Monthly CEO Challenge for September 2010
The World Isn’t Flat: Planning for a New 2011
by Jane Adamson :: September 7th, 2010
Can you imagine being alive in the late 1400s when Christopher Columbus *didn’t* sail off the edge of the world? After a lifetime of believing the world was flat, would you readily accept that it was round? Or is it possible that you might react as many others do when faced with a new reality …by ignoring, denying, or actively denouncing the new belief?
The World is Different
I’m bringing up this history lesson because fall is the season for strategic planning, and 2011 presents tremendous opportunity and possibility for those companies who embrace the new realities of our changed marketplace. While competitors hold onto old ideas and dream that things will get back to “normal,” agile, creative companies can leap ahead. In fact, Scott Allen, a writer and technology entrepreneur, summed it up nicely when he wrote, “The future is uncertain, and uncertainty is the playing field of the entrepreneur.” Nimble companies (perhaps like yours!) have a huge advantage over older, slower, and/or larger organizations that are heavily vested in the past.
So during this planning season, tap into your company’s entrepreneurial roots and celebrate 2011 with a positive outlook and a real understanding that change = opportunity.
Embrace Change and Win
So how can you recognize and capitalize on new opportunities in 2011? In other CEO Challenge articles, we’ve written about the importance of “thinking like a Chief Revenue Officer” and developing a “revenue strategy” versus a corporate strategy. Those two mindsets embrace the five strategic planning concepts I’ve outlined below, so I encourage you to review them (share them with your leadership team, too!) and incorporate them into this action plan.
Action Plan:
Embracing Change During Your 2011 Planning Process
1. One way to adjust your company’s thinking is to change your vernacular to paint an image of a future filled with purpose, meaning, and relevance.
The right language can make all the difference in the minds of your team and your customers. For example:
| CHANGE | TO |
| Selling our new medicine | Saving lives |
| New pricing for travel packages | Helping dear friends re-connect |
| Cutting costs | Building a new growth model |
| Customer mistrust | Using social media to communicate honestly |
| Selling | Having a conversation |
| Positioning | Deep specialization |
| Reducing channels | Supporting the most passionate partners |
| Selling bio-diesel plants | Offering self-sufficiency to villagers in Africa |
2. Put the customer front and center.
Today, companies that are most deeply in tune with their customers will beat those companies that aren’t. To keep your customers top of mind, help your company visualize and hear customers at all times:
- Post pictures of your customers all over a wall in your conference room
- Before making any decision, ask the question “What would Fred say?” or “Why would Fred care?”
- Bring a stuffed doll to the conference room and address the doll as if s/he is the customer whose passionate approval you need
- Break your planning sessions into separate meetings with assignments to talk with customers about your idea before coming to the next session
3. Make sure every member of your team can answer this question: “What’s the problem we solve that no one else solves?”
Answering this question requires an understanding of the high-level business problems your customers face. It does absolutely no good to talk to your customers about features and benefits and cost savings if you don’t understand the broad business issues they are dealing with every day. What you *think* is the problem may just be a symptom, or you may be off the mark altogether.
This question is typically very difficult to answer because true customer problems are frequently unspoken, or only identified through a deep understanding of how your customers use your product/service.
In addition, problems also exist on a personal level with your buyer:
- The problem may have to do with ease of use: “They’re a hassle to work with.”
- The problem may have to do with confidence: “What will my boss think if I recommend this firm over another?”
- The problem may have to do with a fear the customer has: “I don’t know much about this topic and I don’t want the salesperson to think I’m not competent.”
- The problem may have to do with a risk the customer doesn’t want to take: “What would happen if my bag gets lost en-route and I have to look good in that important meeting tomorrow?”
- The problem may have to do with packaging: “I don’t want people to think I bought something cheap”
Don’t talk features and benefits … solve problems.
4. Get real about execution.
A few years ago, Rick and I facilitated a planning session that concluded with the development of a detailed execution plan. During a casual lunch break, one of the participants commented that a man named Joe was working in a remote office for the next six months.
Rick and I looked at each other and said, “How can that be the case? We just agreed that Joe would drive an important initiative that requires his presence in this office!”
Silence.
It turned out that the team had agreed Joe should drive the initiative because he was the only one with the required skill level. They simply ignored the fact that Joe wasn’t truly available to execute in the way the company needed. They assumed it would all be fine. Unfortunately, that is never the case.
Don’t make the mistake of planning if execution isn’t taken seriously and realistically. That means assigning responsibility, allocating resources, establishing timeframes with regular milestones, identifying and removing obstacles, aligning support requirements, setting metrics, and tracking progress.
