JD Dillon is the Chief Marketing Officer, Communications Leader, and Pricing Professional at Tigo Energy.
In this episode, JD shares the 8D problem-solving technique that helps create a solid pricing strategy in place.
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Why you have to check out today’s podcast:
- Understand what the 8D technique of problem-solving is and where you can specifically apply it to.
- Learn how to figure things out and find solutions logically rather than emotionally.
- Discover the ‘Five Why’ in verifying the root causes of a problem.
“If you are in a situation where there’s a price reduction, try to do two or three other things first.”
– JD Dillon
Topics Covered:
01:15 – How JD’s Pricing journey started
02:21 – Updates about T.J. Rodgers
03:23 – Overview of what the Eight-D problem-solving technique is all about
04:12 – How does a quality program relate to pricing?
05:32 – What goes on in D-Zero?
07:32 – Where do we ideally apply Eight-D to? [Showing a case study]
08:51 – D-One: What happens here?
10:24 – How do you go about D-Two?
12:36 – Action steps you need to do in D-Three
14:49 – Finding the root causes with D-Four and using the ‘Five Why’ technique
17:36 – How do you verify permanent corrective action in D-Five?
18:49 – Getting everything executed in D-Six
20:05 – Digging deeper into D-Five and [culture and internal processes]
20:58 – Preventing recurrence in D-Seven
22:48 – D-Eight: Congratulating the team
24:23 – How often do you perform the Eight-D process?
26:55 – JD’s best pricing advice
28:25 – Connect with JD
Key Takeaways:
“Pricing is the quality metric for revenue.” – JD Dillon
“If you do it right [Eight-D process], it builds into the DNA of the company. And after a few years you’ve improved your DNA continuously and quite a bit.” – JD Dillon
“What I described is a thought process, that’s all. You can do it in a meeting with people that know what they’re doing. I can do it with somebody who’s worked for me in the past and we can quickly go through the process in 10 minutes about one small little issue and then move on.” – JD Dillon
People / Resources Mentioned:
- Ted Levitt: https://en.wikipedia.org/wiki/Theodore_Levitt
- T.J. Rodgers: https://en.wikipedia.org/wiki/T._J._Rodgers
Connect with JD Dillon:
- LinkedIn: https://www.linkedin.com/in/jd-dillon/
Connect with Mark Stiving:
- LinkedIn: https://www.linkedin.com/in/stiving/
- Email: [email protected]
Full Interview Transcript
(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)
JD Dillon
If you are in a situation where there’s a price reduction, try to do two or three other things first.
[Intro]
Mark Stiving
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the operational relationship between them. I’m Mark Stiving, and our guest today is JD Dillon. Here are three things you wanna know about JD before we start. He’s currently the CMO at Tigo Energy. I hope I pronounce that right, a solar company. He was the VP of marketing and pricing at Enphase Energy. And I wanna point out that he and I have several things in common, right? So we both have MBAs from Santa Clara University. We were both in the semiconductor industry for a while. We both applied to West Point. Mind you, he got in and graduated. I applied. Welcome, JD!
JD Dillon
Great to be here, Mark.
Mark Stiving
Hey, it’s gonna be fun. How did you get into pricing?
JD Dillon
Pricing was an interesting journey. I did product management at Cypress Semiconductor and we did an engagement with McKinsey. And I met a gentleman by the name of Craig Ziada, who ran their pricing practice at the time. And he was responsible for transforming how he did pricing at Cypress. And I raised my hand and volunteered to be full-time pricing for a period of time, as opposed to having to just siphon off as part of the product management. Because to me it’s a perfect combination of data and emotion and it kind of converges upon value, which to me is the epitome of marketing. Value and marketing should be synonymous.
Mark Stiving
Oh my gosh. Couldn’t I just say those exact words? And by the way, can I add that product management should be synonymous with value as well?
JD Dillon
Yes.
Mark Stiving
Absolutely. Hey, back when I was in the semiconductor industry, T.J. Rodgers was a big name and you almost never hear of him anymore. What happened?
