1. Value Propositions in B2B Markets
Agenda
Consumer vs. Industrial Markets
Commodity vs. Specialty Industrial Markets
Picking markets / applications
Defining value and market needs
Competitive Benchmarking
Value Capture Checklist
Organizational & Process Issues
Summary
Sudhir Hublikar
Vice President of Technology
AGY, Inc.
Page 1

2. Industrial vs Consumer Markets
High
Industrial
Buyer
Consumer
Low
Technical Impulsive Dependency Number of Number of
Understanding Buying on Suppliers Buyers Product App’s
Industrial buyers are sophisticated and use a deliberate, technical process.
Source: Advanced Industrial Marketing, Inc. Page 2

3. Commodity vs Specialty Industrial Markets
Commodity Semi-Specialty Specialty
Market data are well documented. Market data are very limited
Market segments and product needs Market segments and product needs
are well understood. are very poorly understood.
Competitors’ products are easily Competitors products difficult to
obtained & analyzed. obtain and analyze.
Product testing & qualification driven Product testing & qualification is very
by industry standards. customer-specific.
In specialty industrial markets, understanding market segments, customers’
product needs and competitive landscape are all significant challenges!
Page 3

4. Example - AGY Markets and Applications
Helicopter Aerospace Aircraft Interior
Reinforcement Panels
Tapes Blades
Thermal Industrial-Other Aircraft Cargo Liner
Insulation Bazookas
Defense
Filtration
Humvee
Armor
Sewing Thread
Protective Fabric
Auto
Mufflers
Printed
Circuit Ignition
Boards Cables
Cable
Electronics Automotive Timing Belts
Insulation
Solar Screens
Insect Concrete Boards
Roofing Construction Screening
Understand the market but focus on the application. Page 4

5. Winning Strategy For Specialty Industrial Markets
Pick the right market segments/applications
Understand unmet needs
Know the competition
Define winning value propositions
Develop the right new products
Page 5

6. Understand You Applications Portfolio
2.0
Application
1.5 Leader
Market Power
Are there
(Relative share)
1.0 “Performance”
applications in the
portfolio?
0.5
Application
Follower
0.0
-5 0 5 10 15 20 25
Application Growth Rate, % CAGR
Page 6

7. Which Growth Strategy Do You Want to Follow?
Leader Focused Leader
2.0 2.0
1.5 1.5
1.0 1.0
0.5 0.5
Growth Rate
0.0 0.0
Margin
-5 0 5 10 15 20 25 -5 0 5 10 15 20 25
Follower Opportunistic
2.0 2.0
1.5 1.5
1.0 1.0
0.5 0.5
0.0 0.0
-5 0 5 10 15 20 25 -5 0 5 10 15 20 25
Page 7

8. Example - AGY Application Portfolio
5.0
4.0
Market Power
3.0
(Relative share)
2.0
1.0
0.0
-4 0 4 8 12 16
Application Growth Rate, % CAGR
Page 8

9. Pick the Right Markets & Applications
Attractiveness Criteria
Market 1. 2. 3. 4. 5. 6. 7.
Size of Market Market Unmet Likely Power Likelihood of Current
Segments or Revenue Segment Segment Customer of Value Technical Market
Sub-Segments Opportunity Growth Profitability Needs Proposition Solution Presence
Marine
Coatings B C B A A C C
Maintenance
Coatings A C B B B C C
Aircraft
Coatings A A B A A B B
Bridge
Coatings C B A A B C B
Railcar
Coatings B C C C A B C
Source: Advanced Industrial Marketing, Inc. Page 9

10. Picking Markets / Applications: Example
Attractiveness Criteria
Market 1. 2. 3. 4. 5. 6. 7.
Size of Market Market Unmet Likely Power Likelihood of Current
Segments or Revenue Segment Segment Customer of Value Technical Market
Sub-Segments Opportunity Growth Profitability Needs Proposition Solution Presence
Marine
Coatings B C B A A C C
Maintenance
Coatings A C B B B C C
Aircraft
Coatings A A B A A B B
Bridge
Coatings C B A A B C B
Railcar
Coatings B C C C A B C
A : Very Attractive
B : Moderately Attractive
Source: Advanced Industrial Marketing, Inc.
C : Unattractive Page 10

11. Understand the Application Lifecycle
Performance Phase Optimization Phase
• Sale depends on one or two • Sale depends on optimization
performance attributes of multiple product & service
attributes
• Cost is a minor factor • Cost is a major factor
• Multiple materials, • Standard materials, processes
processes & designs & designs
• Grow with market • Steal growth from competitors
• Growth rate >> GDP • Growth rate ~ GDP
• Path to competitive • Path to competitive advantage
advantage is clear is complex
Page 11

12. Defining Needs: Don’t Just Talk to Direct Customers
Most firms listen only to direct customers…
Application
Automotive Belt Mfg
AGY Cord Mfg E
Timing Belt
N
Electronics
AGY Weaver Laminator PC Board D
PC Boards Shop
Shop
U
Aerospace -
AGY Weaver
Component
Prepregger Component Distributor S
Interior Panels Mfg
E
Sub-
Sub-
R
System
Armor AGY Weaver Prepregger Panel Mfg Component
Component Integrator
Mfg
Mfg
Focus on decision makers and influencers.
Page 12

