jump to navigation

Deep in the complexity of the middle game, keep focus by imagining the Press Conference and concentrating on the “power of one”. April 29, 2014

Posted by bernardlunn in Deal-making, Enterprise Sales.
Tags: , ,
add a comment

This is # 5 in a serialized book called Enterprise Sales for the Digital Age, delivered here as 10 blog posts. You can get value from each in isolation, but if you really need to understand enterprise sales, reading the whole series is worthwhile.   You can buy an improved version, neatly printed and bound, for $6 from Amazon.  

Deep in the complexity of the middle game, keep focus by imagining the Press Conference and concentrating on the “power of one”.

Maybe you think that daydreaming sounds rather self-indulgent. Perhaps this is some new variant of the old “think positive” stuff?

Actually this is a very practical strategic selling tool. It is also a powerful visualization tool, similar to what great athletes use. 

Enterprise sales are complex and it is often really hard to see the wood for the trees; it is like the middle game in chess. Deep in the middle of the sales cycle, you are probably juggling internal politics, resource constraints, demo and proof of concept technical issues, pressure from partners, competitive moves and customer politics – and that’s all before lunch!

You need something to keep you focused on what really matters. You need to know what is the one overriding motivation for your decision-maker. This is the story that your decision-maker will be announcing when the deal is done. She will present why her great initiative will have a big effect on one of the company’s key strategic objectives and why she was smart enough to select the one vendor that was ideal for the project.

Unless you know what this story is, you are shooting in the dark.

Even big, complex enterprise sales come down to the personal motivation of the ultimate decision-maker on your project. Customer politics can get in the way when the personal motivations of different managers are pulling in different directions. However if you know the personal motivation of the big boss (and if you are reasonably confident the big boss will stay in power long enough to get the deal signed) you cannot go far wrong. You can then focus on helping the boss align the pesky, politics-playing managers to the big objective.

To cut your way through the complexity of enterprise sales, you need to simplify. Select one person who is the key decision-maker. Understand what is important to that decision-maker. Select the one big reason why he/she wants to do this project. Select the one reason why he/she will announce your company as the right vendor.

There is tremendous power in keeping the focus to one. Find one decision-maker, one business-driver and one vendor selection-driver. When you see multiple answers, keep drilling and imagine that press conference. The CXO will only have one minute to describe the vendor and why he/she chose you, so there cannot be lots of reasons.

Imagine yourself in the buying shoes. Remember when you have had to make an important decision and how you finally made up your mind. What you will usually find is that it was one simple reason and everything else was incidental. It was probably not a feature that hooked you; the anti-lock brakes on the BMW are good, but is that why you want to buy a BMW?


Even more powerful is the realization that there is often one precise moment when you win or lose a deal, even if the whole sales cycle is 6 months or more. My first job out of college was selling encyclopedias and you could see the moment you won or lost a deal in their eyes; it took me a while to understand that the same is true also in complex big ticket deals. Everything before that is preparation to sell and everything after that is managing the process to closure. Think about decisions you have made and how you made them. There might have been lots of research to get you to a certain point and then a key point when in your mind you think “this is it”. Then you may still spend lots of checking to make sure you are doing the right thing, but you want the answer to be positive. You are looking for verification not problems.

Selling is a people game where intuition is valuable. You will know when somebody is convinced. It is less about what they say, but how they say it, the expression in their eyes, their tone of voice, their body language. No, that will not fit into a CRM system but that is a criticism of CRM systems, not a criticism of the value of intuition.

In some sales, you may not be there when that key moment happens. This is not ideal, but it is the reality in many enterprise sales. At the crucial moment of decision, your decision-maker is probably sitting with the one manager he/she holds accountable for this decision (the “recommendation-manager”). Again, there is one key recommendation-manager, although lots of other managers may be involved in the research and diligence stages.

Although you may not be there at that critical moment, you must have a very close relationship with the manager who is doing the briefing and you and he/she must have total alignment on the key objectives.

In long sales cycles, take time to imagine the press conference. Use this to get clarity on the “key ones” – one decision-maker, one business driver and one vendor selection driver. When it all gets mind-numbingly complex – KISS and focus on those “key ones”.

Athletes do this kind of visualization. You can see downhill ski racers with their eyes shut before leaping out of the starting gate, their hands tracing the path they will take, their mind going over every bump and corner to the finishing line. It is hard to understand theoretically how this kind of visualization works, but the empirical evidence from athletes is clear.

It is also great practical reality check. Great sales people know that qualification is a process, you do it every day not once at some point prescribed in a sales methodology handbook. Great sales people do this because they understand that sunk cost means nothing. It does not matter if you have sunk 6 months and lots of company resources into a sale; that has no bearing on whether or not it will close. Circumstances can change. Or you may have misjudged it earlier. If you cannot visualize that Press Conference, if you don’t have a firm handle on the key ones”, it may be time to pull the plug.

