Steven Forth, Managing Partner at Ibbaka and co-creator of Value IQ, joins Mark Stiving to tackle a topic most pricing teams are avoiding: pricing governance in an AI-driven world.
This episode explores who owns pricing decisions when AI is involved, how companies should govern data and models, and why pricing leaders must step into a broader leadership role or risk having governance imposed on them by others.
If AI is touching your pricing process in any way, this conversation will change how you think about responsibility, risk, and trust.
Podcast: Play in new window | Download
Why you have to check out today’s podcast:
- Understand what pricing governance actually means and why poor governance shows up as finger-pointing between sales, pricing, and finance.
- Learn the new governance questions AI introduces around data usage, bias, accountability, and mistakes.
- Discover why pricing leaders must own AI governance or risk losing control of pricing decisions altogether.
“The big issue for me is how, as pricing people, do we develop the knowledge that we need to be accountable for AI pricing governance? It’s not something any of us were taught.”
– Steven Forth
Topics Covered:
01:51 – Pricing Governance and Accountability. What pricing governance really means and why accountability breaks down when roles are unclear.
05:04 – Pricing and Customer Value Alignment. Why pricing teams sit at the center of aligning sales, product, finance, and customer value.
08:01 – AI Challenges in Pricing Governance. How AI introduces new risks around data usage, ownership, and responsibility in pricing decisions.
12:45 – AI Pricing Governance Challenges. Who is accountable when AI makes mistakes and how strict rules can slow innovation.
16:35 – AI Governance in Pricing. Why pricing leaders must take ownership of AI governance or risk losing control to other functions.
22:13 – AI Transparency in Pricing. The importance of explainable pricing models and why transparency matters to both sellers and buyers.
26:49 – AI in the Buying Process. How buyers are using AI to evaluate vendors and why transparency will shape future pricing outcomes.
28:08 – Connecting on LinkedIn. How to continue the conversation and connect with Steven Forth directly.
Key Takeaways:
“Governance is an area of pricing that we don’t spend enough time thinking about and talking about because it’s not sexy and it does not immediately tie to results.” – Steven Forth
“If pricing leaders don’t take ownership of AI governance, someone else will.” – Steven Forth
“It’s the fact that the AIs are not deterministic that allows them to be, dare I say it, creative and to find new things.” – Steven Forth
“AI generally does a better job of explaining how it got to its answers than most humans can.” – Steven Forth
Resources and People Mentioned:
- Tom Nagle – Referenced as Steven’s mentor and a foundational thinker in pricing governance
- Michael Mansard – Mentioned for prior work and thinking on pricing governance
- Tim Smith – Referenced for contributions to pricing governance discussions
- Karen Chiang – Co-founder of Ibbaka
- Stephan Liozu – Mentioned for advocating the Chief Value Officer role
- Anthropic – Research on bias and AI self-evaluation
- OpenAI – Data usage and model governance considerations
- Deal Desks – Scaling pricing guidance with AI support
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 big issue for me is how, as pricing people, do we develop the knowledge that we need to be accountable for AI pricing governance? It’s not anything any of us were ever taught. It’s not anything that our mentors were able to teach us because it’s too new.
[Intro]
Advertisement
Today’s podcast is sponsored by Jennings Executive Search. I had a great conversation with John Jennings about the skills needed in different pricing roles. He and I think a lot alike. If you’re looking for a new pricing role, or if you’re trying to hire just the right pricing person, I strongly suggest you reach out to Jennings Executive Search. They specialize in placing pricing people. Say that three times fast.
Mark Stiving
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the urgent relationship between them. I’m Mark Stiving and I run bootcamps to help companies get paid more. Our guest today is the one and only Steven Forth.
Here are three things you wanna know about Steven before we start. Let’s see, number one, I consider him a friend. Number two, he’s brilliant at pricing and AI. And number three, oh, that’s right, he runs this little company called Ibbaka and they launched Value IQ. Welcome, Steven.
Steven Forth
Hey, Mark, good to see you again.
