Understanding the Decision-Making Process: Early and often

A few weeks back a client of ours was working very closely with an internal contact to finalise a deal. They had been going back and forth with the account to finalise the details of the solution and the roll-out/implementation plan. Everything was sorted out, and the sale was in the sales team’s system at 100%. However, it turned out that while the customer contact fully believed that she had the authority to make the decision, other parts of the organisation had more than enough power to block it. In this case, IT was brought in as part of the implementation planning, and they blocked the whole thing.

The deal is now, essentially, back at square one, with the supplier needing to work with IT to understand the needs of IT, and to demonstrate the potential value creation for the organisation as a whole.

Clearly, this episode resulted in a lot of wasted time and effort, and we were brought in to look at the situation in terms of improving salesforce efficiency. I’ve seen it happen a few times at other accounts recently, so this is not a one-off situation. Especially in our post-GFC world, many organisations have changed the way decisions are made, and who has the authority to make them. The result is that salespeople waste a lot of time selling to the wrong people.

In my analysis and research, there are two typical pitfalls that sales teams fall into, both of which are easy to avoid:

1.       Not asking about the buying process early in the sales process. Successful sales people confirm very early in discussions what is the buying process, who needs to be involved, who really owns the process and, importantly, who makes the decision. Less successful people tend to find people who think the idea is interesting, and immediately start trying to craft a proposal.

To avoid this, build this step into your own process: once you have an opportunity to create value for the account, and the contact has validated her interest, ask about how decisions are made. It’s an easy step. Team managers can easily coach around this topic as well, by asking team members “Who makes the decision here?” Simple stuff!

2.       Not helping the contact to understand their internal risks. Later in the buying process, when you’ve been selected as the supplier, there is often still work to be done before you can get the account to a signed contract. Helping your contacts to manage their internal risks is a great way to add value to the client, even when it seems like the signature is imminent.

To do this, you can help them to think about the things that might stop their purchase progressing. There is a balance here, of course: you are not looking to introduce new risks and worries to the decision-making process that might scare them away! Rather, you are trying to open up the conversation to reveal their worries, and to help them think the situation through more effectively.

Consider using questions like:
·         Who else is involved in this decision? Does anyone else need to be on board?
·         Are their people or groups that could block your decision?
·         Have things changed in the organisation since the GFC? Are more people involved in the decision than before?

It isn’t always the case of a contact pretending that they have the authority to make a decision when really they do not. In fact, from my observations, that is usually NOT the case. So what we have here is a great opportunity to add VALUE for the customer, as well as improving our own efficiency and effectiveness. Going into the process with a positive, customer-centric approach is likely to produce results.

As with much of successful selling, it comes down to being comfortable enough to ask questions to open up discussion. In this situation, questions this can help to do two key things:

• Open up the conversation around what the contact knows about the process, to make sure they are sharing as much as they can, and
• Force the contact to really consider what needs to happen, internally, to get their decision through.

If you focus on understanding the decision-making process earlier in your discussions, you’re likely to improve your effectiveness and efficiency, and create value for the customer. Of course, don’t forget that things do change over time, so these discussions may need to happen both early AND often! 

Make sure your Value Adds actually add value!

The concept of including additional “Value Adds” in a proposal has come up frequently lately. In the interest of keeping this posting short (as readers have recommended!), I’ll address only one issue around Value Adds at this point: it is important to make sure that your client actually understands the value of what you are including.

This sounds like pretty basic advice; after all the word value is included in the phrase Value Add. But the key is to make sure that you can show what the specific Value Add means to that specific account, and then, to the extent possible, quantify it. I’ve seen many situations where a salesperson fails to do that.

Here’s a recent example: A salesperson for a technology company wanted to improve the overall value of their solution by adding some additional training for the operators. This was to be included in the proposal, as a bullet point under a heading of “Additional Value Adds”. The customer contact with final approval on the proposal, a fairly senior executive at the organisation, would have had very little idea what that meant, let alone the value of it to the organisation.

It turns out that this Value Add was about building new skills in the operators, beyond the skills required to operate the equipment (which were covered under "Training" elsewhere in the proposal). This would be of tremendous interest to the operator community, who view it as an opportunity to advance their skills, and to get involved in more interesting work within the company. If they had those skills, they could be more proactive about working with other parts of the organisation, and improve the workflow within the business. This could result in reduced administration effort, compressed development timelines, less rework, fewer errors, less frustration, etc. So clearly, this Value Add really could add value, but it was in danger of being sidelined.

To make sure that your Value Adds aren’t under-valued make sure you focus on three areas:

1.  1. Identify what the Value Add means. In the example above, there was the very real possibility that the Value Add would be confused with the training required to operate the equipment, thereby eliminating the additional value. Keep your explanations clear, concise and relevant, but if additional description is needed, make sure to include it.  