 Next post in series.

Once you are through the door, forget the sales process and focus on the buy process April 28, 2014

Posted by bernardlunn in Deal-making, Enterprise Sales, SAAS.
2 comments

 

This is post # 4 in a serialized book called Enterprise Sales for the Digital Age. You can get value from each post in isolation, but if you really need to understand enterprise sales, it is worth reading the whole series.   You can buy an improved version, neatly printed and bound, for $6 from Amazon.  

When you get through that door, your job is testing your theory. You created a theory about why this specific customer should be a good prospect. That is what I described in the last post, the proactive lead generation process. You now want to find out if that theory works in practice. You are trying to find out if your product is a fit to your customer’s need. Your prospective customer is also trying to figure this out. This is a cooperative process between buyer and seller; neither of you wants to waste time if the fit is not good.

Product fit to market is the key step in the entrepreneurial journey. Product fit to customer is the key step in the sales journey. It may sound strange to think of a single customer like a market, but enterprise means really, really large customers. Selling to an enterprise as big as Google, Citibank or Pfizer is as much of an opportunity as selling to tens or even hundreds of small firms.

Your goal is to become an enterprise-wide approved vendor. That is a ticket to 8 figures (tens of millions of $) per enterprise per year. Clearly, that takes time and is done in steps but, if you are in the enterprise game, that is your mission.

Once you have your foot in the door, you have to prove that your product is the right fit for that customer’s need. This is the complex, lengthy middle game where your CAC (Customer Acquisition Cost) metrics can get so damaged that investors conclude that you have “a great product, but a lousy business”.

The enterprise sale is notoriously long and expensive (high CAC), but there is far too much emphasis on sales cycles and sales processes. As a vendor you should be focused on the buy cycle and the buy process and how to gently nudge it in your direction. That is the only way to get your CAC to a level where your venture can scale its profits.

The buy process typically has four steps:

1. Senior management recognition that there is a problem to be solved. This recognition usually evolves slowly through conversations between multiple stakeholders. “Wait ’till you hear the screams” before you engage seriously; you must know that the pain is acute, that this is a heart transplant kind of problem, not a problem that an aspirin can solve. Start-ups have to get involved at this stage, even though on normal sales qualification criteria you should wait until there is a budget for an approved project. Incumbents can afford to wait, they will always get invited to bid. Start-ups cannot afford that luxury. You have to be involved now, not only to get on a list of vendors which is relatively simple. What you have to do now is influence the requirements. This is where great sales people can make a difference at this stage. Great sales people have a deep understanding of three things a) the customer pain point b) your technical advantage c) your incumbent competitor’s weakness. At the intersection of that venn diagram is the key to the sale. You have to find the “innovator with clout” (see earlier post on leads) who has the background to understand it when you say “the only way you can fix xxx (customer pain point) is with yyy (your technical advantage)”. The innovator with clout can then carry that message to stakeholders. If you manage to insert your technical advantage as a requirement and make sure that enough stakeholders are aware how important it is, then you will be able to block the counter attack from the incumbent when they wake up to the fact that you are a threat. Note that all this critical selling is done well before the customer would be recognized as a “prospect” or even “suspect” in most sales methodologies. The key to doing this well is to cast your net very wide and qualify ruthlessly, a subject that we cover in the next post on having the courage, patience and smarts to “wait until you hear the screams”. Think of this stage as planting seeds. It should not take too long, most seeds won’t make it but you certainly cannot hope to reap later if you don’t seed at this stage. Note also that this is the time when you can build senior management relationships; as soon as you at the next step, you will be managed by more junior managers whose job it is to manage vendors and “keep them in their place”; incumbents always win this game. 

2. Somebody is given the job of defining a solution. This includes coming up with a list of potential vendors and a budget. This is where most “leads” come from and this is why experienced sales people are wary of these leads. Often the vendor list just needs a couple more names. Maybe they already have Incumbent Vendor A and Innovator Start-up B. They want to see what else is out there. They just need a list with say 3 or 5 vendors, because that’s what their buying process requires. You can jump in at this stage and win but the odds are against you. This is before a budget is allocated. It can take a long time for a budget to get allocated. That may never happen for many reasons – the problem just goes away, they find a non-technical way to solve it, an incumbent vendor may show a just good enough solution based on an incremental module or version upgrade. This is where rookie salesmen are buried. The person that the rookie is talking to may be sincere or may be just getting some “suckers to the table” to fill out a list and make the buying process look good. Even if the person who is tasked with contacting the vendors is sincere, he or she may simply not know that the deal has already been tied up by another vendor. It is possible to “come from behind” and win in these situations, but the odds are stacked against you; so be cautious of leads that come from this stage of the buyer’s process.

