On Reflexion - what we've been thinking...

Is your Solution a New Concept, a New Paradigm or an Established Category?

Last week I took part - together with 30+ senior sales and marketing executives from the technology sector - in an excellent discussion hosted by Richard Eldh of Sirius Decisions on the topic of sales and marketing alignment.  

The audience included experience of everything from early stage start-ups to mature market leaders – a spectrum I’ve written about in a recent blog about "The Jungle, the Footpath and the Highway". 

Crossing the Chasm Revisited

Richard offered an idea which I’d like to develop here, because I believe it lies at the very heart of making intelligent decisions about sales and marketing strategy.  In fact, the Sirius perspective is that it provides the essential foundation for all sales and marketing efforts.

I imagine anyone in high tech will be familiar with Geoffrey Moore’s characterisation of technology markets as evolving from early adopters and then crossing the chasm (with varying degrees of success) to address mainstream and - ultimately - laggard buyers.

New Concepts, New Paradigms and Established Categories...

Sirius presented the idea of the “demand spectrum”, and identified three categories – new concepts, new paradigms and established markets.  For reasons that may become apparent later, I've tended to use "established category" for the latter.

As you’ll see in a moment, it’s clear that the behaviour of both buyers and sellers changes significantly between demand types, and that making the wrong assumptions – or choosing the wrong strategies – can wreak serious damage to an organisation’s sales and marketing effectiveness.

I’d like to offer my interpretation – drawn from experiences and observations of a growing number of B2B clients – as to how the idea of the demand spectrum can and should drive sales and marketing strategy.

New Concepts

New concepts are truly disruptive product or service offerings. They either solve a new problem which has so far been unrecognised by the market or – perhaps more likely – open up a potentially important new opportunity. Budgets are unlikely to exist – they will have to be created.  The solution category is unlikely to be widely recognised – so educating the market is critical.  

Without obvious reference points in the market, vendors introducing new concepts have to fire the imagination of their potential prospect champions, who will almost always be forward thinking executives for whom the new concept will help them achieve a breakthrough goal.  It’s hard to achieve this without effective issue and thought leadership of a world without reference points.

My take? Without existing category reference points, the potential market needs to educated - or more accurately inspired - about the potential of the concept to help them address a critical business goal. 

New Paradigms

New paradigms offer innovative ways of addressing an already recognised problem or opportunity. Unlike new concepts, with new paradigms at least some of the reference points exist – the category of problem is already understood and accepted as important by the market place.  It’s the way in which the problem is solved that is innovative – perhaps bordering on the disruptive.

One of the best examples of the introduction of new paradigms is CRM delivered through software as a service, exemplified by Salesforce.com.  CRM was already seem as an important function, albeit one that often cost too much, took too long or failed to deliver the promised results.  With this as a reference point, Salesforce were able to show that their distinctively different approach delivered dramatically better results.

My Take? The market did not need to be told about the problem – they needed to be educated that there was, in fact, a better way of solving it.

Established Categories

The third group - established categories - represents the vast majority of product and service offerings.  The problem that they solve is well understood, and they fall within a well-recognised and clearly defined category of solution, so there is no need to educate the market on the need for the solution.  But because of this, the market is also crowded and fiercely contested.

Vendors are milling around in the market, all trying to steal market share from each other.  The question is not whether the problem needs addressing, but rather when to solve it (urgency) and which vendor to solve it with.  It seems to me that vendors in this market have two choices – to either out execute their competitors in a head to head battle, or to outsmart the opposition.

My take? If you're not already the category leader, I’m a great fan of the second approach - helping your prospect to rethink the problem in a way which de-commoditises the situation and differentiates you as a vendor in a meaningful way.

Where do you sit on the spectrum? 

So – where are your products or services positioned along the demand spectrum? Are they new concepts, new paradigms or established markets? And are you consciously tuning your sales and marketing activities accordingly?  If not, what's holding you back?

The Jungle, the Winding Road, and the Highway...

An experienced VC once described the journey that he saw B2B companies going through as the jungle, the winding road, and the highway. 

During the initial “jungle” phase, whilst the company may have successfully sold their initial product offering or service to early adopter customers, every sale still feels hard-won.  Like an explorer deep in the jungle, progress involves energetically hacking away at the surrounding undergrowth, but the best way forward is not yet clear.  Inevitably, much effort is wasted.  Many start-ups – maybe a majority – never get beyond this stage, but those that do find themselves on the winding road...

On the “winding road”, patterns are starting to emerge and a way forward is becoming visible, even if the route is not always completely signposted and still requires widening and straightening. Whilst the general direction is clearer, work still has to be done to ensure that the company can move faster in its intended direction.  Companies often broaden their offerings and recruit significant sales forces and or partner channels in the hope that they will speed the organisation’s progress.  Many established companies find themselves bogged down by uneven or unpredictable conditions, but a few manage to make it to the final stage...