2.  2. Specify what it means to the specific individual(s) reviewing the offer. It is important to understand what your audience cares about. If the audience is the operators, discussing the opportunity to learn new skills and advance their career would have been extremely relevant. In this case, though, the audience is senior executives, and operators' career paths may be less compelling. We’ll need to translate the Value Add into business metrics that matter to management: improved efficiency, lowered costs, shortened development timelines, etc. Get the impact right for the right audience.

3.  3. Quantify the impact of the Value Add. It can be hard, but the better we are at quantifying the impact, the more compelling the Value Add will be. We could work with operators, and other departments, to possibly identify the savings from improved productivity, or reduction in waste. We might even model the impact of a decrease in employee turnover in the operator community. In this specific case, the salesperson was leveraging privileged relationships to get access to training that would cost thousands of dollars on the open market: another opportunity to quantify the impact!

Following these three steps can significantly improve the perceived value of your Value Adds, and improve your chances of success! Over time, you may even find that you require fewer Value Adds as you ability to show their impact improves...  

More on Commercial Acumen in business-to-business selling

In the past few weeks I’ve worked with a number of sales teams to refine the business cases that they were creating for own clients. While I’ve discussed Commercial Acumen before as a critical skill in post-GFC selling, it just keeps coming up, and I wanted to add a couple of additional insights to previous comments.

In past blogs, I’ve identified a difference between salespeople that can apply commercial acumen at what I called a Tactical level, versus a Strategic level. At the Tactical level, as salesperson rises above simple price comparisons to quantify the direct impact. On the Strategic side, the salesperson knows the client business well enough (and has the right skills) to cover the impact on multiple parts of the value chain, and, in particular, can link to Strategic priorities like revenue growth. I still think that distinction is right, and I continue to see this as a key separation.

To get to the Strategic level requires an understanding of your client’s commercial model: What are their drivers of revenue? How do they make money? Who are their target customers? How do they differentiate themselves from their competition? These are basic questions, but they influence how you can tailor the business case to the specific client (even if your offering is fundamentally similar across clients!).

By focusing on the commercial model of the client, you are more likely to uncover key areas where your product or service can impact those key levers of commercial success. In particular, being able to connect your offer to impacting customer or revenue growth can really help to set you apart from the competition. Suppliers often handicap themselves at this point in the sales process: they believe that the connection between their product and their client’s commercial model is too distant to even mention.

I argue that it is worth a try, partly because it could uncover significant value that you add, and partly because it will force you to better understand the client’s business, which may unveil more Tactical commercial impact!

For a corporate customer, for instance, you might focus on the value of incremental customers (e.g. How could your product help improve the client’s ability to convert a prospect into a customer?), or on the value of improving the client’s customer retention (e.g. How could your product improve their customer satisfaction?). Perhaps you can help the client to increase their internal speed to market; the value of launching a product one day (or one week) can be simply quantified.

For one account recently, let’s call them Alpha, we helped them to quantify their service to a potential client, we’ll call them FinCo. We applied strategic commercial acumen to look at a slight improvement in FinCo’s internal process within one part of their business. Alpha noted that their service might save a typical FinCo call centre worker about 15 minutes per week. The temptation at this point would be to look at this as a cost savings, but Alpha went further. That 15 minutes a week across the 40 person call centre added up to about 10 hours per week, or about 63 man days per year. Given that the average sales per person in the call centre per day was about $1,000, the solution added about $65,000 in revenue for FinCo. This is on top of the other savings arguments in Alpha’s favour.

Notice, by the way, that in the above example Alpha had to know what was really going on inside FinCo. This came not from guessing, nor even from using past experience. They got inside the FinCo business and had real conversations with contacts. Having your data come from internal sources can make those figures even more powerful.

Even in the Education or Government space, this commercial model idea – and the application of strategic commercial acumen - is an important one. I’ve been working with a few clients lately that shy away from this commercial discussion in the Government and Education space, saying that thinking commercially doesn’t apply. But that’s wrong: it absolutely does. And even worse, if all you’re doing is talking about cost reductions in these sectors, you’re missing out on the chance for a more valuable, more strategic discussion with the account.

A key consideration in the commercial model in the Education and Government sectors is the funding model. The way that the entity gets money is analogous to revenues in the corporate world. Government departments, or government-run organisations, all have budgets. And just like a private business, much of the department’s focus is on growing that budget year-on-year. Once you understand the underlying logic – whether it is the number of ratepayers or patients, the number of employees, or the volume of fines assessed – you can connect your offering to this. In our experience, organisations that sell to the government tend to miss this compelling argument in their pitches.

Education is the relatively easier of the two: whether public or private, a key top line driver is students, so if you can define how you can connect your product or service to attracting more students, or retaining them, then you are talking strategic commercial issues.

In a private school, the commercial model is much more similar to a corporation, but it’s interesting to focus on a few key drivers of revenue for a typical private school: students (and the fees they pay), fundraising (from parents and alumni), income from endowments (generally funded by alumni), and, in some cases, government grants.

