Forty Billion Dollars! 460 aircraft!
You think your sales job is high pressure? These numbers are at stake in a single deal at American Airlines as Boeing and Airbus compete for one of the largest orders in the history of commercial aviation. “Get your foot in the door” for Airbus, versus “lose the farm” for Boeing. Fasten your seatbelts and brace for impact. Oh, first grab some Maalox from the beverage cart when it rolls by!
This deal isn’t just sales versus sales, or EU versus US. This is Sales versus Sales versus finance versus product development versus engine technology versus supply chain versus corporate strategy. I’m sure I’ve left something out, but this gives you a thumbnail of the Gordian knot of competing interests and cross-departmental drama that’s going on behind the curtain. If knock-down, drag-out sales competition gets your heart pumping, you won’t find a reality show more exciting than this.
As incumbent, Boeing has an interesting conundrum: the company might not want American’s business. OK, I’m wrong. They do want American’s business. Badly. After all, Boeing’s the incumbent, and what Boeing exec wants to see even one shiny new Airbus jet painted in American’s colors landing at DFW? But there are two words about this deal that scare the living bejeebers out of Boeing Finance executives and the company’s bankers: insolvent American. According to The Wall Street Journal, (American Leans Toward Airbus, July 19, 2011) “American is the financially weakest of the major US carriers, so Boeing and its partners have balked at increasing their financial exposure to it.” “Balked”? Such aplomb! If any number with nine trailing zeroes was at risk in my investment portfolio, I’d be white as a sheet.
In this staredown, Boeing just blinked, and being European, Airbus couldn’t resist saying carpe diem, y’all! “American was attracted (to Airbus) partly by a rich package of almost $6 billion in aircraft financing that Airbus has put on the table,” the paper reported. Give the customer what they want, even if it means going belly up. Next time you’re in Tolouse, don’t order anything caffeinated, because they stopped serving it. People are already tres jittery.
Win, lose, or draw, Airbus has played its risk card superbly. By taking on risk their competitor eschews and by connecting that to what their prospect values, Airbus is exploiting a knock-kneed, risk-averse Boeing. They’re offering American a tantalizing sales carrot—financial security. That got their CFO’s attention! Sure, there’s more to this deal than financing terms, including engine technology and total cost of ownership, but when the game is tied with two out in the bottom of the 9th, it’s ironic to think that selling machines as complicated as passenger aircraft still depends on lowbrow devices like hand calculators and sharp pencils. And some salespeople assume product features, benefits, and quality rule customer decision making! Imagine!
Logically, it’s not a mental stretch that higher risks are bad and lower risks are good. But over time, all of us have learned exceptions, like the joy of riding a bicycle without holding the handlebars, or things we did in college. Whether or not you agree with Airbus’s account strategy, the company’s executives believe they can sustain higher financial risks to win American’s business. Before ink is applied to the American Airlines contract, we can emulate how Airbus has used risk management as a strategic sales weapon.
To fly past your competitors, here are some risk levers you should consider pulling:
Financial: If you can sustain it through lower costs of capital or better credit terms, and your competitor can’t, go for it!
Time horizon: Some salespeople get frantically nervous if a sales opportunity takes longer than six months to close. Can you simply out wait your competitor because you’re better suited for long decision cycles? That’s the reason we have large government contractors.
Experience or expertise required: if you can handle implementations because you have the talent and expertise on staff, you can pursue opportunities at companies that might seem prohibitively under-resourced—and risky—to your competitors.
Outsourced capabilities: companies that can quickly coalesce outside teams that can offer solutions can be more agile and tolerate more risk because the expertise can be readily disbanded if the opportunity doesn’t materialize.
Level of risk and opportunity identified versus level of investment: You can be more speculative on opportunities that are in your geographic backyard if your competitor must pay travel and expenses every time the prospect wants to meet.
Phase of innovation development: Companies that seek to share future development costs can sometimes absorb risks that companies recouping them cannot.
Leverage existing customer base or capture new: Long production runs and mature products enable companies to absorb other risks that would be undesirable to competitors undertaking the risks of entering new markets or developing new products.
A few months ago, a Tom Toles cartoon published in The Washington Post depicted a Wall Street executive seated in an office bearing a sign that reads “For bigger profits, take bigger risks!” Surrounding him are images of Japan, BP, climate change, the economy, and housing. The anonymous man in front of him quips, “Maybe it’s time we took that down.”
Whether that wisdom proves true for the outcome of the American Airlines deal remains to be seen. Stay tuned!