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.
When I was 11 years old, my father gave me the assignment of cutting the lawn once a week through the summer. The lawns in our neighborhood were about ¼ an acre so it took some effort – especially after a lot of rain. As part of the assignment, he wanted me to make sure the lawn was cut following straight lines, the cuttings were bagged for trash pick-up and the edges were trimmed. He wanted our lawn to represent the neighborhood well and he showed me how to make that happen by paying close attention to details and keeping a regular service schedule.
Our neighbor, however, was struggling to keep up with his lawn. If he let it grow for longer than a week without cutting it, it would look like a jungle compared to our lawn. I talked to my father for permission to use our lawnmower to cut the neighbor’s lawn for a fee. He agreed.
I spoke to the neighbor about cutting the lawn once a week and we settled on the price of $10.00 each week. It wasn’t long until his lawn started to look good like ours. I decided to go through the neighborhood to see if there were others that needed their lawn regularly serviced. As a result, I found another neighbor willing to let me care for his lawn.
Then, one weekend in mid-summer, something interesting happened. Someone walking by while I was servicing one of the lawns asked if I would do his lawn as well. He had spoken to the homeowner of the lawn I was servicing and they were impressed by the:
- Regularity and reliability of the service
- Quality of the service and attention to detail
This happened more than once and by the next summer, I had accrued 10 different customers. By the time I was 13 years old, I was making over $100 per week. This wasn’t a result of me soliciting additional business, but it was a result of great customer references.
As a result of this early training by my father, I learned the value of providing a reliable service with high quality. By applying that training, I learned the additional lesson of the value of great customer references. Through great customer references, I was able to dramatically increase my income. I have carried these values with me throughout my career.
Corner Office Wisdom:
There is no substitute for a great customer reference. They will help you grow your business. To get great customer references, one needs to focus on high quality and reliability.
Aristotle is attributed with the expression “Excellence is an art won by training and habituation.” This is demonstrated every week in the sporting community. The best athletes in the world will tell you that they are always training in order to stay in top form.
This same thought is true for those that want to excel in the workplace. To achieve specific goals, each person needs to focus on their own personal development of the needed skills to be successful. How can this be accomplished? Here are some suggestions:
- Check the resources made available by your company. Many companies offer training courses to assist in employee development. Often, these courses are overlooked or even unknown.
- Outside resources may also be available through the company. Check with the HR department to understand the available options for tuition reimbursement.
- Express your interests to your management. Based on their experience, they may be able to recommend specific courses that can directly benefit you in achieving your goals.
Once you have a clear understanding of what is available to you, design a personal training plan that will take advantage of those resources and execute on that plan to enhance your skill-set.
I have always had excellent coaches and mentors that provided me sound advice, guidance and support. They have always allowed me to enroll in training courses that would improve my personal performance, enhance the team environment and increase my value as an asset to the company. Some of these training courses have covered topics such as:
- Continuous Improvement
- Leadership Effectiveness
- High performance teamwork
- Public speaking
Topics such as these have provided benefits to all of the various roles I have taken in my career as a manager and as an individual contributor. Before I could register for any courses, my management always wanted me to make sure there was enough room in the budget to cover the costs.
It should be noted, however, that most managers are focused on achieving quarterly goals and milestones. It is very possible that employee development may not be at the top of their priority list. In my own experience, while I knew my management continued to support me, I found that I needed to be willing to take the initiative in my own training. Thus, it is important that each individual proactively pursue their own personal development.
Corner Office Wisdom:
Be proactive in pursuing the development of your skills. Create a plan, review the resources available to fulfill that plan and execute on it to manage your personal development.
Last week, I posted Big Data: Mountain of Differentiation stating my observations on the potential differentiation and disruption available to Communication Service Providers (CSP’s) through Big Data.
Needless to say, I was pleased to read this week’s post entitled Big Data for Telco Begins to Unleash Systems of Engagement by Brian Hopkins of Forrester Research, a well-known, prestigious market research firm that focuses on IT and Telco trends.
In his post, he states “In our recently completed Q3 2013 Global State Of Enterprise Architecture Online Survey, big data for real-time analytics moved from the No. 3 most revolutionary technology to the No. 2 position, according to the 116 enterprise architects who participated. This reflects the importance firms now place on turning vast amounts of data into immediate insight. And this trend is extremely important to telecommunication industry communication service providers (CSPs), who are sitting on a gold mine of data about what subscribers are doing on their mobile devices.”
It is always enjoyable to see a firm like Forrester Research align on shared observations and viewpoints.
Watching the World Cup qualifying tournaments has been really enjoyable. It is always great to see individual talents performing at the highest levels. But what was even more enjoyable was seeing the teamwork demonstrated by the players. The teams that gelled the best were the ones that were the least selfish and supported their team mates.
There are many times in the momentum of play that the player with the ball has an opportunity to take the ball down field. As he does so, he will need to temporarily “switch” positions with another player. For example, if the player is a defender or a mid-fielder moving the ball down field, he might suddenly occupy the space of a different player, perhaps a winger. The winger will need to switch positions and pull back to cover for the midfielder. To do this successfully requires great communication, cooperation and common skills between players. If the winger does not fall back, the result will be too many players bunched up in an area of the field. This will leave gaping holes in the defense should the momentum of play shift and go the opposite way.