Mark Stiving
It is good to see you too. Hey, we’re going to talk about governance today. And it’s such an interesting word, because it’s not one that we use, I use a lot in pricing, and I’ve been in pricing in forever. So I had to look it up and figure out what the heck we were talking about. So for our listeners, what do you mean when you say the word governance?
Steven Forth
Yeah, so I think governance, you know, is an area of pricing that we don’t spend enough time thinking about and talking about because it’s not sexy and it does not immediately tie to results. And let’s face it, most of us are fairly short-term oriented and we want to be working on the things that will deliver an immediate impact. But governance is an umbrella term for all of the different ways that we control who has what authority and who has what responsibility for the different aspects of pricing.
So who gets to make decisions about the pricing process? Who gets to and who’s responsible for managing pricing models? Who has the ultimate authority to set prices? How does discounting get managed?
All of those things about who is responsible for what and who is accountable for what come under the title of pricing governance. There have been people that have done some good work on this.
Our friend, Michael Mansard has been thinking about it a lot, as has Tim Smith, you know, in Chicago. So there has been good work done on pricing governance over the last couple of decades, but I think things are changing again.
And I’m sure you can guess why I think things are changing. But, you know, AI and the use of AI introduces all sorts of new questions, you know, around governance and data and how are we going to manage this that I think we you know, we can no longer ignore.
So I really believe the governance conversation is going to be an important part of the pricing conversation and the pricing and AI conversation over the next year or so, as we sort this out.
Mark Stiving
And so as I looked this up and thought about it, I think to me, one of the more interesting problems in governance is who gets blamed when something goes wrong? I just think that’s a fascinating question. So pre-AI, who gets blamed if something goes wrong? So it could be the salesperson, it could be the pricing person, but we’ve got a person to go say, ‘hey, this didn’t work well.’ Now what happens?
Steven Forth
I mean, that reminds me of the old joke, right? That sales defines pricing as the revenue prevention function and pricing defines sales as the margin destruction function. And, you know, they both tend to point, you know, it’s his fault. But when that happens, that’s a sign of poor governance. When there’s good governance.
Sales understands what it’s accountable for and what its span of action is. The same is true for products. And a good pricing function is actually building alignment between the different parts of the companies. I really see, you know, pricing people as critically responsible for building alignment between the product teams, the sales teams, the customer success teams, and the finance department.
Mark Stiving
Yeah, I think if you pulled AI out of the story for a second, I agree with you 100%, right? I always think that pricing is the only group, at least it’s the first group inside a company, that starts to truly focus on where customers get value, how do customers perceive value, and what’s their willingness to pay? And everybody in the company should care, and so that puts pricing in that center to say, ‘hey, let’s align around this singular concept of customer perceived value.’ Now what happens when we throw AI in?
Steven Forth
Yeah. Again, just before we go there, Tom Nagle, you know, who is my mentor in the pricing world, you know, one of Tom’s points is that there’s generally a person responsible for revenue. There’s generally a person responsible for costs and companies assume that if you have someone responsible for revenue and someone responsible for costs, that everything else will somehow resolve. And that just ain’t the case.
And you can rely on your CFO to try to be the arbitrator, but the CFO has their own metrics. And as you know, very few CFOs I would hazard to guess are accountable for value delivered to customers and how we capture our fair share of that value. So governance is really about defining these roles.
And I think it is in pricing and pricing leaders’ interest to have good governance models. But I think that, you know, AI is upending this because it opens all sorts of new questions that need to be answered around governance. Shall we dive into what some of those are?
Mark Stiving
We shall. I just wanted to toss out two quick comments. This entire conversation, I’ve been thinking the one piece of governance that I always think, oh, this is something I have to deal with as a pricing person is sales discount authority levels. Right? I think about those a lot. And in terms of what do we want to allow salespeople to be able to do and, you know, how much should they have and how much shouldn’t they have?
And so there’s trade-offs both ways. And so we can think about that. And the other comment that I wanted to add based on what you said is that I love CFOs because they truly care about profit. They truly care about margins, but they just don’t understand what value is, right? That’s it’s not their job to understand how we deliver value to customers or what the value is we deliver to customers. So it’s just not the right place to be the center of this value circle.
