Episode 73 Mar 31, 2023

Building Your Best Digital Future w/ Argano

“The world is not constant and stable. So why should your pricing strategy be? You have to mimic the working world that you live in,” said Argano Chief Strategy Officer Tim Harris on today’s episode.

Harris joined Barrett Thompson to continue the show’s ongoing examination on how manufacturers are digitizing their commercial platforms in response to ongoing volatility and unpredictability. Argano specializes in designing modern digital foundations and partners with Zilliant to infuse agile, intelligent pricing into manufacturers’ digital future.

Harris and Thompson go deep on the “why” and the “how” behind this critical digitization process.

Tim Harris

Tim Harris

Pricing is the central point that influences so many parts of your business. You got an eCommerce solution, you've got your ERP and CRM applications - all these different things that are calling these pricing engines. And that consistency of being able to provide the right price to the right person at the right time, regardless of the channel that they're coming through, is a big advantage.  
- Tim Harris

Episode Transcript

Tim Harris: Our current business climate is one of constant unexpected change. I don't think we've had as many disruptions in the last couple years as we had in the 10 years prior, right? If you look at it started with Covid and it progressed to a supply chain issue, now we have fluctuating costs and margins driven by things like interest rates and bank risk and the cost of debt and so forth.

The operating world is not constant and stable as it was several years ago. So why should your pricing strategy be? You have to mimic the working world that you live in, and I don't think organizations have necessarily invested in this area.

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 Tim Harris, chief strategy officer at Argano.

Tim, welcome to B2B Reimagined. Tim, tell us a little bit about Argano and about your own professional background.

Tim Harris: Sure. Argano is really what we call the world’s first and leading designer of modern digital foundations, and we empower companies by re-imagining their business operations through things like integration, automation and optimization, and the way that kind of data and technology and users interact with that.

If you look at kind of who we focus on today, it's really from the Fortune 100 all the way through the Global 2000, and they all trust us to build a more reliable journey to their best digital future.

Barrett Thompson: We appreciate you coming to share with us today. [00:02:00] I think your experience and perspective is going to be very relevant to our audience.

Tim, just before we jump into our content for the day I want to break the ice a little bit, maybe let the audience get to know you. Would you mind sharing something that folks wouldn't necessarily learn about you if they looked you up on LinkedIn?

Tim Harris: I was a competitive squash player when I was younger which usually in the US not too many people know about squash.

They're more familiar with racquetball, but very popular in Europe and whatnot. And I was nationally ranked, sponsored every weekend I was in a different city playing a tournament. And I think being in a very competitive sport, regardless of what it is, really lets you hone in on your competitive nature and really create discipline and learning and execution.

And I attribute a lot of those days to my success today even though it's in a strange sport in a strange country.

Barrett Thompson: I appreciate you sharing that. I thought, I don't know any squash players, competitive or otherwise. So glad to have you in my circle with that. [00:03:00] Very good. Well, Tim, I want to keep in context in the conversation that we've been having around how manufacturers gain value from the Salesforce platform, and I know that you have an expertise in that area, so really looking forward to exploring that with you.

And maybe to kick it off, let me ask this of you, help us understand the landscape from that manufacturer's point of. Characterize their business for us. So we're thinking about it correctly and not mistaking it with other B2B enterprises. Maybe talk a little bit about the tools that they use today and the practices and techniques they have, their aspirations about digitizing their business and the challenges that they face.

If you would set a landscape for us there, I'm sure we can use that to explore lots of inroads.

Tim Harris: Yeah, that sounds good. Let's think a little bit about discrete manufacturing and maybe in a run rate type of business. These organizations are usually heavily dependent on the procurement of the [00:04:00] material. They do account based planning, maybe in a longer term fashion with their customers, so they set up long term pricing agreements and contracts.

They're probably using some version of Salesforce, maybe some CPQ. They're building contracts. They rely on logic running in the background. It gives their salespeople data and information. But really, I think one of the big things that they have is, they really have a historical view of pricing, but they don't have an advanced view of pricing of where it needs to evolve into.

