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| Home - Industry Article - Sep 02 Issue |
What Getting Real in Today's Environment Really Mean
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2. Sales pipelines in which a majority of the significant deals forecast not only do not close in a given quarter, but show no forward progress from month to month (in many cases, companies do not distinguish effectively between pipeline, forecast and committed items; the blurring of these classifications can lead directly to last-minute disappointments in quarterly sales and earnings results below the already-lowered guidance and consensus estimates that are typical in today's market);
3. Field sales forces populated - and managed - predominantly by 'hunters" brought up in the boom of the naughty nineties to expect to be handed hot leads and close them in short sell cycles, and who cannot adapt to the challenge in today's market of creating demand using more consultative selling skills;
4. Organizations in which 'sales" is treated as a functional activity, rather than a company-wide activity. These are the same organizations in which executives and directors spend less than 20% of their time in 'proactive" customer contacts (i.e, excluding 'damage control" or 'deal-closing" activities). When sales don't materialize, the finger-pointing starts, but no one is authorized or informed enough to understand or address the cause of the lost sale;
5. Human resource management: Companies that continue to execute successive RIFs, each one being touted as the last, without any significant alteration to company strategy or business design. Morale is gradually eroded, as employees, management and board members lose sight of the cause that originally attracted them to the company, and the best people leave (or go on indefinite sabbaticals).
(*) As an example of the gravity of this problem, since the 1996-1999 period - when widespread experimentation into new tech business models was funded by VCs and others in the wake of the Netscape phenomenon - the software-licensing model has re-exerted itself, especially in the enterprise-focused software world. Thus, many former ASPs, B2B exchanges, B2C software companies, and even some professional services companies, have redefined themselves as software companies. Unfortunately, in many cases, certain critical functional disciplines for enterprise software companies of product management, solutions marketing (via industry and/or field marketing groups), consultative selling, post-sales field support, and account management - often neglected during the boom - have still not been either suitably designed into, nor installed in, the reworked organizations. Such gaps are proving themselves in some situations to be life-threatening, as enterprise customers turn away from young companies that do not learn quickly enough how to deal with their stringent requirements in these areas.
Five signs that the Board and e-team are giving their companies a chance to survive:
1. Business model: When, for example, reverting from a transaction services model (e.g., an ASP) to a licensing model (e.g., a classic enterprise software model), the executive team performs a complete overhaul of its vision, market strategy, sales process, operational resources, and organizational structure. This implies having the guts to re-allocate people, release others, and hire, outsource or partner for new skills and resources, as necessary - especially at the top.
2. Sales pipeline: All deals that have not made progress in the selling process from one quarter to the next are eliminated from the sales pipeline and forecast, and potential deals are only (re)admitted when closure is actually forecastable within the current quarter, based on clear steps in a documented sales process;
3. Field sales force: Salespeople and managers are required to develop/manage their business using consultative selling and relationship management techniques, as required by enterprise customers;
4. Organization structure: Sales is organized and authorized to manage the selling process on behalf of the company, but they are required to engage the entire organization in the process. When sales don't materialize as forecast, the organization has sufficient information to identify the cause of the problem and take corrective action for the next deal;
5. Human resource management: The company reviews and, if necessary, redesigns its business model and organization, including a plan to install new functional disciplines and eliminate others, as needed. Adopting a bootstrap or customer-funded approach (in light of today's acute scarcity of cash), if the resource review indicates that a RIF is needed, it is implemented in line with the most conservative sales forecast designed to produce an operating breakeven or better. New resources are only brought on board when there is solid business to back it up.
Clearly, management cannot be held responsible for the external market factors that are making it so difficult for tech companies to successfully manage their growth and profitability in the current environment; nonetheless, everyone with a measure of common sense recognizes that management must take full advantage of slower-moving markets to reorganize for better times.
Philip Lay is a Managing Partner of the Chasm Group, a strategy consulting firm based in San Mateo, California. He focuses on helping high-tech companies (mainly in enterprise software and systems) to optimize their market strategy, drive effective sales execution and organizational alignment. Prior to joining the Chasm Group in 1995, Lay was founder/CEO of a leading PC/network security software company, country manager of an ERP software firm, and salesman for IBM UK.
 
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