Steven Forth
So, yeah, let’s dive in. Yeah. And just, you know, which is why Stefan Liouzu has been advocating for people to be chief value officers. You know, that the path, the upward path for pricing people is to the chief value officer position. But that’s a conversation I’ll let you have with Stefan and Karen and people who are obsessed with that.
So, you know, I really think AI is challenging a lot of companies when it comes to pricing governance. So one of the first questions, you know, that you have to address is data. You know, what data are you allowed to put into AI models?
What are the rules around data governance? Who is responsible for data governance? How does AI change data governance and how does that interact with the pricing function? And I am sure that anyone listening to us who has implemented a pricing management system or who is trying to implement AI has struggled with this. So is our data safe? Is our customer’s data safe?
What data can we put into these systems? If we put data in, is it going to leak? If we put data in, is it going to be used to build better models that will be used by our competitors to compete with us? All of these questions need to be surfaced and discussed and policies developed and governance imposed. And I don’t think most of us are doing this. Things are moving too fast.
Mark Stiving
You know way more about AI than I do, but I was under the impression that all I have to do is flip the little switch in chatGPT that says, don’t use my data for public use or for learning on. Is that not acceptable?
Steven Forth
Well, it needs to be validated and read the fine print in your agreement with OpenAI, including the part that says we reserve the right to change these rules whenever it is convenient for us. So, yeah, I mean, there are good answers to these questions and the AI experts think deeply about these questions and can be good thought partners for this, but you have to ask the questions and make sure you understand how they’re going to be answered.
Mark Stiving
Yeah. The other thing that jumped into my mind when you were talking about what data we’re going to use, the first thing that jumped to my mind was what if we took data we’re not supposed to have access to and we put it into our AI?
Steven Forth
Would that even happen?
Mark Stiving
No, that would never happen, Steve, never. And so, that’s what I was, I mean, one piece of governance is the legality side.
Steven Forth
Yep. So, you know, there are a lot of really good books available as PDFs online. Like now, whenever I’m looking for a book, one of the first things I do is to see if the PDF version is available to me.
And I quite frequently run it through one of my AIs to decide whether I’m going to read it or not, or whether I can, you know, write what I need from the book out of the AI. I still read a lot of books, but, you know, I often read through the AI first and then go deeper by actually reading myself. And I have uploaded that book now into an AI system.
Now, how’s the AI system using it? Maybe they’re doing nothing. Maybe it’s a sort of retrieval augmented generation and they have very good rules and they respect all of the copyrights, but you know, let’s face it. The AI companies are not known for their strict adherence to other people’s copyrights.
Mark Stiving
They didn’t teach those things on no data.
Steven Forth
See how polite I am. I must be Canadian or something. And, you know, for example, I would love to train my AIs on Tom Nagel’s strategy and tactics of pricing books. And there are versions of that book out there in PDF. You know, not the seventh edition, but you know, there are versions out there that you can find. I have not done that because I’m pretty sure I would be violating Deloitte’s rights if I did that.
And, you know, as a person who generates a fair amount of content, I want to respect content authors’ rights. But man, do I ever want to. There’s this guy, Mark Stiving, not sure if you know him, who writes lots of books about pricing. You know, I’m pretty sure that you use your books to train your AIs.
Mark Stiving
I absolutely do.
Steven Forth
How would you feel if other people started using your books to train their AIs?
Mark Stiving
So I think if I was a normal person, that would bother me. My attitude at this point in my life is just, I like creating content and sharing it. So, it really doesn’t bother me.
Steven Forth
Yeah. I’m with you on that. Actually, I want to inject some of my ideas into the sort of larger knowledge that the world has about itself. So to me, I’m fine with that, but you know, not everyone is.
Mark Stiving
Yeah. If I was trying to build a business, you know, a decent sized business around this, then that would bother me a lot.