JD Dillon
So, T.J. Is in the background, which is a funny sounding phrase. If you know T.J., when he was asked to leave Cypress Semiconductor, the company he founded, and that didn’t go particularly well. But after he left there, he’s on the board of a number of companies to include Enphase Energy. And quite frankly, a bunch of the executives, myself included, at Enphase came from Cypress Semiconductor and applied a lot of the management principles we learned there at Enphase. And a lot of the turnaround from 72 cents to as high as 300 bucks of the stock was due to Cypress principles.
Mark Stiving
Nice. Well, he was certainly a rockstar back when he was at Cypress, so that’s pretty cool. It’s so funny, I asked you to be on the podcast and you said, I want to talk about The Eight D. I’m like, what’s that? So let’s start and let everybody else know. What’s that?
JD Dillon
Eight D is the eight discipline problem-solving technique. That’s the simple answer. And it is a way of approaching problem solving that was founded in the quality movement. It was founded by Ford Motor Company in 1986. And, if you remember, ‘For quality is job one’ was their campaign, great marketing campaign. Marketing campaigns have to have some sort of basis in reality, this one did. And so they invented essentially the Eight-D problem solving in 1986. And quality people everywhere would know it thoroughly. Marketing and sales and product management, finance, not so much.
Mark Stiving
Okay. And so does a quality program apply to pricing?
JD Dillon
Absolutely. I would argue pricing is the quality metric for revenue.
Mark Stiving
Now that’s a pretty fascinating concept, right? I often think of the price you can win at is a measure of the value you could deliver and communicate.
JD Dillon
And understanding the value and then communicating it is often three quarters of the problem. How often have you been in situations where everybody’s buying the product? Everybody says, why do they buy our product? Because it’s so good. What does that mean? And frankly, if revenue is through the roof, maybe you are giving away too much of the value in terms of low price.
Mark Stiving
Yeah. I have to say, I work with hundreds of companies and I don’t think I’ve ever met one where they actually understood the value of what they were delivering. Yeah. I mean, the way their customers perceive it. Yeah. I just find it fascinating. Okay, so let’s do the Eight Ds. We’re gonna try to keep this interesting and I wanna learn. I’m lucky in that he sent me a document, if he’ll let me, I’ll post this with the show notes as well so you guys can all refer back to it later. But, let’s hear what the Eight Ds are and how we can use them in pricing. So D Zero, I guess that’s not one of the eight.
JD Dillon
So D zero was added, so they came up with the Eight D, eight had a nice ring to it, and then later on, I believe they added in D Zero at the beginning. So D Zero is basically identifying the issue. So something’s of concern. Heck, just this morning I got a call from the CEO and the head of north of European sales. They needed a price approved. The CEO was trying to do a new process here at the company. And of course the head of sales called the CEO first which involved me. So the process is broken right there. So the point is there’s something of concern and then you just gather facts.
Mark Stiving
And, so out of curiosity, you heard that this morning. Are you now going through the Eight D process to solve that issue?
JD Dillon
No, this one is a very specific-pointed-obvious issue that I am going to work on. So a full Eight-D is resource intensive and you’ve got to apply some judgment upfront. Could we learn cross-functionally? And the keyword, I think is cross-functionally from applying the full Eight-D problem-solving. If it’s just one person going rogue, how much learning organizationally are we gonna do? I’m just gonna call up the head of sales tomorrow and say, dude, what are you doing? That doesn’t need a full Eight D.
Mark Stiving
Right? Right. So there are big issues that we in pricing often deal with, right? Things like, we wanna change the pricing metric or talk about what the pricing metrics should be. Or we want to talk about how we package the products into a good-better-best product packaging so that we can capture more of the revenue of the value from our marketplace. I mean, there’s lots of things like that where we need to make these big decisions. And so those are the things that you wanna apply Eight-D to.
JD Dillon
Yep. If I can give a very specific example that I was thinking of from my past, and this one is based on a real example, business unit manager pointed out the gross margin percent was way too low for a given business unit. So, the horse had already left the barn, once the gross margin’s too low, if that’s the point that you’re identifying, it’s either cost and or price. So you start digging in and we did a price band analysis, which shows that it was a bathtub curve. So there was two customers that were way, way low, and there was hundreds and hundreds very high. So the average price is off, but looking at the price band analysis says it’s not that simple. It’s just, well, it is simple, it’s just two guys. So that identified a problem and the business unit manager said, we have a huge problem. What are you gonna do about it? So we gathered all the data and that was the D-Zero.
