Not to throw cold water on anyone’s exuberance, but social networks could destroy your sales strategy, and your company along with it.
Why? Because technology and the Internet propel unplanned situations and events at unprecedented speed. So it’s important to recognize that the same social forces that create significant value also have the power to annihilate it. How you manage the risks will determine whether history will judge you to be a New Media Ninja or another unprepared victim. While new media and social networking present boundless opportunities, no discussion is complete without asking what could go wrong, and what actions should be taken.
Risk Silos
Consider the catastrophic outcome that Bob Furniss shared in which a disgruntled 15-year-old started a FaceBook group called "ACME Tied to Kill Me."
As he described it, “She outlined her dissatisfaction. Suddenly, there were others who joined the group. Soon there were hundreds of links to personal and business blogs and complaint sites.” Twenty years ago, an unhappy teenager would have limited capacity to disseminate a product grievance, and would not have posed a measurable threat. That was then. This is now. The CRM breakdown likely led to a significant financial problem for the company. How many times do you think Acme’s Director of Customer Support said “Woulda . . . Coulda . .. . Shoulda” when he met with the company’s board?
How did ACME blow it? By failing to manage risks across the organization. CRM risks ARE financial risks. Unfortunately, many organizations like ACME silo risk management in the same way as they do business processes and information. Could this problem have happened if ACME’s VP of Customer Experience warned their CFO that through the Internet, an unhappy customer could singlehandedly undermine her best cash flow projections? Or, if the CFO had considered how events outside of market cycles and interest-rate fluctuations might put her imperil her financial planning? What preemptive actions could ACME have taken? In the absence of such strategic planning, the unprepared ACME managers must have appeared like deer in the headlights to this media-savvy kid.
For companies that value brand identity, social networks create unique risks as well. For example, a vexing trend is for consumers—not marketers—to use social networks to define product and brand attributes. While social media create the opportunity for products to better match required consumer outcomes, this shift in information power underscores the importance of asking the right risk-related questions:
• If we lose control of product designs and life cycles, what strategic risks would we face?
• What if the resulting product design or image is one we don’t want, can’t support, or both?
• What operational challenges could occur if we can’t manufacture the desired products in the right quantity at the right time?
While the operational questions highlight risks that companies have faced and managed for many years, social networks have rendered past mitigation strategies obsolete, so new strategies must be developed.
Strategy risk
In his article, Like On-Demand, the Social Web May Have Unintended Consequences for Businesses, Denis Pombriant highlighted another set of risks. He writes, “My bet is that social computing will provide us with an avalanche of new data from customers that must be analyzed, and that's where I think we can look for unintended consequences.”
Those unintended consequences are the associated risks of implementing the wrong strategy, or implementing the right strategy the wrong way. According to Denis, one risk is “that we take the new information we collect too seriously and that we fail to perform analysis and challenge the results. If that happens, look for companies running off in strange directions chasing what amounts to unicorns. The odds are that some companies will fall into this self-baited trap...”
Reputation Risk
If you’ve worked in sales for few years, you’ve probably heard a manager in your company say “If we can just get meetings with the right people, our product sells itself.” Clearly, the best products in the world can’t be widely sold if influential people don’t know about them.
Based on that imperative, it’s easy to understand why social networking tools are vital for reducing sales risk.
John Todor explained why in his CustomerThink article, Social Networks and Online Communities Create Elastic Ties and Surprisingly Powerful Pay-Offs: “The power of online social networks comes, not from whom you know directly, but from the people the people you know know. People who actively pursue weak-tie relationships stand to gain substantial benefits. They can quickly take advantage of emerging opportunities, find collaborators, find jobs, find employees and build a pool of advocates.”
Barry Trailer’s blog provides empirical proof:
“For a test, 30 sales executives were selected to interview. Using LinkedIn members of our network were asked to facilitate an introduction to these people we had never met. Surprisingly, 29 of these individuals accepted the request and passed it on to their contacts with a personal note of introduction. More surprising, 23 of those targeted executives (including people in Europe and the Far East) accepted our request, and offered to consider helping our research effort.
In follow up, 18 of the 23 participated – a 60% hit rate! A much more favorable result compared to cold calling.”
But these discussions don’t tell the risk part of the story. As I’ve learned the hard way, prospects hold very high expectations from social connections, and underperformance in the sales process causes backfires that can remain ugly. For example, one company I worked with believed its account executive was so well connected in a prospect’s organization that they didn’t apply customary rigor to navigating the steps to the sale. “No need for account qualification, value propositions, or financial justification because we know Joe through Steve,” they said. They were wrong. Not only was Joe disappointed, but he called Steve and asked “How did you ever get involved with these guys?” Beyond the introductory social connection chit-chat, somebody still needs to sell something. Complacency gets in the way.
Further, I was struck by a certain irony as I read Barry’s findings. Although we admonish our school-age children to be wary of social networking tools on the web, the high ratio of invitation acceptance he describes suggests that executives don’t exercise similar caution (albeit they need to do so for different reasons). Does the risk of a damaged reputation seem so remote that executives readily accept requests from cyber-strangers to endorse them? Will the current success ratio Barry discovered diminish as social networking becomes more mature, and executives learn how carefully-built reputations can become damaged? Will we see a similar wave of caution as we did with chat rooms, FaceBook, and MySpace?
Stay tuned.
(Apologies to Rob Cross for corrupting the title of his excellent book, The Hidden Power of Social Networks.)
Tuesday, January 6, 2009
Goofus and Gallant Make CRM Decisions
For those who may not be familiar with Goofus and Gallant, the Highlights Magazine feature contrasts how two children—Goofus, who is bad, and Gallant, who is good—make divergent ethical choices when faced with the same set of circumstances. The text is presented as captions below simple drawings that illustrate the action. (A quote from a 1960 Highlights: “Goofus turns on the television when there are guests; whenever guests arrive, Gallant turns off the television at once.”)
Reading Goofus and Gallant is a great dose of reality on days when I’m feeling totally ethical. I always ask myself “What would I do?” While I don’t think I’m as flagrantly selfish as Goofus, I’m clearly socially and ethically maladjusted next to Gallant’s consistent kindness, thoughtfulness, and sense of fair play.
