Monthly Archives: May 2013

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Sustainable Business Growth: The Sales-Engine-Model

Businesses certainly all strive for reliable, sustainable growth- and it is usually well within the reach of most of them. Simply put, it requires developing a process driven, quantitative, highly measurable sales process (emphasis on process) no matter what the industry or market situation. A number of organizations today are using the term Sales Engine to describe this tried and true model. It’s not new, it does work, and the tools for implementation are much improved and getting better every day.

The first introduction for me to the sales engine model was in 1990. I had just taken a position as the VP of Sales & Marketing for a subsidiary of Eastman Kodak. We were introducing what was at the time a revolutionary new system for digitally composing pages for publication. It was the first “open system” platform of it kind. We had very high expectations for market penetration and our business plan called for us to place more systems in our first two years than the current market leader. We had to hire, train and equip a new sales force in less than 12 months, and beat the competition in system placements in year one. Dock Square Consultants had been hired to help us build a sales engine that turned out to be the critical success factor for us in achieving the lofty goals. More on this later…

sales engine

The classic “database centered” sales engine has 3-parts.

  • Activity Generator where inbound and outbound marketing activities generate leads through marketing communications programs, or even through “cold-calling” using all available channels
  • Prospect Database that contains the target market database for the product or services
  • Sales Funnel that is used to manage the sales process once a “lead” is generated.

Regardless of the tools employed (websites, CRM, e-blasts, blogs, etc.) in the sales engine, the basic model remains the same. It is the rigor, quantitative measurement and process-management of the sales engine that creates sustainable growth.

In 1990, we did not have websites; and CRM’s were very large, expensive and cumbersome systems. We used the tools available to us at the time. They were rough but adequate- it was our company-wide commitment to using the sales engine process that made the difference, not the tools. Everyone on the customer facing side of our operation was involved, especially the sales team. We made it a condition of employment for the sales organization, and we also made it profitable for them in the commissions and bonuses as they achieved results.

There was predictability in the model. We could pace lead generation, we knew when we needed to hire more sales or more support staff, we learned the profile of the best prospect and used that to update the database, we could effectively forecast sales, schedule installations… all because we measured and managed each step of the process. We knew where the bottlenecks were before they became bottlenecks. Dock Square set up the engine, but our sales leaders managed it- everyone owned it.

We started with a database of prospect names that were then pre-qualified by a telemarketing team equipped with a qualification questionnaire. Before we placed a sales rep in a territory, we generated 50 highly qualified leads in the territory to help the rep get started, and then continued to drive lead generation. We measured every step in the sales cycle at weekly sales reviews, and posted results of each of the sales rep’s activity and results. We set up a “war-room” and measured all activity not just wins and losses , because the right activity leads to sales. Of the 12 very-senior-sales exec’s hired only one fell out due to lack of performance in that first year.

In case you are wondering, we met our sales goals in both the first and second years of operation. We were so successful that many of our team were promoted and moved onto larger areas of responsibility- myself included. We carried the model with us into our new assignments because we believed in it and because it worked.

While there are always many variations on the sales-engine theme to accommodate the uniqueness of different businesses, the model remains the same. As I said earlier, the tools are certainly much better today which makes implementation more cost effective and faster. Sustainable business growth creates value. At the heart of growth, is a strong functioning sales engine.

Market Focus: Get It and Keep It

Market Focus is about knowing, listening and responding to the customer. It’s about understanding the trends shaping the market. Without it, companies can easily drift into a more internal focus over time.

The good news is that Market Focus can be learned or relearned within an organization that has the right C-Level leadership.

Why is this important? Because Market Focus can make or break a company. Here’s one story about how focusing on the customer helped re-make a business:

Simplex_Time_Recorder-4In the early 1980s, the Simplex Time Recorder Company (STR) recruited a “turn-around” management team. The goal was to restore profitability and growth to this iconic company that invented the time clock almost 100 years earlier. One of the challenges this team faced was resurrecting STR’s fire alarm and building control systems. It was the largest segment of STR’s business, but it was under heavy attack by competition.

