Monday, December 15, 2014

Coverage Models for Marketing & Sales


“Make sales, not calls,” urged IBM’s Thomas Watson in 1933. “Calls which do not result in sales or in developing the prospect for future business are not productive and a waste of time.”
More than eighty years later, much of the effort invested today in sales and marketing remains of dubious quality. Companies tend to lack the discipline to allocate their precious resources properly. This impacts their ability to actually generate demand now and in the future.

When I look into the performance of a company, I always start with the effectiveness of the growth strategy and the associated alignment of marketing and sales resources to that strategy.
The two most common symptoms of stalled growth are:

1)    Misaligned marketing spend. The ratios of marketing people to marketing programs aren’t optimized around the ultimate goal of generating sales-ready leads. Resources are spread around with the hope that something sticks.

2)    Overly-complex coverage models. An effective coverage model needs to be deliberate about who should be hunting and where. Roles, compensation, and decision rights all need to be aligned to the overarching coverage strategy.

You would think that the allocation and measured returns on both marketing spend and sales coverage would garner some pretty significant focus and attention; in many cases, you’d be wrong.
It’s simply not sufficient to hire talented sales and marketing talent. Companies also must restructure their coverage model, which means defining and synchronizing sales roles differently. For example, you need to make explicit decisions around organizational roles, measures of performance, compensation structures, decision processes, and relative priorities.

Few metrics, few results
One of the more common situations I encounter is benign neglect of the measurement and refinement processes for these investments.  Account managers often get comfortable serving their customers. Hunters searching for new clients can tend to wander off the strategic roadmap and chase opportunities that are really not part of the plan.

Sadly, sometimes success can mask these problems.  A few years ago, a company was celebrating great sales performance, only to learn that the hunters were deviating from the prescribed playbook of offerings, and signing contracts for solutions that lacked conformance to the strategy. As a result, the quality of service delivered varied greatly and the profitability of the business suffered greatly.  Sales reps were paid for closing business that was, ultimately, deemed of bad quality.
At one firm, the preponderance of spend on account managers went to people who overtly denied that they were part of the sales community. In fact, these people tended to see themselves as protecting their clients from the sales activities of their own company.  Cross-selling services stalled because the gate-guards didn’t understand the nature of adjacent offerings. 

In the past, when companies had a series of individual product lines, their sales model could thrive as long as they had the right account coverage with a crisp pitch on features and functionality. Today, what’s required is assembling the right team of experts with relevant solution knowledge at the right time in the sales cycle. This means that coverage is a team sport, with great collaboration among the participants.
Remember that the marketing organization is part of the coverage team.  Resources spent on marketing programs need to be geared specifically around enabling sales. It is curious to me how often companies lack a closed-loop measurement process for marketing spend. In this age of measuring everything, you’d think that the marketing profession would embrace the opportunity to show return for their expertise.  Too often, I find that there is ignorance on the return for marketing expense.

Frame all of this by the fact that enterprise buyers are more sophisticated than ever before.  They are equipped with a plethora of new tools and resources to do their homework in advance of the first direct encounter with prospective providers. Services are bought these days more often than they are sold.  Most good sales people will tell you that they are dealing with prospects that have much greater awareness today than ever before. It’s rare that a sale is closed without the client conducting five or six separate tests of the merits of the purchase – all via social channels.
Complexity in today’s sales process is unavoidable.  Yet, poorly managed complexity can erode customer confidence. The key to success is to coordinate well your specialist roles.

When I get invited to look through the performance of a company, I always start with the coverage model for both marketing and sales investments.  At many large companies, these models have become more complex and less efficient, putting pressure on profit margins and placing drag on the growth engine.  Discipline and purposeful design are key to successful coverage models.

Peter Allen has many years of operating experience as a top executive of rapidly-growing multi-billion dollar companies and in assessing sales and marketing effectiveness. He is now a Boston-based Managing Director at Alvarez & Marsal.