By the time these companies finally reach the “highway”, their direction is clear – to the point of being difficult to change.  Processes have become highly standardised and - in theory - very scalable and repeatable.  As long as conditions remain constant, rapid progress can be made.  But it’s hard for these organisations to divert from their route, even if the environment changes.  Companies that are optimised for the highway can find it challenging to explore the winding roads or jungles that could represent radically new opportunities.

I found his simple metaphor tremendously powerful.  As he pointed out, very few founders (with the probable exception of Gates, Dell and Ellison) have managed to successfully steer their companies through these transitions. But it’s not just CEOs that need to adapt – it’s the whole organisation, and I believe that this provides an explanation for why so many apparently promising companies get stuck in either the jungle or the winding road, and why companies who appear to be masters of the highway end up running out of road when markets or technologies move.

Managing to evolve...

The attitudes, skills and experience needed for employees to make the right contributions (and I’m not restricting my remarks to executive leadership here) can vary significantly from one stage to the next. Factors like the ability to work with or without structure or supervision, tolerance for ambiguity, willingness to change and openness to innovation all play their role. Successful companies manage to establish the appropriate culture and bring in the right people at each stage along the way, but one thing is clear – they manage to evolve.

For example, I’ve seen many “winding road” companies accelerate their progress as a result of bringing in a suitably experienced chief operating officer (COO) or equivalent who can complement an entrepreneurial founder by adding the appropriate degree of discipline, focus and alignment. But I’m sure that you’ve also seen many hiring disasters when jungle or winding road companies were tempted to bring in “heavy-hitter” sales leaders from a leading highway-style company who turn out to be completely incapable of delivering results without the support of the infrastructure and brand awareness they have become so accustomed to.

Getting the right people on board... 

Having the “right” people on board prior to each transition seems to be vital, as does finding ways of helping existing employees grow with the company. The experience that comes from coping with change often proves to be critical. When adding new talent, the evidence suggests that companies should strive to bring in key people who have successfully (and recently) experienced the transition from the current stage to the next.

The journey isn’t over when the company finds itself on the highway, because as we’ve observed, companies that are optimised for this mode can find it difficult to travel off the beaten track. As Clayton Christensen pointed out in the Innovator’s Dilemma, organisations at this level of maturity can find it hard to exploit radical new opportunities. Adaption - and ultimately, survival - may depend on creating autonomous business units populated by people with a jungle or winding road mindset.

Moving ahead... 

So – where is your organisation? Hacking through the jungle, jogging along the winding road, or driving down the highway? And – assuming that you have ambitions to accelerate your progress or move to the next stage, what steps are you taking to ensure that your team is fit for the journey?

Are Current B2B Marketing Conditions Causing You to Think Differently?

Nick de Cent, editor of Modern Selling recently asked me if I had any feel for how people are thinking about the economic climate and business prospects looking forward over the next few months.  It gave me a chance to step back, reflect, and gather my thoughts.

Here's what I told Nick ... I'd love to hear whether it tallies with what you are seeing and hearing in your own markets:

"According to the messages I hear from the market, it remains tough out there, but some of the projects that have been in limbo since Q4 last year are starting to come back to life.  Even in live projects, there remains a big gap between being chosen and getting the order.  Many internal champions haven’t yet fully understood how to navigate their pet projects through a financial approvals process that has become much stricter and highly risk-averse.  “Deciding to do nothing” remains a common outcome.  The vendors that are breaking through have mastered the art of both eliminating the perceived risk of their solution and elevating the negative consequences of doing nothing.  Simply exhorting your sales people to “sell harder” is absolutely, definitively, a losing strategy.  Instead, they have to focus on eliminating risk and facilitating the prospect’s buying process.

The early adopter market has shrivelled to almost nothing – not because their aren’t still some early adopter individuals out there, but because the companies they work within have become more conservative in approving new projects and new expenditure.  So innovative technologies are having to work out how to “cross the chasm” (and talk business, not technology) far earlier in their company’s evolution than was necessary in the past.  Start-ups who haven’t mastered this are particularly hard hit, without an installed base or an established service revenue stream to fall back on.  But failure is not inevitable – companies that have the discipline to focus on creating genuine customer value (rather than product marketing puffery) are winning business."

What's your perspective?  Please share your comments.

Crossing the Chasm, Eagles, Flocks and the 70% Solution

I was reflecting with a client the other day on the current economic climate, and how hard it was to recruit really good sales people, and how challenging it was to win new customers as a new technology business.  It seems that these two challenges are connected.

Crossing the Chasm

Let’s start with something familiar to most of us in high-tech – the technology adoption curve, and the challenges of crossing the chasm that separates the early market from mainstream buyers.  When the author Geoffrey Moore introduced the concept – nearly two decades ago – it was reasonable to believe that as much as 20% of many markets behaved like early adopters.

