The Path to Product Excellence: Avoiding Common Pitfalls and Enhancing Commun...
Chris P
1. www.simon-kucher.com
Monetising Innovation:
Lessons from around the world Sydney, May 8th, 2019
Chris Petzoldt
Sydney office
Level 4, 146 Arthur Street
North Sydney NSW 2060
Australia
Tel. +61 2 911 21 300
sydney@simon-kucher.com
2. 1 Source: R&D Magazine, Bloomberg
R&D investments higher than ever
16.1
13.9
12.7
12.7
12.1
12.0
11.4
10.1
10.0
Amazon
Alphabet
Samsung
Intel
VW
Microsoft
Roche
Merck
Apple
R&D investments 2017 in bn1
Companies with highest innovation
expenditure
Global
R&D investments
2017
~$2,066bn
Chris Petzoldt Monetisation of innovation in practice.pptx 2
3. Source: Globlal Pricing Study 2014; n=1.615
Despite high investments poor innovation performance
72% of all new
products do not achieve
profit target
In 25% of companies
all products fail to meet
profit target
76%
74%
72%
69%
Japan
USA
Globally
DACH
New products: "flop rate"
Chris Petzoldt Monetisation of innovation in practice.pptx 3
7. vs.
72% What goes wrong here? A typical example
Second biggest new product flop in
2012 after the Apple iPhone map
Disastrous sales performance for a
volume model
(2016 43k units, 2018 390 units)
Became one of the most
important Porsche cars
72,000 Cayenne sold in 2018
Chris Petzoldt Monetisation of innovation in practice.pptx 7
9. Source: Simon-Kucher & Partners
Failure category #1: "Feature Shock"
Chris Petzoldt Monetisation of innovation in practice.pptx 9
10. 1) Source: Bolt Blog
Feature Shock
Juicero: "Unconstrained development is lethal."
$400 for a WiFi-connected juice press
$120m burned
"incredibly complicated piece of
engineering“1)
"dozens of components that are
incredibly complex and beautifully
engineered, but hopelessly expensive
to manufacture"
Chris Petzoldt Monetisation of innovation in practice.pptx 10
11. Source: Simon-Kucher & Partners
Failure category #2: "Minivation"
Chris Petzoldt Monetisation of innovation in practice.pptx 11
12. Minivation
Automotive supplier/VW: ParcAssist
Cost plus pricing
towards VW and
other OEMs: approx. €100
OEMs understand
full customer value
VW's customer price: €670
Chris Petzoldt Monetisation of innovation in practice.pptx 12
13. Source: Simon-Kucher & Partners
Failure category #3: "Hidden Gem"
Chris Petzoldt Monetisation of innovation in practice.pptx 13
14. Hidden Gem
Kodak – did not recognise they had it
1974
Kodak's Steven Sasson invented
the digital camera technology
1995
Kodak introduced its first digital
camera; only in 2001 they got
serious about that business
2012
Kodak declared bankruptcy
Chris Petzoldt Monetisation of innovation in practice.pptx 14
15. Source: Simon-Kucher & Partners
Failure category #4: "Undead"
Chris Petzoldt Monetisation of innovation in practice.pptx 15
16. 1 Wikipedia; 2 MSRP Segway X2 S
Undead
Segway: Born to fail or clearly the wrong positioning
€7,524
2
1
Sales target acc. to bus. plan:
50,000 in the first year
Actual sales:
30,000 in 6 years
Chris Petzoldt Monetisation of innovation in practice.pptx 16
17. Undead
The graveyard of undead new products
Either the wrong answer to the right question…
OR an answer to a question nobody asked
Chris Petzoldt Monetisation of innovation in practice.pptx 17
18. Monetising innovations
The sad truth: Record R&D
investments; 72% flop rate; future
growth is at stake
Just four flop categories:
Feature Shock
Minivation
Undead
Hidden Gem
But: these flops can be avoided
Photocase/Jo
Chris Petzoldt Monetisation of innovation in practice.pptx 18
20. The nine steps framework for monetising innovations
1 2 3Have the
WTP talk
early
Segment!
