Don’t just create value; capture it!€¦ · Unclear value proposition Poor sales execution...
Transcript of Don’t just create value; capture it!€¦ · Unclear value proposition Poor sales execution...
Don’t Just Create Value, Capture It!Gemalto Software Monetization
Sreedhar TatavarthiDirector, Product Management
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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
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A Few Examples
The Right Way The Wrong Way
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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
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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
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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.
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Dilbert on Feature Overshoot
TheConsumptionGap
Source: Complexity Avalanche, J.B.Wood
The Consumption Gap
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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.
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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
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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.
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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
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