PriceCheck Podcast: Why Pricing Transformations Fail

Price Check the pricing podcast powered by Quick Lizard. >> Hi, I'm Ian Lewis, VP of growth and sales here at Quick Lizard. On today's podcast, we've got Anna joining us. Anna is the co-CEO of Topmugs. Anna, do you want to give a quick introduction to >> Yeah, hi. Uh, thank you for having me. Um so I work for TopMs which is a software house uh Europeanbased uh we've been dealing with pricing for over 20 years. Uh we've developed uh some robust pricing tools also some um for small and midscale uh pricing tools but mostly and that's why I'm here probably today we've been implementing those software products for over 20 years at customers worldwide. So that is our specialization. >> Great. Thanks for making the time to join us today. And and thinking about those 20 years of implementing pricing software change in a in a business.

You must have seen a lot of occasions where pricing teams have failed where pricing teams have been very successful where you've seen the transformation go either Just very quickly as an by way of an introduction, what do you think are the top factors that drive a successful business transformation? So um if we first look on the successful ones um those are the companies large corporations that identify the necessity of change um and that um necessity usually came from u myth management.

Usually there is a person uh who is innovative enough uh to actually follow what is happening on the market and that given person realized that uh whatever they were doing for the past 20 30 years uh whatever they were doing manually it just doesn't stand it doesn't work anymore uh and the margins are dropping um they actually do not know what is happening within the business and those let's say mid managers pricing managers usually uh when they identify the need They sometimes start right. They start with looking into the business. Uh trying to understand the business, trying to look on the business to be and especially understanding that all the answers are in the numbers in the data. And once they recognize that all the answers are in the data, they start gathering the data and they realize that is the bottleneck. They just do not have it. They do not know where to find it.

It in such a worse state that they just cannot analyze it. And that's why they have to engage the other departments. So in ideal world and it sometimes truly happens there is this pricing manager uh who has the energy and he wants to take the challenge who cares for the company deeply who is um basically starting the project of transformation by first persuading the sea level to go um with him just to make the effort as well to make this big decision. But at the same time um looking at the other departments of business, sales, finance, IT and persuading them uh to actually get committed um to take accountability for it and to work together because pricing is not only about one guy sitting there and creating prices for the next year in Excel chart. It's actually work of multiple departments uh and of cooperation and alignment.

So in ideal world they uh get the engagement and the decision of the sea level but they also get the commitment of all the other departments and then and that's what I see that's the most important part they take it step by step they do not expect too much from the start but I guess that you have the same experience right >> yeah I I've been involved as you know in pricing for well over 25 years and a couple of things there that you said really stood out for me the the idea of a process change but as well how it impacts so many different departments and what I've really noticed over the years pricing rarely owned by one department it's often owned by so many like you've suggested you've got sales you've got marketing you've got execution you've got finance so many different uh parts of the organization need to come on that journey come on that change along uh along with the pricing team you also mentioned about the data and the importance of the data in the tool.

So let let's dive in. First of all, we'll come back to data in a moment. Let's talk about cross functional teams and how they often work together or conversely where they don't work together, how they work in silos. Any particular examples or or um relevance around that? >> Yeah, definitely. So for us the bottleneck is usually the IT department which is booked for months and if you cannot get the data at the very start we cannot really help. For us it's the precondition to start any pricing project to see the data get the data sample see the structures. So somebody has to give us the answers. If we say show us the data they just send it. So that is what we uh recognize in every single project and that's actually the most underappreciated topics. Um companies usually think it's all right. They have them and they have the data in a great state.

At the moment we start asking and they have to deliver. They realize that they have no clue. To be specific um in the past few months we experience one company having few thousands of Excel charts. Some of them being with a mother company some of them with a daughter companies. They're somehow intertwined. Nobody knows how. Even the formulas are somehow connected but they just didn't figure it out and uh some ladies who understand some Excel charts are not there anymore. So they took the knowledge away. So it's such a mess that it actually it will take a year to identify even where the source of information comes from. And what we want to achieve is that they have one source of truth. That's like ultimatio is is something we really badly need. So they will have a hard job.