The key message is: no matter what sector is your focus, think about value, not just at the Tactical level, but at the Strategic level. Push your teams and yourself to raise their commercial game above cost savings and process improvement, to higher-level impact. If you do, you position yourself as a much more compelling business partner, and you’re more likely to ultimately win the business.  

RFP processes: Becoming more open?

I’ve recently been writing quite a bit about business-to-business selling in the Post-GFC world, in other words, what has changed in sales since the advent of the economic issues that have plagued us since 2008. But some recent client work has reminded me of an important trend in B2B sales that is still occurring, though it may be obscured by a GFC-driven counter-trend.

For the sake of this discussion, let’s consider the situation where the sales organisation unexpectedly receives a Request for Proposal (RFP), or similar request to submit a proposed solution, from an account or potential account. The fact that the RFP is unexpected means that the selling organisation has not been working with the buyer to uncover and develop the need in this case. (Ideally, of course, a proactive and customer-centric salesforce would have been involved from the start, creating the opportunity and possibly even helping to craft an RFP, if an RFP is required. I’m sure I’ve written on that topic before! But we’re discussing the situation where we get the RFP later.)

In the 1980s and 90s, large organisations saw a huge increase in the number of purchasing decisions that were taken away from the business and given to a professional, formal sales process, often led by a purchasing or procurement group. The logic was clear: the company was more likely to get the best possible price in a competitive situation. Great steps were taken to remove possible bias, to ‘level the playing field’ among competitors. This generally meant that communication to the business during the sales process was cut-off. Any information would come from purchasing, and the conversation flow was uni-directional.

While this process was initially only applied to materials and product purchases, the late 1990s and 2000s saw this trend extend to purchases of services as well. Selling organisations, no matter what they were selling it seems, are now put through a controlled, formal selling process, without significant communication back to the purchasing organisation: proposals were to match against the specifics of the RFP and that was it.

This situation is obviously frustrating to a salesperson. Without access to those who will be using or interacting with the product or service, it can be hard to determine the right solution for the client. Companies that can have a major impact on their clients, but who might not fit the specific details of the request, can have a hard time communicating why they are, nonetheless, the right choice. And no organisation wants to be judged solely on price (well, perhaps one organisation per industry wants to be...). Sellers are forced into a formal, and somewhat blind, process of their own, trying to create a low-cost bid that ticks the right boxes. Or they discard the RFP.

Over the past couple of years, that trend has seemed to increase. Decisions that formerly were made by managers now are made by procurement. Decisions that used to be simple, are now made via a complicated formal process. The GFC’s focus on costs and cost savings has accelerated the above trend, and also has increased the number of third-party specialists in the purchasing process.

But there is another macro trend, operating in the background, one that began before the GFC. While many formal purchasing processes remain locked down and one-directional, we’ve noticed an increasing willingness of purchasers to engage in conversations, even after an RFP is released. A willingness to engage, that is, if the selling team makes the effort.

One of the key drivers in this effect is the buying organisation itself. After years of being told by suppliers that a blind tender process often results in a poor buying decision, many procurement organisations have recognised this fact themselves. The political pain they have felt from decisions that the rest of the business were not behind was certainly part of it. But, more importantly, many procurement organisations continue to become more engaged with the business itself. With more analysis into the past performance of previous purchases, the result is a buying organisation that is more interested in making the *right* decision, not just the cheapest one. So we’ve seen companies very interested in sitting down and discussing the RFP, the underlying need, and the key assumptions with suppliers. They don’t want to waste time, energy, and ultimately money, by making the wrong decision.

This is clearly a good trend for a consultative, customer-focused salesperson. But most salespeople have given up: once they receive an RFP, they immediately shift into Respond Mode, crank out a response at the lowest possible price, and sit back and wait. However, there is still plenty of room to be proactive, and to create value for the customer and the sales organisation.

One recent conversation (one of three or four that sparked writing this article) reminded me of the importance of being proactive in response to an RFP, and trying to initiate conversation. While trying to coach a salesperson towards the idea of going back to the issuer of the RFP to query some of the assumptions, the salesperson, “I suppose I could go and ask them if they would be open to discuss it, but 99 times out of 100, they will say no.”

I questioned his statistic, and asked how many times in recent memory he had done so. It turned out that he hadn’t for a couple of years. In this case, he went back to the customer, and, luckily, the customer was more than happy to open the discussion (I say luckily because, in this case, it makes for a much more interesting article). The discussions are ongoing, but he certainly stands a better chance of coming out ahead now.

For a sales team or manager, the action in response to this trend is quite simple: push back on RFPs that you receive. Ask questions. Request a meeting. Don’t *assume* that they will say no. The worst case scenario is they respond that the information required is in the RFP; you are no worse off than before you acted. Second worse is that any conversation that they have with you, or any answers that they give to your queries, also will be communicated to the other bidding parties. In this case, you’re still better off than before. And finally, the third worst-case scenario, is that the account engages with you, allows you to have a conversation about the issues and the needs, and you’re able to work effectively with the account.

Given the *cost* of pushing back on RFPs – almost zero – why not? Make it your company sales culture to do so, and you’ll be more likely to be successful. 