What if Goofus and Gallant outgrew their permanently juvenile forms and became grown-up executives faced with contemporary ethical decisions? How might they decide when they aren’t guided by flowcharts, formulas, and sophisticated software, but rather when answering the question “what is the right thing to do?”
Here are some examples:
“Goofus believes that only frequent passengers on his airline have the right to expect good service. Gallant believes all passengers are entitled to a good flying experience.”
“Goofus markets his products as ‘green’ even though he buys many materials from unregulated offshore factories; Gallant only sells products that meet rigorous standards for responsible environmental stewardship.”
“Goofus licenses his company’s logo to other companies whose practices and motives are unknown so that he can make an extra profit; Gallant values the trust that his customers place in his company.”
“Goofus uses direct mail to circumvent regulations so he can get senior citizens to accept telemarketing pitches; Gallant complies with the FTC’s vendor guidelines for no-call lists.”
“Goofus saves IT costs by not updating infrastructure and information security software; Gallant believes the privacy of his customers’ transaction information is a strategic priority.”
"Goofus optimizes his personal exit strategy when making CRM decisions; Gallant thinks about what’s best for his employees and customers.”
As sales, marketing, and business development professionals, we have at our disposal unprecedented power to create positive outcomes for many people, or to turn that power toward tactics that exploit trust and erode value. The overwhelming majority of the decisions we make are not constrained by laws and regulations. Even if Gallant’s decisions represent an unattainable ethical purity, isn’t it worth asking “what is the right thing to do?”
Reading Goofus and Gallant is a great dose of reality on days when I’m feeling totally ethical. I always ask myself “What would I do?” While I don’t think I’m as flagrantly selfish as Goofus, I’m clearly socially and ethically maladjusted next to Gallant’s consistent kindness, thoughtfulness, and sense of fair play.
What if Goofus and Gallant outgrew their permanently juvenile forms and became grown-up executives faced with contemporary ethical decisions? How might they decide when they aren’t guided by flowcharts, formulas, and sophisticated software, but rather when answering the question “what is the right thing to do?”
Here are some examples:
“Goofus believes that only frequent passengers on his airline have the right to expect good service. Gallant believes all passengers are entitled to a good flying experience.”
“Goofus markets his products as ‘green’ even though he buys many materials from unregulated offshore factories; Gallant only sells products that meet rigorous standards for responsible environmental stewardship.”
“Goofus licenses his company’s logo to other companies whose practices and motives are unknown so that he can make an extra profit; Gallant values the trust that his customers place in his company.”
“Goofus uses direct mail to circumvent regulations so he can get senior citizens to accept telemarketing pitches; Gallant complies with the FTC’s vendor guidelines for no-call lists.”
“Goofus saves IT costs by not updating infrastructure and information security software; Gallant believes the privacy of his customers’ transaction information is a strategic priority.”
"Goofus optimizes his personal exit strategy when making CRM decisions; Gallant thinks about what’s best for his employees and customers.”
As sales, marketing, and business development professionals, we have at our disposal unprecedented power to create positive outcomes for many people, or to turn that power toward tactics that exploit trust and erode value. The overwhelming majority of the decisions we make are not constrained by laws and regulations. Even if Gallant’s decisions represent an unattainable ethical purity, isn’t it worth asking “what is the right thing to do?”
A Sales Team Needs More Than "High ROI" and "Low TCO" To Compete
“How will your IT solution help me sell more pizza?”
That’s how one COO recently confronted a team of salespeople from a software integrator when they showed up for their first sales call. The salespeople could not answer the question. They had prepared for a different discussion, and the PowerPoint they brought, but never showed, included lots of technical information, along with charts and graphs showing ROI (Return on Investment) and TCO (Total Cost of Ownership)—none of which offered insight about how to solve COO’s strategic challenge. The meeting was terminated and rescheduled for a later date. The final outcome? It’s described toward end of this blog.
The pain of that interaction underscores why one of my clients, a large software developer, initiated a worldwide program to help their resellers shift from selling mainly small $20,000 Information Technology (IT) projects—which are frequently vetted using ROI calculations—to selling larger enterprise projects that require sales teams to prove strategic value along with financial returns. As enterprises adopt governance policies and “balanced scorecards” designed to promote alignment between IT investments and corporate strategy, the need to adopt a sales process that proves value beyond the achievement of simple financial calculations or Key Performance Indicators (KPI’s) has never been stronger. The project I’m currently working on provides me the opportunity to facilitate this metamorphosis.
But what’s wrong with talking to prospects about ROI and TCO?
Nothing, other than the fact that many marketers and salespeople simply fail to put these metrics in any context. Case in point: This week, RFID Solutions Online sent me an e-newsletter with the subject “Find The ROI In Your Asset Tracking Initiatives”. But the accompanying article summary doesn’t connect the value of asset tracking to financial or operational strategy.
And it’s not that there isn’t a connection. There is, but I couldn’t find it anywhere in the email. So the over-worn statement “Find The ROI . . .” isn’t visceral to C-Level executives who live and breathe strategy. This example is the tactical equivalent of a quarterback leading an offense to the opponent’s 10-yard line, and on third down saying “I think we’ve gone far enough.”
Why does ROI/TCO alone fall short? Because the “heavy lifting” in sales is in enabling prospects first to believe the facts about an issue, then to care about the issue, then to act to solve it. ROI and TCO are reasonably helpful for the belief stage (“We used the numbers the client provided for our ROI calculations!”), but marginally effective for answering the question “Why should I care?” And, if no influential individuals in an organization care about a given issue, would anyone wager that they would act to solve it?
So, beyond ROI and TCO, how can a company gain a sales advantage?
To answer that question, let’s look at how the sales team managed its setback with the pizza company COO. After returning to their office, the group took the time to formulate a set of questions about the growth strategy for the pizza company, including questions about finance, supply chain logistics, CRM, and human resources. They reformulated a presentation and met with the COO about two weeks later. Their project was approved and they won the opportunity.
What did the team figure out?
First, the team realized that positioning their offering to enable growth was mission critical for both vendor and prospect. By making the shift from a purely financial appeal to a strategic appeal, the sales team minimized the risk of “no decision.” In addition, another important outcome occurred. Because strategic growth impacts every operating unit in an organization, the sales team opened relationships with a cross-functional team of senior executives. Prior to that change, the vendor’s sales team networked only in the IT department. Finally, the sales team was rewarded with an unintentional benefit: they faced fewer competitors. Before changing their approach, the sales team competed with every vendor touting high ROI—some of which were selling IT solutions. Now, only two vendors offered a path to the strategic growth the COO required.
