The CEO Challenge

You know the saying about assumptions. Why are you still making them?

Jane Adamson — Tue, 02 Mar 2010 15:05:55 +0000

Assumption testing has always been important in organizations. Right now, however, it’s more critical than ever. Markets are evolving so fast that the wrong assumptions can be fatal.

Worse yet, an organization’s inability to routinely identify and test assumptions is a cultural defect that can be very difficult to correct.

Rick and I often see this problem when we participate in leadership meetings held by our clients. During these meetings, we frequently hear executives mistakenly state assumptions as if they were facts. Here are a few assumptions we hear regularly:

This slowdown is temporary - things will be back to normal soon.
This customer loves us, so this deal is safe.
Our clients want X.
No one else can beat us at X.
We have to lower our prices.
We have to invest in X.
We can’t afford to do X.
We tried X before and it didn’t work.

Each and every one of these statements is an assumption. And yet we rarely hear anyone challenge these assumptions. Why not?

ARE WE JUST TOO NICE?

It’s understandable that colleagues sometimes fail to challenge each other. First, there’s the fear of appearing negative, especially during difficult times. Executives need to provide solutions; if a solution isn’t readily apparent, it’s easy to withhold questions or challenges, to indulge the groupthink.

Second, we live in a multi-disciplined world in which we need to trust the expertise of our colleagues. When those from other disciplines speak, we may not have the direct knowledge to evaluate the intricacies of what they said, let alone establish whether it’s right. As a result, assumptions go unchecked.

This problem escalates when power is added to the equation. For example, when a CEO, president, or boss makes an assumptive statement, it’s even more likely to slide by. We’ve watched entire meetings in which a CEO will present assumptions without a single challenge. If we talk with that same CEO privately, s/he will inevitably assure us that s/he invites and encourages dissenting viewpoints. That’s an assumption as well — s/he assumes that the rest of the team feels confident and comfortable sharing that dissention.

It’s naïve and dangerous for any executive to believe that employees will automatically voice anything, especially when that “anything” is negative or challenging. The way to truly create an organization that identifies and checks critical assumptions is to build it into the cultural expectations. Only if it becomes the behavioral expectation in the organization will it become real.

Assumptions rarely exist in a vacuum, and they lead to more assumptions that can devastate a campaign, a strategy, or a company.

A CASE STUDY

Here’s a simple, true example of how one bad assumption leads to a myriad more. Let’s say that an organization is attending a trade show with the assumption that the best way to succeed is to attract as many people as possible into the booth and get their contact information.

Based on this master assumption – we must attract as many people as possible — the organization makes all of these secondary assumptions:

The booth needs to be huge and highly visible.
We need sensory devices, contests, premiums and actors.
We’d better be a show sponsor so our name is on the program, the walls and the big banners.
We’ll need plenty of power, labor and technology in our booth so we can electronically swipe contact information and download the data in order to follow-up with everyone.
We need a new booth because it can’t look the same as last year.
We need to increase our tradeshow budget to X.
With this huge budget, the sales team must close $X million in new business from this effort.

This show will now require a significant effort from multiple departments – sales, marketing, finance, operations, and the executive team who banks on lofty results to propel the business toward its quarterly and annual goals.

WHAT IF SOMEONE HAD SPOKEN UP?

What if one person in the organization had been encouraged to challenge the initial master assumption? That person might have brought up these arguments:

Having a lot of traffic in the booth will mean we won’t have time to separate real prospects from tire kickers. We also won’t have time to work with the strategic clients and prospects we’ve invited to the show.
A massive effort to fill our database means lots of pre-show prep and post-show follow-up for a team of sales reps that doesn’t have the resources or budget to absorb an enormous influx of extra work hours.
90% of the names we put in the database won’t be prospective customers, so afterward we’ll need to talk to everyone and find the 10% who are real prospects. This effort will actually reduce sales time with qualified prospects.
We know that 10-20% of the 90% non-customers will ask us to quote or send us RFPs, which will further reduce sales team time to sell strategic prospects. At the same time these extra RFPs will add to the work burden of the various support teams, decreasing their ability to meet their budgets.
Since the post-show marketing program will require a big follow-up effort with limited staff, it will be a long time before we get to the 10% who are the qualified prospective buyers. By that time, many of them will have already bought from someone else. We will be lucky if we can get 33% of that 10% to buy, and we’ll never hit our revenue goals at that rate.

These challenges highlight the fact that “more people” wasn’t the right strategy for the show. And a challenger would have saved the organization many headaches and put millions back into the top and bottom lines. However, since nobody challenged the master assumption, the ramifications negatively affected the company and its strategy for a year.

SOLUTION

If your company’s culture isn’t proficient in identifying, challenging, and testing assumptions … you’re not alone. Therefore, you can gain considerable advantage by evolving into an organization that welcomes and benefits from this kind of consistent, strategic analysis.

ACTION PLAN

1. Make sure your organization supports assumption testing.

There are two tests that demonstrate whether your organization is good at identifying and testing assumptions.

First, when new employees join the organization, find out what they informally learn about the company and its culture. Preferred cultural norms pass from person to person. Listen carefully to what you hear. Are new employees inspired to challenge the status quo? To speak up in meetings? To drive new initiatives? Or are they encouraged to get along and keep their heads low? If there’s any semblance of the latter, you have a serious cultural problem.

Second, observe what gets rewarded and why. When team members question an assumption, what do they receive? A look of annoyance, an eye roll, or a pat on the back? If a company wants a culture that identifies and tests assumptions, it must reward that behavior openly and consistently.

2. Start listening for assumptions. You’ll be surprised by how many are being made.

There are two basic categories of assumptions – those made about the external marketplace and those made about and internal environment of the company. Here are just a few general examples of common assumptions companies make.

EXTERNAL ASSUMPTION	INTERNAL ASSUMPTIONS
Who are our best prospects and clients What’s happening in markets, organizations, industries What our competitors are doing What will happen in the economy Who our best suppliers and partners are and why Which trends are real and the impact they’ll have	What our strategy is and where we want to be in X years How teams, individuals and businesses should be evaluated and rewarded measured The purpose for an existing policy, process, or metric How the organization and teams should work together Roles and impact of different teams and individuals

3. Identify the risks.

In the ideal world, you’d take all of the assumptions from #2 and test each and every one. Unfortunately, that’s not possible or practical. Instead, you can start by requiring that assumptions simply be labeled as such. Separate the known facts from assumptions being made.

How do you implement this step? First, keep a list of assumptions during any important discussion. Then when someone draws on one of those assumptions, ask two important questions:

“What makes you believe that to be the case?” Listen for substantiation. If the answers are vague or hearsay or judgmental, then keep probing.
“If we’re wrong about this assumption, will it cause substantial harm?” If the answer is NO, then move forward, but look for ways to substantiate the assumption in the future. If the answer is YES, then testing is required.

4. Test the most costly, dangerous assumptions.

For those assumptions that will cause substantial harm, focus your team to identify the best and fastest way to uncover the truth and mitigate the risk. The investigation could take numerous forms such as talking to customers or prospects, formal market research, internal surveys, competitive research, “secret shopping,” or even simply asking someone who may have the true facts.

5. Encourage and reward the challengers.

Remember the old adage “Focus on what is right, not who is right.” When there’s a win, credit belongs to the whole team. When there’s a loss, it’s the leader’s fault for not identifying and validating assumptions.

Thus, an important way to encourage challenges is to publicly embrace them. That doesn’t mean you have to engage in long discussion every time someone asks a question, but it does mean that when someone challenges an assumption, it should be labeled, accepted, considered, and appreciated.

It’s also important to establish the difference between negativity and positive assumption testing. Negativity simply shuts down ideas. Positive assumption testing asks questions and forces to the surface thoughtful discussions: What evidence do we have that this is true right now? What will be the result if we’re wrong? What alternatives might we be exploring if this assumption proved false?

Finally, you can include assumption testing as a critical behavior that is expected and discussed during regular performance evaluations. That certainly elevates it from a “tolerated” status to a mandatory action.

6. Identify assumptions (and how you’ll test them) in your annual, quarterly and project-based plans.

Make sure each assumption is clearly identified, and understand how the company will test and react to the results. Then make sure teams are testing and reporting back in real time.

When an assumption is tested and proves to be faulty, don’t punish the team for the original assumption; instead, praise the team for identifying, testing, and preventing expensive mistakes that hinged from that assumption. Point out the importance of the new conclusion and the resulting benefit to the company. The team will now have a new direction based on facts, not assumptions, and that is worth celebrating.

CONCLUSION

Part of the benefit in testing assumptions is greater clarity, completeness and accuracy in cost considerations. Understand why there are different assumptions from different teams, or roles within the company, or from those that impact your success from outside the company (customers, partners and vendors). Understanding their assumptions will help us see gaps, inhibitors, time considerations and cost impacts for all the parties.

We assume you’re going to bring this principle of assumption testing back to your company and put it to work. Is that assumption valid? Let us know!

What do you think? Please share your thoughts and experiences with us here!

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The Cost of Chaos

Jane Adamson — Tue, 02 Feb 2010 14:07:47 +0000

During the first week of the new year, when we tend to gaze optimistically at the road ahead, a headline from the Associated Press announced “Americans’ job satisfaction lowest in 22 years.”

