We were excited to have Dr. John Hogan join us to identify common value leaks and show how you can seal them by incorporating "value gates" into your development process. He shared some excellent real-world examples of how firms have used this approach to substantially improve new product success.

1. Monthly Webinar Series – February 27, 2013
Incorporating Value In Your
Stage Gate Process
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2. Sponsored by LeveragePoint
the Software Solution for Value-based Pricing
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3. Today’s Presenter
Incorporating Value In Your Stage Gate Process
Dr. John Hogan is co-author of The Strategy and
Tactics of Pricing and is a recognized thought leader and
speaker on the topic of strategic pricing and value-based
marketing strategies. As founder of Value Management
Advisors, he works with clients in a range of industries
including technology, healthcare, and manufacturing.
Previously, John was a Partner at Monitor Group, a global
management consulting firm, and managed corporate
pricing strategies for General Motors.
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4. Agenda
• The Room for Improvement in New Product Development
• Using Voice of the Customer to Improve Decision Making
• Building a Value-Based Development Process
• Key Takeaways
• Q&A
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5. A Value-based Approach to Growth
The Value Disciplines
Value-based Value-based Value-based Value Selling
Development Marketing Pricing & Negotiation
“Build profitability “Target segments “Maximize profits by “Establish a value story
into new products based on value, not aligning value and and force customers to
before launch” demographics” price” acknowledge it”
Our Focus Today
© John E. Hogan 2013
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6. There is Room for Improvement in NPD Processes
A 2013 PDMA benchmarking study found that NPD processes are successful less
than 25% of the time. A key cause is the ineffective use of the right data
100
80
76% “Failure”
60 Rate
2012
40
2010
20
0
% of new products that hit Our development process is
revenue targets data driven
© John E. Hogan 2013 6

7. Can a Value-based Approach Improve Development Outcomes?
The Stage-Gate Process
Gat Business Gat Gat Testing & Gat
Scoping Develop. e4 Launch
e1 Case e2 e3 Validation
Stage = +
Data Analytics
Gate = +
Outputs Criteria
The Four Leverage Points of the Stage-Gate Process
© John E. Hogan 2013 7

8. Customer Value Data Enhances the Stage-Gate Process
Since the inception of the Stage-Gate Process in the Nineties, Voice of the
Customer Research has been the main source of customer data
VOC Customer Value
• Qualitative / Quantitative • Qualitative / Quantitative
Data • Focus on attitudes, • Focus on business models /
preference & usage value drivers / economics
• Better in the early stages • Applicable to all stages, but
Applicable (Ideation and to a lesser especially helpful for
Stages degree development) business case, development
and validation
• Offers little guidance for • Helpful, but not sufficient
Limitations pricing, business case for ideation
and market launch
© John E. Hogan 2013 8

9. Improving Analytics Leads to Better Decisions
Customer Value data enables us to understand the profit implications
of development decisions
Feature Prioritization Analysis
Cost
Acceptable • Identifies the profit
Cost potential for potential
too High
features
Cost Cost
• Improves other choices
Marginal
Economic • Product versions
Value • Market price
• Volume forecasts
Feature 1 Feature 2 Feature 3
© John E. Hogan 2013 9

10. Value Gates Improve Product Outcomes
Gat Business Gat Gat Testing & Gat
Launch
Scoping Develop. e3 Validation e4
e1 Case e2
Qualitative Value Analysis Quantified Value Modeling
• Articulate customer business • Refined value models and
models business case
• Identify target value drivers • Value features identified
• Develop initial “value story” • Product versions designed
Quantitative Value Analysis Launch Preparations
• Develop initial value model • Value messaging
• Identify key value drivers • Discount structure
• Set a value-based price • Launch price
• Volume forecast
© John E. Hogan 2013 10

11. Building a Value-based Development Process
Situation:
 Comm Co, a $1B maker of
communications systems, faced
disruptive market changes caused by
new, less expensive technologies
 Company was built through acquisition
leading to inconsistent development and
pricing processes
 Competition was eroding margins and
new product success rates – leading to
tighter development budgets
 The management team believed that the
future health of company was at risk
Objective:
Align the commercial process to create and capture customers
value more effectively
© John E. Hogan 2013 11

12. The First Step was to Diagnose the Commercial Process
Upstream:
• Products overdesigned for market
Diagnostic Output • Ad hoc pricing did not reflect
Product
Marke ng
Sales / Channel market conditions
Market
Management
Product
Management
• Conflicting guidance given by
Business Offering Market Price Account
Requirement Requirement Nego a on Contrac ng
Defini on
Case
Defini on
Development Comm. Se ng Planning
senior decision makers
• Product variations not managed
Process (well defin d
e
and effec ve) 3 2 2 1 1 0 4 3 1
Decision Framework
1 2 1 3 1 3 2 2 1
(aligned with strategy)
Tools (managers have
strategically
needed decision tools) 2 2 3 3 2 1 3 1 2
Data (appropriate and
accurate data 4 3 2 1 1 2 1 1 0
available)
Organiza onal Enablers
Down stream:
Incen ves (aligned
with strategy) 3 2 2 1 1 0 4 3 1 • Uncontrolled discounting
Decision Rights (clearly
defined and followed) 1 2 1 3 1 3 2 2 1 • Limited understanding of customer
Skills (decision-makers
have necessary skills) 2 2 3 3 2 1 3 1 2 value
• Lack of effective value messaging
Resources
(appropriate to
support decisions)
4 3 2 1 1 2 1 1 0
to customers
• Unclear ownership of pricing
© John E. Hogan 2013 12

13. Development Redesign Focused on Tools, Training, and Output
Gat Business Gat Gat Testing & Gat
Launch
Scoping e2 Develop. e3 Validation e4
e1 Case
Value Value Feature Value Value
Creation Map Quantification Prioritization Messaging Selling
Competitive Version Design Competitive
Value Driver Pricing
Price Analysis
Analysis
Price Setting Discountin
g
Financial
Market Analysis Solution Product
Reqmnts Reqmnts Sales & Readiness
Doc. Market
Opportunity Doc. Plan
Doc.
Brief
© John E. Hogan 2013 13

14. Product and Pricing Review Group
Existing decision board was
divided and ineffective:
• Too many non-stakeholders
• Conflicting agendas
• Different market views
Solution required real change
• Limited membership to senior
stakeholders
• Conducted training on new
process and value-based
approach
• Agreed on set of strategic
questions for PM’s to answer
© John E. Hogan 2013 14

15. Results
 Improved time to market by minimizing
“reworks” caused by lack of alignment between
PM’s and decision board
 Margin erosion turned around and started to
improve
 Better alignment of the leadership team as the
new pricing / product council focused on
strategy and policy rather than tactical product
and pricing decisions
 Project manager was promoted shortly after
project concluded
© John E. Hogan 2013 15

16. Some Key Learnings
 Customer value provides a powerful metric for improving the
commercial process
 Value Management tools are essential to scale the process changes
and ensure consistency
 Migrating to a value-based approach is effective. But don’t
underestimate the degree of change required
 Upstream and downstream changes must work together to deliver
maximum results
© John E. Hogan 2013 16

17. Our Next Webinar – March 2013
• Harry Macdivitt ,
Director, Axia Value Solutions
• “Best Practices for Capturing Value”
• March 27, 2013 – 11am EST
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18. Thanks for Watching!
John E. Hogan, PhD
jhogan@valuemanagement
advisors.com
www.ValueImperative.com
sales@leveragepoint.com
www.leveragepoint.com
(617) 252-2876
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