How did the sales team realign to address the COO’s problem, and what steps did they follow from beginning to end?
The team leveraged the competencies they already had, but had never effectively combined. They used empathetic listening skills, systems analysis techniques, and business acumen to convert what could have been a certain loss. All of these competencies rarely exist in one individual, so collaborative processes and effective team leadership were also required. The specific steps the team used will be covered in next week’s blog, “How to Uncover Strategic Opportunities through Strategic Questions.”
That’s how one COO recently confronted a team of salespeople from a software integrator when they showed up for their first sales call. The salespeople could not answer the question. They had prepared for a different discussion, and the PowerPoint they brought, but never showed, included lots of technical information, along with charts and graphs showing ROI (Return on Investment) and TCO (Total Cost of Ownership)—none of which offered insight about how to solve COO’s strategic challenge. The meeting was terminated and rescheduled for a later date. The final outcome? It’s described toward end of this blog.
The pain of that interaction underscores why one of my clients, a large software developer, initiated a worldwide program to help their resellers shift from selling mainly small $20,000 Information Technology (IT) projects—which are frequently vetted using ROI calculations—to selling larger enterprise projects that require sales teams to prove strategic value along with financial returns. As enterprises adopt governance policies and “balanced scorecards” designed to promote alignment between IT investments and corporate strategy, the need to adopt a sales process that proves value beyond the achievement of simple financial calculations or Key Performance Indicators (KPI’s) has never been stronger. The project I’m currently working on provides me the opportunity to facilitate this metamorphosis.
But what’s wrong with talking to prospects about ROI and TCO?
Nothing, other than the fact that many marketers and salespeople simply fail to put these metrics in any context. Case in point: This week, RFID Solutions Online sent me an e-newsletter with the subject “Find The ROI In Your Asset Tracking Initiatives”. But the accompanying article summary doesn’t connect the value of asset tracking to financial or operational strategy.
And it’s not that there isn’t a connection. There is, but I couldn’t find it anywhere in the email. So the over-worn statement “Find The ROI . . .” isn’t visceral to C-Level executives who live and breathe strategy. This example is the tactical equivalent of a quarterback leading an offense to the opponent’s 10-yard line, and on third down saying “I think we’ve gone far enough.”
Why does ROI/TCO alone fall short? Because the “heavy lifting” in sales is in enabling prospects first to believe the facts about an issue, then to care about the issue, then to act to solve it. ROI and TCO are reasonably helpful for the belief stage (“We used the numbers the client provided for our ROI calculations!”), but marginally effective for answering the question “Why should I care?” And, if no influential individuals in an organization care about a given issue, would anyone wager that they would act to solve it?
So, beyond ROI and TCO, how can a company gain a sales advantage?
To answer that question, let’s look at how the sales team managed its setback with the pizza company COO. After returning to their office, the group took the time to formulate a set of questions about the growth strategy for the pizza company, including questions about finance, supply chain logistics, CRM, and human resources. They reformulated a presentation and met with the COO about two weeks later. Their project was approved and they won the opportunity.
What did the team figure out?
First, the team realized that positioning their offering to enable growth was mission critical for both vendor and prospect. By making the shift from a purely financial appeal to a strategic appeal, the sales team minimized the risk of “no decision.” In addition, another important outcome occurred. Because strategic growth impacts every operating unit in an organization, the sales team opened relationships with a cross-functional team of senior executives. Prior to that change, the vendor’s sales team networked only in the IT department. Finally, the sales team was rewarded with an unintentional benefit: they faced fewer competitors. Before changing their approach, the sales team competed with every vendor touting high ROI—some of which were selling IT solutions. Now, only two vendors offered a path to the strategic growth the COO required.
How did the sales team realign to address the COO’s problem, and what steps did they follow from beginning to end?
The team leveraged the competencies they already had, but had never effectively combined. They used empathetic listening skills, systems analysis techniques, and business acumen to convert what could have been a certain loss. All of these competencies rarely exist in one individual, so collaborative processes and effective team leadership were also required. The specific steps the team used will be covered in next week’s blog, “How to Uncover Strategic Opportunities through Strategic Questions.”
Is Sales Necessary? ... Or Necessarily Evil?
Salespeople fight a "guilty until proven innocent" reputation when working with customers. I know, because as a salesperson I’ve battled it for over 20 years. The customer reaction isn’t surprising. Sales people are on the customer-relationship front line, and they absorb the brunt of buyer vitriol. In fact, a survey that DDI International recently conducted with 2,705 corporate buyers worldwide, “2007-2008 Global Sales Perceptions Report,” documented the problem with painful clarity. The report reveals how salespeople are perceived, and over 47% of US survey respondents indicated that they “would not be proud to be called a salesperson.” According to the report, “the most common description across all countries was that Sales is ‘a necessary evil.”
Given the billions of dollars that are spent annually on sales effectiveness training and CRM systems, this sentiment is an indictment on the sales profession, and it says we’re failing at our efforts to improve our face-to-face experiences with our customers. Not all is bad, however. Tremendous opportunities exist for enterprises that strategically change how their sales forces engage with customers.
Why do buyers have antipathy for sales people?
To answer this question, it’s necessary to look beyond salespeople themselves and to the culture and systems under which salespeople have worked for several generations. First, ever since sales became a distinct entity in commercial enterprises, the tactical objectives of the sales force have been dictated by corporate revenue goals. A closely-watched metric by investment analysts, revenue goals are developed in the board room, and trickle down to the individual sales representative through a sometimes-perverse and inherently flawed calculus, the end-point of which is called a quota. This all-important number represents the salesperson’s revenue commitment to the organization, and it carries ponderous weight. With revenue as the focal point of sales-performance discussions, quota over-achievement often means significant financial rewards; under-achievement compromises a salesperson’s ever-tenuous job stability.
As any quota-carrying salesperson or sales manager can attest, the assignment of sales quotas frequently involve rancorous negotiations. Some quotas are completely arbitrary, based on the direction fairy dust blows when it is thrown up in the air. Others are based on conditions that are outside of the salesperson’s control—market and economic forecasts, product and pricing forecasts, assumptions, and growth factors.
