Show notes
Show Notes: In this episode of Unleashed, Will Bachman talks to Jared Simmons, business consultant, coach, and speaker, on design to value. Jared defines the term 'design to value', offers examples of how it can be used, and talks about the various steps involved. Using the example of a design to value playbook, Jared talks through each essential step that should be included. Step one is defining value and creating a shared understanding of it. This involves getting everyone on the same page about the intended purpose. Understanding value involves both the company running the project and the end consumer of the product. The project's goals should be determined, such as cutting costs, making it more of a premium, or growing volume. Step two is mapping out the value chain end to end, from materials to end use, and understanding the basic cost structures associated with each step. This ensures that the project is designed to value both the organization and the end consumer. Jared discusses the importance of mapping the value chain for a product or project. Step three is understanding consumer priorities and preferences which is crucial in determining what they care about and are willing to pay for. Step four involves mapping these preferences to each other, such as the cost of delivery or raw material(s). Step five is creating projects and programs to capture defined value. He emphasizes the need for a shared understanding of who is responsible for which steps in the value chain, including incoming raw materials, converting them into products, and the decision rights and responsibilities within those steps. He also highlights the importance of understanding how each person in a large company works with different materials and services, and what they are trying to accomplish within their roles, such as procurement, shipping costs, currency, and supplier selection. Jared advises senior associates to understand high-leverage starting materials and manage them effectively to achieve cost savings. He emphasizes respecting the intelligence and effort of those involved in the value chain and not just looking at the price but also considering what makes the cost palatable for the procurement person and the rest of the organization. Mapping the value chain is a crucial step in achieving cost optimization in a product or project. It requires a deep understanding of the decision rights and responsibilities within the organization, as well as respecting the intelligence and effort of those involved. Internal and External Benchmarking Jared discusses the importance of internal benchmarking in converting products across the entire value chain. He believes that external benchmarking can be problematic due to the lack of context on how other organizations reached their goals and the capital and labor involved. Jared suggests that internal benchmarks are more valuable than external benchmarks because they provide a full picture of what is driving each number. In terms of understanding consumer preferences, he breaks down this into functional and psychographic segmentations. Psychographic segmentation involves the product's benefit and the belief about the product, while functional segmentation focuses on the features. To determine consumer preferences, he uses a combination of qualitative and quantitative research methods, such as one-on-one interviews, focus groups, dyads, and triads. Quantitative research can involve concept-driven non-concept-driven questionnaires to gather quantitative data on consumer preferences. One-on-one interviews allow for depth and richness in understanding consumer preferences, while dyads allow for more nuanced responses from multiple people. Triads involve three or four participants, while focus groups typically involve 468 participants. Conjoint analysis is another method used to set up quantitative research that gets results. This method helps to understand the trade-offs between different product features and price points. In conclusion, Jared emphasizes the importance of internal benchmarking and understanding consumer preferences to successfully convert products across the entire value chain. By utilizing various methodologies and techniques, businesses can gain valuable insights into their target audience and improve their product offerings. Reducing Product Cost while Maintaining Value To determine which features people care about and will pay more for, Jared states that they need to conduct research on multiple dimensions. This involves building a functional prototype that people can interact with and react and respond to. He also mentions the importance of defining a north star to ensure all departments understand the direction. He mentions a few crucial steps, including: Integrating consumer research, supply chain knowledge, cost structure, and consumer preferences. It's not just about math; it's about prioritizing decisions across the entire value chain and ensuring that there is a qualified decision-maker on the job. Jared runs a boutique consultancy that works in the innovation space and has worked on yogurt portfolios, sports/nutritional drink portfolios, and distribution companies for gas-controlled products, and they have worked with various industries. The team is focused on driving out cost while maintaining value in the product design process. By incorporating consumer research, decision-making, and external support, the team can create a more effective and efficient product. Jared discusses the importance of design to value programs in capturing cost savings and enhancing customer value. He explains how his company works, including services and typical costs savings. To learn more about Jared's practice, he recommends visiting his website, Outlast Consulting, and LinkedIn. He also encourages listeners to contact him directly on his LinkedIn profile. Timestamps: 03:00 Cost reduction and value optimization in product design 04:00 Five steps in a design to value playbook 12:24 Strategic costs in the value chain 13:07 Analyzing consumer preferences and product conversion costs 15:11 Internal benchmarking 16:51 Functional and psychographic segmentation 20:19 Using conjoint analysis for product design and cost reduction. 28:51 Cost savings in CPG industry through design to value programs Links: The company website: https://outlastllc.com/ CONTACT: LinkedIn: https://www.linkedin.com/in/jaredsimmons/ Unleashed is produced by Umbrex, which has a mission of connecting independent management consultants with one another, creating opportunities for members to meet, build relationships, and share lessons learned. Learn more at www.umbrex.com.