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Where Did The Risk-Taking Go?
For the first time in my life, I’m actually concerned about the future competitiveness of America. It has nothing (at least directly) to do with the recession we are either in or just completing. It has everything to do with the USA going against type.
I just finished reading a research report discussing why and how banks are under extreme margin pressure. The report states:
“Conventional wisdom holds that a steep yield curve is good for banks — borrow short, lend long. With a Fed Funds rate of essentially zero and banks paying almost nothing for deposits as well, bank-funding costs are at all-time lows. Unfortunately, after a prolonged period of near-zero rates, bank assets (both loans and securities) are also re-pricing to all-time low levels. Banks also remain cautious about lending, choosing to park cash in safer, but lower yielding assets.”
As I read this report, it made me think of what the television networks are doing with reality programming. Because of their low cost, networks are almost guaranteed to make money – just not much.
These two points are symbolic of a series of actions that I’m seeing taking place in companies – both big and small. Every time a company makes the decision to focus on exploiting its current assets, rather than exploring how to deepen and expand those assets and the impact of those assets; it is behaving like the banks and television networks.
I’m concerned that many American companies are coming down on the wrong side of a critical, philosophical business question: “Are profits the result of having the right focus or are they the focus?.”
When banks stop lending, or television networks begin relying on cheap reality programming, they are making the decision that profits are the focus. When you’re focus is on profits, you start extracting value from your market and you stop taking real risks because they’re, well, risky.
When you focus on your customers and you answer the question – “what can we do to improve their lives like no one has done before,” and then you pursue that path with dogged determination; then you’re making the decision profits are the result of the right focus. When you make that decision, you see risk through a new prism, and while it does, in fact, represent risk it also provides great reward.
For more than 100 years, America has been the most profitable country in the world by focusing on taking the right risks and creating value better than any other nation. I sure hope we don’t lose that.
Let Them Taste It
I’m from the government, I’m here to help you.
The check is in the mail.
Really, I promise you’ll get the benefits after you buy from me.
Truth be told, this is how 95%+ of businesses position themselves in the sales and marketing process. I’ve written (ad nauseum) about the fundamental need to create value in all aspects of the sales and marketing process. The problem is that merely claiming to be the best choice or promising that you’ll do wonderful things for people after they buy is not enough to capture the hearts and minds of people. Claims are no longer enough to drive buyer behavior.
Instead of waiting for people to buy from you before they can get a taste of what make you different, special, unique and/or better; let them taste it from the very first time they encounter you or your company – and furthermore, let them continue to taste it all the way through the buying process.
This is why content marketing is so powerful. Instead of promising expertise or superiority, you’re delivering it. By doing so, you are reducing the perceived risk for the buyer (which in an environment like today is a BIG deal), and giving the buyer more control (thus increasing their confidence), all while you build marketing assets which increase in value, and give you leverage, over time.
Recently, I was working with a client who had seen a precipitous increase in sales cycle times and sales costs. As we reviewed the problem, we found a significant increase in the number of opportunities that stalled towards the end of the sales cycle. The losses had been excused away – it was the economy, the prospect was cutting back, no more discretionary budgets, etc. As we reviewed their sales process, I discovered that they did a pretty good job up-front in establishing needs, but then fell back to the we-do’s. The value proposition focused on superior workflow process design, and how that design decreases costs and increases an organization’s productivity. As I said, they did an effective job of identifying cost and productivity needs, however, they left it to the buyer to believe their organization could help them. I recommended that they stop promising better workflow design and instead start letting their prospects experience it – at every touchpoint. It’s still early, but we’re already seeing an increase in sales and a decrease is cycle times.
Please note that what I’m talking about here goes beyond “sampling” (letting buyers try you out in some small, low risk fashion). I’m not against sampling, per se, but I think a) it’s often done in a highly transactional, manipulative way, and b) it is not enough. Sampling is what Kentucky Fried Chicken did when they made October 26 the “free piece of grilled chicken day.” What I’m talking about is re-orienting everything you do – from your website to your advertising to all aspects of your sales approach – to be the embodiment of the experience you are promising, rather than merely a statement of promise. As I shared in the recent webinar Making It Rain Even In A Drought, the lag time between the origin of a problem and the awareness can be quite long. By sharing your wisdom you can provoke their awareness, accelerate the sales cycle and make your competition irrelevant (because you’ll be the only one there when the prospect/customer becomes aware). The key is to stop selling your wares, and instead be helpful by providing your prospects a taste of your experience.
