Category Archives: Revenue Risk Management

Why Competitors Love Ostrich Rivals

Thursday, 05 December 2013 16:19
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“Bring me sales, not excuses!” Notorious demands from a VP of Sales whose identity I’ll protect. He unwittingly aided his competitors because his sales-not-excuses mantra doomed him to repeating stupid selling mistakes.

A real-world example:

Carmella (not her real name), his sales representative, lost a software opportunity to a rival vendor. She explained to the sales-not-excuses VP that she lost for two reasons. First, her sales proposal included a large custom modification that her competitor provided as a standard capability. Second, her sales support team was unable to hold a final meeting with her prospect on the day the prospect preferred.

Carmella’s boss felt she mismanaged the sale, and that she was only making excuses. He assumed she didn’t emphasize the strengths of her packaged software product, and that she didn’t apply effort toward “overcoming objections” about the customized feature. Her inability to meet on the most convenient date for the prospect? He believed she didn’t try hard enough to overcome that problem, either. Carmella’s points hit a dead end. They were never heard outside her department.

Did Carmella mismanage the opportunity? The answer ranges from maybe to definitely. But put that question aside for a moment. Did the problems she identified exist when she talked with her boss? Yes. Did her competitor know the reasons he won? Definitely. Will his company exploit that knowledge? Absa-freaking-tively! Should the risks Carmella identified be reduced or eliminated? That is a management question Carmella’s boss should have considered—but didn’t.

What’s the takeaway? When observations about performance gaps are routinely dismissed, there is high risk for recurring problems. Why, then, would any sales manager stifle dialog that reduces the risk of lost revenue opportunities? I wish I had an easy answer. Ego? Myopia? Impatience? There’s a long list . . .

Besides toning down his arrogance, what should Carmella’s boss have done? He could have begun by being circumspect about why her opportunity didn’t succeed. Expressed in methodical terms, he should have performed an After Event Review.

Effective reviews:
Capture observations from multiple viewpoints
Identify risks and opportunities
Promote organizational learning, and facilitate continuous improvement
Enable more accurate sales forecasts
Improve attention to detail in recognizing and reflecting on success factors and problems

Reviews ask and answer six questions:
1. What was the intended outcome?
2. What actually happened?
3. What was learned?
4. What do we do now?
5. Who should we tell?
6. How do we tell them?

Here’s what the VP of Sales would have learned:

1. The custom modification Carmella proposed was just one of several product shortcomings the demo team encountered.
2. The sales team was poorly prepared for two client meetings
3. The proposed custom modification was a clunky 5-step process using three screens. The competitor’s product accomplished the needed capability with one step.
4. For unknown reasons, the essential custom modification was never considered for the development queue.
5. Carmella had to postpone her key sales meeting because company policy required that all pre-sales staff obtain a manager’s approval before committing time. The department manager was on vacation (and unavailable) at the time she made her request.

An opportunity for performance improvement crushed by bravado. It happens every minute of the selling day.

If you’re conducting After Event Reviews, here are pitfalls to avoid:

1. Not integrating them for ongoing sales improvement. In a sales risk survey conducted with CustomerThink in February, 2010, we found that of approximately 100 salespeople and managers, just under half reported doing post-sale reviews as part of risk management.

2. Formulating a conclusion, then backing it up with facts. Reviews are not witch hunts: “I think we’ll find that Tim really mismanaged our sales process.” If you draw conclusions first, you can always find supporting data. But it won’t bring you closer to solving the problem.

3. Protecting a specific employee or department. If your prospect shared that one reason you lost was that your VP of Marketing made an off-color joke at a presentation, that fact goes out on the table! When it comes to uncovering the truth, no artifact should be concealed or considered sacrosanct to bring into the spotlight.

4. Calling them “Win/Loss” reviews. Don’t. “Win/Loss” distorts the analysis. Wins lull people into examining what was done well. Losses shunt the analysis into what went wrong. Typically, it’s some of both for each. Further, how do you classify a Pyrrhic “win”—when the cost of sales exceeds revenue? Referring to the discovery as an After Event Review helps ensure objectivity.

5. Reviewing only wins or only losses. There’s a wealth of vital information contained in both. Patterns emerge. By looking at what went wrong, you can infer what’s right. Same for the reverse.

6. Focusing on just improving performance of individual salespeople. As the example illustrates, multiple issues can be revealed. And all opportunities for improvement should be considered.

