After months of intense work, your company has developed a new business strategy in response to competitive market forces perhaps in order to boost anemic sales and/or increase lagging profits or enter new markets. Executives have identified and communicated the strategy (objectives, scope and advantage), Ideal Customer Profile and corresponding desired market segmentation. This, of course, led to a realignment of the sales organization, new sales roles and a change to sales compensation. In addition, the entire Marketing program has been revamped to get the right message out to the target market and to arm the sales force with the appropriate collateral material.
I’m sure most of you have been through some or all these changes in your career – and they can be extremely disruptive, especially to short term sales. No organization undertakes these changes lightly and some do so because they have no choice. However, the right strategy when well executed, can dramatically change the fortunes of the business. In this post I want to discuss one key aspect of executing a new business strategy that is too often overlooked.
The “De Facto” Business Strategy
Let’s use the building of a wall as a metaphor for successfully executing a new business strategy. If the strategy is well executed, the result will be a straight and tall “wall” that is strong enough to resist competitive assaults. Furthermore, the “bricks” that comprise the wall are the individual deals sold and closed with each new customer. In short, strategy is essentially executed one deal (brick) at a time. If the bricks are similar in shape and material with the appropriate mortar, the wall will be straight and strong.
However, if the bricks are varied (sometimes dramatically) in shape and material, the wall will likely be weak and easily breached by the competition. This is what happens to any business strategy when it meets the reality of “highly customized” deal structures that were deemed necessary to “bring a deal in.” In my experience, that variability can significantly increase in the waning weeks of a quarter. Even worse, the most “odd-sized” deals tend to be with the largest customers, which exacerbates their negative impact. Therefore, I submit, the actual deals being approved by management and closed by sales reps represent the “de facto” business strategy.
Strategic Deal Profile
This problem is akin to the telco “last mile” issue, where closing the right deal structure represents the “last mile” of any sale. The fault lies not with the sales organization nor necessarily with the new strategy. It is one of effective execution, which is typically the thorniest issue. The strategy didn’t identify for the sales organization the “target” deal profile at which they should aim. As a result, how can we expect the sales force to hit that target? I call this the Strategic Deal Profile.
The Strategic Deal Profile identifies the key Deal Levers that support the new business strategy. It also provides limits or “guardrails” to each Deal Lever to provide the appropriate (and acceptable) amount of flexibility that is needed to sell into complex and highly contextual B2B situations. Deal Levers are simply the key components of a business deal usually seen as products, services, volumes, price (discount) etc. However, depending on the specific business and strategy, there are other levers that can have a dramatic impact on deal economics and thus strategy achievement.
I find it useful to think of Deal Levers as falling into four basic categories:
- Solution Levers: these are the Products and Services we sell and the desired mix we want to support our strategy
- Contractual Levers: represent “whose paper” and critical contractual items such as Indemnification, Liabilities, Warranties etc. These will vary significantly in importance for different businesses and industries as well as strategies
- Business Transaction Levers: are the key commercial items such as Pricing, Minimum Volumes, Discounts, Payment Terms, etc. which can significantly impact deal quality
- Strategic Levers: don’t make the current deal “bigger” but set up renewals and more upsell and cross-sell opportunities. These may be co-publishing papers and presenting at conferences, agreeing to be a reference, developing Customer Success Plans, regular Customer Value Reviews with key executives, etc.
Developing the Strategic Deal Profile is best done as a cross-functional effort between Finance, Legal, Sales, Marketing, Support, Product Management, and Manufacturing while developing the new business strategy. Deal Levers should be prioritized, and ranges assigned to each lever. In addition, dependencies such as volume and discounting identified and documented. And then it needs to be officially presented to the sales force.
The Strategic Deal Profile, just like the business strategy, is not static and will necessarily change over time in response to shifting market dynamics – but it should always be aligned with the revised business strategy. Assuming the new sales tasks have been identified and sales has been provided with the appropriate processes and skills (value propositions, proposals, negotiations, etc.), the organization has dramatically increased the odds that the new business strategy will be advanced – one deal at a time…