Consulting
What are you Really Selling? (hint – solutions)
It is interesting to see Sales and Marketing people still focusing on features, performance, cost, and even value without creating a linkage to what that means to a company from a business perspective. Once you understand what your prospect is buying and why they need it, you can connect with them meaningfully to increase your win rate.
A sales adage from the 1940s (source) asserts, “No one wants a drill. What they want is the hole.” Today, that basic understanding of why people and companies buy is often lost in sales and marketing messages. Sales success is all about solving problems and satisfying needs.
Several years ago, my team and I were selling a new Analytics Database that was genuinely different. Still, our message was identical to every other database vendor – “70% – 100% faster than every other product.” It is nearly impossible to differentiate your product using a non-differentiated message. Don’t treat your product or service as a commodity if it is not one.
I flipped the messaging to focus on business needs. We created a weekly webinar focused on Why Fast Matters. Query response time is important, but responsiveness to customer needs and requests is essential. What if they did not need to wait a week or two to have new indexes created or a month to have a Star Schema updated? They could just run queries as-is, maybe wait a minute instead of a second or two, and have what they need then and there. That message resonated; we sold the first 50% of that product globally. When the Australian team began using our messaging, their sales also increased. Funny how that works.
Effectiveness is all about results and intended outcomes. Efficiency is about achieving those results with the least time and effort invested. It doesn’t mean that we are looking for a lazy approach to find a win. Instead, it is about identifying repeatable patterns that circumvent unnecessary activities, accelerate the sales cycle, and minimize related costs.
The way to help yourself understand what you are selling is to view things from your prospect’s perspective. What struggles are they likely facing? Where are the greatest opportunities to help their type of business? Are you analyzing data to attempt to assess their unmet needs? Your insight can become a huge differentiator, especially if you can teach them different and better ways to do something (ala the Challenger Sales Model).
What is the difference between your prospect company and its main competition? This analysis requires a general understanding of the problem space and a more specific understanding of the prospect company, its history, and 2-3 main competitors. It also requires an honest account of how your company and products compare to the competition so that you can play up your strengths and limit your investment in areas where the fit is not as good.
The next item to focus on is messaging. Below are a few examples from my career –
- Analytics & Big Data – The focus here is often on data volume, the currency of the data, speed of queries, cost, maintenance, and downtime. Those things become essential later in the sales discussion, but initially, companies want to know what problems their product or solution will solve.
- Some of my fastest deals sold because I demonstrated ways to make better decisions faster and/or identify minor problems before they had the chance to become major problems. Avoiding problems and unplanned outages were critical elements of the messaging.
- In one case, I closed a significant deal in less than three months by focusing on how a company could provide customers with five years of transactional data. Those customers could use the data to make better purchasing decisions in less time than it took the current system to analyze six months of data. Their sales increased after implementing this modernized system. Helping their customers make better buying decisions faster was the winning message.
- Embedded Products – While many companies focus on APIs, features, or cost per unit, I would focus on how the product I was selling made things better and easier to manage for improved Customer Support and Customer Satisfaction.
- I closed a $1.1 million deal in less than two months to a medical device company by focusing on the life cycle of those devices (often 10-15 years) and how their customers needed consistency from machine to machine. Consistency over time was the winning message here.
- After being approached by a Defense Contractor for a relational database product for a new Flight Simulator system, I changed the discussion to the complexity of flight control systems, the need to correlate 30+ operational systems in real-time, and the importance of taking a verbal command and translating it to specific commands for each related system. That led to selling a NoSQL product ideally suited for this complex environment. Letting our software handle the highly complex workload helped us win this deal.
- Consulting Services – These were not contracting or body shop services (commodities) but actual Business and Technical Consulting services with high visibility and impact. In these cases, expertise, experience, and having a track record of success in different but demanding scenarios provided confidence. These were often multi-phase engagements to prove our value before making a significant commitment.
- In a bid against two well-established competitors, we won a deal with a large Petroleum company worth nearly $500K. The proposal included information we uncovered about the system and use case and later verified with the prospect, a section on our people and past projects, and a high-level project plan with firm-fixed pricing. We won the bid, and I later discovered that our cost was $50K higher than the largest competitor and $100K more than the other competitor. The customer told me, “Your proposal demonstrated the understanding of who we are and what we need, and that confidence provided the justification to select your company and pay a premium to have the job done right the first time.”