7. Confusing After Event Reviews with social media. Unlike social media, After Event Reviews aren’t public knowledge. Findings require closely-governed boundaries and privacy protection. The last thing a new customer wants to see is an accolade she provided in confidence posted on a Facebook fan page.

As Larry Bossidy and Ram Charan wrote in their book, Confronting Reality, “the tools, practices, and behaviors that will distinguish success from failure can be summed up in one phrase: relentless realism.” That can only happen when key issues are out on the table, and when people aren’t threatened by knowing what they are.

Want an Aggressive Salesperson? Be Careful What You Wish For!

Thursday, 05 December 2013 15:59
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Originally published 6/15/10

Who do you want on your sales team? Hunter types with “street smarts,” and a “sales personality?” Salespeople who are motivated, hungry, and assertive? What about aggressive, driven, and relentless? Slobber and drool! How about overbearing, intimidating, and obnoxious? Oops! It’s hard to tell exactly where I strayed into the behavioral red zone. There’s no crisp boundary, and these behaviors don’t easily segregate.

How might a customer view a salesperson possessing this group of attributes? In a blog posted May 10, 2010, a man named JerseyFrank provides a poignant answer:

“My wife and I have been looking to replace our old worn down living room furniture and we went to a local furniture store to check out thier (sic) furniture. The sales person was very loud and obnoxious and made me feel like I could not get a word in. I wanted to leave because my anxiety and depression made it very hard to deal with this salesman. My wife wanted me to stay and although I tried I kept my eye on the exit and found myself planning a quick escape route no matter where we were in this store. I was slowly crumbling and got very quiet when my wife found a living room set she liked and struck up a deal with the salesman. We purchased the set and left the store (finally!). About an hour after we got home my wife changed her mind about the living room set after doing a few measurements and decided it would not fit. Than (sic) she wanted me to call the furniture store back and cancel the order. I tried talking to the salesman over the phone and he was literally yelling at me over the phone. I had enough of his crap and just exploded at him! My wife quickly grabbed the phone and tried to take over and than (sic) things really got ugly between us and thise (sic) salesman. We were told when we made the purchase that we had 48 hours to change out (sic) mind and suddenly this jerk wouldn’t take no for an answer. My wife is going to call the store manager this morning and cancel the deal.

I thought I was feeling better for a while before this shopping adventure but now I feel like this experience has made me feel like I have just taken a HUGE step back in what I thought was progress. Even after a night of sleeping on it I still feel awful.”

While it’s possible to dismiss JerseyFrank’s experience because we’ve only read his version of the transaction, my heart goes out to him. But . . . was the salesperson “just doing his job?” No matter. JerseyFrank’s buying experience reeked, and it didn’t have to. Show me a business that doesn’t understand that the customer’s perception is reality, and I’ll show you a business on the road to ruin. As unbelievable as this looks in print, I’ve heard many times “that (customer) is just an idiot, anyway.” Wrong-o! JerseyFrank’s experience is emblematic of much that is wrong with selling today. It begins with leadership. Even if JerseyFrank’s salesperson didn’t follow the rules in his manager’s playbook, can someone explain to me why he’s even allowed to work with customers in the first place? Only his boss knows for sure!

Fixing JerseyFrank’s bad experience—and thousands of similar daily interactions—requires new management thinking. Einstein’s quote is overused, but I’ll plunk it in here anyway because it fits: “We can’t solve a problem with the same thinking that got us there in the first place.” Companies must have customers in order to survive. That hasn’t changed. But if prospects resist interacting with salespeople, there are reasons. Is the solution to continue to hire aggressive, relentless salespeople, jam a large quota down their throats, and reward revenue achievement at any cost? I don’t know, because I’m not sure if the likely behaviors create outcomes like JerseyFrank’s. I suspect a consistent connection.

Some free advice for the retailer JerseyFrank could have bought from: examine the buying experience from the outside-in, through the eyes of your prospects and customers. Think about that experience. Live it. Build your selling processes to ensure the outcomes your customers require happen over and over. Find salespeople who are passionate about making that experience happen—and who are motivated by the reward. You’ll discover that the salespeople you should hire and retain are different from the ones working for you.

Woulda, Coulda, Shoulda! How to Prevent Your Sales Strategy from Becomming a Disaster

Thursday, 05 December 2013 15:53
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Originally published 6/21/10

Oil slicks, mine explosions, lost sales opportunities . . .

