Episode 79 Jul 20, 2023

Why Pricing Transformation isn’t a “Chicken or Egg” Problem

What should come first: pricing technology or pricing strategy? Our guest today, PwC Partner Ron Otocki, makes a strong case for why the two should go hand-in-hand. Ron leans on his vast experience guiding companies through digital transformations to explain how pricing fits into larger transformative projects, and how the most successful pricing initiatives mix strategy and the right tools from the very start.

Listen to learn how to marry strategy with technology in your pricing and digital transformation initiatives.

Ron Otocki

Ron Otocki

When you're in an enterprise environment, it's easy to essentially ask for investment in a tool and say that's going to be the solution. It's much harder to say, ‘Well, I'm going to implement a tool, but I also have to implement a culture change and implement role changes.’ That's the harder stuff, but it’s so critical to have those two go hand-in-hand; otherwise you're only doing 50% of what you need to do.
- Ron Otocki

Episode Transcript

Ron Otocki: 40% of those CEOs do not think their company will be economically viable in 10 years if they continue on their current trajectory. They're basically saying, if we stay on our current path, we're going to disappear. I think everyone is recognizing the speed of change in business, you need to start building a strong foundation that is agile and that can adapt and start building that muscle because the ground is always going to be shifting.

If you have the solid foundation and the culture and the processes, you'll be able to adapt to these type of changes.

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 Ron Otaki, partner at PwC. Ron recently attended our Mindshare conference in Austin, where his colleague, Colin Carroll, led a breakout session on how to get your pricing transformation right.

Ron, thank you for your continued partnership and welcome to B2B Reimagined. Ron, you want to share a few words about your Mindshare experience?

Ron Otocki: Yeah, I'm happy to. It was my first Mindshare event great opportunity to meet some new folks. Really enjoyed the keynotes that were lined up over the couple of days.

I found that really interesting. Great to see some of the individual case studies of folks and to hear their personal journeys on implementing their solutions, and [00:02:00] implementing different Zilliant solutions. Also, I had some really great one-on-one conversations in some breakouts with different folks.

And I, it's just a, it's a great crowd that has a lot of similarities from a functional perspective, so it's nice to all talk the same language, and when you say something like gross to net waterfall, everyone knows what that is, and it's a great crowd to, to work with.

I look forward to future events.

Barrett Thompson: Yeah. We're definitely among friends when we're talking with people at that event, that's for sure. And their stories are inspirational and give courage to press on. There's a great a great reward at the end of the journey. Ron, before we jump into our topics for the day, I would love it if you'd share a little bit about your professional background and what you're responsible for at PwC.

Ron Otocki: Yeah, happy to. Yeah, maybe most folks know PwC. It's a very large firm. I'll tell you just from a structural perspective, we have trust solutions and we have consulting solutions. I'm within the consulting [00:03:00] solutions area. And specifically I'm part of customer transformation. We really focus on business strategy, operational transformation, and really driving outcomes for our customers.

And even more specifically, I spent a lot of time with front office functions, so with sales teams, with marketing teams, with pricing leaders, and really helping to try to drive alignment across those teams and those functions. So I cover everything from customer segmentation to benchmarking to pricing models, to go to market models you name it as, and when you talk about the front office.

Barrett Thompson: That's all very relevant for this audience. Ron, just before we start, is there anything you'd like to share about yourself in the non-work world? Something that I wouldn't learn if I just looked you up on LinkedIn?

Ron Otocki: Sure. If you stared enough at my LinkedIn profile, you might see the thread that I have been in Chicago or Illinois my entire life, which I think is pretty rare these days.

Most people are moving around, but done everything locally, including,[00:04:00] education, the University of Illinois, university of Chicago. So that's been great. But I would say the other thing outside of that LinkedIn profile is I've been really obsessed with pickleball lately, and that's been my fun hobby.

And I just got back from a little vacation with my wife and we played every day. And I'm exhausted from it, but it's a great sport.

Barrett Thompson: I love it. It's, you're a trendsetter because it's certainly taken off like crazy. Ron, thank you again for being here and our topic today is just right in your wheelhouse talking about digital transformations and in particular, how pricing transformations fit into those plans or in cases where you might have seen it maybe overlooked in those plans.

So I'm really interested in exploring that and the ways in which pricing transformation comes about. How it supports the larger ambition of digital transformation and. Even how software and services and partnerships go hand in hand to make that happen for customers. So let me begin with this. PwC, of course, is well [00:05:00] known for ushering many companies through their major digital transformations.