One size fits
none!
The core:
Product
configuration
and bundling
4 5 6Monetisation
model:
How you charge
trumps what
you charge
Pick the winning
price strategy:
Only 3 options
Outside-in
business case:
That includes
WTP
7 8 9Value
communication:
The product
will not sell itself
Use
behavioral
pricing &
tap into
psychology
Chris Petzoldt Monetisation of innovation in practice.pptx
Maintain
your price
integrity
20
21. Free ground shipping
Communicate on-line with seller over chat
24x7 customer support
Early access to special deals
Price guarantee
Membership sharing
Highlight connections from Facebook
Ability to place a video call with seller
$10 off first purchase
Message with friends
Source: Simon-Kucher & Partners
Early WTP talks at a 2 sided marketplace.
Without the WTP talk you cannot prioritise & focus!
Features WTP in $
1
From 25 to 10 features
Clear ranking of these 10
Principle: Focus on
winners, get rid of
losers early
WTP methods for every
case available
Chris Petzoldt Monetisation of innovation in practice.pptx 21
22. Is there no WTP for higher speed?1
Chris Petzoldt Monetisation of innovation in practice.pptx 22
23. "Want the best"
(30%)1
"Want it now"
(40%)
"Want product
only" (10%)
"Want price only"
(20%)
Price (+/-10%)
Service programs
On-time delivery
Product performance
(end user)
Product quality (converter)
Speed of delivery
Tech support
21
15
15
14
13
13
9
Importance of needs/features in %
Needs/Features All
customers
Segments
12
19
14
21
17
8
9
18
15
19
10
10
18
10
26
8
10
21
18
10
7
36
14
13
9
10
11
7
* Segment size (value)
Segmentation in action2
Chris Petzoldt Monetisation of innovation in practice.pptx 23
24. Product configuration is more science than art!3
Chris Petzoldt Monetisation of innovation in practice.pptx
Simon-Kucher approach:
Identify leaders, fillers and killers … … and build packages
24
25. Source: Simon-Kucher & Partners project database
Telco: Bundling of music does not reflect customer needs
Simon-Kucher
project example
3
Other
38%
25%
19%
6%
6%
6%
Surfing
Socialising
Video streaming
Music streaming
Email
Current provider bundling Actual customer preferences
Preferred options:
Chris Petzoldt Monetisation of innovation in practice.pptx 25
26. Source: Simon-Kucher & Partners project database
Telco: Bundling: Improved profit through elimination of killers
Simon-Kucher
project example
3
Current provider bundling Financial performance
Subscribers +5%
Profit +10%
Chris Petzoldt Monetisation of innovation in practice.pptx 26
27. Source: Simon-Kucher & Partners
How you charge is more important than how much!4
Chris Petzoldt Monetisation of innovation in practice.pptx 27
29. Source : Project by Simon-Kucher & Partners
Pick the winning pricing strategy: Only 3 options!
Penetrate Maximise Skim
5
Chris Petzoldt Monetisation of innovation in practice.pptx 29
30. 0%
5%
10%
15%
20%
25%
30%
35%
Profits Market share Volume Product mix Volume
growth
Revenues Cost
reduction
CEO
CMO
Sales Director
CFO
Procurement
KAM
Product Manager
Pricing
Marketing
Source : Project by Simon-Kucher & Partners
Pick the winning pricing strategy: Align on goals!
Relative importance
5
Chris Petzoldt Monetisation of innovation in practice.pptx 30
31. Smart offer design – take into account your customers'
irrational behaviour
ARPU (Ø revenue per user)
from new subscribers $70 $96 +36%
MRR (monthly recurring rev.)
from new subscribers $175k $225k +29%
Basic
(58%)
$49
Basic
(43%)
$49
Standard
(30%)
$79
Standard
(41%)
$99
Advanced
(12%) $149
Advanced
(14%) $199
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Before
re-design
After
re-design% of new
subscribers
New tier:
Premium (2%) $299
8
Chris Petzoldt Monetisation of innovation in practice.pptx 31
32. Avoid knee-jerk repricing!9
Chris Petzoldt Monetisation of innovation in practice.pptx
Board member
In our organisation you have to come up
with at least three measures what can be
done apart from price decreases before
we even think about decreasing prices.