I think CPQ on its own is a great tool. We all know CPQ configure, price, and quote. But really what does the price mean? What does it do? What does it not do today? And I think that's the area of innovation that we're seeing a lot around today. CPQ is pretty light, I would say in general on that pricing component.

It can handle things like quantity breaks and maybe some additive pricing or customer discounting that exist in like an ERP system or something. Are you thinking about as your supply chain changes and the cost structures change?

And we all know, like even the debt market or whatever else that's influencing the world today is constantly changing my cost allocation side of things. And when you're looking at your margins, you want to rely on in what you did a month ago or what you had in a pricing agreement a year ago.

Or do you want to sort of dynamically really look at the influencing factors of your pricing and be able to streamline that? And what Zilliant does is it streamlines the intervention and it increases that trust and that consistency side when you're dealing with a customer. From that perspective, and maybe just to add to that if you think about today, what happens in a lot of organizations is the salesperson goes out.

They talk to the customer, they gather, what they want to do from a contractual pricing perspective. They come back to their organization. They then somehow go through, multiple different departments and groups, and they find out, oh, you know what? We can't offer it at that price. [00:06:00] So now they have to kind of crawl back to the customer.

It's all of that. Now this price is changing and that's gonna upset them. The customers then are gonna want to renegotiate and then there's a big chance that you can maybe potentially lose that business. Having something that can give you the right pricing at the front end. And we always talk with manufacturers and distributors and we say, what if you could do this in front of the customer in real time?

Instead of having to go back, ask for permission, beg, borrow, steal, you know what you need to do in order to come up with the right scenario, and then you end up with that back and forth negotiation. What if you could do it at your laptop in front of the customer and feel confident in that pricing and feel that you've got trust in that pricing and get that deal closed on the spot.

And I think that's where a lot of this innovation is starting to happen on the pricing side is you need a tool to be able to give you that confidence and give you that trust and empower your sales force to be effective when they're having those discussions with the customer. So yeah, there's [00:07:00] just some thoughts on that.

Barrett Thompson: You've said a lot there.There could be some connections, I think between these the process efficiency, the customer experience, and I love how you expressed it. Both of these may be traceable back to the confidence we have in the price point and this simple, but I think powerful test you gave, who on this call would say, I'll take my prices as they sit right now in my item master or my ERP or something else.

Just run 'em that way. Run the business on those prices without the ability to stop and negotiate with a customer. When that matrix price that I set is 15% out of market now, because the market's really volatile, I think most customers that I speak with at B2B, they would not at all want to be forced to run their business on those static prices.

Right. That would just decimate their business. In your point of view, back to confidence. Confidence in the price, what is your perspective? The kinds of things that need to occur when [00:08:00] a price is calculated or generated and let's say put in front of that rep sitting in front of the customer for a wonderful experience.

Their one stop close, what needs to happen so that the price carries confidence, the rep's confident to sell at that price. The business is confident they're gonna hit their profitability targets when they close the business at that price. And the customer's confident that they're getting a fair price in the market.

They're not getting gamed by the sales rep, for instance.

Tim Harris: Yeah, sure. I think context is king, and when we think about context, we have to think about the information I have as a business. So what are my costs? What is the availability? Other factors that, that go into, the long-term nature of relationships with customers and so forth.

But then there's external data and the external influencing data factors that really need to go into your pricing engine to help you be competitive, putting the right price at the right time with the right customer. And I think, an example of this is we had a steel [00:09:00] manufacturer and they were dynamically adjusting their prices to their customers, but they were having to do.

Historically, through multiple meetings and conversations and well, we think we're competing against these people and we think this is their pricing and we want to maybe offer this price. But it was all kind of anecdotal in, in many ways. But what we found out is that in the steel industry, because steel is so heavy, the cost of transportation was a majority factor contributor to the actual cost of delivering that product, which of course then impacts your cost.