The article then went on to say “That is the lowest level ever recorded by the Conference Board research group in over 22 years of studying the issue. If the job satisfaction trend is not reversed, economists say, it could stifle innovation and hurt America’s competitiveness and productivity. It also could make unhappy older workers less inclined to take the time to share their knowledge and skills with younger workers.”

Well, that got my attention! Of course there are many reasons for the decline, including the worst recession since the 1930s and the fact that downsizing has created more work and more demands on the workers who’ve survived the cuts. That doesn’t change the fact, however, that such a decline has somber implications for businesses, and executive teams need to address this issue in their organizations.

Soft issues, hard impact

Much has been written about the effect morale, culture, and what’s frequently referred to as the “soft issues” have on an organization. If you’ve read the articles or experienced a negative culture, you know that the effects are anything but soft. Lost productivity, poor teamwork, tension, a dearth of ideas and innovation, doing just as much as required and nothing more … all of these problems dramatically impact the bottom line.

Need proof? In their book The New Corporate Cultures, Terrance Deal and Allan Kennedy calculated the average performance of culturally robust companies and their weaker counterparts. They found that

Over a span of 11 years, “culturally strong companies” averaged 571% higher gains in operating earnings than those they deemed “culturally deprived.”
Companies with highly-rated cultures averaged 417% higher returns on investment than their less culturally-robust counterparts.

At The Revenue Game, we frequently use the term “cost of chaos.” This concept came from our work creating revenue strategies and aligning organizations to execute on those strategies. We’ve seen firsthand that the staggering lack of alignment in most organizations has real financial cost. But today, let’s talk about the human cost – the cost of poor alignment on people and their outlook about their work.

Some of you may object to the word “chaos” when we’re talking about organizations that are out of alignment. You may say, hey, we’re not perfect, we have problems, but “chaos” is much too harsh. We argue, however, that the word choice is appropriate and weighted accurately.

The human cost of misalignment

Human beings, especially in today’s economy where the necessity of brainpower is so acute, desperately want to do things because they matter. They want to be part of something bigger than themselves. It’s the motivational driver behind engaged workers, behind innovation, behind passion and commitment. In order to feel that intrinsic motivational pull, employees need to be pulling in the same direction and not at cross-purposes. (On that note, I highly recommend this 20-minute TED lecture by Dan Pink on “The Surprising Science of Motivation.”)

For example, here are three common examples of misalignment that cause frustration, anger, confusion and, eventually, disengagement.

1. Sales reps are judged on and rewarded for bringing in revenue while manufacturing/ engineering/ operations teams are judged on and rewarded for efficiency.

This misalignment directly and frequently impacts a company’s bottom line. After all, when there is no alignment on the type of revenue or projects sales should bring in, reps will bring in anything they can find. Manufacturing/engineering/operations teams end up with a slew of different projects with different expectations from different customers with different needs.

Sales reps walk around patting themselves on the back for the revenue they’ve brought in, but the delivery folks gripe about sales because the projects coming into the company make efficiency impossible. Sales reps become confused and frustrated, and the most talented ones often leave the company for greener pastures. Operations teams become equally angry. And guess what — customers see this tension and eventually take their business elsewhere.

2. The company’s revenue goals depend on a few sales heroes who get all of the recognition, pay, and perks. The support group behind those reps works hard but receives little recognition for contribution.

What makes this scenario even worse is that company leaders will get up in meetings and talk about teamwork, but employees experience a far different reality – one that tells them some team members are better than others. Resentment is rampant.

3. Everyone knows the company’s revenue goals, but the strategy for achieving those goals is either non-existent or known to only a few executives. Everyone does the best they can, but with a limited view of the strategic whole, their efforts are frequently ignored, unappreciated, or even disparaged.

If employees think what they’re doing is right, but then they’re shot down for their efforts without understanding why, the natural reaction is disengagement.

Is it any wonder that job satisfaction is so alarmingly low?

Action Plan

1. Develop a clear revenue strategy that maps out HOW you will achieve your revenue goals.

Every functional area of the company should be represented in the development of the strategy so that each representative understands the rationale behind the strategy, the revenue principles the strategy is based on, and what the key elements to success are. Ensure that the communication then flows from the strategic development team to all corners of the company. The goal is to paint a very clear picture to every single employee of where you’re going, why you’re going there, and how individual employee’s work contributes to the company success.

The plan itself should clarify:

The specific niche the company wants to dominate
A profile of the perfect customer
The promises the company is making to that customer
The problems that customer has that the company’s offer will solve
The offer deliverables to the customer

With that information in hand, individual employees will be able to stay in alignment with the strategy as they make small daily work decisions.

2. Build high-performing teams that understand and want to support the big picture.

It’s not enough to just communicate a revenue strategy and plan at the beginning of the year. Your management teams need to continually communicate the vision and lead your organization to execute on those goals each day.

A big part of that leadership is to break down silos and rally your employees around the customer and solving the customer’s problem. Silos intensify when people either don’t understand dependencies or they’re rewarded on silo-based metrics. It’s up to your management team to monitor silos and address any disconnects immediately.

Remember, humans want to do a good job. The goal is to show them exactly how they help each other — they will make the system even better.

3. Give your team the resources they need to succeed.

Nothing discourages employees faster knowing what the goal is, but not having the resources to achieve it. It’s the root of most accountability problems and many morale issues that – as we said earlier – have human and financial costs for your business.

If your revenue goals are worth achieving, they’re worth the appropriate investments in people, processes and technology. If you can’t justify the investments, then you probably need to lower your goals so they’re achievable.

4. Make sure that your compensation plan supports your alignment.

Comp plans that reward a few sales stars with hefty commission, generous expense accounts and lavish trips can absolutely kill the alignment in your organization. You’re sending a message to the entire team that only a few players in one functional area – sales – are highly valued and that individual performance is more valuable than team accomplishment.

We’re not suggesting that commission and bonuses are wrong. We do recommend that your sales reps are rewarded for profitable, successful projects rather than just revenue. That way, their goals are aligned with the company’s revenue strategy and the goals that all functional areas share.

The same philosophy holds true for other functional areas – make sure their incentives and bonuses are tied to the company’s goals so that they are rewarded for working together rather than in silos. In addition, high performers in all areas should be recognized for their contributions on a regular basis. Don’t let the sales team walk around patting themselves on the back without publicly recognizing the rest of the talent that brings the company’s vision to life. Not everyone wants the stress of sales, but they do want recognition for their achievements.

5. Create positive metrics for your revenue plan.

Your team wants to celebrate success, so structure your metrics so they’re positive, not negative. For example, instead of the negative “reduce our current error rate of 20%,” say “improve our 80% accuracy rate.” That small shift allows you to celebrate small steps as you approach the goal and then surpass it! Celebrate 79.9%, 80%, 80.1%, 80.2%, and so on. The celebrations will motivate, re-energize, and keep people focused on the right things.

Conclusion

Win The Revenue Game by cutting out the “cost of chaos.” Give your employees the joy of being engaged and committed to something they understand and know they can affect. In order for that to happen, employees need to be pulling in the same direction and not at cross purposes. Let’s not let year another year go by without addressing and improving that employee satisfaction statistic!

What do you think? Please share your thoughts and experiences with us here!

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Thought Leadership is a Business Strategy

Rick McPartlin — Tue, 05 Jan 2010 15:14:09 +0000

Last month, Jane wrote about the courage to create a brand, and boy, the word “courage” struck an interesting chord within our community. Branding involves making a difficult choice to go after a niche market with laser focus in order to differentiate your business from your myriads of competitors. (Even if you think you don’t have a lot of competition, you do — more than ever.) That focus means turning down business that isn’t on strategy. Difficult? Yes. Courageous? Absolutely.

This month, I’m intrigued by a similar concept: “thought leadership.” A lot of companies bandy about the word “thought leader” as if it’s a marketing tactic, but many others aren’t familiar with the concept or the strategic benefits that come with it.

The cold reality is that thought leadership is much harder than it appears. It isn’t a marketing campaign; it’s a long-term business strategy. In this month’s CEO Challenge, I’ll outline what the concept really means, the benefits, and how your company – if you’re courageous enough – can implement this strategy in 2010.

What is thought leadership and why is it valuable?

When I talk with companies about thought leadership, they sometimes tell me that “yes, we’re doing that.” They point to their shiny new blog, their Twitter account, their webinar series, their Facebook group. However, any company can implement these kinds of marketing programs, but that doesn’t mean the company is a thought leader. They’re confusing communication tools with strategy.

Instead, thought leadership is a long-term business strategy that drives everything the organization does each day and at all levels. A thought leader is an innovator in a very specific niche, and customers in that niche recognize, value, and – most importantly – are willing to pay for that innovation, that leadership position.

Many companies that launch new products and services have truly high value solutions. They pride themselves for delivering great value and they heap services, support and options into their offering. They’re proactive in sharing knowledge, opportunities and choices. They believe they’re a thought leader because they’re delivering innovation and value.

Yet somehow they find themselves competing with low-cost providers, and they can’t charge what they believe their solutions are worth. The problem is that these companies aren’t thought leaders because the market isn’t following; prospects and customers don’t consistently recognize or understand the value.