So, how do you (or can you) give your prospects a taste? Leave a comment, I promise I’ll give you feedback.
Making It Rain, Even In A Drought
Last month, we held three very successful webinars focused on helping business grow – regardless of economic conditions. Making It Rain Even In A Drought focused on three key areas:
- What is “the drought” and why are we in it
- What causes rain
- Three steps to what we call “The Raindance,” that puts you in a position to create demand and make your competition irrelevant.
We got so much positive feedback, we decided to share it with the readers of this blog. Enjoy. Feel free to leave any questions or comments you have about the ideas in the comments section – I promise to respond to every question.
(RSS readers that are not showing embedded video, click here to watch)
Part I – Focuses on The Drought & What Causes Rain
Part 2 – Focuses on the first critical principle to making it rain, instead of being forced to wait for the rain
Part 3 – Focuses on why most sales efforts fail to create economic value and how to monetize your sales efforts.
Thanks for watching. Please feel free to ask a question or leave your thoughts in the comment section.
Is It Time To Say Goodbye
Growth is disruptive. It requires change – all the time. There is nowhere that this is more true, and more difficult to deal with, than in the area of your client/customer base. It’s unfortunate, but the customers that get your business to one level are often the barrier to getting you to the next level of growth and profitability.
The only way a fast growth company can sustain fast growth is to find ways to increase its leverage. Fast growth must be geometric, not arithmetic. As your business grows, so does it complexity and its cost structure. You must find customers who are capable of paying you a multiple of that increase. The failure to do that will cause the business to be overwhelmed by complexity, and it will stall and stop growing.
Additionally, the most important asset you have to support fast growth is focus. You must serve a core customer base better than anyone in the world. If you growth plan has you catering to larger customers, or customers dealing with bigger problems, continuing to focus on your legacy customers merely holds you back from fully serving your future ones. Its an unfortunate truth about growth.
Sustainable fast growth is all about allocating resources to your highest value activities. And sometimes, that means you have to say goodbye to people that were very important to you.
Finding Demand Creators
Earlier this week, I wrote a post about The 5 Levels of Sales Excellence. It’s generated a lot of discussion, best summed up by this stream of comments:
- Rodney Johnson says:
Doug – you nailed this one. I can tell you that businesses are struggling with the peddlers and commoditizers in their organizations. If they could just find a few Professionals, they would be in heaven. If they could find a Demand Creator, they would have found Utopia.
So let me ask you. Where does one look? How do we evaluate? And are Demand Creators even available?
- Doug Davidoff says:
Rodney, that is a great question. I’ll begin writing the answer now. I’ll post it as soon as it’s done.
- Rodney Johnson says:
I thought about my question, and at least in my world working with CEOs through Vistage, I can say with certainty that the Demand Creators tend to be the CEO/Entrepreneur of the organization. They have the skill set. They have the business acumen. They have the connections. And they definitely have the drive. If this is the case, finding individuals out there with Demand Creation skills is likely a very elite and small group. Your thoughts?
Here are my thoughts:
First and foremost, Demand Creators and even most professionals are very rarely (to a statistically insignificant level) “found”; instead, they are made. The only meaningful exception to this, as Rodney points out, is found at the CEO and entrepreneur level. They create demand, most often, because they are the creators of the value for their company and can’t help but go deep and resonate with buyers. The challenge is that CEO/entrepreneurs create demand in a non-replicable way and that creates a “growth wall” that halts most companies’ growth.
While sales mythology is filled with stories of “natural” sales superstars, reality rarely lives up to the story. The only meaningful difference between these natural sales superstars, Demand Creators and unicorns, is that the sales superstar does actually exist; but they are EXTRAORDINARILY hard to find, they are very expensive and they are very difficult to keep happy. Peter Drucker said you can’t scale a business requiring genius, and the same is true here.
The Critical Element to Make Demand Creators
The prerequisite to make/create Demand Creators is a repeatable, sustainable sales and marketing process. This is where IBM destroyed its competitors in IBM’s heyday. IBM was a superior sales organization, not because they hired better sales people (actually, IBM had a huge advantage in their ability to hire younger, less experienced salespeople than their competitors), but because they had a superior process – in the full sense of the word.
