Today’s guest blog post comes from a former colleague, Ken Evans .  Ken is Managing Partner for sales and marketing at Critical Path Strategies.  He also has primary responsibility for CPS’ Chief Sales Officer Agenda consulting practice, which helps CSOs develop agendas to take their sales organizations to new levels of performance.  Most of the important stuff that I know about sales I learned from my time working with Ken at Waste Management.  He’s the best in the business.

The New Reality    by Ken Evans

I recently worked with a seasoned sales executive who has experienced his fair share of business cycle highs and lows. Better for it, he likes to say, “Opportunity’s favorite disguise is trouble” and “A downturn is a terrible thing to waste.” Glimmers of improvement in the economic landscape are increasingly apparent. So how do you shift your thinking from the recent head-down, in-the-bunker survival mode to gear up for a growth play?  Having reduced operations and SG&A cost structure down to shiny metal, what do you and your sales organization need to do to emerge hand-in-hand with your customers?  Here’s what some of our clients are doing to prepare customer focused growth plans best suited for their new reality.

> Rigorous voice of the customer interviews.

A greater understanding of your customers’ perceptions and needs helps unearth new ways for you to provide value, enhance relationships, identify unmet needs, and grow revenue. Conducting one-on-one, in-depth interviews with your selected customer executives helps you discover their experiences and attitudes about their business—what they buy, why they buy, and why they align to particular suppliers. It’s a productive way to explore with them where and how they see value created and approaches that differentiate preferred suppliers from the rest of the pack.

> Market segmentation.

The market impacts and directs all aspects of your activities. It may have been “reordered” in the wake of recent economic swells. Accurate and specific information about your market segments, industry trends, and potential threats is critical to the success of your existing businesses—and to the creation of new ones. What are the major factors impacting your customers? How are your customers responding to these factors?

> Market alignment.

Clear information about the potential in your market segments helps illuminate the playing field and identify which opportunities to pursue and how to maximize them. Establishing a good coverage strategy that is able to withstand changes in customer preferences, product lines, and economic conditions is the basis for your selling organization’s success and momentum.

> Creating value propositions for the marketplace.

The game is value. The judge is the customer. The winner is the one who delivers the greatest value to the customer. But not all customers value the same things. So how do you ensure that what you are delivering is of value to the customer? Value will differ from one customer to the next—the challenge is to produce and deliver value messages that link your activities and results to your customer’s most critical needs, creating both qualitative and quantitative benefits for your customer. What can you do and what have you done to make a significant impact on your customer’s business?

> Sales playbook reengineering.

Your selling teams today face a competitive rate of change that includes reduced barriers to entry, the ability of competitors to meet or beat pricing, add components, develop alliances that enable quick turnarounds and, seemingly, respond to any customer need. This competitive environment requires your sales teams to possess an in-depth understanding of product and service knowledge, including features and benefits and the ability to demonstrate and articulate value to the customer. Successful sales leaders are spending a great deal of time and energy evaluating game plans to prepare their teams to respond to a variety of competitive situations. Are you?

> Sales skills enhancement.

Do your salespeople possess the skill set critical to success with your customers? Are your sales managers providing day-to-day leadership? By defining the skill requirements to do the job you expect of individuals, assessing each individual contributor, providing personalized access for skills improvement, and establishing career paths and succession planning, you enhance your teams’ performance. You can share this insight in formal classroom training, by mentoring, sharing top performers’ practices, and field coaching.

> Competency certification.

Your salespeople are asked to respond to customer problems, develop and execute sales and account strategies, prepare for and execute sales calls, deliver and implement products and services, and demonstrate value at every point of contact with the customer. How can you be sure they possess these customer-facing competencies and know how and when to use them to be successful?

> Sales management recasting/certification.

Your sales teams are constantly reinventing themselves to align with their customer’s environment. When they are at their best, they are in sync with the customer’s tactical and strategic initiatives. But in these recent days of commercial flux, your teams may be struggling to get their bearings. Increasingly, companies are recasting their sales managers as human capital coaches and developers. They keep their teams on track by giving them advice and resources when required and recognizing their achievements along the way, improving their performance and odds of success.

> Management by metrics.

Timely, trusted data and actionable metrics drive your sales decisions, both strategic and tactical. Timely decisions drive increased sales performance, leading to greater revenue and profit. So it is crucial for you to identify and measure key mathematical performance indicators that will help you pinpoint problems and proactively manage change. What new metrics do you need to track the new realities in your market?

> Communicating benchmarks for success.

