Intersell / SALES IS CHANGING /

Intersell

Don’t get left behind | by Owen Dowden


INTRODUCTION

The IBM sales transformation story is a compelling one to highlight the radical transformation that has started to take place in the front end of many organisations. IBM under the leadership of CEO Sam Palmisano refocused the sales towards customer needs, placing emphasis on the strategic role of the sales-force creating customer value. This involved transforming from a fragmented organisation driven by maverick, product focused sales teams towards an integrated global organisation, with cross divisional teams that aligned and mobilised resources to create bespoke enterprise customer solutions. Theresult was a turnaround from being depicted as a ‘Dinosaur’ on the cover of Fortune magazine in the 90’s, to a top ten for Innovation and business solutions in 2008.

Other companies including HP, P&G, many of thePharmautecal Companies have started similarre-organisations in an attempt to keep pace with rising customer expectations and find new sources of competitive advantage in increasingly competitive markets.

Nigel Piercy from Warwick Business School a leader in the field of Sales and Strategic Marketing presented a compelling vision of the transformation starting to take hold of the sales function is similar to the transformationthatraised the profile and strategic nature ofpurchasing and the human resource functions over recent decades. A transition he defines as a move towards ‘strategic customer management’. 2

In this white paper we discuss the new strategic significant of the sales organisation in light of new customer relationship strategies and the increasing academic view that the sales organisation may be the only place left for some organisations to find competitive advantage.

We also highlight the new competencies required of salespeople and how this new profile is more aligned to a ‘strategist’, requiring much broader business acumen. We identify a number of sales transformation priorities to successfully meet the challenge of this new sales era and to fully leverage the potential of the sales-force to become a dynamic source of value creation.

THE STRATEGIC IMPORTANCE OF SALES

The sales organisation has never been more strategically significant. The challenge of rising customer expectations, the high cost of sales activities and the realisation that in many organisations sales may be the only place left to add value, has raised the sales profile and increased the focus on sales effectiveness.

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Customer relationships

Building strong relationships with customers is recognised as a top management priority by academics and executives.Building customer relationships is the most important source of competitive advantage in the 21stcentuary according to Human Capital consultancy Mercer.

But customer expectations are becoming increasingly demanding. Availability of information on the web and sophistication of procurement departments means it is not uncommon for buyers to know more about the market than sales people. Globalisation, shorter product life cycles and the rapid pace of technological change has increased complexity and customers want solutions to match.

Increasingly customer expectations are exceed salesperson knowledge, speed, breadth and ability to customise solutions. This gap presents a serious threat to achieving sales organisation effectiveness and developing customer relationships.

The World Class Sales Excellence Report(H.R. ChallyGroup 2006) outlines the new expectations of the salesperson.

  • Personal accountability for the buyers results
  • Understanding the customers business (competencies, strategies, challenges and culture)
  • Customer advocacy (be the customers advocate within his own organisation)
  • Designing the right applications (thinking beyond features into implementation within their business)
  • Accessibility (constantly connected and within reach)
  • Problem solving (able to diagnose, prescribe, and resolve customer problems)
  • Creativity in responding to customer needs (expect innovators, creativity to solve customer problems)

If CEO’s are to be successful in their customer relationship strategies, sales-force transformation is a priority. The sales organisation must transform to adapt to the new market realities.

High Cost of sales

Many sales departments have managed to avoid the brunt of cost reduction initiatives but it is the logical next place to look for efficiency improvement. Sale’s is a high cost function, and in B2B environments can cost up to 20% or more of total revenues.

New technologies have already offered opportunity to reduce sales overheads, through the development of direct channels and automating processes. However, many sales functions would benefit from further process scrutiny and leveraging the latest advancements of the digital age.

The only place left to add value

Nigel PiercyNikala Lane in his excellent book ‘Strategic Customer Management’discusses how many large organisations have followed similar improvement initiatives to re-engineered processes, lean supply chains, outsource non-core activities and adopted the same technologies. The result has left organisations with similar cost structures, similar products and consequently increased the pressure of commoditisation.

There is a strong argument therefore, that for many organisations sales may be the only place left to add value. Firstly, research has shown that research has shown that sales person effectiveness can account for up to 40% of the B2B customer choice of supplier, simply because technology has made the products themselves increasingly substitute. The sales person is increasingly becoming the added value component in the sale.

Secondly, the opportunity for the sales-force to enhance business strategy through market sensing capabilities is unexploited in many companies. The sales-force can become a valuable source of real time insight into customers, competitors and changes in the market that enables the business to perceive and react to opportunities and threats more effectively than the competition.

