Episode 81 Jan 04, 2024

Are You "Transforming" Your Business in Name Only?

“For me, the strange thing is companies are investing in transformation in all dimensions of their business, but barely in the one that has the biggest profit impact – pricing,” says Sebastian Wrobel, cofounder and managing director of PricingWorks on today’s episode.

Sebastian and host Barrett Thompson explore how smart B2B organizations include pricing transformation in their digital transformation journeys and have a frank discussion on what “transformation” actually means.

“In some companies, what they call ‘transformation’ really isn't a transformation,” says Barrett. “It's more like just a technology upgrade, something more like maintenance, and the bigger promise of transformation isn't really achieved…They ought to be doing better things, not just the same practices embodied in a different tool set.”

Find PricingWorks customer success stories here.

Sebastian Wrobel

Sebastian Wrobel

I encourage all CIOs, CFOs, CEOs to actively force pricing on the digital transformation agenda. Too often I see pricing folks asking shyly to get some budget and start small, where considering the high profit impact potential of pricing, this should be exactly the opposite. You should not waste time and wait or start small. 
- Sebastian Wrobel

Episode Transcript

Sebastian Wrobel: I would like to encourage really all CIOs, CFOs, CEOs to actively force pricing on the digital transformation agenda and their initiatives. Too often I see pricing folks asking shyly to get some budget on the IT projects and start small to prove concept, where considering the high profit impact potential of pricing, this should be exactly the opposite, especially in times of economic downturn and volatile markets.

You should not waste time and wait or start small.

Barrett Thompson: Hello everyone. My name is Barrett Thompson. I'm the general manager of commercial excellence at Zilliant, and I'll be your host for our podcast. I'm joined today by Sebastian Wrobel. Sebastian is the co founder and managing director at PricingWorks. Sebastian, welcome to B2B Reimagined.

Sebastian Wrobel: Hi Barrett. Thanks for having me here today.

Barrett Thompson: It's a pleasure to have this podcast with you today, Sebastian. And [00:01:00] just before we dive into the content, I wonder if we could ask you to share something interesting or surprising about yourself that our audience would not learn by visiting your LinkedIn page.

Sebastian Wrobel: You know, meanwhile, it's surprising myself as well. You know, a long while ago, I finished an Ironman triathlon race twice. Which I'm very proud of.

Barrett Thompson: You know, it sounds exhausting. Tell me about it.

Sebastian Wrobel: It is, you know, this is something where you start small and you go through, you know, the full journey of all the ups and downs when you start, you know, into this kind of sports.

And I never envisioned to finish an Ironman distance, right? You start, you know, with little races. And I think that's something that characterizes me quite well. And you need to be on passion. You need also on stamina and bit of stubbornness to do this. And I think this is also reflecting my passion in the field of revenue management and pricing, which I'm, you know, on for many years meanwhile.

Barrett Thompson: So you bring that same approach then into your practice, into your consulting practice. I love that. I love that. You're the athlete turned coach. I think that's a great, I think that's a great one. So tell us about PricingWorks and a little bit of your professional background.

Sebastian Wrobel: I probably have a typical pricing career. I started my career in finance and accounting, and very early on, I recognized the impact that optimized price management can have, and this was at Siemens, one of Siemens entities at that time. And how poorly we have been managing pricing and this was in the late nineties. So it's a while ago. And at this time, the role of price manager, which I was developing and got into was a kind of unicorn.

You know, when I was asked to, what are you doing? I'm a pricing manager. Nobody knew what would this job be. During this, you know, career, I have worked on pricing profitability [00:03:00] initiatives in many B2B industries. So I was always in B2B business. Mainly in manufacturing companies and often as usual, you collaborate in with strategic consultancies, right?

I've been working with BCGE, McKinsey, Zemun Cooper Partners, many others. And where I got kind of passionate about pricing and also we have enjoyed the collaboration, this one usually short term, right? That's its nature of consulting engagements, especially with the big five or the big players, also because of the investment.

And after the pilot phase, we had to face many challenges on our own with minimal resources, usually in pricing that we had, you know, and I think it's still there today, I've been often struggling with getting pricing done right. And also many good strategic concepts from consultancies were very difficult to deploy lastingly.