Image: opensourceway/Flick

Monday, December 8, 2014

Jettison Your Legacy Investment ... or Not?

When should a legacy investment be written off in order to enable a new capability?

If you’re asking this question, you are motivated by threats and/or opportunities that cause you to suspect that new options will be better than the status quo. You may be exploring ways to fundamentally change how you organize, operate, and source a business service.

Perhaps your legacy is a service provider relationship.  Perhaps it takes the form of a technology platform.  Maybe it's an organization/operating facility.  Often, it's all of the above.

I had the personal experience recently to drive the retirement of a functional CRM platform in favor of a competing alternative that conformed more directly to the principles of an “As a Service” operating model.

The CEO expected material improvement in sales effectiveness; the CFO swallowed hard. We decided to spend more as a means of achieving a step change in business performance.

In today’s complex organizations, most decisions favor the status quo: do nothing or stay the course.

The Queen is the story of England's Queen Elizabeth II as she and her family dealt with the death of the former Princess Diana on August 31, 1997, and for the next several days thereafter. It also depicts how we all tend to cling to the past and resist change when new circumstances seem to dictate that a different direction is warranted.

It is easy to condemn the inactions of the monarch. As Tony Blair states in the movie, "How do we save her from herself?" But the Queen's actions are a microcosm of the reaction of many of us when faced with events that would seem to demand a change in the status quo.

I have used this sort of criteria to help companies think through the legacy-vs-new tradeoffs:

1)    Time: Have you allowed yourself enough runway to launch the new capability, or is it already too late to change your fate?  Not many of us are skilled enough reclaim time that is lost.  Non-linear thinking about how to effect change is often required.

2)    Competitive Upside: Is there a material advantage earned over your current market position as a result of this change? I point to the HR Outsourcing market and the litany of failed technology deployments that almost submarined this segment. Today, many of the HRO providers jettisoned their proprietary platforms in favor of viable commercial alternatives; these providers are tending to be the winners.  Corollary: are you certain that you know who you’re competing against?

3)    Financial Dustbin: Do you know where you can park the financial overhang of yesterday’s decisions, and is that container able to hold the residue long enough? It’s a tough decision to swallow, and one that needs to be shared among many, but it’s necessary. For example, can you use balance sheet actions or staff redundancies to cover the costs? 

4)    Fit for Purpose: The allure of a shiny new capability can sometimes obscure the tangential and related implications of factors such as trading partners, skilled staff, regulatory reporting, channels to market, and the like.  Have you worked through the details on all aspects of what the “new world” operations will entail?

5)    Transition to Win: At the risk of generalizing, I believe that such moves from “old” to “new” are best affected quickly. Tendencies to implement in phases, run operations in parallel, and minimize risk … often carry greater costs, stretch the skill base, and erode the perceived commitment.  Are you adequately loosening the constraints to innovation that often strangle such challenges to the status quo?

So, whether the desire is motivated by a fear of losing or the opportunity to dominate … making a decision to retire a legacy way of doing business in favor of a disruptive new approach is a big bet. These bets are being made more often now than at almost any time in our history. Executives are less interested in “how we got here” than they are in “how we will reinvent ourselves to win in the economy ahead.”

Peter Allen is a Boston-based Managing Director at Alvarez & Marsal.

Image: Bev Goodwin/Flickr

Wednesday, December 3, 2014

3 Dirty Words You Should No Longer Use About Outsourcing

Outsourcing and Shared Services operations are shifting towards “As-a-Service” models of delivery. As this happens, three words have become inappropriate, although they previously enjoyed proud status in the vernacular of the industry:

1)     Labor – the industry formerly prided itself on the ability to hire, train, deploy, and develop vast armies of practitioners, but the “human capital” component of the services proposition is fading fast.  Sure, there remains a need for smart and committed people behind the curtains of the industry, but the metrics of value no longer pivot around headcount, “fresher” hires, retention rates, and the like. 

