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COMPANY CONFIDENTIAL

Maximizing ROI In Product Development

Monthly Webinar Series – January 23, 2013

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Sponsored by LeveragePoint the Software Solution for Value-based Pricing

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Today’s Presenter Maximizing ROI In Product Development

Dr. Stephan Liozu (www.stephanliozu.com) is the

Founder of Value Innoruption Advisors and specializes in disruptive approaches in innovation, pricing and value management. He has worked for Fortune 500 companies specializing in crafting and designing unique innovation and business strategies leading to differentiated business models. Stephan moderates brainstorming, mind mapping and creativity sessions with executives, partners and customers to generate ideas, value models, value propositions and innovation strategies. He recently earned a PhD in Management at Case Western Reserve University.

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Agenda

• The Focus On Value Management

• Trends In the New Product Development Process

• Opportunities To Improve the NPD Process and Maximize Return-on-Investment

• Key Takeaways

• Q & A

Personal Observations

Competitive pressures have increased significantly….

flat is becoming the new growth….and cost cutting is not a

sustainable strategy.

Innovation has become the name of the game!

But the ROI of innovation is being more scrutinized.

Traditional way of screening projects might not work as well

now. New-to-the-world breakthrough innovations need to be

measured in terms of profitability and differential value.

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Innovation, Value & Pricing

Observations in Value & Pricing

in the New Product Development 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

gates.

• Pricing information might be part of formal documents but not dedicated

value and pricing deliverables through development stages.

• 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. <7>

New Product Value Assessment is Difficult

*APQC=American Productivity & Quality Center; NPD=New Product Development

Source: 2010 Stage Gate International

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A New Way to Screen Innovations

Based on Margin & EVE®

Value in the NPD Process

• Successful new product development is about

– Creating unique value propositions and USP’s

– Assessing customer willingness to pay

– Getting customers to pay for it

• Start with an internal common language of value (R&D, marketing,

technology, sales, finance).

• Move considerations of value upstream in NPD process (USP’s and

UVP’s).

• Build strong & scientific value analysis into new product development

checkpoints and documents (e.g., the market requirements document) to

make it work.

• Get internal team consensus on the value quantification levels to gain

internal credibility and create belief.

• Make sure customers’ economic value gained defines and prioritizes

product and engineering requirements.

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Integrated Value Gates

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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.

*USP = Unique Selling Proposition; UVP = Unique Value Proposition; VOC=Voice of Customer

Source: 2004 SPG Insights – Adapted from John Hogan

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Post

Launch

Value to Price Development Process

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Innovators should pay closer attention to

differentiation and value propositions.

Monetizing the differential value of innovation helps

capture customer value through pricing.

Innovation projects can be sorted on the basis

of both gross margin & differential economic value.

Value and pricing should be reviewed at each

gate of the NPD/Stage-gate process.

Key Take-aways!

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Our Next Webinar – February 2013

• Harry Macdivitt

Director, Axia Value Solutions

• Topic: Using “So-What” Analysis to Identify Value

• February 27, 2013 – 11am EST

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Thanks for Watching!

sales@leveragepoint.com

www.leveragepoint.com

(617) 252-2876

Stephan Liozu

sliozu@case.edu

(484) 347-1458

@StephanLiozu