Episode 39 Sep 23, 2021

Manufacturers Need CPQ, A.S.A.P. w/ Prashant Garg (Tata Consultancy Services)

We welcome Tata Consultancy Services (TCS) Enterprise Architect Prashant Garg, who specializes in Quote-to-Cash, to the show to talk all things manufacturing and CPQ. Given the recent industry upheavals and the scramble to digitize commercial processes, Garg and host Barrett Thompson describe the urgency of CPQ, how advanced price optimization fits in to a full solution and what advice they give customers on how to navigate future disruptions in the industry.

Learn about how both manufacturers and their customers achieve financial, experiential and process-driven benefits from modern CPQ.

Prashant Garg

Prashant Garg

With CPQ, one of the great benefits is that you can onboard your new salespeople quickly. And when you're selling complex products, the knowledge of those products, it becomes like a tribal knowledge that only certain salespeople know. And those things are not documented. Now when you start a CPQ project, if you have documented those things and you bring to your system integrator, then we can use those and model the products, where onboarding sales reps could be a much easier exercise.
- Prashant Garg, TCS

Episode Transcript

Prashant Garg: With CPQ, one of the great benefits is that you can onboard your new salespeople quickly. Right? And when you're selling complex products, the knowledge of those products, it becomes like a tribal knowledge that only certain salespeople know they learn over the years. And those things are not documented.

Now when you start a CPQ project, if you have documented those things and you bring to your system integrator, then we can use those and model the products, where the onboarding sales reps could be a much easier exercise. Right? Much shorter cycle.

Lindsay Duran: You're listening to B2B Reimagined, a bi-weekly conversation hosted by a rotating roster of Zilliant B2B pricing and sales thought leaders featuring expert guests in the fields of technology, distribution, manufacturing, and business services. Join us as we explore the challenges and dynamics across a unique mix of industries in an [00:01:00] increasingly complicated environment.

Walk away from each episode with pragmatic tactics and strategic advice to reimagine the commercial approach in your business.

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 Prashant Garg from our partner TCS (Tata Consultancy Services). Prashant is an enterprise architect with specialization in quote to cash business processes. He has more than 25 years’ experience and product configuration and pricing domain.

During his time Prashant has managed and delivered numerous quote to cash transformation projects covering all of the major industry verticals. Prashant. Welcome to B2B Reimagined.

Prashant Garg: Thank you Barrett. Thanks for having me.

Barrett Thompson: I wonder, if you would, so our listeners can get to know you a little better, would you share an interesting factor detail about yourself that someone might not learn by checking out your LinkedIn page? [00:02:00]

Prashant Garg: Sure. Barrett. I have an architecture background, even though I'm in IT now, I still like to design and build. And recently, I completed a full kitchen and bath remodel at my house.

Barrett Thompson: Oh my gosh, quite an undertaking and it might've been difficult to find a tradesman to help out. I hear it's a tight market these days.

Good. Thank you, Prashant, for joining us today. I think it's great that we're talking about this changing world of manufacturing and the imperative to look at CPQ. In fact, the digital commerce has exploded. Hasn't it for B2B manufacturers? Gartner did a research project and found that digital commerce platforms now account for 45% of organizations revenues.

I think that's quite an astounding fact. And they expect that 75% of B2B manufacturers will be selling directly to their customers online by 2025. So, Prashant, I'm just interested in your perspective over the last couple of years. Do you see that same shift? Do you agree it's here to stay? What's your viewpoint?

Prashant Garg: Yeah, [00:03:00] Barrett. So, I certainly agree with this shift. Traditionally, sales rep created quotes using Excel or other homegrown CPQ tools, and they prefer to present these quotes in person. With COVID, as we all know, all travels and in-person meetings stopped. And this brought a huge challenge to manufacturers.

And, to keep the lights on, something had to change. Fortunately, they had several technologies like SAP, Oracle, Salesforce, and others at their disposal. Before COVID, customer experience was already a popular topic and many had already started a journey towards digital transformation to improve customer experience.