So um if they would like to start the pricing transformation at the moment we have to tell them hey you are just not ready for it and it's not about your pricing maturity that may be quite good you understand your processes you know how to improve it but your data is just not ready. Um the second striking part which we experience now multiple times it repeats is that at the same time as the large corporations uh decide for a transformation they want to read all at once.

They want to change the ERP system now mostly transferring to um SAPS for HANA and at the same time with it they want to transform the pricing processes and they cannot imagine how much it is for them to take how big the changes are and they usually do not handle the changes that well it it just turns into chaos and we have to wait for the SAP transformation to take part first so that we can step in but I guess you have experienced that as well right >> in [clears throat] Indeed. Uh quite often I've come across situations where a company's thinking about we need to change the tool to be better at pricing and then the focus is on the tool not necessarily on the process that goes hand inhand with that.

Uh there's been a few times when I met with companies where they want to take their old business process built on legacy tools like Excel and the example you gave with all of those different Excel tools. take the same business process, transfer it onto a new tool, and expect to receive a lot of benefit, a lot of improvements. Now, obviously, you know, you're automating things like data inbound and stuff like this and data outbound, you're going to get benefits, but doing a lift and shift of the old process onto a new tool. In my opinion, it feels like you're missing out on capturing quite a lot of the benefits that would actually come with that.

and and the example you just gave with all of those Excel spreadsheets, thinking about the business process that must drive those, do you feel that organizations when they're going into a business transformation such as pricing, do you feel they're generally ready? You you mentioned earlier as well, you know, data is a key thing. How much planning needs to go in to get all of these pieces in place? >> I would say generally they are not ready at all. Secondly, they do not know what to expect. They are not being realistic. Um so if they would speak to somebody technical like us they would directly see that it is a huge change. So I will look into the points which are being underappreciated. So first of all if we start any discussions about pricing pricing tool implementation we always want to see the processes as they are and the processes to be the best possible scenario.

How would they like to have it with S is um if they want to show us the processes they very frequently realize they don't know there are gaps somebody is doing it somehow there are certain formulas or calculations nobody knows and there are multiple steps in the process and they try to gather the information they start actually trying to understand the processes it just didn't happen to me so far that somebody would come and directly just explain it draw it for for us and know everything. So that's first lengthy process few months of preparations to understand it as you mentioned from the various perspectives from all the departments you have to really talk to multiple people from finance, sales, business, IT. It's not one perspective only. So that part takes quite some months. You cannot just um jump over and start uh at to be. But to B it's something that you have to assess as well.

You like I would never recommend that you just skip to B and you will implement um uh like the robust pricing tool on the as is situation because as is could have been uh could have been prepared 10 years ago, 20 years ago but the world has changed. Everything has changed like you have changed the competition has changed the products um the market um now we are more vulnerable to seasonality and we can work with the warehouse um we like we have million options and we should just embrace it all and we can wait I would suggest waiting a bit to understand what is available what is happening then doing step two working on the 2B and then as a step three working on implementing pricing solution. Agree. >> Absolutely. I agree. And it is such a big transformation in so many organizations.

It drives a lot of benefit, a lot of value for organizations, but it is a big change that a lot of companies go through and I think the preparation is the real key for success there. You got to have a strong leadership who's supporting the change because, you know, as we've talked about already, it cuts across so many different departments. You've got to have a clear plan, a good understanding. Where do you want to be? But to get there, you've got to map out a journey from where you are to where you're going. Thinking about the 2B process as well. And a lot of the transformations generally around we need to do things better. Better being quicker, more transparent, more open, more collaborative, and so on and so forth. tying in the future state. Today, a lot of companies are talking about the use of AI, the need to have AI in their platforms, in their future tools and so on and so forth.

