ROI: Standard requirement for sales enablement
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.
Cross-training: A lesson from the World Cup
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.
Do you multitask? Not very well!
A colleague of mine thinks they are the ultimate multitasker. Because of their well-honed skills at multitasking, they also believe they are extremely productive. One day, I walked into their office and I saw it in action. My colleague had:
1. A webinar going on their laptop about a new set of use cases for telecommunications.
2. At least two different email reply’s open and “in progress”.
3. Four different instant messaging panels open and blinking waiting for the response from my colleague.
4. A speaker phone dialed in to a conference call. The phone was on mute.
5. A mobile phone with an ear-bud stuck in their ear while responding to a call.
Were they really at the peak of productivity? Or were they deceptively sacrificing quality for quantity?
Since the 1990’s, experimental psychologists have examined the idea of human multitasking to identify our capabilities and impacts. In summary, what has been determined is that our brain’s working memory capacity does not allow us to multitask successfully – in spite of the confidence we have in our own abilities.
Because the brain cannot fully focus when multitasking, people take longer to actually complete a given task and they are more error-prone. The impact to business? Employees are less efficient and quality suffers. Overall productivity is diminished.
Here are some interesting studies highlighting some results:
• A study by the American Psychological Association indicates that we lose as much as 40% productivity when we attempt to multitask.
• A study by the University of Utah in 2013 showed that people who multitask the most tend to be impulsive, sensation-seeking, overconfident of their multitasking abilities – and tend to be less capable of doing it.
• A 2008 study by the University of Utah showed that drivers talking on the cellphone missed their exits and turns more often that those talking with a passenger.
• A different study by Stanford University found that even trying to talk on the phone, send an instant message and read email can impair your cognitive control.
• A 2012 study by the University of Illinois at Chicago indicates that multitasking works against the processes that generate the “a-ha” moments of creativity and limits problem-solving.
With so many available channels of communication, we have an over-developed expectation of immediate response. We feel the need to immediately respond to others and we expect an immediate response from them. The result is we respond to the volume of communication but sacrifice value. Our brains are maxed out and we diminish our ability to solve problems and lose creativity.
And my colleague? Were they really successful in multitasking? Not very well!
1. The webinar was recorded so they could listen to the replay later. They likely didn’t get anything out of it the first time.
2. Having been the recipient of a few responses, the email replies were likely sparse and incomplete. The instant message responses were unintelligible and some of the replies were directed to the wrong person.
3. When they heard their name on the conference call, they had to unmute the phone and ask for the question to be repeated. It was later they heard about any action items.
4. The mobile phone call was the only real task that was completed with success.
The idea of multitasking is a great one. We just need to be more serial about it and focus on task-switching. By task-switching, we are able to get the task that needs to be done completed with high-quality, efficiency and minimal rework. This will make us more productive and more successful.
Corner Office Wisdom:
To do a task and do it well needs focus and concentration. Take just a few seconds to get your mind centered on what needs to be done. You will find you get more accomplished in a shorter period of time with higher quality. Quality is more important than quantity with errors.
Supply and Demand: Price too high?
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.
Opportunities are like buses
…if you miss one, another one will come along. How are you going to make sure that you don’t miss it?
Businesses with strong discipline in their sales process will conduct a Win/Loss Analysis with their sales funnel. The goal is to determine why a deal was won and why a different one was lost. The focus is to achieve continuous improvement in the overall sales process. There are usually many factors that contribute to the win or loss of a sale, but three major areas are:
2. Product or Solution
People are more comfortable purchasing from people they know and trust. For opportunities that are won, chances are there are strong relationships all the way up and down the organization that made the buying decision. For opportunities lost, were all of the decision makers and influencers known or identified? Were their requirements understood? I have seen many opportunities missed where the key decision makers were not clearly determined. For the ones that were known, what was the relationship like? What was done to strengthen it? What improvements can be made?
A true litmus test on the relationship is: how did the opportunity become known? Was it through a request for proposal or quote (RFP/RFQ)? Does it use terms common with another competitor’s products? Often companies will get “assistance” in writing the requirements from a particular vendor. If you didn’t help write it, then your competitor probably has a closer relationship. Work needs to be done to get a stronger relationship with the customer and get between the customer and the competitor and get more of the customers mindshare.
Product or Solution
How do you know if you have the right product or solution for the customer requirements? Just review the responses to the RFP/RFQ. If a significant number of responses are answered “Roadmap Item” or “Requires Development”, then you are trying to fit a square peg in a round hole. Too many of those and the probability of winning will drop significantly.
The results from the Win/Loss Analysis can be a great source of feedback to the product managers and development teams highlighting key gaps in the product and to shape its direction.
When people hear the term “offer”, price is the first thing that comes to mind. For a deal that is won, was too much money left on the table? For the deals that were lost, price is the first to blame. I have seen opportunities won where our offer was the highest price on the short list of competitors and we still won. Conversely, I have also seen opportunities lost where we were at a lower price than our competitors.
An offer is more than just price. It also includes the perceived value that the customer expects to receive from the package such as a quantifiable return on investment (ROI) and total cost of ownership (TCO). It also includes their comfort level on product support vs. “hidden costs” and even the health of the business. Are you, the vendor, going to be around long enough to support the product? Engaging marketing teams in the Win/Loss Analysis can provide focus on strengthening and further articulating the value propositions.
The goal of the Win/Loss Analysis is to identify areas of continuous improvement in the sales process, product and support teams and can be extremely useful across multiple organizations.
Corner Office Wisdom:
Opportunities are like buses. Performing a Win/Loss Analysis will make sure you don’t miss the next one.
That was one of first words of advice I ever heard. They came from my father. For my inaugural post to this blog, it is certainly more than appropriate that it comes from him.
Dad always wanted my brother and me to always do the best we could in any activity whether it was learning a musical instrument or playing a sport. He would always work with us to help us with our technique. We would review the fundamentals and look for ways to improve. He would make sure we had time to practice getting those fundamentals down so at game time, we were ready to perform and perform well.
After each practice and game, we would talk about what improvements we might make and how we can become better players. Then we would hit the practice field and work on those adjustments until they came natural. He knew the better we performed, the more success and fun we would have.
Even today, when facing business or personal challenges, he still continues to be a great coach and mentor. His advice:
1. Review the fundamentals
2. Look for areas to improve
3. “Swing hard!!”
Perform your best and enjoy the success!