Tag Archives: sales_strategy

How Risky Is Your Revenue Plan?

The English language needs a new word. A word that combines the meanings of hope and stupidity. Hopeidity sounds right. A versatile noun I can use when someone exclaims, “Hey y’all, watch this!”

I searched for this phrase online, and began an adventure to the boundaries of risk taking. Among the gems I uncovered:

• spud gun with propane and oxygen (“dangerous, NOT RECOMMENDED !!!”)
• the 25 most death-defying stunts ever
• “we try to pull down a 30 foot tree with a Hunt V and its wench. We fail.”
• The longest motorcycle ride through a tunnel of fire

These specimens are among the few I can call cerebral. The rest? Sheer hopeidity. Which opens deep questions: what motivates people to accept risks? Why do some BASE jump, or willingly leap from high bridges with a bungee cord strapped to their ankles? Why do men and women descend into coal mines 175 stories deep in the earth to earn a paycheck? Why do entrepreneurs invest their entire savings to start companies, when others say, “no freaking way!”

I accept that I will not come close to solving this bafflement. It joins a collection of other perplexities: how infants transform from joyously happy to shrill meltdown in a mere instant. Why GM ever produced the Pontiac Aztec. But I see a bright side to my willful ignorance. Disparities in risk perception drive capitalist economies, of which I am a part. Ignorance as a patriotic duty? That’s a discussion I will take up later. Today, I will not talk politics.

If every individual had an identical view on risk, commerce would grind to a halt. Financial exchanges and commodities markets would not exist. Money would not be loaned or invested. And that means no farming, no livestock, no food production. Everyone would be forced to subsist on wild mushrooms and berries. Microwave ovens would be cannibalized to provide scrap metal for roofing.

I offer a simple, though imperfect, explanation for why I won’t voluntarily don a wingsuit, and sprint from a sheer, rocky cliff, arms and fingers extended, with experimental clothing and air pressure differential as my only means to support a safe descent: I can’t tolerate the risk. And, for sure, I lack capacity to deal with a failed outcome.

Risk tolerance is a mushy concept. It’s hard to quantify, and difficult to explain. I’ll just say that risk tolerance relates to feelings and attitudes about uncertainty in the context of attaining a goal. Besides, I’ve promised to keep this article short, and Sigmund Freud, I’m not.

What I do know is that for wingsuit flying, the possible outcomes are binary. I can either live to talk about a thrilling experience that few others have the viscera to try, or through an unfortunate landing, I can become sustenance for coyotes and vultures. My thoughtful decision: nein! Here, my risk tolerance relegates me to watching someone else fly, while I’m solidly plunked in a folding chair, eighty feet from the precipice, cold IPA in hand, faithful hound at my side. I’m OK with that. I can still get an adrenaline rush without needing to be asked whether I have updated and signed my will.

I’ll leave risk tolerance to be dissected in touchy-feely psychology journals. But risk capacity? – well, that’s quantifiable, and it fits nicely in my wheelhouse. Give me a number, and straightaway, I’ll crunch it into a ratio or performance indicator. In business, I can’t easily gauge risk tolerance, but I can certainly calculate whether people or companies have the assets and cash flow to sustain a failed outcome.

“Hey, y’all! Watch this!” I can spot versions of this bravado from a mile away. For example, “One year after its inception, IMSWorkX Inc. expects to grow 300 percent in 2014 because of a key personnel addition and recently introduced production.” A feat that requires spunk, and boundless hope. The company’s president, Shannon Chevier, added, “We started off with a little bit of an installed base, but we’ve increased that dramatically this year and we have huge plans for the coming year.” In this vicinity, I expected her to mention customer and future demand. But no. I had to settle for installed base. Hopeidity. We need this word.

