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Sales Methodology Experts Guide to Sales Effectiveness

December 2003

This Sales Methodology Experts white paper discusses how increasing sales effectiveness can positively impact a companys growth strategy. After exploring the key components of a companys growth strategy, this paper outlines how increasing the capabilities of the sales organization can drive growth. It also provides a clear process for improving overall sales effectiveness, as well as a simple method for determining the impact of these improvements on a companys revenue.

W H I T E PA P E R

Table of Contents
The Growth Imperative

Figure 1: Strategy Components


Growth Strategy Components

1 1 2 2 4 4 4 4 4 5 5 5 5 6 7 7 8 8

Figure 2: Product/market expansion grid


Accelerating the Execution of the Growth Strategy

Figure 3: Reducing Risk Process Tools and Technology People


Developing the Sales Organization

M: Methodology S: Skills K: Knowledge E2: Effort and Environment


Understanding the Impact on the Growth Strategy (The Power of .1)

Figure 4: Sales Equation


Successfully Implementing Change

Figure 5: Six Stage Implementation Process

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The Growth Imperative


As companies emerge from the difficulties of the recent economic downturn, the challenge is to transition successfully from a survive strategy to a thrive strategy. Many companies are developing aggressive growth strategies designed to enable future employment, investment, and organizational opportunities. Studies have shown that strategy execution is the single most important non-financial factor valued by investors. The challenge not only lies in how to define the growth strategy, but more in how to energize the whole organization, particularly the sales organization, to execute the growth strategy. A useful way to consider the effectiveness of a growth strategy is to consider it from three perspectives: Has the growth strategy been clearly defined? Has it been communicated to the right audiences within the company? Is it being acted upon by the right people? To be effective, a growth strategy must meet these criteria and contain the following 3 components (See Figure 1): Market Strategy Product Strategy Channel Strategy

Market Strategy

WHERE

Growth Strategy

Product Strategy

WHAT

Exists / Defined Communicated Acted Upon


Figure 1: Strategy Components

Channel Strategy

HOW

SALES EFFECTIVENESS

W H I T E PA P E R

Growth Strategy Components


1. Definition of market segments the where of the growth strategy.

Geoffrey Moore, a prominent strategy consultant and author of best-selling business books including Crossing the Chasm, defines a market segment as a group of customers or prospects who have a common set of needs and who reference each other when making a buying decision. Companies are rapidly realizing that as global market conditions continue to improve, the time has come to clearly consider which market segments to pursue for future growth, and with which products. Professor Igor Ansoff, a prominent thinker in the field of strategic management, posited

a growth matrix that outlines the four fundamental market growth areas companies can pursue (See Figure 2): 1. Selling an existing product in an existing market Market Penetration 2. Selling an existing product in a new market Market Development 3. Selling a new product in an existing market Product Development 4. Selling a new product in a new market Diversification Each option has its own level of risk and reward. Only after careful analysis and planning can strategic thinkers identify the appropriate target market segments and begin to understand the implications on messaging and offering development.

NEW

2 MARKET DEVELOPMENT

4 DIVERSIFICATION

M ARK ETS

MARKET PENETRATION

3 PRODUCT DEVELOPMENT

CURRENT

P R ODUC TS

NEW

Figure 2: Product/market expansion grid (Source: Igor Ansoff)

SALES EFFECTIVENESS

2. Definition of product/service the what of the growth strategy

3. Definition of channel (coverage) strategy the how of the growth strategy

Associated with the selection of growth markets is the need to clearly define the products and capabilities that are compelling to target customers. By identifying segment needs, product development and product marketing professionals can determine what new products or modifications to existing products will fully address those needs. In this way, the company can provide superior products that establish a sustainable competitive differentiation. Product strategy development is an iterative process, and must be linked to the Market Strategy in order to be effective. Time considerations also come into play here; if a solution can not be developed within the time constraints (imposed by production schedules, competitors maneuvers, or political developments, for example), there may be a need to reconsider the original market segments.

A critical component of the growth strategy is determining the best way to cover the selected market segments and product sets. For example, does entry into a new segment or offering area require developing a new goto-market channel (such as telesales), or the deletion/modification of an existing one (such as reducing dependence on a live sales force)? Determining effective channel strategy is one of the most difficult aspects of strategy definition (and especially execution), since it frequently involves modifying the behaviors of a group that can often be resistant to change the sales organization. Again, the iterative nature of strategy development plays a role here it is often necessary to reconsider the target market and strategic product selection based on the availability of sales talent (sales professionals; sales managers; sales consultants; pre-sales support resources; channel or business partners; etc.).