Quotas are half the story. The other half is how revenue is credited against sales quotas. This exercise often results in a smoke-and-mirrors game that is as much political as it is the application of accounting debits and credits. The result is an unwieldy multi-page document, sometimes called a Commission Plan, which can require a lawyer’s expertise to decipher for all the ambiguity. Such complexity prompted one Vice President of Sales at a company I worked for to envision a commission plan that could fit on one side of a business card—a noble goal he never implemented.
So every day under this basic system of illogical quota calculation and revenue accrual, legions of salespeople engage with millions of customers worldwide. Lost in all the shouting and confusion are the answers to these questions: “What is valuable to the people and organizations that use our products?” And the corollary question, “How will our salespeople behave given the financial “ecosystem” we have created?” No wonder so many buyers decry their sales experiences. Any moniker purporting “customer-centricity” only serves to put lipstick on this big, ugly pig.
Second, many organizations have not applied thought to the question, “what value must sales contribute to our organization in order for us to meet our strategic objectives?" Yet, companies invest in recruiting, hiring, managing, training, and compensating their sales forces in spite of such vagueness, and without a coherent way to measure efficacy.
When I ask my clients what value their sales force must provide to their organization, the immediate answer I often hear is “revenue.” “OK,” I say, “but if there are no profits associated with the revenue, is that valuable?” My clients respond “Of course not, we must make a profit.” Taking this idea further, I ask “If you make a profit, but your customers aren’t satisfied with your product and wouldn’t recommend your company—is that valuable?” And the inevitable answer: “No, of course not.” Finally, I ask “What if your organization achieved profitable revenue targets, and had satisfied clients, but didn’t gain any market insight for future strategy—would that be valuable?” The answer: “No, our planners and strategists depend on our sales force to provide valuable feedback from the field!” Then the light bulb turns on: the sales force must deliver value beyond top-line revenue! Unfortunately, we’re stuck in a cycle of value-chain discord until organizations stop demanding multiple outcomes from their sales force, but understand only one dimension—revenue.
Happily, some organizations have taken important steps to break free from the revenue-at-all-cost myopia. One company I work with penalizes a salesperson if a customer has purchased its software, but does not use the capabilities the software provides. Why has the vendor taken this position when nearly all of its competitors are focused on pushing new licenses and version upgrades? Because their senior management recognizes that nothing puts a company’s logo into a customer’s budget-cutting crosshairs faster than a known wasted IT investment. Other examples abound in which organizations have taken a progressive stance on rewarding salespeople for activities that are valuable to the organization beyond revenue generation. Such changes are important because they serve as steps to mitigate the discord described in the DDI survey.
But if we can’t change the economic system, how can we find a better way for sellers and buyers interact?
Probably the more fundamental question is “do we need to find a better way?” Are you content with the status quo? The DDI survey clearly says buyers are not. Your answer likely depends on whether you view sales as necessary—or necessarily evil.
Given the billions of dollars that are spent annually on sales effectiveness training and CRM systems, this sentiment is an indictment on the sales profession, and it says we’re failing at our efforts to improve our face-to-face experiences with our customers. Not all is bad, however. Tremendous opportunities exist for enterprises that strategically change how their sales forces engage with customers.
Why do buyers have antipathy for sales people?
To answer this question, it’s necessary to look beyond salespeople themselves and to the culture and systems under which salespeople have worked for several generations. First, ever since sales became a distinct entity in commercial enterprises, the tactical objectives of the sales force have been dictated by corporate revenue goals. A closely-watched metric by investment analysts, revenue goals are developed in the board room, and trickle down to the individual sales representative through a sometimes-perverse and inherently flawed calculus, the end-point of which is called a quota. This all-important number represents the salesperson’s revenue commitment to the organization, and it carries ponderous weight. With revenue as the focal point of sales-performance discussions, quota over-achievement often means significant financial rewards; under-achievement compromises a salesperson’s ever-tenuous job stability.
As any quota-carrying salesperson or sales manager can attest, the assignment of sales quotas frequently involve rancorous negotiations. Some quotas are completely arbitrary, based on the direction fairy dust blows when it is thrown up in the air. Others are based on conditions that are outside of the salesperson’s control—market and economic forecasts, product and pricing forecasts, assumptions, and growth factors.
Quotas are half the story. The other half is how revenue is credited against sales quotas. This exercise often results in a smoke-and-mirrors game that is as much political as it is the application of accounting debits and credits. The result is an unwieldy multi-page document, sometimes called a Commission Plan, which can require a lawyer’s expertise to decipher for all the ambiguity. Such complexity prompted one Vice President of Sales at a company I worked for to envision a commission plan that could fit on one side of a business card—a noble goal he never implemented.
So every day under this basic system of illogical quota calculation and revenue accrual, legions of salespeople engage with millions of customers worldwide. Lost in all the shouting and confusion are the answers to these questions: “What is valuable to the people and organizations that use our products?” And the corollary question, “How will our salespeople behave given the financial “ecosystem” we have created?” No wonder so many buyers decry their sales experiences. Any moniker purporting “customer-centricity” only serves to put lipstick on this big, ugly pig.
Second, many organizations have not applied thought to the question, “what value must sales contribute to our organization in order for us to meet our strategic objectives?" Yet, companies invest in recruiting, hiring, managing, training, and compensating their sales forces in spite of such vagueness, and without a coherent way to measure efficacy.
When I ask my clients what value their sales force must provide to their organization, the immediate answer I often hear is “revenue.” “OK,” I say, “but if there are no profits associated with the revenue, is that valuable?” My clients respond “Of course not, we must make a profit.” Taking this idea further, I ask “If you make a profit, but your customers aren’t satisfied with your product and wouldn’t recommend your company—is that valuable?” And the inevitable answer: “No, of course not.” Finally, I ask “What if your organization achieved profitable revenue targets, and had satisfied clients, but didn’t gain any market insight for future strategy—would that be valuable?” The answer: “No, our planners and strategists depend on our sales force to provide valuable feedback from the field!” Then the light bulb turns on: the sales force must deliver value beyond top-line revenue! Unfortunately, we’re stuck in a cycle of value-chain discord until organizations stop demanding multiple outcomes from their sales force, but understand only one dimension—revenue.
