Steven Forth is Ibbaka’s Co-Founder, CEO, and Partner. Ibbaka is a strategic pricing advisory firm. He was CEO of LeveragePoint Innovations Inc., a SaaS business.
In this episode, Steven delves into the dynamic world of pricing strategies as revealed through the lens of the Professional Pricing Society event. He talks about the latest developments, innovative practices, and thought-provoking discussions emerging from these events of pricing professionals. From uncovering cutting-edge pricing technologies to dissecting evolving pricing trends that offer valuable insights to help you in navigating the ever-changing landscape of pricing strategies especially where AI is concerned.
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Why you have to check out today’s podcast:
- Discover what’s in store for this year’s Professional Pricing Society conferences
- Find out the significant and engaging topics discussed in the PPS event
- Look forward to Steven’s valuable insights and key points on pricing trends and innovations, particularly in relation to AI
“The other problem or challenge, I think, that one can have with AI-based approaches to pricing is the sort of black box nature. And generative AI, gives something of a path forward for that.”
– Steven Forth
Topics Covered:
01:46 – Steven highlighting how the Professional Pricing Society [PPS] listens to Impact Pricing podcast
03:29 – Professional Pricing Society’s calendar of events this year
04:39 – What’s coming up for this year’s event: Return of the book store
06:25 – Featured and notable books available at the event
09:54 – Other interesting things coming up for PPS’ event
11:28 – Steven’s important thoughts on pricing sustainability and some examples on point
15:41 – What differentiates a value model from a sustainability model as far as Ibbaka’s concerned
17:26 – What he thinks of these big pricing vendors approach to AI
18:46 – Talking about pricing industry frustration and the black box nature of AI and the shift to generative AI
21:19 – Discussing the application of generative AI in a dynamically configuring software and its implications on the pricing strategies
24:56 – Sharing about the scale and complexity of traditional value model as well as the potential of generative AI to quickly adapt to different pricing and value configurations
28:39 – Watch out for an upcoming webinar on May 23rd
29:08 – What he thinks of people’s reception to his presentation at the Professional Pricing Society’s conference
Key Takeaways:
“Feel good metrics or social responsibility, none of those things are really going to get people to buy and pay for sustainable solutions. It has to be tied to value, and you have to be able to show that your green solution provides more value than the competing solutions.” – Steven Forth
“I think the secret here, at least from a pricing and modeling approach, is to find those variables that get used across the different models. And by having the same variable used in different models you can pull sustainability together with value together with pricing.” – Steven Forth
People/Resources Mentioned:
- Arnab Sinha Impact Pricing Episode 564: https://impactpricing.com/podcast/564-exploring-game-changing-pricing-dynamics-for-different-industries-with-arnab-sinha/
- Game Changer: How Strategic Pricing Shapes Businesses, Markets, and Society by Jean-Manuel Izaret and Arnab Sinha: https://www.amazon.com/Game-Changer-Strategic-Pricing-Business/dp/1394190581
- Stephan Liozu Impact Pricing Episode 582: https://impactpricing.com/?s=stephan+liozu
- Nick Nalepa: https://www.linkedin.com/in/nick-nalepa/
- Stop Racing In A Blindfold!: Big Data + Pricing Science Drive Bigger Profits by Jim Vaughn: https://www.amazon.com/Stop-Racing-Blindfold-Pricing-Science/dp/099068380X
- Michelin: https://www.michelinman.com
- Hydropoint: https://www.hydropoint.com
- Vendavo: https://www.vendavo.com
- Pros: https://pros.com
- PriceFX: https://www.pricefx.com
- Totogi: https://www.totogi.com/
- Resilience: https://www.bcg.com/publications/2023/resilient-pricing-for-uncertain-world
Connect with Steven Forth:
- LinkedIn: https://www.linkedin.com/in/stevenforth/
- Email: [email protected]
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.)
Steven Forth
The other problem or challenge, I think, that one can have with AI-based approaches to pricing is the sort of black box nature. And generative AI, gives something of a path forward for that.