So what we were able to do is to leverage external data factors alongside, commodity pricing and various other information that they had within their ERP environment to say, well, okay, we know we're competing against these plants that are close by to the customer. What is the distance from our competitors to that?

Project site or wherever they wanted to deliver to, and how can we dynamically adjust our pricing to be competitive enough that we're still profitable, but [00:10:00] at the same time know that we're not getting taken to the bank on that margin. So ultimately what this allowed them to do is actually get into new business, which they had historically just said, oh, we're too far away.

We're not gonna be competitive. The other thing it allowed them to do is to push up their pricing for the times where they were the closest to those facilities and they knew there was an actual benefit to that. So that's just, kind of one example out there. I'll use one more example, and I think it really relates to the speed of process.

I mean, I know we, we hinted on that a little bit earlier, one of the major distributors for some industrial goods, they're also a value added manufacturer. But what they really did is they had a lot. Technical capabilities in configuring their products. So these are large boiling systems and heating systems for hospitals and hotels and things like that.

So the CPQ was really important and they had a great way of configuring these products, go through, configure it, get the right, flow rates or whatever else you needed to do [00:11:00] in that particular sense. But when it came to pricing, they were like, okay, I've got your configuration, then the sales rep would go back home and they would sit down with technical sales and they would try to spec this thing out to the nth degree.

Yeah. Pick, come up with some very specific price that then went back to the customer who has, five other quotes from whatever, whoever else out there. And then they got into negotiation process, et cetera. And what we were able to do is to say, let's take a look at, again, some of these external factors we looked at.

Are we the basis of design with the architect that specked this? Do we know this general contractor and what's our win rate with this general contractor, the end user that's purchasing this? Have we done work with them before and what's our success rate with that particular customer? And then we used external data factors like, what's happening in industry, we know their supply chain issues for these different vendors that we're competing against and so on.

We used all this data together to essentially dynamically adjust the pricing for the client and make sure that you are still in a profitable place. What did it really [00:12:00] enable able to do is not only come up with the right price a lot faster, they didn't have to involve two or three different departments, but they were actually able to control the margins much more effectively as a result.

So, Just some examples of how it changes process, how it can, you can use those external data factors to take that tribal knowledge that it used to exist in all those meetings and conversations that existed before and systematize it and let those folks work on, the next value added capability that they can provide to their customers.

Barrett Thompson: These examples really resonate with me. In fact, I hear many customers saying, I want to have, data intelligence, signal intelligence informing the prices. I want to take these factors that I know matter that you just described, a whole list of them, factors that should be considered, and I want to quantify them and I want to apply them consistently so I can move them out of the realm of sort of subjectivity or magic on the part of the commercial team and turn it into [00:13:00] a predictable and definable and consistent process from the say, from the pricing.

That's very doable. Zilliant, in fact, has built our solution to support those approaches, to support the structuring and codifying of data intelligence in order to improve the pricing. So, there's a lot of synergy between what you're saying, what you've seen, and the things that that we've delivered in the past.

Tim Harris: And just think about it from a consistency perspective too. I was having a conversation with one of your colleagues at the Salesforce partner kickoff this week, and we were talking about the fact. Pricing is like the central point that influences so many parts of your business. You got an e-commerce solution.

You've got your ERP and CRM applications that are looking at pricing. You have all these different things that are calling these pricing engines, right? And that consistency of being able to provide the right price to the right person at the right time, regardless of the channel that they're coming.

Is another real advantage. I think that solutions like Zilliant really provides here and [00:14:00] being that kind of central repository or almost master data management of pricing the engine, the calculations and then the presentation of that to whatever the source is. And I think that's just another unique aspect that you bring to the table.

Where before it was like this massive synchronization of all these different systems and you're pulling like, what's the source master and where do we get this? Where do we get that? And so forth. So you ended up with inconsistencies. Your e-commerce solution has a different price than your CPQ with your sales rep.