13. Finding Value in the Value Chain
Example: You sell a resin used in a clear coating… which is sprayed on automotive exterior parts
Your Immediate Immediate Customer’s Customer’s
New Customer’s Customer’s Customer’s Customer’s
Product Operation Products Operation Products
Aqueous Production Clear Part Mfgr & Coated
Resin of Coatings Coating Coating Parts
Reduced mixing Reduced oven Higher gloss
time & labor drying time levels
Elimination of Elimination of More durable
another ingredient solvent recovery coatings
Reduced waste One coating for Better mar
stream many part types resistance
Higher usage Longer coating pot Fewer coating
efficiency life defects
Operational benefits are often Product benefits can deliver high value
predictable & measurable & change the basis of competition.
Source: Advanced Industrial Marketing, Inc. Page 13

14. Finding Value in the Value Chain
Your Immediate Immediate Customer’s Customer’s
New Customer’s Customer’s Customer’s Customer’s
Product
Your Operation
Immediate Products
Immediate Operation
Customer’s Products
Customer’s
New
Aqueous Customer’s
Production Customer’s
Clear Customer’s
Part Mfgr & Customer’s
Coated
Product
Resin Operation
of Coatings Products
Coating Operation
Coating Products
Parts
Aqueous Production Clear Part Mfgr & Coated
Resin of Coatings Coating Coating Parts
Reduced mixing Reduced oven Higher gloss
time & labor drying time levels
Elimination of
Reduced mixing Elimination of
Reduced oven More durable
Higher gloss
another ingredient
time & labor solventtime
drying recovery coatings
levels
Reduced waste
Elimination of One coatingof
Elimination for Betterdurable
More tar
stream ingredient
another many part types
solvent recovery resistance
coatings
Higher usage
Reduced waste Longer coating pot
One coating for Fewer coating
Better tar
efficiency
stream life part types
many defects
resistance
Higher usage Longer coating pot Fewer coating
efficiency life defects
After identifying a benefit, you must quantify it, preferably in $/yr. Example:
A. Reduced B. 1.5% less C. Annual
waste stream waste generated savings = $160k
Source: Advanced Industrial Marketing, Inc. Page 14

15. Compare With Competitive Products – Example
Example: Armor
Property Test Method Units Impor-
1. Identify key properties, tests & tance
Strain to Failure ASTM D638 % H
importance, as defined by value chain
Impact Resistance ASTM D6110 KJ/m2 H
Tensile Strength ASTM D638 MPa M
Flammability ASTM E162 sec M
Density ASTM D792 g/cc M
4 S-2 Glass E Glass Carbon Aramid
3
2. Perform side-by-side testing against
2
competitive materials
1
0
Strain to Impact Tensile FST Density
Failure Strength
0 1 2 3 4 5 6
S-2 Glass
3. Generate weighted scores to
E Glass
understand our competitive position
Carbon
Aramid
Page 15

16. Defining New Products - Product Roadmapping
Filter Life
10
9
8
7
Max Flow 6 Housing Size
5
4
3
2
1
Unit Durability Pressure Rating
Our New Product
Impurity Size
Best Competitor
Page 16

17. Value Capture Checklist
Value Proposition
– We understand how the customer defines value
– We have evaluated existing products using the customer’s definition of value
– We have developed a product roadmap to exploit gaps between customer
needs and existing products.
– Our (new) product target better meets the customer’s definition of value
Value Capture
– We know how much incremental value we will generate for customers
– Our pricing plan will capture a fair share of this value for our company
Product Development
– We have defined product specifications
– We have a technical plan and understand risks
– We have a marketing plan
– We have defined the resources needed for success
Page 17

18. Organizational & Process Issues
Use a simple process to focus the organization on a few key projects
– Example : The AGY Idea-to-Profit Process
Use multifunctional project teams to execute large projects
– Co-Leaders: Commercial or Manufacturing + Technical
– Have the “end-user” function be accountable for the project
Use a multifunctional leadership team to manage the project portfolio
Don’t give engineers more than two must-do projects
Involve the (lead) customer as early as possible
– Customer relationship & access is more critical than size, etc.
– Co-develop with a lead customer if you are entering a new application
You need to be “in” the application to really understand needs
– Don’t be afraid to get a me-too version 1.0 out there
Review projects thoroughly and don’t be afraid to say “No”
Page 18

19. Summary…
Summary
In specialty industrial markets, understand the
market but focus on applications
Analyze your applications portfolio and focus
on a few applications
Understand who are the decision makers and
influencers in the value chain
Understand how the value chain defines value
Use side-by-side testing to assess yours and
competitors’ products
Use the Value Capture Checklist
Define projects thoroughly and resource them
properly
Focus, focus, focus….and get something done!
Page 19

20. Value Propositions in B2B Markets
Questions?
Consumer vs Industrial Markets
Commodity vs Specialty
Industrial Markets
Picking markets / applications
Defining value and market needs
Competitive Benchmarking
Value Capture Checklist
Organizational & Process Issues
Summary Page 20

21. Page 21

22. AGY Idea-to-Profit Process
Concept Developed by…
New Business
New Business Development Good
Opportunities AGY Fit?
Core Business Business
Teams Y
Fast-track Develop Launch
Y Project Product
Few Projects
Resources
Needed?
Key Develop
N Develop Launch
Business Approval Approval
Projects Product Product
Case
Page 22