A Wave of Foolish Optimism?

As the world celebrates the most galvanising US Presidential Election in living memory and Barack Obama takes the applause for the most unlikely of victories - had you tried to predict it even a year ago - the Bank of England joined the frivolity and slashed the base rate by 1.5% to give Britain the lowest interest rates since the early 50s.

Have no doubt, what Obama achieved was a resounding victory for those who believed change was required, and even if that meant the selection of the first non-white President in history – something again no one might have predicted at the start of this process and that America had seemed to be against for so long.

Surely this is the dawn of a new era of optimism?

The State of the Unions

While we may rejoice at the swathing cut in bank rates and hope that not just those on Trackers get the benefit, we also got the announcement that house prices had dropped 15%. More importantly, not for the first time, and contrary to Gordon Brown’s assertions about our economic position, the IMF predicts that Britain will be worst hit by the downturn. At Glenrothes last night, Scottish dreams of independence all but evaporated as Labour held the SNP challenge in the wake of the failure of the two Scottish banks, HBOS and RBS.

Perhaps the best summary of the Blair-Bush-Brown era is a sustained period of missed opportunity. Both started on a platform of the most stable economics for some time and there was a new mood of change in Britain about the squeaky clean New Labour approach and their vision of a ‘Cool Britannia’. Much has turned out to be false hopes. As the era presided over a number of the most devastating terrorist attacks in the US, the UK, Russia, Bali, Spain, Pakistan, India and more, the ‘Team’ embarked on two major wars only one of which warranted global support.

As Britain laboured over huge investment and meaningless targets in all aspects of Public Service, laissez faire Government became the order of the day. But a more distinct feature of the period was the rise of the unelected officials who influenced and arguably ran the country culminating in the most bizarre moment when a ‘Political Adviser’ actually strode into a TV Station and ‘demanded’ to be put on a news program at prime time. At the height of the ‘David Kelly Affair’, Alastair Campbell wielded more power than the Prime Minister and flaunted all legal repercussions to give his side of the story on a matter that centred on a document that had been the basis of Britain’s decision to go to war with Iraq which proved to be a pack of lies that either emanated from a ‘spin machine’ or an incompetent Intelligence Service. The Joint Chief got promoted, Campbell retired at his own leisure to enjoy a life of notoriety – the BBC was flayed and the reporter involved in the story is minor hack. Mandelson was recently made a peer to get a key Government post even though he is unelected – so the show goes on.

It’s the Economy, Stupid

The era started with plenty of econo-speak about prudence and cycles and Brown could do little wrong. Despite taxes rising on an unprecedented scale, Britain wallowed in a new freedom of credit which fuelled an explosive growth in house prices. Average families could leverage the equity in their house and their cashflow due to cheap and plentiful credit and borrow and buy on a massive scale whilst savings went negative. As Britain ‘boomed’ a massive hole was appearing in the finances and sums didn’t really add up.

No matter, everyone was doing it – Britain just happened to expose itself more as an economy so very dependent on the Finance Sector for its GDP and house prices rising 160% in 10 years while average earnings actually declined in real terms – the factors underpinning the boom economy were actually going backwards at a rate of knots. The Credit Crunch was a shock to the studious Brown and more of a shock was the fact our economy was far more exposed than he thought despite the obvious warning signs. With all thoughts of economic policy, prudence and regimentation out of the window, Britain has mortgaged itself heavily based on our future tax as part of the £4.5 trillion global bail out of the finance system.

Historical Parallels

There is a bit of the ‘Cool Labour’ in the image and talk of Obama. He is fit, young, good looking and he talks the way people want to hear, bringing out over 90% of the voters to make their feelings known. He is inspirational, enigmatic and has joined all parts of society and the world into his vision of the issues we face and the problems he needs to solve.

US foreign policy has gone up a dark alley and its spectre stalks the streets of international badlands with a large stick talking menacingly to anyone they periodically don’t like. They underestimated peoples and countries, they made terrorism a religious thing by having Christian zeal guide their thoughts just as in Britain and have chased laughing shadows and wrestled vicious, slippery eels in their quest to fight a war which they won’t know if they have won should they do so and have no vision or strategy for the world after as well.

