Business Development verses Sales

I was following a car to work today that has the prestige license “VPRES”. I wondered if this person was a teller in a bank. Kidding aside, titles can really be confusing. I’m in the business of creating long-term incremental new revenue. One might think that means adding new accounts or growing embedded accounts. To me the answer is “yes” and “no”, but mostly “no”. I have traditionally approached sales as the means by which a company achieves its annual revenue plan. This includes both growing existing accounts and adding new ones. I like to think that a good rule of thumb is to have 30% of revenue from new accounts. This helps deals with the revenue attrition experienced with older existing accounts.

So in my definition, what is business development? Clearly you have to be able to sell to develop incremental new revenue. But the selling is more strategic than tactical. A good business development person is opening an all new market. The selling is typically to the early adopters who will blaze the trail for the mainstream sales force to take over. I think in terms of a three year cycle. At the end of three years it becomes more of a sales activity than a business development activity. What are the traits of a very good Business Development person?

Sales: Number one on the list. It’s about revenue. There is no reason to have a business development process if the end game doesn’t produce significant revenue growth. Solution selling skills are the minimum requirement. Advanced skills and experience are what you are looking for. Do they have a wide variety of successes or are they a specialist? I believe a variety of experiences is always best.

Marketing: It’s not about spinning an existing product to fit a new market. It’s about finding and validating an all new revenue source. There is a lot of advanced marketing going on here. Market research is paramount to long term success. Remember, in no more than three years you want to turn it over to the rank and file sales teams to exploit. The marketing is not so much copywriting and collaterals as it is messaging. What is the Unique Selling Proposition and what’s the value add that makes the solution appealing?

Product Development: Again, this is not classical product development. But it is the ability to create a new product from existing parts, with an extra dash of new. It is understanding the effort required and the resources available to meet time-to-market. It’s the ability to assure that it is within the product roadmap for the company.

Business Skills: Are they going to treat the company’s money like their money? It cost money to develop a new market. Can they run it like a profit center or are they content to run it as a cost center. Do they understand the investment they are asking for and the return they are willing to deliver? Have they built Pro Forma statements to use as milestones?

In the end, if you hire a sales person for a business development position, you may grow revenue in the short term, but will it dramatically affect the revenue potential of the company in the long term? And the other point is…. If you are looking for a pure hunter to open new accounts, don’t call it business development. If you want a hunter, ask for a hunter and hire someone who is proud to be called a hunter. If they don’t like being called a hunter then they probably aren’t one…..

Unique Sales Proposition

This is one of the least understood and most over used concepts in sales and marketing. Everyone thinks they have one, few companies do. Here’s why….

A Unique Sales Proposition (USP) must have these characteristics:

1. First and foremost it must be unique
2. Second, it has to be easily validated
3. Third, it must have real intrinsic value to the buyer.

USP’s are situational. What has unique value in one environment may not have any value in another. So one of two things must happen, either the USP changes based on the environment or the seller must target only the environment in which the USP is truly unique and valuable. The second alternative limits the viability of the market. The first alternative widens the target market but required that the seller understand both the unique value of their products or services and the specific value the prospect is looking to achieve. So the USP starts to look like a BBQ Menu; pick one entre, and two side items. Listing the attributes of your products and services is the easy part, getting past the second characteristic is where most fail the test.

Validating your USP is going to be difficult in traditional terms. Companies like to think their UPS is best-in-class service, leading edge technology, the most this, the fastest that, the only whatever…. The problem is can you prove it? More importantly can you prove it prior to the sale in such a way that your competition is left in the cold. This innately means that the USP must be measurable. If I want to state that my product is installed in more companies than any other like product; do I have the third party validated market share data to back up the claim? Is there another study out there that might invalidate my claim? If I claim to have best-in-class service; can I validate it with third party customer care data? Many benefits are just that benefits, they are not USP’s. I may be able to demonstrate that my clients rate my customer service 97 out of 100, but that does not make it a USP. It makes it very good and is an asset, but unless I can validate that my competition cannot meet that, it’s not a USP.

The last point is the logic test. Who cares? I have a good friend whose company has incredible IP based video server technology. It is truly great stuff. It is incredibly fast and has great features. The problem is; who cares. They compete against analog video servers that are half the price in small configurations and most of the video is never viewed. They lead with their gee-wiz technology just to get hammered on price. They try to tout their reliability, but the prospect counters with “I can afford spares”. The real challenge is to find a market that requires very high camera counts and the video is reviewed on a regular basis. Think casinos…. Think major airports….

The point is that every buyer has a unique set of pain that requires a unique solution. The product or service does not have to be unique, just the sales proposition. When your company can document that your product or service can uniquely address their particular problem, you have a leg up on getting the business. This will shorten the sales cycle and could lead to larger margins.