Steven Forth
And, you know, to just bring us back to the governance question. So, you know, organizations need to be very clear on the rules for what can be uploaded and how it can be used. Can it only be used in sort of one shot types of AI where it’s not kept, or can it be built into the larger set of contexts they’re using to train their ideas? All of those now are very relevant to pricing governance.
Mark Stiving
Those are tough. Yeah.
Steven Forth
They’re tough, but they’re questions that we need to be able to answer. Then let’s sort of flip the conversation around, you know, AIs make mistakes. I think the problems with hallucinations are much less than they were six months ago, even. And the AIs, the good ones, are getting pretty good about provenance. They say where stuff comes from, but they still make mistakes.
So if assuming that you’re, you’re going to be using AI extensively in your pricing, who is accountable for those mistakes? What are the rules around that? And you, you screw that down too tight and you’re going to wreck the innovation in your company, but you have no accountability.
And there’s no pressure to improve. So part of the, I think the AI pricing governance conversation has to be, how do we manage error when it occurs? What’s our policy? How tolerant of error are we?
Mark Stiving
How do we find errors, detect errors?
Steven Forth
Yeah. There is a super interesting piece of research published by Anthropic recently. I’ll send you the link so you can provide it, you know, with this podcast where they looked at their own political bias.
Mark Stiving
I read that. That was, I read your article on that.
Steven Forth
Yeah. So super interesting. Right. And that’s for political bias, an important thing globally, but there’s also pricing bias. Like how do we assess the bias inherent in our own AIs? Again, that’s an AI pricing governance issue.
Mark Stiving
Yeah. And since we talk about AI making mistakes for a second, I heard this phrase the other day, the old AI was essentially deterministic. It would give you the same answer every time you ran it. Now we’re running probabilistic AI. So it gives you random answers. And so, sometimes the random is going to be wrong.
Steven Forth
Yeah, I wouldn’t say random. I think random might be too strong, but they’re probabilistic. Yeah. Yeah. I mean, learning how to live in a world that is inherently probabilistic is tough for a lot of people, including me. I mean, I’ve, it took me 30 years to accept probabilistic systems.
You know, when I was in my twenties, I found this just absolutely appalling. And I was very much in favor of deductive systems, you know, formal knowledge, representation, all of those fun things that have been swept away. But I’ve come to terms with living in a probabilistic world rather than a deterministic world. And I think we’re all going to have to.
Mark Stiving
There’s no doubt. There’s no doubt. But when I run one of my custom GPTs on a website or something like that, I don’t get the same answer every time I run it on the same website. And you’re like, Oh, that was, that was bad. Right?
Steven Forth
But you know, if I ask Mark Stiving his opinion of something, are you going to give me the same opinion every time I ask you?
Mark Stiving
No, cause I’ll forget tomorrow what I told you today.
Steven Forth
So, and that’s not bad. It’s the fact that the AIs are not deterministic that allows them to be, dare I say it, ‘creative’ and to find new things. But we are, we’re going to get ourselves into all, no end of trouble here. So let’s get back to the governance question.
Mark Stiving
Okay.
Steven Forth
Yeah. So to me, I think there’s questions about pricing leaders need to get on top of how AI is going to be used in their pricing organization and take accountability and leadership for that. If they choose not to, someone else will do it for them, which they probably will not like, or there’ll be no governance, which will be even worse.
Mark Stiving
So let me, I want to take a step back for just a second. If we think about, you know, pros, this was deterministic AI they were using. So we would get the same answer every time. And so now, do you know of anybody who’s actually using generative AI to create a price that we use? Because that feels risky to me today.
Steven Forth
Ibbaka and Value IQ are working on this. So this is an active area of research and we are making faster progress than I thought that we would. So the way it’s going to work at ValueIQ is that there will be a deal pricing agent and it will give you advice on how you should price a deal. Now it’s built off a value model. So we have an agent that acts as a value-based selling coach.
And the first thing that it does is build a value model, and then it customizes that value model for a specific deal or opportunity. And then this future agent, the deal pricing agent, will give you guidance on how to price. Now there’s a lot of gotchas here, right? You know, does the company have a pricing model? If it doesn’t have a pricing model, why not?