Now COVID accelerated this growth and adoption of these technologies tremendously. This trend is expected to continue as it is bringing many benefits to both manufacturers and their customers. Manufacturers are starting to invest in certain CPQ capabilities that enable customers to request for quote online at their own convenience with [00:04:00] capabilities like guidance selling, where customers can narrow down to the product choices by just answering few questions. They have AI-based product recommendations that are based on prior purchases and other parameters available to them. And then products and options are ranked by popularity so they can filter. And based on that, I'm finding that lot of manufacturing are starting to bundle their products and also moving towards solutions.

So, it is just hard to imagine that a customer that now has so many options at their fingertips to make smart buying decisions, without going back to traditional ways of buying. Hence, I think this trend is here to stay.

Barrett Thompson: Yes. I think you're right on. Thank you for those insights and specifically why and how CPQ is adding this value.

Prashant let's chat for a moment. Who do you think is a good candidate for CPQ? And in fact, are there some obvious cases and maybe some not so obvious cases where a business really is a candidate for CPQ?

Prashant Garg: Sure. CPQ in my mind is a [00:05:00] process that takes place when any businesses selling products or services to their customers. What CPQ tool they invest in to facilitate this process depends on many factors.

One of the main factors is type of product that you are you selling. Are you selling simple products that are pre-configured products that are stopped and identified by a skew code and a description? Or do you have complex configurable products that can come in different flavors of complexity? If you have configurable products, then CPQ tools like SAP CPQ that’s a no brainer. For businesses that have simple products, CPQ could still be a good candidate. If, for example, if pricing is common, with CPQ, many types of pricing strategies can be supported, like volume-based your base subscription and so on. There are other factors like approval processes, size of sales team, frequency of products and pricing updates, number of prices, sales channels, compliance needs for discounting and legals. That can also be considered to see if a [00:06:00] business needs CPQ.

Barrett Thompson: It all makes sense. Then one of the takeaways I'm picking up from that is just because you don't have a complicated configuration need, don't count yourself out for CPQ. You could well be a candidate. Okay. Prashant, let's think for a moment, when you look at a business, what kind of readiness criteria do you look for to help a business figure out? Is this the time for them to embark on a CPQ initiative? And what would the success criteria be?

Prashant Garg: Great question. Having implemented CPQ solution for several customers and also having worked in pre-sales for many years, I have come to a conclusion that CPQ readiness and establishing a success criteria is number one, critical step towards achieving a successful CPQ project.

CPQ readiness manufacturers can document that current selling process. Identify what is working well and where the pinpoints are. And they can review the technology stack and data model of products, pricing, and customers, in the [00:07:00] meantime. And they also need to understand their products. Many manufacturers of CPQ prospects that I've seen don't know the product. So, when we start the project, that's when we try to figure out what the product capabilities are, what benefits our products bring to the customers, and also what the product relationships are. So as part of CPQ readiness, I think the manufacturers can do some of this homework and digitally map product capabilities, benefits, and relationships. And they can also identify any bottlenecks in sales process, like pricing approvals. That could be taking a long time and causing their sales cycle to be long. Creation of customer facing documents - that could be a challenge where they have many different formats and so on. And quoting errors caused by incorrect pricing or incorrect products that have been discontinued and so on. So along with CPQ readiness, success criteria to measure sales effectiveness, achieved by using CPQ tools, could also be [00:08:00] based on certain KPIs, like opportunity to quote on our own time. So, this CBQ definitely shortens this. And number of quotes, generally.

So, having this tool available to you that can expedite the turnaround time. Right? For converting opportunity to quote. And thereby you can generate a lot more quotes. It can help you improve your win-loss ratio. Right? And also, it helps you to reduce your pricing errors. Now, overall, it also increases your deal size and improves your margins.

So, all of these things can be measured and KPIs can be based on this.

Barrett Thompson: Yes. In fact, that quote turnaround time is something I hear all the time. I hear it from most customers who are doing quoted business will tell me that their speed is far slower than they wish it were - far slower than what the market needs.

So, I've seen that a lot. I can second that that success criteria. I found it interesting that one of your readiness ideas was a little counterintuitive to get to know the product better, but I can appreciate what you mean. If you [00:09:00] have a large catalog with 30,000 items and then you're doing configurations on top of that, you know the products in one way.