Accessing, consolidating, and evaluating data from lagging, in-process, and leading performance indicators combine to reflect a single version of the truth, enhancing your timely decisions and, ultimately, the sales performance of your selling organization. These key indicators are valuable for diagnosing problems, redirecting salespeople, and planning future activities. They provide insight into trends, opportunities, and risk. Many companies translate these metrics into dashboards for rapid, visual, high-impact communications.

> Recruiting, reward, and recognition redesign.

A well-designed sales compensation plan is critical to attracting, retaining, and motivating your sales force, and is a key driver to improving sales performance. With business objectives changing in the new environment, many companies expect to make changes to their sales incentive plans’ performance measures, weightings, and incentive formulas and mechanics. Do the new realities in your marketplace suggest a review of your recruiting, reward, and recognition programs is in order?

Recent market indicators suggest the economic forecast appears brighter. And those flexible enough to deal with change stand to enjoy some just rewards. But understanding customers and being able to anticipate what they want is critical. If you do not create value for your customers, you will be relegated to the “old reality” and suffer the unending cost cutting cycle associated with a commoditized business.

 ABOUT CPS.

CPS helps clients improve the effectiveness of their sales organization. Our portfolio of services addresses the strategic, organizational, and relationship issues that impact selling performance. Our powerful processes enable clients to transform their sales culture, enhance their competitive position, and accomplish strategic business initiatives. Our clients—emerging companies and members of the Fortune 500 alike—typically measure 100 to 500 times their CPS investment in revenue growth.

Every year, I resolve to spend the holidays relaxing.  Take some time away from work….  Hang out…. Enjoy the down time….. Chill…..  And every year, I end up driving myself crazy.  I don’t really like relaxing.  I don’t want to take time away from work.  I don’t enjoy having “down time”.  Chill is a Mexican beer – not something you do. 

I don’t think I’m alone in this, as I’m pretty sure that most people don’t like to have nothing to do. (Formal vacations are different – you spend lots of money to do nothing).  I was watching ESPN Sportscenter recently as they covered the surprising retirement announcement  from Urban Meyer , the head football coach at the University of  Florida.  (He has since reversed his decision and wisely un-retired). Lou Holtz , the legendary college coach, motivational speaker, and occasionally entertaining  commentator  mentioned his concerns about a 45 year old guy giving up his profession, and he repeated his now famous quote about people’s four basic needs:

1. something to do; 2. someone to love; 3. something to hope for; 4. something to believe in

Perhaps we all need to resolve to find the balance between what makes us get up in the morning and what we do the rest of the time.   For most of us, “do nothing” may sound like a good idea at certain times, but it’s not really an option.  How do you find that balance?  

It’s that time of year when business organizations hold luncheons and ask noted economists to make some predictions for the upcoming year.  I have attended no less than three of these gatherings the past week or two!  My main take-away (besides eating too much chicken and really rich desserts) is that predicting the future is tricky business.  As the noted economist John Kenneth Galbraith  once said,

“There are two classes of people who tell what is going to happen in the future: Those who don’t know, and those who don’t know they don’t know”.  

In all fairness, there was a tremendous amount of great information put forth, and it is important as business owners and managers to understand the current and future economic landscape.  Many businesses are staring at 2010 and wondering if they should start new projects, begin hiring, and/or invest in the business once again.  Those decisions are easier if you believe the economy is recovering vs. staying stagnant for another year.  

Here is a summary of the things I heard about 2010:

• The forecasts forReal GDP  % change were all around + 3.5%.  This compares to 2009′s expected decrease of almost -2.0%.
• There was also similar consensus across the economists I heard on the 2010 consumer price index . An increase of between 1.5% and 1.9% - no one at 2.0% or above.  Remember, 2009 is hovering around 0%.
• Despite all the rhetoric right now, none of these speakers was concerned about inflation for the next 12 months.  In fact, only one thought there was a strong chance of inflation becoming an issue any time in the foreseeable future.
• Most seemed to think unemployment has peaked and will begin to s-l-o-w-l-y come down during 2010.  Interestingly enough, on Friday, the rate unexpectedly fell to 10 per cent  (from 10.2 per cent in October), as employers cut the fewest number of jobs since the recession began.  The predictions for year-end 2010 unemployment ranged between 8.5% and 9.5%.

A few other predictions/observations from the three groups:

• Everyone pointed out that only 30% of the stimulus money has been ”spent”, with the bulk of it to come in 2010. 
• The capital markets are still fragile – witness the recent Dubai “crisis” - and they will remain that way through 2010.
• Residential real estate prices may be close to a bottom, but continued high unemployment will keep them from increasing for at least a few years.  Commercial real estate will have a terrible 2010, and it’s impact will be felt by regional and community banks.
• The dollar will continue to be weak because of the US govt. deficit spending, but no one I heard in the three meetings felt there was a real possibility of it losing status as the global currency standard any time in the 5 years. 

