President of Technology AGY, Inc.
- 2. 2 Industrial vs ConsumerMarkets Technical Understanding Impulsive Buying Dependency on Suppliers Number of Buyers Number of Product App’s High Low Consumer Industrial Buyer Industrial buyers are sophisticated and use a deliberate, technical process. Source: Advanced Industrial Marketing, Inc.
- 3. 3 Commodity vs SpecialtyIndustrial Markets SpecialtySemi-SpecialtyCommodity ■ Market data are well documented. ■ Market segments and product needs are well understood. ■ Competitors’ products are easily obtained & analyzed. ■ Product testing & qualification driven by industry standards. ■ Market data are very limited ■ Market segments and product needs are very poorly understood. ■ Competitors products difficult to obtain and analyze. ■ Product testing & qualification is very customer-specific. In specialty industrial markets, understanding market segments, customers’ product needs and competitive landscape are all significant challenges!
- 4. 4 Example - AGYMarkets and Applications Aerospace Defense Automotive Construction Industrial-Other Electronics Filtration Thermal Insulation Protective Fabric Cable Insulation Printed Circuit Boards Roofing Insect Screening Timing Belts Ignition Cables Solar Screens Reinforcement Tapes Sewing Thread Concrete Boards Bazookas Humvee Armor Auto Mufflers Helicopter Blades Aircraft Interior Panels Aircraft Cargo Liner Understand the market but focus on the application.
- 5. 5 Winning Strategy ForSpecialty Industrial Markets ! Pick the right market segments/applications ! Understand unmet needs ! Know the competition ! Define winning value propositions ! Develop the right new products
- 6. 6 Understand You ApplicationsPortfolio 0.0 0.5 1.0 1.5 2.0 -5 3 10 18 25 Application Growth Rate, % CAGR MarketPower (Relativeshare) Application Leader Are there “Performance” applications in the portfolio? Application Follower
- 7. 7 Which Growth StrategyDo You Want to Follow? 0.0 0.5 1.0 1.5 2.0 -5 3 10 18 25 Follower 0.0 0.5 1.0 1.5 2.0 -5 3 10 18 25 Focused Leader Opportunistic 0.0 0.5 1.0 1.5 2.0 -5 3 10 18 25 Leader 0.0 0.5 1.0 1.5 2.0 -5 3 10 18 25 GrowthRate Margin
- 8. 8 Example - AGYApplication Portfolio 0.0 1.3 2.5 3.8 5.0 -4 0 4 8 12 16 Application Growth Rate, % CAGR MarketPower (Relativeshare)
- 9. 9 Attractiveness Criteria Market Segments or Sub-Segments 1. Sizeof Revenue Opportunity 2. Market Segment Growth 3. Market Segment Profitability 4. Unmet Customer Needs 5. Likely Power of Value Proposition 6. Likelihood of Technical Solution 7. Current Market Presence ▪ Marine Coatings B C B A A C C ▪ Maintenance Coatings A C B B B C C ▪ Aircraft Coatings A A B A A B B ▪ Bridge Coatings C B A A B C B ▪ Railcar Coatings B C C C A B C Pick the Right Markets & Applications Source: Advanced Industrial Marketing, Inc.
- 10. 10 Attractiveness Criteria Market Segments or Sub-Segments 1. Sizeof Revenue Opportunity 2. Market Segment Growth 3. Market Segment Profitability 4. Unmet Customer Needs 5. Likely Power of Value Proposition 6. Likelihood of Technical Solution 7. Current Market Presence ▪ Marine Coatings B C B A A C C ▪ Maintenance Coatings A C B B B C C ▪ Aircraft Coatings A A B A A B B ▪ Bridge Coatings C B A A B C B ▪ Railcar Coatings B C C C A B C Picking Markets / Applications: Example A B C : Very Attractive : Moderately Attractive : Unattractive Source: Advanced Industrial Marketing, Inc.
- 11. 11 Understand the ApplicationLifecycle Performance Phase Optimization Phase • Sale depends on one or two performance attributes • Sale depends on optimization of multiple product & service attributes • Cost is a minor factor • Cost is a major factor • Multiple materials, processes & designs • Standard materials, processes & designs • Grow with market • Steal growth from competitors • Growth rate >> GDP • Growth rate ~ GDP • Path to competitive advantage is clear • Path to competitive advantage is complex
- 12. 12 Defining Needs: Don’tJust Talk to Direct Customers ! ! ! E N D ! U S E R ! Automotive Timing Belt Application AGY Cord Mfg AGY Weaver Prepregger Panel Mfg Sub- Component Mfg System Integrator AGY Weaver PC Board Shop AGY Weaver DistributorComponent Mfg Electronics PC Boards Aerospace - Interior Panels Armor Most firms listen only to direct customers… Focus on decision makers and influencers. Belt Mfg Prepregger Laminator
- 13. 13 Finding Value inthe Value Chain Your New Product Aqueous Resin Immediate Customer’s Operation Production of Coatings Immediate Customer’s Products Clear Coating Customer’s Customer’s Operation Part Mfgr & Coating Customer’s Customer’s Products Coated Parts Example: You sell a resin used in a clear coating… which is sprayed on automotive exterior parts ■ Reduced oven drying time ■ Elimination of solvent recovery ■ One coating for many part types ■ Longer coating pot life ! ■ Higher gloss levels ■ More durable coatings ■ Better mar resistance ■ Fewer coating defects ■ Reduced mixing time & labor ■ Elimination of another ingredient ■ Reduced waste stream ■ Higher usage efficiency ! Source: Advanced Industrial Marketing, Inc. Operational benefits are often predictable & measurable Product benefits can deliver high value & change the basis of competition.