Mark Stiving
So we’ve got this problem, we’ve got, well, can we re-articulate the problem to say we have two customers that are not paying us enough, or that are paying much below market price. I’ll just put it that way.
JD Dillon
We haven’t gotten to D Two yet, which is defining the problem.
Mark Stiving
Oh, nice. Yes. Nice. Okay. So let’s do D One.
JD Dillon
So the D zero is just piling a bunch of data. It was numbers analysis, opinions. Everybody’s throwing out thoughts, but D One is forming the team. See, you gotta get a cross-functional team and you gotta identify a team leader. And in this case, get the salespeople person. In this case, it was one salesperson that might be the root cause, a salesperson for two accounts, the business unit manager, maybe an operations person, maybe a finance. But the point is, get it cross-functional. Get different viewpoints there. And so we did. I’ll stick with, by the way, throughout the whole Eight-D, I’m gonna stick with that one example, identified we had a team of four. It’s gotta be small enough that it’s agile and nimble. But you cover all perspectives. So we gathered the team together.
Mark Stiving
You know what I find fascinating about gathering a team together is I remember when I started my career, you know, I always thought that I was really smart, and I never realized that listening to other people was important, right? It’s like, no, no, no, I’m smart. Let me give you the answer and it doesn’t really matter what you think. And I found out that once I started listening to all the other departments and helping them achieve their goals, it just changed my career completely. So I love the idea that we’ve formed a team to go do this.
JD Dillon
And cross-functional different views. Yes.
JD Dillon
Yeah. Absolutely very, very important.
Mark Stiving
Okay, D Two, I can read it. Define the problem. I think defining problems is one of the hardest things companies do.
JD Dillon
Yes, absolutely. And, and here’s a funny thing that’s counterintuitive. Defining the problem as specific as possible, then expanding it out later in the process. So I will give you, you started it down that path, but I’ll give you very specific, Mary, obviously a pseudonym. The business unit manager signed annual contracts for both customers in November, authorizing 10% per quarter price reduction, assuming a 5% per quarter cost reduction that never happened. When I tell you that as the problem, immediately your mind’s racing to all the things it could be. Now you’re keeping out of other areas of the business, you’re keeping it very focused and it’s crisp. And once you can all agree that that is the problem, then you can move on.
Mark Stiving
Yeah, in my mind, I’m struggling. I’m not disagreeing at all. I often think of problems as having a huge range of different possible issues, right? And so, one of my favorite examples when I think about this is, you heard Ted Levitt always say, nobody wants to buy a drill. They wanna buy a hole. Well, actually nobody wants to buy a hole. They really wanna buy the ability to hang a hook in their garage. They really don’t wanna hook in in their garage. They really want a clean garage. Well, they don’t really want a clean garage. They want their wife off their back so they can go golfing, right? And so someplace in that range is the right level of the problem.
JD Dillon
Because if you don’t watch out, next thing you know, global warming is the problem that we’re talking about. Now what do you do?
Mark Stiving
Yeah, exactly. Exactly. Well, obviously the problem in business is we don’t make enough profit, right? But that isn’t specific enough to help us. And so we always go up and down this range to say, where’s the right level of specificity that’s helpful, insightful, but not too broad.
JD Dillon
Wow. We need to quote that. Helpful, insightful, and not too broad.
Mark Stiving
Yeah. Okay. Someone grabbed that, would they? So, okay, that’s great. Let’s go to the D Three.
JD Dillon
So the interim containment plan, this is putting out fires. And the way I look at this is to look vertically for other problems with the same customer process. And then horizontally, do we have a similar issue with other customers or processes? And stop the bleeding, slow things down. Oftentimes in pricing matter of fact, my call this morning, it’s from Europe. So it was a few hours, it was an hour ago. And I said, so if you don’t have the pricing in half an hour, we’re gonna lose the deal. Well, no. Okay, let’s slow down. So oftentimes we gotta slow people down. In this case, Bob, the sales manager, met with both customers. Now, this is gonna be a little controversial. With pricing, sometimes you need to incorporate other things. Said, we’re evaluating the products for end of life and asking for forecasts. Now, that’s pretty gutsy.
