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.
There’s been a lot of chatter in various circles about the economy – whether you’re watching the Sunday talk shows, listening to CNBC, or following Twitter. All one need do is watch the gyrations of the stock market to become clear that no one is certain what lies ahead.
The point of this post is not to add to the speculation. Quite the opposite, it’s to remind everyone seeking fast, profitable growth that FOCUSING ON THE ECONOMY AND WHETHER THE RECESSION IS OVER IS THE WRONG FOCUS.
I’m getting concerned. As I see more executives talk about the possibility of the end of the recession, it reminds me of the wartime movies when everyone would talk about the possibility that the war was ending. I’m sensing a false sense of hope that “things will return to normal.” That, soon, we’ll be back to the hyper-growth, fish jumping out of the water times we had before.
The last time I saw this was in 2001-2002 when I was a financial advisor. I remember sitting in a senior advisor’s office one day when the market rallied like 500 points (I do not remember the details). He commented (and I believed) that this meant the downturn was over – we could get back to things as normal. Of course, the “correction” wasn’t over, and as we went into 2003 we allowed the illusion of normalcy to further erode fundamentals.
I’m not pessimistic about a recovery – I just don’t care. Why don’t I care? Several reasons:
- I have no control over it.
- We’re a sneeze away from just about anything.
- No one has any idea what the future holds, and all this speculation can do is create more illusions
- Most importantly, it doesn’t matter. Whether the economy “recovers” or not has little impact on the decisions that I have to make as a small, mid-market business (SMB) executive.
I’m sure that the executives at Coca-Cola, GE, Amazon, etc., need to worry about GDP, consumer-spending rates, inventory levels, etc. I also understand that these issues will impact the results many SMBs experience, it just doesn’t have any meaningful relevance to the decisions executives need to make.
Look, there are only three scenarios that can occur:
- We enter what economists call a recovery – though I highly doubt it will really feel like one for a while,
- This is the recovery – welcome to “normal” everyone, or
- Another shoe drops and things get worse.
Now, ask yourself how are the critical, strategic decisions you need to make impacted by any of these scenarios? My bet is that the decisions you make are no different at all. I wrote about this at the early parts of the recession, and I think it’s important to reiterate it now.
Here are the dominant questions EVERY executive should be asking – and actively answering:
- Who are our core customers? What are our core markets?
- What are we doing to be/become indispensable to these people?
- Is our business model really sustainable? Please note that if you don’t have a clear, powerful answer to the question above then by definition your business model is not sustainable.
- What is our relentless growth execution plan?
- Can the people we have execute the answers above? (Ask the question again. This is probably the most difficult and important question, there are no points for self-deception.)
- What are we doing to immediately and permanently lower our cost structure, without it negatively impacting our ability to become indispensable and to execute our growth plan? If you can’t, again, your business model is not sustainable.
As an individual, there’s nothing more that I’d like than a strong recovery, a significant reduction in unemployment, and an increased sense of security for all of us. As a business executive, the more time I spend trying to figure out if the economy is “in recovery”, the less time I have to focus on the critical questions above – and the more likely my business fails to grow regardless of what the economy does.
What are the critical questions you would add to my list?
On our recent webinar Making It Rain Even In A Drought, I focused on some of the key actions companies need to take to grow in any market conditions – even down markets. It’s a process we call The Raindance. The first is to understand the market conditions you are in. The are three underlying conditions (a Perfect Storm if you will) that are creating the margin and growth pressures businesses are now facing – I call this The Drought. I thought I’d share an excerpt of the program with you.
By the way, we do still have spots available for September’s 2 Making It Rain webinars. Click here for details.
It’s easy to look at successful companies and explain away their success. It happened to me today at a speech. I was sharing how Apple has been able to create demand, own markets, and receive disproportionate rewards compared to their competition.
Then it was said, “But, I’m not Apple.”
On my flight home, I couldn’t help but think back to the statement. I wondered where Apple would be if it’s executives had said, “But we’re not Apple.”
It’s easy to forget that Apple began making their move when they were written off for dead. They were irrelevant and they were going broke. They had every reason to act as though they had no options, but they didn’t.
They acted as the company they wanted to be, long before they became the company that they are.