Fear of Discussing Price

"Just don't mention price. I did it once, but I think I got away with it." - a paraphrasing of Basil Fawlty.

I have been working lately with a few sales teams where the topic of discussing pricing during the sales process has come up. Or rather, the strong desire to avoid discussing price until the very last minute has come up. These teams have pushed back strongly against the idea of introducing pricing – in any format – into the conversation until the customer absolutely demands it.

And, I believe, their sales are suffering because of it.

In a customer-centric sales approach – where we consider what is going on inside the customer’s mind and their needs, not just our own sales process and goals – it is important to recognise that any buying decision is a complex and multi-phased decision. Successfully giving the customer what they need at that point will help advance the sale. But customers’ needs vary at each stage.

In the initial phase, when the client and the supplier (you) may still be working out what a solution might look like, or what the problem really is, the client organisation needs to become convinced that there is a big enough reason to change. The reason might be lost sales, operational inefficiency, poor quality, etc.

(For those of you who follow Imparta’s Creating Client Value approach, you’ll know I’m talking about clients in the Awareness of Needs phase.)

Once key people are onboard with the need to change, there generally needs to be an approval from someone higher in the client organisation, a Centre of Power, for the idea to move ahead. This does not mean that the supplier might be awarded the deal! At this point, the client is merely saying, ‘Yes, this is a big enough opportunity that it makes sense for my team to spend time and energy looking into it, to pick the right supplier and the right approach.‘

As we’ve discussed in previous postings, decisions are being pushed higher and higher in the organisation. But many sales organisations are not recognising this key fact, and their proposals at this point focus on technical specifications, company capability and generic suggestions of business impact. Fees and implementation costs are left out of the discussion; they fear that they will get locked into that price, even as the solution evolves with continuing discussions.

And that’s where these sales organisations lose out.

Clients at this point, in order to make a commitment to moving ahead, need to see clear business logic – a Value Proposal in our parlance. Again, let’s remember that this decision is being made by a more and more senior audience, so their interest in the details of the solution is likely to be much less than the overall impact on the business performance. So a successful salesperson needs to be able to talk about – and show quantified examples of – the business impact. Consider the strategic impacts – sales growth, improved customer retention, etc – as well as more tactical issues such as productivity savings.

This impact, though, MUST be coupled with the costs to get that impact. If you’re saying that your solution can help create $5 million in additional sales, it absolutely matters to the client whether it will cost them $4 million to get that impact or $1 million. And the costs should be complete – if there are implementation costs associated with the solution, then include them. Consider the impact of leaving these additional costs out: eventually your client will realise that they exist, and if you haven’t revealed them your trustability quotient is likely to be hampered.

Senior audiences expect to see Impact and Costs to be able to assess the total Value they’ll be seeing. Doing so will increase the speed of your sales process, and increase the likelihood that an account will commit to the idea and move ahead in their buying process. Lots of our accounts (before we start working with them J) have genuine opportunities that have fallen dormant because of their inability to present this simple Value = Impact minus Costs argument effectively.

I am NOT suggesting that a consultative sales person should pull out a price sheet early and often. The key point here is that price can’t be ignored, but the key corollary is that price must always be discussed with a senior audience in the context of impact. Price on its own shifts the conversation to discounts. When paired with knowledge of how your solution will impact their business, it can become a discussion of how to move forward!  

So, review your opportunities and consider which ones are at this point: key people within the business support your idea or solution, but you can’t get their boss – or their boss’s boss – to buy in. Make sure that the costs are all in there, and that you can show true Value, and you just might move it along!

Selling in the Post-GFC world: Renewal Business

I have had a few conversations recently with senior sales executives in the packaging and office automation space, and, once again, we focused on the issue of Selling in the Post-GFC space. A few of these conversations were with clients, so the degree of intimacy and insight was quite deep, but even with the non-clients, another key theme emerged – Increased Difficulty in Renewal business.

In past entries I’ve not really focused on new accounts versus renewal business versus new opportunities in existing accounts. This is because the themes I’ve identified apply equally to all of these situations.

However, this time we’ll focus on renewal business, as there are a few key interesting issues – and lessons. Whether in telecommunications, office automation, equipment repair, packaging, or other industries, a salesperson is often selling in a time-based solution. In other words, the supplier is the exclusive supplier during that time period. At the end of the time period, the contract is up for renewal, and it is during these times when competition can win the business. Fairly standard stuff.

In the past, generally speaking, these renewals were fairly heavily weighted towards the incumbent. What we’re seeing now, though, is that the renewal process is much more difficult, and much more fraught with danger for incumbents. Put simply, lots of incumbent suppliers are being cast aside when renewal time comes.

The reasons are many, and include some of the themes that we’ve touched on before. Certainly one issue, raised in other entries, is that in tighter financial times decisions are being pushed higher in the organisation. Simple contract renewal decisions that used to be made at the operator level are now being made two or more levels up.