Happily, some organizations have taken important steps to break free from the revenue-at-all-cost myopia. One company I work with penalizes a salesperson if a customer has purchased its software, but does not use the capabilities the software provides. Why has the vendor taken this position when nearly all of its competitors are focused on pushing new licenses and version upgrades? Because their senior management recognizes that nothing puts a company’s logo into a customer’s budget-cutting crosshairs faster than a known wasted IT investment. Other examples abound in which organizations have taken a progressive stance on rewarding salespeople for activities that are valuable to the organization beyond revenue generation. Such changes are important because they serve as steps to mitigate the discord described in the DDI survey.
But if we can’t change the economic system, how can we find a better way for sellers and buyers interact?
Probably the more fundamental question is “do we need to find a better way?” Are you content with the status quo? The DDI survey clearly says buyers are not. Your answer likely depends on whether you view sales as necessary—or necessarily evil.
Strategic Questions Will Uncover Strategic Opportunities
The late Peter Drucker said “true marketing starts out with the customer, his demographics, his realities, his needs, his values. It does not ask ‘what do we want to sell?’ It asks ‘what does the customer want to buy?’ So, why have so few people figured out how to routinely and systematically uncover this fundamental insight? And why do few senior managers pay more than lip service to encouraging or requiring their sales forces to discover the answer?
One reason is that in the quest to create a “sales-driven culture,” companies push muscular sales tactics that often subordinate the importance of questions. “ABC—Always Be Closing,” or “Show the ROI!” or “Go for a trial close after showing our key features,” are part of sales-process DNA. Does anyone remember this recommendation--“When you get the customer to answer ‘yes’ to three consecutive questions, ask for the order.” ? One sales training tape I heard ignored asking questions altogether, offering this nugget: “If the customer voices an objection, give them a ‘yes . . .but.. . .” (I am not making this up—and I’m sure the phonic similarity to “headbutt” is not just a coincidence!) These superficial tactics fall short by not embedding strategic discovery into the sales process.
What is strategic discovery? It’s the process of learning how an organization plans to create, monetize, and deliver its value. Why is strategic discovery a vital competency for sales forces? Because compared to operational problem solving, strategic collaboration tightly connects enterprises in a value chain. Those tight connections increase a vendor’s value and reduce selling risks. Why? Because strategic initiatives are mission-critical and are often less ephemeral than operational initiatives. When a salesperson says “my solution enables your strategy,” she has a competitive advantage over the salesperson who says “my solution provides the highest ROI (and/or lowest Total Cost of Ownership).” I know from numerous sales engagements I’ve managed that “high ROI” alone provides a wobbly sales-value foundation. (See my recent blog, A Sales Team Needs More Than "High ROI" and "Low TCO" To Compete and related article The Right Sales Questions Will Get the Right Answers.)
Strategic discovery doesn’t have to be difficult, but the process makes many salespeople uncomfortable. Strategy questions must uncover business and financial challenges. They examine forces that are outside of anyone’s direct control. Part of the discussion includes blurry concepts like risks and trade-offs. Few strategic questions can be answered with a simple ‘yes’ or ‘no.” And strategic plans aren’t guided by ordained roadmaps or prescriptive methodologies.
So, what are the steps that a Sales-Discovery Black Belt should follow?
1. Begin with a foundation of mutual trust. As Jim Collins said in the bestseller Good to Great, “create an environment where the truth is heard.” Prospective customers don’t spontaneously open up and provide meaningful and honest answers to questions. And if you wait until the second meeting to start thinking about how to cultivate trust, it’s probably too late. Mutual transparency of goals and objectives must characterize the business relationship from the beginning. The best book I have read on this topic, Mahan Khalsa’s Let's Get Real or Let's Not Play, provides an approach that is as eloquent as it is sensible: “The decision to trust doesn’t start inside (your prospect)—it starts inside of you. Intent is a choice, and your choice will have consequences. You will communicate your intent whether you want to or not . . . Based on your intent, people will decide to trust you or not.”
2. Ask the right questions. Here are some of my favorite strategy questions, culled from a list of hundreds I’ve compiled over many years:
What are the key capabilities and resources required to execute strategy and achieve your goals?
In order to execute your business strategy, what are the key things you must do well?
What proprietary advantages must your company create for your strategy to be successful?
What are the most valuable outcomes your organization enables for your customers?
What are the major forces driving changes in your business?
What conditions have the most disruptive impact on your business now, and will have in the future?
What are the greatest opportunities for your company to change the basis of competition in your industry? How might these impact barriers to entry? Switching costs? Relationships in your value chain? Product differentiation?
How sustainable is your market position and the business model needed to achieve and support that position?
What are your options for growing your business in the future?
3. Identify capability gaps. Specific operational questions will uncover gaps between strategic imperatives and current capabilities. For example, the question “What are the major forces driving changes in your business?” might yield that global competition is a condition of growing importance. If the prospect company lacks operational capabilities to manage a worldwide supply chain, a strategically-significant impediment has been identified. From this finding, the essential work of sales takes place—enabling a client first to believe the facts about an issue—then to care, then to act. Operational questions are instrumental for crossing the belief threshold, so caring and acting are more likely because of the strategic ramifications of the capability gap.
4. Align the gaps with a recommended solution. This final step ensures that the recommended solution matches the client’s strategic imperative. A scenario from my sales past illustrates the importance of this step. Several years ago, one prospective client told me “Our goal is to get our organization 100% on bar coding by the end of next year.” Although I was pleased he believed in my product, I cringed at his remark, wondering how he would handle the Q&A from his management peers at his next planning meeting. The strategic goal was to improve cash flow by cutting order cycle time. Bar coding was one enabler. By establishing a foundation of trust described in Step 1, my commitment was to help my client achieve that outcome.
Achieving the right sales outcome--my client's success--required both my client and me to keep the strategic objective in focus.
One reason is that in the quest to create a “sales-driven culture,” companies push muscular sales tactics that often subordinate the importance of questions. “ABC—Always Be Closing,” or “Show the ROI!” or “Go for a trial close after showing our key features,” are part of sales-process DNA. Does anyone remember this recommendation--“When you get the customer to answer ‘yes’ to three consecutive questions, ask for the order.” ? One sales training tape I heard ignored asking questions altogether, offering this nugget: “If the customer voices an objection, give them a ‘yes . . .but.. . .” (I am not making this up—and I’m sure the phonic similarity to “headbutt” is not just a coincidence!) These superficial tactics fall short by not embedding strategic discovery into the sales process.