The question, of course, is what this means to your business.  My view: 2010 will be a much better year than 2009, and is the start of a slow, but steady ascent back to some kind of normalcy.  Companies with strong balance sheets will get stronger as their competitors wilt.  Opportunities for growth exist, but capital will continue to be hard to come by except for solid stories backed by strong and committed management teams.  Hiring will continue to be anemic, especially in the first half of the year.  This continues to be the right time to use hired guns and temporary resources. In summary, it’s time to be opportunistic, but not yet the time to throw caution to the wind. 

What are your economic predictions for 2010?

I was meeting someone in the lobby of the Four Seasons Hotel in Chicago, and overheard a conversation.   A guy was waiting for a ride to the airport and was on his mobile phone telling someone about his wonderful stay at the hotel.  He went on and on and then told the other person “….Marriott and Sheraton could learn what customer service really means from this hotel”.  Of course, he failed to mention that he had paid about 80% more for his stay at the hotel vs. one of those other brands.  The cost difference did not factor into his opinion.  I hear comments like this a lot when people talk about customer service and compare providers, and it fascinates me.

No one will argue with the fact that there are clear standouts in customer service and the experience you receive from these companies.  Nordstrom’s sales associates are amazing.  Whole Foods presents its groceries like few others in the business.  If you have ever ordered anything from a Williams Sonoma catalog - you will order something from there again.  And the difference between going into a Lexus dealership and a Toyota dealership is substantial.  Has Lexus just “figured it out”?  Have they found the secret to hiring better people and designing and maintaining a first-class facility?  Of course not – it’s the same company!!  The common thread to these top service providers is the absolute premium price they receive for their services and the niche market they have decided to cater to.  The additional revenue from their premium pricing allows them to provide superior service (although, of course, it doesn’t guarantee they will).  Most important – for the right service, people are willing to pay the premium and then feel like they got a great value in return.

All service businesses walk a critical line between the experience they provide, and what customers are willing to pay for it.  Too many companies push premium service in a market segment where no one wants it.  Likewise,  organizations often under deliver on a customer experience based on their perceived value proposition.  Nirvana is when an organization can marry expectations, pricing and delivery.  Southwest Airlines is a great (… and overused) example of this difficult balancing act - particularly when compared to their competition.  Despite being branded as a low-price airline, Southwest’s flights no longer cost less than their competitors (unless they are entering a new market).  Their customers are really paying for on-time flights, and dependable service  – and they don’t pay for baggage!  They can live with the lack of amenities, and those incredibly annoying singing flight attendants.  Southwest customers perceive value – essentially no matter what they pay.

The best service companies have figured out this balance between what they charge, the expectations of their customers, and what they deliver.  When it is done correctly, customers – like my friend in the hotel lobby - forget that they paid extra to receive a superior level of service and feel like they “got what they paid for”. 

Has your organization found that balance?

I spent time recently with several independent dealers of a very well-known industrial equipment manufacturer.  Our conversation turned to “difficult” customers, and one of the participants talked about his dealership’s refusal to do business with one of the largest buyers of the equipment in the US.  This dealership had decided that they were tired of that customer’s outsized discount demands, difficult terms and conditions, and the need for service and support resources greater than any other customer.  They had reached a point where the business was not worth it.  I think it’s a decision that more businesses need to make today. 

A lot of businesses I talk to are  finding some of their customers becoming unreasonably demanding on key issues like price, service levels, and contract terms.   Unfortunately, the economy has actually strengthened the resolve of these difficult customers.  Like the schoolyard bully that gets emboldened with every kid that forks over their lunch money, many large buyers of goods and services feel like they have the upper hand over their suppliers.  Granting concessions to these customers can be a slippery slope, and to mix metaphors – it’s hard to get the toothpaste back in the tube.  Some small businesses are fighting back, according to a recent Wall Street Journal article, but it has to go farther than that.  

The best customer/supplier relationships are partnerships.  But when the customer gains control over the supplier, it’s time to exit the relationship.   That customer’s business becomes bad business - and they need to be fired.   This advice often goes against everything business managers have learned.  Countless magazine articles and business books focus on how expensive it is to obtain new customers, and extol the virtues of keeping customers for life.  Sales and delivery leaders in organizations are urged to do virtually anything to please the customer – particularly a large one.  When you layer on the effect of the economic downturn, it gets even harder to pull the trigger on these troublesome customers.  But at some point, problem customers become like problem employees – they have to go.   