3. Vendor evaluation & selection. By this stage you are down to a short-list, typically with 2 to 3 vendors. This is when you have to prove what you have claimed. This is a three part process for the seller:

A. Demo to formally insert your secret sauce into the recipe. Informally you have done this far earlier, at the first step of the buy process as described above. This can be a generic demo, there is no cost to customize at this stage. The good news is that all the “buyer self education tools” such as Freemium make this less expensive. Using online demos, Freemium and free trials, customers can self-educate before sales and sales support have to put in time. The buyer is investing time. The seller has the option of investing resources to use a human to give the demo. This is a qualification decision. Technical founders and technically driven sales people mix a demo with a training course, feeling the need to show every feature. This is where you need a great sales person working with a great sales support person. Remember what your mission here and KISS. You have to create a enough stakeholders who tell their peers “I just saw xxx, we would be crazy to opt for a solution without xxx, its the only way we can fix yyy (pain-point)”.

B. State what you have.  Now is when you describe that secret sauce. If you have done your work earlier, the requirement your competitors have to respond to will be precise and only you can meet those requirements; this is why the customer will take a risk on an unknown start-up. You have to do this in such way that the incumbents cannot easily “put a tick in the box” with a BS response. So don’t just say “real time approval process” but be as precise as “approval process in less than 1 second on data from three external sources”. This will typically be in a proposal. It maybe in response to an RFP. This may become an addendum to the contract, so it must be accurate. Technical or product management folks must do this, sales people have too much motivation to exaggerate and many sales people are brilliant at communicating face to face but terrible at written communication.

C. Prove that you have what you say you have. There are two ways to do this. One is the Proof Of Concept (POC). This is a customized demo that you leave with them for some time. It is usually free. It is like a free trial, but you put in the effort to customize your product to their needs. This costs money, so make sure the prospect is properly qualified before you invest this time. You must know budget, timescale, decision team, competitors before investing in a POC.

The other way to do this is via a Paid Pilot. This gets used for real and the buyer pays – unlike a POC. This is a real sale, but it is a small investment by the buyer. As the vendor, you look at this as the first Land in a Land & Expand strategy. Tactically you may choose a Paid Pilot instead of a POC or do POC and then Paid Pilot. The decision is complex and situation-dependent and is covered at the end of this series under FAQ.

The prove phase is where you can leverage technology to reduce CAC. Tools that make auto discovery of requirements and facilitate quick customization can help lower CAC.


4. Negotiation & close. This is the subject of a future post in this series.

The buying process can take a long time, a minimum of 6 months and often longer than 12. When you are deep in the middle game of chess, it gets horribly complex. It is the same when you are trying to prove product fit to an enterprise’s requirements, there are too many variables to manage. The next post gives you a way to focus and KISS.

Deep in the complexity of the middle game, keep focus by imagining the press conference and concentrating on the “power of one”. 

How to get enterprise leads that generate the right Customer Acquisition Cost (CAC). April 27, 2014

Posted by bernardlunn in Deal-making, Enterprise Sales.
Tags: , , ,
3 comments

This is post # 3 in a serialized book called Enterprise Sales for the Digital Age. You can get value from each post in isolation, but if you really need to understand enterprise sales, it is worth reading the whole series.   You can buy an improved version, neatly printed and bound, for $6 from Amazon.  