Customers create revenue. So executing huge revenue plans requires more than making tangential references to them. It also requires financial muscle to cover the risk of failure. Something that can’t be assumed, as Richard Harris, CEO of AddThis explained at the Mid-Atlantic Venture Association’s June, 2015 TechBuzz event in Virginia. Harris described a company he worked with which had an operating plan that “relied on one big deal” closing. Hail, Mary! “And what if that doesn’t happen?” Harris asked the company’s senior executive. “We run out of cash at the end of the year.” At least the executive was honest, and didn’t waste time dancing around the answer. The company lost the deal, and suffered a hard landing. High Risk Tolerance with Low Capacity for Failure. This story needs a shorter, less-jargoned title. How about, Hey y’all! Watch This!

Massive layoffs and bankruptcies. These are conspicuous artifacts of incongruity between risk tolerance and risk capacity. Yet, companies often ignore the canary in the coal mine: repeated revenue shortfalls. Which underscores why CXO’s need to soil their A. Testoni shoes, and wade into the sales weeds.

When I asked a related question on several LinkedIn forums recently (“Does your company’s CFO provide input, governance, or guidance over sales lead qualification?”), I received one lonely response: “Please clarify why a CFO would need to provide input, governance, or guidance over sales lead qualification. Do they have any experience in any of those fields?”

Had I substituted the F in CFO for an M, my inbox would have been inundated with adamant opinion and pointed advice. Serendipitously, the solitary answer I received illuminated an important concern: few recognize the connection between financial planning and selling risks.

In fact, the two are intertwined. In 2010, an in-house blog for Rubicon Project, Inc. stated that the company “generates over $100 million in revenue annually” through advertising volume. Beneath the headline MAKING IT RAIN, the company forecast that revenue would “grow to $200 million in 2011.” But in January, 2014, the company’s IPO prospectus “showed just $37.1 million in revenue for 2011 and a net loss of $15.4 million,” according to The Wall Street Journal (Tech Startups Play Numbers Game, June 10 2015). The company’s revenue “surged [in 2014] to $125.3 million, but that was still far below the $200 million number announced by Rubicon in 2010. Rubicon had a net loss of $18.7 million last year.” “Hey y’all! Watch This!” This revenue estimate collided with a rock.

Such disparities create shock and awe. Rubicon Project missed its revenue goal by 82% – an epic planning failure. But I’m not surprised. Marketing and sales executives hoard many crucial decisions that influence revenue risk: How to qualify leads, which pipeline multiplier to use, how much revenue to sell through channel partners, how to guide social media conversations, which sales process to use, how to develop and train the sales force. When shortfalls hit the fan, CXO’s scratch their heads, wondering why so many of their spreadsheet cells are populated with red numbers.

Decisions about how to achieve profits, market share, revenue growth, customer loyalty, and high shareholder returns are rarely compatible. Nor are personal attitudes about risk, which vary from “hey y’all watch this!” to “no freaking way!” So companies must establish a risk appetite framework for revenue operations that guides the nature, types, and levels of risk that the organization is willing to assume. That gives decision makers guidance for discriminating between which risks to accept, and which to reject.

The Wall Street Journal describes a risk appetite framework as “a structured approach to governance, management, measurement, monitoring and control of risk.” (The Benefits of Implementing a Risk Appetite Framework). There are three tiers – risk capacity, risk appetite, and risk limits – represented as an inverted triangle, with risk capacity at the top and risk limits at the bottom. The inferences are clear: a company’s risk appetite should never exceed its capacity to absorb failure. And its self-imposed limits shouldn’t exceed its appetite.

According to the article,

Risk capacity: management’s assessment of the maximum amount of risk that the firm can assume, given factors such as its capital base, liquidity, borrowing capacity and regulatory standing.

Risk appetite: the level and type of risk a firm is able and willing to assume in its exposures and business activities, given its business objectives and obligations to stakeholders.

Risk limits: amounts of acceptable risk—measures and thresholds—related to specific risks, or to specific departments or processes.