Your USP is not a tag line on your advertising. It is a tangible benefit supplied to a specific prospect in a specific environment. Don’t look for the magic bullet. Look for an arsenal, a smorgasbord of objective tangible benefits that can be used as the situation dictates.

Defensively speaking, look at your competitors USP’s and be prepared to demonstrate how your product can provide the same benefit. It won’t make your product more attractive, but it will reduce the FUD factor.

Selling in the 21st Century

Selling has changed considerably in the last 10 years. Start-ups have embraced this change because they have to. Older companies are just starting to understand it. This change in driving business, has been brought about to a large extent by the movement away from the concept of “Web 1.0” to “Web 2.0”. The major difference in these two concepts is the Web 1.0 was a more traditional push-pull approach. The idea was to attract eyes to your website and then provide value. This is an electronic form of print advertising, except that there is a lot more real estate to use and a wider geographic distribution. Web 1.0 didn’t fundamentally change sales methodologies. Prospects were attracted to the website, were then pre-qualified by filling out a form and passed to sales as a lead.

Web 2.0 changes that dynamic. Web 2.0 is interactive. The website visitor can change the content by commenting on it. They can add their own spin. Two prospects can debate benefits and add insight for each other. Many Web 2.0 demonstration sites allow the viewer to interact with the demo by inputting their own data. They can have a dialogue with the presenter if there is one. Fundamentally, a prospect can experience the first 2 or 3 steps of the sales cycle without engaging a live person. When the lead gets to sales, the prospect is much more informed and qualified.

Using blogs, twitters and wikis as part of the marketing and sales strategy has become more commonplace. Letting the marketplace create marketing content through interaction provides deeper insight. Sales has to adjust to this new medium. As the prospects and client collaborate on new ideas and approaches, Sales has to keep up. No longer can they rely on marketing material printed annually for their source of information. Smart sales people have their own blogs and twitters. They are engaging their market to build relationships and find opportunities. Social networks can provide new knowledge on personalities, backgrounds, priorities. Reference selling through social networks is a growing tool.

Hiring salespeople with a defined rolodex and an aptitude for cold calling is old school and ineffective. There are just too many screening processes available to the prospect. The average buyer in inundated with spam and junk e-mail, not to mention telemarketing calls. They have e-mail filters and incoming call identification to help them manage unwanted interruptions.

Times have changed and companies must change with them. Take the time to reevaluate the interaction between clients, marketing and sales. Look for sales people who have embraced the new technologies and know how to use them to drive performance. Have they defined their social networks and do they know if and how these networks affect their performance.

How to Manage Sales Performance Change

In my business I deal with this almost daily. Either a sales person or an entire organization is not performing up to requirements and change has to take place. When I was a new sales manager, and I consider this to be the first five or so years, I tended to approach these problems with more or less brute force. There is a sales methodology in place and I needed to enforce it. I had several years of sales and sales management experience and that experience taught me to go back to the basics and build upward. In time I finally noticed that the irregular results I was achieving while managing change was stressful to me and unacceptable to the organization. Typically a new sales manager brings their bag of tricks and when they run out they move on to the next job. So, I started to look for a better way. I needed to understand how to implement sustainable change.

There are several high brow concepts that need to be understood to effectively manage sustainable change in any organization and this is especially true with sales. The first concept is Gleicher’s Formula for Change. All of these are found in psychology textbooks, but still have relevant practical use. Basically Gleicher states that the discomfort level that exists, times the vision of how things could be better, times a finite plan to make it happen, has to be greater that the resistance to change for change to effectively take place.

D * V * F > R

The second is the concept of Psychosclerosis and Homeostasis both developed by Abraham Maslow. Genetically we do not embrace change at the subconscious level. We dig in our heels and prefer to stay the way we are. Johannes Schultz developed the theory of Autogenic Conditioning around this concept. The last concept revolves around the Reticular Activating System (RAS). That is the part of the brain that is constantly filtering information for the subconscious.

This is a lot of book learning just to attack a simple problem of getting someone to perform at a higher level. But to sustain change over time these concepts have to be understood and applied. Now this is enough material for a book, so a blog will not give it justice. The one sentence answer is this:

The person or system that must be changed must be able to visualize the benefit of change at a subconscious level, and they must understand a clear plan to implement lasting change to embrace that change will happen. Then there must be a repeatable reinforcement methodology in place to overcome the natural desire to stay the way we are.

There are as many ways to accomplish this as there are personalities. Experience managers know how to connect the dots in a lasting and meaningful way. Less experienced managers will go through their bag of tricks until they are no longer effective and then they move on. Never really understanding why change is not permanent.