This leads to another myth – salespeople hate process. Properly stated (and in the context of my post on Demand Creators) it is true: pests, peddlers and commoditizers hate process. Professionals and Demand Creators thrive on effective process.
Please don’t confuse a repeatable sales and marketing process with things like the stages of a sale. While I’m a big fan of a lot of sales training programs out there (and they’ve certainly inspired a lot of my thinking over the last 20 years), they do not represent process. At best, they represent stages. Whether you’re talking about Tom Hopkins, Brian Tracy, Miller Heiman, Neil Rackham, Sandler, Huthwaite, Bosworth, et al; they demonstrate stages, not repeatable process (please note, it is not my intention to slight any of these fine organizations, I think they all do a very good job).
Think about this for a moment. If you were interviewing an operations manager, front line worker, accountant, controller, CFO, or virtually any non-sales and marketing position and they said something like the following, would you hire them?
“Before you hire me, I want you to know that I have my own way of doing things. It’s worked for me for years so I’m going to do it my way, rather than yours.”
Of course not. Can you imagine an accountant saying they find GAAP just a little too constraining, so they’ll just ignore it (oops, I guess that’s what happened at Enron)? But companies let salespeople do this everyday. An effective process makes a decent salesperson good, a good one great, and a great one a superstar. (A superstar by the way is merely a great salesperson who follows a process – whether it’s a stated process or not.)
The reason a process works and is so critical is that an effective process introduces constraints. Constraints, properly applied, force increased focus – which leads to more depth. A salesperson can only create demand by going deeper than their competitors do. These constraints create predictability, which is critical to effectively allocating resources (which for a salesperson really comes down to time). As author, professor, and consultant Jim Collins has said, if you take the person out of the process, the person is no longer as good.
Further, a repeatable process is, by definition, trainable and coachable. This means that you can hire people who fit a particular profile (as done in any top notch hiring process, and a subject I’ll write about shortly) and teach them how to do this. This makes the position hirable and it enables a company to ensure it can continue to grow.
The problem that the vast majority of small and mid-market businesses (SMB) have is that they have neither the time nor the expertise to create such a system. So they either rely on the salesperson to “figure it out,” have absolutely no system or overly rely on the “systems” presented in sales training programs (which as I’ve already mentioned are not adequate substitutes for process).
I know this because for the last five years a core focus of my company has been helping SMBs create these systems, and we’ve been helping companies make their sales teams professionals and Demand Creators.
Are You A Pest, Peddler or Demand Creator
For the last 20+ years, I’ve spent my life working with businesses and salespeople. I’ve seen quite a bit change over that time – things that have both encouraged and discouraged me. On the encouraging front, I feel confident that today, the best, most capable and professional salespeople are there. Despite several calls for “The End of the Salesforce,” there are salespeople creating more economic value for both their employers and their buyers than ever before. Today, more than ever, the need for highly trained, capable salespeople is a must-have for businesses.
On the discouraging front, everyday, I see a majority of salespeople failing to create the very economic value that exist to create. While many salespeople have truly become professionals and executives, the overall “center of gravity,” if you will, of the sales profession has not moved markedly. This is damaging for two compelling reasons:
- First, in today’s ultra-competitive marketplace caused by the recent drought, salespeople cannot afford to be anything less than excellent to create economic value for the selling organization, and
- Second, the overall lack of professionalism and value creation on the part of sellers is causing an exponential increase in the number of buyers who actively finding ways to avoid dealing with salespeople altogether. They figure that since so many salespeople are commoditizing themselves, they might as well just treat them that way. This had led to the rapid increases in RFPs and the increase in power of procurement in buying processes.
Part of my company’s underlying mission is to end all of this bad selling and to support the understanding and growth of the strategic importance that sales and salespeople have. So, for the last 15 years, I’ve been keeping copious notes on the difference between bad salespeople, decent ones, good ones, and great ones. This has led to the creation of what I call The 5 Levels of Sales Excellence. Understanding these levels is important to ensuring that your sales efforts create value.