Winning sales is not enough, you need to win them efficiently so that your CAC (Customer Acquisition Cost) is low enough. The right lead generation is key to this. In ye olden days, most B2B leads came from outbound telemarketing or inbound via advertising or readers surrendering an email address when they downloaded a White Paper. Nowadays we have SEM, SEO and Social Media, but the lead to sales process for enterprise sales is still fundamentally broken. Most enterprise sales people tell you that the leads generated by marketing are no good. This is an age-old debate (often acrimonious) between sales and marketing. Marketing say; “You never follow up properly on our leads”. Sales respond: “If I spend all my time on your rubbish leads, I won’t have time to sell”. Bad leads cost money. Many lead vendors and B2B publishers sell on a cost per lead basis and many marketing departments are measured on this metric; so there is an incentive towards quantity rather than quality. Quantity in this case costs twice over – bad leads cost money to acquire and even more for sales people to “follow up” on. The traditional marketing led leads funnel works reasonably well in traditional red ocean markets where the buyers are shopping for something specific. This is very different in blue ocean markets where the solutions have not yet formed into products that sit within a defined market space. Hearing the screams of pain does indicate that a market will form around any vendor who can fix that pain; but don’t confuse that scream of pain with intent to purchase (which is what lead vendors sell), it is much earlier in the funnel. In blue ocean markets, it is better to hire thought leadership sales people who proactively hunt for the few people in the few companies that will generate big results. The proactive process goes something like this: 1. Pain analysis. This is your long list of potential target accounts. This is your bottom up TAM (Total Addressable Market). Good enterprise sales people are entrepreneurs who look for great products in big fast growing markets. You may give the sales guy a vertical or geographic limitation, so they will do their own TAM within those limits. You need thought leaders who understand the trends in their vertical and geographic market, who know what is driving the CXO agenda in the big target accounts. Is it likely that the pain you aim to solve is keeping your prospects awake at night? That is your Pain Analysis. 2. Competitor Lock-In. You don’t want to obsess about competition, but you must rule out the targets where the competition have a lock on the account. For example, big old vendors will usually have something in their feature set which competes with your product, at least on paper. If you see a company that always buys from Vendor X, even their most shabby products, delete them from your list. It does not matter that you have convincing evidence that your product is in a different league, if it is clear that the target company won’t pay any serious attention to this evidence. Your aim is to win business with the right CAC, not to be a dead hero. 3. Leverage analysis. This makes it into shorter list. You are looking for unfair advantage that you can leverage in this specific customer. This must have something to do with your technical secret sauce. Don’t think that a Board level relationship is an unfair advantage, it is only table stakes. The sales skill is connecting the dots between a) the generic pain point that all customers have and b) your technical secret sauce and c) the specific example of the generic pain point in the target enterprise account. 4. Who are the “innovators with clout” in these accounts? You need innovators who will pay attention to a startup pitch. Most people won’t pay attention, they are too deeply in the legacy box. However you can waste a lot of time with innovators who will moan to you about how stuck in the mud their employer is. That is worse than useless, it is a start-up killing time sink. You need innovators with clout. Usually this means they have delivered business value through innovation before, so the powers that be will pay attention when they come up with another innovation (the one based on your company). Some of this you can do as online research. Thanks to social media, we can do a lot more research like this than we used to. Not only is the buyer much more prepared before they meet the seller, the smart seller is also far more prepared than used to be the case. However, no matter how much research you do “no theory withstands contact with the customer”. Your aim when you get through the door is to validate or discard your theory about that customer. That is what we cover in the next post. Within the context of that proactive, intelligent lead generation approach, it is easier to see that the chances of a lead landing on your desk that happens to fit those criteria is vanishingly small. A good sales person will ignore all the leads that don’t fit those criteria. Within that context, question the wisdom of using an inside sales team as a lead generation engine. Imagine a junior script-following inside sales persons getting that “unicorn” (an innovator with clout in exactly the right target account) on the phone; yep you just blew it with that unicorn. How do you get through the door to those people? It’s simple. Network like crazy, ask for referrals, talk to lots and lots of people. You have to cast a very wide net, while being laser focussed on the few special fish that you want to land. The other critical piece of getting the right CAC, is what you say when you get through the door, what are your first words? When I say “first words”, these could be in an email, on a phone call or in a meeting. This is like your Elevator Pitch to investors; but don’t just copy that Investor pitch. Investors want the macro picture, customers want the micro picture. Its all about “what can you do for me right now?” The opening moves between experienced buyers and sellers is where each is trying to figure out: Should I invest any more time with this person?”. These opening moves now follow a social media dance along these lines:

  1. Ping on a social network, initiated by buyer or seller. The ping follows whatever protocol is appropriate to the social network in question (writing on Wall, liking, retweeting, connection request etc).
  2. You check each other out online. This is the first “should I spend any time on this person” decision. For example you get a ping from a CRM vendor and don’t respond because you are already committed to vendor X. Or it might be a new tool that complements vendor X for a problem that is relevant, so you do a bit of research.
  3. Some socially appropriate persistence by the seller. This can include old-fashioned more intrusive methods such as email and telephone (now that time has shifted from phone to email, it is surprising easy to reach influentials by phone, they welcome a relief from email). Most sales people impose limits on how many times they will follow-up, it becomes counter-productive quite quickly.

The next post describes what you do when you get through that door, how to focus on the buy process to get the right CAC.  Next post in series.

Is your strategy enterprise-first and is your market red ocean or blue ocean? April 26, 2014

Posted by bernardlunn in Corporate Strategy, Enterprise Sales.
Tags: , , ,
1 comment so far

This is # 2 in a serialized book called Enterprise Sales for the Digital Age. You can get value from each in isolation, but if you really need to understand enterprise sales it is worth readinging the whole series.   You can buy an improved version, neatly printed and bound, for $6 from Amazon.  