Evidence of a company’s risk appetite is found in its culture. Some companies instill a culture of knock-kneed fear. They perennially take cautious baby steps with new initiatives, and flagrantly penalize employees for failing. Others have high risk appetite, encouraging employees to try things that have uncertain outcomes. Most are utterly inconsistent. One company I worked for had a policy of putting any salesperson who made less than 85% of goal on a Performance Improvement Plan (read: in three months, you will be fired). Meanwhile, executives in other departments kept their jobs as they speculatively tinkered with products and programs, and squandered millions of dollars.

In Defining Your Appetite for Risk (Corporate Risk Canada, Spring 2012), Rob Quail provides a low-to-high scale for risk appetite – averse, minimalist, cautious, flexible, and open. Companies can adopt these levels enterprise-wide, departmentally, or for a specific process. The point is, establish a policy. Don’t leave risk acceptance to personal whim.

Quail shares four questions for determining appetite:

1) What is the organization’s overall philosophy toward the achievement of the [revenue] objective?
2) How much uncertainty or volatility is acceptable?
3) When faced with choices, how willing is the organization to select something that puts the objective at risk?
4) How willing is the company to trade off achieving this objective for other objectives?

Richard Barfield of PriceWaterhouseCoopers outlines three measures for risk in an article, Risk Appetite – How Hungry Are You?

Quantitative measures. Companies must connect business plans to risk measurement processes. For example, “appetite for earnings volatility.” These “describe the type and [quantity] of risk the business wants to and is willing to take.”

Qualitative measures. “Recognize that not all risk is measurable but can affect business performance. For example, appetite for business activities outside core competencies.”

Zero tolerance risks: A subset of qualitative measures. Identify the categories of risk to eliminate. For example, regulatory non-compliance or ethics violations.

Keys for success.

1. Risk appetite must support present and future strategy. A company that accepts too little risk will fail as surely as one that accepts too much.

2. To ensure that the right revenue risks are accepted, senior management must be involved in the decisions that are considered most consequential to achieving plan.

3. Risk appetite statements must include clear guidance for discriminating between acceptable and unacceptable risk.

I haven’t met any successful business developers who don’t enjoy an occasional shot of adrenaline. The pang of excitement that comes from the opportunity to master uncertainty. “Hey y’all, watch this!” I’m with you! But please, if you’re wingsuit flying with your revenue plan, get everyone at your company aboard, and make sure you can absorb a hard landing.

This article was part of Navigating Revenue Uncertainty, featured on CustomerThink. To view the original article, please click here.

My Favorite Biz Dev Tactic is Dead. Should I Be Grateful?

BANT is dead. Various coroners have made the pronouncement 9,250 times, if I’m to believe what my search results tell me.

OK, OK – facts don’t lie. Even though BANT still makes sense, it’s not perfectly healthy. So I accept the conclusion. But, something’s nagging me. If BANT is really dead – and by that I mean dead-dead, and not kind-of-dead or mostly dead – why do bloggers keep reminding us of its demise? It seems like I’ve been reading BANT’s obituary since before 1998, and the evidence cited is always emphatic. C’mon! Do strategies and tactics actually die? Cease to exist? I know it’s Halloween, but if you’re finding these mortal references overplayed, you’ve probably found the problem: it’s presumptuous to proclaim the permanent end of something while it’s still in use. Maybe we should step out of graveyard!

Here are some other prominent obits I’ve read:

Recruiting is Dead. That recently fluttered through my email inbox, and it wasn’t an apparition. I’m sure of it. Really. I’m sure.

And, what’s this? SEO is Dead? OK. That seems reasonable. After all, on a technological timeline, it’s considered ancient. Still, I was surprised to learn it. Until a few days ago, I never knew it was receiving palliative care.

Alas, Content Marketing is Dead, too, I recently learned. Pity. It was so young. Not sure what happened there. Computer virus, maybe.

Cold calling is dead / the sales funnel is dead / the hunter-farmer sales model is dead / door to door selling is dead / transactional selling is dead.

