Unlocking the potential of pricing - Introducing the Chief Value Officer (CVO)
By Michelle Vestergaard
In the words of Warren Buffett, "Price is what you pay; value is what you get." It’s an important distinction as “value” is far more fundamental than price, with price fluctuations rarely reflecting any deep-rooted change in a product’s value. It’s curious then, that traditional pricing approaches tend to focus rather narrowly on list prices, overlooking broader value aspects such as issue resolution, payment terms, and delivery methods.
It’s become clear from the projects NORTH has led over the years that many organisations struggle with siloed pricing functions. These functions often fail to integrate with other departments, resulting in missed opportunities.
Let us introduce you to your new superhero—the Chief Value Officer (CVO). You may have heard about this title before but let us share how we see it. In this article, we will explore how the CVO tackles the challenges of siloed functions, overseeing value creation across the entire value chain and driving both profitability and customer satisfaction.
Integrating price strategies across the value chain
Effective pricing strategies are, of course, central to a company’s success. Numerous studies have attempted to quantify the value potential from driving rigorous pricing initiatives, with numbers ranging from 1% to 20% improvement potential. Most consulting companies will agree, however, that there is usually more potential to be harvested. According to a McKinsey report, it typically ranges from 2-7%-points for the average global B2B manufacturing company. These numbers align well with North’s own experience with global B2B manufacturing companies doing technology transformations of their end-to-end pricing practices.
Despite this importance, however, they are often managed in isolation, typically by an analytical pricing department with limited mandate to execute a value agenda across the value chain. While the pricing function should stir up some healthy conflict with commercial functions, the complete lack of mandate means there is usually only one winner of the battle: Sales – where the pressure to close deals may prompt sales representatives to offer discounts that undermine pricing strategies or, even worse, completely overlook potential pockets of value that could have been captured without risking the sale. With pricing an operational function that’s a realization of everything from quoting and ordering to finance reporting, there’s a risk of a disconnect when you allow it to be an analytical function that’s based on an external set of circumstances.
To draw on the full potential of pricing, organisations need to shift their perspective and treat pricing as an integral function as opposed to a supporting role. Pricing should influence and be influenced by every stage of the customer journey—from quoting and ordering to finance and post-sale services. This means handing the pricing function the mandate to enact changes across departments to create a cohesive strategy.
When pricing is integrated into the entire value chain, it allows a more dynamic and responsive approach to market demands. For example, if a sales rep is repeatedly told that prices are much higher than that of competitors – a fact which they can rarely check – they could discount the core product, or lower-margin add-ons like shipping or payment terms, but keep full prices for high-margin services, thus protecting the full profitability of the bundle being sold, rather than just slashing prices across the board due to lack of transparency into the product components being negotiated. Rather than viewing pricing as a constraint, sales teams can use it as a strategic tool to heighten customer value and enable a more flexible sales negotiation. Operational processes can be optimised to support pricing strategies, e.g. by limiting fulfilment’s mandate to edit contracted prices, thus making sure that every aspect of the organisation maximises value for both the company and its customers.
As neat and tidy as that may sound on paper, it’s actually quite a hard trick to pull off in real life – which is why a CVO is so important.
The role of the Chief Value Officer
Essentially, a CVO’s job is to make sure that value creation is managed holistically across the entire value chain. Unlike traditional roles that might focus on specific areas such as product pricing or sales, a CVO takes on the responsibility of coordinating and aligning value optimisation efforts across all departments.
Their primary responsibility is to make sure that there is a globally aligned definition of list-to-net value components. The task is to specify out all components that could represent customer value and therefore should be a part of any potential customer contract negotiation or as a potential value leakage if not executed according to the contracted price paid by the customer.
Once value is well-defined and -aligned, the job involves aligning KPIs, incentives, and work processes to capture the full value potential from a list-to-net price perspective. A crucial enabler is to create an end-to-end data flow in a well-integrated system landscape from price setting, over quoting and contract management, to order and rebate execution, and financial performance measurement. If any key customer-facing processes are not system-enabled, data gaps will prevent transparency and preventative action. No global organisation can avoid errors or inefficiencies in trying to hand-hold complex pricing data across self-made, local Excel sheets, especially at global scale. Each market will develop their own way, which may work locally, but will never scale globally or across business units.
To be truly effective, a CVO needs to operate at a C-level level to ensure that value management is a strategic priority across the entire organisation. This level of seniority is central to driving the kind of cross-departmental initiatives that can fundamentally transform how a company approaches value creation.
In much the same way that a Chief Digital Officer leads digital transformations, a CVO plays a transformative role in steering a company towards a more integrated and value-focused approach.