As decisions move up the organisation, they are looked at through a much more strategic and commercial lens than lower in the organisation. And here’s where incumbents can fall down: without the commercial acumen skills to demonstrate the impact on the account’s performance, and to position the repurchase in a strategic context, they are vulnerable. Competitive suppliers selling higher in the organisation, and speaking the language of the executive, can knock out an unprepared incumbent.

Incumbents generally have a huge, and fairly obvious, advantage here: they are already in the client. This should give them a privileged opportunity to retain and grow business. But unless they change their approach in ‘these difficult times’, they’ll lose out.

Here’s where we see incumbents making mistakes:

1. Focusing too much on one part of the organisation. Sales and account management teams generally have very strong relationships with the part of the client that uses the product or service. However, they need to build a network of relationships across the business, horizontally, and up the seniority chain. More relationships will mean more opportunities to create value for mare parts of the organisation, and to position yourself as a useful partner in general.
2. Focusing too much on performance against specifications. Certainly, demonstrating that you have met the terms of the contract is important, but the senior executives that are making the decision care more about the impact on the business as a whole. Focus on how you’ve helped them to take costs out of the business, to identify new customers or markets or segments, to differentiate their offering, etc. The Business Case for keeping you needs to be a strategic one. Oh, and it helps if you’ve proactively identified new opportunities along the way.
3. Waiting until contract renewal to re-engage the account. It’s not unusual for companies to pass accounts over to Customer Service (or similar) for 21 months of a 24 month contract, then pop up just before renewal. This behaviour, in the context of a marketplace that is looking for strategic partnerships, is a recipe for losing an account (or getting pummelled on price).
   
   The renewal process starts on day one of the contract, an old colleague used to say. If you want to keep a customer, keep working with them after implementation. Look for new opportunities to help them to meet their business goals, and be proactive in bringing them to the account. One customer that I work with quite frequently, a business process outsourcing company head-quartered in India, expects their teams to bring at least one “unsolicited proposal” to their accounts each quarter. Now that’s a proactive supplier!

This is basic stuff, really, but we do see companies out there, clients and non-clients, falling in the trap. In the modern economy, this kind of behaviour won’t work – your competitors are getting smarter, faster, more active, and more commercially clever, and you’ll need to raise your game to hold onto customers.

So what can you do? Think about a few of your key customers that are in the early days of their contract:

• Do you have a plan for how to continuously create value for them throughout the course of the relationship?
• Are your sales and customer-focusing teams looking for new opportunities to help the account meet their goals (as opposed to just selling in more of your stuff)?
• Does your team have meaningful *business* relationships with a wide and senior range of contacts at the account?

If the answers to the above questions are no, get ready to lose this client. Or get to work creating value for them! 

Selling in the Post-GFC world: Phasing

Continuing the theme of what works in post-GFC selling, another pattern has emerged in my research and discussions. For the time being, let’s call this theme Phasing. Like other themes I’ve discussed, Phasing is not really a new concept. Nor was it unsuccessful or useless before the GFC. What we’re seeing is simply an acceleration or an amplification of an existing trend.

I had a very compelling and inspiring discussion the other day with two colleagues in the sales effectiveness field, Tamera Lloyd and Mark Lloyd at Candescent Consulting. Tamera reinforced the Phasing theme as we talked about the challenge of growing business in difficult times: Phasing, or down-scaling, is an approach that has been a successful strategy for both Candescent and their clients.

As I’ve mentioned earlier, there is immense pressure on budgets, and even projects that seem to have merit and impact get knocked back simply because of a lack of funds. One approach to combat this is to outline the programme or investment, and to also demonstrate how it can be phased in over time. The first phase might be a relatively lower investment, obviously with lower impact, with future phases implemented when budget is available, e.g. in future financial periods. Hopefully, financial periods where budget is available .

This Phasing approach can be a very nice way to build intimacy and credibility with the account. The salesperson demonstrates that they can understand the pressure of the current environment, and is working to find a way that will create value for the account.

The Phasing approach is more than just throwing out features, functionality, or components in order to drive the cost down to an acceptable budget level – that’s just dickering. What we’re seeing among successful organisations here is a consultative approach that keeps the overall goals intact, but looks for ways to get there over time. As Tamera phrased it, and I’m paraphrasing here, Phasing allows you to grow the client when we can, and focus on a few key bits for now.

There is an implied collaboration in Phasing, and one that should be leveraged by the salesperson. Defining what are the key pieces of the product or service can and should be a discussion. The sales team can certainly come with some ideas, but the process should be one that engages both sides, allowing for a potentially robust discussion of business drivers and business needs. Engaging with the client also prevent this from becoming just a negotiation; it is a process of searching for the best impact that can be built for the account, given the current constraints.

For sales teams that are seeing pushback around budgets, size of investment, etc, the Phasing approach is an easy one to try out, and an easy one for managers to coach with their salespeople. Suggest another conversation with the account, where the scope of the project is divided into “Now” and “Later”, and potentially you’ll see progress.

