Business Relevance: How to Align Sales and Sales Support to Increase Profits in a Weak Economy

by The Summit Group

Introduction A weak economy has resulted in customers becoming more risk averse and price sensitive. This environment makes it critically important to examine and refine how you market and sell your solutions. To do this effectively, you must align your internal organizations around customer priorities, so that your sales force can better use the resources that can help them develop and close opportunities. Unfortunately, traditional attempts to achieve such alignment tend to entail complex, top-down change management projects that few companies can afford and which seldom work in any case. However, such alignment can be achieved without extraordinary expense and can, in fact, generate revenue and profit even as it evolves. A key to such transformations is "business relevance," a way of thinking that goes beyond being "customer-focused," which focuses instead on the customer's end customer. This emphasis not only increases an organization's ability to sell, but provides a model to align the rest of the organization and help support that sales process. This special report defines "business relevance" and explains why adapting to today's challenging economic conditions need be neither traumatic nor expensive. It shows how a corporate culture can, in fact, be changed virally, providing the process is driven by a compelling idea and a system to put that idea into practice. The Economic Challenge We live in difficult economic times. From the collapse of the housing market in the United States in 2006 to the ongoing troubles with the Euro, the past few years have been marked by turmoil. Even China's economy, once famous for growth, is less robust, raising questions as to whether some of the new prosperity in Asia is the result of a bubble, rather than of sustainable economic growth1. Consumer demand in many regions remains weak, causing many businesses to hunker down rather than spend money on new equipment, services, and inventory. What's resulted, in many industries, is a classic "chicken or egg" situation, where businesses are waiting for the economy to recover before spending, while the lack of corporate spending makes that recovery less likely. While most areas of the world have managed to avoid a depression (or even a sustained recession), globalization has created a glut of cheap labor, flat income among many workers, lower tax revenues, and (in general) lower government spending. These are profound structural changes that are shaking the foundations of many corporations2.

1 "U.S. and China Data Highlight Weakness in Global Economy" New York Times (October 13, 2011) 2 "The Price of Globalization: American Jobs" International Herald Tribune (February 2, 2012)

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Unfortunately, many companies are not coping well. In 2010, just after the worst economic disaster in the past 50 years, the research firm CSO Insights released the results of a survey of over 2,800 companies worldwide in order to assess how those companies were coping with the economic challenges3. Not surprisingly, the sales teams inside many firms were finding it increasingly difficult to make quota. The percentage of reps making quota dropped sharply from about 59 percent to 52 percent, and revenue plan attainment was down as well, dropping from around 86 percent to 78 percent. The Response What was most telling, though, was how the majority of corporations attempted to cope with the shortfalls. According to this CEO study, the most common response to the quota shortfalls was to demand more of the same by raising quotas even further out of reach! In many cases, this strategy is driven from top management, without the approval of sales managers who are more likely to realize that simply increasing quotas isn't likely to result in more sales. "Pushing the sales team to sell more" ignores one of the primary challenges that companies face during hard times: keeping existing customers loyal and most importantly—committed, in a world where many products and services (including those sold business-to-business) are becoming more like commodities. A bad economy forces companies to "economize" by going with the lowest-cost providers, making it even more difficult for vendors to sell based on anything other than price. In a business environment where price wars are becoming the norm, a more effective differentiator than merely an aggressively goaled sales force is the quality of the support services that the rest of the company is providing to that sales force. According to researcher Harkiranpal Singh of the Asia Pacific University College of Technology and Innovation, there are direct causal relationships between customer service and both customer satisfaction and customer retention4. Therefore, rather than raising quota in an attempt to cope with the twin forces of growing commoditization and a weak economy, it makes more sense to better align a firm's internal organizations to support the sales effort and build stronger, committed customer relationships. The best companies realize this and are actively pursuing strategies that bring the rest of the corporation into line with the requirements of the sales team. A comparison can be drawn to a supply chain or an assembly line, where problems anywhere in the "value chain" can cause the entire system to grind to a halt. 3 "CSO Insights Study Shows Major Drops in Sales Performance in 2009" World News Report (February 2, 1010) 4 Singh, Harkiranpal. The Importance of Customer Satisfaction in Relation to Customer Loyalty and

Retention. APIIT/UCTI (May, 2006)