2)     Transactional – this term commonly referred to the processing of standardized, volume-based units of work.  Today, it connotes lower-order, analytic-light, rote tasks. Industry players today focus on continuously learning from the processing of work, and improving as a result of self-monitored, self-measured analytics.

3)     Legacy – a particular favorite of mine, this term framed the scope of many outsourcing arrangements: the provider maintained the legacy environment in a more cost-effective manner.  Today, legacies are being retired in favor of more contemporary alternatives. Companies are expressing their spend in terms of “legacy maintenance” versus “operational transformation”… and holding themselves to challenges of rapid reduction in the legacy side of the ledger.

I believe it was Phil Fersht, President and CEO of HfS Research, who brought up these terms at a recent conference his firm organizes, HfS Blueprint Sessions. This is a fascinating event that brings together enterprise buy-side operations leaders with prominent thinkers and operators from the service provider and advisory world.

During the event, I tried to count the number of times the word “automation” was used, but quickly got overwhelmed. You would have thought this was a manufacturing robotics event, not a conference around the use of third-party service models for back-office support. 

The outsourcing industry and its cousin, the Shared Services industry, are embracing automation and robotics as an alternative to labor-based solutions. The service models of the future include a high degree of intelligence and embedded data-driven analytics.

Gone are the days of impressing the market on the basis of numbers of employees and the ability to mobilize those armies. Similarly, gone is the celebration of repetitive tasks defined through how things worked in yesteryear. More than ever, technology’s role in reinventing business processes, and continuous monitoring/improvement, is profound and this will become the standard by which the players will be measured. You aren’t a winner unless you are enabling the “new world” of business operations, and cleaning up your language.
Peter Allen is a Boston-based Managing Director at Alvarez & Marsal.

Wednesday, October 15, 2014

Stabilizing the Power Pendulum

I was privileged this week to spend a few days with several hundred practitioners in the art of commercial contracting.  The IACCM Annual Americas Forum held in Chicago drew participation from hundreds of companies around the world that are committed to innovation and improvement in contracting process, practices, and skills.

I’ve attended several of the IACCM events over the past 15 years – a testament to the commitment and persistence of the IACCM leadership, notably CEO Tim Cummins.  This year’s conference demonstrated the power of collaboration among the professionals who are committed to improving the quality of Buyer-Supplier relationships.
IACCM (International Association for Contract & Commercial Management) is a unique not-for-profit organization that is committed to improving the quality of commercial contracting.  In this day and age of changing forms of contracting, their mission is more important than ever.

I co-presented a session today focused on the techniques used buy procurement organizations and sales professionals to create new sources of value through collaboration.  Jim Bergman of IACCM joined me in this presentation.  We shared our experiences around techniques to move from transactional buying to shared risk, shared investment, and collaborative innovation. 
While collaborative buyer-supplier relationships are clearly not an everyday occurrence, we observed that certain conditions are essential if the parties share a desire to move beyond a commodity transaction.  These include:

·         Foundation of delivery on core commitments and trust
      ·         Transparency and candor
      ·         Shared risk, shared investment
      ·         Strong contractual documentation

Each of us drew upon our experiences on the buy-side and sell-side of commercial contracting.  In particular, I described the shift among enterprises from requirements-driven to offering-derived contracting.  In a world of “as a service” subscriptions, contracting strategies are increasingly informed by the availability of market-defined offerings. It was a fun session that we named “Stabilizing the Power Pendulum”.
We were followed by an enlightening example of the importance of the IACCM mission.  Dr. John Henke of Oakland University and Planning Perspectives shared the results of his research into the bottom-line contribution attributable to strong and positive supplier relationships, with emphasis on the automotive industry.  It was a compelling example of how strong supplier relationships convert to improved profitability.
It was invigorating to be among so many people who are committed to creating value for their firms through techniques of progressive contracting in a changing world.



