Driving Value Upstream Into Product Development

Monthly Webinar Series - June 2012

Driving Value Upstreaminto Product Development

by

Tom LuckeCopyright © 2012 by LeveragePoint Innovations Inc.

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This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion.

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Sponsored by LeveragePoint the Software Solution for Value-based Pricing

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Today’s Presenter

Tom Lucke is Managing Director of Value Management Advisors (VMA) which helps companies develop growth andAdvisors (VMA), which helps companies develop growth and pricing strategies in a range of industries including high tech, software, manufacturing, data & information, and process industries. Previously Tom held senior positions at the Monitor Group, the Strategic Pricing Group, CSMG and Price Waterhouse.

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Polling Question

Copyright © 2012 Value Management Advisors, Inc. 4

Value to Customer in Marketing and SalesValue to the customer is a well-accepted basis for making decisions about pricing and go-to-market strategy

Create Products and

Solutions

Design Price and Revenue

Model

Go to Market and Sell

Manage Product Lifecycle

Design go-to-market strategies and sales

approaches that align with – and

Develop pricing that is consistent with

value across products as well as align with and

capture – valueproducts as well as customer segments


Value to Customer in Product ManagementBut the concept of value to the customer has not generally been applied in Product Development and Product Management, where there is significant potential

Create Products and

Solutions

Design Price and Revenue

Model

Go to Market and Sell

Manage Product Lifecycle

Design go-to-market strategies and sales

approaches that align with – and

Develop pricing that is consistent with

value across products as well as

Optimize product configuration,

targeting and pricing as value to the

Create solutions that deliver the right

value to key customer segments align with and

capture – valueproducts as well as customer segments

as value to the customer evolves

over time

customer segments


Driving Value Upstream – Two ExamplesWithin Development, two areas that offer particular opportunities are decisions about resource allocation and product configuration

Product ConfigurationResource Allocation

• How many variants of the product should I have?

• How should we allocate limited development resources? should I have?

• What set of features should be in each variant?

development resources?

• Which features should we consider deferring when there is a crunch?


Tools for Resource Allocation The core tools for applying value in Development are the same ones we use in pricing – Feature-

F-B-V Value Estimation

Benefits-Value, and Differential Value Estimation

FeatureNegative

Differential Value

Benefit

Positive Differential

Value

Economic V l

ValueReference

Value

Value

Value


Example – Value Estimate for New ProductFor example, here is a simple value model for a product we worked on during its developement

$1 095$1,200

Differential Value Estimate for Network Test Equipment

$120 $115

$60 $100 $1,095

$1,000

$1,200

$500

$200

$600

$800 $595Differential

Value

$200

$400

$0

$

Competitor's Product

Detection of More Types of

Faster Error Analysis

Automated Error

Intuitive User Interface

Custom Reporting

Our New Product

Copyright © 2012 Value Management Advisors, Inc.

Errors Correction

Note: Disguised data

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Using the Value Estimate in Resource AllocationIn this case, the client was able to apply what we knew about the value of particular features to

Value of Feature Compared to Development Effort

make informed choices about the priority of those features and the appropriate allocation of resources

Estimated Development Effort

entia

l Val

ueD

iffer

e

Error Detection Error Analysis Error Correction Custom Reporting

User Interface


p g


Framework for Product ConfigurationDecisions about product configuration are based on identifying groups of customers that derive

L th t bl

value in different amounts and different ways – and creating tailored versions of the product for each group

Segment 1

High Val e

Leaves money on the table for high value customers

Valu

e

High Value Single Product, Priced Here

V

Segment 3Segment 2

Moderate ValueLow Value

And prices lower value


And prices lower value customers out of the market

Making Product Configuration Decisions

Create two versions

Differential Value Estimate for Network Test Equipment

Remove Custom Reporting for a Low Tier

version? – Costly to develop, and not all

customers may use it

based on Types of Errors? Customer may have different

needs

$200

$120 $115

$60 $100 $1,095

$800

$1,000

$1,200

q p customers may use it

$500

$200

$400

$600

$800

$0

$200



What if We Look at Value by Segment?

Biggest sources of

$1,600 $1,600

Value – Segment 1 Value – Segment 2

Biggest sources of difference are Automated

Error Correction and Faster Error Analysis

$180

$275 $65

$100 $1,330

$1,000

$1,200

$1,400

$58$100 $978 $1,000

$1,200

$1,400

$500

$210

$400

$600

$800

$500

$195 $90 $35

$58

$400

$600

$800

$0

$200

$0

$200



Driving Value Upstream into Development

Ultimately, there is a need to embed value-based tools and concepts into development and product lifecycle management Build discovery of value into process Build discovery of value into processDeploy tools to support teams Incorporate into key development documents and metrics

Tools and process allow us to use value to the customer to improve decision-making at critical points Feature prioritizationFeature prioritizationResource allocation Product configuration

Using value-based concepts in development also creates a common language of value to support product launch and hand-off to marketing and sales


Our Next Webinar – July 18th

h d &• Stephan Liozu, President & CEO, ARDEX Americas

O i ti l C fid• Organizational Confidence:Generating “Pricing Superheroes”

• 12:00pm Eastern

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Thanks for Watching!

Value Management AdvisorsTom Lucke

[email protected]

(617) 775 5923(617) 775 – 5923

Ed [email protected](617) 252 2967(617) 252 – 2967 www.leveragepoint.com

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Business

Driving Value Upstream Into Product Development