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manage sales

Manage sales activities, not just outcomes

What do you think is going to happen if you think the way to manage your sales function,  is  simply double last year’s sales to create this year’s targets?

  1. Your sales will double?
    or
  2. Your sales staff will start looking for new jobs?

I’d vote for B every time. As you can’t just double sales without a plan, and only checking in on a sales teams performances at the end of a year is a disaster.

See there is a couple of things wrong with just setting bigger targets.

  1. Targets require resources to get you there.sales activities
  2. Targets are designed to tell story at moment in time, not help you with the journey to get there.

Manage Sales Activities

Most people are aware that sales require activities to generate them, and that series of activities is normally called a pipeline or funnel. Perhaps 10 leads give you one prospect, and 10 prospects generate you one sale. In that example, 100 leads generate 1 sale. So to double your sales, at the simplest level, you need to double the number of leads you generate. If your average sale is $50K and your business turns over $1M a year, you need another 20 sales to get you to your two million, or another 2,000 leads require generation per year.

(Note you can also focus on multiple funnels, changing the ratio’s and the size of the sale!, but Im not talking about this today).

So to specifically address point 1, to double your sales you need to invest in doubling all the activities in your pipeline. I.e. how are you going to generate another 2,000 leads? Spend more money on SEO?, Spend money on PR?, Spend money on a content strategy? Spend money on advertising?

Hopefully I make my point. A sales target without a supporting plan and resources allocated to achieving it will fail. Sales staff know this and will start looking for a new job before they get blamed for managements lack of planning and execution.

The second thing wrong with just setting a bigger target is its focussed on measuring performance at the end, not along the journey. Making it much tougher to manage sales staff.

Set Activity Targets

I’m a big fan of two types of targets – sales outcomes and the end of a big period (monthly, quarterly yearly) and activity targets for your regular meetings (daily, weekly, fortnightly).

By your performance, you will be able to generate indicative ratio’s of how your sales funnel works. For example (for normal week):

• 10 leads from the website.
• 20 leads from advertisements in industry magazines.
• 10 leads from attending two events.

We may also discover that roughly 10 leads generate us 1 prospect, and 10 meetings with prospects generate us 1 sale. Therefore, our baseline operational cadence per week is:
• 30 leads generated from Marketing Activities
• 2 events attended
• 10 leads generated from events, and
• 10 prospect meetings conducted by sales people
However the average week has no sales, as our $50K sales occurs every 2.5 weeks!

Therefore a weekly sales meeting focused on sales outcomes only would be less than useful as even though we are supposed to generate sales averaging $20K per week, sales occur only once ever 2.5 weeks and are that the $50K per sale level. Hard to tweak your activities, when you are guessing on outcomes.

But a sales meeting focused on our activities and whether we have the required operational cadence is vastly more useful.
For example if out week generated (with suggested decisions in brackets)
• 30 Leads – from the website (Big Week!, is this a trend that means our ratio’s need revision?)
• 0 Leads – from advertisements (better investigate what’s happening)
• One Event – attended by sales staff (need to lift our game and identify some events to attend)
• 20 Leads : from the one event (can we discuss what made this event such a high performer so we can replicate it?)
• 5 Meetings – Attended with prospects (That’s too low, what’ss preventing us from getting out the door?)

You see focusing on your sales activity or your sales cadence allows you to make small changes to improve performance as they suggest themselves. Focusing on outcomes only makes staff either happy or sad.  Manage sales activities!

disruptive innovation and food

Today at lunch my father announced that some industries are doomed due to disruptive innovations but some are safe. I of course reacted emotionally at first telling him he was talking complete rubbish, but then after pausing to draw breath, I like to think I rationally pointed out why no sector is safe from disruptive innovations.

Ziferblat CafeWhen talking about innovation I like to talk about Butchers and Restaurants.

The basic value proposition for a butcher is quite simple and has been the same for a thousand years. Nobody wants to slaughter a cow, and its pretty hard to store a whole cow to eat at your lesiure. Much easier to get some one else to do the dirty work, then take a tiny share. There is not much innovation going on in the sector and the heuristics for running a successful butcher shop are fairly simple – put it on the high street, front load your cabinets with delicious offerings, look hygenic.

However old and mature the standard business model is, don’t think you’re safe from disruption.  Consider restaurants.