Risks? What risks? Woulda, coulda, shoulda! By now we know that engineering shortcuts and bad assumptions come home, biting executives in the backside. Serves them right! Apologies fly. If only the sickening results were confined to the perpetrators. But they never are. Ask a BP shareholder, coal miner spouse, or anyone whose business depends on the unperturbed ecology of the ocean. And images of oil-soaked waterfowl further remind us that risks aren’t only manifest in financial statements.

Thanks lately to BP, risky business practices have bubbled to the top of discussions. That’s healthy for sales executives, because selling strategy is all about risk—and how to manage it. But like BP executives, many sales executives aren’t ready to face it. Who wants to be branded a naysayer? “We want to know how we are going to make our revenue target—not how we’re going to miss it!” An optimistic demand that ignores one of the few certainties in sales: not every prospect becomes a customer.

In February, 2010, Outside Technologies, Inc. conducted the 2010 Sales Risk Survey in partnership with CustomerThink. Over 100 salespeople and executives responded. How they’re coping with risk might reflect how a broader group of vendors see the road ahead:

• Greater uncertainty has a direct financial cost. Compared to last year, sales pipelines and sales cycle times are increasing. Fifty-two percent said that sales pipelines increased relative to last year, ballooning to an average of three times revenue target. Only 23% said their sales cycle times were trending shorter.

• The poor economy is perceived as the greatest risk, with approximately 25% of respondents identifying it as #1, and almost half placing it among the top three risks. “Challenges from competitive forces and new offerings,” “inability to establish relationships with decision makers” and “major changes in buyer preferences and needs” also made the top three, with the latter two tied for third.

• The risk of “no decision” remains formidable. Forty-four percent named “prospect delayed purchase indefinitely or did not make a decision” as the top reason for lost sales opportunities, followed by “price was high relative to competitors” (38%), and “competitor did a better job in marketing and sales” (35%).

• Erosion of “sales control” brings new risks. While the majority of respondents (70%) agreed with the statement “when we lose sales opportunities, we know the reasons why,” a surprising 53% indicated that their companies have less influence over purchasing decisions than ever before.

• Even though risks are known, many aren’t managed. Over 63% of respondents agreed “we know the greatest selling risks we face today,” but 43% felt that unexpected situations played a role in lost sales opportunities.

• Most are not preoccupied with having cutting-edge products or services in the sales bag. Less than 20% agreed with the statement “our customers only buy products with the latest features or technology.”

• We might not like what’s happening in Washington, but it won’t impact sales strategies. Less than one third agreed that pending legislation could substantially change their marketing and sales tactics.

• Companies cannot afford to lose their top sales producers. Retention of top sales talent was identified as a vulnerability by over 45%, while almost 25% felt their salespeople “lack the basic skills to compete in our markets.”

• Social media plays a role in communications risk. While nearly 60% felt their salespeople were skilled at communicating key value propositions, a whopping 57% percent disagreed that their companies were “effective at using social media for communicating with our prospects and customers.”

• Supporting technologies are not as vital as sales automation vendors would like us to believe. Nearly 72% were neutral or agreed with “if we were suddenly unable to use our sales/CRM applications, it would not adversely impact our sales operations.”

By nature, salespeople are optimists. But the collective observations of the sales executives who took this survey reflect a nuanced view of how people view the economic road ahead. We can infer emerging strategies and tactics based on the opportunities people see and the risks they want to avoid. In upcoming posts, I’ll share the external forces that contribute to selling risks, the greatest risks that executives see over the next 12 months, and how sales organizations are coping with them.

Further reading: Sales Risk Survey Executive Summary (free to CustomerThink registered members)

Proving ROI Doesn’t Mean Squat Without Disclosing Risk

Thursday, 05 December 2013 15:48
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Originally published 7/8/10

Put a big, fat glob of risk in your product pitch, package it as “excitement,” and you have a powerful sales tactic. Even a disclaimer plays a crucial role, not that it would matter to a buyer to read one:

“Do not attempt. Really. Do not do this. Stunts performed at sanctioned events. Specially equipped rally vehicle. Professional driver. Closed course. Obey all traffic laws, always drive safely and wear your seatbelt.” Right! Where can I get one of these cars to test drive? Such statements are motivating when the target buyer is male, 18 to 29 years old.

In a different, far away sales universe, the B2B salesperson sells his or her product to an older, equally risk-aware buyer, but without testosterone’s helpful property of making risk seem wildly appealing. B2B buyers avoid stupid risks. But salespeople frequently toss all risks into the same negative bucket, and choose not to discuss them. Finding risk transparency in B2B sales is about as common as finding a teenager without a PDA.