Weak execution demoralizes the team and creates a culture of non-performance that cannot be sustained in the market we’re in now.
5. Start now. Doing this right takes time.
Have you noticed that life is speeding up at an alarming rate? It was just a short time ago that companies created five-year plans. No longer. A long-term horizon is now two years and planning takes place in smaller and smaller increments. Six months ago, Arizona companies had never heard of the immigration bill known as SB1070. Now it’s affecting every business in the state.
Planning is a continual process, not an event. Your company can start taking steps RIGHT NOW, even before you’ve launched your official process for 2011. For example, RIGHT NOW you can:
- Start recruiting the right players so they have time to come on board and get fully up to speed
- Talk with more customers to identify true customer problems
- Start marketing early enough to generate leads
- Test critical assumptions that your company is making
- Start tracking new metrics
- Train all members of the revenue chain
- Test new messaging
Conclusion
Believe it or not, “revenue strategic planning” should be FUN! It’s all about finding the right mix that will propel your company’s success in the niche you choose to dominate. You’ll talk with more customers and prospects, learn more, try out new ideas, and identify what works.
Don’t abdicate your strength of agility to the larger players. Don’t keep waiting for a “recovery” to the old ways. Never before have we seen such a confluence of forces come together to take small companies to great heights.
Welcome to 2011!
What do you think? Please share your thoughts and experiences with us here!
Monthly CEO Challenge for August 2010
The Opportunity Cost of that Special Deal
by Rick McPartlin :: August 3rd, 2010
Based on the conversations I’ve been having recently, I know you’ll recognize this scenario. Your star sales rep has uncovered an interesting revenue opportunity, but it’s off strategy for your company. It might require more customization than you typically provide. Perhaps it’s a new industry for you, or you’ll need to hire new people with different skill sets in order to fulfill it. It may also be a test program with promises of future business if the stars are aligned.
Whatever the case, during difficult times, a CEO is more likely to say yes to these kinds of deals — typically called “bluebirds” because they’re beautiful but very troublesome. After all, it’s revenue, right? Absolutely, and revenue is precious right now. Perhaps this bluebird is really a symbol of a real market trend, so you have to pay attention.
BUT … there’s also an opportunity cost. When you just accept new business reactively, you’re no longer driving your strategy forward. Without strategy, your company won’t be aligned toward specific goals. And when you remove alignment, you replace it with chaos.
So this new off-strategy bluebird deal brings in two things: 1) Some revenue and 2) Some chaos. When the deal is over, the revenue disappears. And guess what? The chaos stays.
So how do you decide whether the opportunity is a real market trend that you should pursue or a bluebird that will do more harm than good?
Opportunity analysis
You don’t need me to tell you to start out by carefully analyzing the opportunity. The first step is to thoroughly understand WHY this company is asking for this solution. As you evaluate, here are some of the things you should keep in mind.
First, is the market really telling you about a different way to create value for customers, or is this a one-time deal? If this is a common problem, other companies in your niche will also experience it. Or you may have discovered a problem in a new niche.
Second, is there a gap in the market? Why has the company come to you to solve this problem? Are your competitors unable to handle it? Why or why not? You may have an expertise that the market is finally recognizing. On the flip side, maybe all of your competitors had good reasons to turn the opportunity down.
Third, how large is the niche, and what would you need to do to compete and win? If you’ve determined that the market is asking for a new solution, size the opportunity. Then decide what your company needs to do to win new business and dominate the niche.
Now consider the costs
The first thing you should evaluate is the cost of failure. Frankly, if you’ve never done it before, there’s a good chance you’ll screw it up. That failure will affect customer relationships, market perceptions, and employee morale.
What about differentiation? When you stray from your brand and core competency, you risk losing your differentiation, which in turn confuses your customers and employees. For more on this topic, check out Jane’s article “What are you selling?”
Bluebirds also create margin pressure because, more often than not, they force you to build a cost model that isn’t scalable. If the deal seems to offer incredibly high margins, be careful … there are always significant hidden costs.
Ultimately, chaos is the most devastating result of strategy deviation. Companies that can’t stick with a strategy encounter problems with misalignment, teamwork, morale, revenue growth, profits, branding and much more. We talk more about the Cost of Chaos here.
Finally, let’s not forget opportunity cost. If you take this deal, you may be investing precious resources in a project that isn’t a great fit instead of pursuing one that is.
Solution
To ease the analysis, I tell CEOs to think about matching up the deal to the existing strategy and infrastructure. Here are the specific questions I’d ask.