It's like, well, why is that different? So I think that's another great advantage that Zilliant can bring to the table as well.

Barrett Thompson: The centralization approach that you mentioned, having a central price engine feeding those systems, I think it's extremely important. And in fact, in some cases I would even beyond the consistency, it's the fact that for some of those systems, it's a, you can't get there from here.

Proposition, if you're not calling on a centralized price engine, maybe the e-commerce system doesn't have the data to know from which warehouse you're [00:15:00] planning to fulfill the order, and therefore the cost to serve is different because the transportation leg is. It's sort of blocked forever in a structural way from being able to have a price that's aware of that factor, but you pull it back into a central price engine, you can have the wisdom of all of those factors appearing in those endpoints, even if the endpoints themselves don't know how to house or process that data.

So I think that's a great approach. Now, in the examples we've talked about so far, manufacturing, they sounded like acquisition of new customer cases. And that's certainly very important for all the manufacturers listening to this call. Could we also talk about those cases where I have a longstanding relationship with a customer, I've set up that contract or that agreement that you described in the landscape.

What are some of the concerns there about cultivating that relationship, curating prices over time, and what do you see going on? How are customers approaching it? What should they be thinking about [00:16:00] in evolving their approach?

Tim Harris: Yeah. Again, if you think about the long term contracts, they're usually set up in a way that you have middle order quantities.

You have certain costs that are baked in at a scale that allows you to put the pricing in place, but how do you keep track of it? How do you know as customers are placing their orders that, they're 10 orders away from hitting that quantity break, or, they're a certain number of percentage through their contract or what have you?

Who's really tracing down the actuals against these contracts and the related pricing that's attached. It's just not happening in an accurate way, or it's monumental amounts of effort for someone in the back office to go and, reconcile this at the end of the year. And then, what are you gonna do?

Are you're gonna go back to the customer and go, well, you owe me 10 grand. Like, good luck with that. Doesn't happen, right? So you end up trying to manage that relationship. So having a system that really supports that management and supports conversation and [00:17:00] really enables your sales staff to, to be proactive on these types of things is very powerful for maintaining the profitability, but also the relationship with those existing clients that are out there today.

Barrett Thompson: It's been my experience, Tim, that most B2Bs when they're speaking frankly, will acknowledge that this is an overlooked opportunity to match the customer's quantity, committed quantity, fulfillment against the price. And we know what happens at the front of the relationship. They gave a price discount on an expectation of certain minimum orders would be placed.

Over time they tell me, I don't have a way to track it, and I certainly don't have a way to influence the pricing mid-cycle for instance. You mentioned the example of recognizing when the cumulative quantity was close, but not yet hitting the next threshold for break and maybe prompt someone to see if you could not get the customer there.

You could take that same kind of raw intelligence signal and say, I'm [00:18:00] six months into a 12 month agreement, so I'm halfway through the time period. Customers only bought 10% of the committed quantity. Maybe that's a trigger. Now if you have a massively seasonal business that's gonna happen at the end of the period, you could set up a different algorithm.

But in any case, you could have a prediction of what would typically have been bought on some pro rata or model basis. You could put a, define a variance around that, and if someone's outside the variance, you could be alerted and then go back and act on that. That would be huge. The compliance conundrum.

It's a big challenge for B2B.

Tim Harris: Yeah. And I think if you look at what companies have done over the last, say five years or so, they've overindexed on the customer experience side. And the aspect that they put all this investment in, let's make sure they have the best customer experience, what have you.

And sometimes that came at the expense of the operational capabilities. It's like, well, speed of service is really important. Okay? We're gonna send that from whatever warehouse has it in the right quantities and get it out there. Well, now you're split ordering. That's two different [00:19:00] shipment costs. Maybe you're shipping it from further away, which is additional costs, but you've done all your planning as who was coming from the nearest warehouse, right?

So great strategies in terms of, trying to manage what's important to the customers. Speed, timeliness, et cetera, but what ends up happening is it's impacted their ability to generate the same profit margins because they're now making these exceptions the norm to satisfy, some desire from the customer around speed or what have you.