So [00:04:00] PricingWorks is my and our attempt to democratize advanced value and price management in B2B. By connecting the art and science in this field, and this is what you know, makes me believe is, you know, pricing is always executed by humans, right? Whether it's sales, marketing, portfolio, product managers.

Therefore, we want to connect the human side with the data and data science and technology. So at PricingWorks, we connect the expertise of practitioners in core dimension of this overarching discipline to help the clients to achieve a lasting pricing maturity with strong foundation in the entire organization.

Barrett Thompson: I really admire that. It sounds very practical, if you will, very grounded, right? In making it real thinking back to your triathlon days. What's the old joke about what's the best exercise for you? It's the one that you'll do, right? So what's the [00:05:00] best pricing advice or the best pricing strategy that you can receive or apply?

It's the one that you'll actually apply. You know, that you'll put in a sustainable lasting way. Okay, I'm so eager to dig into the idea of digital transformation. That's an ever present topic. It's a big buzzword these days. I know you hear this and you help your clients with this all the time. And you know, I have a perspective I'd like to see if you share it.

Maybe you can help us unpack it or shape it. It is that in some companies, what they call transformation really isn't a transformation. It's more like just a technology upgrade, something more like maintenance. And the bigger promise of transformation isn't really achieved. And so what I mean by that is doing the same things before and after admittedly with better tools, right at the end of the transformation, a better tools, but I'm doing the same things.

And I get the sense that [00:06:00] they ought to be doing better things, you know, some different things, not just the same practices embodied in a different tool set. So I'd love to hear your point of view when companies are putting out RFPs for digital transformation projects, what are they looking for? Do you see signs that they are thinking about transforming the process and then enabling it, or are they just going for technology?

What have you seen?

Sebastian Wrobel: You know, generally I see broad initiatives that are accumulation of projects over a midterm period of time, like three to five years. And I agree that it's very often technology advancements or even technology streamlining or upgrading, especially looking in many B2B companies, they are still working with different ERP systems in different regions, with different releases.

So digital transformation for them is okay. Getting everything on one platform, sometimes it's leveraging a CRM platform [00:07:00] or deploying e commerce, which has been, you know, heavily accelerated with the COVID pandemic, right? Right. But it's very often, as you described, more tooling technology journeys.

Transformation is really changing the way you do business and how you deal with, you know, how you leverage technology. So in all this, I see companies still not. Especially in pricing, not managing pricing without the power of data and that would come with digital transformation. And I see many companies in our project, we see this company sit on gold mines of data, but cannot leverage access them and still continue using Excel.

And this is for me, the most probably strange things, you know, companies were investing in digitalization, lean process optimization, even IT in all dimensions of business. But barely in the one that is the [00:08:00] biggest profit impact, pricing. And therefore what I observe is that pricing processes are often not, even if they are on the agenda of digital transformation initiatives, but they should be, that's is, you know, what I observe in the market still.

Barrett Thompson: Yeah. I've seen the same. It's ironic, isn't it? That B2Bs have spent 30 years or more collecting rich data sets in their ERP system with their online systems. But the fact that. That gold is not being mined out right in a world where we're not a week goes by that we don't think about. Exploiting data, exploiting algorithms and the power thereof, finding signals within the noise that this happens in our daily lives.

It happens with our smart devices. It happens in so many different realms. And yet over on this frontline commercial B2B pricing and selling arena, it seems to be [00:09:00] suspiciously absent in kind of a shocking way. I agree with you that in an overall digital transformation, there's a big opportunity to include pricing as a part of that transformation.

I, at Zilliant, we believe pricing should be a part of any major digital transformation, but it's not just a tools upgrade or it can be a different mindset, a different way of approaching the pricing process, the pricing strategy, the inputs and outputs. What are your thoughts on that?

Sebastian Wrobel: You know, I had a lot of discussions in my career about tooling and, you know, I have seen many great tools, even expensive tools that has been not really used, it's like, you know, what does a Ferrari bring to you if you don't have a driving license, right?

You can watch it, you know, in your garage, but it has no end, right? So what I see sometimes, and this is maybe because, you know, IT people that often lead the engine of digital or IT transformation initiatives, they are really into tools. [00:10:00] I would call it sometimes even toys. You know, we should not think in this kind of initiatives about tooling first.

