Disruptive Sales

Protect Your Revenue “Nestegg”

“Everything is headed toward commoditization if you don’t fight it,” says Fred Reichheld, founder of Bain & Co.’s Loyalty Practice and author of Loyalty Rules! Defending your company against it, he says, takes a “creative redefinition of markets.”

The CEO challenge is clear: continuously innovate value in your products and services–or face margin erosion and potential extinction. Leaders have responded by coming up with several creative strategies for fending off the threat. Some have broadened or changed the definition of their customers, while others have reinvented their products and rethought the notion of customer value. The WINNERS have developed the approach of the customer specific unique value proposition (UVP).

Redefining the customer

The first key to avoiding commoditization is to review just whom your company is serving. Gaining this understanding of customers allows companies to prevent a “downward migration” in price and transaction value.

In a recent study of 110 senior executives from Fortune 1000 companies by Booz Allen Hamilton and the Kellogg School at Northwestern University, almost four out of five said they plan to shift from selling products and services to developing value-added solutions in partnership with customers. “Companies that focus on the customer specific UVP, while emphasizing growth opportunities and adapting to a changing marketplace, are more likely to be top performers than those companies that focus on decreasing working capital, supply-chain efficiency and spinning off non-core businesses,” the study concluded.

UVP is a Need to Have

UVP is not an optional “nice-to-have” in business - to tailor you value to a specific customer is no longer a luxury; it’s a requirement. Unique and focused customer value propositions gives every promise of creating the separation companies need from their direct competitors, earning the customer preferences profit margins require. However, companies must overcome the inertia of their own organization that fosters resistance to making the changes necessary to implement the unique value proposition approach.

Overcoming Inertia = Survival

Many companies thrive during the early stages of their life cycle, only to fall slack during periods of inertia and die out while others surge ahead Inertia is not the enemy of the UVP approach, but it does resist it at the point of change. Therefore, at that very point, management must learn to deconstruct inertia in order to reconstitute it elsewhere. Developing the focused UVP is that which differentiates your company to create sustainable competitive advantage. We are all more or less strategically aligned. We are just being asked to execute at a new level of competitiveness.

The importance of metrics has been a common theme in recent posts. Today’s perspective offers an innovative way of approaching the ever-important subject.

A conversation on how measuring relates to sales efficiency could go in many directions. To simplify into 2 essential points I suggest the following…

Make sure you are measuring:
• the quality of Marketing’s leads
• how effectively Sales is using these leads

These two umbrella points encompass most of the power behind measurement.

1. Measuring Marketing Quality

Marketing’s contribution to sales, although a separate entity, must be recognized and reviewed. Measuring the quality of leads the Marketing team produces ensures that the Sales department is only being handed qualified leads. In other words, by measuring the Marketing team you can rest assured that your Sales team is being provided opportunities that have the potential to turn into prospects and wins for your company.

2. Measuring Sales Efficiency

Don’t measure your sales team solely on how many deals they close. Obviously, closure rates are a necessary metric to consider in any sales process. It is not the only metric, however. By placing equal, if not greater, importance on other metrics you will reinforce the importance of the entire sales process, not only the end result. Measuring how many qualified leads translate to meetings, prospects, and proposals will tell your Sales team that facilitating the buying process is mission-critical. We all want to close the sale, your reps included. It’s the process, however, that will get you to that point.

By executing effective measurement techniques in just these two areas, instigating an internal alignment between Marketing and Sales, you will see results in the number of accounts closed and the amount of revenue generated.

A survey released by Harvard Business School labels sales as less than 35% efficient, a consequence of the complex nature of the sales process. Most sales people are spending the majority of their days on activities that have nothing to do with sales or revenue generation. By developing a comprehensive, value-based process you can achieve a significant increase in sales productivity.

The value-based sales approach should include:

1. Identification of the right opportunities
• All new opportunity generation should be in line with the overall strategy
2. Determination of a focused message
• Making sure the message is articulated effectively to the sales team
3. Development of an appropriate value proposition
• Mapping the solution to effectively solve the buyer’s problem
4. Consistent support of the sales team
• Generating necessary sales materials
• Sales Force Automation/ Customer Relationship Management

Although finding and acquiring the right sales talent is important, there are many more key success factors to consider. A streamlined process, although ultimately pulled together by an individual rep, shares responsibility across a number of business units. In this end, the understanding and execution of a value-based approach will not only enhance sales performance, but also support cohesion across the entirety of an organization.