So you’re evaluating the products for end of life. Now this gets into negotiation. The customer’s going, whoa, whoa, whoa, whoa, whoa, whoa. If you’re not making enough money, the business is gonna shut it down. So this was not a simple answer, by the way. This took multiple interactions and the salesperson was nervous. And we can’t do that because their customer X and customer Y, our two biggest guides, et cetera. And then the second thing is an audit of the gross margin for other product families. Let’s see if there’s anything else lurking in the weeds. And how many contractual reductions do we have going on? So the interim containment plan says, let’s go broad and deep to see where else this may be working for the company.
Mark Stiving
Yeah, so I could almost say that this was two different Ds, if you care. And one D would be, I gotta solve the immediate problem. Yes. Right? So the immediate problem is I’ve got this salesperson or these two companies that aren’t paying enough. We’ve gotta go figure out how we get that resolved. And then the other part is searching for other places where the problem is.
JD Dillon
So I’ll tell you how TJ Rodgers, who we referred to earlier, would define it. And I actually have a graphic that he drew on a whiteboard once for me that I actually use if I was presenting. You look at subject matter, business process, and culture. So as you get into the root causes, the root cause is rarely one person did one thing in one situation, right? That’s the subject matter. So the fact that the gross margin’s too low in this business unit, and we signed off on a contract, okay, what’s our process for signing off on contracts? Why do we price ahead of cost? In this case, you’re given a price reduction, assuming the cost is gonna happen, could you put a contingency in the contract? Again, this is where you’re looking at the root causes. Did you even think about that ahead of time?
Did you just run into it? What’s the operations plan for the cost reduction? And if you would talk to an operations manager, if they said, oh, there’s no chance we’re gonna get this cost reduction in time. Whoa, whoa. Okay, then why are we doing the price? You start to get into other things about the business process and the culture. Is it a too big to fail mindset? Two customers are driving a lot of the volume, but the profit’s coming from hundreds. Okay, you got a problem with the business here. So culturally, is it we gotta win these deals? And it is not simple at all. It’s more than just Mary signed off when Bob asked. It’s a lot more. That’s where verifying the root cause is. And the method I use is ‘Five Why’, why did the price get approved? Well, cuz we needed the business. Why do we need the business? Because we’re too dependent upon two customers. Why? You could, and that could take you down three or four different paths.
Mark Stiving
Yeah, absolutely. And that gets you, that starts to get you to the root cause. Yep. Maybe it does, maybe it doesn’t. Speaking of root causes, what’s D Four?
JD Dillon
Well that’s D Four, that’s the root cause
Mark Stiving
Right?
JD Dillon
We were just talking about the interim containment plan, which was D Three, which was stopping the bleeding. The D Four is the, and again, there’s a concept called the fishbone diagram, which I don’t care for. I find that too geeky. ‘Five Why’ is the easiest. Literally just say, why’d we do this? Why’d we do that? Usually about the third, fourth, fifth, sixth. You’re really deep into the problem. And you might have, well we did it for two reasons. Again, now you’re branching, which is okay too.
Mark Stiving
Yeah, I also find that when you do the ‘Five Why’ we often get to world peace. Yes. And so you gotta be someplace in between there.
JD Dillon
Yep.
Mark Stiving
So, excellent. So what about number five?
JD Dillon
So five is the corrective action. So verify permanent corrective action. Now we determined, let’s say for example, our process, and I’m just making this up on the fly, but our process for contracts didn’t check with cost reduction plans and operations. Okay? So perhaps there’s a business process that you can fix there. Perhaps one of the corrective actions is the two big to fail problems. Maybe you’ve gotta find a third or fourth customer to couple with those two. Maybe you’ve gotta go back and god forbid, raise the price. None of these things are taken lightly. But if you’re going to have to raise the price or EOL the business, a good negotiator can go in and say, these are our choices. Do you want a last time buy because we’re getting out of this business? Or are you okay with the higher price? Right. You can have that discussion. Again, we don’t get paid to make the easy decisions.
Mark Stiving
No, that’s for sure. That’s for sure. So was that six as well or is six different?