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Mark Stiving
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the recursive relationship between them. I’m Mark Stiving. Our guest today is, once again, Steven Forth. Here are three things you want to know about Steven before we start. He is the CEO of Ibbaka. He has been a frequent guest on the podcast. We love having him on, and he is possibly the world’s biggest expert on the intersection of pricing and AI. And by big, I don’t mean size. So, welcome, Steven.
Steven Forth
Thank you very much, Mark.
Mark Stiving
And I was just going to say, today we’re gonna talk about PPS. You just got back from PPS. I’ll try to move this one forward in the list so we can get it released quickly. But what did you see? What did you hear? What’s going on?
Steven Forth
The first thing I want to note about PPS is that people are listening to Mark Stiving’s podcasts.
Mark Stiving
Woo-hoo!
Steven Forth
So this is a very good thing. And so I want to just give you a shout out. I think you’re doing a great job getting people with real expertise on the podcasts and attracting the right audience. I would say that probably 10 people came up to me and said, oh, yes, aren’t you the guy who does podcasts with Mark Stiving? And so I thought, that’s a great sign.
Mark Stiving
Nice, nice. I appreciate that. And, I have to say, it’s typically the guests that do all this. All I do is ask questions that I’m curious about and then share my opinion about what’s going on. But it’s getting smart people like you on that make all the difference in the podcast because I could never do this without you.
Steven Forth
Well, I think this sort of will intersect with the rest of our conversation today, the true test of an intelligent person is whether they can ask good questions. Lots of us have opinions and can come up with answers, but it’s really asking good questions that makes the difference. And one of the things we’re going to be talking about today and then later in May, is the intersection of AI, generative AI, innovation, and pricing. And when you really think about it, what really makes generative AI work is the quality of the questions that you can ask it. now I assure you, though, that in this case, this is actually me. You’re talking to not my avatar, although I challenge you to be able to prove that.
But anyway, coming back to the Professional Pricing Society. So, as you know, Mark, the Professional Pricing Society has three events each year, sometimes four. They have one on the East-ish coast of the United States. Chicago, I guess counts as the East Coast. I’m not sure that people in Chicago think that. Then they have one further west this year. It’s going to be in Las Vegas. and then towards the end of the year, they have an event in Europe. And sometimes they have an event in Singapore. But this is really the big one. I think the spring conference is the anchor for the PPS schedule. So if people are going to attend the one coming up in Las Vegas I’m sure it will be an excellent event. But the Chicago one is the key, I think. Go ahead, Mark.
Mark Stiving
I was just going to say that Vegas is a hop skip, and a jump for me from Reno, so I’m probably going to head down to Vegas and go to that one. Lust much, much easier travel for me. I’m glad you made it to Chicago.
Steven Forth
I think it’s easy for just about everyone to get to Las Vegas there. It’s a well connected city.
Mark Stiving
Yes.
Steven Forth
A few things that I noticed about this event. So, one thing that I was delighted to see is that the bookstore is back. So the Professional Pricing Society Conference used to have a bookstore, and the bookstore was back for this conference. And it was great to see just the number of books that are being published in the area. and the interest, there were a lot of people coming by and buying books. You should see a spike in the sales of your own titles.
Mark Stiving
Did they have some of my books there?
Steven Forth
They did, yes.
Mark Stiving
Nice. So they had my books at the last event I was at, which I couldn’t tell you when it was. It was one of the events last year I went to and the bookstore was there, but I can’t say that it was well organized at the time. Maybe it was the first time they’d brought it back after having it gone for a while. And hopefully it was well organized this time.
Steven Forth
Yeah, I think they could perhaps do a bit more work on thematic organization, but it’s small enough that you can sort of walk around. They probably had about 100 different titles. It’s sort of manageable.
Mark Stiving
Nice.
Steven Forth
So, it was perhaps not incredibly well thematically organized, but it didn’t need to be, because you could take in all of the titles as you know in a short period of time. so I was really happy to see the bookstore back. I guess they’ve had it, this was not the first event that was back then, but it was the first event that I’ve been at that they had it.
