You may have decided its time for a new pricing system. Before making the investment - whether building your own or buying one, here are five common mistakes that are made.
This list is based my real world experience either replacing existing systems or seeing companies regret a past decision - all told dozens of companies. Some seem like common sense - and they are - but it is surprising that companies - big and small - often fall into some traps.
Avoid these mistakes, and you will be on your way to a successful implementation of your shiny new system.
Not documenting requirements
Too often, companies don't take the time to write down all the requirements that are needed for a new system. Every company has a unique approach to pricing. This requires a lot of thought and attention to detail. It's easy to think that a certain requirement may be met based on a demo or conversation, but until you write it down on a piece of paper to understand your needs, you may miss something.
Good documentation provides assurance that you have a set of problems looking for a solution, not a solution that may solve problems you don't care about.
Implementation is (much) harder then it seems
Red flags should be flying high when a company promises they can replace a pricing solution without much of your resource or in an unrealistic time frame. It is a major amount of work to replace whatever process you may have with something new. There are multiple stakeholders that are impacted, and many people (some who will be resistant) are going to be changing what they are doing.
Also, be prepared for the unexpected requirement or the "Oops" moment, when you realize a certain process, piece of data, or workflow doesn't work as you expected. You should have some agreement up-front with the software provider to protect you (not them) should something new come up. And be sure the vendor provides outstanding project management - including statement of work, issues tracking, and timelines.
Overspending on Modeling
Yes, it is very compelling, especially to senior managers that have quantitative backgrounds, to have a methodical, fact-based, statistical approach to price recommendations. It provides an assurance that pricing follows some disciplined process. Unfortunately, in nearly all cases I've seen, models aren't effective (for a variety of reasons), and the majority of time are ignored by the daily decision makers.
Is there room for statistics and modeling in petroleum pricing? Yes, but it isn't going to be a save-all. Modeling is very, very expensive, so proceed carefully and ensure dollars invested are really going to be worth it. There are alternatives to optimization models that can still provide strategic insight to assist analysts make better decisions.
Counting on the RoadMap
Roadmaps are favorites of the product team. Companies should have a roadmap, which they should share with you, that clearly shows the direction the product is headed in. But remember, these roadmaps change, and are subject to the constant prioritization and competition for resource. A higher dollar value project may trump a requirement you are counting on in the next release. Or, the requirement you see on a roadmap, may not be exactly what you have in mind, and when you see it after its released, it's too late.
The simple rule is this: If it isn't demonstrable inside a real system (not mock-ups or demo-ware), assume the product doesn't have it, when you are making a buying decision. If you want to proceed, make absolutely sure the feature you want is thorougly documented, and the company guarantees its delivery by an agreed date.
Don't skimp on due diligence
We are all busy. But don't shortcut by only seeing a few demos and a PowerPoint deck before making a commitment. It is important to visit the company you are buying from and see what their operation really looks like, meet the people that will be supporting and implementing and developing it. Find out what other customers really think of the product (not from referrals from the company, but by what you hear in the market). Make sure you understand both the strengths, and weaknesses, of the product, as it applies to your unique needs.