Obama has changed that thinking already. He has posed the BIG questions about foreign policy. Britain of all countries knows that in order to fight terrorism you must eventually take away the reason for the fight as the fighters themselves will never be defeated – surely Blair, who nodded in John Major’s tentative cross and scored the winning goal in Ireland, knows that ultimately you have to swallow your pride and talk to the people you don’t like. It was Blair’s only legacy of note.

Don’t Miss the Opportunity

Bush had his chance and blew it. Maybe he was as dumb as people parodied him for all his Harvard education. Obama does not have that apparent failing – he did not have the burden of dynastic destiny. Two years ago, he was a political nobody who had the audacity to hope and in the face of a shoe-in Democratic nomination in Hilary Clinton, he changed the view of an entire nation and the world too.

The clear view is that the United States has sobered up after a bout of heavy drinking at the trough of world greed and power and having staggered through the world muttering aggressively and causing fights, it’s back, looking clean, fit and lucid and has a new sense of self-worth and purpose.

The world is jubilant and expectant. In the face of global recession, terrorism, instability, imbalance and self-interest, Barack Obama represents the hope of a new world order. Let’s hope he doesn’t do a Rumsfeld and believe the war is won after the ‘Shock and Awe’ of a sweeping Election win because, to use that analogy, the war has yet to begin.

But here is to hoping – Way to Go Obama.

Why? It's Just Not Cricket, You Know.

Have I gone mad? What has boring old, stuffy cricket got to do with business strategy?

The Test match cricket I grew up on in the 70s was turgid ‘absorbing’ stuff as commentators described. As the West Indies bombarded England stout fellows put their body on the line and scored at the rate of two runs per over barely. Fast forward to 2005 and ‘Ashes Fever’ gripped Britain as England duelled with the best team possibly in the history of the game, Australia, and Test match cricket had then doubled its scoring rate and pretty young girls in my gym discussed if Simon Jones would achieve ‘reverse swing’ after 22 overs the next day – I think it was the properties of the cricket ball they were talking about.

Cricket has been slow to re-invent itself and gain wider audiences and the game at its highest level has not progressed a massive amount since the days of WG Grace when the bearded giant became possibly the world’s first sporting superstar.

Phase One

It was in the 70s when the concept of a shorter game at the top level gained credence and we saw Sunday League 40 over cricket and International One Day games of around 50 overs per innings. In a single day rather than 3 or 5, a match could be concluded and it represented a pleasant and sometimes exciting day out. It was very popular amongst more than just cricket fans.

Phase Two

Then at the turn of the millennium came the major innovation, Twenty-Twenty. Avid club cricketers like I could relate to this. You leave the office at 5.30pm and get a game started by 6pm and it’s over by just after 8pm. The first class game adopted it and it became an instant success. With floodlights and razzmatazz teams could ‘biff, bang and wallop’ for a couple of hours and produce a great spectacle. It meant in a Summer’s evening, sports fan of all varieties could have an exciting night out and have great entertainment.

Phase Three

It took businessmen in the cricketing mad nation of India to really take the concept of Twenty-Twenty and revolutionise it. This is where business and sport converged. In the theory that talks of businesses swimming in the crowded, turgid Red Ocean, cricket re-invented itself and took to the warm, inviting and competitor-free Blue Ocean.

You see, the issue with all the innovations in cricket as it stood was that they generally embraced the status quo. If you shortened the game, the same teams, with often the same players participated and competed amongst themselves maybe with different shorts. It was tweaking formula to get a bit more out of the fans.

In inventing the Indian premier League (IPL), the rule book was literally torn up. Taking a leaf out of the highly successful model of the UK’s Premier Football League, businessmen packaged a league and sold its rights as a franchise to new clubs who could participate. Those new clubs were given direct access to cash from the media bonanza and they did not just pick the same-olds, they went out and attracting the best players in the world to play in their teams. With a few English exceptions, the IPL kicked off this year with the cream of world cricket. In the inaugural game, New Zealander Brendon McCullum smashed 158 not out including 13 sixes in the very first innings and we knew we had a different sport.

The first tournament was won by the Jaipur Rajasthan Royals captained by the great Shane Warne and for just 8 weeks work many of the cricketers had pocketed a cool £300k.