The 5 Levels of Sales Excellence
At the bottom are the pests. These are the salespeople who just go out and bother people. Their disciples of the “sales is purely a numbers game,” and gosh darn it if they don’t go out there pushing numbers. They’re the ones who show up at a networking event and greet all comers with the battle cry, “Nice to meet you, here’s my card.” They’re poor at asking questions, they don’t listen and they extract value from the process. The biggest problem they represent (even if you don’t have pests on your team) is that it is the profile of the pest that first comes to mind, and is most associated, with salespeople. When executives in your buyer’s organization here a salesperson from your company is coming, pest is the picture that comes to mind, even if they know that your salesperson isn’t one. So, you must always manage against this perception.
The peddler is focused on the “stuff they’re selling.” Often times, they’re great conversationalists (in that they can tell some terrific stories and have much charisma), and they play the part of resource, but you know you’re dealing with a peddler because they spend far more time talking than working to understand. Their “solution” is always the right one “if you’d just understand.” Peddlers don’t listen well, when they ask questions they’re not high value questions, and they don’t “go deep”. A peddler focuses on getting to the presentation/proposal/recommendation as quickly as possible and firmly believes that you have to ask someone to say “yes” five times to have a real chance at success. They thrive on objections, as they’re “buying signs.” Peddlers create little or no value in the sales process, and as a result they lengthen sales cycles and increase sales costs.
I used to call the commoditizer a “professional peddler.” The commoditizer is clearly focused on the solution. Typically, they have a significant level of expertise when it comes to the solution, and they believe firmly in it. Commoditizers ask a lot of questions (they’ve learned that’s important in selling), but the questions are very low value questions, and do not provoke and probe deeper issues. The problem the commoditzer has is that they are so clear about the solution that they suffer from the curse of knowledge. This means that to be fully understood and valued, the buyer must fully understand their problem (which they rarely do). Because they are so focused on the solution, buyer’s don’t view them as important until they have already decided that they need what the seller provides. At this point, decision criteria have been established and the buyer is typically in a shop mode, price becomes increasingly important in the selection process and differentiation is difficult (hence why we call this level the commoditizer). At this level, the sales person is doing an awful lot right, but because they are solutions focused they do not create value.
Important Point: This brings me to an important point. If the focus of your go-to-market efforts is on your solution and attempting to “explain why your solution is best” rather than on diagnosing you buyer’s issues, then you are peddling or commoditizing – at best!
The professional is focused on what the buyer needs. It is the professional that begins to earn a “seat at the table” and is viewed as an important player by the buyer. Buyers value professionals because they know that their best interests are being looked after. Professional’s ask high value questions, probe deeply and help to refine the decision criteria. Professionals create value in the sales process. Their primary drawback is that they limit their focus to the direct issues that their solution addresses and they rely heavily on “treating” the buyer’s awareness. While they do diagnose, they are not diagnosticians, so if the buyer is misunderstanding their problem or is merely aware of their symptoms, professionals will struggle in changing the perceived need, hence, they do not create demand.
Which brings me to the fifth, and highest, level of sales excellence: The Demand Creator. Demand Creators are superstars and when you think of them, you rarely think of them as “salespeople.” When Demand Creators sell (and believe me, they’re the most powerful sellers there are), it doesn’t feel like selling. Demand Creators are completely buyer focused, possess a tremendous degree of business acumen, and are viewed as critical resources by their buyers. Demand Creators have mastered results oriented conversations with buying organizations, have the ability to speak to a variety of levels of buyers and create value in everything they do. Demand Creators are tremendous advantages to their selling organizations, the selling organization doesn’t have to worry about “differentiating” because the Demand Creator is different. The Demand Creator is able to take the conversation with a buyer so deep that they eliminate competition. Demand Creators are comfortable that not everyone should buy from them, and that “now” may not be the best time to solve a problem. While Demand Creators work very hard, they make selling look and feel effortless. When you’re working with a Demand Creator, you know it.
So, where are you – and why? What stories can you share about salespeople you’ve encountered at each level?
Making It Rain Even In A Drought
UPDATE: in less than 24 hours we’ve “sold out” the Making It Rain Even In A Drought webinar. Because of how much it has resonated, we are adding more dates – see below for details.
The last three weeks have brought a tide change in the economic outlook. CEOs are looking at growth initiatives more than they have in two years. Despite the increase in optimism, there are still several challenges your selling team faces:
- Discretionary budgets remain virtually non-existent at most companies.
- Record layoffs have fundamentally changed the playing field at your buyer’s organizations.
- The purchasing function has seized more control than ever in buying organizations – leading to even more acute commoditization.