JD Dillon
That was five, which is verifying the permanent corrective action and then implementing it. So I like to think of D-Five is coming up with a plan. The who, what, when. So Bill’s gonna do this. Mary’s gonna do this. Where James’s gonna do this. You come up with the list, the to-do list. Now you gotta go do it. So you go to the sales or to the customer and then they answer and they’re not gonna answer happily. Now what? You go to operations, okay, now they’re gonna be, they decided to go a different direction. They’re not doing the cost reduction at all. Oh my goodness. So now we’re stuck here forever unless we do something. Is that okay? So the D Six is just the execution of day-to-day actions getting together.
Mark Stiving
So I wanna jump back to D Five for a second because I think that was, I think we missed something there and maybe not. But in the example, certainly we’re gonna go deal with these two customers.
JD Dillon
Yep.
Mark Stiving
But we also want to deal with our internal processes.
JD Dillon
Yes.
Mark Stiving
So those internal processes could have been, well in the future we need to make sure we’re checking with cost accounting or the people who are doing the cost downs. Are we really gonna get cost savings or you know, better yields or whatever happens to be, next year and how do we manage the internal workings and processing this?
JD Dillon
Yes. And the culture is the hardest. Often that’s just talking about it and escalating. I mean, when everybody says, ‘Oh, you know, we can’t have customers that are this important. You’re like, well, have you ever been in business? We’re gonna fix it. Every business has that.
Mark Stiving
Do you like having your factory full?
JD Dillon
Exactly. Or is there a profit level perhaps that it’s in danger of EOL once you hit a profit level. Now, does everybody know what that is? So communicate it so the salesperson doesn’t wanna lose the business long term. So they’re hesitant to ask for this 10% reduction because they know that eventually their commission’s gone, maybe.
Mark Stiving
Yeah. Yep. Yep. Okay. Excellent. So D-Five is, find them, D-Six was actually doing the work.
JD Dillon
Yep.
Mark Stiving
D-Seven is what?
JD Dillon
D-Seven prevents recurrence. Now this is the hard part of business. Do you have to add something into your dashboard that you do every quarter in your QBR? Maybe. So perhaps you look at, maybe in this case you incorporate price as part of the forecasting process. So you don’t just forecast volume and keep a static price. You forecast for the next six quarters or whatever your internal process for forecasting this. You have the pricing person do a forecast. By the way, we did that at Cypress, the pricing person forecasted, knowing all of the contracts, et cetera. So when you do a proforma P and L, you see ahead of time, ‘Uh, oh, we’re gonna have a problem.’ These are, and so to prevent recurrence means you have check-ins, maybe you have on your dashboard, how many outstanding contracts, we have 11. Great. What are there, are there any fire bombs there for the future? And so how do you make sure it doesn’t happen in the future? And that’s just the operations of business, frankly.
Mark Stiving
Yeah. I actually like that idea And I hate to confess to things like this, but I’d never thought of that before. Right. So you have a problem, you go solve the problem and then can we put some metrics in place that we can monitor to see if we’ve really solved the problem, to see if it comes back, if we can catch it earlier next time. I think that’s fascinating.
JD Dillon
You establish a check engine is what you’re doing.
Mark Stiving
Yeah.
JD Dillon
Hopefully something that’s not a lot of work, but you, ‘Oh, we’re getting into yellow here. Let’s chat.’
Mark Stiving
Yeah. So I assume you put guardrails around whatever the metrics are that you’re putting in place and saying, ‘Hey look, it’s getting out of whack here.’
JD Dillon
Yep. Exactly.
Mark Stiving
Nice, nice. Okay. And then D-Eight. I would never ever do this one, but go ahead. Let’s hear it.
JD Dillon
Congratulate the team. Group hug, group hug. And it’s so funny, it’s a pretty rewarding process. I have found, when doing this, I can specifically mention a sales manager that at the very end we had donuts at our party. So the very last meeting that we’re having, we had donuts. And afterwards walking out, he actually put his arm around me. He was a little bit older, I was younger, I didn’t have this at that point. And he put his arm around me and said, this is pretty awesome. He said, I like working with you. So the same way a family can sometimes get bonded when you have arguments or problems, this type of problem, you can come out, you weather the storm together and it doesn’t have to be a big deal, literally donuts at a meeting.
Mark Stiving
Yeah. I think that’s pretty cool. And you know what, I’ll also take away from what you just said is we’re not emotionally blaming each other. We’re actually sitting down and trying to logically figure out what’s the problem, what’s the solution? Everybody gets an opinion. We’re gonna go figure this out so that you don’t get stuck in the situation again.