There are four market strategies:

1. Consumer. Any selling will be done by inside sales teams sitting in call centers. This series does NOT address consumer markets.

2. SMB (Small Medium Businesses). Very few companies get the SMB market right. It is hard. Each small business looks at the purchase as critical to their company. They want to take as much time as a large enterprise in making a decision, want the same amount of support and hand-holding; the problem is that the $$$ at the closing are a tiny fraction of that enterprise sale. There are only two ways to sell to SMB. You either a) scale back an enterprise solution or you b) scale up a consumer solution. The latter, scaling up a consumer solution, has usually worked best. This series does NOT address SMB markets, although some vendors selling to the top end of the SMB market can sell based on an enterprise approach and scale using channel partners.

3. Enterprise-first. This series addresses solutions that are sold to enterprises. The enterprise market is usually given a title such as Global 2000 or Global 5000 (as Fortune 500 is too small a market and is too US centric). The Global 2000/5000 moniker is loose, it just signifies big. Some people use Fortune 100 or Global 100 to signify really, really big. Enterprise-first vendors are usually agnostic on cloud vs behind the firewall, they will implement whatever the cutomer wants. Enterprise-first vendors are usually also flexible on licensing, using monthly per user (like SaaS), or annual or perpetual based on some other usage metric. More importantly, Enterprise-first vendors focus on solving enterprise-wide solutions; from day one they aim to get a significant sized order that solves a significant problem for the enterprise. The end goal is to be a globally approved vendor within large enterprises, but one does not get there in a single step. Most startups use a “land and expand” strategy; you sell to one department or business unit first and then use that as an internal reference to get the next department or business unit. Then you are in a position to become an approved vendor so that other departments or business units find it easy to order from you.

4. Agnostic. Many vendors have adopted an agnostic approach. Products such as Box and Evernote can be used by consumers, SMB and within an Enterprise. This strategy has clearly been working well. You get enough traction within Enterprise one user at a time that the IT folks want to talk to you. This is when you negotiate volume discounts and implement features that help Enterprise IT to integrate your product with all the other products that they have. This is when you need enterprise selling skills (or sell your venture to a big company that has an enterprise sales team). The agnostic strategy works best in red ocean markets, whereas an enterprise-first strategy works best in blue ocean markets. Get clarity on this score before creating any kind of execution strategy. A “red ocean” market is an existing market. It is red because there is a lot of blood in the water and the sharks are circling. Full frontal assaults on red ocean markets (eg trying to sell 100% functional match against incumbents at 20% lower price points) almost always fail. VCs used to “throw money” at the problem, but no longer, it was a very expensive mistake. Red ocean markets are where an 80/20 strategy works. You sell 80% of functionality of the incuments for 20% of their price (ie for 80% less than the incumbents). This is where single feature ventures such as Box, Evernote or Yammer score. You gain traction one user at a time just like you do in consumer markets, ignoring the jeers and put-downs of the incumbents saying “it’s not enterprise-worthy”. A “blue ocean” market is a market that does not exist yet. That sounds crazy, why would anybody go after a market that does not exist yet? What I mean is that the market has not yet been blessed with a name by the analyst firms. It is not yet a “space” in VC speak. What does exist is a) a serious pain point and b) a disruptive technology innovation that enables a solution for that pain point. The beauty of a blue ocean market for startups is that it allows you to get established before the big vendors notice that there is a market. The best strategy in red ocean markets is to use product-driven marketing, using a consumerized product that gets adopted one click at a time. This is where you use Freemium and, if it goes viral you are golden. If you want to avoid ever employing sales people, get enough traction using these techniques then exit to a big incumbent. Or get enough one user at a time traction that the CIOs want to talk to you, raise a big round, hire a sales team to sell to the CIO and become the new incumbent. In blue ocean markets, you can bootstrap using modern tools and frameworks and the “three projects to a product” methodology: Project # 1: Sell a purely custom solution, get paid and learn. “Once means nothing.” Project # 2: Productize a bit, turn specific features into configurable parameters. “Twice is coincidence.” Now you are ready to talk to everybody you can find who will tell you about their ideal future requirements. Project # 3: Build a product that fits those ideal future requirements. Sell it and license it like a product. “Three times is a trend.” Now you are ready to launch, tell the world about your product, hire sales people, scale. If you choose the red ocean consumerized strategy, serious sales skills can be postponed until later and you may be able to exit before you need them. If you choose the blue ocean three projects to a product strategy, you will need serious sales skills – real thought leadership selling – from day one. The founder has to either be equally comfortable in a tech and a sales role or more likely the venture needs two co-founders, one tech and one sales.

Next post in this series.

