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

The 8 Sources of Sales and Marketing Waste

It's clear that in the current economic climate, avoiding wasted sales and marketing effort (and budget) is a subject that is dear to many hearts, as organisations react to the challenge of trying to do more with the same or fewer resources.

Tough economic times are a powerful catalyst for selling and marketing smarter, and for doing a better job of anticipating and satisfying customer needs. Having a company-wide focus on elevating customer value and eliminating wasted effort is a great start.

With that in mind, here are my conclusions as to the 8 most common sources of wasted sales and marketing effort.  Each will form the subject of a future article, when I'll share some more ideas about how to systematically eliminate them.

1: LACK OF AWARENESS: According to some, this has the potential to be the greatest waste of all, since it means that vendors may fail to be considered in deals they could have won, and prospects may fail to identify an optimal solution. 

Lack of awareness cuts both ways: it results in vendors being unaware of potential prospects or their issues, and in prospects being unaware of vendors who may have the answer to their problems.

2: OVER PRODUCTION: Over-production is the result of vendors initiating more marketing and sales activities (generating large numbers of unqualified leads, for example) than their organisations are able to properly follow-up. 

For anything (like an enquiry from an active prospect) that has a "best before" date, over-production can make it difficult to accurately qualify prospect activity, which has a direct impact on the third waste:

3. POOR QUALIFICATION: Accurate, timely qualification of prospects is critical to the effective use of sales and marketing resources.  Like awareness, poor qualification cuts both ways: it renders vendors unable to distinguish between "good" and "bad" deals or to respond accordingly.

The effects of poor qualification are profound.  Vendors many end up failing to allocate sufficient resource to otherwise winnable deals, while they waste valuable energy pursuing bad deals that should have been discarded far earlier in the sales cycle.

4: VALUELESS ACTIVITY: This waste involves any action on the part of the vendor that fails to create meaningful customer value or - just as important - to facilitate the prospect's buying process.

These valueless activities can include irrelevant marketing programmes, actions or campaigns, inappropriate sales tools, or sales actions that do nothing to advance the sales cycle.  A recent study suggested that in some organisations as much as 90% of the materials produced by marketing were never taken up by either the salesforce or prospects.

5. VALUELESS FUNCTIONALITY: A regrettably common waste amongst technology or product-driven companies.  It includes any functionality that prospects see no significant value in, or serves to make the vendor's offering over-complex.

Like the other wastes identified here, valueless functionality is completely avoidable - but only if product development is completely driven by a superior understanding of who their best customers are and of the most critical (and therefore valuable) issues they are trying to solve.

6: UNBALANCED RESOURCES:  This waste can be observed wherever bottlenecks or over-capacity are found across different elements of the business or at different times of the business cycle.  For example, certain pre-sales resources may be overloaded while others are under-utilised - or back office teams completely maxed out at month or quarter end but under-used at other times.

This waste can be significantly reduced by carefully designing business processes so that they carry a more even workload - or by amending the incentives that cause frenzied end-of-period activity followed by quiet periods.

7: WAITING: This waste can be observed whenever the actions that a vendor takes - or, just as significantly, fails to take - have the effect of slowing or delaying the prospect's buying process.

You might think that vendors would be particularly sensitive about the consequences of the waste of waiting - yet many have habits, processes or procedures that keep the prospect waiting when they would otherwise be willing to move forwards.

8: UNFULFILLED POTENTIAL: The final waste, but the one that most commonly reflects cultural failings on the part of the employer.  It is caused by the failure to fully harness your workforces' potential to identify and solve problems and to drive performance improvement.

It's widely recognised that a centralised "command and control" approach is incapable to creating the organisational agility required to cope with changing market conditions - yet many employers fail to systematically engage the talents of their workforce - or the insights of their partners.

So there you have it - the 8 most common causes of waste in B2B sales and marketing.  Their cumulative effect is frightening, yet adopting a "lean mindset" can start to change things quickly - and provide the platform for continuous improvement.

Subsequent articles will address each of these wastes.  But if you can't wait to find out more, or would simply like to share your opinions and experience, please drop me a line to bob.apollo@inflexion-point.com.

Outstanding Common Sense from Neil Rackham...

Neil Rackham is the father of SPIN.  No, not the sort of dodgy dialogue that you hear from politicians, but the sales methodology that was truly groundbreaking for its time, and still highly relevant today.

Neil has just written a guest piece in Modern Selling.  He certainly has a way with words.  Allow me to quote from the master: "While mediocre salespeople can survive or even prosper during good times, in hard times the real talent comes to the top. The order-takers and talking brochures who contribute little in the way of customer value, will sink into the quicksand of history along with many of the financial services wretches who worked so hard to create this mess in the first place."

He's got some pithy advice for all of us who are in the business of selling.  Here are my favourites:

• Focus on fewer opportunities.  Qualify hard, and invest your resources on the ones where you have the best chance of winning.  Let your competitors spread themselves too thinly by chasing every deal.
• Sell on safety rather than price.  Make sure that yours is the least-risk solution.  Customers will pay more if they feel that their choice represents the safest option.
• Fix the disconnect between sales and marketing. Too many companies have managed to muddle by with poorly coordinated or misaligned sales and marketing activities.  Not any more.