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Unfortunately, such realignments entail change in the way that companies operate and such can prove difficult. In many cases, employees resist change, managers protect fiefdoms, and organizations remain "silos," even when companies spend millions of dollars on complex corporate change initiatives. The classic case of this is "business process reengineering," which (according to one author of the classic Reengineering the Corporation) has a failure rate as high as 70 percent5. Other management fads have similarly depressing success rates. The question is: why do they fail? How the Best Companies Change To better understand how corporations make major changes in organizational behavior, it helps to understand how and why individuals do the same. In general, there are two spurs to radical changes in personal behavior: 1) desperation and 2) inspiration. Desperation occurs when an individual has "hit bottom" and has nowhere else to go. In the corporate world, desperation usually takes the form of an impending bankruptcy. Change becomes mandatory, whether the people inside the organization want it or not. Inspiration is quite different. With inspiration, the individual is seized by an idea that's so compelling that the individual realigns his or her thoughts and behaviors to match the idea. Regardless of whether it's a religious idea, a creative idea, a moral precept, or a technical innovation, inspiration is the only effective way to drive proactive change. The change in behavior happens because people want it to happen. There are two primary reasons that most corporate-wide change initiatives fail. If (as is often the case) they are implemented out of desperation, it may be too late for the change to make any difference. If, by contrast, the change is initiated proactively, corporate change initiatives are usually uninspired and thus are too abstract and theoretical to drive meaningful change. To illustrate this, one need merely examine virtually any corporate mission statement. In nearly every case, such statements are stuffed with well-meaning abstractions and high-sounding business buzzwords. Employees seldom, if ever, read such statements, let alone use them as touchstones for behavior. In fact, such statements are frequently the butt of employee jokes, since the aspirations they espouse are often the opposite of what actually takes place within the corporation.

5 "White Paper: Why Reengineering Fails" Edward M. Gurowitz, Ph.D., Executive Director, Center for Management Design, Inc.

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Sometimes corporate change initiatives attempt to motivate change by creating a false sense of desperation. For example, sales executives sometimes strong-arm sales teams into using a Customer Relationship Management (CRM) system by refusing to pay commissions until the electronic paperwork is complete. Similarly, a division might be told that they'll lose their budget if they don't implement the management fad du jour. Unfortunately, such initiatives often create resentment and resistance. Employees may observe that the sense of desperation is forced and come to resent management as a result. Such strategies can also result in a climate of fear that makes individuals more risk-averse and thus less likely to actually change. Another alternative—the one seen in the best companies, the ones that thrive even in difficult times—is to introduce an idea that's so compelling that it inspires people to "get on board." To drive change, the idea must make business sense, not just at the corporate level (e.g., "it will make us more profitable through accelerating sales revenues"), but at the individual level as well (e.g., "it will enhance my career and livelihood"). The idea must, in short, have business (and personal) relevance. Furthermore, to drive viral change, a compelling idea must be supported by a system that allows that idea to quickly and easily disseminate throughout a corporation. Like individuals, corporations tend to resist change, especially when that change involves behaviors that were once successful and have become habitual, even though they are no longer creating the same level of success. What Is Business Relevance? What's needed then, in today's economy, is 1) an idea that will inspire and motivate a better alignment of the corporation to serve the customer's needs, and 2) a system whereby that idea can be disseminated virally throughout the corporation, without the need for cumbersome corporate change initiatives. The concept of Third Box ThinkingTM is an idea that's powerful enough to inspire both sales teams and the people who support them. As defined by The Summit Group, Third Box ThinkingTM posits three boxes:

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Vendor (You)

Customer

End Customer

Many sales teams (and the managers and companies supporting them) focus primarily on the first box—themselves, their products, their internal politics, and so forth. This is called "First Box Thinking." In good times when a growth economy is "lifting all boats" a company can do this type of corporate navel gazing and still survive or even grow. The weakness of First Box Thinking, however, emerges during a bad economy. Self-absorbed companies seldom create customer loyalty, and certainly not customer commitment, and thus are always vulnerable to competitive price reductions. Indeed, in many cases, customers who've been subjected to a vendor where First Box Thinking predominates are very likely looking for an excuse to move elsewhere. By contrast, more effective sales teams and companies practice "Second Box Thinking." They are customer-focused and therefore set up sales channels that adapt to the way that customers want to buy, try to anticipate customer needs, obtain customer help in designing future products and services, and so forth. Second Box Thinking is obviously far more likely to build customer loyalty than First Box Thinking. However, unless a vendor's competitors are all very stupid (i.e., only capable of First Box Thinking), they'll be executing the exact same strategies, and therefore competitive differentiation is not achieved. That's why the absolute best sales teams emphasize Third Box Thinking, which means that they're anticipating the needs of the customer's customer, and helping the customer to satisfy them. For example, in addition to the tactical moves required for Second Box Thinking, a sales organization with Third Box Thinking may conduct research into the buying habits or preferences of the people who buy from the customer, investing in internal industry experts who provide the sales teams with much deeper insights. In today's market, it is no longer enough to effectively uncover and respond to "what keeps the customer up at night." In fact, ongoing customer engagements, backed up by industry survey results, point to a sales team's ability to offer deep business insights into the way customers think about their business—as the number one thing decision makers value. This is what leads to a truly committed relationship. For example, in an effort to accelerate revenues, a leading consumer products company pulled together critical stakeholders from internal functions to capture and deliver customer and industry insights to the sales force. This "outside in" thinking, along with other Summit Group methods, helped to uncover the unique company capabilities that linked to customer priorities. This resulted in incremental revenue growth, improved customer satisfaction, shortened sales cycles, and an increase in the amount of time that sales people were able to spend with customers.