Tuesday, October 7, 2014

Build versus Subscribe in a Platform World

Among the many attributes that are different in the world of running a business as a platform, one factor gets brought to the table with increasing frequency:  what’s our new investment framework for proprietary capabilities?
Think about it. The Build-versus-Subscribe decision for a business’ operating capabilities previously led to the creation and nurturing of large organizations of technical and business staff to conceive and implement new functions.  I remember one global bank during the Y2K “event” which cataloged its applications and concluded that over 80% of its operating capability was built in-house. This was a common profile.
The coin is flipping.  Most companies cannot afford to maintain large internal, dedicated staff to develop proprietary capabilities.  Further, they know that innovation comes from a “built for purpose” mindset, and that’s a characteristic of organizations that are serving markets, not unique situations. 

Companies are re-defining the decision criteria for investments in proprietary functionality.  Build-versus-Subscribe requires much more foresight than ever before.  I particularly like the vision of one forward-thinking client who uses a nice taxonomy of future-state traits to help inform the decision making around what his company needs to build for itself versus subscribe to a service.
The criteria for investing in the building of applications functionality centers on five fore questions:

ü  There is an absence of this capability available in the market.  Specifically, is there truly no Service available to which we can subscribe to achieve the functionality we need?

ü  The capability provides distinct competitive differentiation.  If not, then the functionality is common to others and we can gain access to it without carrying the burden of full ownership. We may need to prompt the creation of a market offering, but we don’t need to build the capability for ourselves.

ü  A proprietary capability will be distinguishing for our company over the next N years.  The time horizon varies by business circumstance, but this question forces a consideration of the time and cost to develop functionality in a market of fast-paced innovation. Absence of a market capability today might warrant some form of investment that is external rather than to build for oneself.

ü  The characteristics of the “ecosystem” are aligned with our business strategy.  This recognizes that no business functionality operates in isolation and that dependencies surround virtually every technology-enabled business process – whether built or bought/subscribed. If the source of a capability introduces undue risks or conflicts with the architecture or operating principles of the organization, this may be a significant factor in the decision.

ü  We have the opportunity to monetize our investment at a future date.  This is a speculative question, but one which is becoming more common as companies look to commercialize their innovations in a world of apps-on-demand.  In the past, investments in building application functionality used to be considered the cost of doing business.  Now, those spends are considered opportunities to generate returns more directly than just via improved business performance.
The implications of this move towards subscription over proprietary building of applications are many.  One of the most profound is around the talent required within the enterprise.  I think we will see the skills associated with integration, dev/ops, and risk management take a more prominent place in the organization of the future.  Core development skills will shift with greater pace to the service industry.



Wednesday, September 24, 2014

Big Bets on Platforms

Big news this week on two fronts.  Call me biased, but I see further proof that the future is a world of platforms.

SAP buying Concur is a move that many Shared Services and F&A executives will notice with great interest.  Concur is a clear fast-mover in the world of travel and expense management.  SAP continues to demonstrate that they understand the shifting winds in back-office process management and next-generation ERP, and are determined to reinvent themselves around cloud-based platforms. 

The second notable deal was an industry move.  Cognizant’s buy of Trizetto is well-documented by my friend Phil Fersht on his blog at Horses for Sources.  I won’t repeat any of his fine reporting.  I can tell you this this move is reflective of a well-defined strategy of CEO Frank d’Souza’s to bring relevant platforms of business processing services to the industry segments that Cognizant values most.  I don’t think that Cognizant will stop with Healthcare.  This company understands that the future of business services is platforms.

In both cases, a prominent rationale for the acquisitions was the ambition to achieve leadership in the Business Process as a Service (BPaaS) market.  One for “horizontal” services (travel and expense) and one for “vertical” services (healthcare).  These aren’t the first such moves, but they are both noteworthy for the scale of the moves by ambitious market leaders.

As one considers these moves, I find that the work of my colleague John Rossman in his recent book The Amazon Way offers a great framework for how these business combinations will need to operate in the new world:

John discusses four groups of capabilities that help define a platform company.  Few, if any, companies will embody 100% of these attributes but I suspect that SAP and Cognizant will do their utmost to embrace them.