- My first million-dollar deal was with a company where we demonstrated our ability to solve problems. They knew they needed assistance but were not exactly sure where. I created a “Pool of Days” concept that provided flexibility in the work performed (task, deliverables, and scheduling) but had minimum monthly burn rates and an expiration date to protect my company. The winning messaging this time was that flexibility and the ability to accommodate changing needs without introducing significant risk or additional cost were better ways to buy consulting services. This approach led to many other deals of a similar nature with other companies.
The common theme is helping companies solve their specific business problems from these examples. Even when technology was central to the message, focusing on better outcomes for that prospect and their customers was essential. Value matters, but positive results and better outcomes matter even more for purchasing decisions.
Nobody wants to be responsible for taking a chance on a new vendor and be responsible for a high-profile failure. Helping instill confidence early on makes a huge difference, and following through to successful implementation results in happy customers who become loyal customers who provide references and referrals.
Success starts with selling what you can do from a business perspective for your Prospects. You are solving their problems with solutions they need and avoid getting lost in the noise of the unfocused messaging from most of your competition.
Good Selling!
Are you Visionary or Insightful?
Having great ideas that are not understood or validated is pointless, just as being great at “filling in the gaps” to do amazing things does not accomplish much if what you are building achieves little toward your needs and goals. This post is about Dreaming Big and turning those dreams into actionable plans.
Let me preface this post by stating that both are important and complementary roles. But, if you don’t recognize the difference between the two, it becomes much more challenging to execute and realize value/gain a competitive advantage.
The Visionary has great ideas but doesn’t always create plans or follow through on developing the idea. There are many reasons why this happens (distractions, new interests, frustration, lack of time), so it is good to be aware of that, as this type of person can benefit by being paired with people willing and able to understand a new idea or approach, and then take the next steps to flesh out a high-level plan to present that idea and potential benefits to key stakeholders. People may view them as aloof or unfocused.
The Insightful sees the potential in an idea, helps others understand the benefits and gain their support, and often creates and executes a plan to prototype and validate the idea – killing it off early if the anticipated goals are unachievable. They document, learn from these experiences, and become more and more proficient with validating the idea or approach and quantifying the potential benefits. They are usually very pragmatic.
Neither of these types of people is affected by loss aversion bias.
I find it amazing how frequently you hear someone referred to as being Visionary, only to see that the person in question could eliminate some of the noise and “see further down the road” than most people. While this skill is valuable, it is more akin to analytics and science than art. Insight usually comes from focus, understanding, intelligence, and being open-minded. Those qualities matter in both business and personal settings.
On the other hand, someone truly visionary looks beyond what is already illuminated and can, therefore, be detected or analyzed. It’s like a game of chess where the visionary person is thinking six or seven moves ahead. They are connecting the dots for the various future possibilities while their competitor is still thinking about their next move.
Interestingly, this can be a very frustrating situation for everyone.
- The Visionary with an excellent idea may become frustrated because they feel an unmet need to be understood.
- The people around that visionary person become frustrated, wondering why that person isn’t able to focus on what is important or why they fail to see/understand the big picture.
- Others view the visionary ideas and suggestions as tangential or irrelevant. It is only over time that the others understand what the visionary person was trying to show them – often after a competitor has started executing a similar idea.
- The Insightful wanting to make a difference can feel constrained in static environments, offering little opportunity for change and improvement.
Both Insightful and Visionary people feel that they are being strategic. Both believe they are doing the right thing. Both have similar goals. What’s truly ironic is they may view each other as the competition rather than seeing the potential of collaborating.
A strong management team can positively impact creativity by fostering a culture of innovation and placing these people together to work towards a common goal. Providing little time and resources to explore an idea can lead to remarkable outcomes. When I had my consulting company, I sometimes joked, “What would Google do?” to describe that amazing things were possible and waiting to be done.
The insightful person may see a payback on their ideas sooner than the visionary person, and that is due to their focus on what is already in front of them. It may be a year or more before what the visionary person has described shifts to the mainstream and into the realm of insight – hopefully before it reaches the realm of common sense (or worse yet, is entirely passed by).
I recommend that people create a system to gather ideas, along with a description of what the purpose, goals, and advantages of those ideas are. Foster creative behavior by rewarding people for participation regardless of what becomes of the idea. Review those ideas regularly and document your commentary. You will find good ideas with luck – some insightful and possibly even visionary.
Look for commonalities and trends to identify the people who can cut through the noise or see beyond the periphery and the areas having the greatest innovation potential. This approach will help drive your business to the next level.