The value  proposition of a restaurant is also pretty simple – pay a third party to give you food that you can’t or wont prepare for yourself.   But when you talk about innovation in restaurants, things start to get weird when you pick at the surface.   At most restaurants you pay for the food you order, with each dish a separate price.

Sometimes the food is in the kitchen for you to order, and sometimes its brought to your table for you to select (love yum cha!). Sometimes you pay a set price and get a set menu. Things can get much more innovative though. In South America, kilo restaurants are not uncommon. Restaurants that advertise a price per kg. You then load up your plate with whatever you like from the bain-marie, weigh it then bay the kg price.  And now there is a new innovation I find quite fascinating – as it approaches the monetisation problem from a completely different angle and throws out the original value proposition effortlessly.  A pay per minute cafe has just opened in London. Basically everything is free, you just pay for how long you stay at a rate of 3p per minute.. The catch is that for many things you may like, you may have to cook yourself. Eg there are eggs and bread in the pantry and frypans and toasters available.

The key here is that disruptive innovation can come to any sector, simply by having a good look at the value proposition that underlies all the other activity.

The butchers value proposition is just started to get looked at – which is why we are seeing franchises of poultry specialists, direct to the public wholesalers and champagne served with tastings!  Plenty more innovation to come I think.

Validating Assumptions

In 2010 I was asked to give a quick presentation to MEGA program participants,.  MEGA could be described was an early accelerator program in Australia. The title of my quick speech was “Is your idea commercially viable?”. But the thrust of the speech was really on understanding the difference between facts, assumptions, hypothesis and weasel words – and the importance of validating any assumptions on your journey.

I remembered this yesterday when in a Churchill Club meeting, Community Indicators Victoriawas mentioned – an organisation I knew nothing about. It appears they have masses of free datasets and visualisation tools on different aspects of wellbeing amongst communities in Victoria. A fantastic tool for understanding where pain or pleasure can be felt the most amongst our communities. Eg Which communities have the shortest and longest average distances to Public transport stops.

Then there is the Australian National Data Service which is making all of Australia’s Research data discoverable and accessible. Its an absolute treasure trove that is available under the open access and licensing framework of creative commons.

And finally there is the Australian Bureau of Statistics, the mother load of census and economic data, provided under free and commercial models.

Validating Assumptions has never been easier :)

Thinking different about suppliers and customers

Furthering the discussion about innovating from my last post, here another upshot of a conversation I had with office mate Peter Tunjic, which I want to extend a little.

Perhaps the traditional concepts of customer and supplier lead you to bad thinking and behaviour. Perhaps a better way of thinking is that there is just the business, and everyone else is a trading partner.

Thinking differently about trading partnersOutrageous you say! Heretical you say! Well consider this. Business need cash to survive, your trading partners either provide you cash, or resources that you utilize for an eventual transformation into cash.

So who can give your business cash?

  • Investors give you cash for shares – so you can start to operate.
  • “Customers” give you cash for products or services – so you can continue to operate.
  • Benefactors give you cash for good behaviour – so you can grow
  • Government grants give you cash for research – so you can grow
  • Banks give you cash in return for a promise to repay it in the future – so you can grow
  • Perhaps there are more?

So who do you give cash to?

  • “Suppliers” take your cash – in return for products and services you use to operate
  • Employees take your cash – in return for labour that you use to operate
  • Governments take your cash in return for the right to trade.

Now why this is important is that sometimes :

  • Its not obvious where to place the traditional of supplier and customer .
  • By labeling our trading partners in this way we mask opportunities.
  • By labeling our trading partners in this way, we poorly allocate resources to manage them.

Consider the two sided market place such as 99 Designs. They have designers competing to win projects (and perhaps get paid cash for their work, but perhaps not) and businesses logging design jobs and eventually receiving a design for the money they pay. Both are critical trading partners for 99 Designs to survive. The designers won’t come to the site if there are no customers supplying design jobs, and the businesses won’t come if there are no designers to do the work. In a two sided market place you need two groups to interact. But who is the customer here?

Consider the online business that generates content, wrapped in advertising, that is read by people who also pay a small fee to read content behind a paywall. The people supply eyeballs that the business sells, but they also provides cash for content.  The journalists supply content in exchange for cash but they also receive profile which they may trade on, and the advertisers supply content and cash. Again, clear demarcation of customers and suppliers is impossible.