1)     Business Model:  A platform company will generally have the following business model characteristics:

·         Large Fixed Cost/Significant up-front investments

·         Small marginal costs. Decreasing marginal costs with additional usage

·         Network effects

·         Continuous revenue stream  (subscription based, typically transient customers, low barrier to usage and access)

2)     Operational Attributes:

·         SLAs are well-defined, granular, secure, have good privacy controls

·         Business Continuity – 100% service availability

·         Instrumentation is a core competency – measure and monitor everything.  The capabilities and data are appropriately exposed to partners and clients.

·         Service Analytics – ability to implement efficient feedback loops. Transparency is key.

·         Multi-tenant – Should be able to add substantial amounts of clients, brands or “eco system” partners without modification, separate infrastructure or new “instances”. Shared infrastructure requires the proper placement of governance, data management or public policies to minimize conflict and disruption on the common infrastructure.

·         Zero-provisioned – Adding a partner or client has not cost due the self-service nature of the platform.  External entities should be able to sign up to use capabilities without your assistance

3)     Ecosystem:  A platform company not only enables, but also facilitates other businesses use of their platform.

·         External Innovation – Other enterprises innovate on the platform without anyone in the platform organization needing to know about it.  No gatekeepers!

·         Natural Synergies – A platform business created both intentional and unintentional synergies that increase the value and traction of the platform with each additional partner.  (p. 148)

·         Unplanned customers and innovation -  Successful platforms create both the environment and the tools (such as APIs) which make it easy for customers and partners to use and innovate without direct Client involvement.

4)     Critical Capabilities:

·         APIs and Bulk Operations: Clearly defined “sockets” or interfaces through which others interact with the platform are often hardened APIs. 

·         Analytics:  Should provide robust and deep analytics.

·         Self-Service:  Clientele should be able to graduate from “discovery to operating” without ever talking to someone at the platform business.

·         By-the-Sip pricing:    Service should enable traditionally fixed capital and operating expenses to be transformed to flexible and variable expensed costs.  The ability to quickly scale, both up AND down is key to the model

·         Compliance Capability “As a Service” – Platform businesses provide clients with an unusually high control and assurance for meeting and supporting compliance, as well as audit and tax management. Governance and compliance are facilitated by the platform’s inherent metrics and instrumentation.

·         Data and Content steward ship:  a platform should provide clearly expressed and easily managed policies and assurances on data protection, reconciliation, and delete rights.

·         Change Enabler – Data models, configuration, archiving and key capabilities are designed to accommodate and manage change.

It’s striking to me how the topic of “platforms” is increasingly common in the strategies of companies across all industries and of all states of maturity.  This isn’t just a topic for start-ups.  In fact, one executive recently said to me:  “We’re either going to BE a platform, or be a subscriber to the platforms of others.”  To which I replied, “the most likely outcome is both.”



Tuesday, September 2, 2014

Reality Check

Will today’s outsourcing service providers successfully make the leap in the “As a Service” economy?
Recently, the CIO and CFO of a mid-sized manufacturer asked me about the likelihood that their incumbent outsourcing services providers would be considered “top quartile” in the “as a service” marketplace. 

With a few years remaining on their existing contracts, these executives were wondering about the instructions to give to the Supply Chain organization for the future of these relationships.  Clearly, the market is moving to new levels of performance and different forms of contracting.  Conversations with the existing Services Providers all sounded good – commitments to “outcome based pricing” and to greater innovation through collaborative forums.
I suggested that there are five core questions that all Clients of today’s ITO/BPO service providers should be asking if they truly want to understand the degree of Services commitment those providers are positioning to offer.

1)     What is the Services Roadmap?  Like traditional product companies have ingrained in their DNA, the “As a Service” providers will have a committed roadmap of Services features and functionality, with a defined process for Client input and priorities. 