Action plan - questions to ask
1. Survival: Do we truly need the deal to survive?
2. Strategy: How far off-strategy will this deal take us?
3. Branding: How far is this deal from our brand and offer?
4. Niche(s): How far right or left of our defined target niche will this deal take us?
5. Problem solved: How far is this project from the problems we normally solve?
6. Expertise: How deeply do we understand the language and needs of this new area? Do we even know what we need to know?
7. Upside: Exactly what is the upside, and what’s the probability that we’ll realize that upside?
8. Cost: What are all of the hard costs and timeframes for each?
9. Investments: What structure / infrastructure will we need to execute this project without sacrificing our brand promises?
10. Buyers: Are the buyers the same buyers we deal with now, and is that an advantage or disadvantage for us in the short-term and long term?
11. Competitive positioning: What do we gain competitively if we succeed and what would we lose if we fail?
12. Tactical execution: Do we have the skills and staffing to execute, and what impact will the project have on them (financially, expertise, opportunity cost)?
13. KPIs: How will they be impacted and how will that affect the company’s progress toward short- and long-term goals?
14. Channel conflict: Do we have partner or channel overlap that makes this deal risky or safe? How do partners feel about the opportunity?
15. Assumptions: What are the key assumptions we’re making, and what risks do we face if our assumptions are wrong?
16. Exit: If we’re preparing for a transaction, exit, valuation or ESOP report, does this deal have any impact?
Conclusion
It’s never easy to turn down a revenue opportunity, especially if the deal may lead to greater opportunities in the future. The key is to instill discipline in the review process so that your company can be confident pursuing the deal or, if necessary, turning it down.
Have you found yourself in this situation recently? What did you do, and did you make the right decision? What other variables did you include in your analysis? Please share your thoughts and experiences with us here!
Monthly CEO Challenge for July 2010
8 Ways to Listen to Your Market
by Jane Adamson :: July 6th, 2010
Look OUT, not IN! If you’re following our CEO Challenge articles, speaking or consulting work, you’ve heard this mantra a lot. More often than not, answers to your most important business questions aren’t inside your organization; the answers lie out there with your customers. As Betsy Morris wrote in her excellent Fortune Magazine article The New Rules, “No business can afford to focus its energies on its own navel. An inward-looking culture can leave firms vulnerable in a business world that is changing at a breakneck pace.”
Tough questions
We constantly stress how you must understand what’s important to your market. What problems are they facing? How is your firm REALLY doing at solving those problems? How do they make decisions? What’s the image they have of your firm versus your competitors? How much value do you really bring? How consistent and predictable is your service? Do you know what your customers wish you did better? And so on.
You’ve all been very eager to follow through on this strategy. As a result, there’s a question that we’re hearing with more frequency and urgency: “How do we gather this research?”
The big question: How?
Fortune 500-size companies, especially those that sell to large consumer markets, spend a great deal of money on market and customer research. They hire expensive firms which employ the latest technology to delve into the minds and buying habits of various segments. They’re armed with statistics, mounds of research data, complex software, and teams of field operatives in the effort.
Small and mid-size companies, however, often don’t have the resources for expensive research, or they may feel that their markets are too small to warrant a formal research program. Are there smart techniques you can use to listen to your market without breaking the bank?
Solution
To answer this question for this month’s Challenge, Rick and I talked with many of our own customers and colleagues including Tim McPartlin, the EVP of Lieberman Research Worldwide. Please enjoy their insights below!
ACTION PLAN: 8 WAYS TO LISTEN
1. Have your own staff talk with, record, track and segment specific conversations with current and past customers on a regular basis.
The danger here is that it’s difficult for your own team to be truly objective. Thus, it’s easy to jump to conclusions based on a single judgment or an isolated incident. Yet you can protect the company from that danger and make these conversations valuable by keeping on-going records so that you can notice trends. For example, one customer complaint about your invoicing system may be a lone voice. Five customers saying the same thing in separate circumstances may be a shout from the mountaintop. Without good records and consistent feedback, you may not detect the difference.
Segmentation is critical so that you can understand and apply what you’re hearing accurately and better identify root causes, strategies and solutions for the right audiences. Common segmentation categories include:
- New/old customers
- High wallet share/ low wallet share
- Regular ordering/irregular ordering
- Different buyer types
- Different offers
2. Send out short (< 5 minutes) customer surveys via email or postcard to ask a few critical key questions, then follow up!
After each project, one firm we interviewed sends a short survey asking the highest contact to rate their performance on key criteria using a scale from 1 to 5. The firm tracks historical response rates and ratings for each question, and they immediately follow up with any client that didn’t rate them a 5. Why? They believe that a “4″ rating is significantly different from a “5.” In their view, if you want to dominate a niche, “good enough” (a 4) is not good enough.