So an innovative company may look at all the trading partners it traditionally calls suppliers and ask the question “what are they prepared to give me cash for?” It may also look at the trading partners it traditionally calls customers and ask “what are they supplying that I can sell for cash?”

Thinking this way gives rise to management of relationships based on their importance in the supply chain, not just sales people managing customers and purchasing officers managing suppliers. Which is why we start to see job titles such as community manager, engagement manager and supply chain specialist!

So to reiterate the point of my last post – if you want to innovate successfully, question the basics of everything you do.

So you want to innovate like Steve Jobs?

This week I had an interesting conversation with my office mate, Peter Tunjic, about innovation. Peter likes to point out that most management theories are like the Emperors new clothes – and there is usually a competitive advantage in questioning and rejecting the theories.

Steve JobsSo this weeks conversation was on how Steve Jobs innovated.

Apple became the words most valuable public company by innovating in design and products, by innovating at the business model level and by innovating at the corporate level. Plenty has been written about Apple’s products & design and the impact of disruptive models such as the App Store and iTunes. but very little has ever been said about Apple innovating at the corporate level.

So lets set the scene with some facts – Apple paid a minor dividend until 1995 at around 10-12c a share, then discontinued the plan. The dividend plan was only restarted in 2012 after Steve had stepped down as CEO, and was then run at $10-$12.  Peculiar no?

So what happened?  You could argue that the answer is hundreds of years old, so some history first.  When chartered companies first started to appear in around 1,600 they were formed with a specific monopoly or charter, given by a royal family or parliament. Fast forward to around 1844 and legislation appeared in Britain around forming companies, so that anyone could do it and have their own agenda. When a company was formed, it was called “incorporation”. ie it was considered a body in its own right (corporal form). Early companies couldn’t own other companies because of course that would be considered slavery!  Shareholders, were simply the people that gave the company money so that it could operate, and they did so hoping to get a return. The company was pre-eminent, not the suppliers of cash.

Fast forward to 1970 and a peculiar management theory started to take hold that went along the lines of “the purpose of the company is to increase the wealth of the shareholders”. This position was obviously highly popular amongst the masses who were investing, as they were now perceived as being more important than the company. Executives also loved it because no one would complain how much they earned, if the shareholders were making a good return. Even if the dividend was sucking badly need resources out of the company.

Today the concept of investors first, is gospel. Even if it regularly doesn’t make sense. i.e. how can you have strategy to increase the wealth of shareholders (not some but all), when under modern trading conditions some can be on the shareholders register for a tenth of a second and others for a decade.? Why also should a company weaken itself, giving away hard won cash to people who usually  aren’t the initial investors and therefore haven’t added value to the company?

So Steve Jobs rejected this investor first gospel and embraced the older company first idea. He repaid the cash of initial investors through dividends, but once done he ceased paying dividends as giving away cash made Apple weaker, not stronger. This strategy helped build the biggest publicly traded company in the world, with cash reserves larger than the UK treasury.

So if you want to innovate like Steve Jobs, question the basics of everything you do.

Hard or soft serve?

Last year I met with a British researcher who was out in Australia to talk about Innovation policy.  From my point of view, the interesting thing about David Connell was that not only was he a researcher at Cambridge, but he was also, until recent years, the CEO of a Venture Capital fund specializing in technology.

David spoke of a concept that he had, dividing business offerings into “hard” and “soft”.  Basically when your offering was quite malleable and different for every customer, you were considered a soft business, or when the offering was fixed, a hard business.  Businesses could also have both hard and soft offerings at the same time.

Fore example, consider a hairdressing salon.  They sell shampoos and hair treatment products and hair colouring services, these products and services are the same every time they are sold, and are therefore “hard” offerings.  However the salon also sells haircuts, which are different for every customer and are priced differently.  This would be considered a “soft” offering.

David was using the concept ,amongst other reasons, to differentiate whom was paying for innovation.  When you have soft offerings, your customer pays for your R&D, with hard offerings the business or its investors pay.

Now when I was in advertising, we regularly had small engineering businesses, wanting marketing assistance.  However they always shied away from mass marketing programmes, as direct selling had traditionally been where they had got results.  Unfortunately, we didn’t have a conceptual framework to explain what was happening and work with their intuition.