So having that ability either contractually or built into your pricing engine like Zilliant is really critical I think going forward to say, yeah, we can absolutely make sure, especially with the supply chain challenges today, these delivery windows or what have. But recognize that if it's coming from these warehouses, we may have different costing or different pricing engines attached to that.

And being able to really assess those and not necessarily just go off the price paid or what have you. Right? So I think that over-index is starting to swing a little bit back towards the operational side now and go, well, how do we [00:20:00] do this in conjunction? How do we have that great customer experience, but still make sure that we're maintaining a business that is driving the right results?

Barrett Thompson: That's the right balance. It's striving for it. Knowing that you should be balanced is maybe the first step on that journey. I appreciate that. The last thing I'd like to touch on Tim, is to get your point of view on how a tool like Salesforce Manufacturing Cloud in particular, adds value to the run rate manufacturing.

That's above what a normal CRM tool might do. So if someone in the audience says, I have CRM, what else is there? Tell us what else they might aspire to work.

Tim Harris: So I mean, if you look at something like the Salesforce Manufacturing Cloud, it goes beyond the typical sort of pipeline forecasting you might get with your standard CRM application.

It's really packaged specifically for manufacturers to help them manage the run rate business. It's easily componentized, so services like Zilliant can layer easily within their capabilities. When you combine this all together, what to what we [00:21:00] call the digital foundations or what? It's the digital operating platform in general.

We think about how pricing needs to touch these different areas, and we kind of alluded to that earlier. Whether it's your e-commerce, your CPQ, your CRM application, your ERP application. But you know, certainly the manufacturing cloud involves, the revenue cloud, the commerce time backs, et cetera that are all combined in that space.

But it has to work with the other operational platforms as well. So having a solution like Zilliant, which is almost like the Price Master for these sources in a consistent, reliable way, really strengthens your pricing approach as an organization. It takes the guesswork out of sales and it takes the process work that typically has happened in the past to adjust pricing and get approvals and so forth.

And that just really turns into a much more positive experience for your clients.

Barrett Thompson: Tim, this has been a great conversation today and it's provided a roadmap, I would say, for discrete manufacturers to become more dynamic. Achieving the [00:22:00] win-win with their customers is fairly priced and customer satisfaction and so on.

Is there anything else you'd like to leave with our audience today before we say goodbye?

Tim Harris: Maybe just kind of a wrap up set of thoughts here, but you know, our current business climate is one of constant, unexpected change. I don't think we've had as many disruptions in the last couple years as we had in the 10 years prior.

Right. So, yeah. If you look at, started with Covid and it progressed to the supply chain issues, now we have fluctuating costs and margins driven by things like interest rates and bank risk, and the cost of debt and so forth. The operating world is not constant and stable as it was several years ago.

So why should your pricing strategy be? You have to mimic the working world that you live in. And I don't think organizations have necessarily invested in this area, because maybe costs were fairly consistent for a while and their pricing was fairly static, but, the world we live in today is in that state of flux and your costs are changing.

Your pricing strategy needs to match that. So for me, [00:23:00] solutions like Zilliant that take into consideration not only the rules and the contractual pricing, but the external forces to dynamically adjust that pricing and keep you in your sweet spot of profitability. It's really critical of the operational success of manufacturers, distributors, and even other industries.

We're excited to partner with Zilliant, with our customer base and provide this resiliency into their business.

Barrett Thompson: Tim, thank you for being with us today. It's been a pleasure to have you on the podcast.

Tim Harris: Pleasure meeting you and having this conversation. Thanks, Barrett.

Barrett Thompson: I want to thank each of our podcast listeners for being with us today.

We're committed to your success, and if you need any assistance, please reach out to us at zilliant.com. Would you do me a favor and take a moment to rate and review the show in your podcast? As it helps us to continue to put out great free content. Until next time, have a great day.

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