If it does have a pricing model, how do you make sure that the pricing recommended by the agent follows the pricing model? And that has to be fairly deterministic. It’s also what you were talking about earlier, right? About the discounting guidelines. Does the agent recommend a price within the discounting guidelines?
And really this deal pricing agent is meant to be a compliment to the deal desk. So most companies now do not run every deal through a deal desk because that would be crazy making. But if deal desks are adding value, then, you know, every deal should be run through a deal desk. It’s just a scaling issue and AIs help with these sorts of scaling issues. But yeah, so that will introduce all sorts of additional pricing governance questions that need to be asked.
Mark Stiving
There’s no doubt. If we’re going to allow AI, Gen AI, to generate pricing, then I’m worried about the mistakes. Right? How do we handle the mistakes?
Steven Forth
Yeah. And of course, the salespeople who currently set prices and negotiate prices, you know, don’t really make mistakes.
Mark Stiving
Never. Okay. So I just lost my worry. So let me ask you, since you think about this stuff so much, how would you, how would you put governance on an AI that catches mistakes or fixes mistakes or, I mean, what would that even look like?
Steven Forth
So this is where I think that this Anthropic research is actually really relevant and gives us a model. Yeah. And again, the anthropic stuff was about political fairness. So it’s using a different set of metrics, but basically it had, you know, three dimensions that it measured responses on, and it used different models to measure the responses and then looked at the coherence between models.
So the question to me then becomes, what are the dimensions that we want to measure the, I don’t want to say this word, accuracy, or what are the dimensions that we are going to use to measure the validity of the advice being given by the AI? And can an AI effectively evaluate itself?
And there’s, I think it was in the Anthropic article, but anyway, it might’ve been in some of the responses to the Anthropic article. AIs tend to prefer their own answers. So if you ask Anthropic to evaluate its political fairness, and you ask OpenAI to evaluate Anthropic’s political fairness, Anthropic will generally score itself higher than the alternatives. You know, they have the same sorts of biases that we do.
Mark Stiving
Yeah. But we’ve certainly heard of using one AI to double check the other AI.
Steven Forth
Yeah. So I think that’s, you know, double check what becomes the question, but again, that becomes part of the governance function. You know, for the purposes of your pricing operation, what are the one, two, three, hopefully no more than five different areas that you’re going to use to evaluate your AI, the responses given by your AI and how do you build that into your processes?
And I’m not sure how many pricing leaders are used to asking these questions. But we’re going to have to get good at asking and figuring out how to answer them if we’re going to adopt AI at scale. And I believe that the companies that fail to adopt AI at scale are not going to be able to compete. So this becomes mission critical for pricing leaders.
Mark Stiving
Okay. Hi, I’m so glad I’m retiring. Let’s bring up a different topic in governance for a second. What about transparency? What about the problem I always had with the big pricing systems is, ‘Hey, here’s the number. And I’m like, well, how did you get there? Right. Do I trust that number?’
Steven Forth
Yeah. And that’s, you know, so I was once teasing one of the guys at one of the old heavy metal pricing optimization companies. And I said, you know, as a sales guy, I can’t go and tell my buyer that they should be willing to pay this price because my AI says that that’s what their willingness to pay should be.
The buyer is going to say, I don’t care what your AI thinks. That’s got nothing to do with me. So, you know, we need to have ways where we can explain value. I thought you were going to go in a different direction on transparency, by the way.
So this is the whole area of explainable AI. And again, I think a lot of progress has been made. It bugs me when people say, oh, the AI can’t explain how it got to its answers. In fact, it can generally do a better job of explaining how it got to its answers than most humans can.
Mark Stiving
Yeah.
Steven Forth
And it can certainly do a better job than the old fashioned price optimization software can. So I think that buyers have a reasonable expectation that you can explain how you’re creating value. And if you’re using your AI to understand that the AI has to contribute to that transparency and understandability.