It may be in an abstract way - enough to do the kinds of operations you're doing today, whether it's creating some sort of price list or some discount matrix. But that's maybe a little different than knowing the products in a deeper, more intrinsic way, because you're going to want to codify those products and the value of the options and so on into the CPQ tool.

So, I found that one kind of interesting.

Prashant Garg: Yeah. With CPQ, one of the great benefits is that you can onboard your new salespeople quickly. Right? And when you're selling complex products, the knowledge of those products, it becomes like a tribal knowledge that only certain salespeople know they'll learn over the years.

And those things are not documented. Now, when you start a CPQ project, if you have documented those things and you bring to your system integrator, then we can use those and model the products where the onboarding sales [00:10:00] reps could be a much easier exercise. Right? Much shorter cycle.

Barrett Thompson: Prashant, thinking about that CPQ solution, who do you find is typically the corporate owner of the CPQ solution?

Prashant Garg: Sure Barrett. Since CPQ software enables selling of products and services and improves sales effectiveness, it is usually owned by sales and sales operations. However, KPIs could be associated to sales, operations, channel sales partners, compliance, legal, supply chain, and customers.

Barrett Thompson: Thinking a little bit more about the benefits Prashant, you described a few a moment ago. Improvement a turnaround time, improvement in win / loss. Are there some other benefits that you've cataloged - tangible benefits - for the company who deploys the CPQ?

Prashant Garg: Sure. CPQ brings many benefits. Top five, a few that I can think of: Reducing pricing errors is one of them. Improve customer buying experience - with some of the things that I mentioned before, like guided selling AI based recommended [00:11:00] product recommendations and so on.

So that overall improves customer's buying experience. They see the value that they're getting from their purchases. And it helps to improve your margins. Right? Up to 50%. And I'm onboarding new sales rep. As I mentioned before, I had one implementation I did for an appliance distributor. And those appliances were configurable. And they had only one or two sales reps that had that engineering knowledge of those appliances can be configured for a particular customer.

So anytime they had to create a quote, they had to go to these experts. And there was a one-week or two-week turnaround to get that quote back. So, when I worked on that project, I sat down with these two people. Basically, they had to bring all the knowledge on paper. And then we digitize it and created a rule-based configuration where now they can just generate quotes in minutes.

Barrett Thompson: That's fantastic. It's scalable. It's [00:12:00] consistent. You don't worry about who's on vacation. You don't have your key resource around to help you get a quote done when you go digital. I really like that.

Prashant Garg: And then CPQ also helps you to launch a new product in the markets quickly. It brings agility to the business. Right?

In these changing market conditions, you want to bring new products. And being all digital, you don't have to wait to distribute your catalogs, pricing, catalogs, paper catalog, and so on. Your pricing team or your product management team can go into the application quickly add a product, and make it live. Right?

Barrett Thompson: Yeah. That's big.

Prashant Garg: Yeah. And then also with CPQ, because everything is digital it's in one place, you don't have papers flying around and files to look into. It provides you data that you can use to analyze and help your business to improve your pricing strategies and your product portfolio.

These are the benefits that the manufacturers can realize. But on the other side for the customer, since they're getting guided selling, to [00:13:00] select the products helps a lot. I've mentioned that a couple of times before. That also brings a confidence and trust to the customer because the pricing errors already used.

So, they trust more on what you're providing to them. And customers have more choices available when they go to configure a product to see what they can configure. Versus when they're working with a salesperson, they may not see all the choices that are available to them. And because in CPQ, you have your customer's assets available to you, you can quickly renew those assets when needed. And what the customer has bought before. And if the inventory is running out, you can replace that inventory quickly and generate quotes to replace that inventory. And then product recommendations based on prior purchase history and other customers in similar segments as you, those product recommendations also help the customer.