True thought leaders can demand substantial price premiums for their solutions because they can clearly articulate a compelling value proposition for very specific market niche. They also enjoy shorter sales cycles, greater repeat business, and strategic opportunities that their competitors miss.

You must consistently lead

If a company delivers value in a stealth way that the market doesn’t clearly understand or value, that company isn’t a thought leader. Why? They have to actually be a leader.

Leadership means a company has followers who recognize and take action toward their intended results. It means the company is absolutely recognized and respected as THE LEADER in a specific niche. It’s not something a company just suddenly decides to do and then implements during a short campaign. It’s a core business strategy that the organization implements at all levels and over many years.

A lot of companies aren’t prepared to make that kind of commitment. Some executives aren’t comfortable getting in front of their industry on a regular basis. Or they think it’s more important to focus on internal issues rather than creating an external voice and face for the organization’s vision and values.

These companies should not even think about the words “thought leadership” because they don’t have the tools to do it successfully.

In addition, some CEOs worry that, by consistently and loudly sharing their vision and value, they’ll invite competition. And they’re right. That’s why thought leadership isn’t short term, and very few companies can do it because they don’t have a sustainable, meaningful competitive advantage that is differentiated and defensible. They also need to commit to continuous innovation so that when copycats show up, they’re always a step or two ahead.

That’s why thought leadership is a business strategy, not a campaign. It’s a commitment to innovation and sustainable competitive advantage over the long term. It’s also a major commitment to consistently communicate that innovation in a way that creates followers who are willing to pay for that innovation.

Solution

Thought leadership is incredibly important for companies that are launching new products and services, particularly those aimed at early adopters. It creates differentiation and changes the way the market views solutions. Yet unfortunately, I’ve found that very few B2B or small/midsize companies have the guts to create a brand strategy let alone make a long-term commitment to thought leadership.

If your company is truly ready to commit to thought leadership as a business strategy, here’s a high-level action plan to get you started.

Action Plan

1. Define the niche for which you can reasonably be THE thought leader. It may be near impossible to become a thought leader for your entire industry, but you can be the thought leader for a very small, highly targeted niche – for example, a specific geography, customer need, or application. You have to deeply understand the needs of your niche and how they will assess the value that your solution provides.

2. Develop a brand strategy and be ready to stick to it. If you don’t have the guts to turn down business that isn’t consistent with your brand strategy, then you can’t possibly become the thought leader in your space.

3. Define a leadership roadmap. How will you show leadership in your niche? It takes time and effort to become recognized as a leader. Create a roadmap that outlines all of the leadership opportunities you will pursue over the years ahead. For example, are there conferences for which you could deliver a keynote address? Publications in which you would need to be featured regularly? Committees that you can lead?

4. Develop your thought platform. You’ll need a compelling vision, stories, data, and market insight to be respected and recognized as a thought leader. You have to tell the world and your your prospective customers that you are the go-to firm. Your thought platform should show deep knowledge of where your industry has been, the problems your customers face, and where you are collectively going. You’ll also need to create intriguing communications vehicles to share these stories and vision – speeches to industry, conference proposals, events, media materials, publishable articles, intellectual property, best practices libraries, your own communications platform, etc.

5. Get your organization aligned. I can’t stress enough how important this step is. Many – perhaps most – companies have a chasm between cost functions (operations, finance) and customer acquisition (sales, marketing). Your senior team needs to align and lead those functions to execute on your brand and thought leadership position each day. Failure to align an organization is a failure of executive leadership and thought leaders are NOT in chaos!

6. Find the right executive. Here’s the reason so many companies don’t successfully achieve thought leader status – they assign this role to a midlevel communications person or to an executive that isn’t comfortable playing such a public role (or who is too busy with internal initiatives to get out there and lead the industry). A thought leader must have deep experience and industry contacts along with a public persona and job description to lead your niche. The rest of your executive team needs to be fully engaged and able to contribute as well – thought leadership has to be part of your culture.

7. Define your metrics. Naturally, you need to know that this strategy is working. The first set of metrics should involve revenue, pricing and profit margins; you need to know that customers are buying from you based on pricing that reflects the value you deliver. The second set of metrics should track evidence of followership. For example, do journalists call you to comment on news or industry trends? Are you invited to speak at important conferences? Do prospective partners, customers, or funding sources reach out to you rather than vice versa? Do employees want to work for you because they view you as the leader? These metrics might be hard to track, but do it anyway – you’ll evolve your figures over time, and they’ll help you establish your progress.

Conclusion

True thought leaders position themselves as THE source of best practices, language, and metrics for their chosen market niche. When they lead the niche in this way, competitors have to adjust and meet the rules and standards the thought leader has established. What a great competitive position!

In reality, few companies have the discipline and stamina to commit to thought leadership as a business strategy. Those that don’t won’t succeed. Those who are successful, however, can command higher prices, enjoy shorter sales cycles, and operate from a leadership position in their niches.

What do you think? Please share your thoughts and experiences with us here!

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Have the Courage to Create a Brand!

Jane Adamson — Tue, 01 Dec 2009 15:20:34 +0000

Branding is a tricky subject to discuss with small to mid-size companies. It’s a concept that’s more easily associated with consumer products, packaged goods, or the Fortune 500. Branding books use examples like Starbucks, Apple or Dell – examples that don’t resonate with midsize service companies, B2B companies, or industrial product companies.

Many of these types of businesses think of a brand as their logo, the look & feel of their web site, or their slogan. Unfortunately, a brand is none of those things. Instead, we define a brand as the combination of what you sell, how you sell it, and to whom. The result is an experience that develops your customers’ trust, and it can create substantial value because the right customers will be willing to pay a premium for that experience. That experience is based on trust and belief that you will be who you say you are every single time and in all circumstances. Not most of the time. Not just with certain people. All the time, everywhere.

A brand is narrow

The very essence of branding is being very clear about who you are and what specific customer segment you best serve. Thus, done correctly, branding is discomforting for a small to mid-size company because it requires a courageous and counter-intuitive choice to limit your market. After all, when you’re very specific about your target customers, you leave out other customers that don’t perfectly fit your target. For a small company fighting for survival, decisions don’t get much tougher than that.

Why should you limit your market and develop a brand? Because the dangers of NOT branding the company carefully, of NOT choosing, are lethal.

No brand? You’re no different.

First, the act of NOT choosing very specifically who you are, what market you’ll serve, and how you’ll serve that market, is in itself a choice. It’s the choice to be like everyone else, to be anonymous, to hide in the chorus of companies and hope that your voice will be heard amongst all the others.

In an age where your customers can choose from a huge swell of service providers from around the globe, choosing anonymity is a dangerous decision indeed. If you don’t answer the question of “why me,” a competitor surely will. Very simply, branding gives customers a reason to buy from you without you having to plead, prod, and cajole a sale.

A brand is a clear promise

A good brand says, “You can trust that I will meet your expectations because I’ve clearly told you what those expectations are.” If a company hasn’t developed a clear brand, then it’s difficult to be clear about the promises it makes to customers.

If a company knows, internally, what it promises to customers, then the entire structure of the organization (including compensation plans, values, reward systems, resource allocation and so forth) can be clearly established to ensure that the company delivers on those promises. Without brand clarity, it’s easy for internal systems to become misaligned, inevitably leading to customer disappointment and overall mediocrity.

For example, online shoe retailer Zappos.com promises no hassle returns, and they successfully deliver on that promise. I returned a pair of shoes last week, and there was absolutely no hassle — no questioning of my return decision, no cost to me, easy instructions, and friendly service. Their business processes are set up to ensure no hassle returns and their employees are enthusiastic about returns. In other words, their organization is aligned to deliver on a clear brand promise.

Branding drives marketing efficiency

A good brand is extremely specific about the profile of ideal customers. Without that specificity, marketing efforts are diluted because they need to appeal to a broad audience. Next, expensive sales time is wasted as sales reps talk with prospects who really aren’t a good fit for the company.

Is your company facing this problem? Check your revenue generation metrics. Are you attracting the right number of prospects for your investments? Are you closing a high percentage of the prospects you do attract? If either numbers isn’t where you’d like it to be, there’s a good chance that your organization isn’t completely clear about your customer profile and you are, unfortunately, wasting money.

Branding drives word of mouth and referrals

There is one true indicator of a good brand: word of mouth. Strong brands are so reliable and rare that people talk about them. This fact is true even in service industries, industrial companies, small businesses, B2B product companies and the like. Regardless of size or industry, a well-branded company enjoys a tremendous advantage in the marketplace because word of mouth and referrals are the best possible form of marketing.

If your company doesn’t have a strong brand, your competitors have a major opportunity to beat you to the punch and gain an enormous advantage.

Action Plan to Create a Strong Brand

1. Focus on the customer problem you’re trying to solve.

As Marty Neumeier says in his excellent book The Brand Gap, “A brand is not what you say it is; it’s what they say it is.” Therefore, you need to start with the real needs of your customers – and those needs typically have nothing to do with your product. Ultimately, your customers need to generate revenue and profit, and your solution has to help them get there. Customers also have needs such as mitigating risk, convenience, personal image within the company, political agendas, technical limitations, and much more.