So, the question you must be able to answer is:
How are we going to make it rain – regardless of the weather?
On August 27, 2009 I will be hosting a special webinar to answer this very question. As a reader of this blog, I invite you and your guest to attend this webinar free of charge. Here are the details:
When: Thursday, August 27, 2009-SOLD OUT Tuesday, September 15, 2009 & Tuesday, September 29,2009, 2PM (EDT)
Where: Anywhere you have an Internet connection
How Long: 55 minutes
Registration Information: Click Here for September 15, 2009 or Click Here for September 29,2009
I am going to be keeping the number of participants on this call to less than 25 to ensure that it is interactive – allowing you to ask questions and maximize the application of the ideas I am going to discuss – rather than making it the typical “talking head” presentation. While your questions will clearly impact what is covered on this call, I can promise we will address the issues:
- The 3 Critical Actions You Must Take to Drive Growth In High-Margin Areas
- How to create your own “Business Oasis”
- How to shorten the sales cycle – in any industry
- Monetizing the sales process by creating Cash Flow Farms
- The single most important focus to ensure you business thrives in any market condition
Why I am doing this for free, you may be asking? Is this just a sales pitch in disguise? The reason:
With increased talk and focus on the possibility of recovery, we realized that many businesses are positioning themselves to make the very same mistakes they made that got them into this mess. We want to start a new conversation and provide small and mid-sized businesses a newer, clearer direction that leads to more profitable business growth.
With only 25 slots available make sure you register now! Click here for September 15, 2009 or click here for September 29,2009 to ensure you’re Making It Rain – no matter what.
The Truth About Innovation
I’ve always been a fan of innovation. I firmly believe that innovation is at the core for all value creation, and that any business that fails to innovate is destined to the ash heap of history. When I speak to groups of CEOs, I regularly talk about the importance of innovation. As a result, I’ve learned that there is very little understanding of what innovation really is. Too often, innovation is considered with new product development or, even worse, new hi-tech applications.
Last week, I came across a compelling article about The 12 Different Way for Companies to Innovate. You should check it out – it’s must reading for anyone who wants to harness the power of innovation for their business.
Here’s some of my favorite excerpts (with my comments in green).
- But what exactly is innovation? Although the subject has risen to the top of the CEO agenda, many companies have mistakenly narrow view of it. They might see innovation only as synonymous with new product development or traditional research and development. But such myopia can lead to systematic erosion of competitive advantage. (Right on the mark)
- Viewing innovation too narrowly blinds companies to opportunities and leaves them vulnerable to competitors with broader perspectives. (Again, right on the mark)
- In actuality, “business innovation is far broader in scope than product or technological innovation, as evidenced by some of the most successful companies in a wide range of industries. Starbucks Corp., for example, got consumers to pay $4 for a cup of latte, not because of better-tasting coffee but because the company was able to create an experience referred to as “the third place.” (This is a great example that executives need to grasp. Starbucks didn’t “invent” anything, but they were one of the most innovative companies in the world – and certainly in their market.)
- Conversely, technological innovation in the laboratory does not necessarily translate into customer value. (Simply put, every great innovation starts when someone looks at the world from the standpoint of the customer and identifies gaps. Everything is just guesswork.)
- To avoid innovation myopia, we propose anchoring the discussion on the customer outcomes that result from innovation, (Hallelujah!) and we suggest that managers think holistically in terms of all possible dimensions through which their organizations can innovate. Accordingly, we define business innovation as the creation of substantial new value for customers and the firm by creatively changing one or more dimensions of the business system. (If it doesn’t create value it’s not worth doing.)
Now my favorite takeaway:
Business Innovation is About New Value, Not New Things.
The Path of Least Resistance, Weight Loss & Corporate Growth
Robert Fritz, in his (great) book Path of Least Resistance: Learning to Become the Creative Force in Your Own Life
For example, understanding structural tension clearly explains why people tend to yo-yo with their weight loss efforts. As Fritz explains it (and I’m oversimplifying here), people who struggle with their weight tend to have competing beliefs. On one side, they have a belief that they should be healthy so they try to keep their weight under control; on the other, they have a belief that they like rich (fatty) foods. Rarely is their situation in balance.
