|Home - Articles by Sterling-Hoffman - Apr 05 Issue
Missed the Number? Send Your CEO a Japanese Death Poem
continued... page 2
The last time I brought this up at a conference, a chicken-or-egg debate ensued. Great sales executives are attracted to companies with momentum; but to gain momentum, many software CEOs believe that they must first hire a large force of quality sales people. Which comes first? I honestly have no clue. What I would suggest is that Software CEOs first pay attention to the Anna Karenina Principle, described by Jared Diamond in his brilliant book, ‘Guns, Germs, and Steel.’ Briefly put, Diamond asks the reader to consider Tolstoy’s insight about marriage. “In order to be happy, a marriage must succeed in many different respects: sexual attraction, agreement about money, child discipline, religion, in-laws,” but failure in any one of these areas can cause a marriage to collapse, even if all the other ingredients for happiness are in place. It is human nature to seek out simple, single-cause explanations for any given phenomenon – which is one reason celebrity CEOs are so often credited as the sole cause behind a company’s success or failure. But as Diamond points out, “for most important things, success requires avoiding many separate possible causes of failure.” Sales execution is only one of many factors involved in determining a software company’s success or failure.
Given the above, it seems that software CEOs would be wise to simply assume from the beginning that the majority of his/her sales organization will be mediocre. The alternate path is akin to chasing a unicorn in hopes of removing its horn for auction on eBay. Worth millions, no doubt, but ultimately a quest for the mythical beast! In attempting to build the perfect sales force, or hire the perfect VP Sales (mythical beasts indeed), most software companies are engaging in the same impossible quest. Serial entrepreneur Michael Stonebraker (founder of Ingres, Illustra, Cohera, StreamBase) told me recently that he would never bet the success of a software company on the performance of its sales force. I could not have agreed more. Sterling-Hoffman has never coached its clients to build their business plans on the assumption that a superstar VP Sales will arrive to magically save the company. There are simply not that many superstar sales executives to go around!
The obvious question then becomes, what precisely should the basis of a strategy that assumes mediocre sales talent look like? Before I comment, a short disclaimer: my area of expertise is recruiting senior software sales & marketing executives, not thinking about software business strategy per se. For an expert opinion, I suggest you contact either Tom Kippola of the Chasm Group, or Mike Tanner of Adexta – both of whom I have tremendous respect for, and both of whom may very well disagree with the contents of this article.
Disclaimer out of the way, I would make two brief suggestions:
1) Select an extremely narrow, vertical market that is too small for the market leaders to bother with;
Anathema, no doubt, to West Coast venture capitalists. In fact, virtually every venture investor I’ve ever met swears up and down that a software company’s only chance of survival is to select and target enormous, rapidly expanding markets from day one. Well, maybe. Most venture capitalists are a lot smarter than I am. But my argument is that at this stage of the software industry’s evolution, enormous yet underserved markets are difficult to come by (on purpose, anyway) and nearly impossible to gain a leadership position in. Better to focus on a tiny segment, and squeeze as much life out of it as you possibly can while remaining alert for new opportunities that may exist to diversify into new, related markets. Such an opportunity may never come, of course, and you therefore risk working 80-hour weeks to maintain nothing more than a ‘nice little business.’
2) Invest aggressively and early in product management and product marketing resources;
No one can deny the value that Sales Executives offer when it comes to understanding why deals are lost or why customers refuse to buy. Ultimately, sales executives are the ones involved in trench warfare, and as such, have the most accurate information about what is happening in the field. (Whether they are intelligent enough to interpret the data they have access to is a different story). In any case, virtually every VP of Sales I’ve ever interviewed has complained about the lack of adequate investment in product management and/or product marketing. Particularly when a software company is attempting to compete on the basis of customer intimacy, and in a market where customers still refuse to buy unless an application at least appears to precisely fit every aspect of their workflow – strength in both product management and product marketing is key.
Readers will no doubt wonder whether this article is meant to attack, or to defend, software sales executives. In truth, this article intends neither. Sterling-Hoffman recruits sales & marketing executives for software companies – as such, I have seen a lot of good ones, and a lot of bad ones. Ultimately, I believe in facts, and the application of rationality to interpreting those facts to arrive at a model that reflects reality as closely as possible. What those facts say about Sales Executives is up for grabs.
Which brings me back to the question of whether it is fair to judge the quality of a sales executive using ‘the numbers’. On a flight overseas last year, I found myself seated next to the Chief Technology Officer of a well known supply chain software company. While chatting about the industry, he asserted his belief that a Sales Executive’s performance is relatively easy to measure. “Either you make the number, or you don’t.” While it sounded right at the time, I’m not so sure.
Software Sales Executives get hired and fired more frequently than professionals from any other function in a software company. (I know, because I receive hundreds of VP Sales resumes every week – average tenure per employer: 1.4 years). When a company exceeds its revenue target, the VP Sales is often elevated to celebrity status – the object of every board member’s affection. But when the company fails, the VP Sales seems to shoulder most of the blame. Selfishly, I hope this continues because Sterling-Hoffman is a beneficiary of the phenomenon. But the facts do seem to suggest that investors, software CEOs, and sales executives alike would be more relaxed (and in tune with reality) if they thought a little more like dying Japanese monks and a little less like textbook managers. Beat the number? Just so! Missed the number? Just so!
Sometimes, shit happens.
Angel Mehta is Managing Director at Sterling-Hoffman, a retained executive-search firm that specializes in conducting CEO, VP Sales, and VP Marketing searches for enterprise software companies. He can be reached via email: firstname.lastname@example.org