You know, organizations should think outcomes first. You know, for instance, I want to be able to use marketing data insights to drive my price setting and execution rather than the gut feeling of the salesperson making the next, you know, discount for a project based on his recent three deals he lost or won probably.

The key question is like. Now, what are the steps to take to get there? And this is why I see organizations need support and struggle sometimes. Because before implementing a great tool like Zilliant solution or any pricing, advanced pricing solution, even you make it or buy it, you need to go a journey first in terms of assessing what do you want to achieve.

Barrett Thompson: I think this is important because in the digital transformation, it's so easy to jump [00:11:00] on to the categories of application. I need CPQ, I need e commerce, I need price management, I need price optimization. And I love what you're saying here. Think of the outcome first. What's an example of an outcome that might motivate the pursuit of a CPQ?

Sebastian Wrobel: The outcome to pursue the CPQ might be, I want the best fit solution for my client. that the CPQ can guide a salesperson through a consultative conversation. You know, salespeople, for example, naturally configure and quote solutions based on the products they know, which they sell already a couple of years and they are comfortable with, but this still might not be the best solution for the client and I think here data and CPQ solution or even machine learning can help salespeople to have more guided and customer centric conversations.

You know, we think [00:12:00] through end to end digital transformation process, not just, okay, I want the salesperson to be capable to rapidly or faster configure a quote or a solution.

Barrett Thompson: That's a good one. I like it. Occasionally I will hear customers have a strong outcome based point of view, more at the headline level. For example, they will say, I want to reduce the over discounting, they know that some discounting is necessary, but they recognize that humans go too far too often and they don't know it. In the commercial, let's say they want to reduce that or they want to shrink cycle time for various activities.

It could be the time to update price list. Or it could be reducing the time to deliver a quote, an approved quote to a customer. So I think those are interesting ways where in some instances, the [00:13:00] B2B business is already thinking about outcomes and that's good. We want to encourage more of that. We want to be able to tie that back to specific choices and specific parts of the digital transformation.

So I love this idea of outcome focused transformation to ensure that the technology upgrades we're thinking about lead us to the kind of transformation we really need and not just a maintenance level activity. What are some examples of misguided outcome based thinking, is it possible to have the wrong outcome in mind and have it lead you astray?

Sebastian Wrobel: For me the example of misled concept of digital transformation taking pricing as a use case is I want to automate my pricing as is with the pricing software. This is a totally misconception of what such an initiative should be, because then I see companies investing in expensive solutions.

You know, you pay. [00:14:00] And it doesn't make sense to just transform and automate your process as is, to keep status quo. And I have seen this happening. You know, companies still have a great pricing solution or even the IT systems in place, but they continue using cost plus pricing simplistic and just keeping discounting based on static governance guidelines, like it's 20 percent discount or whatever is the discount level you think about.

That's a misleading conception of digital transformation.

Barrett Thompson: Right. Just the as is rolled into the future. Your example reminds me, Sebastian had a conversation with a customer a couple of years back and they said, we have 17 distinct price methods. Different ways to calculate price. And this happened because they grew by acquisition across a number of years.

And the acquired businesses all had slightly different ways of calculating prices they were delivering [00:15:00] into the market or for specific customers. And so we said, well, in the new world, which ways are you going to use for pricing? And they said, all of them, like all 17, we're going to carry forward. And we did a quick look about 12 of those ways covered 3 percent of the revenue in the business. So yes, they were used, but they were a strict minority, almost never in, you know, affecting revenue. And yet the effort to set those up, to debug those, to confirm that they're working, to build them into the new solution was going to greatly increase the effort for setting up the new pricing solution that they were after.

And it was a tough conversation because it was hard for them to imagine running their business on a reduced set of five. That would have covered 97 percent of the business and could probably be stretched, you know, to the other three. So I've seen that same thing. You start with a wrong idea, you end up at a wrong place.

Sebastian Wrobel: It's a good point you make because, you know, having 17 methods, obviously that might be too much, maybe five is too less, but the point is. What I recommend to clients, because this case of growing by acquisitions and everybody's doing their own local pricing, like they, is that I will ask clients, okay, let's look on your net price level that is effectively achieved.