From your perspective, is pricing regularly a central component of that, or do you find that it's an afterthought, or what's your perspective on. On how often people are thinking about pricing as a part of their larger digital transformation and what you think ideally they should be thinking?

Ron Otocki: Yeah, it's a great question.

I think it happens all the time. I see that happen in terms of just overall discussions. Afterthought is a strong word, and I guess I would change the question slightly in that, when you talk about pricing as a central component, it's not just about a pricing sort of static sheet, right?

It's what do you want out of that? It's about the pricing insights or the pricing analytics. That's the valuable part. And you're right in a lot of times when you're dealing with a digital transformation, there's not enough thought put into that part. We do a lot with CPQ, configure price quote type of engagements.

The P tends to be a little [00:06:00] p in the discussion there's sort of an overall focus on what that CPQ is doing. Not enough focus on the capabilities, especially as it relates to pricing. Yeah. We try to emphasize that pretty strongly. When you're talking about these type of digital transformation.

It encompasses not just CPQ, but all of these frontend technologies that just seem to be booming. Right now. You talk about CLM contract lifecycle management or CDP customer data platforms. All of these different solutions that companies are implementing, but the thought of how they all fit together and integrate together and get the right insights, that's where you see the afterthought and companies would.

Would do better if they step back and look at that ecosystem and say, okay what am I trying to capture holistically, end to end from the be very beginning of this process all the way. To a sale and what are some of the insights that I want to capture? Even talking about ERP implementation, same thing.

What's the [00:07:00] insights we're trying to gather? So getting pricing analytics or sales analytics to be more a part of the story rather than we'll get that as part of our reporting later is the way to go. It's a better approach to start thinking about that upfront.

Barrett Thompson: It might be possible for people to get a little bit of tunnel vision when they start, and sure you get some relief of the felt pain if you treat a symptom. But I hear you step back and think more holistically, about what are you after and what might you need to do to get there. Our customers will often speak to us and prospects that we're talking to in the marketplace, Ron, and a challenge that they have, and I think many of our listeners on this call would have is they're asking this question, how do I get the green light for my project?

Let's say I'm a pricing professional listening to this, or a VP of marketing or someone who's responsible for pricing. How do I get the project support and the green light? What are some of the triggering events or some of the ideas you have on how to contextualize their needs and get the buy-in?[00:08:00]

Ron Otocki: Yeah, so what we just referenced here, so I guess, point number one would be as we see those sort of broader digital transformations, Is there a pricing leader or someone who's part of that organization who can jump in and say Hey, let's not make the pricing component an afterthought.

Let's make this front and center. Let's think about what outcome we're trying to achieve and let's build that into what we're going to implement. So I would say that's one way of looking at it more from an inside out perspective. But there are other ways too. We do a lot in helping companies address the impacts of macroeconomic factors from an outside in perspective. So if you look at what's happened over the last couple years with Covid and then inflation, a lot of companies started to come to us and say, Hey, I, my input costs are really increasing. I need help to raise my prices as well and do it in an effective manner.

So helping companies make those type of pricing changes. Sometimes that's just market driven and even now that inflation [00:09:00] or rates are starting stabilized now companies are coming to us and saying rates are stabilizing, but my costs are still a little bit high. And now I can't really pass on my price hikes to my customers.

So what's, what are some other ways I can do that so really, it we're very much tied, I think to the motions of the market and what's happening there. So I think that's another factor that can help, a pricing leader point out, the need for a change.

And then I'll say one last one, which is really to focus on the broader operating model of what's being changed here. As in, it's not just about the technology that you will implement. But think about it more holistically about the strategy and the process and the governance that surround that technology.

And that's going to be, obviously critical to making it successful. Again, just another point to raise with those leaders.

Barrett Thompson: This really strikes a chord with me because I think it is easy sometimes for people who are in [00:10:00] an operational role for pricing and doing pricing full time to move quickly toward the technology. The technology has a lot of promise. We know this, right? But maybe that's where they think about starting first and they might not have made those connections to what are the process changes and what are the strategy confirmations or the strategy changes that need to go hand in hand?

Do you have a way for them to think about that or to convey that up to executives so that they don't just find themselves in pursuit of a technology without having thought about the end from the beginning?

Ron Otocki: Yeah it's interesting because I feel like everyone in a business environment or an enterprise environment, they know in their heart a tool itself won't solve a particular issue.

You can look up lots of different stats and lots of different numbers out there, but there's a lot of data that shows, enterprise implementations or just tech implementations. The percentage of them that fail. And when you look at them deeper, it's because they didn't do the [00:11:00] surrounding work to think about the process and all the governance that surrounds it.