Human beings, by changing the inner attitudes of their minds, can change the outer aspects of their lives. William James (1842 - 1910)

Driving Mechanisms and Critical Events

This subject has come up a lot lately. It’s interesting how many people in sales don’t understand this very simple concept. If there isn’t a change agent going on in the business, change will not happen. If this change is not tied to a drop dead date, it will not happen in a predictable timeframe. When you say it out loud is sounds intuitive. When I talk with clients and they are lamenting about long sales cycles, unpredictable forecasts and why their sales people can’t close business, my first thought goes to these two concepts. Let me explain further….

Almost every professional sales person has now figured out that they have to solve a business problem to stand a chance of closing the deal. They understand that uncovering and validating the pain is important, if not critical. The top echelon even goes as far as to have the prospect validate the value of the pain in their own words. They get the solution to belong to the prospect by having them articulate the need and the value to themselves of meeting that need. Mike Bosworth in “Solution Selling, Creating Buyers in Difficult Selling Markets (McGraw-Hill 1994) defines a prospect as a buyer who has admitted a problem. So you understand the buying process, you are dealing with the decision maker, they have a budget allocated, you have not only uncovered the business pain, you have gotten the buyer to admit to it and put a value on it. Deal closed, right!

Why is the deal still in the pipeline three months from now? How do you overcome objections when there aren’t any? The checks in the mail.

The reason is there are no driving mechanisms and/or critical events to cause the decision to be implemented. Your prospect, the CFO or the VP of Purchasing has never processed the paper because there are other pressing issues or no issues at all. In James Clavell book “Shogun” (Cornet Books 1975), Lord Toranaga constantly reinforces to Blackthorne that no decision should be made until it has to be made. The driving mechanism might be a face-off with his arch-rival, but there is no attack; therefore no critical event. The same is with sales. There must be a driving mechanism such as a reorganization, critical financial crisis, or new business process. Something which causes the potential buyer to consider alternatives to what they are doing today. This is what got you to the presentation and the proposal, but it won’t close the deal. Too many times we get this far and assume the deal will now close.

This is where understanding the critical event becomes extremely important. If I am going to forecast this sale, I had better understand when and why it’s going to close. If my solution is part of a process required to achieve a goal, I need to work backward from the launch or introduction date of the new process to create my critical event. “If we cannot start implementation by next week, we cannot make the launch date of May 17^th.” “If your new plant is scheduled to go into production on July 1^st, then we need to….now”

If they want to improve your AR process or their sales process, but haven’t actually committed to when they must accomplish it, then I can’t forecast the close date on my deal. If they want things to be better, but don’t have a time line for making them better, then I can’t predict when they will buy, if ever.

Even when the pain is real and the cost of the solution is less than the problem, without something driving the buyer to implement the solution, there is no deal. This is why opportunities linger in the pipeline for months and then fad away…..

My Biggest Rant

This is a business blog. The concept is to present ideas that would help business people improve both their businesses and themselves. Over the past few weeks I have been bombarded with social issues that just scream for comment. The underlying dismay voiced by most of these self proclaimed pundits is that the United States has serious problems and someone needs to step up and solve them. That someone typically isn’t the writer. What are some of the issues?

1. The United States Ranks 96^th out of 140 countries on the Global Peace Index according annual survey commissioned by Britain’s Economic intelligence Unit. (Great Britain is 49^th ). Two of the major factors are the highest number of homicides per 100,000 citizens and the fact that we have the highest incarceration rate of all the countries surveyed.
2. Gas prices are at an all time high at almost $4.00 per gallon. Gas is $8.35 in Great Britain and more than $6.50 in most of Europe, according to AA Motoring Trust, when our gas prices were still at $2.87. Whereas we consume 1.6 gallons per day per person as opposed to most of Europe at .5 gallons per day per person (Economist View )
3. The U.S. economy is on everyones agenda. The unemployment rate has hovered between 4.5% and 5.2% since 2005 according to the US Department of Labor. The Consumer Price Index, less food, has been constant since prior to 2004. With the increase in gas prices and the fact that most food is transportation sensitive the CPI including food has risen significantly. A Gallup Poll suggests that 85% of the population thinks economic conditions are getting worse.
4. The Dow Jones Index has risen from a low of 8235 in September of 2001 to 12823 today. That’s a 55% increase in six plus years. A dollar invested in 2001 would be worth $1.55 today. Real average earning during that same period grew from $497.35 per month to $607.49. That’s a growth of 22%. Factoring for inflation the earnings growth was only 2.3% from 2001. So the stock market is outracing real earnings.
5. Household debt is 133.7% of household disposable income in 4^th quarter 2007. Households spent 14.3% of disposable income to service debt in 2007 compared to 13.0% in 2001.

What’s the underlying business concept to all of this? It’s responsibility. The problems we are facing are problems we can deal with on an individual basis. If, and it’s an incredibly big IF in an entitlement culture, we all take responsibility for our part of the problem, it solves itself.