This simple rule had the highest impact.
Everybody understood.
32
33. The nine steps framework for monetising innovations
1 2 3Have the
WTP talk
early
Segment!
One size fits
none!
The core:
Product
configuration
and bundling
4 5 6Monetisation
model:
How you charge
trumps what
you charge
Pick the winning
price strategy:
Only 3 options
Outside-in
business case:
That includes
WTP
7 8 9Value
communication:
The product
will not sell itself
Use
behavioral
pricing &
tap into
psychology
Chris Petzoldt Monetisation of innovation in practice.pptx
Maintain
your price
integrity
33
35. Ralf Drews,
former President of Dräger Safety
1. Creating a monetising innovation type of
process is relatively simple.
2. But deploying it and making sure it stays in
place for every new product can be like
climbing the Mount Everest.
Chris Petzoldt Monetisation of innovation in practice.pptx 35
36. We help to develop, implement and make it stick
Pharma
industry
Chris Petzoldt Monetisation of innovation in practice.pptx 36
38. Source: Simon-Kucher & Partners
There are three kinds
of companies:
Those who make things happen,
those who watch things happen,
and those who wonder what happened.
Chris Petzoldt Monetisation of innovation in practice.pptx 38
41. Chris Petzoldt Monetisation of innovation in practice.pptx
About Simon-Kucher & Partners
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to price their products
Pricing strategy
specialists
The world’s leading
pricing consultancy
In pricing you offer
something nobody else does
BusinessWeek The Economist
Professor Peter DruckerThe Wall Street Journal
World leader in pricing
Atlanta
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Chicago
Mexico
City
Cairo
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consulting firms in the US, October 2016
Marketing, brand,
pricing
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France, 2016, 2018
Marketing, sales,
pricing
Simon-Kucher
& Partners
on par with
Boston Consulting
Group
McKinsey &
Company
Simon-Kucher
& Partners
on par with
Boston Consulting
Group
McKinsey &
Company
1
...
Capital Forbes
Source: brand eins Thema special edition: Consulting –
industry report from brand eins Wissen and Statista,
online survey, 2014, 2015, 2016, 2017, 2018
Marketing, sales,
pricing
brand eins/Statista
Simon-Kucher
& Partners1
Source: Financial Times, list of the UK's Leading
Management Consultants, January 2018
Marketing, brand,
pricing
Financial Times
Simon-Kucher
& Partners
on par with
McKinsey &
Company
1
Boston Consulting
Group
McKinsey &
Company
Boston Consulting
Group
...
...
41
42. Chris Petzoldt Monetisation of innovation in practice.pptx
Simon-Kucher focuses on the revenue side of the profit
equation
Digitisation
Digital strategies
Business model
transformation
Customer-centric
digital approach
Digital offerings
Digital monetisation
model and pricing
Go-to-market
strategies
Big Data analytics
Transformation
Effective and
sustainable strategy
implementation
End-to-end corporate
transformation
towards commercial
excellence
Transformation of
pricing and sales
organisations
Monitoring and KPI
systems
Change management
Strategy
Growth strategies
Competition strategies
New business models
Monetisation strategies
Scenario planning
Market due diligence
Marketing
Market/customer segmentation
Portfolio design
Branding and value communication
Digital marketing
Marketing efficiency and effectiveness
CRM
Pricing
Pricing excellence programs
Pricing strategies for products,
business units and companies
Innovative price and revenue models
Launch and post launch pricing
Pricing organisation and processes
Sales
Sales organisation and efficiency
Omni-channel strategies
Sales force effectiveness
Key Account Management
Channel management,
discount/bonus systems
42
43. Chris Petzoldt Monetisation of innovation in practice.pptx
Simon-Kucher – delivering best value to customers across
industries
43