Have you been in a final project review with your business development team or your customer? Your team has solved the technical problem, delivering all the technical specifications you were challenged with? Yet the customer is not clear what the value of your innovation is?
Innovation teams often find themselves developing technical solutions to business needs or problems. If the innovation team were not able to translate the technical solution or specification in to a value proposition to its customer, it would be very difficult for the customer to accept the solution. While we spend significant effort to increase technical capabilities in terms of know-how, tools, and physical assets, very little time is dedicated to work with technical teams to help them design value propositions for their innovations.
How Do We Design Value Proposition?
Value proposition of your solution must be framed around a (1) specific customer application or product; it must covey (2) what is the problem we are solving and (3) how our offering satisfies the problem. We have to translate a technical specification into a business solution for a need.
One of our partners has developed the strongest castable low alloy steel on the market more than twice the strength of current materials, excellent impact resistance and the ability to cast very thin wall sections, with available manufacturing process, and an affordable price. The material based on its properties should sell itself, they thought. Yet it required significant customer education in the form of value proposition design for the specific application. Usually the first customer question is what is the price per pound? When they provide the answer the sale is lost.
Heavy Duty Truck Case Study
Situation:
Customer is a tier1 providing chassis casting solutions to OEMs. Customer is looking for alternative affordable materials to differentiate their product offering.
Value Proposition:
- Ultra high strength (1.3-2GPa) thin wall (3mm) castable steels for HD Chassis applications
- 40-70% weight reduction opportunity, while maintaining part cost
- Enabling fleet fuel savings of US$3.75/lb.
Value to End Customer:
- Current Part cost US$24
- New Part cost US$20.62
- Value to end customer (40%) weight reduction (6.7lb) or US$25.31
- Total value US$28.69 (US$24 – US$20.62 + US$25.31)
We worked with the team to design a Value Proposition for the Heavy Duty truck chassis part market. The team provides the value proposition of the material application to the customer, rather than a price per pound.
In general the material provides a minimum 40% weight reduction opportunity for the same part. Furthermore due to the weight reduction, while the material cost is significant higher, the part cost is slightly reduced. We also know that the end user (fleets) values the weight reduction by $3.75/lb due to fuel and maintenance savings. So the introduction of their material provides the chassis component manufacturer an overall value of $28.69/part. This exercise allowed the team to understand the value of the material to their customer.
Product/Market fit
This simple case study validated a Product/Market fit for the material the company developed. By completing the value analysis of value proposition and testing it with the customer they were able to, both solve a problem for the customer and provide significant gains for the customer. The company was able to identify an additional value premium ($28.69) that can be partially transferred to the end customer by increasing profit margins.
Value Proposition Design workshops allow the marketing team to test different value propositions with the customer and understand real value to the customer, thus make sure we deliver value to the customer and do not leave money on the table.
For Further Contact
Pedro Guillen
Managing Partner
Technology & Business Innovation
Tel: +1 248.924.5436