Number one on the list is dismal. Twice as many citizens were killed in the state of California during the duration of the Iraq war then were killed in that war. Several points scream out to me…

1. This is just one state in our union. The needless death toll in our own back yard is staggering.
2. These people neither volunteered, were skillfully trained, nor took an oath to die, they just got up in the morning thinking they would make it through another day and didn’t.
3. There is no outrage from the public like there is for the war. We have come to believe this is acceptable.

I visit prisons every year. We can’t afford to continue to build prisons at the rate we are currently building them. Something has to change. I suspect the real reason is that we don’t expose this like the war, is we might feel somehow responsible for not doing our part. Because it happens all around us, we might be asked to actually take action to prevent it. The war is a long ways away and we can’t possible impact the outcome, so we vent and rage for someone else to take action.

The problem with rising gas prices is not a matter of the government reducing taxes, but modification in our social norms. Not an easy task to accomplish. We are Americans and the constitution says we can have and do anything we like as long as it doesn’t impinge of the freedom of others. So I want to drive a big car anytime and anywhere I want and the government is responsible for assuring I can continue to do this. Capitalism is great as long as I get what I want at the price I want. If not, the government needs to step in and mandate my happiness. This is just self-center goofy thinking. Only desperate times will change this. It’s an unfortunate aspect of human nature. We have lived the high life so long we expect it to last forever without our sacrifice. As China and India continue to grow their economies, this problem will continue to grow. It’s not a matter of our government solving this. Free enterprise and right thinking by the general public will solve it, if we choose. If not we will be doomed to second class status in the world economy.

The last starts with the very basic premise of spending less, investing more. If we take control of our spending and invest the difference two things happen. First we capture back 14% of our disposable income used for servicing debt. Second our investments grow faster than real earnings. As individuals we have more. More importantly we invest in businesses that provide jobs and stimulate the economy. Unemployment goes down, employee demand goes up, wages rise, we invest more and the cycle continues.

It's all about individual responsibility. Something we have total control over.

How do you catch wild pigs?

There was a Chemistry professor in a large college that had some exchange students in the class. One day while the class was in the lab the Prof noticed one young man (exchange student) who kept rubbing his back, and stretching as if his back hurt. The professor asked the young man what was the matter. The student told him he had a bullet lodged in his back. He had been shot while fighting communists in his native country who were trying to overthrow his country's government and install a new communist government.

In the midst of his story he looked at the professor and asked a strange question.

He asked, 'Do you know how to catch wild pigs?'

The professor thought it was a joke and asked for the punch line. The young man said this was no joke. 'You catch wild pigs by finding a suitable place in the woods and putting corn on the ground. The pigs find it and begin to come every day to eat the free corn. When they are used to coming every day, you put a fence down one side of the place where they are used to coming. When they get used to the fence, they begin to eat the corn again and you put up another side of the fence. They get used to that and start to eat again. You continue until you have all four sides of the fence up with a gate in the last side. The pigs, which are used to the free corn, start to come through the gate to eat; you slam the gate on them and catch the whole herd. Suddenly the wild pigs have lost their freedom. They run around and around inside the fence, but they are caught. Soon they go back to eating the free corn. They are so used to it that they have forgotten how to forage in the woods for themselves, so they accept their captivity. The young man then told the professor that is exactly what he sees happening to America.

There is a lot to be said concerning government entitlement programs, not all of it is bad. But I want to address the entitlement programs in our lives, the ones that we create for our own benefit. They are the short cuts in our lives that at the time seem expedient, but later sap us of the drive end energy to push through much harder issues.

In college I took four semesters of calculus. Four mind numbing semesters of proving theorems that were printed in the back of our CRC. It was a slow and repetitive process that didn’t seem to have a goal other than to make us work harder. Once I got to Differential Equations and Applied Differential Equations I understood why. This process of proving what had already been proven provided me with the framework to analyze much more complex ideas. The hard work in the beginning prepared me for the work ahead. I could validate amazing concepts that previously seemed impossible to comprehend. (Calculating the center of mass of an irregular object) Many students never got to “Diffy Q” to see the fruits of their labor.

How many times are we so busy multitasking that we lose the lessons that eventually imprisons us in mediocrity? We are looking for a free lunch thinking that it will always be free. The problem is that it will be free as long as you never want to be more than you are. We slowly lose our ability to think outside the box. Psychosclerosis sets in. We become so convinced that new ideas won’t work, that we lose the ability to move forward and grow. We start to love the fences around us. They bring us comfort. We start to believe we will always be able to provide for ourselves and our families using only the skills, talents and knowledge we presently have. We can somehow start to coast to the finish line. I see this happening to younger and younger generations

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Continually strive to stretch your imagination and knowledge. Go through the pain and sometimes boredom required to grow. Never stop. It will pay tremendous dividends for years to come.

"A government big enough to give you everything you want, is big enough to take away everything you have." - Thomas Jefferson