What is strategic discovery? It’s the process of learning how an organization plans to create, monetize, and deliver its value. Why is strategic discovery a vital competency for sales forces? Because compared to operational problem solving, strategic collaboration tightly connects enterprises in a value chain. Those tight connections increase a vendor’s value and reduce selling risks. Why? Because strategic initiatives are mission-critical and are often less ephemeral than operational initiatives. When a salesperson says “my solution enables your strategy,” she has a competitive advantage over the salesperson who says “my solution provides the highest ROI (and/or lowest Total Cost of Ownership).” I know from numerous sales engagements I’ve managed that “high ROI” alone provides a wobbly sales-value foundation. (See my recent blog, A Sales Team Needs More Than "High ROI" and "Low TCO" To Compete and related article The Right Sales Questions Will Get the Right Answers.)
Strategic discovery doesn’t have to be difficult, but the process makes many salespeople uncomfortable. Strategy questions must uncover business and financial challenges. They examine forces that are outside of anyone’s direct control. Part of the discussion includes blurry concepts like risks and trade-offs. Few strategic questions can be answered with a simple ‘yes’ or ‘no.” And strategic plans aren’t guided by ordained roadmaps or prescriptive methodologies.
So, what are the steps that a Sales-Discovery Black Belt should follow?
1. Begin with a foundation of mutual trust. As Jim Collins said in the bestseller Good to Great, “create an environment where the truth is heard.” Prospective customers don’t spontaneously open up and provide meaningful and honest answers to questions. And if you wait until the second meeting to start thinking about how to cultivate trust, it’s probably too late. Mutual transparency of goals and objectives must characterize the business relationship from the beginning. The best book I have read on this topic, Mahan Khalsa’s Let's Get Real or Let's Not Play, provides an approach that is as eloquent as it is sensible: “The decision to trust doesn’t start inside (your prospect)—it starts inside of you. Intent is a choice, and your choice will have consequences. You will communicate your intent whether you want to or not . . . Based on your intent, people will decide to trust you or not.”
2. Ask the right questions. Here are some of my favorite strategy questions, culled from a list of hundreds I’ve compiled over many years:
What are the key capabilities and resources required to execute strategy and achieve your goals?
In order to execute your business strategy, what are the key things you must do well?
What proprietary advantages must your company create for your strategy to be successful?
What are the most valuable outcomes your organization enables for your customers?
What are the major forces driving changes in your business?
What conditions have the most disruptive impact on your business now, and will have in the future?
What are the greatest opportunities for your company to change the basis of competition in your industry? How might these impact barriers to entry? Switching costs? Relationships in your value chain? Product differentiation?
How sustainable is your market position and the business model needed to achieve and support that position?
What are your options for growing your business in the future?
3. Identify capability gaps. Specific operational questions will uncover gaps between strategic imperatives and current capabilities. For example, the question “What are the major forces driving changes in your business?” might yield that global competition is a condition of growing importance. If the prospect company lacks operational capabilities to manage a worldwide supply chain, a strategically-significant impediment has been identified. From this finding, the essential work of sales takes place—enabling a client first to believe the facts about an issue—then to care, then to act. Operational questions are instrumental for crossing the belief threshold, so caring and acting are more likely because of the strategic ramifications of the capability gap.
4. Align the gaps with a recommended solution. This final step ensures that the recommended solution matches the client’s strategic imperative. A scenario from my sales past illustrates the importance of this step. Several years ago, one prospective client told me “Our goal is to get our organization 100% on bar coding by the end of next year.” Although I was pleased he believed in my product, I cringed at his remark, wondering how he would handle the Q&A from his management peers at his next planning meeting. The strategic goal was to improve cash flow by cutting order cycle time. Bar coding was one enabler. By establishing a foundation of trust described in Step 1, my commitment was to help my client achieve that outcome.
Achieving the right sales outcome--my client's success--required both my client and me to keep the strategic objective in focus.
Honor Thy Customer Before He Leaves—Not After
In three years, I’ve never felt as loved as I do now by the cable service I just dropped, Cox Communications. Why? Because at the end of March, Verizon Fios will be the new communications provider at my home. And I feel heartsick for Cox—I’m not leaving Cox because I love Verizon more, but only because the Verizon package costs much, much less than my unbundled services.
Now the jilted Cox is communicating—with a vengeance. They have called me several times in the last two weeks to tell me how much they will miss my business. Today’s call was from Vivian “calling on behalf of Cox.” Picking up on her semantic hint, I asked her what company she was with. “Timberline,” she reported, and without pausing, she continued, “We understand you want to go with another provider, and we’re calling to offer you a discount on your cable service if you continue with Cox.”
The irony of all this was too much to bear, so I asked Vivian why Cox would wait until I’ve decided to terminate my service to have an outsourced salesperson call to tell me how much I’m appreciated by offering me a discount when they were perfectly happy to bill me at the premium rate up to this time. The unflappable Vivian didn’t have an answer for me, but she told me she noted my concern and she wished me a good day.
I was disappointed that Vivian couldn’t shed light on my question. I realize that logic often gets in my way. Is there anyone who can help me understand why Cox might wait until a customer has decided to leave to apply significant resources toward customer retention, rather than loving a customer while he or she is a customer? Is there a compelling conversion factor or KPI that I’m unaware of that makes Cox’s late plea economically astute?
In the end, it seems sad that Cox has such poor Customer Relationship Management execution that it could only muster a price-play on this “hail Mary” telemarketing call. Cox’s customers deserve better—and so does Vivian.
Now the jilted Cox is communicating—with a vengeance. They have called me several times in the last two weeks to tell me how much they will miss my business. Today’s call was from Vivian “calling on behalf of Cox.” Picking up on her semantic hint, I asked her what company she was with. “Timberline,” she reported, and without pausing, she continued, “We understand you want to go with another provider, and we’re calling to offer you a discount on your cable service if you continue with Cox.”