2)     Is Investment Committed?  While the actual funding levels may not be disclosed, your Services Provider should share the nature of the investment being made to enable the roadmap.  Investment is not pricing.  Investment is the “bet” being made by the Provider that it can serve enough of a market with its offerings to make a decent profit.

3)     What’s My Community?  If your company is the sole customer of a specific Service, it isn’t really a Service.  It’s a project.  Or, an experiment.  Or, a “best intentions” level of effort.  It isn’t a Service if there isn’t a market that is readily identifiable that are subscribers to the same utility.  Don’t expect innovation if you’re the only customer of such an offering – a market of one won’t justify the investment. 

4)     What will be Different?   It’s never too early to engage in the conversation about how the nature of the obligations will change as a relationship evolves to be more Services-based.  I’d expect the responsibilities around capital investment to shift.  I’d also expect to see “configurability” be used to describe the service relationship, not “customized”.  The Service Provider ought to be able to describe a new form of Services relationship that feels much more agile to the Client. 

5)     What’s the Transition Look Like?  It would be a disappointment if the conversation about the shift to a Services-based operating model was predicated by a contractual renewal.  In fact, if the discussions about the topics above aren’t happening now … it’s probably time to look at alternative Services options. 

These criteria apply to all forms of “As a Service” market offerings – from infrastructure (communications, computing, storage, etc.) through to Business Processes.  They form a good litmus test for use in your next Quarterly Review of the health of your outsourcing contract. 
A Provider that is excited for the “As a Service” market will readily engage in this conversation.  A Provider that thinks that outsourcing is the answer might only talk about “transactional pricing” and hope that the Client is satisfied.  Reality checks are happening with great regularity.


Monday, August 18, 2014

Time to Plan

A recent conversation with the EVP for Global Shared Services of a major CPG company went down an interesting line of reasoning that I thought worthy of sharing.  It’s all about the increased cycle-time for planning.
Like many large global companies, this one operates a Shared Services entity that comprises all of the common back-office functions.  Further, there is a fair amount of outsourcing being managed as part of the service strategy.  A sign of maturity, there are global process owners in place who carry responsibility for demand management and services architecture, through to service performance management. 

The outsourcing arrangements were constructed using then-current industry best practices and are yielding favorable cost performance.

With that backdrop, here are the top planning-related concerns that the EVP for Shared Services outlined for me:

1)     The original economic equation that supported outsourcing comprised broad scope of services to a small number of providers under long-term contracts; does this strategy still apply in a world of service-level arbitrage?  In other words, would we be better served by contracting with several providers for essentially identical functionality, and select between them on a much more frequent cycle?

2)     How early in advance of the expiration of my ERP license agreements should I develop the tradeoffs between renewal and migration to best-of-function SaaS platforms?  Are BPaaS options available as internally- or externally-sourced alternatives?  What sort of services integration strategy works best in this situation? 

3)     C-suite executives are looking for agility as the highest-priority commitment.  They need confidence in our ability to scale up and scale down in response to both marketplace trends and changes to our corporate structure (e.g., acquisitions and divestitures).  How do I gauge the agility of our shared services functions, and what form of planning model is considered best practice to accommodate such shifts?
4)     Should the shared services scope of operation reach forward to the middle- and front-office functions of the company by applying the lessons of back-office optimization? 

As we discussed each of those situations, one reality became increasingly obvious.  The planning cycle for the shared services organization needed to change dramatically.  As is common, this organization utilized an annual process for assessing business demands and service performance.  The EVP concluded that she needed a persistent tempo of service planning … a capability and a symbol of the shift towards a utility-oriented model of operation.
The implications of this form of planning – with forward-looking indicators driving decisions around such things as capital investments, services contracting, integration architectures, and so much more – were far-reaching.  In fact, one of the first steps to be taken was to engage Supply Chain leadership around the fact that “What we buy, from whom we buy, and how we buy all must change.”

That fact frames the opportunity and threat of the shift to an “As A Service” economy.