When they feel healthy (their pants fit), they experience very little pain from the belief that they should be healthy. Because they feel no “health” pain, they focus on their belief that they like fatty foods – so they overeat. Overeating conflicts with their “be healthy” belief and, eventually, they feel more pain from not being healthy (their favorite shirt doesn’t fit). Because they’ve been eating what they like, they feel very little pain from the “I like fatty foods” belief; so they, temporarily, change their behavior and diet. This works, until people start complimenting how they look, their shirt fits again and they have been denying themselves their favorite foods. Because of the denial the “fatty food” pain, becomes increasingly acute, causes them to overeat and the cycle repeats.
So, what does this have to do with growth and the current challenges we are dealing with in the economy. Let’s take a look at two, typical beliefs held by growing companies: “expand opportunities” and “control or cut costs.”
When the economy and markets are good and revenue is more than covering expenses, businesses feel relatively little “cut/control costs” pain. So they get lazy and, in the name of “opportunism” and poor strategic planning, pursue opportunities with little discipline. This causes costs to rise at a greater rate than the rewards of their investments. As a result of rising costs or a change in market conditions, the “cut/control costs” pain increases significantly. Add to that the “opportunity binge” companies have been on, there is relatively little “expand opportunities” pain.
Just as people who wake up and realize they can’t wear their favorite clothes, companies go on a “crash diet” and cut expenses with little strategic thought. The lack of strategy and discipline that applied in the growth cycle applies equally in the cut cycle and mistakes are made, weakening the company. Keep in mind, the companies beliefs have not changed – they still believe in expanding opportunities, it’s just that the “cut/control costs” pain has become more acute that the “expand opportunities” pain. Eventually, the cycle shifts as the “expand opportunities” pain becomes greater than the “cut/control costs” pain. And the cycle repeats.
This is precisely where the vast, vast majority of business find themselves – they’re in the exact same position as people who struggle to lose weight. Just like the diet shows, gimmicks and shortcuts don’t work for people, shortcuts don’t work for businesses.
What’s the solution? Stop the insanity (yes, that’s a pun for those that remember one of the funniest diet gimmicks ever)! Fritz says that if the focus is on behavior – change will not stick. Over long periods of time, behavior always follows structure. The answer then is to change the structure and to integrate the beliefs. In business, this means that you have to stop looking at “cut/control costs” and “expand opportunities” as opposite ends of the spectrum. You must get out of the good market/bad market mindset. Companies should always be cutting, controlling, and expanding.
Here’s my challenge for you: How can you combine strategy, structure and people to enable you do get the work done by four people to be done better by three? If you’re always asking (and answering) that question, growth will become consistent and market conditions won’t control your destiny.
If You Can’t Grow – Buy?
Today, the announcement came that Pfizer is buying Wyeth for $68 billion. While the normal spin is taking place about synergies, and how 1+1=3; the fact of the matter is that this mega-merger is being fueled by the dominant driver for mergers of these types – weakness.
Pfizer has lost its way. It no longer creates value, its drug pipeline has weakened and it has become increasingly commoditized. The executives depend on the short-term value of the stock for their wealth, so what’s the easiest way to get Wall Street to believe you have a plan? Buy something.
While I have not studied this merger in any depth, I have no problem making the prediction that this merger will further dilute returns for stockholders. The more effective strategy, albeit a much tougher path, would have been to get back to basics and to focus on solving unique problems for unique people. It may have meant that Pfizer needed to cut old, traditional lines of business to focus on real opportunities for growth. Throw this merger in with Bank of America’s acquisition of Merrill Lynch, and of Citigroup’s purchases, or AOL’s purchase of Time Warner.
This merger is further proof that the reason we are suffering the recessionary environment we are in has far more to do with traditional companies inabilities to create value. Steve McKee, who writes the blog When Growth Stalls, has had some interesting takes on recent mergers, and I’m sure he’ll have something worth reading on this one.
I find it interesting that most mergers (at least the one’s that make the news) are driven from a position of weakness. Those mergers rarely, if ever, work. Mergers from strength can work. The interesting point is that strong companies don’t feel the need to merge nearly as much, and as a result find the path of creating value is from more effective.
What should a reader of this blog do now? Make sure you are creating value. To help you do so, you can take The Value Creation Audit™. If you’d like a copy – just send me an email, or leave a comment.