It’s occurred to me since though that this hard / soft concept also makes for an interesting way of viewing marketing spends.  When your offering is soft, business is best generated through one to one relationships (salespeople).  When your offering is hard, one to many advertising spends always work best.

Soft offerings need that (more expensive) feedback loop where the salesman listens to the requirements and continuously tailors the offering to suit.

I feel that this explains a phenomena I regularly see in small technology and consulting businesses, where the CEO normally outsells all other sales people combined.  The offering is generally much more than just a product, and therefore generally a soft offering.  Consequently it needs a salesperson to get the sale across the line; and whom better than the CEO, who has the authority to make any change instantly to make the customer happy. Consequently he will always be the person that customers want to develop a relationship with.

Alternatively it can also explain why sometimes mass marketing programs have difficulty selling your offering.  It may be because your offering is actually soft, and it takes a one-to-one “relationship” to close the deal.

So I’m thinking that this idea creates a couple of useful points:
1.       If your offering changes depending on what the customer wants, spend the majority of your money on sales programmes, not advertising.
2.       If you want to be able to access efficiencies through mass marketing programs, you need to harden up your offering before you will achieve success.

There is a fair bit more that you can do with this concept, especially around redesigning a business to make it more scalable.  For the meantime though I think it’s a nice concept, especially considering the conflict that normally concurs when you have sales and marketing people try to agree on anything.

From Kitchen Table to IPO – What’s your strategy?

During the dotcom era, the Holy Grail was to found a technology company, get capital, list it then move on. But very few achieved this. In fact the few that did setup business that listed generally hung around and had some fascinating learning experiences on the way.

So on the 17th April at the Churchill Club, we ran a programme called “from Kitchen table to IPO”. Which was a look at those experience. We were joined by Silvio Salom of Adacel Technologies Ltd , Leon Lau of Peoplebank Ltd and Michael Abela of Mobi Ltd .

The evening was a look at what has been learnt by founders of public company’s in three areas:

A. The underlying strategy for going public
B. The issues around selecting advisors, and
C. The new skills to be acquired.

This week I wanted to pass on the main points (as noted by me) that were made by our panel around the strategy of going public:

1. Know exactly you are going to list and what you are going to do with the money. Because if you don’t your share price will tank and you will get removed.

2. You are either listing to be rewarded and exiting, or, to get access to capital. Decide which it is before you float. If its get access to capital, make sure you leave room for going back to the market.

3. The business better be prepared to grow with the capital before you list. Because you are simply not going to have time to address these operational problems effectively afterwards.

4. Accounting systems, operations and governance should be tidy before the float, not afterwards. See above.

5. Be prepared for a new job (CEO of a Public Company) to be added on top of your existing job (managing the business). The CEO’s job is a completely new set of tasks which may take you years to master.

6. Be prepared for at least 400 new shareholders holding you personally accountable for the share price. They will ring you!

7. Be prepared to no longer control your business. Its no longer your shop. You effectively need to have 20-30% equity to control what’s going on.

8. Think carefully about how you want to list. A small market capitalization (say less than $100M) means low liquidity for shareholders (not many buyers or sellers) which translate to an inability to raise further capital. Analysts and brokers will not be interested in you either.

Next week, the issues around selecting an advisor.

Square Rooted

Sometimes little bits of ubiquitous technology are much more useful than meets the eye, sometimes not.

Consider the square root key on a calculator. Outside of high school, only a handful of engineers seem to use it. But it’s on every single calculator despite the fact that 99% of the population isn’t actually sure what they would use it for. The real estate on the surface of the calculator is quite limited, so I’m thinking that the Square Root button must have had good PR people originally. Personally I would much rather prefer a button that lets me know I am dealing with money and therefore rounds everything up or down to two decimal places.

Anyway, enough square root bashing – I thought I would mention a tiny bit of technology that’s often overlooked but which I use every day.

Windows Notepad.

In my life I have a number of web based content management systems, using free platforms such as Drupal and Joomla , as well as a variety of systems both such as Google Calendar and the proprietary system behind the Churchill Club website. However the majority of information I own is stored in PDF’s, emails, Microsoft Word and Open Office Write Documents.

When I simply cut and paste information (such as a speaker bio) I often get unexpected and undesired formatting that was hidden inside the source document. This can be quite a pain to remove as it often involves messing around in a HTML encoded view of my information.