So, the next time you find yourself saying, “But,” stop and act as if you could.
On a scale of 1 – 10, how good are you? If you’re like most people you probably do a lot of things where you would rate yourself a 6, 7 or even 8. I’d also bet, that if you’re really successful there are one or two things you do where you’d rate yourself a 9 or 10.
Recently, I was discussing issues surrounding a client’s sales team. I had observed that his top line sales execs (also VP level people in the company) were Demand Creators™ (a term I use to describe the top level of sales professionals), but that there was a huge chasm between his senior level and the front line sales staff – a chasm that could negatively impact their ability to implement a new go-to-market plan. The CEO replied to me that he thought I was underestimating his salespeople. He told me that while certainly his senior people were 9’s and maybe (his word) 10’s the bulk of his front line were still 7’s and 8’s.
I replied to him, that I agreed, but the problem is that the difference between an 8 and a 9 is the difference between – well – a lightening bug and lightening. Don’t get me wrong, if you’re at a talent level of 7 or 8 you’re quite good – BUT GOOD IS NO LONGER GOOD ENOUGH!!
Markets are too tough; buyers are under too much pressure; and the economics of the information age have completely changed the game. In sales, at least, you must build a sales team of Demand Creators (9’s and 10’s) if you are going to create economic value through your sales efforts.
What must a salesperson master to become a 9 or 10? Here’s a start:
- Business Acumen
- The Five Unbreakable Rules for Creating Demand™
- Diagnostic Protocol
- Their customer’s problems
You may say that there is little difference between an 8 and a 9. To get a picture of how BIG little differences are take a look at the money list for the PGA Tour in 2008. Vijay Singh led the tour, winning more than $6.6 million. He averaged 70.27 strokes per round. Kevin Stadler averaged 71.56 strokes – less than a 1.5 stroke per 18 holes difference. He won just under $600,000 – more than a 10x difference. Kevin Stadler is good – really good; Vijay Singh is great.
Just as a golfer must master all 14 clubs he or she uses in play; you’re sales team must master all the tools of Demand Creation if you expect them to drive superior results.
As I was perusing my online news sources, I came across this headline:
While we’re watching “creative destruction” at its best/worst playing out in front of us, I wonder how many small and mid-size business owners are making the very same mistakes as GM and Chrysler have.
Stories of success and failure are always written in hindsight – and in hindsight, the cues of success and failure are obvious. It’s easy to see where the auto companies screwed up. It’s easy to compare them to Honda and Toyota, whose sustainability is not being questioned.
But, I wonder, how would you look under the glare of the microscope that the autos are under? Are you moving fast enough – or are you incrementalizing like the auto manufactures did?
The absolute worst thing you can do today is to make incremental changes. The market will not respond to incrementalization. You must act big and move boldly. You must accept today for what it is. Determine where you business is now. Determine who are most likely to be your best customers tomorrow and focus maniacally on solving their problems better than anyone else – and I mean anyone else. Discover which revenue streams are taking more resources than they are worth, and reallocate your resources to those areas of revenue that will be profitable tomorrow. You must train your people to perform differently – and that means increasing their business acumen.
If you fail to move fast enough, you don’t have to worry about the President commenting on it – but then again, you probably won’t have a golden parachute like the auto executives have either.
I’m seeing it all over the place – desperation. The quiet desperation of an entrepreneur or salesperson who needs sales. Who could blame them? It’s a difficult time for everyone (even those who are growing – and there are plenty of businesses that are growing); and an almost impossible time for some.
Desperation is dangerous for many reasons. Among other problems, desperation begets desperation and repels opportunities. The biggest danger is that it creates a disabling form of myopia that kills productivity. Desperation leads to panic, the brain gets overwhelmed with adrenaline, and the first area of the brain to become dis-impaired is executive function where judgment resides. The ability to prioritize and focus also disappears and this further reduces confidence (which was the original cause of the desperation); and thus a vicious-cycle begins.