There’s no denying it. An organization’s success rate is linked to efficiency. Efficiency, by definition, is the ratio of effective or useful output to the total input in any system.

Let’s not kid ourselves, sales is generally the least efficient part of any organization. And I know that you are all aware of the existence of such inefficiency. How could you not be? After all, I would assume consistent underperformance in a specific area requires some degree of attention. Then again, I may also assume these areas of underperformance would be subject to an increase in evaluation metrics or measurement. So why aren’t they?

What sets sales performance apart?
Performance in terms of sales efficiency is unlike any other business operation. It isn’t measured like manufacturing, supply chain, distribution, accounting, etc. As a matter of fact, there are no performance standards in place. Consider lean principles for optimal production in manufacturing, Six Sigma for process improvement and variation reduction, GAAP, etc. What is the equivalent in terms of sales efficiency? There are none. Sale efficiency is lacking - not only in performance, but in effective ways to measure and control that performance.

The Facts
There are severe consequences to the lack of performance standards in sales:
• No common process
• Poor forecasting
• Low performance metrics, low conversion, high turn over
• No accountability

No one understands good metrics. The use of scorecards and forecasting is great – but how do we know what a truly optimized sales operation looks like? To further complicate things, the whole concept of human nature must be accounted for. This is one intangible aspect of the sales process that is not incorporated in traditional forecasting.

Speaking of human nature, productivity doesn’t always register as a top priority. Do you find that to be true in your organization? What’s driving performance productivity? Do you battle to keep a consistent pipeline, and are you continually filling the pipeline?

Remember, one success shouldn’t mean a temporary snooze until the next ‘goal’ needs to be accomplished. True, lasting success, after all, is a matter of efficiency.

The Big Question:

How do we avoid heightened complexity and the disjointed allocation of resources in an expanding marketing environment?

A blueprint for consistent processes, tools, and performance-management systems in the form of a business development platform. Seems relatively simple doesn’t it?

Unfortunately, it isn’t. All too frequently, responses to expansion undermine consistency, coordination, insight, and decision making. Marketing and Sales can’t seem to achieve proper integration. New brand, channel and segment groups focus on increasingly disparate parts of the market.

Why Should You Care?

If the obvious lack of cohesion and direction isn’t enough to concern you (it should be, by the way), consider the severity of other unintended consequences:
• Reduced sales yield
• Channel conflict
• Rising customer acquisition costs
• Inefficient pipeline
• Inability to allocate marketing dollars consistently
• Lower ROI

Still Unconvinced?

Take the example of a PLM software company dealing with three aspects of expansion:

1. The commoditization of their flagship product where transaction price has plummeted from $110,000 to $45,000 in 18 months and the launch of a new enterprise-wide solution with an target transaction price of $500K
2. The increased importance and proliferation of VAR channels
3. Web expansion by the competition and the end-user community

As could be anticipated, the company’s responses were reactionary and disconnected.
By launching a new brand, a variety of different segmentation strategies, and an increased emphasis on selling at the CXO level vs. traditional product development management, several layers of complexity were added to its marketing efforts.

The Result:

The PLM software company in question diluted the brand, resulting in a steep revenue drop, reduced market cap and eventually a new Senior Management team.

Unfortunately in the example above, as is so often true, the consequences could have been easily avoided had the proper business development platform been in place.

Solving The Problem:

A business development platform is a blueprint for consistent sales and business development in the two or three functional areas. The areas in which you choose to focus (such as value proposition, price –performance, brand positioning, market segments, channel strategy, and major account management) should be those most closely linked with your company’s strategic priorities.

Most business development platforms have four well-integrated components:

• Consistent processes that incorporate principles of LEAN and 6-Sigma to enable best-in-class performance and an optimized business development model
• Leading-edge tools and frameworks to guide decision making
• Clear responsibilities, skill requirements, and talent development for sales and business development professionals in pivotal roles
• Consistent metrics and performance-management systems that reinforce the organization’s processes, methodologies, and talent management

The Big Answer:

I know this all sounds obvious, seems like I’m merely highlighting the standard attributes of any well-functioning business development and sales organization.

Realistically, effective business development platforms are far from common and even more difficult to put in place. Tools don’t work without clarifying decision-making standards. Redesigned processes are useless if not linked to measurable outcomes that matter to customers.

There are many layers to consider but the answer remains: the best way to avoid the unattractive consequences of expansion is to have a proper business development plan in place.

