Don’t Under Value New Products and Services

Companies invest untold millions in innovation every year, lowering customer costs and improving revenue and margin performance.  But are those companies being paid adequately for that innovation?  In our experience the answer is no.  Looking across 30 cases, we have found that managers are inclined to under estimate customer’s willingness to pay for valuable new products and services by over 100%!  Here are a handful of examples.

If you are going to be paid well for your innovation, you need to be asking three questions.

  1. Which customers will benefit the most from our innovation?
  2. What attributes of our new offering drive the most value?
  3. What is the customer’s willingness to pay?

Answering those questions well can turn a $20M breakeven opportunity into a $50M, highly profitable opportunity.  This kind of thinking can be especially valuable in tech industries where the terms  “as a Service” and “profitability” don’t seem to belong in the same sentence.