- 14. 14 Your New Product Aqueous Resin Immediate Customer’s Operation Production of Coatings Immediate Customer’s Products ClearCoating Customer’s Customer’s Operation Part Mfgr & Coating Customer’s Customer’s Products Coated Parts ■ Reduced oven drying time ■ Elimination of solvent recovery ■ One coating for many part types ■ Longer coating pot life ! ■ Higher gloss levels ■ More durable coatings ■ Better tar resistance ■ Fewer coating defects ■ Reduced mixing time & labor ■ Elimination of another ingredient ■ Reduced waste stream ■ Higher usage efficiency ! Finding Value in the Value Chain Your New Product Aqueous Resin Immediate Customer’s Operation Production of Coatings Immediate Customer’s Products Clear Coating Customer’s Customer’s Operation Part Mfgr & Coating Customer’s Customer’s Products Coated Parts ■ Reduced oven drying time ■ Elimination of solvent recovery ■ One coating for many part types ■ Longer coating pot life ! ■ Higher gloss levels ■ More durable coatings ■ Better tar resistance ■ Fewer coating defects ■ Reduced mixing time & labor ■ Elimination of another ingredient ■ Reduced waste stream ■ Higher usage efficiency ! After identifying a benefit, you must quantify it, preferably in $/yr. Example: A. Reduced waste stream B. 1.5% less waste generated C. Annual savings = $160k Source: Advanced Industrial Marketing, Inc.
- 15. 15 Compare With CompetitiveProducts – Example Example: Armor 0 1 2 3 4 Strain to Failure Tensile Strength Density S-2 Glass E Glass Carbon Aramid S-2 Glass E Glass Carbon Aramid 0 1.3 2.5 3.8 5 Property Test Method Units Impor- tance Strain to Failure ASTM D638 % H Impact Resistance ASTM D6110 KJ/m H Tensile Strength ASTM D638 MPa M Flammability ASTM E162 sec M Density ASTM D792 g/cc M 1. Identify key properties, tests & importance, as defined by value chain ! 2. Perform side-by-side testing against competitive materials ! 3. Generate weighted scores to understand our competitive position
- 16. 16 Defining New Products- Product Roadmapping 1 2 3 4 5 6 7 8 9 10 Filter Life Housing Size Pressure Rating Impurity Size Unit Durability Max Flow Our New Product Best Competitor
- 17. 17 Value Capture Checklist ■Value Proposition – We understand how the customer defines value – We have evaluated existing products using the customer’s definition of value – We have developed a product roadmap to exploit gaps between customer needs and existing products. – Our (new) product target better meets the customer’s definition of value ■ Value Capture – We know how much incremental value we will generate for customers – Our pricing plan will capture a fair share of this value for our company ■ Product Development – We have defined product specifications – We have a technical plan and understand risks – We have a marketing plan – We have defined the resources needed for success
- 18. 18 Organizational & ProcessIssues ■ Use a simple process to focus the organization on a few key projects – Example : The AGY Idea-to-Profit Process ■ Use multifunctional project teams to execute large projects – Co-Leaders: Commercial or Manufacturing + Technical – Have the “end-user” function be accountable for the project ■ Use a multifunctional leadership team to manage the project portfolio ■ Don’t give engineers more than two must-do projects ■ Involve the (lead) customer as early as possible – Customer relationship & access is more critical than size, etc. – Co-develop with a lead customer if you are entering a new application ■ You need to be “in” the application to really understand needs – Don’t be afraid to get a me-too version 1.0 out there ■ Review projects thoroughly and don’t be afraid to say “No”
- 19. 19 SummarySummary… ■ In specialtyindustrial markets, understand the market but focus on applications ■ Analyze your applications portfolio and focus on a few applications ■ Understand who are the decision makers and influencers in the value chain ■ Understand how the value chain defines value ■ Use side-by-side testing to assess yours and competitors’ products ■ Use the Value Capture Checklist ■ Define projects thoroughly and resource them properly ■ Focus, focus, focus….and get something done!
- 20. 20 Value Propositions inB2B Markets Questions? ■ Consumer vs Industrial Markets ■ Commodity vs Specialty Industrial Markets ■ Picking markets / applications ■ Defining value and market needs ■ Competitive Benchmarking ■ Value Capture Checklist ■ Organizational & Process Issues ■ Summary
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- 22. 22 AGY Idea-to-Profit Process Opportunities Develop Project Launch Product Fast-track ProjectsY Develop Business Case Develop ProductApproval Launch ProductApproval Key Projects N Few Resources Needed? Y Good AGYFit? New Business Core Business Concept Developed by… New Business Development Business Teams