Be VERY SPECIFIC concerning what problems your customers actually have and how your solution can solve those problems. Become a specialist your customers can trust, not a generalist for everyone.

2. Create a detailed profile of your perfect customer.

Companies often say they have a target customer profile, but it’s typically so general that it’s ineffective. Dig much deeper than top tier characteristics such as company size, geography, job title or industry. The goal is to help the prospect feel like you are talking specifically to him/her. Help your marketing and sales department understand the problems your customers face as well as characteristics like how they make decisions, what’s important to them, what they struggle with, with whom they interact, and how they like to do business.

When the profile is complete, the marketing and sales teams can then identify how best to reach the target group and how to recognize a “good” target customer. A great brand will attract certain types of people. Do not bend to the temptation of responding to prospects that do not fit the profile. Let go. Trying to appeal to different groups will dilute and ultimately crush the brand.

3. Decide, as a company, on your promises.

A promise is a much stronger word than “value proposition.” Value proposition sounds casual and murky and spineless. A promise is real. People are careful about making promises and breaking them is a serious cultural violation. Your brand promises should take on the same solemn quality.

For instance, if a local nursery promises to help customers make informed buying decisions, everything about that company should be set up to deliver on that promise. HR would hire only cashiers with backgrounds in gardening and the different types of shrubs, trees and plants. Training classes would be held on a regular basis so the staff could keep up to date with local planting techniques and watering requirements. Employees would be well versed on all inventoried items. Specialists would be available for detailed questions. The company may even conduct gardening classes for its customers.

A brand promise is a solemn vow. Are you keeping yours? How do you know?

4. Avoid corporate speak.

Great brands speak directly to their client groups in language that they understand and believe. Corporate fluff such as “we’re dedicated to your success,” “we have a full range of products to meet all your needs,” and “we’re better, faster, cheaper” have lost all meaning and credibility. Tell your prospective clients exactly how you solve their problems. Then walk, talk, and demonstrate your dedication to that brand.

A local Scottsdale remodeling contractor I know requires all his subs to clean up a home every evening. He bases his remodeling recommendations on how a family lives their daily lives, and he spends time perfecting every detail of the project even though it may never be noticed. In a city among the hardest hit by the housing crisis, this contractor stays booked, and he enjoys strong word of mouth. He has created an authentic, powerful brand.

The buzzword “transparency” is another way of telling companies to be authentic. In this world of instant messaging and the internet, companies cannot get by for too long without authenticity because the market will unmask the reality and spread the word.

Conclusion

Why don’t more small to mid-size companies spend more time on creating an identifiable brand? The answer is that, like most good things, it’s hard to do and takes enormous corporate discipline and strength of character. Every company has heard the internal plea “we can’t be that specific, then we’ll lose all these other opportunities.” The counter-intuitive pull is tough. Yet when you choose not to create a brand, you’re choosing to be the same as everyone else.

Remember: Your goal is to consistently communicate WHAT you do, for WHOM, and HOW you do it. Make a solemn promise and keep it every time. That’s a powerful brand that can differentiate your company in a difficult, crowded market.

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What do you think? Please share your thoughts and experiences with us here!

How To Fix A BOTW Business Model

Rick McPartlin — Tue, 03 Nov 2009 15:10:55 +0000

It’s that time of year again — strategic planning and budgeting season. The end of a difficult 2009 and possibly a new beginning for your business.

What are you thinking about doing differently next year? Are you setting more ambitious revenue goals, or are you trying to slash costs as much as humanly possible? Are you launching a new product or service, or are you contracting your offerings? Will you fix small nagging problems, or will you reinvent your entire business?

In September, I wrote a post about “Best of the Worst” companies – companies that took great pride in their success during boom times and then went down the toilet when things turned south. I then shared how “Best of the Best” companies thought differently about their business.

Now that it’s November, I’d like to challenge you CEOs with more Best vs Worst thinking. Today, I’m talking about your business model and how you can change it this next year to evolve from Best of the Worst (“BOTW”) to Best of the Best (“BOTB”).

THE BOTW BUSINESS MODEL

First, let’s look at some of the issues we typically find in a BOTW business model.

1. A BOTW marketing strategy is top-down rather than bottom-up, and it goes something like this:

A company believes there are thousands of companies that potentially need their service, and their goal is to close 20 deals. They start with a Dun & Bradstreet list of 7,000 organizations and narrow the list to companies that have at least $5 million in revenue, 25 employees, and geographically close. They end up with 4,000 prospects.

What happens next? They start randomly selecting names from the 4,000. Yet since most companies have a lot of steps in their sales process, this scenario literally creates a game of chance because the company is randomly selecting names to find 20 customers.

A Best of the Best company would reverse the process and say “I need 20 customers, and I’m going to be really clear on what the best customers look like so that I can build the process from the bottom up.” They determine that they need to develop 40 proposals to get 20 customers, and they probably need to pitch to 120 companies to get those 40 proposals, and that means they need to talk with perhaps 360 companies to start. Then they look for the best 360 companies rather than randomly select from a list of 4,000.

The top-down approach is sheer lunacy!

2. Best of the Worst companies build an inflexible cost structure based on external demand, not their own strategy.

BOTW companies often don’t have a sustainable cost model because in the past, they were really just fulfilling accelerating market demand. The phone rang, they answered, they responded.

When a company takes any opportunity in sight, it creates a cost structure based on random phone calls. Somebody says “We want you to do this…” and the company says “Well, we don’t normally do that.” But then it’s part of the job, so they say, well, OK, and they hire another person, another tool, another supplier, another SOMETHING for the business.

A lot of CEOs challenge me on this concept. “Come on, Rick, times are tough. Why would I turn any business away?” I tell them that they’re building their organizations to fulfill random demand, not to excel at anything strategic. Thus, their brand doesn’t exist as anything specific. The market sees those companies as just another average builder, consulting firm, printer, or engineering firm that has no real niche or specialty. And when the market starts to change, when it gets really competitive, when the economy slows down, customers look at suppliers and partners with a far more critical eye. They don’t want average at that point.

When the economy turns, reactive companies like this are usually the first to go out of business.

3. Best of the Worst companies think customers buy from them because they’re so good.

BOTW companies are tactically focused, not business focused. They’re masters at engineering, software, technology, science, consulting, etc., and their whole mindset is “We’re so good that people buy from us because we’re so good.”

Guess what: Even if they are that good, they still have to produce profit for the buyer, and it’s actually very rare that buyers are buying because the company is “that good.” And those BOTW companies don’t want to hear that and don’t believe it. Just like GM. “We’re the best … the biggest … the first ….” Well, is the company making more or less money? Are margins going up or down? Is market share still 70%? Don’t the metrics matter?

As long as a company says it’s good, it’s ignoring the real issue. BOTW companies need to realize that their customers have to make money as a result of buying their product or service. If they’re that busy patting themselves on the back, they’re not focusing on their customer. And sooner or later, good will not be good enough.

THE SOLUTION

My September 2009 post about Best of the Worst offers a number of solutions for BOTW companies, and here are five more to help you in 2010.

ACTION PLAN

1. Develop a thorough revenue strategy that defines what markets and segments you will strategically dominate and how you will get there.

If you don’t starts out with a clearly-defined strategy and plan, you’ll end up passively fulfilling demand as it shows up, and you’ll build a cost structure that isn’t sustainable. You can read more about revenue generation strategy here.

2. Define what niche you will dominate.

A BOTW company thinks it has a huge market for its products and services. A BOTB company has a clear value proposition and knows exactly who will care about that value proposition. When it’s clear, it’s pretty easy to talk with qualified prospects, even in a bad economy, because those people have a clear need. If you’re talking to prospects who aren’t as qualified, they’re going to have an easier time saying no.

3. Focus on the customer problems that you solve.

To be strategic and proactive rather than reactive, you absolutely have to know exactly why your customers buy from you (especially if you think it’s just because you’re good). Don’t just guess and don’t turn to a blanket, generic response. To get this information, you need to spend a lot of time with your customers on an ONGOING basis, not just when you want information or think something is happen. Then you have to have a strategy for why they should buy from you IN THE FUTURE.

4. Make sure your organization is aligned to drive and support your revenue strategy.

“Alignment” is one of my favorite topics, and I can talk about it for days. Here are two articles that address this concept: What’s a Chief Revenue Officer and Why Do We Need One? and Stage 5 Revenue Standards.

5. Develop a plan to measure and improve your revenue-related metrics.

In my September post, I talked about the importance of external metrics; you need to measure your performance versus the market. Those metrics are critical.

You should still have a collection of internal metrics including a very detailed look at your revenue chain. Many companies just look at the very last link – when the customer buys – to see whether they’re closing profitable deals. Yet if the first link in the revenue chain is leads and you’re getting the wrong leads, the rest of the chain will never be successful. So if the only thing I measure is the last step where we look at how many good deals with high margins came out, we may shoot the sales force. Maybe the problem was that our market segmentation, our strategies, our campaigns generated the wrong leads to pursue and close. I wouldn’t care if our leads cost a penny each because they’re all wrong and if entered into the pipeline will have a stifling cost.

Applying metrics to every step in your revenue chain can help you narrow your focus and move from a top-down to a bottom-up strategy. Thus, you should define, evaluate, and improve on those metrics on a monthly basis.