Blue Ocean and Your Business

The IPL is a very good example of a ‘business’ moving out its comfort zone or Red Ocean where it has limited market growth opportunities, sensitive margins, low differentiation and lots of competition and moving into a much richer Blue Ocean where competitors have not staked out a plot, customers see the value and there are profitable growth opportunities. Some people like Sir Allen Stanford, the philanthropist Texan Billionaire, believe the new Twenty-Twenty game could attract a whole new swathe of players and nations and even – now hold on a minute – even the USA. A fast moving, similar format to Baseball – OK we may have to be realistic here but I see what he’s saying. It could be a whole new world for cricket, and a whole set of new players as the new game is so very different.

As we all view the effects of the recession loom, it is a good time to reconsider your own business plans. Are there warmer, more tranquil waters full of opportunity and few competitors that you can take advantage of? If so, how do you do it?

One thing is for sure, the Red Ocean will indeed run red and turbulent in the next year. Now is the time to take a long hard look at your plans, positioning, cost base, value proposition and think long and hard how you can adapt and clear a patch in your market to not just survive but thrive.

Return on Investment (ROI) Selling – hype or best practice?

ROI is a much hyped and misleading term, in my opinion. It’s certainly not the best measurement for evaluating IT purchases and there is considerable difference in methodology in calculation to believe many people do not calculate it correctly or that there is enough consistency in approach to compare apples with apples. However, like it or not it is here to stay.

In these economically challenged times, customers have been feeling increasing pressures to justify potential investments – it makes you wonder what they were doing beforehand but let’s just leave it at that for now. As a result, the number of companies requiring an ROI analysis to justify IT purchases has risen to over 85% according to Ernst & Young research. Canny Vendors have retaliated by concocting ROI tools, white papers and case studies to address the customer concerns and arm salespeople. However, as little as 8% of Hi Tech companies consider ROI a valuable tool in improving sales, it is alleged. The fact is that most Hi Tech companies are missing the opportunity as they at best consider it as a selling tool rather than a key method of understanding the customer’s needs and decision criteria. It also means that most Hi Tech salespeople have little idea what ROI really is all about from a customer’s perspective and tend to use legacy tools learnt from different career moves as a basic template.

Why is ROI Important?

The ability to demonstrate that your service or product can generate positive returns to customers is very necessary, but the real benefit to the Vendor is in devising a process or methodology which stacks up to their own assessment and those of the customer as well for understanding any customers’ needs and how they may change in time.

From long experience I have learnt the only way to measure sales is look at the number of customers and the average deal size. Many ROI initiatives try to increase the number of deals by driving up the number of deals won as a fraction of prospects touched – known as the hit-rate. Another good method is to try to decrease the sales cycle time so that more deals can be compressed into the same period of time. This all really comes down repeatable success. While some may argue spouting a better ROI percentage is what counts, ultimately repeatable success comes from demonstrating understanding customers’ perception of value. This enables trust to be built quickly which in terms helps strong customer relationships. The ability for a salesman to prove their solution’s value is the primary reason for avoiding discounting or allows them to justify higher price.

So a well thought-out ROI model provides the platform to create value-based pricing which in turn allows the flexibility to adjust pricing models, which also gives the ability to improve prices, which allows control and management of discounts which in turn controls sales margins. It actually gives a great tool for qualifying leads to make efficient use of the salesforce which in turn drives the hit-rate by giving them more closable opportunities.

Naturally, these benefits can be very rewarding in terms of driving sales and profitability, but they do not account for the benefits of getting and utilising the customer’s input in any ROI analysis – it should be the prime source of market information. With the help of input from real customer meetings or calls, positioning messages can be changed on the fly and benefits they thought would chime the bells but in reality do not, can be stripped out. The marketers can use customer input to determine optimum market segmentations and tailor the messaging, pricing, and product features to optimise profitability. But more importantly, it provides feedback link between the field and headquarters to get a harmonised story across the entire salesforce and get real data about customers’ perception on the value proposition.

Some Tips on ROI Models

1) Continuous Improvement

Gaining customer feedback and real information is not a one-off project. Clearly it needs to be done on an ongoing basis. It requires continuous improvement and fresh data in order to stay current and keep apace of market trends. The salesforce need to have this continuous support in customer situations which change almost daily.

