The Phoenix Effect
Looking back at the previous economic downturn can shed some light on our opportunities during the current economic crisis. When the dot com bubble burst a few years ago, two companies weathered the resulting economic storm much better than could have been predicted.
Cisco Systems was at the heart of the Internet economy. Being the leading provider of networking equipment not only put them in the heart of the internet growth cycle; it also put them at the higher end of the risk spectrum when the cycle retracted. After the dust settled, however, Cisco only had a 15% drop in revenue from 2001 to 2002; better than most of the internet dependent market. This feat of leadership could easily go unappreciated until it’s compared to the competition: 3Com and Nortel both suffered revenue drops of over 40% during the same time period.
In a parallel story, Dell Computers also rode the internet growth cycle with impressive results. However, when the rug was pulled out, they too recognized a slowing demand for their flagship products; personal computers. But their retraction and subsequent growth profile looks even more favorable. Dell’s revenue dropped 2% year to year during the retraction, but rebounded over 13% in 2003. In contrast, Compaq experienced a 21% decline.
So the question is, what did Cisco and Dell do to avoid the significant calamities that other companies suffered?
To answer this question, let me start with what we didn’t see.
Sales Weaknesses Revealed
When the economy is healthy, and demand is up for new business solutions, a variety of sales skills usually suffer from neglect. This is not a critique on any particular organization; it’s simply a matter of which effort brings the highest return. In Cisco’s case, during the run up of the Internet market surge, demand was so strong for their products that their sales teams rarely engaged customer stakeholders outside of the customer’s IT organization. Related to this, they also rarely took the time to gain an understanding of the customer’s business challenges or help the customer contact justify the purchase with return on investment discussions. Their time was best spent educating their customers on the latest products, negotiating contractual commitments, and managing the quarter end closing drill to higher and higher levels.
Dell was no exception to the lack of sales discipline across the board during the internet run up. The “1-800” business model which created a multi-billion dollar enterprise developed strength in marketing advertising, catalog distribution,custom product configuration and fulfillment. The demographic of their sales force was largely recent college grads that entered a culture dominated by a clock, visible in all call centers, displaying the time a customer was placed on hold while waiting to order. Responsiveness was valued most of all.
Like the first example, skills like gaining access to key stakeholders, developing financial justifications, or creating need for complimentary products were not highly valued skills at Dell during the run up. Nor were they necessarily needed.
When the market retracted, both organizations recognized that passively riding out the storm was not an option. Without delay, Cisco implemented a leadership driven campaign to adjust their sales behavior in light of the slowing market conditions. When they engaged my services, they were well versed in their strengths and weaknesses.
They knew they needed to break their dependency on the I.T. sponsor and gain access to the business unit “real” customer to overcome the general spending freeze that a large number of their best clients imposed. They also cited the lack of skill in selling other products and services outside of the main switch and router product lines. In other words, they felt that they were leaving money on the table by not selling other products that might be applicable to the customer’s situation.
But now they had the motivation to take action on the situation.
With the help of many senior executives in the company, we jointly created an initiative to sell internet business solutions directly to the business unit management of their customer targets. The rationale was that even during spending freezes, a company still spends money. They simply do a more diligent job of prioritizing where they spend their money. Cisco’s job was to create need for their solutions with the business unit decision makers that were in the best position to prioritize a purchase of networking solutions.
The initiative was very successful. The early wins included a 300% increase in the post meltdown pipeline. And they cited many examples of large opportunities that came out of the ashes of spending lockdowns.
On Dell’s side, they were also equally adept at describing the skills that were not valued during the good times. They realized that their culture created a very responsive organization that was lax in need creation skills. Previous attempts to introduce other products were described as lackluster, at best.
I was asked to help Dell execute on a leadership campaign to integrate a wider array of new, related products into their sales opportunities. One of the key results of the campaign was a dramatic increase in the “attach metric”; a measurement used to track the sales of servers, storage and services. Currently, these other products now account for over $14 Billion in additional revenue, contributing over 23% of the total $61 billion in 2008 revenue. Not a bad payoff for an initiative born out of crisis.
The Devil is in the Details
The summaries of the leadership success of Cisco and Dell in their rebound efforts following the popping internet bubble may sound like it was easy, but both cases required a significant amount of leadership to produce a return on their respective initiatives.
Here’s a high level list of the types of leadership steps they implemented to produce a major change in sales behaviors:
o Develop the Vision
o Brand the initiative
o Train the troops
o Define early wins and communicate success
o Re-align the environment
o Remove Obstacles
o Upgrade the team
For the remainder of this article, I’ll expand on each item, however, initiatives of this complexity can consume far more paper for the overall plan that this short article will use if you decide to print it out. For this reason, I’ll footnote this section with an acknowledgment that I will probably under serve each topic simply because the length and scope of this article isn’t intended to concisely relay the particulars. Please refer to our other white papers on sales transformations for more information.