Key Performance Indicators (KPIs) for CVO success
The effectiveness of a Chief Value Officer (CVO) hinges on their ability to implement and track the right KPIs. Traditional metrics, like profit margins or revenue alone, tend not to capture the full spectrum of value creation. As a result, a CVO needs to focus on KPIs that deliver a more comprehensive view of the company’s financial health and customer value. Of the factors that are important here, experience has taught us that the following three are most crucial for success:
Absolute profits: This serves as a primary KPI for the CVO, as it reflects the total financial gain after considering all costs and revenues. Unlike profit margins, which can be misleading in certain contexts due to its – at times – narrow scope that excludes vital costs, uncertainty of cost allocation to product lines or customers, and even subjective interpretation of scope, absolute profits provide a clearer picture of financial success as it takes into account the volume of closed deals.
Revenue: This is an important secondary measure, particularly when viewed in conjunction with profitability metrics. While revenue growth is a positive sign, it shouldn’t be pursued at the expense of profitability. A CVO needs to balance these two metrics to steer sustainable growth and avoid absolute profits stemming purely from cost-out exercises.
Mapping of value components: Perhaps most importantly, companies need to identify and agree on the various components that contribute to the overall value of the company’s offerings. This includes deciding which aspects should be monetized and keeping all parts of an organisation aligned with this approach. Examples include basic terms and conditions that should be handled during the contract negotiation, like payment terms, delivery methods, and rebate schemes, but it also includes operational process after the negotiation, including reminders for contract expiration dates, validation of customer’s entitlement to after-sales services, rebates or delivery methods. With a CVO tracking these components, they can drive data collection and behaviour change across a company, leading to more effective value management.
Competencies for a successful CVO
In order to fulfil their role effectively, a CVO needs to bring a distinct combination of skills and qualities to the table. Given the strategic importance of their role, they must have the authority, insight, and influence to challenge established practices and nurture collaboration across departments.
Experience: This is a prerequisite. A CVO role demands someone who has a comprehensive understanding of both the commercial and operational facets of the business. End-to-end value realisation is ultimately an endeavour of meticulous operational execution. This necessitates not only experience but also an in-depth knowledge of both the specific company and the industry in which it operates to credibly substantiate the benefits promised to the organisation.
Charisma and influence: A CVO needs to inspire and mobilise an entire organisation – from top-level executives to ground-level operational teams – around the value management agenda. This often involves major changes in how departments operate and collaborate, which can be met with resistance. Strong communication skills and political deft are therefore a necessity, with a CVO needing to be able to articulate a vision for value management in a way that connects meaningfully with different stakeholders and engages their commitment to it.
“Everyone agrees that value management matters. Few realise how complex it is to get right.”
Replacing the F with V in CFO
In a perfect world, you would hire your next CVO from within your internal ranks. The reason is clear: deep familiarity with the company’s operations, products, and culture is essential for success in this role. An internal hire can hit the ground running, leveraging established relationships and a thorough understanding of the organisation's challenges and opportunities—critical for managing value holistically across the business.
However, finding the right person internally can be a challenge. This is where the natural evolution from CFO to CVO comes in. This shift isn’t just about a new title—it’s about redefining how companies view and manage value. As pricing becomes more complex and integrated across the value chain, CFOs are uniquely positioned to step into the CVO role. There are a few reasons for this:
The CFO has an executive mandate which allows them to drive end-to-end accountability for pricing realisation. They have a unique reach and pre-existing collaboration with all business functions from sales to supply chain, allowing them to pick up the value conversation in existing collaboration fora.
The CFO is already mandated with managing value. Pricing is just a part of that, and it is an area riddled with overlooked value pockets, if only someone did the work of attaching value to it and insisting on measuring it.
The CFO area is usually quite meticulous in financial definitions. This is a perfect fit with pricing, as the area needs to expand the definition to more than just list prices. The number of conditions that could be included in a contract negotiation is vast, and it requires meticulousness to map it.
The benefits are obvious: Set commercial functions free to do what they do best. Maintain division of responsibilities and avoid the wolf guarding sheep. No CCO should be tasked with setting their own prices. Allow the pricing area to become something more than an analytical function setting list prices.
Many CFOs are already evolving into this position, overseeing not just financial reporting, but how pricing and value creation are aligned across departments to maximise profitability. This transition allows CFOs to become strategic leaders in value-based decision-making, moving beyond numbers to influence how value is realised throughout the organisation.
Conclusion
Within the broad number of 3-letter acronyms that fill modern C-suites, the CVO must become a more widely recognized and adopted business title with clear responsibilities and company-wide mandate.
This role is a key driver of sustainable profits, helping businesses adopt a value-centric approach. CVOs transform how companies manage value realisation, going beyond mere product pricing to expanding the very definition of pricing and avoiding value leakage in every department along the value chain.
For companies ready to improve their value proposition and drive meaningful change, the appointment of a CVO represents a profound strategic investment in future growth.
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