Introducing Enterprise Sales for the Digital Age April 25, 2014

Posted by bernardlunn in Deal-making, Enterprise Sales, SAAS, start-ups.
Tags: ,
11 comments

This is # 1 in a series of 12 blog posts. You can get value from each in isolation, but if you really need to understand enterprise sales, it is worth reading the whole series. You can buy an improved version, neatly printed and bound, for $6 from Amazon.  

This series is written for technically-oriented founders of enterprise software ventures who need to hire & manage sales people and to hire & manage the people who manage those sales people. If you sell enterprise software for a living, you may also get value from thinking about how the game of sales has changed since you went on those early sales training courses; the Internet changes everything, including sales.

The techniques for enterprise sales were created in the years when companies like IBM and Oracle were rising to prominence. These techniques worked very well. They were encoded into books, CRM systems, training courses, methodologies and the daily work of countless sales executives and sales managers. If you wanted to close complex, big ticket enterprise sales you used these techniques.

Then something happened. That something is called the Digital Age, the convergence of mobile, social, real time and big data. This resulted in techniques such as SaaS,  Freemium, Marketing Automation, Growth Hacking and Viral Marketing. It seems like it is time to throw out the old and bring in the new.

Not so fast.

Ignoring the new techniques of the Digital Age is not smart. Nor is it smart to use those techniques alone and ignore the wisdom of the past that created the enterprises that dominate our landscape today.

My aim with this book is to marry the best of the old with the best of the new. There are other people thinking about this, the entrepreneurs who are creating the Salestech ventures that I profiled in a series of posts on ReadWrite.

I have created this book as a series of blog posts, a serialized book in the tradition of Victorian novelists like Dickens who originally published each chapter in monthly magazines. (I did this before with the Startup 101 book that lives at ReadWrite). The content will always live here online thanks to WordPress. If you want the convenience of a PDF copy that you can print, please send me an email.

There are six reasons why many entrepreneurs need this guide now:

  1. There is a Renaissance in Enterprise Software. Or as the VCs would say, “this space is hot”. Or to put it another way, Google, Facebook and Twitter sucked the air out of the indirect/ad-driven model for debt-burdened consumers, so lets get direct revenue from where the cash hoards are overflowing in big companies.
  2. It is different this time. Consumerization, SAAS, Freemium, social networking – none of these were around when the early enterprise sales guys were learning their game. Big enterprises are facing existential crises related to the twin challenges of digitization and globalization. That’s good news, there are plenty of problems to solve with tech. The bad news is, don’t expect to get attention/budgets selling the “same old, same old”. The Big Old Vendors have got same old, same old sewn up. Don’t extract a sales team from those Big Old Vendors and expect them to meet today’s challenges with today’s tools for your startup.
  3. Most entrepreneur’s sales skills atrophied during enterprise software’s decade in a coma. I call the last decade a “coma” in enterprise technology, because there was very little innovation, just big old vendors selling the same old stuff to the same big old enterprises in the same old way. Most founders in the last decade were developers who did not want anything to do with sales; who wanted anything that looked like Glengarry Glenn Ross? Although it is different this time, there are still some old-fashioned sales skills that few entrepreneurs can ignore. Not quite everything is different. This series adapts the timeless verities of sales to the modern world.
  4. Developer entrepreneurs need to be at least be Consciously Incompentent in Sales. Developer entrepreneurs are mostly Consciously Competent in development (good and always figuring out how to get better), but need just enough to be Consciously Incompentent in Sales (know what you don’t know so that you can hire well). That is why I keep each chapter to the length of a blog post; you don’t have time for a PHD dissertation on sales and our attention spans have become shorter thanks to the Internet. The aim of this series is to save you from being Unconsciously Incompent (the one fatal quadrant).
  5. Your product will not sell itself.  Even if you opt for a sales-lite (try it online) model, you may need to sell to channel partners and you may need to sell the first few customers yourself (“do things that don’t scale”). Even if a consumerized Freemium model is your foot in the enterprise door, you may later need to meet the folks who control the big budgets in order to scale that.
  6. Despite all the great marketing technology, the bottom of the funnel needs attention. Despite the revolution in consumer marketing that we see from inbound marketing and the scientific processing of leads through Marketing Automation, the impact on B2B has been light and the impact on the enterprise end of B2B has been virtually non-existant. The attention today is on the bottom of that funnel where leads become sales – or don’t.

I am not the only person observing the increased focus on sales. This is from Businessweek:

“In the past few years the number of sales programs at colleges and universities in the U.S. has exploded, according to the “Sales Education Program Landscape Study” done by the Center for Sales Leadership, run out of DePaul University’s College of Commerce. In 2007, courses in sales were offered at 44 U.S. schools, a number that jumped to 101 schools in 2011. Now 32 schools offer a major, minor, or concentration in sales, up from nine just four years ago, the study found. Even MBA programs are starting to get into the game, with 15 now including sales courses as part of their graduate programs in 2011 and six offering an MBA with a sales concentration.”

