Good news! The U.S. Department of Labor has reported that the job market has finally recovered to pre-economic crisis levels. Still there are some lessons that should not be forgotten. With this recession, enterprises around the globe adjusted their policies on how they make buying decisions. Across the board, enterprises implemented a strict set of requirements to justify purchases of new products and services. They require that each purchase needs to show a clear definition of the expected total cost of ownership (TCO) and anticipated return on investment (ROI). This has created new challenges for sales teams.
In order to enable sales teams to achieve their goals, they need to adjust their sales process. They need to be able to demonstrate they clearly understand the business of their customers and articulate how the product or service they offer will enhance their business. With tighter controls on spending by the enterprise, the burden of proof is in the sales teams court. To accomplish this, they need to team up with their product managers and product marketers to define effective ROI/TCO modeling tools to show the benefits of their product or service.
Beware of Snake Oil
I have seen a variety of ROI/TCO modeling tools being used in the technology sector. Some of them definitely fall into the category of “snake oil” or “cure-all” elixirs. These are the models that typically require only a few inputs, such as “Quantity of licenses to purchase”, and result in an amazing too-good-to-be-true ROI. Often, these models don’t take into consideration all of the critical factors to estimate a realistic total cost of ownership and return on investment.
Effective ROI Tools
An effective ROI modeling tool to support the sales effort is going to take into consideration the viewpoint of the customer CFO. It should allow as input all the expected cost factors experienced by their operations and particularly those factors impacted by a purchase of the product. Some of the factors would include:
- Manpower costs
- Facilities costs
- IT and data center costs
- Administration and maintenance costs
- Infrastructure costs such as new servers to support a software purchase
- Costs of the product and/or service being sold
The output of the ROI modeling tool should also be able to show the expected benefits that would result from the purchase of the product or service. These benefits may include reduction in operational and fixed costs such as:
- Reduction of infrastructure
- Redeployment/re-purpose of manpower
Benefits may also include new efficiencies such as:
- Increases in speed to revenue
- Efficiencies in transaction processing and volume management
- Improvements in customer service
A good ROI modeling tool will also be able to clearly define “tipping points” such as whether or not it makes sense to utilize cloud-based services or purchase premise-based equipment. This is a topic for a future post.
Corner Office Wisdom:
Sales teams, product managers and product marketers need to have the ability to show the ROI/TCO benefits of their products or service in order to be successful. This will require a comprehensive set of tools and training in order to empower the sales teams to have such a discussion. If they cannot support such a discussion and the competition can, they will lose the opportunity.
Watching the English Premier League (EPL) this season has been fantastic. New records have been set and others soon to be broken. The exhibition of play and teamwork has been outstanding especially by the teams in the top four including Arsenal, Manchester City, Chelsea and Liverpool. One record that may fall by the end of the season is the most goals scored in a single season. Luis Suarez of Liverpool FC has already scored 22 goals in just 16 appearances. The reason? He is well supported by his team with unselfish play and Luis can be counted on to play his position.
When a player is moving the ball down field, he may be challenged by a number of defenders at one time. To keep the ball in play, the player may need to blindly pass the ball to where his team mate is expected to be. This has happened time and again with the Liverpool club when players such as Steven Gerrard or Phillippe Coutinho are moving the ball forward. They can count on players like Luis Suarez or Daniel Sturridge to be in their position, blindly pass the ball to them, allowing them to take a shot on goal. Of course, the players receiving the ball need to be counted on to fulfill their role and they have done so exceedingly well. Hence, Luis Suarez and Daniel Sturridge are currently 2 of the top 3 scorers in the EPL.
Most organizations today are global. Complementary personnel needed to finish a critical deliverable may not be in the same office, but rather, in different locations across different time zones. There are instances when a blind pass is critical in order expedite the expected deliverables.
There was one instance when a sales person needed a data sheet on one of our products. The existing one was horribly outdated. The sales person was in Europe and the key subject matter experts were located in various regions with one in Asia, one in Europe, and other in the United States. In order to expedite getting the product data sheet completed in time for the presentation, it was going to require a tremendous amount teamwork including communication and cooperation.
I proposed that I create a new draft of the data sheet, have each of the SME’s review it and provide comments and feedback by following the sun. This is exactly what happened. I completed an initial draft and performed a “blind pass” to my colleague in Asia. They provided their comments and feedback and sent it to our colleague in Europe. They incorporated their feedback and sent it to the colleague in Chicago. By the time it got to me, it required some tuning but we were able to get it produced into a final format that day and over to the sales person in time for their presentation. The net result? The sales person had a successful meeting and was well positioned to submit a proposal to the customer.
What makes teams great is the ability of individuals to apply their own unique skill sets while fully supporting the other members of the team. In this case, there was an excellent combination of skills that included technical depth as well as the ability to define and articulate essential value propositions. The team members also showed great flexibility through a temporary adjustment of their priorities to support the needs of the business. With personnel scattered across different locations, it is essential for companies to leverage the “virtual” team.
Corner Office Wisdom:
As individuals face challenges in meeting customer demands, they should be able to count on the support of their team members and their expertise. Critical to that effort, each individual will need to be flexible to adjust their priorities in support of the overall goals of the organization.