You never know where the next good idea will come from. Efforts like these provide growth opportunities for people, products, and profits.
The Importance of Proper Pricing
Pricing is one of those things that can make or break a company. Doing it right takes an understanding of your business (cost structure and growth / profitability goals), the market, your competition, and more. Doing it wrong can mean the death of your business (fast or slow), the inability to attract and retain the best talent, as well as creating a situation where you will no longer have the opportunity to reach your full potential.
These problems apply to companies of all sizes – although large organizations are often better positioned to absorb the impact of bad pricing decisions or sustain an unprofitable business unit. Understanding all possible outcomes is an important aspect of pricing related to risk and risk tolerance.
When I started my consulting company in 1999, we planned to win business by pricing our services 10%-15% lower than the competition. It was a bad plan that didn’t work. Unfortunately, this approach is something you see all too often in businesses today.
We only began to grow after increasing our prices (about 10% more than the competition) and focused on justifying that with our expertise and the value provided. We were (correctly) perceived as a premium alternative, and that positioning helped us grow.
Several years ago, I had a management consulting engagement with a small software company. The business owner told me they were “an overnight success 10 years in the making.” His concern was that they might not be able to capitalize on recent successes, so he was looking for an outside opinion.
I analyzed his business, product, customers, and competition. His largest competitor is the industry leader in this space, and products from both companies were evenly matched from a feature perspective. My client’s product even had a few key features that were better for management and compliance in Healthcare and Union environments that his larger and more popular competitor lacked. So, why weren’t they growing faster?
I found that competition was priced 400% higher for the base product. When I asked the owner, he told me their goal was to be priced 75% – 80% less than the competition. He could not explain why he did this other than to state that he believed that his customers would be unwilling to pay any more than that. His lack of confidence in his product became evident to companies interested in his solution.
He often lost head-to-head competition against that competitor, but almost never on features. Areas of concern were generally the size and profitability of the company and the risk created by each for prospects considering his product.
I shared the graph (below) with this person, explaining how proper pricing would increase their profitability and annual revenue and how both of those items would help provide customers and prospects with confidence. Moreover, this would allow the company to grow, eliminate single points of failure in key areas (Engineering and Customer Support), add features, and even spend money on marketing. Success breeds success!
In another example, I worked with the Product Manager of a large software company responsible for producing quarterly product package distributions. This work was outsourced, and each build cost approximately $50K. I asked, “What is the break-even point for each distribution?” That person replied, “There really isn’t a good way to tell.”
By the end of the day, I provided a Cost-Volume-Profit (CVP) analysis spreadsheet that showed the break-even point. Even more important, it showed the contribution margin and demonstrated there was very little operating leverage provided these products (i.e., they weren’t very profitable even if you sold many of them).
My recommendations included increasing prices (which could negatively impact sales), investing in fewer releases per year, or finding a more cost-effective way of releasing those products. Without this analysis their “business as usual” approach would have likely continued for several years.
Companies are in business to make money – pure and simple. Everything you do as a business owner or leader needs to be focused on growth. Growth is the result of a combination of factors, such as the uniqueness of the product or services provided, quality, reputation, efficiency, and repeatability. Many of these are the same factors that also drive profitability. Proper pricing can help predictably drive profitability, and having excess profits to invest can significantly impact growth.
Some customers and prospects will do everything possible to whittle your profit margins down to nothing. They are focused on their own short-term gain and not on the long-term risk created for their suppliers. Those same “frugal” companies expect to profit from their own business, so it is unreasonable to expect anything less from their suppliers.
My feeling is that “Not all business is good business,” so it is better to walk away from bad business in order to focus on the business that helps your company grow and be successful.
One of the best books on pricing I’ve ever found is “The Strategy and Tactics of Pricing: A Guide to Profitable Decision Making” by Thomas T. Nagle and Reed K. Holden. I recommend this extremely comprehensive and practical book to anyone responsible for pricing or with P&L responsibility within an organization. It addresses the many complexities of pricing and is truly an invaluable reference.
In a future post, I will write about the metrics I use to understand efficiency and profitability. Metrics can be your best friend when optimizing pricing and maximizing profitability. This can help you create a systematic approach to business that increases efficiency, consistency, and quality.