CASE STUDIES

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Accelerating the Execution of the Growth Strategy

Tools/ Technology

Process

Recently, many companies have looked to technology as a means to accelerate the execution of their growth strategy. While it is true that technology has a pivotal role to play, it is also true that technology alone cannot guarantee strategy execution. There is no single panacea that guarantees success. Recent experience with companies across a broad spectrum of industries has revealed that success in driving the growth strategy results from the effective convergence of three distinct domains: process, technology, and people.

core processes. While the processes are designed to drive sales effectiveness, technology-enabled selling tools make it easy to leverage the processes. By determining the appropriate tools, infrastructure, and technology to implement, companies ensure that they fully leverage their processes without placing excessive burden on users. The marriage of these two elements, process and technology, is key to enabling the sales organization to implement the growth strategy.
People

The convergence of Process, People, and Tools/Technology drives sales effectiveness

People

Figure 3: Driving the Growth Strategy

Process

The first domain of convergence consists of corporate-level processes designed to enable the members of the sales organization to do their jobs. In order to drive sales effectiveness, companies should implement certain best practice processes. The most critical of these corporate-level processes is the sales process. The sales process identifies the sales stages your organization uses for evaluating the status of each opportunity for pipeline management and forecasting purposes. The sales process also defines the critical roles in the organization, identifies key buying milestones, and should map onto the customers buying process. Defining and implementing the appropriate sales process is the first step to driving sales effectiveness.
Tools and Technology

The development of sales people is the final domain of convergence. The goal is to deploy the right people with the right capabilities to execute the growth strategy. The right people are those who are able and willing to implement core processes and utilize tools and technology to maximize their effectiveness. Developing sales people can be a difficult task, as these individuals are often resistant to change. Sales people and sales managers do not automatically migrate to new processes and technologies because they believe they limit the unique sales approach that have spent significant time developing. They are concerned that the new processes and technology may, in fact, be inferior to their current method of pursuing sales and commissions. Adopting the new sales strategy and methods may entail risking valuable time, effort, and relationships risks that sales people are ultimately unwilling to take. This belief in their own abilities and methodologies makes it difficult to convince them of the need for change.

The second domain of convergence is the implementation of the technology, tools, and infrastructure necessary for supporting your

SALES EFFECTIVENESS

W H I T E PA P E R

Developing the Sales Organization


In order to identify and design development activities for the sales organization that directly support the growth strategy, an understanding of cause and effect, as it relates to the sales function, is beneficial. To determine the positive effect of sales development (or in its absence, the negative effect of stagnation), consider the following equation: However, today there is an apparent need for new, differentiating skills that serve sales people and teams as they compete in todays market and prepare for future market environments. Specifically, these skills include the ability to establish credibility with senior executives, and the ability to determine and communicate compelling, business-based value propositions to prospects and customers. These two skill areas separate merely adequate selling from truly exceptional sales performance. These skills provide the how of competing successfully.
K: Knowledge knowledge is the area of sales competence that provides the salesperson with the necessary context to perform. Simply understanding the sales process and having the skills to implement a meaningful sales call is insufficient without the appropriate knowledge that establishes credibility and creates potential value in the mind of a prospect.

(M + S + K) *E2 = Results
Where results can be measured in numerous ways: revenues, profits, number of users, level of margin, etc.

M: Methodology to improve the

effectiveness of a sales organization, one of the first steps is to install best-in-class methodology. A methodology is a learnable and repeatable best practice used by individuals and teams that identifies what to do at different times. Examples of different types of methodology include: Opportunity Management; Account Management; Territory Management; Partner Management; etc. The application of a methodology normally results in a plan that can accelerate the creation of revenue streams, the development of excellent customer relationships, and the winning of sales opportunities.
S: Skills all sales people have already developed many of the required sales skills in their pre-selling careers, and then are able with coaching and training to hone those skills to meet the competitive and demanding situations in which they find themselves.

Many companies invest significant resources (people, money, and time) in providing their sales communities with knowledge that can be less effective than desired. The requirement of the effective sales organization is to receive applied knowledge information and insight which feeds directly into the methodologies for creating and winning opportunities. Examples of applied knowledge include: product information with recommended winning sales strategies; win/loss summaries; solution maps; etc.