Stop, already! Ebola is scary enough! Besides, I don’t know of one strategy or tactic on this list suffering from a flat line heartbeat. In fact, just yesterday, my phone rang, and a telemarketer from a company I’ve never heard of was on the other end of the line. Hmmmm. There’s still some breath left in cold calling.

Not dead yet! Monty Python would be proud, but I’m not sure whether to be disappointed, or grateful.

What Makes a Highly-Effective Sales Culture? A Tiger Mom Might Have the Answer.

On Sunday, the Oscars awarded The Wolf of Wall Street nada. Bupkus. A big goose egg. Too bad there wasn’t a category for Best Movie about Selling. It might have won the honor.

The Wolf of Wall Street reveals two important realities about how sales organizations operate: “You can’t build a culture in a comfort zone, and there is a dark side in the drive to be first,” as Cliff Oxford wrote in The New York Times. The movie brilliantly executes a believable drama based on a true story. Take a group of egotistical people, and feed them a motivational diet rich in high-octane hype. Focus them on a single goal—make money, and subtract morality. The audience knows from the get-go the incendiary mix will create a bad ending. “I may be going to hell in a bucket, but at least I’m enjoying the ride,” as the song goes.

It’s not hard to identify what makes the sales culture in The Wolf of Wall Street highly dysfunctional. But figuring out what makes a culture highly effective proves much more challenging. The answer comes not from a heavy-hitting, quota-busting Sales VP, but from a formidable parental authority—Amy Chua,Tiger Mom.

Chua and her husband Jed Rubenfeld are in the news after publishing a controversial book, The Triple Package: How Three Unlikely Traits Explain the Rise and Fall of Cultural Groups in America. In the book, the authors express their views about what enables certain cultures to achieve disproportionately higher success compared to other cultures. “The reality, uncomfortable as it may be to talk about, is that some religious, ethnic and national-origin groups are starkly more successful than others,” they write. The authors highlight three distinguishing values:

1. Superiority complex—a deep, abiding belief in their exceptionality.

2. Insecurity—a feeling that whatever you’ve done isn’t good enough.

3. Impulse control—based on a sense of awareness, future-thinking, and common sense.

We can save for another day a spirited discussion about the validity of these insights, and their ramifications for society. But in my experience, these same elements are consistently present among the best sales organizations. The best have embedded a firm belief not only in the great power of their products and services, but in their organization, too. The best have ingrained an ambient insecurity that fosters urgency—an “us against the world” attitude. And the best refrain from knee-jerk impulses by placing high value on methodical strategies and disciplined action.

But these three don’t complete the picture when explaining what makes sales cultures effective and successful. We’re missing ethics, particularly noteworthy because its absence lies at the root of a growing problem. As The Economist reported this week in an article, The Enemy Within, a Kroll study found that 70% of the companies it surveyed were affected by internal fraud in 2013, up from 61% in 2012.

While the Kroll study reported on all cases of corporate fraud, the issue has always had a strong presence in selling cultures as well. As I shared in a recent blog, Announcing the Winners of the 2013 Sales Ethics Hall of Shame, when corporate leaders lose sight of the right thing to do, confidence and trust are damaged immeasurably. Few business risks are more corrosive to culture than bad ethics.

Which of these four elements was present in the The Wolf of Wall Street sales culture? Superiority—check! Insecurity—for a while, check! Impulse control—no! And ethics—emphatically, no! Had the latter two not been utterly smothered, The Wolf of Wall Street, too, could have had a highly effective sales culture. But few would want to make a movie about it, and even fewer would be interested in seeing it.

Will The Caveman Principle Save Face-to-Face Selling?

Disruption and upheaval are hot topics in business these days, and if you believe the marketing hype, we just can’t get enough. With so much conversation about the “accelerating pace of change,” I began to wonder about the veracity.  “Pace of change” seems so hard to measure. That’s what led me to The Caveman Principle. Turns out, things are not exactly what they seem. For about 1,000 centuries, we humans have been pretty set in our ways.