There are no straightforward guidelines to follow.   But you need to answer a few questions to see if it is time to fire that difficult customer:

• Do you really know the profits generated from this difficult customer, including ALL the resources and associated costs needed to service them?
• Have you factored in the negative cash flow impact of these resource hogging, high maintenance, and often intentionally slow paying customers? 
• Do all those resources expended on the difficult customers take resources away from your more profitable customers?
• Is there an impact from bad customers on the morale and productivity of your employees?
• Are you sure that if you push back on their demands that they will take the business elsewhere?

It’s not easy – but it’s often necessary.  If you get to this point with a customer, channel your inner Donald Trump and let them know, “You’re fired!” 

Please pardon me in advance for some shameless self-promotion!!

Our firm – Pebble Creek Partners - has added a new partner, and I couldn’t be more excited.  Tom Riek and I worked together at Waste Management in the late ’90′s.   We participated in a number of exciting initiatives and I think we made a difference – all while having  fun, despite long hours and lots of pressure.  

Tom went on to have a string of great career successes,  including starting, growing, and sometimes even selling  recycling businesses. You can read all about Tom here and here. 

We went our seperate ways and lost touch for a few years, but eventually we reconnected (via LinkedIn, of course!).  Once we got together and talked, we realized that Pebble Creek Partners offered a great opportunity for Tom to do what he does best – help organizations grow and become more profitable.  Plus, we would get a chance to work together again, and capture some of that magic from those fun days of the past.

We will continue to focus on environmental, transportation, and Cleantech industries.  But Tom also brings a unique perspective and skill set to recycling, “green” initiatives, and how companies can not just talk about the very hot issue of sustainability  – but do something about it.  He’s going to start blogging in this space on those very topics.

I love our firm because we help interesting clients get better in unique and exciting ways, and I get to work with really smart, fun people…. and  Tom fits that description perfectly.

I was talking with some friends about the fact that digital video recorders  (like TiVo ) have completely changed the TV viewing habits of those who have them.  The ability to record shows so easily and then watch them at your convenience, coupled with the ability to fast forward though the parts you don’t like – means many users no longer watch any “live” television. 

Experts call the technology time shifting, and it’s certainly not new.  In fact, old school technology like voice mail and e-mail have allowed us to time-shift much of our communications on a daily basis.  RSS feed readers allow us to accumulate our favorite web site news and blogs and conveniently hold them until we have time to read them.  Even social media sites like Twitter, Facebook, and LinkedIn give us the ability to communicate with vast members of our friends and business network on mutually convenient terms.   

I wonder, however, if we haven’t taken some of this time shifting a little too far.  I sense that it has gotten very easy for people to avoid real-time, live contact.  I’m getting a lot more voice messages after hours – when people know I’m less likely to answer the phone.  I spend too much time in ”conversations” using e-mail.  After about the 4th or 5th e-mail exchange with someone, I wonder how much time and typing we could have saved if we had just called each other.  To prove how absurd it’s gotten, I recently had a lunch meeting participant send a Twitter update telling me (and the rest of the Twitter universe) that they would be late for our lunch!

All this time shifting technology is great, and I am convinced it has made communications more efficient.  But efficient communication is not always effective communication.  No matter what the technology, we are human beings and there will never be a substitute for the nuances of live communication.  In fact, I would suggest that the further away we get from being face-to-face, the more chance for the message to be lost.  The answer?  Use the right tool for the job.  There is a time and a place for each of the methods - but convenience should not always be the highest priority.  

If you find yourself using the technology to avoid live communication, put the “remote control” down and communicate in real-time.  There is no substitute.

As a long-suffering Chicago Cubs fan, I am very familiar with giving up on the current season, and looking forward with optimism to a new one.  The phrase “…wait ’til next year” has become an annual ritual for Cub fans, as the team hasn’t been to a World Series since 1945, and hasn’t won it for over 100 years!!

Unfortunately, “giving up on the season” is happening at a lot of businesses right now. 2009 has not been a good year for most organizations, and many employees have a substantial part of their compensation tied to company and individual financial results,  particularly positions like sales.

Challenging economic times trap an organization into a vicious cycle towards the end of the year as employees know they will not earn very much from these performance bonuses, and begin focusing on a reset of the targets at the beginning of the next year.  For businesses just coming out of a very tough period - or even struggling to survive - this “coasting” can’t come at a worse time!!  In addition, the lack of a bonus award removes an incentive for key employees to stay with the organization until the actual payouts early the following year.  This, at a time where the economy seems to be thawing and hiring is starting up again.