The irony of all this was too much to bear, so I asked Vivian why Cox would wait until I’ve decided to terminate my service to have an outsourced salesperson call to tell me how much I’m appreciated by offering me a discount when they were perfectly happy to bill me at the premium rate up to this time. The unflappable Vivian didn’t have an answer for me, but she told me she noted my concern and she wished me a good day.
I was disappointed that Vivian couldn’t shed light on my question. I realize that logic often gets in my way. Is there anyone who can help me understand why Cox might wait until a customer has decided to leave to apply significant resources toward customer retention, rather than loving a customer while he or she is a customer? Is there a compelling conversion factor or KPI that I’m unaware of that makes Cox’s late plea economically astute?
In the end, it seems sad that Cox has such poor Customer Relationship Management execution that it could only muster a price-play on this “hail Mary” telemarketing call. Cox’s customers deserve better—and so does Vivian.
Strategies—Not Products—Create Lasting Market Disruption
"I just saw our software demo," I said to my company's VP of sales. "I can see how its features will be valuable for our customers." "It's disruptive!" he replied proudly, without enlightening me about what that meant or why it mattered. But his ebullience seemed so promising at the time.
Within two years, the company churned its senior management team, the sales VP and the majority of its sales force. What went wrong? I'll get to that in a moment.
The sales VP probably knows now that products and processes by themselves have little capacity for creating meaningful change because they are not disruptive. Strategies enable market disruption, and those strategies include product innovation. Skills play a role as well, and successful managers know that working with potentially disruptive innovations requires the economic insight of Adam Smith, the inspirational leadership skills of Martin Luther King, the communication skills of Ronald Reagan, the perseverance of Thomas A. Edison, and the entrepreneurial vision of Steve Jobs. If that sounds like a daunting combination, take solace in the fact that these individuals took risks and failed repeatedly before achieving success.
‘Try describing to a teenager today what you did in 1980 to obtain music that you liked to listen to.’
What makes an innovation disruptive, anyway? An innovation is disruptive when it affects the hegemony of the market-leading company, companies or prevailing technologies for a specific market. Among the many examples of disruptive products are digital photography technologies, which replaced photographic film. And Netflix upended complacent market leader Blockbuster through an innovative business and logistics model, which forced Blockbuster to relinquish a significant source of profits from late fee charges.
Many variables
The term, disruptive innovation, was introduced by Clayton Christensen in an article written with Joseph Bower, Disruptive Technologies: Catching the Wave. The magnitude of the disruptive impact resulting from innovation can take many years to develop because the influence of many of the variables involved is unknown at the time the innovation is introduced. Today, the amount of disruption caused by such nascent innovations as iPhone, Linux and digital media file sharing is still unknown.
What conditions must be present to create disruption?
The market for the product or service is experiencing, or is likely to experience, an increased rate of demand. This demand might be created by social, business or regulatory change.
The economic outcomes in providing, acquiring or adopting the new product or service must be significantly better than the prevailing offerings.
The business model or core technology used for the innovation must be both fundamentally different from the prevailing offerings and sustainable.
Because there are many variables over long timeframes that influence whether a product or service will be disruptive, is it accurate or even useful to proclaim disruption as the sales VP did? What relationship do product innovation, market demand and marketing strategy have with market disruption? Do products that have potential to create market disruption have unique characteristics that require specialized strategies and tactics? See Elements of a Successful Disruptive Strategy below for the answers."
So what did go wrong for the sales VP and the rest of the company? Simply put, the company couldn't generate enough sales to cover expenses. It had scant market presence or brand recognition. The partner strategy was formulated as an afterthought to the sales program. The product's value to its prospective customers was poorly understood, so it could not be communicated. Compound those problems with high adoption costs and unproven financial and operational outcomes for customers, and the result was a sure failure by any sales measure.
Most egregious was the company's miscalculation that the strategic benefits its customers achieved in one successful market—electronics—would extend to other market verticals. The reason that assumption was proven wrong can be summed up with one word: Dell. No other market vertical had the adapt-or-die economics that Dell imposed in electronics. The company's managers completely misunderstood that reality, and they made poor assumptions as a result.
What can you take away from my erstwhile sales VP? First, market disruption does create value for customers. Try describing to a teenager today what you did in 1980 to obtain music that you liked to listen to. He wouldn't believe that before disruption in the music industry, consumers had to accept music in the form of complete sets (back in the day, they were called record albums) from artists that companies wanted to record, in the order they recorded them, on the media they provided, from retail channels they controlled, at the prices they wanted to charge.
But here's the second lesson: Customers are not interested in disruptive products per se; they're interested in the outcomes those products provide. Chasing the objective of creating a disruptive technology will almost surely divert management's attention from achievement of more worthwhile goals. Market disruption is a byproduct of other strategies that are inherently more meaningful to define, measure and control. Those goals could be achievement of a targeted return on investment, revenue milestones or a specific customer adoption rate.
Any one of those, managed well, will garner more success for your company than chasing the elusive disruptive technology.
Elements of a successful disruptive strategy
An understanding of the economics of the product innovation in the context of the prevailing competitive economics. Companies that have created market disruption have exhibited a keen understanding of the laws of supply and demand. Their executives understand the connections among costs, pricing, adoption rates, and market growth.
Leadership for facilitating change. Displacement of entrenched competitors—whether they are loved, reviled or something in between—requires the displacing organization to lead change. Leading change requires appeals at multiple levels: emotional, factual and symbolic. In the book, Changing Minds (Harvard Business School Press, 2006), Howard Gardner outlines seven levers of change: reason, research, resonance, representational re-descriptions, resources and rewards, real world events and resistances. These seven levers relate to different ways visions and ideas can be communicated, so people are inspired, motivated and moved to action.
Business processes that are empathetic to the customer's perspective. Effective disruptive strategies are based on an outside-in view of the innovator's organization, which means that sales processes are created from the perspective of how customers buy—not how sellers sell.
Providing purchase motivators. Those motivators are based on managing two product attributes: reduced price compared to current offerings and an expectation of increased benefits—or a combination of the two.
Reducing adoption barriers. Similar to purchase motivators, reducing adoption barriers has two components: minimizing switching costs and ensuring availability (synchronizing supply with demand, for those who like buzzwords)—or a combination of the two. Many companies formulate compelling purchase motivators but fail to consider the huge impact that adoption costs have on purchase decisions. Many great products have failed in markets because adoption economics have favored the status quo or because the new product simply wasn't available when needed.