And it's not surprising because when you're in an enterprise environment, it's easy to. Essentially ask for investment in a technology or a tool and say that's going to be the solution, and it's clean and it's well packaged, correct. It's much harder to say I'm going to implement a tool, but I also have to implement a culture change and I have to also implement some maybe potentially role changes.

That's the harder stuff and it's a bit of the squishy stuff, but it's so critical to have that married with the technical implementation, those two go hand to hand. You otherwise you're only doing 50% of your, of what you need to do.

Barrett Thompson: That sounds right. It aligns with the experience I've had. I can imagine too, if someone is attempting to be the mobilizer, the catalyzer for a project, and they may be very comfortable with the technology and they might not be as comfortable with, how do I lead a culture change inside my company?

So again, maybe the history and [00:12:00] experience might cause them to gravitate more toward the technology, but their success is going to re, ask them to expand that purview.

Ron Otocki: It becomes a cross-functional topic, right? So what's your ability to cross sales and marketing and it across those different functions and build something that's going to be very collaborative.

Again, not always easy. We love to live in our silos, in our little areas and so you really gotta break down those walls to make it successful.

Barrett Thompson: Yeah. That may be a challenging perspective, but I think it's the right one. That the payoff really comes when you say, it's not just what me and my comfortable team can do, but to drive the transformation.

I've got to get out. Another question I have really value your perspective when we think about these elements, Ron, if it's the strategy, the process change. I've heard customers talk about organizational changes and job descriptions. They want to layer in with that technology that they want to layer in types of data readiness initiatives.

I think there's a challenge about what is the order of [00:13:00] operations there? Are there some things that must come first? Are there some things that. Can surprisingly come later than you would think, or there might be a now and later. There might be some things that can happen in parallel cuz some, one reaction I've gotten when I've had this discussion about strategy, organization, process, technology, data is gee, I might have a 10 year journey and what I, so I need to go off and do.

Eight years of pre-work to then come back and get ready about this thing I finally wanted at the end, which was to go and implement better pricing tools or something. And that may feel like a long time. What's your thought on that order of operations? Serial parallel.

Ron Otocki: An eight year journey. The world had changed two times over by then, so yeah.

So whatever you were thinking is, I'm exaggerating, but Yes. Yeah. Exactly. No, but your point is true. You're right that some of those things should happen in parallel, but I think the right way to think about it is just getting the right starting point. Having that overarching strategy.

Which really should be [00:14:00] guided outside in, really a deep understanding of what's the customer, what are they needing, what are they asking for, and what is the competitive landscape maybe that you're dealing with in terms of what you might serve that customer with. And what are some of the partners that you might be working closely with.

To be competitive in the market. So I think, it starts with that sort of strategy. I'll call it a strategy map of just really thinking about, how you're going to best serve the market before you start looking at the internal capabilities that you're going to build to serve that strategy.

In terms of order operations, I really think everyone has to get aligned on what's that goal, that endpoint, so that you could start building the road towards that.

Barrett Thompson: Ron does a particular customer example come to mind where we could take that framework that you just described and root it in a real illustration, from a real customer?

Is there a story there you could share with us to bring it to life?

Ron Otocki: I will say, I'm currently working with a pharma client [00:15:00] and it's been an interesting journey and it's not done and it continues, but they have an interesting environment where they have their pricing.

Information and the pricing master that lives in their rebate tool. They're just kicked off a revision to their ERP. They're going to go with an S4 HANA solution. They're implementing a new CLM contract lifecycle management solution. And then they're also talking to us about CPQ. So I'm actually giving an example of maybe the wrong way.

Okay. Of how things are going. But I am pointing out that, it's not surprising because that is the typical journey for a lot of companies. Because those different tools reside in different places. What we've been able to do is ratchet that back up to the senior leadership and say, okay let's again look at this holistically and look at the different levels of maturity in these different areas for the organization and ask them what are you really trying to achieve overall?

Ultimately they want to make sure they're not leaking revenue. They want to make [00:16:00] sure they're not paying rebates where they shouldn't be. And so they have a list of, very clear pain points. And again, I think anchoring on that is helping to drive the priority of the roadmap of these different technologies to say may, maybe you don't need a CPQ engine right now.

You just really gotta focus on fixing some of the processes so you get the insights that you want before you, you worry about a tool that can help you accelerate adding tools on a shaky foundation, right? So let's help them build that solid foundation. So that's what we're in the process of now.