“Our wants, dreams, personalities, and desires have probably not changed much in 100,000 years. We probably still think like our caveman ancestors,” writes physicist Michio Kaku, author of an upcoming book, The Future of the Mind. “The point is: whenever there is a conflict between modern technology and the desires of our primitive ancestors, these primitive desires win each time. That’s the Cave Man [or Cave Woman] Principle.”

If you’re placing your strategic bets on face-to-face selling excellence, this is where things get interesting. “By watching people up close, we feel a common bond and can also read their subtle body language to find out what thoughts are racing through their heads. This is because our apelike ancestors, many thousands of years before they developed speech, used body language almost exclusively to convey their thoughts and emotions,” Kaku says.

Lately, it seems, people have walked upright all over his idea. Analytics and marketing automation dominate business development mindshare, and with good reason: knowledge workers are starved for insight, and automation is “repeatable and scalable.” “Do more with less!” Who could argue? The question remains: are analytics and automation empowering for people-to-people connectedness, or numbing, like a shot of novocaine? The answer, I believe, is “yes.” They’re both.

The Caveman Principle is important because it exposes gnawing questions that have gotten buried under sedimentary layers of hype:

1. Are there limits for how much cognitive separation can exist between buyers and sellers before relationships become ineffective or dysfunctional? If so, what are the boundaries?

2. Can remote measurement alone adequately explain or predict buyer behavior?

3. Are auto-analytics sufficient for monitoring sales effectiveness and productivity?

4. If The Caveman Principle is true, can vendors capitalize on revenue opportunities by providing more (and better) face-to-face, or “high-touch” buying experiences?

5. If face-to-face interactions between buyers and sellers hold crucial importance, what information about them needs to be captured, collected, and shared, and how can that be accomplished?

Right now, I don’t have the answers to these questions (though I’m working on it). But I do know that in the rush toward marketing automation, a wedge has been inadvertently driven between vendors and customers. Emblematic of the divide is that along the way, practitioners coined the blandified and faceless term, “user experience.” And some industries have given up the long-shriveled, vestigial “personal” part of “personal selling.” Some of this was inevitable. In my early sales career, “customer self-service” did not exist outside of retail. In 1980, the term “empowered buyer” meant negotiating leverage. Today, that term carries a far more expansive connotation.

The Caveman Principle means that for vendors, there is potential durable competitive advantage for “being there” with customers. For that reason, face-to-face selling won’t likely vanish. Sure, shifting information power from sellers to buyers—and from buyers back to sellers—will continue to cause sea changes that create pressure within value chains, fostering new opportunities and risks. But as Kaku writes, “The lesson is that one medium never annihilates a previous one, but coexists with it. It is the mix and relationship among these media that constantly change.”

Your Cutting Edge Strategy Won’t Cut It in 2012

Originally published 12/03/07

Which of these definitions comports with your beliefs?

“Salesmanship is a battle of organized knowledge against unorganized knowledge or ignorance.”

or

“Salesmanship is the ability to make a mutually profitable exchange of values.”

In fact, both definitions appear in a book first published almost 100 years ago, Salesmanship and Business Efficiency by James Knox. The second definition is relevant, but the forces of social and technological change have rendered the first definition all but obsolete. Laws, theories, ideas and assumptions become stale at different rates. The force of social change is marked in another way: In 389 pages, the book includes no references to women.

By 2012, will familiar terms such as “cold calling,” “individual contributor” and “lead lists” mean anything to sales and marketing professionals? Will “word-of-mouth marketing,” “collaborative teams” and “integrated marketing databases” be our buzzwords?

Based on interviews with industry experts and scholars, here is what I predict will happen demographically, financially and technologically to the world of buying and selling.