Mark Stiving
So, don’t mention my books because I don’t really care, but did any books jump out at you that were there? What’s the latest and greatest that they were pushing or that looked like, hey, this is the one that everybody should be reading right now?
Steven Forth
Well, it wasn’t actually at the bookstore because BCG was giving it away for free. But, oh, what’s it called? The BCG books. I’ve got a copy, you’d think I would memorize this. Just a second.
Mark Stiving
This is an old-age memory.
Steven Forth
Game Changer. For some reason I had the word power shift in my head, but it’s Game Changer.
Mark Stiving
Oh, Game Changer. Yeah. So they presented that last PPS, they didn’t give the book away. They presented the presentation and I went out and bought the book. It was good.
Steven Forth
I think it’s an excellent book. In some ways, it’s quite original in the way that it provides a structural analysis of the different ways that the pricing game can be played and suggests what drives you from one game, whether it’s a value game or pure competition, or cost-plus-based game, what drives you from one game to the other. And one of the keynotes was by one of the authors, Arnab Sinha. And so that was good. So that was the book, I think that drew a lot of attention.
Mark Stiving
Nice. We had both Arnab and JMI on the podcast a few weeks ago, or months ago. I’m not great with time, so…
Steven Forth
Yeah. So, I think that was the book that really drew my attention. I picked up a good half dozen books to sort of keep the luggage nice and solid on my way back. Augusta Mahan, who I think has been on your podcasts. Yep. He said that he bought nine and then we both went and bought another book together. So we also went and bought the second edition of Jim Vaughn’s book. This is out in the second edition now. Stop Racing in a Blindfold Big Data + Pricing Science which is, it needed an update because things have changed quite a bit over the last few years. And Jim has some sensible things to say. So I think that was great as well.
Mark Stiving
Nice. So, I got to ask you a question that’s not pricing related for a second. Why do you still read physical books?
Steven Forth
Because I spend enough time looking at screens.
Mark Stiving
Oh, I like the idea that I have all my books with me all the time.
Steven Forth
Yeah. I’ve tried virtually every e-reader known and have been using them since I lived in Japan when they first started to come out. So, but that’s coming close to 40 years ago. so I have a huge collection of e-readers and devices that you can read books on. But, I spend eight plus hours a day staring at an electronic screen of one form or another. I’m just glad to have some form of respite from it.
Mark Stiving
Nice. Maybe I’ll pick up a real book one of these days and see what it feels like.
Steven Forth
There are also quite a few books where the form factor does not suit a phone or a Cobo or a Kindle or any of those other readers. So, if you have a large format book with a lot of detailed technical drawings in it, paper’s still a pretty good medium.
Mark Stiving
Hmm. Okay. I’ll try it. Okay. Back to PPS.
Steven Forth
So the other thing that I thought was quite interesting was that there were some very good talks on sustainability and pricing. So, as you know, this is a theme that Stephan Liozu has been deeply engaged in for the past couple of years. And there have been lots of different talks and approaches to it. But I thought at this year’s event, the themes were sort of coming together and coalescing. And one of the most interesting talks that I went to was actually, it was Friday morning. And it was by Nick Nalepa, from Michelin, who gave a really compelling talk, I thought, on how do you price sustainability? So that price helps you reinforce the value.
And, let’s face it in B2B, anyway, feel good metrics or social responsibility, none of those things are really going to get people to buy and pay for sustainable solutions. I don’t think so. It has to be tied to value, and you have to be able to show that your green solution provides more value than the competing solutions. And I think that message is coming together and that the sustainable solutions themselves are maturing to a point where they actually provide more compelling value. And that’s a really important shift.
Mark Stiving
Can you provide an example?
Steven Forth
Sure. Out of respect to Nick, I’m actually going to use Michelin as my first example. So, Michelin, as we know, makes tires and systems for using tires. So if you design those tires so that the trucks, and let’s face it, most of the commercial uses are for trucks or airplanes that the trucks run more efficiently, they have less impact on the environment. If they have less wear, they are more efficient to operate, but also they have less impact on the environment. And if you have squeezed efficiencies out of your supply chain so that it is more sustainable, it’s also more energy efficient and it uses more recycling and that makes it actually a more efficient supply chain as well. So, the efficiency metrics can get translated into both cost-savings and revenue generation metrics. And having a more efficient and sustainable supply chain gives you more resilience and lowers your costs.