The first four posts describe the key stages of the sales cycle. These posts follow the enterprise sales process, which is like a game of chess

Beginning: how you get leads, your opening moves.

Middle: proving product fit to that enterprise’s need

End: closing, getting signature and cash.

As a tech entrepreneur you may have to do some of this yourself. You will certainly have hire people to do this. It is useful to understand what the people who you are hiring will be doing.

The key management concept is CAC – Customer Acquisition Cost. You aim is not just to sell but to sell with a low enough CAC. If your CAC is too high, investors will conclude that “it may be a good product, but it is not a good business”.

We start at the beginning, like the opening moves in a chess game. How do you get leads? More importantly how do you do this cost effectively:

How do you get Enterprise leads that generate the right Customer Acquisition Cost (CAC)?

Then we focus on what you do once you have made contact and you are in the sales process.

Once you are through the door, focus on the buy process to reduce your Customer Acquisition Cost (CAC)

When you are deep in the middle game of chess, it gets horribly complex. It is the same when you are trying to prove product fit to an enterprise’s requirements, there are too many variables to manage. This post gives you a way to focus and KISS.

Deep in the complexity of the middle game, keep focus by imagining the press conference and concentrating on the “power of one”.

Finally, nothing happens until you negotiate and close. There are so many books, courses, seminars and theories about negotiation. Much of it “does not stick”, because in the heat of the moment you need to make instant decisions. One way for negotiation tips to stick in the mind is to relate them as stories, particularly stories where somebody screwed up really badly or did something clever to gain advantage in a difficult situation. These are the the subject of:

Negotiation Ninja Says: Tips on Closing from those with scars on their back

We then move onto management subjects. The first in the management series tackles the toughest question:

How to hire the A Team sales guys

The next post describes how to manage these rain-makers. How do you manage enough to meet company objectives without “crimping their style”:

How to manage a sales team in the era of bring your own everything

Is forecasting a science or a black art? It is certainly something that keeps CEOs of startups up at night, a lot of resource allocation (what a CEO does) depends on forecasting. Yet most forecasting systems are “garbage in, garbage out”. This post recommends a different way of thinking about forecasting.

Forecasting: Keep all stakeholders on the same page by rewarding accuracy

Before starting at the beginning of the sales process, the first post asks a clarifying strategic question:

Is your strategy really enterprise-first and is your market red ocean or blue ocean?

 

The Small Business IT Revolution Will not be televised April 22, 2014

Posted by bernardlunn in Uncategorized.
Tags: , , , , ,
add a comment

We all love a David vs Goliath story. We want small businesses to prosper. Our economy depends on this. We want David to win, but today it looks like the score is 2 Nil to Goliath:

1 Nil: access to low cost finance (Fortune 500 can borrow at Libor Plus 2, SMB is more likely to get
Libor Plus 6 if they are lucky to get any financing at all).

2 Nil: low tax rate. The effective tax rate for Fortune 500 is around 12.6% vs the 19.8% that small businesses pay on average according to the SBA. That 7.2% difference is massive when you are scrabbling to be price competitive while maintaining reasonable margins.

The macro numbers reflect this. In 1954, Fortune 500 companies accounted for only 1/3 of GDP, but by 2000 that share of the pie had grown to 2/3. In those cold statistics lie a lot of Mom & Pop shops and family farms and shattered middle class dreams. Yet 50% of jobs are still in small business, so this matters to all of us.

2 Nil is tough, but it is not game over and small business will bounce back because of IT. Think about the iterations of IT and how they affected small vs big businesses:

– Mainframe/Minis: David did not get a shot at all. All the advantage went to Goliath.

– PC: Wordprocessing and spreadsheets empowered small business, but before the Internet, the PC was only marginally useful unless attached to servers and there the playing field was still tilted to Goliath.

– Web 1.0: only BigCo (or developer hobbyists or VC funded startups) could create an online presence.

– Web 2.0: we could all now write as well as read, but all we did with this new power was play and spend, we did not use this new capability to earn a living.

– Web 3.0: I define Web 3.0 not by any single technology innovation but rather by the ubiquity of digitization. Earlier IT was primarily about reducing G&A costs; if G&A is 10% of costs, even a big reduction in costs is not that big a deal. Today, when most of the 7 billion people on this planet have mobile phones, selling digitally is a big deal; the CIO has become the CMO because IT is about revenue acquisition.

