Thoughts On The Tech Industry

#9 - Perspicacity

A few days ago in this blog we kicked off a David Letterman style countdown 'Top 10 Revenue Mistakes Tech Companies Keep Making"....

Drum-roll please... #9.... Perspicacity: Is Management In Touch With It's Customers?....  (huh?) 

Management guru Peter Drucker once said that the purpose of business is to create and keep a customer.  We've been working with a lot of our clients on this theme, it's a deceptively simple idea.  To us, it's basically a question of  'is management in touch with the customers?'

In what we euphemistically call the Litmus Test of Managerial Customer Intimacy, we created a brief checklist below (with examples) to ascertain of management is in touch with customers (or if they're simply faking it)

• Percent of Exec Team time spent with customers and prospects? - Take a lead from Dave DeWalt, the newly appointed CEO at McAfee.  When Dave took the helm of this $1B security pure play, he immediately embarked on a '100 Customer, 100 Day' road trip.  One key result of that initiative was customer feedback about some McAfee product deficiencies which then led to a strategic acquisition.
• CEO at Chief Sales Officer? - Look no further than CEO Phil 'Dunk' Dunkelberger at PGP.  Try getting a hold of this guy the last month of the quarter (you won't unless you're writing PGP a check); you'll find Dunk on the road pounding the pavement with his team.
• Level of 'customer sensory skills' amongst the management team? - Remember the old PC reseller MicroAge?  It's now called KST Data and going very strong at $1B/year in revenue.  EVP Field Operations Mark 'Eddie' Edson has a reasonably narrow customer base for a company this size and he likes it that way.  His team goes very deep with a few few large clients, listens intently, and delivers precisely on customer requests and requirements.   The customer sensory skills amongst his management team is unrivaled.
• Win/Loss information in excruciating detail? - John Street and Pete Khanna at MX Logic have this one wired.  With 20,000+ customers in the SMB space and a very broad channel, they have a wealth of data they regularly pour through and mine for strategic insights how best to grow revenue.
• Customer 'fingerprints' all over new products? - Check out CEO Loic Le Meur of Seesmic.  From the first day this company launched, Loic and his team have very deliberately and intently designed the product from prospective customer input.  Let your customers vote on the next feature?  You bet.  We don't think a startup has ever driven it's product strategy so deeply by customers than the way Seesmic has.
• Breadth and depth of customer evangelism stories? - CEO Terry Gold of Gold Systems is the high water mark here.  Each time I visit their Boulder offices I get a tour down several hallways which are literally filled with framed and unsolicited customer feedback stories.  It's their 'Customer Wall Of Fame'.  Terry has molded an entire company culture around this one very visible manifestation of customer intimacy.

These are great examples of exemplary companies that are exceedingly in tune with their customers and prospects.   If you want to be intimate with your customers and prospects, it's simply a checklist if your company is walking the walk.  We're proud to work with these companies and to know them.

Stay tuned.

#10 - Precision and Practicality

My colleague Chris Kocher and I were having lunch the other day with a prominent VC at one of those swanky Bay Area eateries only the in-the-know crowd have programmed into their iPhones.   Talk turned to revenue and how VC's continue to be frustrated that 50% or more of all venture money ultimately gets spent on sales and marketing efforts.  This VC asked us, "so what are the revenue related mistakes you see tech companies continue to make as they try to scale?".  Funny you should ask that Mr. VC, I just gave a presentation on the East Coast a few weeks back on that very subject.

In the spirit of a David Letterman-like 'Top 10' list, we'll periodically post in this blog a countdown of the 'Top 10 Revenue Mistakes Tech Companies Keep Making".   So without further adieu...

#10 Precision and Practicality: 'Common Mistakes In The Pipeline' - Any quick review of a sales pipeline can typically reveal a myriad of problematic issues.  (Lack of) Precision and Practicality, we call it.

• Little (or no) persistence in demand generation capability
• Lack of understanding how long the sales process really is (and it varies by vertical)
• Not correctly aligning a 'sales process' (yours) to a 'buy process' (who you're selling to)
• Inaccurate/incomplete qualification process - failure to qualify out!
• Poor forecast methodology
• Overly optimistic sales teams
• Channel conflict

The disconnect between a companies revenue plan and what's actually in a pipeline can often times be a very large delta.  The seven items above, if properly managed, can yield dramatic performance improvements in the pipeline.

Stay tuned.

How To Deal With A Departing Salesperson?

What's the right thing to do when one of your key contributors decides to depart?  The "old school" approach is to "walk them" right then and there....  that is, to escort them out of the facility once they've communicated their intent to leave...  and to let them know their relationship with you and the organization is now forever changed.

Should you feel betrayed?  "Ditched?"  Disappointed?  Hurt?  Vindictive?