Mark Stiving
I’m going to be a huge naysayer here. By the way, I love the example. And here’s what I just heard you say. We’re not pricing for sustainability. We’re designing sustainability into the product attributes that we’re delivering, and therefore we can price for the value that we’re delivering.
Steven Forth
Yeah. That’s not being an ace area. That’s exactly what I said, or what I meant and that’s how it’s got to be.
Mark Stiving
Yeah, I agree completely. Absolutely. Yeah.
Steven Forth
Or to take another example. So, as you know, Ibbaka believes in a model-driven approach to pricing. And at its heart what Ibbaka is, is a bunch of model builders and software to build models and increasingly AIs to build models and optimize models. The models that we build. So we build a value model, we build a pricing model. These days we are increasingly building cost models, but we also build sustainability models. So, it was actually our customers that led us to do that. And the company, I’m going to give an example, is actually one of the companies that early on said, part of our selling proposition is our impact on the environment. And so we need to quantify the environmental impact of our solution and not just the economic value of our solution. So this company, it’s called Hydro Point.
And what Hydro Point does is it creates the hybrid internet of things systems that are used to improve water management. And so water management at large facilities, whether it’s a Walmart store or a large building complex or Google’s campus or, and so on. So, there’s both a value model and a sustainability model. And of course a pricing model because you still have to get to pricing. and these three models share variables. So by putting in the same data, you can output an estimate of the value, an estimate of the environmental impact. And those two things can also be used to generate the price. So, I think the secret here, at least from a pricing and modeling approach, is to find those variables that get used across the different models. And by having the same variable used in different models you can pull sustainability together with value together with pricing. Did that make sense?
Mark Stiving
It did, but because I love arguing with you, I’m going to push back on that one too, if you don’t mind. But by the way, I have no qualms about what you just said, but I could argue that sustainability in their world is simply value. And we could have tucked sustainability into the value model and said, this is one of our value drivers. And so we’ve got seven other value drivers along with sustainability. And, by the way, there’s nothing wrong with that. So I don’t know if it needed to be something different, but I think the difference is totally okay.
Steven Forth
But for Ibbaka, a value model spits out a dollar figure. For Ibbaka, the value model is calculating a dollar value, whereas the sustainability model is calculating a reduction in water consumption and a reduction in greenhouse gas emissions.
Mark Stiving
Yeah. So what that says to me is that you weren’t able to tie a reduction in greenhouse gas emissions back to revenue to the company, even though the company knows that that is important to their revenue, your model didn’t tie it back.
Steven Forth
No, the model does tie it back, but the hydro point’s customers also need to report on their greenhouse gas emissions. So it’s part of their public reporting. So there’s one community out there who doesn’t care about the economic value, they care about the environmental impact.
Mark Stiving
Right. And so this is a KPI that we’re tracking. And I don’t mean to demean it at all, but, in my world, it’s all about value.
Steven Forth
And sometimes perhaps Ibbaka takes too narrow a view of value because although we do have ways of framing emotional and other types and community value. At the end of the day for pricing purposes, we are primarily focused on the dollars and having the other thing separate but connected allows us to think more clearly about the two.
Mark Stiving
Yep. Understood. Okay. Back to PPS. And I don’t want to run out of time because I want to know how your presentation went. Was there something else before that you wanted to talk about?
Steven Forth
Well, I think just in general there is a lot of interest in AI. So all of the big pricing vendors, the Resilience, the Pros, Vendavo, PriceFX, all of them have started to change how they talk about AI. So let’s face it, those companies are all sort of native AI companies, but it’s an older generation of AI. And their approach to AI is relevant when you have a large number of SKUs and a large number of transactions, they’ve always struggled. I believe with the more typical B2B case where you have a relatively small number of SKUs unless you’re a distributor, and where you have tens to thousands of transactions, not hundreds of thousands to millions,
Mark Stiving
Right.