Demonstrable thought leadership. Thought leadership involves being a champion for the change you wish to see in the world, however that might be defined. It's easier to be known as the market leader because you've said so from the beginning, rather than reminding customers of that fact when the market is saturated. Innovators who seize an early opportunity to become thought leaders can dominate the industry buzz for their product or service; elevate the value their prospects perceive for their product or service; and solidify their role as the innovation pioneer.
—Andrew Rudin
Within two years, the company churned its senior management team, the sales VP and the majority of its sales force. What went wrong? I'll get to that in a moment.
The sales VP probably knows now that products and processes by themselves have little capacity for creating meaningful change because they are not disruptive. Strategies enable market disruption, and those strategies include product innovation. Skills play a role as well, and successful managers know that working with potentially disruptive innovations requires the economic insight of Adam Smith, the inspirational leadership skills of Martin Luther King, the communication skills of Ronald Reagan, the perseverance of Thomas A. Edison, and the entrepreneurial vision of Steve Jobs. If that sounds like a daunting combination, take solace in the fact that these individuals took risks and failed repeatedly before achieving success.
‘Try describing to a teenager today what you did in 1980 to obtain music that you liked to listen to.’
What makes an innovation disruptive, anyway? An innovation is disruptive when it affects the hegemony of the market-leading company, companies or prevailing technologies for a specific market. Among the many examples of disruptive products are digital photography technologies, which replaced photographic film. And Netflix upended complacent market leader Blockbuster through an innovative business and logistics model, which forced Blockbuster to relinquish a significant source of profits from late fee charges.
Many variables
The term, disruptive innovation, was introduced by Clayton Christensen in an article written with Joseph Bower, Disruptive Technologies: Catching the Wave. The magnitude of the disruptive impact resulting from innovation can take many years to develop because the influence of many of the variables involved is unknown at the time the innovation is introduced. Today, the amount of disruption caused by such nascent innovations as iPhone, Linux and digital media file sharing is still unknown.
What conditions must be present to create disruption?
The market for the product or service is experiencing, or is likely to experience, an increased rate of demand. This demand might be created by social, business or regulatory change.
The economic outcomes in providing, acquiring or adopting the new product or service must be significantly better than the prevailing offerings.
The business model or core technology used for the innovation must be both fundamentally different from the prevailing offerings and sustainable.
Because there are many variables over long timeframes that influence whether a product or service will be disruptive, is it accurate or even useful to proclaim disruption as the sales VP did? What relationship do product innovation, market demand and marketing strategy have with market disruption? Do products that have potential to create market disruption have unique characteristics that require specialized strategies and tactics? See Elements of a Successful Disruptive Strategy below for the answers."
So what did go wrong for the sales VP and the rest of the company? Simply put, the company couldn't generate enough sales to cover expenses. It had scant market presence or brand recognition. The partner strategy was formulated as an afterthought to the sales program. The product's value to its prospective customers was poorly understood, so it could not be communicated. Compound those problems with high adoption costs and unproven financial and operational outcomes for customers, and the result was a sure failure by any sales measure.
Most egregious was the company's miscalculation that the strategic benefits its customers achieved in one successful market—electronics—would extend to other market verticals. The reason that assumption was proven wrong can be summed up with one word: Dell. No other market vertical had the adapt-or-die economics that Dell imposed in electronics. The company's managers completely misunderstood that reality, and they made poor assumptions as a result.
What can you take away from my erstwhile sales VP? First, market disruption does create value for customers. Try describing to a teenager today what you did in 1980 to obtain music that you liked to listen to. He wouldn't believe that before disruption in the music industry, consumers had to accept music in the form of complete sets (back in the day, they were called record albums) from artists that companies wanted to record, in the order they recorded them, on the media they provided, from retail channels they controlled, at the prices they wanted to charge.
But here's the second lesson: Customers are not interested in disruptive products per se; they're interested in the outcomes those products provide. Chasing the objective of creating a disruptive technology will almost surely divert management's attention from achievement of more worthwhile goals. Market disruption is a byproduct of other strategies that are inherently more meaningful to define, measure and control. Those goals could be achievement of a targeted return on investment, revenue milestones or a specific customer adoption rate.
Any one of those, managed well, will garner more success for your company than chasing the elusive disruptive technology.
Elements of a successful disruptive strategy
An understanding of the economics of the product innovation in the context of the prevailing competitive economics. Companies that have created market disruption have exhibited a keen understanding of the laws of supply and demand. Their executives understand the connections among costs, pricing, adoption rates, and market growth.
Leadership for facilitating change. Displacement of entrenched competitors—whether they are loved, reviled or something in between—requires the displacing organization to lead change. Leading change requires appeals at multiple levels: emotional, factual and symbolic. In the book, Changing Minds (Harvard Business School Press, 2006), Howard Gardner outlines seven levers of change: reason, research, resonance, representational re-descriptions, resources and rewards, real world events and resistances. These seven levers relate to different ways visions and ideas can be communicated, so people are inspired, motivated and moved to action.
Business processes that are empathetic to the customer's perspective. Effective disruptive strategies are based on an outside-in view of the innovator's organization, which means that sales processes are created from the perspective of how customers buy—not how sellers sell.
Providing purchase motivators. Those motivators are based on managing two product attributes: reduced price compared to current offerings and an expectation of increased benefits—or a combination of the two.
Reducing adoption barriers. Similar to purchase motivators, reducing adoption barriers has two components: minimizing switching costs and ensuring availability (synchronizing supply with demand, for those who like buzzwords)—or a combination of the two. Many companies formulate compelling purchase motivators but fail to consider the huge impact that adoption costs have on purchase decisions. Many great products have failed in markets because adoption economics have favored the status quo or because the new product simply wasn't available when needed.
Demonstrable thought leadership. Thought leadership involves being a champion for the change you wish to see in the world, however that might be defined. It's easier to be known as the market leader because you've said so from the beginning, rather than reminding customers of that fact when the market is saturated. Innovators who seize an early opportunity to become thought leaders can dominate the industry buzz for their product or service; elevate the value their prospects perceive for their product or service; and solidify their role as the innovation pioneer.
—Andrew Rudin
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