You can read the full article here.  While you're at it, I recommend that you sign up to the Modern Selling site. 

Why Great Companies Get Started in the Downturns

Matt McCall is a co-founder and Managing Director of Draper Fisher Jurvetson Portage Venture Partners.  He writes with great insight in his VC Confidential blog - I strongly recommend that you suscribe. 

Matt's just posted an article on "why great companies get started in the downturns" that I found so profound that I want to republish it in full here, with full credit to him.

"I have always been amazed by how many of our success tech stories, as well as Fortune 500 companies, started during drastic down turns. Innovation does not take a holiday, and in fact, thrives during difficult times when pain & need are greatest. While the current downturn is historic, it pails in comparison to the 22 year depression the US experienced from 1873 to 1895, triggered by the Vienna stock market crash.  During this extended drought, a large number of Fortune 500's & major corporations started including Eli Lilly, IBM, Merck, Hershey's, Gillette, Alcoa, J&J, Chevron, GE, AT&T, Abbott, Lilly, Coors, Johnson Controls, Bristol-Myers and PPG to name a few.

During the great depression (1929-1939), Texas Instruments, HP, 20th Century Fox and United Technologies all launched. Since much of the Valley's legacy came out of HP, the seeds for the current Silicon Valley were planted while the stock market was crashing nearly 90% and unemployment approached 30%.

Other periods: during the Oil shock & market crash (1973-1976) Microsoft, Genentech & Apple started. The biotech and PC revolutions emerged when the market was down nearly 50% and inflation was racing into double digits.  In the crisis of the early 80's (1980-1982) with mortgage rates peaking at nearly 21%, Amgen, Sun, E*Trade, Autodesk, Adobe, BMC, EA and Symantec were created. The question is why does this happen?

Dogs Will Try New Dog Food
When everything is going well, few people or companies want to change behavior, process or vendors. They have little incentive to do so and risk upsetting the apple cart. However, when their hair is on fire, customers & business partners are willing to try new or different approaches to address the pain. So, while some would say that sales cycles stretch out significantly during downturns, I would argue that for new technologies that solve real problems, they compress considerably.

Take Care of Darwin
Leading entrepreneurs have a maniacal focus on efficient use of capital and on fulfilling customer needs (versus nice to have's). During troubled times, these entrepreneurs are even more focused on these. Cash is spent only when absolutely necessary and no to few features are built that aren't demanded by the customer. Those less disciplined will find themselves victim to Darwinian realities. Companies "forged in hell" have a much more durable and advantaged DNA coming out.

Power of an Equity Culture
In these times, firms either bootstrap or fund themselves from modest equity rounds. Credit, other than credit cards and such, is not readily available. Furthermore, the start-up world is an equity culture versus the credit/debt culture of buyouts. So, they are able to survive when banks won't lend and credit lines are non-existent. Equity can be a beautiful thing.

Weak Gazelles are pruned
During boom times, sectors get overfunded and weaker competitors destroy the economics for everyone involved. They create significant noise in the market place, create skeptical customers by overpromising and underdelivering and have undisciplined pricing policies. In hard times, there are many fewer competitors which allow companies to scale quietly during the trough and take significant market share when conditions improve. Furthermore, these firms enjoy rational pricing, higher profitability/margins and lower cost structures given their DNA.

So, yes it is ugly out there and about to get even harder but start-ups are used to hard times and are well suited, if managed properly, to thrive in the downturn and accelerate during the recovery. The trick is to stay alive one day longer than your competitors..."

Way to go, Matt... Time to Take Care of Darwin!

McKinsey on Surviving the Downturn

One of my little luxuries is a McKinsey Quarterly subscription. I keep it up even during challenging times because it forces me to reflect on some of the key issues that face us today. 

They recently published an excellent series of articles on surviving the downturn.  They won't thank me (and I haven't got the room) to publish their advice in its entirety - and I recommend you take out your own subscription.

I found the following recommendations particularly profound, though, and I'd like to share them with you:

• In hard times, save the core at the expense of the periphery. When times improve, recapture the periphery if it is still worthwhile.
• Any stable source of good profits - any competitive advantage - attracts overhead, clutter, and cross-subsidies in good times.  You can survive this kind of waste in such times. In hard times, you can’t and must cut it.
• If hard times have a good side, it’s the pressure to cut expenses and find new efficiencies. Cuts and changes that raised interpersonal hackles in good times can be made in hard ones.
• Use hard times to concentrate on and strengthen your competitive advantage. If you are confused about this concept, hard times will clarify it. Competitive advantage has two branches, both growing from the same root. You have a competitive advantage when you can take business away from another company at a profit and when your cash costs of doing business are low enough that you can survive in hard times.
• Take advantage of hard times to buy the assets of distressed competitors at bargain basement prices. The best assets are competitive advantages unwisely encumbered with debt and clutter.
• In hard times, many suppliers are willing to renegotiate terms. Don’t be shy.
• In hard times, your buyers will want better terms. They might settle for rapid, reliable payments.
  

Last, but perhaps most significant, was the following:

• Focus on the employees and communities you will keep through the hard times. Good relations with people you have retained and helped will be repaid many times over when the good times return.

We all need to be prepared to make tough decisions and bear the consequences.  But we should never forget our friends.