Why not take the "high road," and show him or her that you appreciate what they did while they were with you?

Most companies will take immediate action, and "walk" the employee.  That's not wrong.  But consider one company's approach to the situation:  Ask the individual to transition his or her work appropriately, with your direction, then pay him/her for two weeks after his/her last official day on the job.

Why?  Think about his for a moment.  And before I go on, let me say that this is not an original thought...  Someone far wiser than I suggested this to me, and it makes sense:  If you demonstrate by your actions and your policy (they're the same, right?) that you A.) value the individual's contribution, and B.) expect an orderly and professional transition, and C.) will reward both with a two week "severance," even when it's your salesperson's decision to depart, you send a message to the rest of your sales team.

If executed properly, you'll most likely avoid the situation where you're "left holding the bag..."  In other words, you encourage effective and productive transition from all your people, as a hedge against those that decide to leave, perhaps, before you had wanted them to.

...Makes sense to me.

Is There an "Ideal" Salesperson?

“How would you describe the ideal salesperson?”  When someone asked me this recently, the best answer I could come up with was “it depends.” So often, companies don’t take the time to profile their customers before they think about profiling their salespeople.  And of course, there is a chicken-and-egg dilemma here—hard to profile the customer if you don’t have any because you don’t have any salespeople.

However, you do know what your target market is; you know your ideal customer.   I try to think about how that customer likes to buy and extrapolate that to try to figure out the type of person that they will buy from.   Do they want to have a business conversation at their desk?  Do they just want to spec and order their products over the internet?   Do they want someone to understand their business?  Do they want someone who can speak deeply to the features and functions of the product they are purchasing?

It’s too easy to say “yes” to all these questions.    Not all these things typically come in one packaged salesperson, nor would you want them to.   I’m a big fan of what I call the “sales continuum.”    What I mean by this is that there are all kinds of sales situations during a company’s lifecycle, and each has different needs.

At the beginning, the need is for customers.  Pure and simple.   The mission is to go out, find someone who will buy this product, implement it and validate our existence.   Then do that again.  Several times.    What kind of salesperson do you need for this?  You need a hunter.    A hunter will go knock on doors, nay kick down doors, until someone answers and says “yes, I’ll try it”.  That guy is not afraid of having people tell him no, is not daunted by the fact that so far nobody has bought this product, and is a quintessential sales hero.

Fast forward a year or so.  Now, you’ve got momentum.  You’ve got customers.  All kinds of customers.   You’ve seen some highly unusual implementations of your product, and you’re starting to see a pattern.   Despite thinking you think you have a repeatable model you’re seeing lot of “one-off’s”, not the straightforward, repetitive implementations, that make your professional services department happy.   Who’s your ideal sales guy or gal now?   It’s the individual who can go out into the world and describe to new prospects how it’s been done in the past; why other customers are using your product, and why they should, too.   Here is where you need the persuasive, business oriented salesperson, who isn’t knocking on every door, but is selectively choosing his customers and closing highly profitable, repeatable deals.

Fast forward again.   You’ve got enough traction now that you should segment the market and go broader and deeper.   You have a repeatable model, and now you’re looking for proliferation within enterprises, and larger, more complex deals.   Guess what?   Now you need a different set of skills.   Your ideal salesperson now is a strategic thinker who looks at an account and sees a myriad of possibilities, and has the expertise to call high and move from division to division and department to department.   He’s not knocking on doors at all….he’s leveraging relationships he’s built within the organization to introduce him and the product into the next arena.

So it’s not always simple.   It’s situational.   As a company and product matures, its sales force must grow and change as well.  Sometimes that means painful choices; the sales force that puts a start-up on the map isn’t necessarily the sales force that takes it to world domination.

Blocking and Tackling

During a lunch conversation other day a client asked me what I thought were the most critical factors that affected revenue growth. While they may seem obvious, three very important areas, which often get forgotten during day to day activities, stand out:

1. Build and maintain a strong sales pipeline. Lead generation is the most challenging discipline for high tech companies yet it is the key to consistently meeting revenue goals. In working with clients we’ve found that while most lead generation firms and programs can generate names and appointments, the quality of leads, the conversion of leads to sales opportunities and the close rate on leads generated is poor. Anything that’s expensive and ineffective is going to be challenging.

To improve lead generation companies should first understand their customer’s IT buying process and where an opportunity is in that process.  Second, to get the prospect’s attention, companies should focus on identifying and qualifying customer problems rather than identifying and qualifying projects. Lastly, strategic alliances are often an under-utilized channel for leads. Making strategic alliances work can be an effective means to building a strong pipeline.