Of course, price objections can mean many things, which we can cover later. But ‘in these difficult economic times,’ it’s worth having a go. Sometimes a lack of budget is just a lack of budget.

Selling in the Post-GFC world: Commercial Acumen in the salesforce

Business-to-business selling in the post-GFC has been tough. Budgets have been cut, investments postponed, entire functions down-sized out of existence. Yet some selling organisations continue to be successful, while others have stumbled. I’ve been looking at why some firms have been better able to weather the storm than others, and will be sharing some thoughts over a series of articles.

One of the key drivers of success in B2B sales currently is the amount of applied Commercial Acumen in the salesforce. Successful organisations are much better at putting together a compelling business case for the client company, clearly demonstrating the value created by the decision to move forward. What I’m calling Commercial Acumen here is a combination of financial and business smarts that allows someone to generate a business case showing the client the clear difference (in profitability, or earnings per share, or EVA or whatever key business metric is important to that client) the seller’s products or services can make.

Commercial Acumen is important in this economic environment for reasons that all come back to the same theme: budgets are tight. Purchasers (whether business-led or procurement) are coming under immense pressure to justify any spend that they make. This leads them to require harder business cases from suppliers, or to simply not spend. There’s a lot of fear out there, and significant risks to the purchaser, and organisations that don’t address this will have trouble moving forward.

On a similar note, there is much more executive intervention in spending decisions than ever before. Decisions that previously could be approved at one level of the business now have to be made two or even three levels up. We’ve seen situations where business unit head approval is even required for any interstate travel ($50 on Tiger!). Selling organisations need to recognise that their proposals are being looked at by a much more senior audience than before. This audience has completely different, and more commercially sophisticated, expectations.

From my observations, there are three levels of Commercial Acumen in a salesforce:

1.    

1.  Price/Performance. Realistically, this is the absence of applied commercial acumen. A salesperson here focuses on lining up specifications against the performance requirements, and demonstrating price leadership. This price focus leads to the occasional win, but tends not to build a long-term relationship.
2. Tactical. Organisations at the tactical level of commercial expertise demonstrate a focus on the operational impact of their products or services. They tend to be very good at the cost-out part of the equation, showing how they can help save the client money above and beyond the price of their offering. Strong and useful relationships can be built with purchasers when operating at this level.
3. Strategic. At the top of the pile is Strategic, where salespeople integrate multiple perspectives into an overall impact statement. A notable difference from the Tactical level is being able to look across multiple functions within the client to identify impacts and savings. Another key difference is the inclusion of strategic priorities of the client, things like growth, increase in market share, customer retention and the like.

Moving from Price/Performance to Tactical is a huge and important maturation for a business. In fact, companies that have not been able to do so over the past 5 years or so are probably no longer with us (or operate in a truly commoditised space). This was true even before the GFC.

But the GFC has shown that firms with that can operate at the Strategic level of applied Commercial Acumen are much more likely to keep growing, or, in some situations, even accelerate growth. These firms are more likely to get approval to move forward with their ideas, more likely to build strategic executive partnerships, and more likely to be retained next time around. I’ve worked with companies to put together Value Proposals (a simple business case model) that emphasise this Strategic element, including a food ingredients company that emphasised the impact on the client’s customer retention, and a document automation company that focused on a client’s incremental improvement in customer acquisition. The Strategic perspective can actually change the entire conversation from a selling conversation to a business conversation.

How to get there? Jumping from Price/Performance to Strategic directly is tough, and I certainly haven’t seen it happen. The first focus needs to be on incremental movement, from one level to the next.

To get to Strategic from Tactical takes a series of concerted efforts. Having a structured Value Proposal template is one step, where the template emphasises looking beyond the obvious, and beyond the current contact, both horizontally and vertically. And, of course, you’ll need to develop some basic finance skills and a comfort level around discussing these topics within the sales team .

Oh, and you’ll need to engage with the client quite intimately to get this right. An organisation can’t reach the Strategic commercial acumen level from the outside. To succeed you’ll really need to be sitting down with the client to put together the Value Proposal with their input and active participation. But that’s a topic for another day! 

Selling in the Post-GFC world: Intertwinedness

I had an interesting discussion the other day with Brad Collins, Head of Product & Sales Capability & SMSF Sales at AXA Australia, and the topic came up of “What is new in Sales in this post-GFC world?” Now, setting aside the possibility (probability?) that we are far from post-GFC, I think it is an interesting area for discussion, and one into which I’ve been doing a bit of research myself.

Brad believes that one of the key themes for a business-to-business salesperson to emerge from the GFC is that of Intertwinedness (I’ve used this word, he summarised the idea much more eloquently). Essentially he suggests that for businesses to be successful, they need to do a better job of moving away from just the impact of the product or service to actually dealing with the success of the corporate entity itself.

Intertwinedness means looking at the client’s entire business system, value chain, strategic goals and business drivers and thinking “How can we improve this?” It requires the ability to look beyond just our products and services that we can offer, and to think more effectively about the capabilities of the business as a whole. This simple mapping of key client needs to our capabilities can create conversations that are two and three steps away from the actual products we sell.