Getting Through The Recession
It is not new advice – I remember hearing it when I was eight years old and my parents owned and ran a travel agency. You can’t cut your way to success. My guess is that no one reading this post hasn’t heard this before. I’d also bet that at last 90% of readers agree with this statement. However, that knowledge is not stopping people from trying to do it today.
Look, I understand the fear about this market. I’d be lying if I didn’t say that I wasn’t concerned (even though the demand for what we do is skyrocketing and we’re getting ready to bring on more clients than ever before). Here’s what I know – today there are two (and only two) critical objectives for every business:
- Position yourself to survive this storm. We don’t know how long it will be, or how bad it will be – and you must ask yourself, “What am I (we) doing to ensure that we will survive the storm – however long or bad it is?”
- Survival, however, is not enough – you must also position yourself to thrive when the storm is over.
There you have it – SURVIVE & THRIVE.
This may sound mutually exclusive in a devastating market, though the reality is that it is not. It calls for a singular approach with two prongs:
1. Allocate your resources and investments towards those actions that provide direct growth opportunities – cut everything else. That doesn’t (necessarily) been eliminate, but cut disproportionately. Don’t take what I call a “peanut butter” approach to cuts – those that are spread evenly.
There are tremendous opportunities to cut and grow at the same time. My friend, and staffing guru Bob Corlett just wrote a post on how you can upgrade your talent and reduce your costs – at the same time!
Today is a great time to cut those actions that are no longer the focus of your future. Remember – don’t focus on improvement when transformation is necessary.
2. Focus on growth, even if there is no chance of “growing” next year. This may make no sense, but it’s critical to understand. We have a client whose market is down by almost 50%. No matter what he does, his business will not do more in revenue next year than it did this year or last year. That doesn’t mean that he isn’t maniacally focused on growth. He realizes that now more than ever, he must push his “growth engine” to full tilt.
Think about it, if you’re going into a head wind, you better have forward momentum, or the wind will wipe you out!
Additionally, if you don’t focus on growth – doing the things to grow and thinking about growth – you and your business will atrophy. If the battle cry is survival, your “growth muscles” will atrophy. That’s double jeopardy: you’re weaker to deal with the strom if it continues and you’re too weak to grow when the storm ends.
Sustaining Growth In Devastating Markets
Well, it’s official – 2008 is a recession (of course, the announcement is kind of like historians telling us that they’ve determined that WWII ended in 1945). As I’ve written before, recessions make it more important that ever to have a growth agenda. When markets are good, mistakes are forgiven. In today’s market, mistakes are disproportionately punished. The good news is that you can gain a distinct, and lasting, advantage if you do the right things.
Three weeks ago, we conducted a webinar Sustaining Growing In Devastating Markets that shared:
- The difference between Demand Creation and demand fulfillment – and why Demand Creation is the only viable strategy going forward.
- The 5 Unbreakable Rules for Creating Demand
- The 7 Critical Actions to take NOW to ensure your growth
Here’s the beginning of the webinar. If you’d like learn more about growing in difficult markets, simply click here and we’ll forward the URL for the remainder of the program.
Part 1:
Is Harvard Business School Relevant
Many entrepreneurs have wondered about the relevancy of the good, old MBA. Talking about such relevance in business is often the equivalent of talking religion or politics at a dinner party or Mac vs. Windows at an IT convention.
It appears (from an email I received via my subscription to Harvard Business Review) that now, so is Harvard Business School.
I give Harvard credit for reevaluating the basis of their program. It’s admirable, wise, and it may even work. What strikes me, however, is the comment, “plot its directions for the next 100 years.”
Are they kidding? A business school is going to determine how it will remain relevant for 100 years? I’m all for long-term planning, but if 100 years is how Harvard is going to look at itself – remind me not to hire any of the people who graduate from the business school.
I don’t mean to be brash, but if we’ve learned anything over the last 20 years is that there are no more 100 year plans. The world moves to fast, and any growth manager (let alone fast growth manager) must remain flexible and open. While I’m a fan of Jim Collins book, Built to Last; “lasting” is not a prerequisite for business.
This is symptomatic of one of the major flaws in business – the illusion of certainty. It sounds good to talk about 100 years; it may even feel good. However, I think it’s great if you can focus on five.
What Saving Detroit Doesn’t Teach
I get nervous when I hear the conversation about what needs to happen to “save Detroit.” I’m going to stay away from the politics of the debate, I want to focus on the growth part. Today on several of the “Sunday Shows,” I’m hearing the proponents of bailout say things like, “we already know what needs to be done, they’re doing it at Toyota and Honda. We need to make more fuel efficient cars.”