Let me give three examples from my personal experience of hacking IT from components of the programmable web to create capability that was unthinkable for tiny new businesses even a few years ago:

1. An annual sporting event. In the first year we had zero budget for both IT and marketing. Never having written a line of code in my life, I was able to hack together a solution using a mix of WordPress, PayPal and EventBrite. It was not perfect, but I can already see the tools and features I will use next year (eg replacing PayPal with Stripe).

2. A sports training business. This has more admin complexity than the annual event, so I will be looking into really simple accounting systems such as Xero that play well with online marketing tools, so that we get as close as possible to straight through processing.

3. A niche electronics product used in sports training. Thanks to Arduino, building the first prototype can be as low cost as building a web site. That is a big deal, because consumers still expect to pay for a physical device even if they expect a digital online service to be free. Add Crowdfunding sites to get products into the hands of early adopters and we have a real revolution. This can enable hundreds of thousands of niche businesses.

A lot of the buzz about SAAS and Consumerization refers to the enterprise market but the real revolution is in small business.

SAAS reduces CAPEX, but enterprises don’t worry about CAPEX, they are loaded with cash, they worry about OPEX. However, small business worries about CAPEX; their cost of capital since the financial crisis is far too high. So SAAS is a big deal for small business.

Consumerization is a game-changer for vendors, but – viewed from the enterprise IT buyer’s point of view – it is simply out of control spending driven by employees using whatever they want and expecting the enterprise to pick up the tab at the end. However, for small business owners, who do IT in their spare time, consumerized digital services (no training costs or IT overhead) is a total game-changer.

Here is what I mean by “will not be televised”. The small business IT revolution will not generate stories about superstar entrepreneurs like Steve Jobs, Jeff Bezos or Mark Zuckerberg, it will be the untold stories of millions of small scale entrepreneurs. Nor will those stories, even in aggregate, be reflected properly in the sorts of numbers like GDP or Unemployment that are beloved of the economists and financial traders that we see discussing the stock market on TV: these data points reflect an Industrial Age which is passing.

Integration is key to this small business IT revolution. The first phase of this revolution is driven by tools that are designed like consumer services, they do one thing and only one thing very well. That is fine for free agents and entrepreneurs in the really early stage of a new business. Simplicity and low cost rule, we can use “digital sneaker-net” (aka copy & paste) for integration. However, as the business grows from one or two people working part time to a “real” business with employees, integration becomes key. Fortunately the Programmable Web with RESTful APIs makes this easy. So companies that work a lot with small business, like WordPress and Nimble, offer built-in integration with the other services that their customers want. If you used WordPress in your “ramen days”, will you desert it for an enterprise CMS when you grow? Or will WordPress continue to evolve to serve your needs and partner with others to fill in holes they don’t consider core? I would bet on the latter. If your favorite services don’t already work with each other, there are now services such as Zapier where you can integrate services yourself without writing a line of code.

Technology is also addressing one of the biggest issues for small business – working capital. If you asked most small business owners what keeps them up at night, the most frequent response would be “working capital”, the money you need to pay the bills as you expand. Here again, technology is helping in three ways:

1. “Spare change in your sofa”. New services such as AirBnB and Uber help people generate cash from spare resources (such as a spare bedroom or a few spare hours per day or week). This is a big enabler for ramen startups.

2. “Disruptive Fintech” services that byepass the banks such as Peer to Peer Lending and Crowdsourcing. If the banks won’t lend and you don’t have a buddy on Sand Hill Road, don’t give up, these new services have moved beyond the cool idea phase to viable alternative sources of capital.

3. “Just in time supply chains for the rest of us”. Michael Dell became one of the richest men in the world by building the product only after a) the customer had sent the money and b) the component vendors had sent the materials needed to build the product. Thanks to this innovation, Dell got rid of the “curse of inventory” and always had positive working capital cash flow. Thanks to the real time web, this kind of real time supply chain is now possible for any company. This disruption, what I think of as real time supply chain for Mom & Pop, is still nascent. (I would love to hear from startups innovating in this space.).

It’s 2 Nil and Goliath is looking cocky, playing to the crowd, he does not notice David with his IT slingshot.

30 second view on #flashboys April 1, 2014

Posted by bernardlunn in Uncategorized.
add a comment

Only from reading an online excerpt – and many years selling tech to Wall Street:

1. Rollicking good yarn, reads well (as always with Lewis).

2. Front running should be illegal no matter how it is done. For some bizarre reason front running using HFT tech is not illegal today. This book may help change that.

3. HFT kills day traders but is only minor loss for long term investors. Don’t think Buffet is worried by this.

4. Consumer loss of confidence in markets due to perception that they are rigged is the big issue, undermines a free enterprise society.