And I think that's, this is getting better, more well received. But, I think that's a very typical type of journey that I see many clients on.

Barrett Thompson: Yeah, that's a great one. And I, two things I hear in that, Ron. The first is that it's not always clean. It might not often be clean. And number two, if you're on a path that you say, this is not really the best path, or this path is myopic or the.

You don't have to say I'm fated to stay on that. You can do what you said. You can pause for a moment, elevate the conversation. And perhaps influence it [00:17:00] in a different direction. It gets you back more thinking holistically, top-down, outcome-based, right? That sort of thing.

Ron Otocki: Exactly. And this is why as a consultant, I can't just create the static playbook and just hand it out to companies because every situation you come into, A different scenario, a different environment where there are different levels of maturity in different parts of the organization.

You want to keep those eye levels of maturity and you want to fix the low ones, but it's always a bit of a custom solution.

Barrett Thompson: Ron, another area then, after customers have done this work that we're talking about, think, thought about their strategy process, they recognize the holistic nature and they plan that smartly.

At some point it does come down to selecting. Technology to help them with various facets of their programs. So I'm interested to see your point of view on how customers might go through that technology vendor evaluation. I'm on the receiving side of many customers who are in the market looking for [00:18:00] technology, and there are times when I feel like they might be lost as if they don't really have a thoughtful or structured way to look at.

These particular types of solutions that we're talking about, strategic pricing solutions. Do you have a point of view or pearls of wisdom on how companies should think about judging the vendors and evaluating the tools?

Ron Otocki: Yeah, and I think your instincts are right. We've seen an evolution here.

If you look back maybe five, 10 years, he was a more rigorous, structured RFP process where. Know, the goal of a company to run a vendor evaluation was, Hey, let's create a spreadsheet of functional and non-functional requirements. We'll create this master list. We'll ask them to, respond to each and every one of these line items.

Maybe we'll hide some and see if they, suggest some ones that only we know, but, we're hoping that they're going to volunteer, and what happens when you go through [00:19:00] that type of processes? All the vendors look close. You end up like evaluating five vendors. You put 'em in this very complex scoring machine and it's wow, okay, so vendor number one is rating a 4.9 vendor.

Number twos right rating a 4.95. And it's did, what did we really accomplish here? And as we help clients really run that RFP to be successful. Again, putting it in the perspective of you as the customer, what are you trying to accomplish?

Think about it from a user story perspective, from a use case perspective. Think about like your process flow of how you're going to be using this tool or this solution in all the steps. And again maybe you're not comfortable doing that because you feel my process has broken, so I don't want to necessarily communicate that I don't want that to be the foundation.

But you have to have some starting point there and I think it's okay to share that with the vendors and it doesn't mean that can't be refined, it, articulating a customer journey is going to be a better way for those vendors participating in the RFP [00:20:00] process to really show you where they think they're shine.

And I think what you find is throughout that process, Different firms will have better strengths in certain areas of that journey than others. It just becomes a more visible path and a better way to, to help select your choices.

Barrett Thompson: Ron, I appreciate all the insights that you've shared today. The conversation's been enlightening as I knew it would be.

Is there anything else you want to leave with our audience before we sign off today?

Ron Otocki: I’ll say one last thing. We, every year we do a global CEO survey and our latest one for 2023. There's an interesting stat in there that's basically 40% of those CEOs do not think their company will be economically viable in 10 years if they continue on their current trajectory.

40% I find very high. They're basically saying if we stay on our current path, we're going to disappear. I think everyone is recognizing the speed of change in business. And of course we didn't talk about gen ai but that's another [00:21:00] accelerator that everyone's talking about right now.

All of these things really mean that you need to start building a strong foundation that is agile and that can adapt and start building that muscle because the ground is always going to be shifting. But if you have the solid foundation and you have the culture and the processes, you'll be able to adapt to these type of changes.

So think about that. In relation to any type of implementation you might be thinking about.

Barrett Thompson: That's great guidance. Ron, thank you so much for being with us today. Thank you, Barrett. I want to thank each of our podcast listeners for being with us. Also check out the show notes for links to prior episodes we've recorded with PwC on handling inflation and executing successful revenue growth management.

We'll also have a joint webinar coming soon, so please keep an eye out for that. We're committed to your success, and if you need any assistance, please reach out to us at Zilliant.com. Would you do me one favor and please rate and review the [00:22:00] show in your podcast app as it helps us to continue to put out great free content.

Until next time, have a great day.

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!