3. Hire an objective professional to conduct phone surveys with select individuals – current customers, former customers, prospects, or companies in your niche.
By using an outside party, you’ll avoid injecting an insider’s inherent bias into the process. The survey should be about the industry and market in general versus your company in particular; it’s best if the customer doesn’t know who is sponsoring the survey.
4. Send an executive to regular 1-on-1 customer meetings to engage in creative, in-depth, strategic discussions.
There are many benefits to these meetings — information gathering, relationship building, and signaling the importance and value of customers to your organization. It also helps executives mobilize to prevent isolation and inward-thinking in your company.
5. Take advantage of inexpensive and easy-to-use online survey system (Survey Monkey, Zoomerang) to send regular, customized, anonymous surveys to specific audiences.
For example, you can ask:
- What is the experience with your company like to a first time buyer?
- How responsive is your firm?
- How many other companies does your customer use for the same product/service? Why?
- What problem does your customer wish you would solve for them?
- What is the primary reason your customer uses you?
6. Leverage your trade show participation by proactively meeting with your customers.
Most companies try to take some advantage of trade shows to meet with clients for golf, dinner or a cocktail party. Go further than that. Instead of just trying to sell at the show, set this goal: “What can we learn from our key customers and strategic prospects?” This is an excellent opportunity to talk about bigger business issues, so connect with senior executives to find out what their future looks like. Share with them your plans and discuss how their needs and your new developments support each other. Learn what else you can you do to improve their business. Test your assumptions about what they really value.
By learning about your clients’ big business challenges, you’ll better understand how compelling your offers really are. You can also uncover opportunities to add even more value through focus, process changes and/or new offer development.
We’ve written about the dangers of making assumptions and the necessity of testing assumptions that, if proven to be incorrect, could have a significant impact on the business. A neutral third party is often the best choice for such field verification testing. In field verification, a 3rd party actually talks with a select number of people in-person in order to learn about a specific issue. For example, this technique is frequently used for:
- Launching a new product or service. What value would the new service/product bring to a prospective buyer and what price would they consider reasonable? More importantly, what reasons do they have for not buying?
- Discovering why prospects chose not to buy or why a client left. Simple surveys will frequently point to false answers to this question. It’s easy for someone to answer that the price was too high or the need wasn’t there. However, the answer is frequently quite different and a false reading will cause a company to proceed with even more dangerous assumptions.
- Learning where true value lies. A common (mis)assumption is often made concerning what the customer does or does not truly value. Frequently, we see what we’ve termed “value creep” where companies keep adding “stuff” in the false assumption that it’s valuable to the client. In other cases, what a customer truly DOES value ( more likely in how something is done rather than what is done) is not understood, not adequately funded, or not expanded upon.
8. Post-mortem meetings are an excellent way to both deepen client relationships and to learn.
The objective of a post mortem is to sit down with all parties in a project and review what went well and what could be improved upon next time. The meeting should take place as soon after the conclusion of a project as possible while issues and experiences are still fresh.
As long as all parties come to the table for the sole purpose of continuous improvement, this methodology is highly effective and instructional for increasing value, reducing defects, and streamlining process. It also positions companies as partners and collaborators as opposed to vendors and clients.
Conclusion
What are your ideas for keeping on top of what’s important to your clients and prospects? Please join the conversation and share ideas and experiences with the other readers of the CEO Challenge.
Please share your thoughts and experiences with us here!
Monthly CEO Challenge for June 2010
What are you selling? The answers may surprise you.
by Jane Adamson :: June 8th, 2010
Pop quiz! Right now, right after you finish reading this article, go to each member of your leadership team and ask them this question:
What are we selling?
For good measure, write down exactly what you hear and from whom. Then, back at your desk, review the results. Are the answers:
A) Inconsistent?
B) Describing a stand-alone product (e.g. solar panels) or service (e.g. web design)?
If either (A) or (B) is yes, then the company has a problem.
How will customers understand?
Inconsistency, (A), is a major problem. After all, if the executive team can’t consistently define what you sell, then how on earth will customers or prospects do it?
If you’re in this boat, you have plenty of company. For example, when we engage with new clients, we send out a survey to the leadership teams that includes that question. And we almost always see vastly different answers. Some responses describe a product or service (“technology services”). Others offer a sound bite that seems appropriate (“end to end software solutions”) while others provide a vague value statement (“a path for lowering your overhead”).
No matter what you sell, customers probably have plenty of options to meet their needs. So if they’re not crystal clear on why they should choose you, then you’ve already lost the revenue game.