In one of my roles, I was leading a software development team. It consisted of a Sr. Engineer under contract, a tester, a student-intern, and me, also a Sr. Engineer. We had a tremendous amount of work to do to get our delivery completed. Each of us had individual roles and assignments. After working an extensive amount of overtime, we completed the delivery. Then my group was combined with a second group. It also included a mix of Sr. engineers, testers, as well as a person who handled the massive amount of process paperwork required by the customer.
In our first meeting together as a team, we compared notes and realized the new group had worked even more overtime than my original group. They were really tired and on the verge of burn-out. Looking at the dark circles around everyone’s eyes, we determined there had to be a better way.
We decided to review the process used to get things done. We determined that there were a number of bottlenecks in the way each task was accomplished. The biggest issue was that people were so focused on their own role and assignment that they did not know what the others persons did. We discussed how we can tear down some of the walls between roles in the team and focus on how we can work together better. The results included:
1. Cross-training and developing skills among some of the team members to expand their abilities.
2. Allow them to grow and take on additional, more expanded roles.
As a result, we were able to “switch” individuals between roles and directly assist one another when needed. With the combined adjustments of increasing the skills of the team, increasing communication and cooperation, we met our deadlines with very high-quality, high-morale and minimal overtime.
Corner Office Wisdom:
There are times when process improvement also requires skills improvement including cross-training of individuals in the organization. By improving the skills of the team as a whole and encouraging cooperation, the team will operate with greater efficiency and higher quality in completing their deliverables.
A challenge with managing any product or service is determining how to price the offer. There are many methods to determine price such as comparing with the competition, evaluating willingness to pay as well as assessing supply and demand. What if there was little supply and a lot of demand?
My grandfather told a story that provided a good lesson about supply and demand. In his later years of life, he refurbished wooden antiques and sold them throughout the midwest United States. At one antique show, he had a number of antique tools on display. They were priced at $14.00. One morning, he noticed a man stop by and give his tools a thorough examination. Then, the man walked away. The man came back again about an hour later and re-examined the tools. He walked away again. He came back a third time and had a very short conversation with my grandfather:
Man: “There is a store in town that had these tools for $7.00”
Grandfather: “Do they have anymore?”
Grandfather: “Well – if I didn’t have any, I would sell them for $7.00 as well. But I have these and they are $14.00”
He always had a dry sense of humor. Was he priced too high? He had a supply. Was there demand?
I told you that story so I could tell you this one. At one time, I worked for a Sr. VP of Operations for a small software company. He decided to give me a new assignment. There was a group of application developers that were eating up a lot of salary but their efforts weren’t tied to any revenue stream. My assignment: Recommend what needs to be done with them to eliminate the costs.
I met with the team and found they were working on a stack of customer requests to modify custom applications on legacy systems. These modifications included significant design changes to the applications as well as complex interface updates to billing and CRM systems – all at no charge.
After my discussions, here were my observations:
1. They were providing a value-added service to existing customers. Without a billing/CRM system interface the application would not function and not be able to fulfill its purpose.
2. They had no process or organization to the work. They were receiving work orders from multiple directions including customer service, sales and the customers themselves. The work orders were not tracked, quantified or scheduled.
3. Customers being served were on legacy systems that needed to be upgraded.
4. They had no means or methodology in place of showing their value.
Their efforts were essential to maintaining a satisfied customer base. My recommendation to the Sr. VP of Operations was to define a standardized process for the work and to charge customers for the value provided. There was plenty of demand and this group was the only supplier for the service. He agreed to move forward with the recommendation.
As a team, we defined a standardized process for receiving, tracking and completing the work orders including customer sign-off. Since there was a consistency in the type of work being completed, we also defined a standard pricing catalog for various requests being made.
This is when things got interesting. The head of customer service went through roof thinking that she and her staff would be inundated with complaints about being charged for programming modifications. The head of sales felt that existing sales relationships would be put in jeopardy and that they would not be able to upgrade those customers to the next-generation systems being deployed. There was a lot of pressure being applied to not make any changes to the way things were being done.
Within the first 30-days of implementing the new process and pricing for value-added services, contrary to the fears of customer service and sales, the feedback we received from customers was: “I’m surprised you didn’t do this earlier!” The demand was there. The customers appreciated the value of the service being provided and were willing to pay for it.
Over the next set of quarters, the team successfully tracked, reported and recognized revenue to not only cover their salaries but also add some margin to the company’s bottom line. Customer service never received the high volume of complaints. Sales maintained their relationships and successfully upgraded those customers to the next-generation systems.
And as for my grandfather was his price too high? He didn’t need to drop his price by 50%. He knew the value of his products, the demand was there and he had no trouble selling them.
Corner Office Wisdom:
If there is demand for a product or service that you can supply, don’t sell yourself short. There is a willingness to pay. Price it in such a way that allows customers to appreciate the value of your offer.