Steven Forth
And I believe in talking, going around and talking to the people at the different technology companies that have started to really interact with AI in new ways, and this is great. This is a breath of fresh air within the industry.
Mark Stiving
So we started this conversation off with the important question part. What question did you ask? What was the important question that you asked the software vendors to understand what they’re doing differently with AI?
Steven Forth
Well, I didn’t even really need to ask the question because they were so eager to tell us. And I think that they were probably aware that there was a certain level of frustration in the industry with what they’d been doing and the sort of black box nature of it. Just two quick stories from previous PPS conferences. One of the major vendors was up on the stage telling us that everybody in B2B was going to move to dynamic pricing. and you better get on board preferably with their solution because dynamic pricing was going to take over B2B. So I naively got up and asked the questions as to how they were pricing their own solution using dynamic pricing. and of course, they’re not.
Mark Stiving
Of course.
Steven Forth
But, I think that there has been sort of a bit of ennui, just a feeling that nothing new is really happening. And then the other problem or challenge, I think that one can have with AI-based approaches to pricing is the sort of black box nature. So imagine you’re a salesperson and the AI has suggested a price to you, and you’re talking to a customer, the customer goes, oh, no, I think that price is too high. Is the salesperson going to say, well, our software told us that that’s what you should be willing to pay. The buyer’s going to say what do I care what your software thinks I should be willing to pay? The black box nature of those calculations wasn’t really helping anybody. And generative AI gives something of a path forward I think for that. So, having said that, I didn’t really need to ask them. They were eager to tell sometimes their problem was to get them to be quiet for a moment. Which is good. Now, I wouldn’t say every booth was well-staffed with people that were deeply familiar with what they were doing, but there were at least two or three people at all of the major vendors booths that were very well-informed, had thought deeply about the issues and had I thought intelligent and useful things to say. So Las Vegas should be really interesting. The solution should be that much further along by then. Hopefully there’ll be more demos and more ways to interact with the software by then.
Mark Stiving
Yeah. So, you didn’t answer the question, what’s new? What are they doing with generative AI that makes it interesting and fun?
Steven Forth
Yeah. Well, I think that probably most of the set of people are more at the exploration stage. So I am going to tell you about one of the companies we’re going to want to discuss when we have our webinar on May 23rd. So part of the promise of AI, and this is a theme that Ibbaka had identified early on in its research, was the ability of AIs to dynamically configure software. Not to dynamically give you a price, but to run a dynamic configuration so that your conversation with AI would give a configuration of it, would configure the software. And I had thought that for most practical purposes, this was 18 to 36 months out. But as we were doing our research, we came across a company called Totogi.
And what Totogi does is it makes a BSS solution. So BSS is the layer of software that operates mobile networks. Now, these are large complex pieces of software, normally with a lot of configuration or customization. And three years ago, it would probably take you a year and a half to more than two years to get one configured and get your system out there. Over the past year, there have been a number of vendors that have come up with cloud-based, highly modular, highly configurable solutions that really dramatically shrink that time down to anywhere optimistically two months, but reliably four to five months, that was a huge step forward, right. From say two years to four months. That’s a big difference. Totogi using generative AI, guess how long it takes them to configure a system?
Mark Stiving
A minute.
Steven Forth
Yeah. Less than that. So, this is a dramatic change. And think about this now for a moment from a pricing perspective, if systems that used to take months to configure or at least days can now be configured in minutes, that is a fundamental game changer. And it will change how we need to think about pricing such systems as well, because now the pricing has to be as configurable and as well, I hate to use the word dynamic, how about responsive? As responsive as the configuration system. And I think that this opens a path towards configuring an AI driven, value-based configuration.
Mark Stiving
So, let me make sure I understand. When you use the word configuration, what I heard in my head was implementation, right? So when I had a real pricing job out at Maxim, we bought Model N software and it took us months, if not years, to figure out what setting we want to do with this and how do we get this data into this place? And right. And so what I’m hearing you say is that it goes from that year down to a minute. Is that the piece that we’re talking about? Because I got to say that’s huge.