In addition to confusing customers, inconsistency also confuses referral sources and partners. Clients and colleagues often ask, “ Why is it so difficult to get referrals?” Well, one reason is that people only refer companies when they are clear about what those companies can do and for whom. If a referrer or a partner isn’t quite positive about how you can help someone, they’ll keep quiet and referral business will continue to elude you.
People don’t buy products.
It’s equally common to see quiz results that are dominated by descriptions of products and services. The problem here is that people don’t buy products. Instead, they buy offers. By that I mean that decisions are never made on the basis of the product alone; they’re made on a combination of factors that include what a company sells and how they sell it.
Here’s a simple example. Think back to the last time you purchased office furniture. The product may have been a desk and chair. But the decision on who to give your money to may have depended on a myriad of factors:
- Did the seller deliver?
- Was a refund available if the furniture didn’t look good in your office?
- Did you see the desk while shopping at a retailer like OfficeMax?
- Did the desk appear expensive?
- Did the payment terms work for you?
- How user-friendly was the website?
- What was the image the pieces conveyed? Did you want that image?
- And so forth.
Notice that many of these questions aren’t related to specific features and benefits. Instead, they consider ALL of the components of the sale – features, benefits and terms. We call this marriage “the offer.” Salespeople all too often behave and talk as though the features and benefits are the deciding factor in a buying decision, but it’s ALL of the pieces of the offer that count.
Customers don’t buy products. They buy offers.
ACTION PLAN
1. Understand what’s important to your customers.
A friend recently told me about a “fast pitch” competition in which startups had 90 seconds to pitch their companies to a panel of investors who rated their pitches. Interestingly, very few companies described the problems and needs of their prospective customers; instead, they just pitched products. Guess who scored highest with investors? The companies that proved that they knew their customers.
You can replicate this concept in your company through a competitive role playing game. Divide your sales team into buyers and sellers and get them in front of their peers. Then ask the “seller” to talk with the “buyer” for 5 minutes without mentioning your product, features or benefits. The audience handles the scoring by counting the “violations,” and the seller with the lowest score wins.
To increase the difficulty, you can later expand this challenge to a 10-minute and even 20-minute round, or do the exercise regularly at each sales meeting. As a result, your “sellers” will become better listeners by learning to shift their focus to the buyer problems and pain rather than your “stuff.” The seller will get better and better at asking questions and qualifying real buyers on what you are selling versus thinking that “telling is selling.”
2. Ensure that everyone on your team understands the difference between a “strength” and a “differentiator”.
Company strengths are part of the offer, but they’re typically just requirements to play the game. For example, we frequently hear leadership teams describe their “outstanding customer service”. Excellent. Customer service is an important and necessary strength. But it is outstanding enough to be a real differentiator for customers – enough to create a sustainable competitive advantage? That’s a lot more difficult and uncommon.
A differentiator is something specific that your competition cannot claim. Typically it’s a combination of what you do and how you do it in order to create value for your market.
Can’t find a real differentiator? Time to create one!
3. Invest in messages and rehearse!
Now it’s time for messaging so that everyone on the team can answer key questions (like “what do you do?”) consistently. You need a short version (aka the “elevator pitch”) and a longer version for more in-depth conversations.
Messages contain four components in a specific sequence. Everyone needs to know and practice the delivery of the first two parts. The last two parts can be conversational and personalized for the listener as long as the basic information stays consistent.
- Part I: The Theme. Captures the essence of your company and elicits an emotional response. Example: “At BMW, we build the ultimate driving machine.”
- Part II: The Big Picture. Finds a way to put listeners in the picture so they can visualize themselves with your offer . For example, you might say “If you enjoy the pure pleasure of driving…”
- Part III: Value Proposition. Features and benefits personalized for the listener – for example, “This model offers a convertible top, bluetooth enabled …”
- Part IV: Solidification & Proof. Provides listeners with the comfort that this offer will work for them. For example, you can note the safety record or financing details.
Notice that the what (features and benefits) comes in parts III and IV of the message, NOT I and II.
Good messages are very hard to develop because they need to be specific, compelling and emotional if possible. You may need help from a professional copywriter. It will be money well spent.
4. Measure and revise.
As your team practices your new messages in the real world, have keep score of how listeners react. Is it creating dialogue? Are people curious to learn more? If it’s working the impact will be measurable in words, physical response, questions / statements, emotion or actions. This is another cased where role playing or shadowing can help. But don’t just measure the results – use the data you collect to improve them consistently over time.
Conclusion
Experience tells us that after reading this article, many of you will be more confused about what your company is selling. Good! Now you have an opportunity to address it!
What is your company selling? What is your OFFER? We’d love to hear about it.
What do you think? Please share your thoughts and experiences with us here!
