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Chapter 10: An Enterprise Sales Future
Overview
You Can Watch It Happen to You or You Can Make It Happen for You
The same forces that are driving today's sales environment are shaping the structure and focus of tomorrow's sales world. We described how the forces of commoditization and complexity have changed the sales environment to the point that the assumptions on which conventional selling methodologies are based are no longer accurate reflections of today's marketplace. These two forces are clearly splitting the world of sales into two distinct groups.
This split, a chasm that will continue to widen, is in the process of creating two separate sales environments. On one side of the chasm, the typical sale will be a self-service, commodity-based, cost-driven transaction - what we call a nonprescription sale. On the other side, the process will be a complex, value-driven transaction - a prescription sale that will continue to require the guidance of an experienced team of professionals.
The sales professional's future on the commodity side of the chasm is not very secure. In 2002, it was reported that as many as half of all existing sales positions will be gone within five years. [1] That report came near the height of the Internet Revolution, and it isn't hard to understand how some experts could forecast that half the salesforce would simply disappear. After all, many experts were claiming that the entire "Old Economy" was quickly becoming obsolete. In the process, online vendors with virtual auctions and other electronic marketplaces will soon replace existing salesforces.
This hasn't happened as quickly as many predicted, but behind the overly grim statistics, there is a strong kernel of truth. Internet technology is an effective means of providing access to product information and a rapid education of customers; thus, many products and services are treated as commodities. In this scenario, customers can self-diagnose, design their solutions, and serve themselves. As a result, comparisons on price, convenience, and transaction cost become the driving force in the market. One recent example dramatically illustrates the point: In 2002, e-commerce retailer Buy.com decided to build its share of online book sales. It announced that it would beat Amazon's already discounted book prices by 10 percent. The day the price cut went into effect, Buy.com's daily book revenues increased 800 percent, and its daily average of new customers nearly tripled. [2] That's a commodity market and a nonprescription product.
There really isn't room for a dedicated salesforce in the nonprescription, commodity sale. In fact, sales professionals are an unnecessary and high-risk expense. When salespeople are not adding value via diagnosis, design, and delivery, their presence cannot be justified. Any loss in the number of sales jobs in coming years will come at the expense of those who are allowing their offerings to be treated as commodities. That is why we expect to see the demand for sales professionals decreasing in numbers and the remaining positions filled by highly skilled sales consultants.
On the other side of the chasm in the sales world is the enterprise sale. As we have shown, this sale cannot be turned into a self-service transaction. Customers do not have the knowledge or resources necessary to self-diagnose and/or design the solutions that they need as well as implement those solutions. They require the assistance and support of a professional team.
The forces of commoditization and complexity are both acting on the enterprise sale, but the more complicated problems and solutions become, the less the sale should be transacted with simple decision making that characterizes a commodity-like transaction. Further, because of advances in technology and intense competition, the rates at which innovation and change occur are accelerating. As a result, both the problems and their solutions tend to get more difficult to understand, analyze, and evaluate. In other words, enterprise sales are getting even more difficult to manage, and more and more products and services that require this type of interaction are appearing in the marketplace.
For all of these reasons, we see the enterprise sales arena growing at a rapid rate. Today, there are roughly 16 million sales jobs in the United States. Of those, we estimate that 5 million positions are in more heterogeneous environments. Because of the trend toward increasing complexity, we expect to see employment and compensation expand on that side of the chasm.
To summarize, the sales world will continue to split into two models. One is the commodity-based transaction where few salespeople will be needed. The other is the enterprise transaction where skilled sales professionals will be required more urgently than ever. This is why we believe that enterprise sales will dominate the future of the sales profession, and great compensation will be available for those who compete there. Accordingly, sales professionals who want to ensure successful careers need to seriously pursue mastery of the enterprise sale.
[1]Neil Rackham and John DeVincentis, Rethinking the Sales-force (McGraw-Hill), p. 3.
[2]As reported in the company's press release, "Books Sales Soar".
Choosing Sides
The interesting thing about the splitting of the sales world is that organizations often have a large degree of choice about whether to bring their offerings to market using either the commodity model or the enterprise model. Companies can decide which side their services and products will occupy.
Some companies, especially in the business-to-business sector, do not fall cleanly into a commodity or enterprise transaction. They are already straddling the chasm and will be forced to either choose one selling model for their entire organization or clearly segment their markets and products into one of the two models. The one option that is not viable is to continue to allow the conventional salesforce to cover both sides of the spectrum.
