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.