It’s easy to say you’re transparent, but harder to be transparent. Here’s a personal example for how not to do it: One prospect I worked with had installed—and de-installed—two mid-range ERP systems in four years. I was there because the company was preparing to rip out #3 as well. As vendor-victim #4, the company’s CEO told me point blank, “we need you to tell us everything that could go wrong with your solution.” “What don’t you already know?” was the unsaid reply that flashed into my mind. But even that sarcastic response would have been better than the feeble one I offered. I was totally unprepared for the conversation he wanted.

Why? Risk discussions weren’t part of my sales tool kit. My kit had the expected implements: Problem/Solution/Benefit statements, features and capabilities collateral, key differentiators, and a smidgen of Return on Investment fluff. No risk insights adding weight to the bag. Salespeople are rewarded for mowing down concerns about their own products, and for raising them about competitors.

Would a street-smart salesperson disclose that just yesterday, his company’s chief software architect took an unannounced sabbatical to go mountain biking in Peru with his girlfriend? Or that his CEO has discussed selling the company in the next 12 months? Stuff happens, and it’s classic FUD (Fear, Uncertainty, & Doubt) material. When our sources are credible, we spread this about the other guys, never about ourselves.

How transparent a salesperson should be about such sensitive matters tiptoes into the shadow of the Ethical Elephant, and I’ll stick to the periphery. Anyway, there’s a more pragmatic side to this discussion. Prospects aren’t deer in sales headlights. Not anymore. They’re fully capable of learning about risks. But as many salespeople know from we’re-putting-this-on-the-back-burner-for-now conversations, prospects are also prone to the stasis of no-decision purgatory. Could risk confusion be one cause? Could salespeople be more valuable by intelligently guiding buyers to recognize and consider the risks that change creates—even if it means discussing their own?

Author Sharon Drew Morgen believes they can. In her book, Dirty Little Secrets: Why Buyers Can’t Buy and Sellers Can’t Sell, and What You can Do About It! she wrote, “Until buyers understand, and know how to mitigate, the risks that a new solution will bring to their culture, they will do nothing.”

Risk matters. If it didn’t, the shortest closing sales pitch, “nobody ever got fired for buying IBM,” could not have helped sell tons of IBM iron and services against arguably superior technology. But the sword cuts both ways. One thing I’ve learned: when I haven’t identified my risks, they will be identified for me—never a good thing. Too much perceived risk and my opportunity is toast. Too little, and I might win—but when the first glitch occurs, my prospect will never forget how I over-promised and under-delivered.

Back to “Proving the ROI.” Accounting Professor Bob Kemp told me this year that business decision makers ask three questions about value: what do I get, when do I get it, and how certain are the answers to the first two questions? Déjà vu. That’s what the CEO wanted to know. And because his company was a candidate for the Guinness Record for Most Scrapped ERP Systems, he was screaming for help. But without a clue about my own assumptions and without understanding the CEO’s risks, I was only slightly more useful to his decision process than a Ouija board.

Which risks did he need to learn? Ideally, the causes for the failures of his first three ERP systems. But most salespeople don’t have the luxury of performing detailed project retrospectives. A general rule of thumb: any risk that has high likelihood and high impact on a financial claim, estimated performance improvement, or outcome is a candidate for discussion.

Had Steve McConnell’s 660-page book, Rapid Development, been available at the time, I would have presented this adapted list of project risks:

Feature creep: escalating the project by adding new feature requests

Gold-plating: insisting on the “latest and greatest” technology, instead of “good enough.”

Software defects, interoperability problems, and operating system instability

Schedules developed without factoring constraints

Inadequate software design and poor usability

“Silver-bullet” syndrome: expecting software or technology will solve problems they’re not intended to solve

Weak personnel: not having the right talent in the job at the right time

Communication problems and interpersonal friction between developers and customers.

You’ve probably already recognized the same risks can occur for customers and vendors. But discussing these risks would have provided me the opportunity to describe how my company managed them.

How much better would my meeting have been had I brought these risks to the forefront? How much more effectively would my prospect have been able to make calculations about financial return and estimate time to value? How much more trust could I have fostered in the buying experience? Much. For all three questions.

Oh—the outcome of my sales call? Despite fumbling the CEO’s question, I won the order. After three failed vendors, he was running out of alternatives. Best of all, my software ran on IBM.