And I'm meaning the pocket price. So we as experts, you know, we talk about the off list discount and the discounts that are coming along the price chain, right? Like year end rebates, advanced payment terms. and other giveaways. So when you look at all your pricing methods and you check them against what is the effective net price remaining, 12 methods can come to a very close range of the same price, so you can legitimately ask, why do you need that menu or that complex method?

Let's focus on what is the [00:17:00] willingness to pay and ability to pay in your market segments, and let's find a model that is making it as efficient and effective as possible. And we love to be in very detail, you know, I'm German origins, right. And, you know, we love being perfectionist in all the details, which very often doesn't provide really benefits after a certain degree of level of complexity, but people then also struggle to let it go.

Barrett Thompson: It's true. It's those become institutional, right? They might've been inherited by the pricing people that are in positions now, and it's lost in the mists of time. Why do we have so many different discount types? What was their purpose? Are they really different or do they really just add up to be a large discount at the end and we could just have a reduced number of discount types?

Often, Sebastian, when I'm speaking to customers, I'll hear them mention that, you know, one of the [00:18:00] pursuits they're after is reducing costs in the business. That seems to be one of the strong motivators, or at least it's often used to build the business case around the transformation. What is your thought on transformation and cost reduction as a goal?

Sebastian Wrobel: No, cost reduction as a goal is not wrong by itself. The challenge with cost reduction is, you know, it has been a field of exploitation over decades already. And it's very difficult to optimize costs in our economic situation right now. The cost dimension is also misconsidered. I was working in procurement for a while and there very often cost reduction is considered buy cheaper, but don't change anything.

This is not really cost reduction and you hardly achieve it in procurement. What you should do is, you know, design to cost to reduce costs, which would require to understand the value delivered to [00:19:00] client. I see solutions being over engineered because people at features not really asking, do I need the features for my clients or are they creating value to my client segments I want to serve?

So I think it's good to keep this initiative on cost, but it's more hard work. It requires even being more intelligent about how to approach it and why companies even right now should continue on this direction. They should even more invest on the dimension of pricing at point of salient or optimization potential there because it delivers faster outcomes that they can reach with costing optimization today.

Barrett Thompson: It also occurs to me with that idea that you have to go further upstream in the life cycle of the product and align it to value, then you can't correct for it or fix it up at the front line of selling by moving price around or bringing a more clever argument to the customer or pressing harder on your [00:20:00] suppliers for lower material costs.

If you sort of missed by a large amount, when you design the product and put the features together and put the value prop together.

Sebastian Wrobel: Exactly. And, you know, even discontinuing existing products, it's a lot of effort. And, you know, if you take things away, client might ask also, okay, now it's less, so it's less worth, so I want to pay less, which is not the story.

But it comes to naturalism and expectation, right? So companies need to be really careful about this dimension. So this is why I'm not a big fan in, in cost cutting initiatives. Obviously there are situations in companies and economic environments when you need to do your work, but focusing on the right solution with the right value to your market segment at the right price is where leaders should focus upon.

It's purely exploited area, even a greenfield in many B2B companies. You know, I'm also. Serving the German Mittelstand [00:21:00] and if you look how pricing is determined there, it's really scary sometimes. So price management optimization, customer life cycle value alignment is something that is keeping a lot of untapped fields can transform and run business different if exploited.

Barrett Thompson: Agreed. Well, let's apply this to the manufacturing side of B2B. You have a lot of experience there personally. You serve that space in your consultancy these days. Could you share with us some examples of how you've seen companies apply these techniques to drive the right price?

Sebastian Wrobel: Just before starting PricingWorks at my last company, I was in an operational role as a leader of pricing in EMEA. We developed a deal desk pricing system for price recommendation and point of sale for project specific discounting. And we were leveraging data science and machine learning with great success there. [00:22:00] Luckily, we had a great data scientist team. that was capable to translate our pricing needs into an algorithm.