JD Dillon
Exactly. Exactly.
Mark Stiving
Yeah. So this is pretty fabulous. Now, we talked a little bit about this is for big projects, not small projects, not small things. So, how often do you do this? Or how often would you think a pricing department in a, you know, in a hundred million dollar company would do a do a D-Eight process?
JD Dillon
When I was up and running? Cuz I’m not at such a size company. I’ve done one in my two years here at my current company. When I was at Cypress, that was a bigger company. It was a billion dollars a year. So quarter of a million dollars a quarter, and we had 35 people in the pricing department or something like that. We had two going at any given time. And so there were various stages. Now we had 13 business units. It was worldwide, right? So there might be a European business Unit X and a Asia business unit Y going on at the same time. The only common element was me. So I would, but I would have it going on because you’re continuously improving. Think in terms of a factory, how often should you be continuously improving the factory? Well, all the time. But can you do it like, have five of these going at once? No.
Mark Stiving
Yeah, that’s pretty fascinating. So what I’m taking away from what you just said is this is a big deal, right? These are big projects. It’s not, you know, ‘Hey, I wanna raise prices a dime next year.’ This is real work.
JD Dillon
Yes, yes, exactly. And it’s, but if you do it right, it builds into the DNA of the company. And after a few years you’ve improved your DNA continuously and quite a bit.
Mark Stiving
Yeah. So I wanna take another lesson out of what you just described to us, which, by the way, I loved this. This was great JD, thank you so much. But, you know, the other lesson I wanna take away is we often have problems that we have to go solve. And even if we’re not going through this whole D-Eight process, there’s nothing at all that says we can’t stop and say, ‘Okay, I know I have to go solve this problem. What were the root causes of the problem?’.
JD Dillon
Sure.
Mark Stiving
Can I actually solve those root causes instead of just solving the problem? And so I think that’s fabulous.
JD Dillon
And what I described is a thought process, that’s all. You can do it in a meeting with people that knows what they’re doing. I can do it with somebody who’s worked for me in the past and we can quickly go through the process in 10 minutes about one small little issue and then move on.
Mark Stiving
Yeah. This has been fascinating, JD, thank you so much. Okay. Even though you already gave us a ton of info, I’m gonna ask you an off the wall different question because it’s always the last question.
JD Dillon
Sure.
Mark Stiving
What’s the one piece of pricing advice you’d give our listeners that you think could have a big impact on their business?
JD Dillon
If you are in a situation where there’s a price reduction, try to do two or three other things first. It’s actually an interesting point, and I can’t remember if I got it from Craig Zo or Marvan one of those two guys, but it was, if you have an issue, just say, ‘Okay, the salesperson comes and say, let’s try three other ideas. Can we market a little bit more? Can we do this? Can we do that?’ It’s a small thing you can impact immediately and oftentimes you creatively get to an answer without the price.
Mark Stiving
I think that was a fantastic suggestion. Now, two thoughts when you said it, first off, luckily not that many companies are in price reduction situations, right? We used to live that in the semiconductor world all the time. Yeah. But luckily most companies are not. And as soon as you said the words, if you’re in a situation where you’re facing a price reduction or regularly facing price reductions, I was thinking in my head, get into a new business.
JD Dillon
Yes. Okay. Warren Buffet, the key to success is having pricing power. Yes.
Mark Stiving
Yes. But I do really like the idea that says, ‘Hey, try three things.’.
JD Dillon
Yep.
Mark Stiving
And if they fail, okay, great. We’ll lower the price, but we’ll try three things first. Awesome. Awesome. JD, thank you so much for your time today. If anybody wants to contact you, how can they do that?
JD Dillon
LinkedIn’s the best. Since I’m the third, I’ll give a shout out to my late grandfather and my father. So I’m James Dillon the third. So I go by JD, so it’s James [JD] Dillon, any of those calls it up.
Mark Stiving
Excellent. And the link will be in the show notes, I’m sure. To our listeners, thank you so much for your time. If you enjoyed this, would you please leave us a rating and a review? You can go to ratethispodcast.com/impactpricing to do that. And finally, if you have any questions or comments about the podcast or pricing in general, feel free to email me mark@impact pricing.com. Now, go make an impact!