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The concept of business relevance also applies to corporate change initiatives. The business ideas that inspire people inside an organization (and therefore drive change) are those that seem relevant to them, both in a business sense and a personal sense. To illustrate how this works, it's necessary to "burst out" the First Box to show both the sales function and the sales support function. In the figure, the sales team is practicing Third Box Thinking and thus is concerned with the end customer as well as with the customer. For sales support, however, Third Box Thinking consists of considering the sales team to be the customer, and the customer and their customers to be end customers. In other words, sales support becomes relevant to the sales team by anticipating and satisfying the needs of the people to whom the sales team is selling. This allows the sales team to sell the unique capabilities of the vendor's firm—a critical success factor to competitive insulation—without spending excessive time working on internal issues and having to cobble together their best effort view of the unique capabilities their company offers. This is exactly the behavior that you see inside companies that tend to enjoy a base of loyal and committed customers. For example, one of The Summit Group's clients, an online marketing firm, was hired to generate leads for a retailer of big-ticket consumer items. (Lead generation is, of course, a classic sales support function.) This marketing firm subsequently discovered that the retailer's sales team was not successfully closing many of those leads. Rather than considering the low conversion rate to be the retailer's problem, the marketing firm looked at the customer to whom the retailer was selling and was able to diagnose the root cause. The marketing firm was then able to better realign its own efforts, as well as help the retailer fix the internal problems that were blocking the sales team from effectively using the leads.

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Sales Support

Sales

Customer

End Customer

Implementing Business Relevance While the concept of business relevance provides a compelling model for what companies must do in order to thrive in difficult times, companies must invest in developing the sales competencies needed in today's selling environment, and invest in building a systematic way to implement those competencies. Ultimately the goal should be to change the corporation so that everyone is automatically doing the appropriate level of Third Box Thinking. This system is best envisioned as a series of steps that include sales support stakeholders:

Discovery & Insights • Step #1: Understand what creates value for your customers. This is the basic level of Third Box Thinking, where you research and

define the needs of your customer's customer and what they seek from your customer. This step leverages internal customer/industry/solution expertise to help the sales force tailor and deliver unique insights to the customer.

• Step #2: Uncover what your customer is doing (or not doing, as the case may be) to satisfy their customers and what they themselves care about. Their "care-abouts" (i.e., things that they care about) are the second level of Third Box Thinking.

Alignment • Step #3: Align your capabilities with what your customer really needs. This is the third level of Third Box Thinking, where you look

at both your sales team and the surrounding elements of the company to see how well and where your firm matches what your customer needs from you in order to address the needs of their own customers. You also identify other organization assets that bring unique value.

• Step #4: Develop offerings that uniquely address those needs. In this step, you expand and integrate the products and services (solutions) that are most likely to have business relevance to your customer (because they help your customer satisfy the needs of their customer).

• Step #5: Articulate the value you're planning to create. This entails expressing what you've learned in Steps 1 through 4 in a way that makes sense to the customer. This expression should "tell the story" from the viewpoint of the customer rather than from yours, the vendor's.

Impact • Step #6: Determine how to measure the value you're planning to create. This involves much more than just measuring the sales that

result from the overall initiative for you. It means taking responsibility (through measurement) of the customer's sales. • Step #7: Deliver on the value proposition defined in steps 3 through 6. This is a purely operational step, as you execute what you

said you would do, measure the results of your actions, and correct as necessary. • Step #8: Make the delivery of that value sustainable over time. Once you've established that you can help your customer satisfy the

needs of their customer, you create additional loyalty (and reference sales) through a closer strategic relationship and ongoing alignment that increases your value to the customer's ability to serve their own customer.

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It must be emphasized that, unless your company is very small, the above is best implemented as a pilot project, rather than as a corporate-wide initiative. The reason is simple: as a general rule, the effectiveness of corporate change efforts is inversely proportional to their size and scope. While it's possible to implement a business relevance strategy throughout an entire small business, it's much more effective, when driving change across a medium to large size organization, to illustrate the success of an approach within a small group, and then use the success of that small group as a model for broader change across the remainder of the company. In addition to being easier to implement, pilot programs entail far less risk, because they are easily corrected and re-aimed if missteps occur. Ideally, though, a successful pilot program will spread virally when individuals who did not participate in the pilot learn of its success. For example, if a company selects a specific solution or a particular customer industry vertical to focus upon, it becomes much easier to find internal stakeholders who are motivated and goaled to collaborate and rally around a cause that is finite and manageable, and which ties directly back to their personal measures and incentives. Conclusion Taking an "outside in" view of your business helps a company evolve beyond being merely focused on the customer to being relevant to the customer. The concepts of "business relevance" and Third Box Thinking help the sales team to articulate (and the sales support team to buttress) the unique value that a firm provides to its customer's ability to sell to its own end customers. That, in turn, helps forge closer customer relationships, thereby increasing sales revenue, competitive differentiation, and customer loyalty, while simultaneously reducing sales costs.

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About The Summit Group

The Summit Group has been providing value creation thought leadership for over twenty years and works with leading companies’ executives and sales teams to develop talent, elevate strategic relationships, execute go-to-market strategies, ensure business relevance, and accelerate growth. For more information please visit www.summitvalue.com.

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