Are You Investing in Value-Driven Change?
Why would you invest in revenue management? Imagine your company is under economic pressure and the panic button is on. You’re surrounded by innovators who believe in you and in value. After all, you were hired because you did a great job somewhere else, and your company needs you as a change agent…
Earlier this month, the Syncron team touched down in Chicago for the 29th Annual Spring Pricing Workshops & Conference at the Loews Chicago O’Hare Hotel. Hosted by the Professional Pricing Society (PPS), the conference is focused on bringing pricing’s foremost thought-leaders together for events, pricing strategies, value integration, workshops and online courses to facilitate ongoing learning, networking, and shared experiences.
In the midst of all the thought-leadership, we got to hear from Miguel Serrano Kieckebusch, Vice President of Global Pricing Strategy and Revenue Management at Medtronic, on “Organizational Development: A Leading Company’s Cultural Shifts Towards Value.” In the session, Kieckebusch discussed the key success factors to establish and grow as a company, how to identify and overcome main barriers, and what elements and investments to consider.
When it comes to revenue management, just about 60% of companies invest in value-based sales. Of that 60%, only 50% succeed; and, of that 50%, only 30% last. So, all in all, only 9% of companies succeed in implementing a fundamental, long-lasting, value-based change.
But, where does value fit in the organization and market? First, you must understand where your role fits within your company, and where your business fits within its market. Establishing those basics earn support on the executive side, helping leaders of the organization understand why there is a need to invest (read: spend money) in change and what their ROI will ultimately be.
Prioritize Pricing in a Value-Driven World
In order to truly shape your journey towards a value-driven change, you have to build your credibility and be a change agent within your organization. As you align your incentives to the organization and discover what key metrics the company cares about, you can in turn map what your journey’s goals are and how they map back to the key goals of the company.
Earlier this year, we sat down with Siemens’ Carsten Knudsen to talk about ways to deal with change within an after-sales organization. “In today’s ever-evolving world, transparency is more important than ever,” said Knudsen. “The connected world we live in creates an opportunity for manufacturers to connect their internal technologies and processes, making operations more visible than ever. It’s critical for teams to see immediate results of their work and see it benchmarked against competitors’ performances.”
A key shift toward value that’s happening in manufacturing right now is an increased prioritization of after-sales service. After-sales service is becoming an increasingly important and strategic focus area for manufacturers around the world. There is more interest in the space than ever, as senior executives understand the value that exceptional service experiences can bring to a company’s financial performance.
Value Integration: The Driver of an Organizational Shift
But, what exactly drives this value integration? Here are the top three drivers of an organizational shift toward value:
- Business Partnership – enabler is infrastructure.
- Innovation – enabler is talent.
- Functional Excellence – enablers are analytics and tools.
Ultimately, it’s important to view value through multiple lenses. Value creation is when you provide insights, even if it disrupts the apple cart. It’s important to challenge people to think differently. Be willing to look at information through different lenses – just because it computes in one way, doesn’t mean it captures the big picture. Change doesn’t happen overnight, but as we shift from data to information, we’ll ultimately shift from products to value.
And, this changing landscape is pushing pricing pros to change what they’re pricing, evolving to selling subscription-based uptime service contracts over individual service parts. This transformation introduces a whole new lever for pricers to pull – manufacturers’ sense of urgency – which can have a huge impact on a pricing department’s contribution to profit margins, and creates a unique opportunity for pricers to automate and optimize their pricing strategies.
“An outstanding product is no longer a significant competitive differentiator,” reminds Knudsen. “If one brand isn’t performing up to a customer’s standards, they will switch to a competitor. To win, manufacturers must outperform in lead-time, quality and price.”
So, when you look at your pricing strategies for the second half of the year, ask yourself one question: Are you investing in value driven change?
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