Because adrenaline is running high, we become more comfortable “doing things,” and we focus on more and more activity. Because our judgment is impaired, we are neither able to think through the implications of the ideas nor are to focus on effectively executing the good ones. The mind focuses more on “what” we are doing and “how much” we are doing; rather than “why” are doing something and “how well” are we doing it. Because we keep piling more on the plate, we under-allocate resources to a wide variety of actions, under the rationalization that “we don’t know what will work or when, so we need to put it all out there.” The end result of this is that we run around faster and faster and get absolutely nowhere – if we’re lucky (what happens even more frequently is we end up worse off than we started).
The effective approach (albeit much harder – physically and mentally) is to focus on progress rather than activity. To do this, we must – MUST – disconnect from our “problems.” We must work with them as if they were not ours. We must deal with reality and be completely honest in all aspects of our analysis (one of my favorite quotes is, “All Progress Begins With Honesty”). It is far better to eliminate activities and over-allocate resources to them, under the premise of “Do one thing, do it well, then do the next thing.” It requires patience to allow change to occur. At the risk of using a trite analogy, growth starts “below the surface” and if you don’t tend to it, you’ll never see it. This approach requires deliberate, focused action, and effective judgment.
I get how difficult this is, but it’s important to remember that the highest value words to deal with difficult times is “No, we’re not going to do that.”
Last week, I was sent a query from a reporter doing a story on the mistakes salespeople make during a recession and how selling is different in a recession. As I wrote my answers to her questions (and knowing that at best an excerpt would be used), I though I’d share my full answers. I hope they help as you guide your sales efforts. Questions are in italics.
1. As a sales manager/trainer, what is the most important lesson you have learned when coaching salespeople through past economic downturns?
The most important thing I’ve learned in guiding salespeople in any environment, but especially in a downturn, is to maintain concentration and confidence. It’s very easy to get focused on what is being “lost,” which erodes confidence and causes salespeople to enter a scarcity mentality. Getting salespeople to focus on what is happening and on the opportunities that do exist is critical. When salespeople focus on what is happening instead of what isn’t happening, they’re able to take an assertive approach and build their confidence. When they’re not focused, they become increasingly reactive, and in a down economy, being reactive is the equivalent of being thrown by the waves in a hurricane.
2. Is selling during a recession different from selling at any other time? Why or why not?
Selling is and isn’t different in a recession. The difference lies in the customer’s mentality. The customer is more likely to be in a defensive posture and to shut down. This means that salespeople need to focus even more on connecting with customer issues and diagnosing the causes of problems, they must make their offerings indispensable. Additionally, salespeople must spend more time ensuring that the customer a) fully understand their problem and b) that salespeople monetize the value of their offerings/solutions. If a selling proposition fails to provide hard evidence of return, the “softness” of the proposition will be overwhelmed by the fear of risk from the buyer and the sale will stall. What’s not different about this, is that this is what salespeople should be doing in any market. They’re able to get away without doing this work when “the tide is high,” but in this environment mistakes are not forgiven.
3. What is the most detrimental mistake salespeople make in a down economy?
The biggest mistake they make is they lose focus. The natural tendency in a down market is to try to put more and more opportunities into your “pipeline” or opportunity filter. This is what I call the wide approach. However, because customers are in a heightened state of fear and the work a salesperson must do to make a sale is greater going “wide” is deadly. We call this going wide instead of going deep. The right strategy in a difficult market (any market really) is to go deep – but few salespeople (or businesses) actually do this.
4.Why is this mistake often made?
The reason for this mistake is twofold:
- Fear – salespeople start getting worried, take on a scarcity mentality and start focusing on volume of “opportunities” rather than the depth or quality of them.
- Lack of strategy – the reality for most salespeople is that they are less “the cause of sales” in good times, than they just happened to be there when sales got made (I don’t mean this a derogatorily). When times get tougher and buyers retreat, salespeople have not developed the skills or planning to truly penetrate and create opportunities. I often say that the definition of a great salesperson is someone who can be selling when there is nothing that can be bought. This is how relationships are built and developed.
5. What can be done to correct this mistake?
- Training – the unfortunate truth is that most salespeople need to be taught again how to sell. They’ve operated in a “rising tide” environment for so long that they’ve become lazy and stopped competing. Selling in difficult markets is different than in growing or neutral markets. Every industry has the feel of “decline” to it. New skills and new approaches are needed.