Even beyond that Sweet Spot, Brad suggests that selling organisations looking to intertwine themselves consider not just where our capabilities overlap with our clients’ needs, but where our needs overlap. He gave the example of an industry superfund approaching a rail operator with the business idea of pooling purchases from printers, in order to decrease costs of creating publications. Some of those publications may be shared, but the business benefits would go beyond that simple overlap.

Being intertwined means it is hard to uncouple the business systems - Brad used the analogy of a weed that is so intertwined in the roots of a plant that to remove the weed would kill the plant. Maybe aspiring to weed status isn’t inspiring, but it hits home. In the GFC this can be a powerful defence strategy. Interwinedness is, of course, just as powerful when used as an offensive strategy, something I’m sure I’ll touch on in a future posting.

I like the idea and my experience and research supports it. The challenge, of course, is to get the sales organisation to be able to think strategically and holistically about their account. I believe that this is a difficult task, but not an impossible one. To achieve it, an organisation needs to break it down into smaller tasks; one can’t expect a transactional salesforce to become a strategic trusted partner overnight.

A good starting point is the number and kind of contacts that a salesperson has within an organisation. If they are only dealing with one area, or one area plus procurement, then they are unlikely to be able to see beyond the simple product impacts. Drive them to have more connections and conversations with other functions, business units, etc, to at least have a sense of what those different stakeholders care about. Then start them thinking about how your product or service might help those other areas to succeed.

It is a slow process, but thinking outside the current buying area is a good first step towards intertwinedness. Be The Weed! J

The Challenge of Measuring Sales Training

To: Sales Directors, Sales Academy Staff, Sales Skills Development staff, Sales Learning/Training staff

I was speaking to a client contact the other day about the challenges that they faced to justify the investment the organisation as making in building sales skills. They had created an internal “Sales Academy” a few years back, but other than who had attended what courses, they didn’t have much to report.
A key lesson here is that the measures and metrics need to be established, and bought into, from the start. Then the method of gathering the data can be designed, data collected, and regular discussions can take place on progress. That said, even without thinking ahead of time, there are still things that can be done.

The two challenges are to be able to communicate upwards the value of the work that the team (or in this case the Academy) is doing, as well as communicating to your internal customers (the sales teams) that the Academy is helpful to them. Often we forget the value and importance of communicating to the sales teams in our zest to communicate upwards!

Of course the key to this process is the availability of data (see key lesson above). Without having planned in advance for measurement and reporting, you can be left with quite narrow choices for data. Without knowing what data each your organisation has access to, it is hard to make any specific recommendations; you need to be creative with what you can get (and, occasionally, politely aggressive to get access to it). I can offer up some suggestions, though, based on what we’ve done before.

Below are a few ideas of analyses that you may want to perform:

1. Compare scores on the Sales Competencies to performance against sales quota. While imperfect (since it relies on the assumption that quotas are reasonably and consistently set), this analysis should be able to show that those with better skills exceed quota.
   
   You can also quantify the value of moving the average competency score by one point (or similar), for instance, “a 1 pt movement on the average competency score equates to 2% improvement in quota performance.” This can also easily be translated in dollar impact.
2. To be even more targeted, you can group specific skills (e.g. Opportunity Development and Clarification) from the competency model and analyse their impact as performance. This is the same as the above, but much more focused on key known gap areas, or key areas where you know you can have impact. Once again, this can be translated to dollar impact, “improving our skills in opportunity development could mean $10 in top line sales”.
3. Compare teams that have received coaching from the Academy, to those that have not. Typically well-coached teams out-perform poorly coached (or at least less frequently coached) teams. You may not have this degree of data on yet.
4. Compare the performance of known experts in the Competencies or the Sales Process to those who do not perform as well. In our Academies, this is typically done through the accreditation levels; we see that Gold accredited individuals outperform Silver, who in turn outperform Bronze. Without accreditation, you could create quartiles for comparison. The goal here would be to be able to say something like “the top quartile performers in the competency model outperform the second quartile by 40%,” thereby further proving the value of the model and of engagement with the Academy.
5. Compare won deals to lost deals, in particular along whether the deal had specific completed templates filed against it. This would allow you to show that chances of winning a deal are x% greater if the template is completed. This will help to argue against those that see the tools as simply an administrative task.
6. As a simple win analysis, capture the value of wins where the sales team has been coached, or used the tools, etc. A simple roll-up of the value of the contracts won would allow you to communicate that “teams where we have been involved in the sales process have generated $150 million in sales”.
7. A more complicated win analysis, would be to get sales managers and account managers to assign a percentage of the win to the tools, coaching and process received from the group during the sales process. This percentage is then multiplied by the deal value, and then all the percentage deal values across all the won deals are added to create an impact value.

This list may well be more ideas than anyone needs, but they are a few ideas that might get you thinking about your own internal challenges to demonstrate the impact of your programmes.