And it was just was well that they did, because these early adopters offered significant sales opportunities to new and relatively unproven technology companies.  These early adopters bought new technology because they were interested in finding competitive advantage from new applications for emerging technologies – and were prepared to accept the risks involved.

They assessed vendor offerings in a very different way from their mainstream market colleagues, who insisted on proven solutions to identified business issues.

The Chasm is getting closer

So here’s the first issue – the chasm has moved a great deal closer.  Buying behaviour has become more conservative – accelerated by the current economic climate – and most observers would now agree that early adopters now represent a single digit percentage of the buying population.  It’s become even more urgent that vendors master the art of crossing the chasm and satisfying conservative mainstream buyers.  There simply aren’t enough early adopters to sustain them.

Now let’s turn to the second issue before we see how the two elements are colliding together.  It’s the question of the quality of the sales population.  Some proportion of the sales population are intuitive sales people, inclined to have conversations and ask intelligent questions. “Solution selling” comes naturally to them, and they are able to qualify early and accurately.

Eagles - and the Flock

Unfortunately, the majority often seem less naturally gifted.  Whilst generally competent, they are inclined to give presentations, to make statements and generally depend on good process if these members of the “flock” are to emulate the quota achievements of their “eagle” colleagues.  There was a time when these deficiencies might be papered over.  But the current tough climate has served to highlight just how few eagles there are in the sales population.

Eagles always represented a minority. I’m not sure that there were ever more than 20% genuine eagles in the sales population.  But comparing notes with a number of chief executives, I’m inclined to suspect that true sales eagles may make up an even smaller percentage of the total sales population.

It's inevitably hard (and probably unwise, impossible, or both) to recruit and maintain a sales team consisting exclusively of eagles.  So most vendors need to find a way of making competent average sales people more effective.

The 70% Solution

What’s the effect of the interplay between these buyer and seller trends?  Here’s the problem: early market buyers have the imagination and inclination to work out for themselves how technology can be used to solve problems.  But mainstream buyers need the sales person to convince them that they have a proven solution to their business issue – something that average mainstream sales people are not naturally adept at doing.

So you have a majority of the sales population who don’t naturally sell the way that the majority of the buying population want to buy.  No wonder average sales performance – by a number of key metrics – has been declining.

The Answer? Dynamic Scalable Sales Process

The answer lies in crafting a dynamic, scalable sales process that embodies best practice and equips, encourages and enables the average sales person to sell the way their mainstream buyers prefer to buy – and which is reinforced by their CRM system and the sales management regime.   

Much of this best practice can be gleaned by observing what the top sales performers are doing to facilitate each significant stage in their prospect’s buying process.  Additional valuable insights can be learned from the behaviours and supporting processes of industry-leading sales organisations.

These processes exemplify the way the vendor intends to do business, and provide the framework for aligning sales and marketing around a common purpose, finding, winning and satisfying more of the right sort of prospects.

Using sales play books to share best practice and creating customer anecdotes databases that encourage selling through storytelling have proven to be particularly effective in reinforcing the chosen go-to-market approach.

The benefits can be striking.  CSO Insights, in their latest annual survey of over 1,000 B2B sales organisations, concluded that organisations who had implemented a systematic, dynamic company-wide sales process outperformed their peers by over 30%.

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The Chasm is closer than you think

Like most high-tech marketers, I found Geoffrey Moore’s “Crossing the Chasm” essential reading. His concept of the gap that exists between Early Adopters and the Mass Market, and the fundamental shifts in emphasis required to bridge it, has proved to be a key frame of reference in crafting growth strategies for high-potential companies. I enjoyed the privilege of being coached by the Great Man himself, just a few months after the books first publication. I believe the core technology marketing principles he laid out remain fundamentally true.

But something has changed. The Chasm has got Closer.

At the time Crossing the Chasm was published - in the mid-90’s - it seemed reasonable to assume that Innovators and Early Adopters made up as much as 20% of the buying market. That may have been an exaggerated view even then, but the world has clearly changed, and they now typically represent a low single-digit percentage of the addressable market.

Here’s why this is important: Early Market Buyers identify applications for emerging technologies, but the post-Chasm Mainstream demand proven solutions for key business problems. With an even higher percentage of the market lying the other side of the Chasm, emerging high-tech companies are running out of Friends, Family and Early Adopter buyers far faster than their pre-2000 counterparts did.

Technology-driven companies are falling into the Chasm earlier than before, and getting stuck for longer. Many will never make it out. It’s placing an even higher value on understanding where your Mainstream market bridgeheads lie, what’s really important to the buyers you are trying to address, and understanding what it would take to motivate them to take a buying action.

It strikes me that the Chasm is a bit like adolescence. And it seems that adolescence, for many high-tech companies is going to have to be curtailed, and they are going to have to grow up faster …