How a Company’s Product Failure Can Open Great Opportunities for Its Sales Force

Thursday, 05 December 2013 01:57
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Late last month, an IT failure crashed the administrative systems at agencies across the state of Virginia. Prisoners at state facilities couldn’t be released, drivers couldn’t renew licenses, and the state department of taxation couldn’t access accounts. The Virginia Department of Motor Vehicles alone estimated that 35,000 to 45,000 customers were affected, making it necessary to grant temporary amnesty for driving with an expired license. At least some customers weren’t complaining.

The state’s $2.4 billion IT services contract with Northrop Grumman was placed in the center of the blame game, which wasn’t hard to do, given the number of zeroes in billion. Hardware vendor EMC was drawn in because a pair of their memory cards contributed to the outage. According to an article in The Washington Post (Computer Crash has Tech World Watching, September 2, 2010), Virginia Governor McDonnell “is now grappling with the worst network failure since (Northrop) took over the state’s technology overhaul in 2003.” One state legislator said “We’re paying Northrop to run modern, quality service—and they have failed to do it every step of the way.” A quote you won’t find on Northrop’s home page. Off with their heads!

Such shrill, social-media enflamed negativity could send the most brazen, battle tested Northrop and EMC salespeople scurrying back to the office, tail tucked between the legs, until the uproar abates. When the news broke, I visualized thousands of Post-it notes newly affixed to their sales proposals, with the words, “postpone this decision.” They might as well say “radioactive.” “It’s a selling point for (EMC) when they talk to a major organization, that this stuff never goes down,” according to Bill Kreher, an analyst who follows EMC for investment firm Edward Jones. I’ve experienced the pain myself. Product failures are about as welcome as a root canal.

Or not. While it’s probably too early for Northrop and EMC salespeople to begin snapping up new Bimmers, they are likely winners. In discussing last month’s incident, David Bergert, CEO of Tessaraic, a Virginia-based IT services firm, said “if you’re a CIO and not aware of the associated risks (of an IT implementation), then you’re an idiot.” Bergert doesn’t recommend running from Northrop or EMC, and I don’t anticipate him combing Virginia’s IT vendor directory for other suspect companies to pillory. In fact, Bergert sees opportunities for salespeople to reach out and discuss Virginia’s problems—and solutions—with prospects and customers alike. Bergert sees the big picture. With his extensive public-sector IT experience, he understands that backup, disaster recovery policies and state IT contract management have as much to do with system uptime as do components like EMC’s memory cards.

Art Stewart, a communications strategist, agrees that good outcomes can result from bad events. He sees high-profile failures as “transformational moments” for corporations. “There is a fork in the road, and you can choose which path to take,” he said. Stewart recommends selecting the road in which a vendor takes a leadership role in solving the problem, and making sure communications about the crisis from field operations and salespeople are congruent with those from corporate executives. The worse road for a vendor includes finger pointing, blaming others, and litigation, which Stewart says corrode brand equity and undermine trust. Nothing new if, like me, you’ve bypassed a BP station recently in search of search of more politically-correct fuel.

Good ideas, but in IT, identifying who is obligated to solve problems, and who is accountable proves increasingly difficult. After all, the term stand-alone system has become a quaint artifact of a kinder, gentler time when data was transferred on floppy disks. Complexity grows with companies running multiple operating systems, open-source middleware, and home-grown applications coded in offshore facilities. Jeff Baker, an enterprise sales executive with Hewlett-Packard says “a minimal QA (Quality Assurance) effort may have been done and . . . vendors are reluctant to dive in and take responsibility. So it can be a mess.”

Still, Baker finds opportunity in disaster. “It could be presented as a potential proactive notification or a lessons learned discussion, with the support teams engaged…and if skillful, could lead to the TCO (total cost of ownership) discussion and facilitate the enterprise sales strategy. A good job in responding will provide closer ties to executive management at the customer, better ties into the support organization and an impending event from which to build an enabling enterprise sales strategy.”

What should salespeople do in the event of a high-profile product failure?

1. Don’t duck the issue with customers or prospects.
2. Assume a leadership role in solving the problem, and demonstrate that your company is doing so.
3. Immediately ensure that adequate resources are assigned, and maintain those resources until the problem has been resolved.
4. Communicate the causes of the problems and the steps toward resolution internally and externally.
5. When done right, feature how the crisis was managed and mitigated.
6. Remember that excellence and commitment in resolving difficult customer situations is a compelling competitive differentiator.

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