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THE NEW SELLING IMPERITIVES

MOHR Inc studied over 1000 sales people and identified 7 competenciesthat the 21st century salesperson must master.

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Aligningcustomer/supplier strategic objectivesto identifying opportunities that create mutual value for the customer and the firm

  • Gathering information to understand customers business strategies and view of market opportunities
  • Staying up to date with new developments and innovations in markets
  • Keeping current with emerging trends and initiatives of customer’s competitors

Listeningbeyond product needsto identify business process improvement potential and value adding opportunitiesalong the supply/value chain

  • Keeping customers regularly updated with information and changes that might be important
  • Suggesting ways the sales person can ring add value to the customers
  • Helping customers think differently about their future needs

Understanding the financial impact of decisionson the customers organization and my organization and quantifying these

  • Looking actively for ways to contribute to the customers profitability
  • Searching actively for more cost effective ways to serve customers
  • Focusing on the financial consequences of approaches to meet customer needs

Orchestrating organisational resourcesby identifying key contributors, communicating relevant information, and building collaborative, customer focused relationships.

  • Communicating customer needs, suggestions, and concerns to appropriate resources in the organization.
  • Working co-operatively with people in other parts of the organization who can be useful sources of ongoing information, resources and support.
  • Ensuring that the product, sales and service units work together to deliver value

Consultative problem solvingto create new solutions, customized products and services, and paradigm changes while being willing to work outside the norm when necessary

  • Anticipating possible problems and inviting discussion about how they can be overcome
  • Determining the cause of a problem and identifying constraints before recommending a solution
  • Proposing innovative solutions that go beyond the immediate application of product or service

Establishinga vision of a committed customer/supplier relationshipby identifying value addingprocedures, processes and service

  • Creating a relationship that supports the goals and values of both organizations
  • Developing relationships that recognize the needs of all contributing functions in both organizations
  • Communicating objectives for the relationship that are achievable and challenge the creativity of both organizations

Engagingin self appraisal and continuous learningby securing feedback from customers, colleagues and managers

  • Demonstrating an understanding of what’s working, what’s not working and how sales people can do things differently.
  • Staying up to date in their field of expertise
  • Asking for and welcoming feedback to assess a salesperson’s performance and the degree to which he or she is meeting expectations.

The role of the salesperson has become more of a ‘strategist’ than a ‘seller’, someone blessed with the entrepreneurial flairto identify and capitalise on opportunities, the diplomatic skills to find consensus that balances the needs of different functions and the influence to command internal resources and changes in pursuit of customer success.Effective selling is no longer about ‘salesmanship’ but about ‘strategy’ ‘leadership’ and ‘insight’.

This implies a very different agenda for the recruitment and development of salespeople, something senior executives must think carefully about. To date most have failed to successful develop a sales-force that can live up to this new vision of success.

High performing sales people of the future may not fit the ‘stereotype’ or characteristics that have determined past success.Understanding thecustomers strategic objectives, supply chains and value creation is more important that sales tactics, overcoming objectives and closing techniques (the domain of traditional sales training)

Selling methodologies and influencing techniques are not now obsolete, but their relevance is being superseded by newrequirement for broader and more advanced business skills; strategic literacy, analytical skills, leadership and change management skills – closer to the domain of the MBA. An MBA is a bit extreme and unrealistic as a training investment, but a scaled down version that develops a broader cross functional understanding of business and value creation could be one mechanism to support the development of existing sales teams.

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THE SALES TRANSFORMATION AGENDA

Developing a strategic sales-force is a challenging journey but the rewards are significant. Those who successfully transform will distinguish themselves in the eye of the customer and benefit from new sources of competitive advantage.

TRANSFORMATION AGENDA

  1. Market IQ
  2. Strategic Customer Management
  3. Sales Management
  4. Alignment & Integration
  5. Technology
  6. Purpose

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Market IQ

Developing market sensing and learning capabilities, to improve strategic effectiveness and sales effectiveness

The more you know about your customers, competitors and markets, the more likely you will be to develop a winning business strategy. Some academics argue that achieving competitive advantage may well be based on the asymmetry among firms in their “Skill in collecting, filtering, and interpreting the information about the value of future resourced” Madock & Barnet.

Effective market sensing and learning enables companies to become more self conscious and aware than their competitors which enables them to perceive and adapt to change more effectively.However, understanding markets has never been more challenging due to the speed at which customer preferences and market dynamics are changing ‘companies are failing to response to fast changing markets because they are unable to understand and adjust to what their customers want … business are struggling to meet demands of increasingly competitive international markets and sophisticated clients’ BPM Forum

The significant role the sales-force can play inmarket sensing and intelligence gathering is often overlooked and unmanaged. But with the appropriate direction, motivation and support, the sales-force can provide a rich source of real time insight into customers, competitors and market changes and assist the company in becoming more strategically effective.