The goal, of course is to be able to talk dollars: here’s the dollar impact of what we’ve done. Once you have quantified some business impact (“Level 4”), you can go on to show ROI (“Level 5”). This can be pretty compelling data to communicate upwards. For instance, for one account we found that every $1 spent on a training/coaching programme generated $16 of gross margin. That got some attention!

Let's not all drink the Virtual training Kool-aid!

I have been hearing a lot of excitement from clients lately about the idea of delivering "virtual" sales training sessions. It has been coming up a lot in conversations, frequently enough that it is already time to raise some red flags. We need to be careful with this excitement, and not allow the it to overwhelm the reality, nor, importantly, to overwhelm the impact of these sessions. (In the interest of full disclosure, before I begin, some of the excitement is, indeed, coming from me.)
Let's define what I'm talking about first. When I say virtual sales training (VST) sessions, I am talking about replacing face-to-face training/coaching/in-field support, with a virtual interaction. This generally takes place via a Web-Ex- or NetMeeting-like technology, allowing individuals to gather around a common desktop or slidedeck. The session is synchronous, meaning that the attendees are all present at the same time, all can contribute, discuss, ask questions etc. That's enough of a definition for now.
One more thing, though: I don't want to get caught up in the argument of "Good virtual learning is better than bad face-to-face," or vice versa. Let's assume, for the sake of the argument, that we're discussing good versions of both. Arguing that good skills development programmes are good, and bad ones are bad, is something that takes up a surprising volume of space in blogs and discussion groups, but gets us nowhere. Onward.
Probably the first, and largest, red flag is the context in which VST is discussed. Most of the time it comes up around a discussion of doing more with less, and virtual sessions are immediately introduced as a way to save money. This has been particularly true during the global financial crisis (or, as Saul Eslake rightly calls it, the North Atlantic Financial Crisis) where budgets have been cut, costs slashed, people retrenched. VST comes in to save the day: we can do the same amount of training, but save heaps on travel and room hire, etc. 'Not only that, but the team doesn't need to be out of the field for 2 days in a row! We can run 4 x 2-hour sessions and get the same result!' (Yes, I have heard virtually that same quote from a client).
The second red flag comes when people start talking about how VST delivers the same thing as face-to-face interaction. Through the magic of technology, we hear, the experience is the same. One client even said that the only difference between VST and a classroom session is that with VST you can't have drinks together afterward! Someone in the room suggested they could have virtual drinks instead - ha ha!
The third flag comes when people discuss how easy VST is. People are used to virtual sessions, now, they say, and the results just come. This is a variant of the classic 'If you build it they will come' argument, tweaked to say, 'If you VST it, their behaviours will change.'
And the final flag (for now) pops up when people discuss that they have moved their course from face-to-face to VST. This is worrying when the discussion implies that it is a straight port across, or that all they had to do was eliminate a few things that "wouldn't work virtually".
So what's my point? I'm a big fan of VST, and I think it is a very useful past of a sales development programme. But we have to be realistic. Many conversations I have heard with clients or with people in the sales effectiveness space sound an awful lot like the conversations we had back in 1999: face-to-face training is dead, long live online training. The truth was, and is, much more complicated.
Here's the truth: VST is hard, just like any effort to build the skills or change the behaviours of salespeople is hard. And VST will fail, just like other approaches, if it isn't combined with good upfront communication, defined measures goals and metrics, coaching and reinforcement, systemic support, and reporting. So instead of jumping on the bandwagon and declaring that VST is the answer to all questions, and the solution we've all been looking for, focus on making sure that VST fits into a larger picture plan of how you're going to support whatever you're doing via VST, and change behaviours in the field.
Above and beyond the above, VST requires thought. Creating VST is not just a process of using the same slide deck, the same discussions, the same exercises. Effort needs to be put into creating a session that works in a virtual world, leveraging the advantages (and avoiding the pitfalls) therein. There will likely be lots of commonality, but a sure path to poor results is when your VST session maps 100% onto something done face-to-face. VST is different – and that’s a good thing – and needs to be thought through.
Thinking of VST as a cheaper way of doing things condemns us to the same mistakes as was made a decade ago with online training, and 20 years ago with Computer Based Training. It *may* be cheaper, and it *may* be overall more cost effective, but the key thing is not the cost, it is the outcome. Again, VST is *different* and needs to be understood and discussed as such. The focus needs to be on getting good outcomes from the inputs, not just saying 'VST is cheaper'. There’ll be lots of space in other posts to discuss some of the keys to what makes VST different, and how to take advantage of that.
The deeper truth, of course, is that VST is one element that probably has its place in almost any sales development project. It should be included as a possibility in most programmes, and eliminated or included on its own merits. The more tools and technologies that we use to develop skills and embed behaviours, I believe, the better.
But my honest and heartfelt warning remains: don’t just jump on VST because it is the latest thing, or the cheapest thing, or the only thing that you can afford. Look deeper, think harder, and you will more than likely be on the right path.