While Toyota, Honda, and several others certainly have made fuel efficient cars, and cars that are (clearly) more popular. However, if we listen to the proponents and follow their advice to “save” the industry, we’re going to make the exact types of mistakes that we’ve made before – that is we are going to try to copy our way to success. Merely making the same types of cars as Toyota will give Detroit no more likelihood of success.
It’s easy to focus on the end products of Toyota, and hard to focus on the causes. Toyota is one of the most forward thinking, aggressive, and disciplined businesses in the world. Their focus on lean manufacturing and lean design are critical causes of their success. Simply put, they run their businesses differently then Detroit. They know who their target buyers are, what they value, and how they feel. The understand that success yesterday doesn’t mean success tomorrow – they are always looking at the world from their customer’s viewpoint.
As I’ve written before, The Five Unbreakable Rules for Creating Demand mean that first and foremost you must focus maniacally on who your customer is (and who they are not) – then you must run your business.
I am not saying that Detroit cannot be saved. I’m not even saying that the government (unfortunately) doesn’t need to play a role (I haven’t made my mind up about that yet). What I’m saying is that if all we do is restructuring their business – without restructuring their approach to business; then we will fail.
The same is true for you.
Salesperson + Sales Manager = Failure
I realize that I am not the first person to say that you cannot effectively combine the role of salesperson with the role of sales manager or sales leader – but, let me be the latest. The entire premise that allows otherwise reasonable and intelligent people to even consider this idea is based on the flawed premise that either:
- Neither has to be a full time job, or
- The roles are complementary, or
- The only way that a company can afford the intelligence and knowledge of a VP level person is by asking/requiring them to cover their overhead costs through sales.
All three premises are flawed (I’ll address each in a minute) and the failure to understand this leads to as much wasted resource and frustration as any other aspect of a company’s sales and marketing efforts. Just today, I’m in the midst of helping two prospective companies untangle these issues.
Let’s take a look at each premise:
Neither has to be a full time job:
Rooted in the idea that “she only needs to manage 30% of the time, so she can sell the other 70%;” the flaw here is that the key limiting factor in selling is time. This is not true – the limiting factor is attention (often called bandwidth). Selling and managing may not require full-”time” each, but they certainly require full-”attention“.
Both selling and sales management require one’s full, complete and total focus. Diverting the attention significantly increases the likelihood that neither function is done well. While other disciplines require excellence, there is virtually no such thing as mediocre sales performance. It’s either excellent or not-acceptable.
Complementary Roles:
I’m always amazed at the number of people who freely admit that selling is a far different skill than managing. Then they proceed in a constant search of the “unicorn” who can and will do both things well. From there, the justifications begin.
Let me clear, I am not saying that someone cannot be a great salesperson and a great sales manager – I’m clearly saying they cannot be great doing both at the same time (as a matter of fact, the odds clearly say they can’t be good at either if they try to do both). Selling and managing/leading require different disciplines, different thought processes. One has to dominate the other to be successful. It’s a question of what do you think about when you go to sleep. Do you think about leveraging your sales team or do you think about leveraging your pipeline? If you think about both, neither is getting enough attention.
Affordability:
The rationale has the benefit of being true, in that most companies under $25 million of gross profit can not justify the resources needed to retain an excellent VP level person without requiring them to produce revenue to offset their costs. It becomes a chicken or egg type question – do I hire the VP level capability before I get the revenue; and if I can’t afford to do that, how do I get the revenue? This “damned if I do, damned if I don’t” predicament is what leads companies to make the bad decision of mixing the roles (for the reasons mentioned above).
Unfortunately, it’s not as easy as merely eating the expense associated with hiring a VP level person and asking them to manage alone. Why? Because rarely does a company under $25 million in gross profit have the resources or the complexity to be attractive to the type of person they need. Simply put, good managers like to manage – and good leaders like to lead. Companies under $25 million GP can rarely afford to have more than one leader – and that leader needs to be the CEO.
So what can you do when you need management/leadership and you need people to sell. Stay tuned to my next post (and many more in the future).
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Resources
Doug's Washington Business Journal Columns- Intelligent Growth Articles
Third Wave Selling Blog
Products to Grow