Steven Forth
That’s the destination that we are making real progress towards. Yes.
Mark Stiving
Wow. So to me, the challenge I would see, and of course, because I’m not as insightful as you are, the challenge I would see is every company is different. It’s kind of like the reason we do different pricing for every company, it’s because every company is different.
Steven Forth
I would go further than that. I would say that for every company, each of their customers are different. So things that we knew were sort of interesting ideas theoretically two years ago or even a year ago, are now coming into the realm of possibility. I’m going to give Ibbaka as an example here. So Ibbaka builds value models, in essence and turns them into pricing models and value stories and other things. Now, it takes us two weeks to build a value model. and it can take much longer if it’s complex and our customer doesn’t understand its customers. So, it can take several months and it takes the dedicated effort of smart people with smart tools. Now we were speaking to one large European company about a year ago, and they said, look, I get it. I understand we should have value models. I understand that value-based pricing is what we should be doing. To do what you’re suggesting, we would need roughly a thousand value models. Now, there’s a couple of problems with that. First of all, Ibbaka cannot build us a thousand value models on our timescale.
Not only can Ibbaka not do this, nobody can do it. And probably if you put all the capability of all the pricing people in the industry to work on this, they still couldn’t do it in a reasonable timeframe. And even if they did, they would’ve changed by the time you’d built all those value models. So, this value modeling approach, nice in theory, does not work at scale. And I couldn’t disagree with the guy, right? If he came to us and said, okay, let’s go, I want a thousand value models, when can I have them? Well, I probably, after you woke me up because I’d fainted and fell to the floor. Well, let me get back to that and preferably, let me get back to you on that in six months. so imagine now that you can build an AI that if you have the right prompts and you’ve trained it properly and you need to do a bunch of stuff. But let’s just say that I have a generative AI that can build a credible value model in seconds. So that in itself is a game changer. But now because building a value model is just the first step, right? You have to create an instance of the value model for every customer which also takes time. Now, that time goes down from two weeks to two months to 20 minutes to two hours.
But it’s still a significant amount of time. Now you can do that, in seconds at higher quality. That certainly changes how you think about using value in your business. But then it also allows you to explore a lot more. So in the past you might have explored, two or three, maybe five of the possible models. And when you’re configuring, you explore, again, two or three of the possible configurations now because you can configure so much more quickly, you can explore the different opportunities much more quickly. And you can come up with solutions that are both very specific to that customer and its customers. And that can change rapidly over time. So it leads to much more agile and flexible organizations that can really organize themselves around delivering value. And that change will have a huge impact on how we think about pricing.
Mark Stiving
Okay. You’ve got me thinking. I mean, I have lots of pushbacks, but you’ve got me thinking. And the thing is, we’re running out of time, so we’re going to have to wrap it up.
Steven Forth
We’ll be continuing this conversation at our webinar, or we’ll be focused just on these questions, right? What is the new generation of generative AIs, how are people developing with it and how are they going to price what they’re developing?
Mark Stiving
It will be exciting. There is no doubt. And so last, you didn’t answer this question and so see if you can do this succinctly because we don’t have any time. How did your presentation go?
Steven Forth
Well, that’s always hard for the person giving the presentation to answer. I will say that I have received probably 15 or 20 questions about it over the last three days. So if it generates questions, I think it went well.
Mark Stiving
People actually paid attention and wanted to know more. So that was good.
Steven Forth
Yeah.
Mark Stiving
Excellent. Steven, as always, thank you very much for your time today. If anybody wants to contact you, how can they do that?
Steven Forth
The best way is to just email me, Steven, S-T-E-V-E-N, @ibbaka.com, and I am very easy to find on LinkedIn, Steven with a V, Forth, F-O-R-T-H.
Mark Stiving
Excellent. And finally, for our listeners, if you have any questions or comments about the podcast or pricing in general, but not AI, please email me [email protected]. Now, go make an impact!
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