For me, I'm seeing a lot of value being unlocked from automation coming in from AI. Automation of repetitive tasks such as creating charts or doing analytics, building insights and so on and so forth. So, this can really unlock a lot of value right now. In your experience today, are companies thinking that direction about where do we automate f current processes for the future world? Uh particularly when they're maybe stuck in a process or mindset from 10, 15, 20 years ago. >> Yep. Uh we are AIdriven company. Uh we use it daily. We use it for uh coding. We use it for code reviews. We especially use it for any administrative tasks that are annoying and they take a lot of time. So um we created a lot of time that we can spend on more important things on decision making or on understanding actually using our brains you know better than hands.

So it works but it only works because we understand what is happening within a company. understand what is cloth doing. Uh we can really guide it and streamline it and it doesn't mean that we will just say hey cloth is working today and we go for swim run and coffee. It really means that we have the expertise we have the experience and we are sitting at the computer and what we are trying to do is simulations and we try to use different options and actually that is the great benefit. So if you do understand your pricing, if you do understand your processes, if you're strong in it, you can use it first step, yes, uh anything which is uh manual labor which is repetitive, you can definitely replace it by AI. But for anything more complex, you have to be the expert. You have to be the one who is guiding it.

You can never let it just spread because it goes sideways within five minutes immediately. So imagine that you are not so mature in pricing and you just use an agent uh to help you out. It doesn't work. It simply doesn't work. But what we see that companies have this AI budget and they would love to use the AI budget as soon as possible. So they start engaging AI in the ways that are not even beneficial to them. It's a kind of mess. It's misguiding. Uh they do not know how to use it. And because they do not know in few months they drop it. They just um it doesn't work for them. So that's why we suggest the steps. So if you can use AI at the end definitely and it helps you significantly but you still have to take the steps um before that this understanding um as is the understanding of to be uh understanding and especially having the data.

Imagine using AI without having clean data >> impossible right? >> Absolutely. And without that clean data as the background as the building block to start making decisions on even today where decisions are quite manual where tools are quite manual having errors in that data extrapolates those errors. >> Yeah. and you tie that into a new tool, a new process where those decisions are able to happen much more quickly again, but with control, with transparency, without having that data foundation being clean, being clear, being ready to go, you're making more decisions more quickly that are not necessarily a perfect decision because of that, because of the underlying data. That does bring a bit of a debate, I guess. When is it better to make a quicker decision on imperfect data versus a delayed decision while you're waiting for that perfect data? What are your thoughts?

I know there's probably not a right or wrong answer, but what's your thoughts on that? >> So, my opinion would be at least do something, react quickly. Um, imagine the oil crisis. So we had customers and some of their products um had the main commodity oil. Then the prices what happened? It was sudden. Nobody expected it and they were not able to react in months. Uh how much did they lose? Well, it was tremendously a lot. So at that given moment if they were at least able to identify which products are impacted and uh out of the whole portfolio of products um how much is it actually what is the ratio what is the portion of products they would have taken at least some steps and minimize the loss that they had. So I would say be ready for it that anything can happen now. It can be war, it can be oil crisis, it can be uh gas, anything can happen.

So understanding your data at all times to have at least the dashboards uh with the best data quality you can have but at least seeing what is happening and to be able to react somehow somewhere to start somewhere just do it. Um you can always identify uh what is the biggest pain at that given moment and at least do something about the biggest pain. So start small but start somewhere. Imagine you can prepare um if it comes to pricing implementation it can take years before you are ready before it's implemented. Can you wait that long if the world is changing so rapidly? I I guess you >> That's interesting because uh I think recently we had an article on LinkedIn maybe on one of the blog posts about the the biggest cost of choosing pricing software isn't the software you choose. It's the delays that happen before making that decision, before starting that journey.