The key is ‘understanding’ not ‘information’. The ability to ‘understand’ how customers and markets are changing is where the competitive edge lies. Focusing on how things are changing is more important that analysing the traditional market structure and comparing to established competitors, which is the focus of much traditional market research. It is new business models and technology that kill businesses, consider the impact ofi-tunes and digital downloads on the music industry.

The strategic sales organisationmust adopt a culture that places intelligence as the heart of the sales approach and business strategy.

It starts bydeveloping a culture of disciplined curiosity that consistently asks questions to unearth a deeper understanding of customers value drivers and the market place in which you operate.

What are the critical success factors in this customers end market?

How are the preferences of our customerscustomer’s changing and how will this effect our customer?

How can we make the customer more competitive in their end market?

How can we accelerate the achievement of this customers strategic goals?

What economic value can bring to this customer?

How can we help this customer prepare for future market changes?

What value do we offer that our competitors cannot?

What new technologies, business models and competitors are developing in this market and how could this affect us?

How is the market structure and channel preferences changing?

How are customer preferences changing and how will this affect our current strategy?

What opportunities and threats do market changes create and what are we doing to capitalise on opportunities and manage threats?

These insights must be effectively linked to strategic planning to support the development of effective competitive strategies, new product development and breakthrough innovations.

In addition,a deeper understanding of customers and markets will enhance the effectiveness of the sales force. Without a deep understanding of the customers’ business and markets it is very difficult to identify relevant value or to quantify the advantages that you can bring to the customer.

Customers want salespeople who can bring insights to the sales process. They don’t want to be asked about their problems or what keeps them up at night. They want sales people to highlight new opportunities for them to become more competitive, showing them things that they had not yet thought about or were not aware off – they want insights. The way you sell is becoming more important that what you sell. Customers often perceive products and services to be lot more similar than sellers do and the value the sales person adds to the sale by educating the customer is increasingly the distinguishing factor in the sale.

Strategic Customer Management

Focusing on long term customer relations, but also assessing customer value and prioritising the most attractive prospects.

‘Improving customer relationships’ is the new mantra at board level it was not surprising to see it headlining in the 2012 IBM CEO survey.

Customer relationship management has been identified by academics as a new core strategic process of a firm. But equally it is suggested that customers are selected carefully to better manage profitability and enterprise risk.

Many companies have invested in key account strategies (KAM), prioritising large strategic customers. KAM has resulted in mixed results, largely due to poor customer selection and the mistake of taking a one dimensional view of the attractiveness of customers (i.e. size of the account) and not accounting for risk and dependency.

KAM can be counter intuitiveas often the largest clients are the least profitable and becoming too dependent on a handful of large key accounts can create strategic vulnerability.KAM can be effective, but needs to be based around a more realistic view of:

  1. The value you can offer the customer
  2. The life time potential of the customer
  3. The level of commitment from the customer The level of risk with the customer

Organisations must become much more adept at actively managing the customer portfolio like an investment matrix to better manage profitability and enterprise risk. The goal should be to ‘balance’ risk and reward across the customer mix (Strategic, Major, Middle Market and Transaction / Direct customers) and to use portfolio analysis to:

  1. Identify and mitigate risks, for example and over dependency a small number of large but high risk customers
  2. Identify and capitalise on opportunities i.e. a highly profitable middle market accounts that demonstrate strong future growth prospects
  3. Continually assess and reshape the portfolio to maximise profitability by moving investment towards prospects and away from over demanders, as seen in fig X

Fig X

If strategic accounts are the least profitable and pose highest risk, it may be wise to reach out to new prospects to develop higher levels of profitability and reduce levels of dependency.

Even thought the implications of the customer portfolio can have a dramatic effect on business performance, they are often overlooked in the strategy development process. The recommendation is that the customer portfolio and its implications should become central part of the strategic planning and decision making process.

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Sales Management
Developing the capabilities of sales management and shifting from ‘command and control’ to ‘coaching and facilitation’

It is well documented that front line managers are the critical lever for effectively implementing strategy and improving performance. They provide the link between leadership aspirations and what actually takes place on the front line. However, research suggests training of sales managers is neglected in many sales organisations and needs significant attention and investment. Often sales managers are promoted into management and leadership roles based on sales success and possess qualities, attitudes and skills which do not always play well into management roles. Any organisation serious about improving sales performance, must take a critical look at its sales management.