This is where Notepad comes in.

Every time I transfer information from one system to another I paste it into Notepad, then copy it and paste into the system I am using. The beauty of Notepad is that because it is only a primitive text editor, it simply can’t handle any hidden formatting information, and strips out things such as font types, sizes and carriage returns. And because Notepad is such a primitive application, it runs almost instantly and never crashes.

In real terms I reckon that on an average day by doing this I save myself 15 minutes that I would spend (very frustrated) trying to alter paragraphs I have pasted into a Content Management System that looks wrong.

Complete Communication Complexity

I said to my  wife, “I believe my problem is I have current and future communication complexity”.  She said “w*nker”.  I said “I’ve got a phone problem” so she said, “then fix it”.

1.    I work out of 3 offices (that’s including the kitchen table at home).
2.    At one of my offices, I am not the primary tenant so the phone gets answered with another company’s name.
3.    I believe that at some stage in the nearish future I will be moving offices.
4.    I don’t just want to be handing out a mobile number all the time, as I feel that its like walking around with a t-shirt saying “small-time”.

What to do?

The answer was SkypeIn.  I’ve heard of Skype you say, but whats SkypeIn ?

– Firstly you get a free Skype account  that allows you to make free computer to computer calls.
– This isn’t a tutorial on how to use skype, so skip to the next step.
– Next you buy yourself a local number from Skype. They call this service SkypeIn.  In real terms this is going to cost you under $100 a year.
– You connect the phone number to your skype address (it simple, and done via their online control panel).
– Finally you decide what you want to do with the calls you receive.

Option A.  Take the phone calls on your computer.
If you don’t answer the call (eg you are away from your desk) the calls can automatically go to your voicemail system.
The other choice is that if you don’t answer the calls, you can have them forwarded to another phone (small perminute cost for this) such as your mobile.

Option B.  Forward calls to your skype phone number to the office of wherever you are or your mobile.

A couple of cool things about this solution.
1.    People see a landline number, not a mobile or weird address.  Eg Mine is 03 9014 9600
2.    If you are overseas, local people call your local number and get charged for a local call, despite the fact you might routing the number to a village in Siberia.
3.    You can have local numbers in lots of areas in the world – Want to setup a virtual office in San Francisco?
4.    Finally if you are like me, and using lots of computers, you can login to your skype account with any of the computers.

There are lots of other good ways of using the skypein number but the above are what appeals to me.

The solution appeals to the wife as well as now she only has to call one number to find me.

The sausage, the sizzle and the whole bloody bbq

I used to sell people. Although I had the occasional slave trader vision, usually accompanied by lots of whipping, the reality was much more mundane. Apart from the part where no one wanted to have coffee with me – it turned out I had developed the habit of sacking people at coffee, but hadn’t noticed I had the habit.

Anyway, selling people in the IT services industry meant we normally either offered people at an hourly rate, a weekly rate or occasionally offered customer to pre purchase hours or “block time” at a discount. Pretty much our offering was the same as the rest of the industry and a differentiator was the availability and skill of the people on offer.

I wasn’t really thrilled about this arrangement though, and spent a lot of time in front of a white board trying to understand what was making me unhappy. The conclusion I came to was that there were three things going on that interacted.

1. My Product

2. My Sales Model

3. My Market

My product and market was reasonably obvious. I had system administrators and network engineers that could help organisations that had IT problems.

However the Sales Model was where I spent the majority of my thinking. I was selling people by the hour, and would offer a discount for bulk purchases. The question haunting me though (haunting is probably too strong a word) was “is there a better way to sell people?”. After much staring, I came to the conclusion that there were three things I wanted from my sales model.

1. It made it easy to sell the product.

2. It maximized the profitability of the sale.

3. It gave me repeat business.

These I realized were probably principals of good sales model design.

Having this framework, I then looked at other industries to see how successful businesses were applying these principals. In fact I realized that the further I looked the more innovative solutions I found.

Eventually I came up with a solution that I now see regularly in the market place (and of course like to think it was copied from me). I called it contract support. Basically our client’s committed to a certain number of hours per month of iIT services that they would buy off us. They got this at a low/low rate. Then any additional hours they purchased were at a higher rate, but still below the market rate.

The result was a product that was easy to sell, more profitable (due to a higher utilization) and gave us forecastable repeat business. Sweet. Sizzle.