- Focus – The three most important aspects of selling in a difficult market are: focus, focus and focus. We are advocates of what we call Warboards – lists of key targets that we are pursuing. This idea is by no means new or original – frankly all great selling organization utilize a similar approach. Our prototype recommendation is on what we call The Focus 50 (this number is adjusted depending on company issues), which is comprised of The Top 20 (the 20 best opportunities that we are working with to close in the short term) and The Farm 30 (the 30 best opportunities that we are developing). 80-100% of sales efforts should be focused on Warboard accounts.
- Monitoring – One of the first things President Barack Obama did when taking office was to institute a daily economic briefing to mirror the daily national security briefing that Presidents have been getting for decades. The same thing should be done in selling organizations. On a daily or weekly basis (depending on the situation) there should be a Warboard Review meeting. Every Warboard account is reviewed in a rapid fire manner. This increases accountability, requires salespeople to maintain focus on accounts, and identifies opportunities and, more importantly, log jams faster. We find that within a month of instituting the Warboard Review meeting the entire sales culture changes for the better.
Last week, Amazon announced the new version of their e-book reader, The Kindle 2.0. They maintained the price at $359 (which is actually a price increase, because version 2.0 does not include a cover, it’s $20 extra).
I have the original version of the Kindle, and I love it. I travel a lot and I’m a voracious reader. Sure, it’s a bit clunky looking, and I lose a little of the feel of having a “real” book, but the Kindle has many advantages. The new version of the Kindle is much nicer looking, and fits what you’d expect from a mass consumer electronics item. I’m even tempted to get the new one – but I’m not about to pay another $359 to get one. Actually, I’m quite insulted that Jeff Bezos, bragged about how they were taking care of their “early adopters” (those who bought version 1.0) by “granting” us the first 24 hours to get an order in.
That, however, is not the mistake that Amazon is making. Amazon should cut the price of the Kindle to no more than $199 (and possibly even $99). Before regular readers of this blog think I’ve gone nuts, the reason for this has nothing to do with making the Kindle “cheaper.” It has everything to do with the concept I call What Causes Sales.
Kindle causes sales. The only reason to buy a Kindle (no matter how much it is) is because someone wants to read books. Further, when Amazon sells a Kindle they “lock in” a customer. I can only buy books from Amazon for my Kindle – all other bookstores become irrelevant. Therefore, the more Kindles that are bought, the more books must be bought from Amazon. What’s more, buyers of Kindle are grateful for the experience.
While Kindle is the top ebook reader today, there are several forms of competition on the scene, including Sony and more and more aps for the iPhone. What’s more, many of these competitors are “open source” meaning that you can buy the book from anywhere. Additionally, the biggest complaint about ebook readers is that it is still far too frequent that a title is not available and one must choose to either go off the Kindle (or other reader) and buy a copy of the actual book or skip reading the book. The fastest way to fix this is to get more titles – and the fastest way to accomplish that is to dramatically increase the sales base for ebooks.
Additionally, I’ve written about money making machines before. For Amazon’s book division, the money making machine is the purchase of books. It appears to me that Amazon is trying to make the Kindle a money making machine as well, however, unless they make the Kindle open source and dramatically change the business model I don’t think that would work. Amazon would be far wiser to lower the price to a level that book lovers will buy the Kindle just to have it and see what the fuss is all about.
Amazon has a great advantage to dominate this market the way that Apple has dominated digital music. Apple gave away iTunes and continuously and aggressively lowered the entry point for the iPod. This “caused sales” of music and Apple today is the dominant player. Amazon seems not to have learned this lesson.
The only justifiable excuse for this pricing decision is that they are keeping the price high to reduce demand so that they can manufacture them at an adequate pace (the supply of the first version of Kindle regularly ran out). If this is the case, it’s inexcusable that Bezos hasn’t built the capacity to support such a powerful divergent offering.
Will Amazon learn? We’ll find out soon enough.
Two great posts from the great minds at Brains on Fire. Check out Spike Jones‘ and Robbin Phillips‘ take. Both posts take a look at the crisis taking place in Detroit and ponders how when companies truly take care and value their customers, their “love” is returned and crisis like these are averted. Well worth the read.