And you take quick listen, we can implement pricing software in sort of 12 to 16 weeks, have customers up and running, delivering value. But if a company is waiting 3 months, 6 months, 2 years for other projects to happen, ERP upgrades as you mentioned earlier and so on and so forth. All these delays are still happening and compounding on all of those pricing decisions, all those pricing moments that happen day in day out in an organization which are maybe imperfect, which may be a bit delayed and so on and so forth. It it's really coming back to planning out where you're going to go as a business, where you need keep driving the the requirement to make sure you're going to be successful. >> Yeah. And that's why I say start small but start somewhere. Either you can use the time for all your preparation or and you don't have to choose for the robust pricing tool.

You can just start small and then switch but just do something otherwise the train is too quick and you will never catch up. I think the it has proven us right what has happened in the past few months. >> Absolutely. And I think it's a very common theme now that people are living with disruption. disruption is the new normal, the new consistency. >> Uh starting with COVID and and pretty much everything going on in the world since then, both political, both business, everything is really driving a lot of change, a lot of need to change. What are your thoughts around winners and losers going forward from where we are today? Is it something that companies are going to be missing out in the marketplace if they're not already thinking about changing the decision process around how pricing is made? Yeah, that's what I precisely think.

Um I think there will be a huge gap and only like generally large corporations are rigid and conservative most of them. >> Even nowadays you still find super large corporation who is using pen and paper for some of the calculations. >> Um you can see that within those thousands of people there is one lady called Mary and she knows everything and if she gets sick or retired they are just screwed. So I believe that um you have to automate in order to be very quick uh with decision- making and with changing the prices. You cannot change prices unless you have the data, unless you understand what is going on uh unless you can react to the market signals very quickly. So those companies who will not become dynamic and use this dynamic way of pricing they will just lose because those company which do they will react to whatever is happening in the matter of days even hours.

Imagine if you would start with approval process. It can take a month in large corporation or you can have a tool which streams um all these approvals that within two days you have all the signatures necessary for a change and you can adapt very quickly especially uh during the oil crisis that proved to be benefit number one. So you do not have to have a complex strategy. You do not need to know everything, but at least approve the change of the price quickly and in an informed way. And how can you be informed if you do not have the data? So you always go back to the beginning just be ready at all times, understand what is going on and have the dashboards and like follow it and then you are the >> And I'm conscious of of how long we've been on the call for. So we'll start wrapping up in a moment. Just before we do, I want to come back to the the Mary that you mentioned just now.

The hypothetical Mary, the one person who knows everything in the business, how everything ties together, the different tools, the data, and so on and so forth. I hadn't thought about this until you mentioned it just now. That's a massive business risk. That's a continuity risk for the organization. So, pricing isn't just the number that goes on a spreadsheet to go onto a pricing ticket or label or invoice. It's not just how you position your your company, your products in the marketplace. [music] It goes beyond that. And it also adds in that business risk that if you're still working in an old legacy way, you you've introduced risk in your business. You need to adjust that. >> Yes. Um you have to adjust everything, but you have to adjust your mind.

First of all, start being more open and flexible in your mind and just find the energy somewhere to go through this transformation and then go through it step by step because I told you about Mary and the Mary is not hypothetical. It just happened twice in three months. One Mary got retired and the other Mary got sick. So it it really happens and you have to see forward. You have to look forward and just act now like without waiting just starting And as I said, we're coming to the end of the podcast. I appreciate you spending the time today. If I just do a quick recap, let me know if I've missed anything around this. So, it starts with the planning. Planning of where you're going, planning what data you need and the quality of it. Planning the crossf functional transformation. So many people are involved, but also do something quickly to get started. This is a journey.

It's not going to happen overnight. So, you need to go on that journey. And the sooner you start it, the sooner you're going to start getting the benefits from it. >> Yes. And maybe one last advice would be directly focus on change management. Plan it. Know how important it is. You have to adopt the changes within the whole company. Every single person has to go with you. That that would be the >> That's a great piece of advice. Anna, thank you for your time and uh we'll catch up again soon. Okay, cool. Thanks so much. Byebye.