CONCLUSION

Transforming your business from Best of the Worst to Best of the Best is not a small undertaking, but the longer you wait, the worse your predicament. I would like to really challenge you to take your 2010 planning process to a whole new level. Use it to redefine what you will be for which group of customers. Move beyond tactical implementation to a strategy that can drive your growth for the years to come!

What do you think? Are these concepts going to make it into your plans for 2010?

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Shameless self promotion: Many of you have asked me about services to help you move toward BOTB status in 2010. In response, we’re now offering 2010 revenue strategy & execution services. To learn more, visit this page.

How to Survive an Investor’s Due Diligence

Jane Adamson — Tue, 06 Oct 2009 15:24:38 +0000

As we all know, this isn’t a good time to raise capital for your company. But surprisingly, it may be a good time to sell. An August 2009 New York Times article (“As Deal-Making Returns, Midsize Companies Are Seen as Prime Targets” by Brent Bowers) proclaimed “The United States is ripe for a boom in acquisitions of privately held companies.”

Dennis J. Roberts, the chairman of the McLean Group, an investment bank in McLean, Va., estimates that 1.2 million U.S. mid-market businesses earn annual revenues of $1 million to $500 million. Collectively they earn nearly $8.8 trillion and have a market value of $4.4 trillion. (That’s an average of $7.33 million in revenue per company with an average market value of $3.67 million.)

Roberts identifies four trends that will drive the surge:

Baby boomer burnout
Technology advances that drive market consolidation
Increased foreign appetite for U.S. companies
A buildup of cash at the nation’s 4,000-8,000 private equity groups

The article is full of helpful recommendations for owners and executives who are preparing to sell or raise capital. Even if an exit isn’t in the cards right now, Roberts recommends bringing in outside counsel to evaluate the company from an investor’s perspective. Why? Because outside advice could help you improve your strategy and profitability, leading to a higher valuation if you later decide to take the next step.

Can you sustain your revenue and profit?

When they launch due diligence, a seasoned investor, organization or buyer is looking for one simple thing: Will this company make money in the future? They truly don’t care whether it was profitable in the past. It’s all about the future.

That’s where many business owners or executives get into trouble. I’ve seen many CEOs and small business owners assume that since the company is profitable now, it will continue to be profitable in the future. And yet buyers and investors aren’t making that assumption at all. In fact, they’re doing just the opposite — they’re looking for evidence that the company CAN’T maintain and grow profitability.

For example, let’s say your company’s revenue and profit depends on a relatively small number of high-value accounts. An investor or buyer will assume that you’ll lose some of those accounts, which can kill your valuation and/or the entire deal. What if your company has one or two star salespeople? An investor or buyer will assume that one or both of them jumps ship, leaving the company in a lurch.

You’ve just introduced a great new high-margin profit. Guess what? Investors will assume that you’ll soon have competition and won’t be able to maintain those margins. If your industry is generally weak in marketing, they’ll assume that someone will improve in short order. If you’re in a very hot economic market, they’ll evaluate what happens when the market softens.

As you can see, buyers and investors need to be pessimistic because they’re looking for the best investment opportunities — companies that can survive their most rigorous analysis. Thus, your challenge during this due diligence process is to clearly demonstrate that your revenue and profit is sustainable and repeatable over the long term.

Is there a structure and process in place?

To show that your revenue and profits are repeatable and sustainable, your organization needs two components:

A clearly-defined long-term revenue strategy
The process and structure to create that reality.

To really demonstrate these concepts, I’ve created a “Revenue Test” for this month’s CEO Challenge. It’s lighthearted, but these ideas are serious business. After all, buyers will take a very hard look at how your company generates revenue. You should do the same.

The Revenue Test

1. Could everyone in your company AND your customers describe your brand in the same way?

a. We don’t have a defined brand
b. We have a defined brand but haven’t communicated it well
c. Our clients wouldn’t be able to describe our brand consistently
d. YES

2. Do you have a clearly defined niche you either dominate or have a written plan to dominate?

a. We don’t have a defined niche
b. We’ve defined one in theory
c. We have a defined niche but don’t have plans to dominate it
d. YES

3. Could your employees identify the “problem you solve” for your customer niche?

a. What do you mean?
b. There are many. Which ones do you want?
c. The sales team in clear on this. The rest of the company isn’t.
d. YES

4. Is your company “messaging” consistent in all forms (website, written materials, answering the phone, verbal conversations)?

a. Everything is different & changes regularly
b. Written communication is very consistent, but verbal isn’t
c. We’re consistent but change regularly
d. YES

5. Do you have a regular system for tracking customer feedback?

a. We don’t track feedback at all
b. We track informally
c. We track but don’t share the data well
d. YES

6. Do you have a regular system for tracking future trends in your industry?

a. We don’t track future trends at all
b. We track informally
c. We track but don’t share the data well
d. YES

7. Does your company have a defined sales process with clear steps for both marketing and sales?

a. What would that look like
b. Somewhat
c. We have a sales process but it’s not detailed
d. YES

8. Is everyone in your organization clear about what promises you’re making to your customers?

a. The promises depend on circumstances
b. Promises change
c. The promises are department dependent
d. YES

9. Have you had a strategic revenue plan in writing for each of the last 3 years?

a. We’ve never had one in writing
b. We created one this year for the first time
c. We’ve created them but I don’t know what happens to them
d. YES

10. Have you achieved your company objectives for each of the past 3 years?

a. We haven’t had clear objectives
b. Occasionally
c. Usually
d. YES

11. What metrics do you track?

a. None
b. Top line and bottom line
c. Sales related metrics
d. Companywide key indicators, department indicators, and revenue indicators

12. Do you track the ROI for every marketing initiative (e.g. ads, trade shows, mail campaigns, referral marketing, web marketing, lead generation programs)?

a. We’ve never tracked ROI
b. Sometimes
c. Usually
d. YES

13. Do your compensation plans align with the stated goals?

a. I’ve never looked at it that way
b. No
c. Not exactly
d. YES

14. How many times have you changed focus over the past 3 years?

a. Numerous
b. Several
c. Twice
d. Never completely, only slight adjustments to market changes

15. Do all functional areas of the company participate in revenue discussions on a regular basis?

a. No
b. Occasionally
c. Sometimes
d. YES

Conclusion

Give yourself 1 point for every (a) answer, 2 points for every (b) answer, 3 points for every (c) answer, and 4 points for every (d) answer.

Score	Recommendation
15-30	Don’t try to sell.
31-45	Consider major changes to create a revenue focus in your organization.
46-59	Keep up the good work. With some small adjustments, a big win is in your sights.
60	Call us – we’re ready to invest!

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What do you think? Please share your thoughts and experiences with us here!

Are You a “Best of the Worst” Company?

Rick McPartlin — Tue, 01 Sep 2009 15:10:11 +0000

Lately I’ve been talking with a lot of CEOs about a concept I call “Best of the Worst” (BOTW). The term is harsh, but many executives quickly realize that yes, their organizations have a lot in common with BOTW companies like, say, GM.

In boom times, BOTW companies are enormously confident in and proud of their performance. They’re meeting Wall Street’s projections and their internal short-term metrics. They think they’re invaluable to their customers and are immune to the whims of the market. In other words, they think they’re doing everything right.

But then the environment changes. The market sours, the economy tanks, new competitors show up, legislation kicks in, or some other external variable shifts. Sales and profits plummet.

What do BOTW companies do? They blame these uncontrollable external variables for their woes. Then they just try to survive until the boom times return.

Yes, external variables like today’s economy create challenging environments. Yet those variables also put Best of the Worst companies on display, because those companies only do well when the external environment is strong. They aren’t really market leaders; they’re just fulfilling accelerating demand. Right business, right time. But when that huge demand takes a nosedive, they point fingers because they don’t recognize this painful truth:

THEIR PROBLEM IS INTERNAL.

In this month’s CEO Challenge, I’ll explain some the characteristics of BOTW companies, then provide an action plan for addressing one of the major issues – internal versus external focus.

“BEST OF THE WORST” CHARACTERISTICS

Whether you’re a Fortune 100 company or a startup, regardless of your industry, you may have a lot in common with GM, Nortel, Sun Microsystems, AIG, Kmart, and other BOTW companies. Here are a few of the characteristics those organizations share:

Their top priority is short-term financial performance.
Their metrics are all internal rather than external.
They’re reactive versus proactive.
They don’t understand, value, and/or focus effort on customer needs.
They don’t constantly evaluate their competition or their customers.
They can’t clearly articulate a value proposition that the market cares about or understands.
They can’t quickly adjust to changes in the external environment
They can’t articulate a clear, long-term strategy to dominate specific niches and markets
They create a sense of urgency about all the wrong things.
Teams are aggressively competing for budget, resources and rewards.
They’re constantly patting themselves on the back.

Let’s look more closely at some of these clues.

THE BLINDING LOOK IN THE MIRROR

Why do so many companies blithely ignore changes in the marketplace – shifting consumer demand, new competitors, impending legislation? It’s because they’re so focused on short-term financial performance that they don’t notice or don’t care. They just want to make the boss and Wall Street happy this quarter. After all, BOTW companies fire people who don’t hit this quarter’s numbers and throw huge amounts of money at people who do.