So how do you get your people to focus on the 4th quarter ? …. updated incentives!  Here are a few ideas: 

• Implement a special 4th quarter bonus program:  Create new 3 month targets and a special one-time incentive payout for reaching them (just make sure not to double up on existing sales achieved).  This can be a very effective approach to getting people to focus on the final three months in order to recoup some of their lost incentive pay.
• Revise the targets:  The real time to do this would have been in June, but it may not be too late to salvage the 4th quarter.  Just make sure the payments as a result of this change will be ”self-funding” based on the potentially increased sales, and be careful to stress the one-time nature of these programs.
• Start the new year early:  There is no law that says you cannot start a “new year” with new targets.  You need to be careful of the overlap of two bonus programs, but those details can be worked out.

Unlike the Cubs who are finished for this season, it’s just too early for your business to give up on 2009.  Get creative, and get people motivated to finish the year up strong.  You really can’t afford to ” …wait ’til next year”.

Last Friday, Chicago lost its bid  to host the 2016 Summer Olympic Games . It was a huge disappointment to the city, and a large group of people who dedicated vast amounts of money and effort the past few years to try to win the difficult Olympic bid process.  In the aftermath of the crushing defeat (surprisingly, in the first round of eliminations) there has been a lot of speculation on the reasons.  The analysis  has focused on the global “politics” of the process ,  as many of the pundits believe the loss had little to do with the actual quality of Chicago’s bid.

In this case, Chicago may have been a victim of politics, but this situation has brought back vivid memories of the important business defeats I have been involved in.  In the aftermath of these losses, the people involved were angry and they often placed the blame everywhere but inside the organization.  Unfortunately, we usually missed an opportunity to learn from the situation.  Let’s be honest…. bids are lost, customers leave, and businesses falter for very specific - and often avoidable - reasons.  If I had collected a dollar every time someone blamed irrational competitors, a flawed selection process, or the ”politics” within the customer’s  organization, I might be able to attend these 2016 Olympics in Rio.

Big, disappointing losses are exactly the time to reflect on what really happened, and make the changes necessary as indicated by the loss.  When you lose business because of price, is it really because your competitor is desperate and irrational - or is your cost structure out of line?  When a long-time customer leaves you for another vendor, are they showing an incredible lack of loyalty – or did you lose track of what they really want or need?  When you lose in a bid situation, is it because of the politics within the selection committee - or did you miss the mark with your proposal? 

We learn more from our failures than from our successes. Although I don’t think Chicago will try to get the Olympics again anytime soon, the rest of us can learn from a big loss.  The next time your business suffers a crushing defeat, don’t allow the organization to blame everyone else… and don’t waste the opportunity.  Get the team together, examine the situation and figure out what actually happened.  You’ll have a chance to address the problems and move on to the next battle… and you might not get blindsided again.

I spent time recently with two entrepeneurs that run a very successful, but complicated business.  They have multiple locations across a number of states and their industry is as competitive as it gets.  These guys are smart and energetic, they have hired good people, and they have a great strategy.  But I don’t think those things are the key to their success.  I think it’s the passion they have for the business and how that passion rubs off on their employees. 

In our time together, we didn’t spend a lot of time on small talk about sports, or our families, or even politics. (…maybe we spent a little time on those topics).  We talked about their business, and in these discussions the guys were animated, excited, proud, humble, worried, confident – the whole range of emotions.  More impressively, their passion has rubbed off on the people around them.  I’m not sure I met anyone at any of their locations who didn’t seem excited about what is going on in the company.  It wasn’t fake – it was real.

Many years ago, I participated in a “culture shaping” excercise given by the firm Senn Delaney.  The firm is still going strong, and in their promotional material they capture the essence of what I saw in my recent visit:

“Cultures become ingrained over time as a response to the style and actions of influential leaders. An organization’s culture plays a significant role in its ability to successfully execute strategic plans. Successful leaders shape their cultures instead of allowing their cultures to shape the company”

We have all seen it ….. the employees that make up organizations take on the personality of their leaders.  Leaders that hide in their offices and dictate rules through emails end up with department silos that don’t cooperate with each other.  Tyrants end up with employees that hide bad news.  Bureaucrats end up with slow moving processes and work-arounds.  Indecisive leaders cause gridlock and are frustrated by lots of unfinished projects. 

I realize that as organizations get larger, the culture issue gets more complicated.  I also know the company I visited and the two passionate guys that run it have challenges and issues.  But a solid culture - taking its cue from the style and actions of its leaders – will help organizations power through the issues and keep moving forward.

How does your style and that of your leadership team impact your organization’s culture?