SALES EFFECTIVENESS

E2: Effort and Environment The three

development components of Methodology, Skills, and Knowledge are aspects of improving the ability of the sales organization. Equally important is driving the willingness of the sales teams to do what is necessary to accelerate the execution of the growth strategy. Willingness is partly demonstrated by the work rate of the individual sales people their level of Effort. Effort is an attribute of an individual it can not be trained, it can only be recruited. Behavioral interviewing is a technique that enables managers to ensure that they are recruiting people who are willing to expend the necessary effort. Based on the concept that past actions are the best predictor of future behavior, the line of questioning with behavioral interviewing is focused on actual demonstrated behaviors, instead of hypothetical questions. Interviewees are asked to provide detailed, specific examples of when they demonstrated the particular behaviors or skills the employer is seeking.

The other element that determines willingness is the Environment surrounding the sales people. Environmental factors include: Management how is performance managed? What is expected of salespeople? How are they coached? What reinforcement is provided? Measurement are the measures (incentives, pay, and recognition) aligned with the behavioral requirements? David Packard, co-founder of Hewlett-Packard, frequently stated, Tell me how a man is measured and I will tell you what he does. Systems and Tools are the sales people provided with tools that enhance (and not inhibit) their performance? Are systems designed to minimize duplicate entry?

SALES EFFECTIVENESS

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Understanding the Impact on the Growth Strategy (The Power of .1)


The ultimate goal of investing in the development of the sales organization is to successfully implement the companys growth strategy. This investment is intended to have a significant positive impact on the companys revenue. It is often extremely difficult to visualize the potential returns from an investment in these areas. Managers intuitively know there is some benefit in training and development, but lack a model to help them understand the magnitude of that effect. However, Sales Methodology Experts has created a simple formula, the Sales Equation, to help managers and executives gain a basic understanding of how a sales effectiveness initiative can impact their organization. The Sales Equation is based on the idea that the outcomes (revenue) generated by any sales organization are the direct result of four main factors: 1. 2. 3. 4. The number of opportunities in the pipeline The size of the opportunities in the pipeline The percentage of opportunities won The length of the sales cycle

These four factors are positively impacted through investments in the Process, Technology, and People areas discussed earlier. This means that managers and executives have the opportunity to directly influence their success by making relatively small changes in these four areas. (See Figure 4) For example, companies can invest in a proven opportunity management methodology in order to directly impact opportunity size, win rate, and the length of the sales cycle. A proven opportunity management methodology can significantly increase the average size of the different opportunities being developed, the percentage of opportunities in the pipeline that are closed, and the speed with which those opportunities are closed. These benefits can be increased even further through an investment in the differentiating selling skills discussed earlier. In addition to impacting the factors related to managing opportunities, companies can significantly impact the number of opportunities or at bats for each salesperson through an investment in account or partner management methodologies. Through the effective management of a companys pool of current and future customers and strategic business partners, a significant number of new, pipeline-filling opportunities can be identified.

Revenue

# deals X size X win rate sales cycle

Assume a 10% improvement in all areas as a result of an investment in Opportunity, Account and Partner Management Methodology to improve key measurements

1.1 X 1.1 X 1.1 0.9


Figure 4: Sales Equation

48% =
REVENUE

SALES EFFECTIVENESS

W H I T E PA P E R

Successfully Implementing Change


The benefits of developing the sales organization to drive sales effectiveness are evident. However, in order to minimize risk and improve the chances of success, it is critical to apply a successful change management process. Although it seems counterintuitive, organizational change is a manageable process that has a definite structure and outcomes that can be reliably anticipated. If major corporate change is attempted without understanding this process, one might be confused by reactions that are a natural part of the process. Implementation guidelines can help managers anticipate the reactions to and manage the outcomes of major corporate change. Sales Methodology Experts has developed an effective change management architecture for implementing large-scale process changes in sales and marketing organizations. This Implementation Architecture incorporates leading-edge change management techniques. The Implementation Architecture covers six phases of a successful sales and marketing process change initiative: Analyzing business needs and identify the right solution for achieving change Aligning management with the change initiative Integrating the solution into existing processes and systems Deploying the solution through effective training Transferring ownership of the new process to managers Reviewing the success of the initiative and present results to management For additional information on leveraging the Implementation Architecture to successfully plan and execute corporate change, please look for Sales Methodology Experts white paper: Establishing Lasting Change in Your Sales and Marketing Organizations.

Figure 5: Six Stage Implementation Process

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