BOTW companies are overconfident because they only look at what’s going on inside their four walls. Their metrics are all internal – things like revenue and net income — rather than external, dynamic measures like market share and customer accolades. They’re hitting their internal growth targets, but they don’t realize that they’re growing more slowly than everyone else, losing ground when they think they’re gaining. In the meantime, the landscape is changing and they won’t know it until it’s too late.

It takes guts to constantly look outside your business and your industry. GM ignored Consumer Reports lambasting their products. Their attitude: “We’re making money. We don’t have to listen.” Ross Perot laid out their problem 25 years ago, but instead of focusing on external variables like customer needs, growing market share, or paying attention to their competitors, they just turned to Europe and Asia to fuel their growth.

Examples of internal versus external focus

Internal focus (BOTW)	External focus (BOTB)
Revenue, margins, net income, shareholder returns Short-term performance Closing any kind of deal Patting selves on back Fire drills Internal silos No knowledge of competition Staff rewards & punishment	Market share Growth versus industry Customer satisfaction Industry thought leadership Long-term strategy Creating real customer value Constantly challenging the status quo Consistently monitoring a broad range of competitors

By focusing internally and reactively rather than externally and proactively, BOTW companies have no solid foundation from which to manage. As a result, they end up creating a sense of urgency around things that don’t really matter – things that are usually internally focused and almost always short-term. They try to optimize for the moment without taking any time to look at what the long-term focus is or should be.

As for metrics, well, internal metrics are straightforward and easy. External metrics are hard and ego-bruising. BOTW companies just don’t think much about external metrics, competition, or improving the status quo. They’re smiling into the mirror, so they don’t see subtle shifts in the marketplace until it’s too late. If they had been consistently evaluating themselves against their competitors and really caring about customers, they would have had a chance to see the changes taking place. Instead, they discover that they can’t reorganize quickly enough, they don’t have the expertise, they don’t have the product lines, they don’t have the capital or loyal partnerships.

The Solution: Look Outside!

This action plan will help you shift your company’s focus from internal operations to the external marketplace. In future posts, I’ll offer solutions for other BOTW problems.

Action Plan

1. Bring in new outside advisors – people from outside your company and your industry.

Entrenched insiders often can’t tell when they’re sitting in boiling water, but outside advisors can. Find them and use them! Ask them hard questions about your business. Ask them to challenge all of your assumptions. Be ready to really hear what they say, and then take action on their recommendations.

2. Spend a lot of time with current customers.

BOTW companies are overconfident in their solutions. In fact, they’re so in love with their own products and services that they make little effort to understand anything beyond the superficial.

If you want to be BOTB (Best of the Best), you need to deeply understand who your customers are and why they buy from you – trust me. Yet the reality can be very far from your perception. In boom times, a customer’s motivation to buy from you will be completely different than in leaner times. If you don’t recognize those motivations, you won’t be able to capture their business.

3. Talk to people who you think should absolutely be buying from you but aren’t.

It always shocks me when a CEO says that the company doesn’t actively reach out to highly targeted prospects that have chosen a competitor. Those people and companies can be a goldmine. Ask “why aren’t you doing business with us?” and be prepared to listen, accept, and act on their responses.

4. Set external metrics and hold your team accountable.

Start setting external metrics and make them just as important as the internal ones. Those metrics should include goals for niche domination, market share growth (your rate should equal or exceed market growth), revenue growth with target clients, external industry thought leadership, published external research, news coverage, web traffic comparisons, and other ways that your customers and market will validate that you’re as good as you think you are.

If your company is privately-held or external data is sparse, don’t be afraid to create estimates based on your team’s experience and some well-documented assumptions. Seek out colleagues and advisors to validate your models. Yes, it will be hard to evaluate your growth versus that of your competitors and the market, and that’s why it’s even more important that you start somewhere. Ignoring the external won’t make it go away.

5. Develop a meaningful value proposition for a clearly defined market.

Start by looking deeply at your current and prospective customer needs, then take an equally intense look at your competition and where your market is heading over the next 3-5 years. What’s your long term-strategy? BOTW companies don’t really have one. They’re just thinking about the next quarter, and so they typically have a weak or incomprehensible value proposition.

BOTB companies have clear value propositions that resonate with highly targeted buyers. They don’t try to go after enormous markets that they can’t possibly penetrate. Instead, they figure out exactly which customer niches they can dominate, and they create products and services that win market share and legitimate industry and customer acclaim.

By creating a meaningful value proposition for a carefully targeted market, your company will take an important first step in shifting focus from short-term internal results to long-term customer value.

6. Clean house of bad assumptions and the wrong people.

As Jim Collins discusses in “Good to Great,” the enemy of great is good. People who are good don’t see a need to be great. And those people work for BOTW companies. BOTB companies are filled only with people who want to be great. They welcome metrics instead of shun them; they care about long-term value rather than short-term wins. Those are the people you need.

CONCLUSION

I don’t want to belittle the fact that today’s economy is difficult. It is. But we’ve experienced it before and we’ll experience it again. If our businesses are so completely dependent on external factors, how can we continue to drive profitable growth without major upheaval once or twice a decade?

One of the best ways to weather the storm – and elevate your organization from the BOTW category – is to shift your attention from the inside to the outside of your building. Know what your customers really think of you. Measure how well you’re growing relative to your industry. Hire fresh thinkers and get advisors who will tell you the cold, hard truth and make you a better company as a result.

You’re driving the bus. Don’t let a storm send you off a cliff.

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What do you think? Please share your thoughts and experiences with us here!

“We have plenty of leads but can’t seem to convert!”

Jane Adamson — Tue, 04 Aug 2009 15:10:53 +0000

Recognize this sales funnel? I call it “the desperate pipeline” because it’s wide enough to catch any breathing soul who meanders by! You know what it’s like to be caught in one, receiving endless calls and emails because sometime, somewhere, you accidentally crossed a seller’s path.

Don’t be one of those desperate companies. A fat sales funnel has dramatic hidden costs and creates a barrier for consistent, profitable revenue growth. Marketing programs that focus on attracting as many leads as possible are no different from aggressive salespeople who pitch every breathing soul at every trade show, networking meeting and playground.

The solution? Shrink your pipeline!

Three Hidden Costs of Quantity

Most companies don’t need to improve the quantity of leads in their pipelines; they need to improve the quality. The quantity strategy often leads to three major problems.

1. It diverts focus from customer needs.

There’s a world of difference between generating more leads and solving customer needs. When the strategy is “more,” the marketing team looks for media and venues where “more” congregate. The opposing strategy — solving problems/needs — shrinks the audience because the solution becomes more customer-specific.

Without prioritizing customer needs & problems, companies cannot generate sustainable revenue growth. They may catch a wave or become the flavor of the month, but sustainable growth requires deep, honest focus on buyers’ specific requirements.

2. Messaging loses its muscle.

In order to appeal to a broad audience, a company has to water down its messages. As a result, those messages don’t speak to specific values and needs, and the company sounds like everyone else. And since buyers won’t pay a premium for an undifferentiated solution, the company has essentially positioned itself as a commodity.

3. It’s an expensive waste of time and $$$.

Most B2B marketing teams are judged by the quantity of leads generated. Their goal: generate plenty of leads and keep the sales team busy.

Those leads become increasingly expensive as they move through the sales process. Sales reps are spending valuable time in meetings, giving presentations, and writing proposals. They’re traveling, doing demos, bringing in engineers and senior execs.

Much of the cost of this scenario can’t be seen or measured. It’s the cost of missed opportunities. When the pipeline is overflowing, reps spend expensive time and money with tire kickers. The company needs more reps to work the huge pipeline, and truly qualified prospects can get lost in the shuffle.

Companies with good pipeline management systems don’t try to work everyone in the funnel. Their goal is just the opposite: quickly eliminate the noise and qualify prospects OUT.

Process + Detail = Profit

Most companies claim they recognize a qualified lead, but a recent report found that 50% of sales organizations don’t know how to pick the right target prospects to sell.

Here’s the cold, hard truth: Anyone who can use the company’s product or service is not a qualified prospect! Companies need a qualification process with detailed qualification criteria.

Without a process, companies assume that a prospect is qualified based on superficial information.
Without detailed criteria, real prospects don’t respond.

Here’s an example. Two companies that sell large graphics displays qualify their prospects using different criteria:

Company A: ”Our customer is a retailer who could use graphics in their store.”
Company B: ”Our customer is a clothing retailer who already uses graphics, has between 35-50 stores in the U.S., rotates its images at least 4x a year, and has added stores each of the last 3 years.”

Company A’s marketing team tries to reach all retailers who have used and could use graphics. Sales reps spend their time convincing owners of local stores and large chains to use imaging in their visual merchandising program. Their message: “We sell graphics!” Well, so do many other companies. Unfortunately, Company A is defining itself as a commodity, and reps are chasing fuzzy leads, many of which will never buy.

This strategy produces tons of leads but little revenue with slim profit.