And we have leveraged price sensitivity as a parameter to provide the Pruitt's recommendation to SEAD's teams. And the definition of success was not for me specifically, not only determined by the P& L impact and the reduction of time to quote, which you mentioned that is one target that you want might aspire because salespeople were always complaining, you know, to get the release through the pricing authorization process, takes us days and we are lacking the competition or there's complaints, which were fair and true.

Success was for me connected to the adoption rate with sales teams, because, you know, if you implement a pricing solution, especially machine learning, make price recommendations, people, you get a lot of objection or concerns. Whether it's meeting their business and their own individual situations. [00:23:00]

And we had a really great adoption rate. And for me, this is the key driver of sustainable lasting impact. And here we see more and more manufacturing clients that are increasingly use processing software solutions and the power of data driven insights, but it's a journey. Many companies need first to fix their data and the data quality, but this can be done much more rapidly.

So yeah, I see also a high growing potential and trend of exploring cross and upselling opportunities, leveraging data once you have a pricing system in place. And this is something that, you know, I try to promote more heavily because pricing is not only about having the right price at the right discount, but also good pricing solutions nowadays always bring in Microsegmentation and data insights that helps salespeople untap and discover sales opportunities to just get their sales [00:24:00] targets accomplished faster and easier, which should also cross that chasm between pricing and sales.

Barrett Thompson: Yes. That should be attractive to the front line, right? It's a win for them, right? Here's how to win the deal. Here's 5 percent more revenue into the deal as you win it, right? Here's how to align it to the market price, align it to the product value.

Sebastian Wrobel: Absolutely. In fact, data driven insights and especially price elasticity have started to change the game. And there's one interesting kind of discussion I hear very often that, you know, pricing and finance people say SEADs teams discount too much, you know, this theme of over discounting. At the same time, SEADs people keep complaining about pricing that are too high and non competitive. And I always, when I hear this with clients and, you know, both sides are complaining to myself, I say, yeah, you both are true and you both are right.

Which is interesting because, you know, everybody's starting in defending why they are, when [00:25:00] I'm wrong and the other side is not doing their job right. I said, no, the challenge is like, you're just missing the data insights to really understand where you need to be more expensive and where you can, where you generate value that you can capture.

And I think most companies struggle to approach problem solving at their root cause. So they keep status quo, cost based list price setting and ending up with two high list prices. And this is kind of like self fulfilling prophecy. And I think with digital transformation, there is a chance to overcome this hurdle.

Barrett Thompson: Agreed. Well, Sebastian, this conversation has been really great. Very enlightening. Is there anything else you'd like to leave with our audience before we sign off?

Sebastian Wrobel: Absolutely. I discussed this recently with a peer of mine in pricing, and I would like to encourage really all CIOs, CFOs, CEOs. to actively force [00:26:00] pricing on the digital transformation agenda and their initiatives.

You know, too often I see pricing folks trying to engage bottom up with, you know, asking shyly to get some budget on the IT projects and start small to prove concept where considering the high profit impact potential of pricing, this should be exactly the opposite, especially in times of economic downturn and volatile markets.

You should not waste time and wait or start slow. My ask and, you know, recommendation would be to all the CEOs or CXOs for your Net Digital Transformation Initiative, start to ask what are we doing about data insight driven revenue and price optimization?

Barrett Thompson: I love that.

Sebastian Wrobel: And, you know, give your head of pricing a seat at the table. Now I will see many CXOs raising their eyebrows saying. Oh, pricing, head of pricing. If you don't have a pricing owner [00:27:00] in your organization yet, that's even more important that you roll up your sleeves and, you know, get on this.

Barrett Thompson: Yeah I love that suggestion that the awareness and the visibility by the larger executive and leadership team about the importance of pricing and having that as a regular part of the conversation for your steer co is critical.

So that's a great suggestion. And I hope that those listening will take it to heart. Perfect. Sebastian, I want to thank you for being with us today. It's been a pleasure and I look forward to speaking with you again soon.

Sebastian Wrobel: Thanks a lot for hosting me today.

Barrett Thompson: I want to thank each of our podcast listeners for being with us. Please check the show notes for links to manufacturing case studies from PricingWorks, which reveal the positive impacts of the transformation we've been discussing today.

Are you ready to learn how Zilliant can help you overcome your pricing challenges?

Reach out to us today to learn how we can help!