Don’t Just Create Value, Capture It!Gemalto Software Monetization

Sreedhar TatavarthiDirector, Product Management

2

Rethinking the Concept of Value

Value CaptureThe “monetization" of value.

How to make money from the offering

Value CreationCustomer Value Proposition.

Increases the value of company offering

3

A Few Examples

The Right Way The Wrong Way

4

Industry StatisticsLot of innovative products fail to capture value for many different reasons

72% 65% 75%

New Products Do NotMeet Revenue Goals

New Products Fail to Penetrate Market

Funded Startups Fail

Harvard Business ReviewSarah G. Carmichael, Sep 2014

Product Development & Management AssociationBenchmarking Survey, 2013

Harvard Business SchoolShikhar Ghosh, Sep 2012

5

Many Potential Failure Points

Wrong products

Wrong features

Incorrect forecasts

Incorrect budgets

No differentiation

Wrong pricetructure

Sub optimal features

Sub optimal prices

Wrong segments

Unforeseen portfolio effects

Frequent escalations

Un-deserved discounts

Unclear value proposition

Poor sales execution

Channel gaming

Matching comp prices

Un-necessary price cuts

Lack of pricing visibility

Unclear upgrades

Poor negotiations

R&DDetermine value of product

Pre LaunchEstablish pricing structure and levels

LaunchCommunicate value to the marketplace

Post LaunchManage pricing over time

Source: Simon-Kucher & Partners

6

Recurring Themes

UndervaluedFeatures

FeatureOvershoot

OvervaluedProduct

A one size fits all mentality. Lack of goodsegmentation strategy and lack ofunderstanding of what the customervalues

These are features that are completelyunder valued by the company. Thecompany fails to monetize these hiddentreasures

Products are overvalued by the company.Customer are not willing to pay for thevalue offered by the product.

7

Dilbert on Feature Overshoot

TheConsumptionGap

Source: Complexity Avalanche, J.B.Wood

The Consumption Gap

9

Recurring Themes

UndervaluedFeatures

FeatureOvershoot

OvervaluedProduct

A one size fits all mentality. Lack of godsegmentation strategy and lack ofunderstanding of what the customervalues

These are features that are completelyunder valued by the company. Thecompany fails to monetize these hiddentreasures

Products are overvalued by the company.Customer are not willing to pay for thevalue offered by the product.

10

Most Common Monetization Models

Perpetual LicenseAll the value is captured upfront. Used less often for software but still exists for hardware products

SubscriptionValue is captured over the

subscription time period. Used by almost all software vendors.

Consumption BasedPay-as-you-go pricing. More aligned

with outcome based economy.

Data MonetizationGather data from product usage and resell that data to other businesses

FreemiumIncrease adoption by

offering a free version with limited functionality

Revisiting the Consumption GapThere has been a shift in the old capex model. Today consumers want to pay only for the features they use.

In a recent survey conducted by Gemalto,almost 60% of respondents indicated thatConsumption Model is a high priority.60%

Industry Trend

Source: Complexity Avalanche, J.B.Wood

TheConsumptionGap

12

Wide Range of Business NeedsMany companies find it difficult to respond to business needs due to a lack of a product monetization capability.

DiverseCustomer Base

Heterogeneous customer base is a fact of doing business. Companies must be able to offer product variety while reducing costs.

Mergers &Acquisitions

Support inorganic growth and do so in a manner that provides synergies.

LegacyProductsSince products have their own lifecycle, companies must have a way to efficiently manage those.

GovernmentAgenciesMight have a completely different set of requirements from the rest of your customer base.

13

RecommendationsIt is critical that you build software monetization capabilities into your product as part of your product requirements

Offer Product VarietyOffer product variants for specific market segment needs2

Identify Willingness to Pay Identify what your customers want and what they value1

Create Flexible Business ModelsOne size does not fit all so offer new monetization models.3

SUMMARY Understand Customer Value

– And align your product with it

Extract More Value– By offering product variety that caters to your

market segments

Focus on the Business Model– Don’t just focus on the product, focus on

innovative monetization

Build Monetization Into Your Product– Make sure your development team can easily

create product variants and/or enable and disable features.

QUESTIONS & ANSWERS

THANK YOU !This presentation brought to you by Gemalto