Develop the Vision: Although it seems like a simple task to diagnose the situation and communicate a solution, there are several opportunities for the process to get off on the wrong foot. Most important is to ensure that enough of the senior management is bought into the initiative to support the transition. According to sales people, one of the key reasons they resist a change in behavior is when they detect their superiors don’t walk the talk.
An effective visioning process should include a group effort with the entire senior sales leadership contributing to the definition of the objective, problem statement and solution strategy. It’s very common for an initiative to die for lack of buy in from the same leaders that would be responsible for overseeing the execution of such an initiative.
Another critical aspect of the visioning step is to communicate the vision in terms that represent the company as well as the individuals who will be called on to make changes in their daily behavior. If the sales person on the street does not understand why they should change, they will find ways to passively or actively resist the campaign.
Lastly, it’s all too easy to under communicate a leadership initiative. In his ground breaking book, “Leading Change”, John Kotter estimates that failed leadership initiatives under communicate by factors of 10, 100 or 1000. One memo is not enough to support the communication requirements of a behavior changing initiative.
Brand the Initiative: There is a significant value in branding the initiative with a catchy phrase, icon or other simple labeling option like an easy to remember acronym. If the branding is effective, it will conjure up the entire vision statement each time it’s used so that the participants are regularly reminded about the objective, the problem and the solution without having to reiterate the details.
Train the Troops: Behavior change begins with awareness, but the recipe also requires a skill development component. Where ever possible, use training that not only conveys the concept, but allows the participants to develop the new skills with relevant exercises. When using outside resources, it’s important to ascertain their ability to customize the skill development exercises to your products, your customer situations and your sales skill challenges.
Early Wins and Communicate Success: If the objective for the initiative is something that will take some time to achieve, it’s critical to define some early wins that indicate your team is on the road to success. For instance, if your objective is to increase revenue growth by 15%, the results may not show for a quarter or more. Pick a set of early wins that indicate you’re on the road to success; perhaps a pipeline increase or forecasted orders for a new product for example. Select something that can be achieved sooner than the overall goal, but is truly a stepping stone on the way to success. Then take the time to acknowledge, communicate and celebrate the success.
Realign the Environment: When a company matures over the course of many years, the systems, processes, and cultural norms form to support expected behaviors. If new behaviors are identified as crucial, the environment should be analyzed for realignment opportunities. Examples might include forecasting terminology or milestones, marketing messaging topics, communication formats, meeting agendas, previously acceptable cultural norms and more.
Remove Obstacles: Although the topic above is a form of obstacle identification and removal, in this section I’m referring to people obstacles. Every significant transformation of behavior will have its fair share of detractors; people who don’t want to change, and will passively or actively resist the change. In some cases, they form coalitions, groups of people resisting the change and working together to undermine the initiative. The critical action for the leader of the initiative is to identify the detractors, attempt to neutralize their stance, win them over, or remove them. Sales people are very adept at “waiting out” leadership initiatives. Nothing short of a direct focus on this issue will provide any relief.
Upgrade the Team: There are two facets to this concept. The first is to communicate expectations for required skill levels, provide development opportunity, measure, and deliver feedback. In other words, upgrade the skills of the team. The second facet incorporates the process of replacing members who are incapable or unwilling to improve their own skills.
Skills and Leadership
In both the Cisco and Dell situations, the skills that were not valued during a growing economy, but became especially critical during the retracting economy included:
o Creating need for other products.
o Accessing influential stakeholders outside of the infrastructure group.
o Uncovering impact to help the customer justify and prioritize the purchase in economic terms. Sometimes referred to as ROI selling skills.
o Preparing proposals that speak for themselves. A price quote might suffice in a growing economy, but a persuasive business proposal is required to pass the muster of a penny pinching sign off authority.
But skill development alone is not enough to change behavior. Consider all of the forces that work against the individual who needs to change:
o Customers push the seller to present product capabilities, limit access to decision makers, and may not understand the impact enough to create their own justification.
o Many company’s have product training that does just that, providing training on product features, not customer usage situations that would benefit the seller in creating need, building justification and establishing executive level credibility.
o The sellers own comfort zone is an impediment to change, especially if has worked for him or her enough to make their quota goals in the past.
o If your website and key marketing collateral are hyping product capabilities, but you want your sales teams to call on executives, there is an opposing force in play.
The list is actually longer, but the point is that leadership is the critical ingredient in causing sales behavior to change. More specifically, leadership is required to help the team overcome the obstacles that stand in the way of changing behavior. Creating and communicating the vision, role modeling expected behaviors, defining early wins, removing obstacles, navigating resistance and revamping the team are all leadership skills. I often suggest that skill training is less than 10% of the requirement to cause behavior change. When contrasted with the other leadership activities required to bring about change, the actual training event is a small portion of the overall pie.
So if your team could benefit by augmenting their selling skills during this difficult market, this article is intended to encourage you to consider the leadership planning and execution that will be required to help them benefit from the change. A majority of failed sales transformation efforts can be traced back to underestimating the scope of the leadership contribution required. Just remember that behavior change is 90% leadership!