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JANUARY/FEBRUARY 2008
State of the Market 2008...
Solution Integrators must reengineer the sales force. With the combination of product commoditization and our current economy woes, sales reps require strong messaging directed toward economic buyers. Products can be purchased almost anywhere, and discount levels seem to have no limit. At the same time, budgets are created by those who see justification at the business level. Sales people can no longer afford to sell products, they must specialize in process.
Without fail, every January, VARBusiness comes out with their market predictions. It is hard to gauge how much value the VAR community sees in these forecasts, though likely very little. Unfortunately, while the topic is pressing, VARBusiness’ content is anemic. After conducting several interviews, our faithful editors have brought back less than helpful insights; improve DOS (days outstanding), and continue to optimize your cost structure through careful spending, elimination of excess, and keeping one’s eye on pipeline management. I have taken the liberty of condensing four pages into a few sentences, but the bottom line is better collections and smarter spending. Most of their statistics indicate that VAR business owners expect to grow profits next year. Does that mean everything is going to be ok?
Efficiency is always wise counsel, but...
The current fear of recession requires a harder look at the business. The "next Line for reinvention", reports last week’s Wall Street Journal, is, "the art of selling". In an interview with Ram Charan, a well known author and consultant to such companies as Verizon, Charan states that sales re-engineering should be a strong focus this year. In his interview, he calls sales people to start focusing on business process. Mr. Charan tells us that, “sales people should not sell products anymore.” Instead, he cautions, “Focus on core business needs which combine products, services, and thought leadership.” While operation and cost reduction should be a daily discipline, our business is changing and commoditizing in areas that used to be highly profitable. Sure, there are still small, discontinuous innovations being made as we transition from server applications to SaaS (Software as a Service - another topic brought up in this month's VARBusiness issue), but profitable growth is going to require stronger differentiation, short sales cycles, and a message/offering that creates new budgets in areas we are selling. Living off of OEM rebates is not a great strategy – at least long term. I expect corporate America to put many of their new initiatives on hold this year. In the end, who will grab the larger portion of this dwindling IT budget?
What's wrong with our current strategy?
We've been talking about Solution Selling for ten years in this business. However, most sales training comes from the vendor and is focused on products, features, and benefits. Sales books and sales generalists (versus someone focused on high tech sales), have offered some great ideas about how to "Sell to Vito", "Sell Concepts", or move toward "Client Centric Selling"; yet few are really making this work. Most sales still come as a result of some corporate initiative that was created by a “big three consulting firm”, and now require some product and install which you compete and discount to own. When you do this, price is still your differentiator, and the margins, which directly affect company profit and personal commission statements, are thin. Even if the company bottom line is going well, the average sales person must sell an incredible volume to make up commission losses based on gross profit.
Veritically Focused Efficiencies
Budget approval can be had through one of four routes. These are the same four I have written about for years and you should memorize them. They are: return on investment, operational efficiency, competitive advantage, and risk reduction. Both risk reduction and operational efficiency can get the attention of buyers; however, I believe risk still has the upper hand. Risk reduction is important because of the new threats of cyber war, cyber espionage, the continuing rise in information, and more specifically, ID theft. Operational efficiency focuses on the need to optimize midmarket and enterprise businesses in an effort to squeeze out more profits. In order to capitalize on these key elements, sales people need to be reading every day, learning more about business, and spending more time talking with executives. It is essential that they learn to speak with business leaders. In summary:
- Sales training focused on executive level dialogue
- Read books on verticals you work in
- Spend less time on product features and rely more on technical Subject Matter Experts
- Practice your messaging like you are going on stage before meeting with C-level managers
While I don’t see Ram Charan’s Wall Street Journal comments as anything new, they are certainly relevant. It is time for sales managers to take a hard look at who is producing, invest in people who are ready to work hard, and cut their losses on those whose mindset is reminiscent of the mid to late 90’s. If you are selling, start reading, learning, and becoming a specialist who is able to advise the decision makers in the way Charan is pointing us.
Please pass this on to anyone you know who is working to build a profitable solutions business today. Consider having David Stelzl speak at your next quarterly meeting or customer event. Create a value proposition that positions you as the expert and attracts new clients. Consider hiring a professional coach to accelerate the process.
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