Mark Stiving
Yeah, I could imagine that there’s two different categories of explanations. One is, what’s the value I’m delivering to my customer that I can communicate to my customer? And the other is, what are the reasons internal to my company that I’m setting this price this way that I’m not going to communicate to my customer?
Steven Forth
So that brings up a super interesting question, right? Around transparency. And I do think that transparency is a big part of governance. So I think we actually are on topic here. So what do we mean when we say price transparency? I think that there’s sort of a number of different things that we can mean.
One is we are transparent about the process that we said that we use to generate the price, which is what Uber does, right? Uber is actually pretty good at explaining how it goes about setting its price. Second, we can be transparent about what the price is and what it’s going to be either publicly on our website or in sales conversations.
It’s amazing how many legacy pricing systems are not transparent. And it’s very difficult to figure out how a price was generated. It’s like those old Oracle spreadsheets that you needed to have an advanced degree to figure out. And that was regarded as one of their advantages, not a disadvantage. I think that world’s long behind us now.
So transparency could be about process. It could be about models. It could be about the actual price and it can also be internal or external. You know, there are many companies where the salespeople cannot explain how a price was derived and either they’re given the price and forced to sell to that price or they just get frustrated and start making stuff up.
And sometimes that’s referred to as discounting, but it’s kind of just random behavior, right? So it’s not really discounting, but there’s no rhyme or reason to it. Or maybe there is, but only in the salesperson’s mind. So, you know, understanding transparency is I think a critical part of pricing governance.
And I think it’s changing because, you know, we talk quite a bit about AI in the pricing process, AI in the sales process, but what really matters the most is AI in the buying process. How are the people that are buying from you using AI to define their requirements, to select, to find vendors, to shortlist vendors, to evaluate vendors and down the road, even to negotiate prices?
And I suspect, my hypothesis is that the more transparent you are, the better an outcome you’ll get as buying AIs interact with you and your website and your materials. And it’s not just about price. It’s also about value. So you’ll want your website to be able to provide the information and the models to frame value the way you want it framed so that an AI can consume that and use it when it generates a report.
Mark Stiving
So Steven, I just have to say, I find that topic absolutely fascinating and we have to do an entire podcast just on that topic.
Steven Forth
Yeah, yeah, we should. AI in the buying process and what it means for your pricing.
Mark Stiving
Yeah, I think that’s going to be fascinating. Believe it or not, we’re out of time. I’m going to tell you that of the conversation we just had, I think to me, the scariest piece of governance that we discussed was the accuracy piece, right? How do you keep it accurate? Did you have a different opinion or was, what do you think is the scariest?
Steven Forth
I don’t know if any of it’s particularly scary. I think that the big issue for me is how, as pricing people, do we develop the knowledge that we need to be accountable for AI pricing governance? It’s not anything any of us were ever taught. It’s not anything that our mentors were able to teach us because it’s too new.
So I could go back to Tom Nagel and say, Tom, really great chapter on pricing governance in your book. How does this apply to AI? Tom’s a smart guy, but I’m not sure that he can provide us with any better governance than we can provide by having conversations with each other.
Mark Stiving
I think we’ll have to ask our friend ChatGPT that question.
Steven Forth
Or Perplexity.
Mark Stiving
Or Perplexity. Yeah, yeah, yeah.
Steven Forth
Or Llama.
Mark Stiving
Steven, as always, this has been a ton of fun. Thank you very much for your time. If anybody wants to contact you, how can they do that?
Steven Forth
The best ways to connect with me, on LinkedIn, I’m very easy to find. Steven with a V, Forth, F-O-R-T-H, and I’m very open to making connections. You can also email me, [email protected].
Mark Stiving
All right, and to our listeners, thank you for your time. If you enjoyed this, would you please leave us a rating and a review? And finally, if you have any questions or comments about the podcast, or if your company wants to get paid more for the value you deliver, email me, [email protected]. Now, go make an impact.
Advertisement
Thanks again to Jennings Executive Search for sponsoring our podcast. If you’re looking to hire someone in pricing, I suggest you contact someone who knows pricing people. Contact Jennings Executive Search.
[Outro]