Barrett Thompson: Yeah. I think the world of buying and selling has changed in the [00:14:00] many ways we've described. And I'm running into businesses who will say: “Yeah, my customers are doing things outside of normal business hours. So they want to be able to self-serve and they need a system that they can come to and configure the item for themselves and do it during an unusual time of day or on the weekend, submit it and get the order processed.” And sounds like the CPQ is going to facilitate that it's going to improve the customer's interaction and enjoyment, if you will, and ease of doing business with that manufacturer.

Prashant Garg: Exactly.

Barrett Thompson: Prashant, the CPQ clearly is going to be synergistic with other applications in the It landscape.

There are many different data sources that we know will coordinate with and feed into CPQ pricing, configuration, and quote creation processes. Could you outline for us what dependencies or synergies the CPQ have with other systems that are commonly in place?

Prashant Garg: Sure, Barrett. CPQ systems can integrate with many other systems like CRM, customer [00:15:00] relationship management, like Salesforce C4C from SAP and so on net suite and so on. And also, ERP systems. Right?

These are backend systems like SAP HANA, ECC and so on. And on the front-end side for the customer facing B2C customers or even B2B customers, there's commerce cloud. There are analytics platforms. There are pricing optimization engines or product recommendation engines, sales compensation tools, subscription billing, learning modules, product information management tools, DocuSign contract life cycle management.

So, these are all the different applications and all the applications that CPQ can integrate with and interact with. Now, behind all of these systems, there's a common data stream that CPQ enables. Right? There's products, pricing, and customer. These three data points are very important in these integrations. Right?

So, in simple terms, through system integrations, data replication and duplication are avoided, and best practices, too, clearly. [00:16:00] Like the single source of truth for your data, depending on the system that is available to you. For example, CRM is a source for opportunity and prospects data. ERP is for customer accounts, product and pricing.

CPQ brings all of these together for sales negotiations. And finally, to generate a customer facing document.

Barrett Thompson: Prashant, that all makes sense to me. Now, when you're looking at customers, what advice do you have for them when they need more functionality than the base CPQ provides?

Prashant Garg: Sure. So, your most CPQ application provides some level of customer pricing and order management capabilities.

However, each of these areas have different levels of complexities based on business size. Small-scale customers could get around with just CRM or CRM plus CPQ. But larger customers tend to have different systems dedicated to each of these things. Right? When establishing CPQ readiness, customers should go through their use cases and match them against available CPQ capabilities. [00:17:00]

Most CPQ applications that are cloud-based work on an API framework. And some provide inbuilt connectors to third-party applications. In a CPQ tool it is important to have a mature and secure API framework and standard out of the box integrations with third-party applications like CRM, ERP, DocuSign, and price optimization apps like Zilliant.

Barrett Thompson: So, I hear the basic approach is: Reach out and integrate to pick up that functionality you need from another application that's specialized to do that. And let me dig in a little bit on the point you made there at the end price optimization. When you're looking at a client, how do you know when they need some pricing support beyond what CPQ is able to serve? What do you look for? What are the indicators there that they might be a candidate for advanced pricing tools?

Prashant Garg: Sure. Pricing optimization can be quite complex in terms of data requirements and analytics. Typically, you need at least six months of one loss quote history [00:18:00] data with quote numbers in thousands.

More the better. And we also need together data from multiple sources to arrive at a data model that has enough parameters to provide you this. To provide price or price optimization. And finally, you need a powerful data processing engine that can analyze this data. Also, price optimization and product recommendations, if available, are two features that are usually offered as a software add-on. Right? In CPQ tools. And to decide if a pricing add on is needed, all these parameters need to be looked at. In summary, I would ask the following questions: Do you have an ability to create data models in your CPQ tool where the data could be coming from multiple sources?

Does your data engine provide ability to slice and dice pricing related data from multiple angles? And also, does it provide analytics dashboard to review this data? Do you have the ability to create custom dashboards? What kind of pricing optimization algorithms are provided out of the box and is their ability [00:19:00] to create custom algorithms? And finally, consider your license costs for these add-ons and skillset needed to implement and maintain pricing logic.

So, these are some of the things that you can look at to see if your current CPQ tool can provide the pricing optimization capabilities that you need, or you need to get an add on.