Trend 1: Retirement of the early baby-boom generation

The cascading retirement of the baby boomers, whose most senior members will be 67 in 2012, has significant implications for selling, including how to transfer knowledge and how to staff future sales organizations. Because much of sales knowledge is tacit, organizations will need first to define knowledge and then systematically capture and share it, or the knowledge will leave the enterprise along with the worker. The exodus will create a dearth of highly experienced sales professionals—at least initially.

At the same time, new entrants to the workforce in 2012 will change the culture of buying and selling. Those individuals, born in 1994 and after, will bring technical competencies that the retiring generation learned only recently, or never at all. The new generation of workers is growing up in a digital culture and comfortable in an environment of near-ubiquitous and instantaneous mobile communications, information and video. Today organizations encounter challenges because younger workers may have developed skills on new software that employers haven’t yet adopted. This skills imbalance will alter one change-management paradigm: Many organizations will be required to update their technology and processes to accommodate their incoming workforce, not the other way around.

Trend 2: Growing use of product virtualization

Ten years ago, the prevailing wisdom was that meeting face to face and satisfying the visceral need to “get the product into the hands of the customer” were correlated with successful sales outcomes. But the trend for product virtualization, a visual representation of something that emulates its physical properties, is very much driven by the financial needs of business and is not just a fad made possible through technology. That’s because virtualization creates an emotional connection with a product and can generate demand before physical products are available.

That early demand enables many companies to profit from the cash-before-delivery outcome that Dell famously unleashed. Second Life, a web site known for virtualization, has promoted this capability to manufacturers from Adidas to Mazda. Through avatars—representing individuals in Second Life’s virtual world—Mazda made it possible for anyone to test drive its Hakaze concept car, even though only one physical model existed. Once the virtual drivers demonstrated an appropriate level of online handling mastery, they could keep the virtual concept car and re-use it in subsequent activities on Second Life. By the time the first Hazkazes reach the dealerships, the benefits for Mazda’s financial strategy will be huge: reduced time to financial break-even, increased demand, lower supply chain costs and improved forecast accuracy.

Trend 3: Increased predictive insight into customer behavior

Exploring ways to more accurately identify and reach valuable prospective customers will continue, even in the face of privacy concerns and regulation. Why? Investor-backed companies require lower selling risk and more productive demand generation for improved cash flow and rapid business growth. These financial imperatives are unlikely to diminish.

Companies will convert from low-productivity marketing activities, like mass mailings and telemarketing to broad markets (derisively called “smiling and dialing”), to tools providing unprecedented sophistication in targeting and reaching the most likely buyers. Average sales cycles will shorten into timeframes once thought anomalies, and results from measurements such as close ratio (the number of prospects completing a purchase transaction divided by the total number of prospects contacted) will improve dramatically. What underpins this capability is a combination of improved predictive analytics and what Stefano Grazioli of the University of Virginia’s McIntire School of Commerce calls the growing use of the universal identifier. (Think of it as a large digital bucket that can collect lots of information about a person.) This powerful combination makes it possible to derive meaning from a rich trove of artifacts about an individual from disparate databases containing his or her personal information. Consider the predictive accuracy regarding a person’s lifestyle and buying habits when data from his grocery purchases, warranty card registrations and motor vehicle records are combined versus just looking at grocery-buying habits.

The wave is already forming. The Wall Street Journal reported in October 2007 that a company called Acxiom has a database of 133 million U.S. households divided “into 70 demographic and lifestyle clusters.” Two married women who are next-door neighbors can visit the same financial services web site at the same time and see two different ads. Differing lifestyle-related content will follow these individuals as they visit other sites, and software services to support immediate purchases will accompany the ads.

How will today’s strategies evolve in light of the forces that are changing our culture and world? In Part 2, I’ll look at how social networking, environmental responsibility and the redistribution of information power will redefine sales.

© Contrary Domino 2013-2016.
Website development by Crisp Point.