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: http://budurl.com/qcsq

1. Stephan M. Liozu, Ph.D.
Founder
Are you Capturing the Value of your
Innovation?

2. Stephan Liozu, Ph. D
sliozu@case.edu
@StephanLiozu
To view live tweets follow #innovalue

3. Revisit your overall business model, your main value proposition, and
the critical unique selling proposition of your products/services.
Innovation has become the name of the game but more focus than
ever on the ROI of the innovation investments!
Energize the core business by creating greater differentiation and
competitive advantage.
Breakthrough thinking is required: are you challenging yourself and
your business model enough?
The Business Dynamics Have
Changed 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 value
drivers 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 value
and pricing deliverables through Stage Gate.
• Economic value estimation is not consistently and scientifically conducted and
value drivers are rarely monetized.
• Pricing decisions are often based on legacy pricing (old generation + %) and/or
premium pricing (competition +%).
• Stage Gate® projects are traditionally evaluated/screened using matrices
combining risk/attractiveness, effort/benefit, projected cost/projected price,
volume/margin contribution, strategic fit, etc.

6. The Value Discipline
<6>
Value Selling
& Negotiation
Value-based
Pricing
Value-based
Marketing
Value-based
Innovation
“Build
profitability into
innovations
before launch”
“Target segments
based on value, &
user needs, not
demographics”
“Establish a value
story and force
customers to
acknowledge it”
“Maximize
profits by
aligning value
and price”

7. The Economic Value Estimation®
Framework
Positive
Differentiation
Value
Your Unique
Value
Delivery
Competitive
Reference Value
Price of Next Best
Competitive
Alternative
Negative
Differentiation Value
Total Economic
Value
Value Capture
Source: Monitor Group

8. Using Cloud-based Value Modeling
Software

9. EVE® – Heavy Equipment Manufacturer
Reference
Competitive
Alternative for
this Customer =
$72,500
Add’l warranty
cost = -$1050
Increased revenue from
higher uptime – rental
svc = $2350
Invoice processing &
consistency savings =
$1500
Parts inventory pgrm
savings = $1250 Total Offering
Economic Value
$79,950
Differential
Economic Value =
$7,450
Reference Value
= $72,500
Improved residual
value = $1200
Fuel economy savings
= $2200

10. A New Matrix to Rate Innovation
Projects

11. A New Approach to Categorize Projects

12. Integrated Value Gates
Gate 1
Opportunity
Identification
Viability
Assessment
Gate
2
Development
Gate
3
Test and Piloting
Gate
4
Launch
Value Driver
Identification:
Identify and
document value
proposition; value
proposition must be
linked to at least
one strong customer
value driver or
USP/UVP*; establish
VOC and value needs
(cost savings or
incremental
revenues)
Value Impact/Cost –
to-serve Analysis:
Potential service
constraints
identified; test cost-
to-serve relative to
value impact;
additional value
drivers identified.
Initial Value-based
Price Established:
Establish first draft
of value-based price
based on EVE®,
value sharing
position and pricing
moderator; establish
sensitivity analysis
and market
potential.
Define Segment
Strategy & Pricing
Structure:
Refine value-based
pricing levels, define
value messages by
market segments;
define formal pricing
structure
Communicate Value
& Validate WTP:
Communicate value
messages by
segment supporting
entry-level pricing
structure; establish
quick feedback on
customer WTP.
Modify EVE® models
based on initial
feedback.
Source: 2004 SPG Insights – Adapted from Paul Hogan
Trackmetrics,post-launchdebrief;
dynamicrefinementofvaluemodels.
Post
Launch
Value 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 development
checkpoints and documents.
• Get internal team consensus on the value quantification levels to gain internal
credibility and generate buy-in.
• Make sure you include differential economic value in the screening and
prioritizing of your innovation portfolio.

14. Stephan M. Liozu, Ph.D
www.stephanliozu.com
sliozu@case.edu
http://www.linkedin.com/in/stephanliozu
@StephanLiozu
#innovalue