Driving Value Upstream Into Product Development
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Transcript of Driving Value Upstream Into Product Development
Monthly Webinar Series - June 2012
Driving Value Upstreaminto Product Development
by
Tom LuckeCopyright © 2012 by LeveragePoint Innovations Inc.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means —electronic, mechanical, photocopying, recording, or otherwise — without the permission of LeveragePoint Innovations Inc.
This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion.
COMPANY CONFIDENTIAL
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
Copyright © 2012 Value Management Advisors, Inc. 5
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
Copyright © 2012 Value Management Advisors, Inc. 6
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?
Copyright © 2012 Value Management Advisors, Inc. 7
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
Copyright © 2012 Value Management Advisors, Inc. 8
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
Copyright © 2012 Value Management Advisors, Inc. 10
p g
Note: Disguised data
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
Copyright © 2012 Value Management Advisors, Inc. 11
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
Copyright © 2012 Value Management Advisors, Inc. 12
Note: Disguised data
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
Copyright © 2012 Value Management Advisors, Inc. 13
Note: Disguised data
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
Copyright © 2012 Value Management Advisors, Inc. 14
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
(617) 775 5923(617) 775 – 5923
Ed [email protected](617) 252 2967(617) 252 – 2967 www.leveragepoint.com
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