Next question?

Today marks the beginning of Disruptive Sales, the VizQuest Ventures blog. At VizQuest Ventures, we are always looking for fresh, out-of-the-box ideas as they relate to the sales and business development space. With this in mind, the blog was created to facilitate provocative reflection and discussion on the subject.

So first, let me welcome you. And secondly, let me warn you. The name is no mistake. Here, you will never find a “safe” read. We refuse to feed you the same cookie-cutter explanations and information that you are already being flooded with. In fact, you may not like what you hear or see here at all. But before you get scared off, let me put things in perspective. How many of us like going to the dentist? Or like the taste of the medicine that cures us? None of you? Exactly. Me neither. The fact of the matter remains, sometimes you need it. Trust me; this is one of those times.

Still with me? If not, can’t say it’s unexpected. Of course, I know some of you may already find this to be too disruptive for your taste. Thank you for visiting. I welcome you to pursue other arenas of finding rich, relative sales and business development information. And by all means, if you happen to find any, come back and share it with us.

For the rest of you, let’s set a few things straight. In terms of effectively executing sales, you’ve got some problems on your hands. That very well may be the most conservative statement that will ever be made on this blog. Some problems. The harsh reality? Lots more then some problems.

To quantify, consider this. Nearly half of sales representatives are not meeting numbers. That is to say, the job is being done effectively about half of the time. Of the reps that are reaching quota, only a small percentage are top performers, bringing in $2M on average compared to the standard $900,000. Imagine if the lack was comparatively relative. I just had to bring my car to get the brakes done, for instance. What if that task was only completed effectively half the time? Harsh? I told you.

That’s not to say the job of a sales representative can be even remotely equated to that of a mechanic. The fact of the matter is the individual (mechanic and sales rep alike) can only do so much, or unfortunately, so little. But the intricacies that go into building an operational vehicle exist in terms of sales and business development. In other words, there is a process, one that must encompass the strategic alignment of a number of factors to be successful. The underlying process determines efficiency, effectiveness and subsequently your success, not the individuals who execute it.

Some of you fall prey to the same error. When attempting to increase performance, you mistakenly take a misguided approach. Let me be the first (or at least hopefully the last) to tell you… increasing sales capacity of an already inefficient system will not work. Actually, it will prove to be more detrimental then anything else.

Wondering if I’m talking to you? Why not see how you measure up. A simple way to do so is to examine your Yield on Sales. Yield on Sales is defined as actual sales vs. sales capacity, i.e. if capacity is $10M and your sales organization only produces $5M, it is producing 50% yield. If you have >50% yield, rest assured. That is just about the average. Those of you with >70% yield should be proud to call yourself best-in-class. I am hesitant to even discuss those who have <50% yield. I mean, there’s really no excuse for that. At least there shouldn’t be. But sadly I’m sure there is. You have them? Let’s hear it. Until then, why not be proactive. A word of advice to the excuse-makers out there, try coming up with some answers. They happen to be a lot more beneficial in the long run. Nothing? I’ll help you out. If you want to improve Yield on Sales, I’d start with considering a few key levers (think time spent selling, close rates, sales cycle time, average order size). Investment here goes a long way. Don’t believe it? Just keep an eye on your revenue growth.

Completely convinced you are in the clear? That you have gleamed nothing from what you’ve read so far? Then its likely you are exactly who should be the most concerned. See, there happens to exist a common phenomenon in terms of sales and business development. Perhaps you’ve heard of it…its called apathy. Too many adopt a “why fix what isn’t broken” mentality to sales. The problem is, determining what is “broken” depends on how your company defines things. Is there a difference between merely operating and actually performing? To revisit our automobile example, what kind of driver are you? Do you wonder why anyone would adjust a vehicle that is operating fine, something that gets sufficiently from Point A to Point B? Well you shouldn’t wonder. Some adjust things because it isn’t acceptable to do anything less. Some drivers want more, they strive for optimum performance. These drivers want to get efficiently, not sufficiently, from Point A to Point B. To those select few, we are here for you. To the rest, feel free to call us when you inevitably break down.

Welcome to Disruptive Sales!

Disruptive Sales is the perspective of VizQuest Ventures, a sales and business development company that helps businesses increase net new revenue. We create customized and focused go-to-market strategies to help us efficiently and effectively find the best opportunities that we can close for you.

Our ideas and focus are unique, and yes, disruptive. Check back often for our unique perspective and feel free to contact us to get your own program started.