The General Manager leading the turnaround sent a team on the road to talk face-to-face with customers to find out what the company had to do to restore its competitive advantage. He told the team to stay out there until they had the answer. He promised that after the 5th or 6th in-depth visit discussing issues with customers, they would have the answer and be allowed back in the office. He was right.

The team found that the fire alarm and building control systems functioned extremely well when properly installed. But the problem was that contractors felt the systems were “impossible” to install. The wiring schemes were far too complicated. The first graph shows the ratio between installation cost and equipment cost for a typical installation. Far too much money, and far too much time, was spent in the installation process because of the wiring complexity. The electrical contractors were going crazy trying to conform to the wiring specifications and very often the Occupancy Certificate for the entire building was held-up while the complex fire alarm wiring was debugged. As a manufacturer of these systems, STR concentrated on making what they thought was the best equipment, and not on the total cost of installation. They weren’t looking at things through the customer’s eyes.

After listening to several electrical contractors tell this story, the answer was clear. STR had to look not just at its product but to the entire process of installation and support to determine how they could make systems easier to install and maintain.

Here’s the interesting part- STR went back to the contractors and asked if they would pay more money for a system that was easier to install. The contractors said: “Where do I sign?”

So let’s see how this works- STR can regain its competitive advantage, increase the share of the Total Installed Cost (or put differently increase the price of its equipment), and dramatically increase customer satisfaction if it could solve the installation problem. All of this was learned by listening to the customer- not bad.

STR did in fact find a way to reduce installation cost. They did this by embedding small microprocessors into the detectors positioned throughout the building. Doing so allowed for virtually random wiring because the detectors could identify themselves to the control panel instead of being wired in a specific order. The devices were called “smart detectors”, and they took advantage of the technology trend in integrated circuitry.

But the real story is the part about knowing the customer and their problems, listening to the customer to truly understand the problem, and then responding to the customer with a solution. Revenue per unit and market share for the company both increased dramatically- mission accomplished.

The road-to-success is paved with these stories of Market Focus. Unfortunately, the road-to-disaster is paved by those who lack it.

Turn It Up… Not Just Around- Part 2

“So what did you do?” was the question from last week’s post on the turn-around of the Technology Company. There were 3 Phases to the plan, all of which followed the Analysis, Actions and Results model portrayed in the “pyramid diagram”. Here is what we did…

Phase 1: Triage- 90 Days. The triage effort involved taking the steps necessary to get the business on firmer financial footing. There were 3 primary actions taken in this phase.

prioritiesChanges to the management team were needed that largely involved reassignment of senior staff, although there were a couple key new hires and terminations as well. The second action was to right-size the organization and consolidate facilities- always a painful step, but necessary. The third action was a very important one, and that was to impose financial discipline and financial decision-making. Previously, major decisions were made without financial analysis or justification. The newly appointed CFO took this one on successfully.

Phase 2: Market Focus- 18 Months. MBWA (management by walking around) is a technique I have used for years. I rarely heard the word “customer” in my MBWA analysis in the early days. So it was not difficult to see that the company was too inwardly focused and not market-focused.

dart boardPhase 2 then became the Market Focus phase. We took two significant actions in this phase- the first was to align our business in the way customers saw us and not how we saw things internally. We aligned as many of our resources as possible around our customer segments. In doing so, we improved our sales dramatically, but we also learned what was missing in our products and services. We immediately launched product development programs to strengthen our offerings- this took more than a year to accomplish. But, once we did, sales improved further yet.

Phase 3: Channel Focus- 12 Months. As we analyzed our situation in Phase 2, it became clear that the channels we were using to go to market, primarily OEM channels, were not delivering the kind of results we expected and were never going to. The channel partners lacked our goal-oriented sense of urgency and passion.

goalsWhat had to be done was obvious on the one hand, but very difficult to do on the other- we had to better control our channels to market. The action we decided upon was to acquire a significant channel player with global sales and service capability, and a strong market presence.

What allowed us to pull this off was our financial strength. By imposing financial disciplines in Phase 1, and with strong management and focus in Phase 2, we built a war-chest of cash that we could deploy for strategic acquisitions.

Certainly there is a lot more to this story. But, the 3-phase approach, coupled with the recurring use of the Analysis, Actions, Results methodology is the story. Within 3 years the company had its management processes, products, channels and focus clearly set.