Other companies are operating in markets that are already defined as either commodity markets or sophisticated markets. But that doesn't mean that they can't change their business model and switch sides. Amazon.com is a example of a company upending both commodity, and increasingly the more sophisticated business to business (B2B) markets. From it's origin in the commodity sale of books and CD's to consumers Amazon has continually broadened it's reach to selling an immense range of products for businesses as well as consumers. What was once excess unused computer server capacity has been transformed into Amazon Web Services (AWS) supporting a great many tech and media companies in their formative years across the new economy. This adaptive company forces a sharpened focus if competitors are to stay viable.
With the sales world splitting apart, the question you need to answer is: "Which model should my company pursue?"
There is no simple answer to this question. If your company can squeeze more cost out of the system than your competitors can, competing in the commodity sale may be a viable choice. Certainly, there are companies that have become very successful by sticking to a low cost, high volume strategy. Competing on price is, however, a two-edged sword. As soon as someone else figures out a way to beat your price, customers will switch their allegiance.
We believe that a value creation sales model ultimately offers a more profitable opportunity than a price-based sales model. It is the enterprise sale that offers the opportunity to create value for your customer and capture value for your organization. The enterprise sale allows you to differentiate your company from the rest of the field and capture and defend a competitive advantage in the marketplace. For all of these reasons, organizations that have a choice would do well to choose to embrace and develop a enterprise sales model.
The two key issues for those who choose the enterprise sale then become:
Can you create true measurable and incremental value for your customers and capture a share of that value for you and your organization?
Do you have a process that allows your customers to comprehend the absence of that value in their businesses and be willing to pay a reasonable premium in price to receive that value?
Shaping the Future
For those who choose to pursue a high-value strategy, the final advice we offer is to move quickly to embrace the enterprise model to secure your future. As with most strategies, the companies that take the lead in shaping the sales environment in which they operate are more likely to succeed than those who follow the leaders.
The hard reality of the marketplace dictates that you are either part of your system or somebody else's. If you are working your system, you are in control of your destiny. If you are in the latter, odds are you will end up a victim.
This conclusion is supported by a McKinsey & Company study that examined the corporate strategies of 50 of the best-performing companies during a recent 10-year period. The companies were chosen for their sales, profit, and market capitalization growth and were drawn from a variety of industries including retail, computer, manufacturing, business services, health care, and financial services. The study revealed that 86 percent of the "biggest business winners" had focused their strategies on shaping their markets. [3] In other words, a substantial majority of these highly successful companies had attempted to create their own playing fields rather than accepting and adapting to the existing market parameters.
The Diagnostic Business Development process enables you to differentiate yourself from the competition early and often and create value through the selling process itself. As we have seen, the ability to make a high-quality decision is not a common capability among customers in a heterogeneous environment. It is the value the revised sales process creates and captures that gives it the power to define our customers' expectations and shape our marketplaces.
The enlightened sales professional brings a diagnostic, value-based decision process to the complicated situation and establishes a position in the customer's mind that competitors, especially conventional salespeople, will find hard to dislodge. Think back on your own experiences with salespeople. What outcomes characterized your most positive buying experiences? For us, the best buying experiences have been those in which salespeople helped us reach high-quality decisions with all that it implies - no matter what the product or service we were purchasing.
Ultimately, there are three selling systems vying for supremacy in any particular sales engagement: the customer's system, the competitor's system, and your system. You can get caught up in the customer's system; in fact, that is the course of action that conventional selling recommends. But customer systems are usually aimed at acquiring goods and services at the lowest price and, as we have seen, rarely lead to a high-quality decision. You can fall prey to your competitors' selling system, but, of course, it is designed to stack the deck to deal them a winning hand and you will find yourself constantly reacting to their smoke and mirrors. Or, finally, you can bring your own system to the enterprise transaction.
The final alternative is always the best. When you provide the system, you have the highest degree of professional control over the results and are well on your way to controlling the enterprise sale and being able to compete and win when the stakes are high.
Allow me to leave you with one final key thought.
There is no Magic! - Spectacular success is always preceded by unspectacular preparation.
Whether it is Tiger Woods, Lebron James, Walt Disney, Beyoncé Knowles, an Olympic athlete, an accomplished musician, a respected physician, a successful business person, or it could be a top sales or service professional in your organization, whenever you watch a pro doing what they do, it may look like magic - but it's not. It is systems, it is skills, and, above all, it is discipline. The spectacular success we see is always preceded by unspectacular preparation we don't see. So enjoy your preparation and enjoy your success!
[3]See Hugh Courtney, "Making the Most of Uncertainty," McKinsey Quarterly, no. 4.
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