In contrast, Company B’s marketing team conducts detailed research to find retailers who are qualified and ready to address specific graphics needs. Their message: “We’re experts at producing graphics AND the logistics for storing, distribution, packaging, and managing complex graphics programs for growing companies.” Their sales reps have business conversations with high-level buyers who face a very different kind of problem.

Company B has fewer leads, but they can now

Allocate precious resources more wisely,
Structure the organization to deliver on key promises,
Strategically deploy sales reps, and
Enjoy more substantial profit margins with differentiated, high-value services.

Reduce your cost per sales hour, too

Research has shown that in THE VERY BEST organizations, reps spend only about 20-25% of their time actually selling (moving a deal forward when nobody else can do it better or cheaper).

What are reps doing the rest of the time? Traveling, sitting in meetings, writing reports, and following up on bad leads.

It gets worse. In an AVERAGE organization, reps spend closer to 5% of their time selling. That’s 8 sales hours per month at a cost of $1,625 per hour:

Work hours per month	160
Average sales rep compensation per month	$13,000	Salary, benefits, commission, bonuses
Sales hours per month	8	5% of 160
Cost per sales hour	$1,625

Now consider this: What if this organization had better qualified leads so they could cut the time they spend following up on bad ones? If they could sell 10% of their time (16 hours) instead of the 5%, they would cut their cost by 50%, or $812. More importantly, those 16 hours will be spent on fewer, more valuable prospects that have a drastically increased probability of closing.

More revenue, greater profit margins, and lower costs of sales … all from shrinking your pipeline!

Solution

This month, we challenge you to implement these steps to shrink your pipeline and put your company on a path to generate more sustainable, profitable revenue.

Action Plan

1. Confidently answer this question: “What customer problem do we solve that others cannot?”

If your answer is quality, service or people, you’re copping out — those criteria simply allow you to play in the game. You need to challenge the leadership team to go beyond the superficial and deeply acknowledge WHY/HOW customers buy from your organization and WHAT WILL CAUSE THEM TO CONTINUE to buy from you.

2. Based on your answer to #1, create a detailed, measurable definition of a well-qualified prospect.

What’s important to your prospects? What keeps them awake at night, and what solutions will cause them to pay attention to you? The goal is to proactively find the most qualified prospects and deals instead of chasing everything that may or may not be good business. Go deep. Create pictures so you know exactly what your prospects look like. Add quantitative metrics.

3. Develop a process to find and qualify those prospects.

How will you initially identify prospects and then take them through the qualification process? Define the steps in that sales process and determine how you’ll separate prospects into high, medium, and low value categories. Evaluate and define how your sales process will differ for each of your value groups as well.

4. Task the marketing team to create a nurturing program that efficiently keeps the company in front of specific prospect groups who have potential but aren’t ready to move to the next step in your sales process.

For example, a prospect may be moderately qualified but not ready to purchase right now. Instead of investing a sales rep’s precious time doing regular followup, use the nurturing program to keep the prospect warm until the prospect says “now I’m ready!” Your goal is to nurture real prospects with an efficient, effective process that saves expensive resources and time.

5. Require action from a prospect before involving too many resources from your organization.

If a prospect isn’t ready to take some sort of action, then s/he probably isn’t serious or ready to buy. Ferret out those who are ready by requiring action such as:

Investing time to discuss project details and clarify needs,
Introducing and engaging influencers in their organizations, or
Establishing project metrics, budgets, and/or timelines.

6. Create additional qualification criteria for individual deals.

It’s not enough to prequalify a prospect; you need to qualify the deal as well. After all, the prospect may be terrific, but this particular deal may not be a good match. With more detailed qualification criteria, you can avoid investing valuable resources in the wrong deals, freeing up time to focus on high priority opportunities that are likely to close.

Conclusion

If you’re having trouble converting prospects, take a hard look at your sales pipeline. A wide funnel is an expensive, inefficient strategy that can commoditize your solution and seriously hamper your long-term revenue growth.

Instead of trying to convert a huge number of leads, proactively shrink your pipeline. Focus on finding the RIGHT prospects and delivering very specific value for them – value that they will fully pay for. Your customers will be thrilled that you’ve solved a critical problem, and you’ll boost your margins by increasing revenue and cutting your cost of sales. Everyone wins.

In this scenario, less really is more!

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“Why can’t we hire a VP Sales who can deliver?”

Rick McPartlin — Tue, 07 Jul 2009 15:10:49 +0000

Last month, Jane wrote “I’m lying awake worrying about sales,” which addressed three late-night revenue-related stresses many CEOs face, including “Is my sales manager doing a good job?” and “Is my star salesperson going to quit?” This month, I’m tackling a related issue — turnover in the VP Sales role.

A lot of CEOs share with me their frustration over this painful situation. “We need a sales leader who can build our team, lead us into the market and close business,” they say. ”I’ve spent a million dollars hiring, firing, and starting over. How can I stop the churn and hire someone who will deliver?”

Here’s the problem: A great sales VP won’t accept a job where there is no revenue generation strategy, infrastructure or organizational alignment. Top people know that this chaos impedes their success, and they can spot issues a mile away.

Even if they do join a chaotic company, great sales leaders eventually find themselves in lose-lose situations at exactly the time you need their expertise most. They take the blame for organizational problems and leave you to start the vicious cycle again.

What scares a sales star

1. A company that tries to be all things to all customers and will desperately take any deal it can find. Salespeople are scrambling, praying and offering all kinds of incentives. Customers see this panic, and it ruins the company’s credibility, integrity, and value proposition. It’s very hard to stage a comeback in this scenario.

2. A job description that asks the VP Sales to wear every hat in the store – sales leader, sales rep, team builder, process creator, strategist, mentor, marketer, closer. A great sales VP shouldn’t be doing all of these things – they’re all important, but it’s virtually impossible to get all of this value from one person who also needs to lead a field team. When you ask a VP Sales to do everything, what suffers? Revenue. (More on this subject in our last post.)

3. No clear understanding of the target market, haphazard messaging, or a value proposition that reads like a shopping list. If an organization doesn’t already understand these core principles, a new VP Sales cannot ride in and save the day.

4. A lack of necessary structure in the organization. A good VP candidate asks about resources, systems, processes, and alignment across the organization. If that structure is missing, the candidate will ask how much you’re willing to invest, expected timeframe and roles. If you can’t answer those questions, top candidates will run away – they want to lead sales, not haggle over basic necessities.

Avoiding the pretenders

When you scare the real sales stars, you’re left with candidates we call “pretenders.” Often, these candidates are successful reps looking for their first VP role. They want to be ready (frequently they’re not), and they’re going to try to learn how to run a sales organization on your dime. Or they’re VPs who have enjoyed success because they were simply in the right job at the right time.

Pretenders tend to make everything sound easy as if the job is all art or magic – “I know how this should be done” — but they’re vague about specific people, processes, and metrics. They may claim it’s all about the rolodex or say “I have clients and sales reps who will automatically follow me.” (I could write an entire post about this statement, but for now I’ll just say that it’s incredibly naïve.)

As we’ve already established, your organization isn’t primed for success, so when you hire a pretender instead of a star, you’ve shackled both feet.

Why even great sales leaders are doomed

Even if you land a terrific VP without a pre-defined strategy and structure, that VP is often doomed from the start. Here’s what happens.

When an industry and the economy are hot, almost every sales rep and VP – even the pretenders — look pretty darn good. It’s hard not to. But when new competitors arrive, or the economy sours, or the market is maturing, things get really competitive. That’s when the lack of strategy and structure will kill you.

At this point, the VP Sales will sound the alarm:

“We need to restructure.”
“We need a new marketing process.”
“We need to change our offering, lower our prices, build this service, etc.”

Since the company didn’t have a defined strategy and structure to start with, the CEO doesn’t really know whether the VP’s recommendations are good strategy or a desperate, self-serving stay of execution because the VP just isn’t that great at the job as it’s currently defined.

This is an impossible, lose-lose, “shoot the messenger” situation. The VP recognizes the challenges and is recommending solutions, but the management team just blames the VP for being unable to continue the good times even though the market has changed and the solutions are necessary.

If you don’t have a revenue strategy, structure or metrics in place when you recruit your sales VP, you’re going to face this problem time and time again. Every time the weather changes, a good tactical person will say “I need help.” And more often than not, that person will get blamed for the organization’s strategy problems and will be shown the door.

The Solution

If you’re ready to end this dangerous churn and bring in a VP Sales who will be truly successful, here are four steps to eliminate the chaos before you begin recruiting.

Action Plan

1. Be very clear about where your offers (products / services) fall in the lifecycle bell curve for the niche you plan to dominate.

As you know, there are four stages in the lifecycle:

Introduction: You’re introducing the product/service to the market. There is little direct competition and market awareness/understanding.
Growth: Awareness and sales are growing as the market begins to accept and embrace the solution. New competitors arrive on the scene.
Maturity: Sales are peaking as many companies compete for market share, squeezing profit margins and forcing out smaller competitors.
Decline: Sales and profits are dropping (often quickly) because the product has become obsolete or the market is saturated. Most competitors get out of the business.

Most companies are selling solutions that fall in the growth or maturity phase, but many companies write job descriptions that don’t directly tie to the appropriate lifecycle strategies. The VP job description should look wildly different in each of those stages.