2. Increase your win rate. Chasing low-probability-win deals is a significant problem for many firms. Often it’s the result of the lead generation problem above. Without enough truly qualified sales opportunities, sales resources are expended on any customer who says they are interested. But just because a customer has  a budget, it doesn’t mean it’s a winnable opportunity for you.

    One solution is to conduct regular win/loss analyses to determine the company characteristics, competitive and other factors that drive the selection of your solution. Then, conduct pipeline audits to make sure you have a chance at winning the deals your sales people are pursuing. If done effectively your forecasting accuracy will improve along with your win rate.

3. Create a repeatable sales model. Some companies can drive growth through brute force and a few star sales people. But revenue growth, and ultimately the market valuation of your firm, depends on demonstrating that revenues are scalable and      repeatable. Can you turn those one-offs into a daily occurrence? Can you bring on new sales people and get them productive in a short period of time? Can increase the leverage of your marketing programs?

Developing effective sales process, consistent sales messaging and a disciplined hiring and training process is critical to creating repeatable sales.

Gene Simmons On Selling

Gene Simmons - If he didn't make it as the bass player for Kiss, he'd be selling bass-o-matics on late night cable.  Give the guy credit, he built Kiss into a $1 billion enterprise - mainly a marketing, merchandising and licensing machine; Kiss coffins, Kiss credit cards, Kiss casino's.  Gene can sell, but he's actually a brilliant marketer.

Gene is currently branching out into a  general marketing consulting firm, his first client?  The Indy Racing League.

Gene believes in selling only at the highest levels - "there aren't enough hours in the day to get the Vice Presidents and secretaries up the learning curve.  If you're not talking to the head person, it doesn't matter."

Food for thought - too many people waste time trying to sell to someone who isn't in a position to buy.  There is a clear distinction between Buyer and Influencer, yet it's too often over looked.

The Reckless Hiring Problem

Why is there such high personnel turnover in sales?  Well, for lots of reasons; but today I’m interested in one in particular, which I’ve now observed numerous times: short-sighted hiring.

In order to hire and retain great sales talent, it’s critically important to match the sales professional to the customer need.   Identifying the target customer is of the first order in any business; but often that information doesn’t affect the sales hiring model.   The salesperson’s style and capabilities must fit your business, your client needs, and your company culture.   One size does not fit all.

Ask yourself: how does the customer buy? 

• What are his buying patterns? 
• From whom does she buy other, similar products? 
• What kind of sales cycle will your product have?
• Is it long or short?  Does the customer prefer to purchase globally, or locally? 
• Does your product lend itself to a low value-add, distributed sales model, or to a direct, personal-touch one?

Knowing these things, determine the skill sets that you want and need in a salesperson, and then interview and hire against those capabilities.   For starters:

• Decide whether having a rolodex is more important than the ability to form strong, lasting relationships
• Determine whether the ability to pick up the phone and start a conversation is as or more important than the ability to see a deal to fruition
• Define the cultural values that are important for any employee you hire

You don’t need to make a value judgment on the skills—they are not good or bad, just different in the way that they apply to your particular product.

Set up a hiring model that maps to your customer needs—and watch two metrics move: retention rate up, and cost of sales down.

Four Irrefutable Tenets Of Sales And A Few Penetrating Questions

 

 

I. We never qualify our friends well. When they say they need our professional help, we, flattered, rush toward the mission, often failing to ask questions that would always be asked of a normal client. Some of these qualifying questions are simple. “Who is paying for this?” “Is there budget for the project?” “How will you define success?” “What is the timing?” We love doing business with our friends for lots of reasons, but what if we got everyone’s expectations set at the beginning?

 

II. We continually believe that our customers will buy on our timeframe, without recognizing that the end of a quarter may not be as meaningful to their process as it is to ours. For buyers who have never had the delightful opportunity to take part of their compensation in commission, the end of the quarter simply means lots more calls from salespeople and some good discounts. What if we started closing business on the buyer’s terms instead of ours?

 

III. We overestimate deal value.   All deals start high, and for many, the older they get, the less value they retain. Most of us are optimists, which is just one reason we’re in sales. Therefore the beginning of each sales cycle is much like a new relationship; full of potential and unlimited in its capacity to return on our investment. Six months down the line, it’s either a marriage of convenience or a messy divorce, with significantly less value by all measures—money and emotion.  What if we started off understanding the customer’s actual goals and needs before we put a number on the forecast?

 

IV. Sales is not a numbers game.   Sure, we have to make the calls to get the business. But it’s not about the number of calls we make; it’s about the quality of the interaction and the relationship we form. It’s the relationship that enables us to find out the truth when a deal seems to be souring, and helps us to understand what’s really going on, because it’s based on a mutually beneficial, truthful, exchange of ideas. What if we profiled our ideal customer before we started down the path of getting appointments?