Barrett Thompson: We have some customers who want their price to be responding pretty much in real time to some data or some changes in the market or the situation, which simply isn't visible to the CPQ system.

An example might be: “As my inventory level goes up and down, or as my inventory position compared to my competitors inventory position is changing. I want to have a very dynamic and a real-time price update.” And CPQ might not have anywhere to store or see what is the inventory position for the manufacturer or for their competitor for that matter.

So that's an example where I've seen pricing tools provide that missing component because they're able to see that information and process it. One other [00:20:00] that I become aware of is: customers thinking about implementing a price change. Let's say, even in CPQ, you have referenced prices like list prices, and you have some generalized discount rules that you're using to apply various discounts to different customer types in the CPQ.

The CPQ may be able to handle that construct: take a list price, give a discount for certain customer. But now the business is saying: “Hey, I'm considering adjusting those discounts. And in the CPQ, I just simply go and change the value if I know what I want the value to be. But as a price planner, before I can figure out what the value should be, I want to create a sandbox for myself.

I want to consider different price discounts that I might apply to your comment on analytics. I might want to take those candidate price discounts, project them across rolling 12 months of order history to get a sense of what my revenue and profit impacts would be if I make those price changes.” So, there's this sort of separate analytical endeavor that happens. [00:21:00] first, in order for me to convince myself “Okay, this is the discount price. The discount change I want to make. And then I want to push that into CPQ.” And what I've seen is the CPQs don't provide you with that sandbox. They don't provide you with a workspace where you can go and model a price alternative in order to arrive at your decision even if the CPQ is able to execute on the decision once made.

Prashant Garg: Yeah. That could be another reason. Yeah.

Barrett Thompson: Prashant, there's a lot of insights that you've shared here. If I could ask you just to imagine, look out into the future three to five years, tell me what do you see manufacturing might look like?

Prashant Garg: Yes. Barrett. So, what I see is that with available technology, it'll be easier for manufacturers to offer configurable products to the consumers. Right? And with these configurable products, customers have more choices available to them. They can really buy what they exactly need. For example, if you're buying a car, you [00:22:00] don't have to pick a car that is available off the shelves at a dealership.

You can go to the car dealers’ site, the car manufacturers site, and configure exactly what you want. What color of seats you want. What hubcaps you want. Everything. Right? About that car - configure it. You get a price right away. You place an order. It gets manufactured and you have it. This trend is going to continue.

It's going to come down to other smaller stuff. For example, recently I was at a night store and there, I was able to configure my own shoe as I wanted, whatever fabric I want on it. And I was even able to put my own logo on it. Tailor-made bespoke shoe, right there. So, I think those things will come more and more.

We'll see more and more of those in the future. And with all of this available online, digital, as you said, the customer can go in and configure these at any time they want. So, this self-service aspect of the customer to create the quote or request for quote, for whatever [00:23:00] they want, will continue to increase.

And the other thing I see, there are other technologies that are available, like IOT through which some of the machines, they can talk to the CPQ engines and if they are running out of inventory, like for example, your printer and it needs ink. The printer can send a message to the manufacturer: “Hey, I need some more ink.”

And automatically a quote gets generated a service ticket gets generated, and a service guy comes over or service technician comes over: “What's a new ink for you?” Right? So, all of that process can be automated. So, we'll see a lot of this automation also coming through.

Barrett Thompson: That's very exciting future out there for us and for the manufacturing space.

Prashant, this has been a great conversation today. I want to thank you for joining us and sharing your great ideas to consider as we navigate the bold new digital world. Appreciate your sharing your perspectives.

Prashant Garg: Thank you Barrett. Thanks for having me.

Barrett Thompson: I want to thank each of our podcast listeners for being with us today. [00:24:00]

Please see the show notes for a link to a white paper from TCS called “Transforming Industrial manufacturing.” Creating data driven customer experiences with CPQ” We're committed to your success. And if you need any assistance, please reach out to us at Zilliant. This concludes our podcast today. Would you please do us the kindness of rating and reviewing the show as it helps us to continue to put out great free content? Until next time. Have a great day.

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