Many firms choose to engage external Contractors to help build a model and then use internal resources to support the model. However, it has been found that over 95% companies relying entirely on internal support fail to have a model in use 6 months later. This is usually because they a) fail to create ownership, b) develop sufficient in-house expertise in creating and maintaining models and c) the wealth of information customers are sharing is being wasted.

2) Get Sales Buy-in

Once you have developed your excellent ROI model, there is little point just printing it up in a laminated sheet and handing it out. In order for it to be valuable to customers, it needs to be seen by them. There is zero point in marketing holding the 'Secret Sauce' for themselves and so become the champions and not involving the salesforce. The salesforce, bless them, need to be educated and trained in how to use the model, know what inputs are required to work it and then how to communicate the results with confidence to customers. The biggest danger is that your best weapon could misfire or worse still hardly get fired at all. It should be natural to every salesperson in the team.

3) Make Sure It Holds Water

As a salesperson about the worst thing that could happen to me is that I think using an ROI tool would make the sale more difficult or even kill it. I can tell when someone has dreamed up a pithy ROI case without consulting customers because the first time you use it, someone remarks ‘That’s not actually how we work things here,’ or ‘That’s interesting but you haven’t included such and such’, it's a sinking feeling. The mantra must be – build the ROI model or value proposition and validate it with real customers before deploying widely. The most daft crime is to assume you know everything about a customer’s business – so by glibly saying ‘I can shave 60% off your OpEx’ or ‘I can improve the margin on your beverage sales by reducing your IT spend’, don’t be surprised if people say, ‘But my OpEx includes logistical costs which are 50% of the total and you’re saying by buying this IT service/product you can save 60% of those costs too?’ or ‘The margin on my beverage sales is the difference between sales and cost prices of the products and does not include IT costs.’ There are umpteen variations which may need to be incorporated so it is best to get a handle on them and build in leeway in the model to accommodate them – beforehand. Otherwise it means either the model has to be rebuilt for each customer which is very time-consuming and costly or, worse still, salespeople will quickly ditch it.

4) Don’t Blind People with Mathematics

Okay, I’m a simple sales-type yet I can crunch a spreadsheet with the best of them. But I know, in order to get my point across, if I can handily reel off 10 key benefit statements, each having substantial impact on cost or bottom line, then it is far more impactful than sending an Excel spreadsheet via email. Again, spreadsheeting assumes that you understand exactly how your customer plans their business and budgets – and you should know from personal experience that business planning varies markedly from company to company and often department to department. A really good ROI analysis can be used by a customer to champion the project internally, but most customers still develop their own ROI. This occurs because Vendors focus on showing Excel calculations instead of using ROI calculations to reinforce sales messages. A list of 10 benefits prevents the customer from remembering any one specific benefit. You have to remember, very often there are multiple decision-makers, each with their own agenda, by using 10 powerful statements, it is likely they will resonate strongly with more of the decision-makers.

How to Tackle ROI Properly

Like any good story, it starts at the beginning. Any ROI project is doomed without the long-term buy-in of sales and marketing. The first thing to remember is that building an ROI is itself a project that costs money so you need to budget it and plan for the maintenance in advance, rather like a customer might actually do in order to justify buying your product or service. You need to think about design, materials, training and ongoing support. As I pointed out, many companies fall into the trap of focusing on one key fact, laminating the story and sending out to the salesforce. Validation of the proposition is vital before doing this and only real customers can provide the valuable input required to do this. This step will save time, money and frustration later as well as the credibility of the champion. Keep the model flexible which allows customers to make changes to create the ROI they want so they don’t have to re-create it separately. And most importantly, use the ROI as a process for facilitating conversations with both customers and internally between sales, marketing, and engineering.

The fact of the matter is that many see ROI as just another piece of terminology from some sales-guru whereas it is at the heart of the value that your product and solution will bring to your customers. It is the value proposition that will set customers salivating. It is the template for repeatable success. It is the platform for all professional salespeople to build their credibility and trust with their customers that will help them differentiate themselves over their competition. It is the way to pre-qualify in-bound leads to ensure only the ones that fit the ROI model are sent to the salesforce. Ultimately, it is the single most productive tool to help drive hit-rates up and sales cycles down – it is also the most compelling story to tell any new salesperson.

It is your ‘Secret Sauce’ to pour on every sale to make your solution more appetising than any other. Design it well and use it liberally – and enjoy greater success.