2. Develop a clear revenue generation strategy and support structure based on your offer’s position on the bell curve.

Your revenue generation strategy defines how your entire organization – not just your sales and marketing functions – will work together to reach your revenue goals over the long term – preferably the next three years. You should manage and execute that strategy in rolling 90-120 day executable, measurable plans. (Learn more about revenue strategy and “CRO Thinking” here.)

You may think, “Shouldn’t the new VP Sales develop and lead this planning?” No. First, if your company doesn’t have a clear revenue strategy in place, “star” VPs won’t talk with you. They can be much more successful with an organization that’s ready to go. Thus, you’ll be talking with less-experienced candidates.

Second, as the CEO, it’s your responsibility to drive an organization-wide revenue strategy and involve your entire senior team. Without a revenue strategy, you don’t have a business. The VP Sales will lead the implementation of that strategy, but he or she should not solely own its design; your whole organization needs to be aligned and prepared to support that strategy. If you leave revenue solely in the hands of your sales team, you’re setting up the very situation we’re trying to resolve right now.

3. Recognize how your spot in the bell curve affects your hiring strategy.

Your buyers, their mindsets, your selling strategies, and the team’s compensation plan will be completely different in each stage, requiring a very different skill set in your sales VP. For example, if you’re in stage one (introduction), nobody has ever heard of your solution, and you need a very special team who can build close, proactive partnerships with highly targeted prospect companies to prove the solution, improve the product/service, and build credibility. At this point, you need a highly consultative business development team rather than a traditional sales force that can work a pipeline – the market isn’t ready. And the compensation plan has to focus on successful strategic partnerships, as opposed to the comp plan for a solution that’s in stage three (maturity), which has a highly defined market with margin pressures that require a full pipeline and more systemic sales process.

4. Develop a chaos-free job description that will entice the right candidates.

Now that you have a defined strategy that ties to the bell curve, you can very clearly define what this VP Sales will need to do. Remember that sales stars won’t bother engaging with you if they sense that they can’t be successful in the organization. A good VP candidate will quickly ask questions about expectations, resources and metrics, and s/he will have experience doing exactly what you need for your stage in the bell curve. Document your key assumptions as clearly as possible and great candidates will quickly see that your infrastructure is ready and eager to support the revenue generation process.

Conclusion

When you’re hiring a new VP Sales, it’s very easy to be lulled into thinking that s/he will come in, figure out what needs to happen, define the strategy, develop the right messages, build the team/process/systems, and lead execution. That’s what great sales leaders do, right?

Not really. You organization needs these things, but not from one person. It’s the CEO’s responsibility to ensure that the company has a clear long-term revenue strategy before you begin the recruiting process. Most small/midsize companies need a VP Sales to close business, not sit in their office and develop strategies and systems.

Define the revenue strategy and align the organization. Get clear on the VP’s job. Evaluate candidates based on their experience in the targeted part of the bell curve, and hire someone who has done it before and asks the detailed questions that show comfort and expertise. After all, revenue generation isn’t magic. It’s science.

Do these things and you’ll stop the revolving door, drive your organizational success and get a lot more sleep at night!

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“I’m lying awake worrying about sales!”

Jane Adamson — Tue, 02 Jun 2009 15:10:22 +0000

As you’re well aware, a CEO is constantly juggling a myriad of challenges. But when it comes to sleep deprivation, the top culprit is typically revenue-related … burning questions such as

Is my sales manager doing a good job?
Is my star salesperson going to quit?
Why does one salesperson excel while others struggle?

This stress frequently stems from two beliefs:

That consistent revenue generation depends on the talents of a few select individuals
That those individuals operate in a world lacking both structure and predictability.

Good news: You can eliminate this chaos! Revenue generation is a science similar to other disciplines inside your organization. And there are three keys to your success:

Create a solid revenue generation strategy
Align your organization to support your revenue strategy
Build the team and structure to implement consistently.

Let’s look at each of the three “late night worries” and develop an action plan to put each one to rest.

Late Night Worry #1: Is my sales manager doing a good job?

The primary reason for this confusion: organizations give sales leaders conflicting instructions. On one hand, sales managers are compensated for bringing in new revenue today — being in the field and closing deals. On the other hand, sales managers are asked to look forward and make strategic decisions about alliance partners, compensation models, product development and all kinds of things that don’t have anything to do with driving revenue NOW.

Revenue and strategy … you need both, but not from the same person. A company that uses what we call “CRO Thinking” shouldn’t expect or ask sales managers to work on strategic questions that eat up their time and even take away from today’s revenue in exchange for a more profitable future. It’s not fair to the sales manager, who ends up wearing two hats that may directly conflict with each other.

You shouldn’t have to wonder whether the Sales Manager is doing a good job. It should be clear to everyone.

Action Plan

1. Task the Sales Manager with short-term revenue goals based on a revenue strategy built by the entire leadership team.

That revenue strategy should include a future vision, one-year objectives, and 120-day action plans. Without such a strategy, the sales team (supported by the Sales Manager) typically just “wings it.” For example, when a deal comes along, the rep goes after it regardless of whether it’s on strategy or not. If a particular message seems to work, the rep will keep using it whether it’s consistent with the company’s message or not. Same thing with pricing – the rep will try to close the deal at whatever price point will work.

To replace this haphazard activity, the team needs a revenue strategy to guide their actions. However, the responsibility for creating that strategy lies with the leadership team, and the responsibility for executing it lies with the Sales Manager. That gives the sales team focus, direction, and accountability for specific results.

2. Measure results – and not just top line results.

Challenge the leadership team to measure indicators and milestones that track progress toward the one-year plan. If the organization is falling behind, it’s up to the leadership team to review the revenue plan and determine where the issues lie.

Late Night Worry #2: Is my star salesperson going to quit?

This concern usually points to what we call an “alignment” issue, and here’s an example. A sales rep brings in a big deal. Instead of handing it off for others to fulfill, the rep then has to:

Create a complex proposal
Argue with finance about pricing
Wait for pricing to be approved
Cajole operations about delivery terms such as due date or materials specs
Make sure customer service understands how the deal has been packaged
Defend contract terms
Oversee everything to make sure it meets customer expectations.

Each department (some would say silo) has justifiable reasons for their actions. Yet what the rep hears is “Bring in revenue!!! Oh wait … not THAT revenue. We really meant THIS revenue.” Suddenly there are all kinds of additional qualifiers that previously didn’t exist – the company wants to reduce excess capacity, provide a particular delivery schedule, hit a certain margin and so forth. Frustrations rise and the local bar does good business that night.

Your internal processes and culture impact your bottom line and your ability to keep stars on board. Sadly, many organizations drive star reps away. Stars won’t stick around when organizational barriers limit their success. After all, their talents are portable.

Action Plan

1. Develop a revenue strategy.

Just as we mentioned in the previous section, your entire senior team should develop a 3-year revenue strategy that includes financial goals, the niches you want to dominate, and the infrastructure you need to support your sales team. Then create a 120-day executable plan that you consistently monitor and evolve. (Learn more about revenue strategy here.)

2. Align and rally your entire organization around the revenue strategy and 120-day plan.

Since everyone has participated in its development, all teams should recognize the part they play in its success. The priority: teamwork. Sales reps need team support. With it, a superstar rep won’t have to beg for help from people who feel abused by having to “support” sales. Instead, the rep will have good, talented resources that are aligned and enthusiastic to support the generation of revenue rather than do battle over terms.

3. Make sure your compensation plan supports the generation of revenue throughout your organization.

If the comp plan rewards sales for current revenue but compensates other teams for different activities, then you don’t have true alignment. Compensation is a powerful tool – use it to drive revenue-supporting activity in every function.

Late Night Worry #3: Why does one salesperson excel while the others struggle?

If this fear is familiar, look at everything you ask your sales reps to do and calculate the amount of time the typical rep spends actually selling (moving a deal forward when no one else in the company can do it cheaper or better). The best sales organizations spend 20-25% of their time actually selling. In average firms, it’s 10% or less.

What else are typical reps doing? Going to meetings, writing proposals, going through bingo cards from the trade show, politicking, filling the pipeline and so forth.

Have you noticed that star reps frequently don’t do all of these other things? That’s because stars know where to invest their time. They don’t follow the rules because the rules limit their success. Frustrating or not, these stars are actually doing the best things for the organization.

Your job is to understand what a good sales rep should be doing and institutionalize those activities across the board.

Action Plan

1. Set an improvement goal.

If you can jump from 10% a week to 12% a week, you may enjoy an astounding revenue gain.

2. Define clear steps in the sales process.

Know exactly who should be doing each task and what support is needed along the way. Then add metrics so that the organization can evaluate the status of your pipeline, where deals are stuck, and what needs to be done to improve results.

3. Delegate non-selling activities.

Give those activities to a team that can do them cheaper or better (for example, marketing should focus on filling the pipeline).

4. Create tools and systems.

The idea is to create better tools, collateral, and systems to handle certain sales process steps so that sales reps can focus on moving deals forward when nobody else can.

Conclusion

It’s time to banish those sleepless nights! To increase your confidence in your team, start with a solid revenue strategy, then carefully align the organization so that your internal structure supports that strategy. Great and talented individuals are a gift to be treasured, not a dependency to be feared.

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