At my company we developed a system where we know how long common tasks would take to complete, and had efficiency factors for each consultant. This allowed us to create estimates based on the type of work and the people most likely to work on the task and fix-bid the work. Our bids were competitive, and even when we were the highest-priced bid we often won because we would be the only (or one of the few) companies to guarantee prices and results. Our level of effort estimates were +/- 4%, and that helped us maintain a 40%+ minimum gross margin for every project. This analytical approach helped our business double in revenue without doubling in size.
There are many causes of poor pricing, including a lack of understanding of cost structure; Lack of understanding of the value provided by a product or service; Lack of understanding of the level of effort to create, maintain, deliver, and improve a product or service; and Lack of concern for profitability (e.g., salespeople who are paid on the size of the deal, and not on margins or profitability).
But, with a little understanding and effort, you can make small adjustments to your pricing approach and models that can have a huge impact on your business’s bottom line.
Connecting the Dots Faster
When I started consulting, an experienced consultant told me, “The best Consultants are experts at becoming Experts.” I started my consulting career with that goal in mind. After a few years realized that “Good consults are people who can learn enough quickly to ask intelligent questions and then connect the dots faster.” This is a great skill for anyone, regardless of the industry or business.
It’s impossible to be an expert at everything. I believe having great depth in a few areas (true expertise) and breadth of knowledge in many areas (enhancing context and insight) is important. Both types of knowledge alone are valuable, but combined, they add a dimension that allows a person to be far more effective and potentially much more valuable because it leads to the ability to pick up on the dependencies and nuances that others miss.
Just think – How much more effective is a salesperson who understands technology and project management concepts when working to demonstrate fit and create a sense of urgency? Or, an Attorney who understands the complexity of service offerings and delivery – enhancing their ability to construct agreements that are highly protective yet not overly complex or onerous. Or a programmer who thinks beyond the requirements and looks for ways to improve or simplify the process. Extra knowledge helps with the big picture understanding, and that often leads to providing more value by “thinking outside the box.” Additional knowledge and skills almost always help us become more effective, regardless of what we may be doing.
Increased knowledge and a desire to do amazing things create opportunities to make a huge and immediate impact. Sometimes it is because you are asking the questions that others may be thinking but simply cannot articulate in a clear manner. It helps you see the gaps and holes that others miss. And most importantly, it helps you “connect the dots” before others do (often many months before something obvious to you becomes obvious to others). A large consultancy once used the phrase “seeing around corners” to make this concept tangible.
So, if you buy into the concept that knowledge is good, the next question is usually, “What is the best way to learn?” People learn in different ways, so there really is no one single best way to learn. Understanding how you learn best will help you learn faster.
I’m a fan of reading. A good book may reinforce ideas you already know, introduce you to a few concepts or ideas that seem like they could help (giving you something to test), and often present many ideas that you know or feel just won’t work. Just don’t become one of those people who changes their beliefs and approach with every book they read (or what I refer to as “The book of the month club manager.“)
I’m also a fan of hands-on learning. The experience of doing something the first time is important. Keeping detailed notes (what works, what doesn’t make sense, what you did to figure it out, workarounds, etc.) enhances the value of that experience. It’s amazing what you can learn when you “get your hands dirty.”
What about formal education? I’ve never been a fan of the person who wants to get a degree in order to get a promotion. There are certainly some professions where education is critical to success (often through legitimacy as much as anything else). My advice to people is to work towards a specific degree because it is important as a personal goal and because it could possibly help you get a different or better job in the future. I will never criticize anyone for learning, going to school, or getting another certification or degree.
I believe the best way to get ahead is to learn the position, innovate, optimize, and deliver incredible results. You won’t “knock it out of the park” every time, but those “base hits” will help you score and ultimately win.
This is not to say that formal education is bad; I don’t believe that at all. I was working on my MBA at the same time I was expanding my consulting business from the US to the UK. I had a concentration in International Business, so I could apply many things I was learning right away. This bit of serendipity both enhanced my learning experience and helped me make better decisions that had real implications for my business. The funny thing was that I was working on that degree to raise the bar for my children, so this was just a bonus for me.
There are also other great ways to learn – ways that only require an investment of your time. There are many good free online courses. If you are interested in learning something or need to know more about it, there is almost always a place to find free or low-cost training. These are great investments in yourself and your future, and may help you learn to connect those dots faster.
Below are links to a few good free learning websites. Do yourself a favor and check them out. And, if you know of others, leave a comment and recommend them to others. Enjoy!
OpenCulture (directory with content from multiple sources)
Open Education Database (directory with content from multiple sources
To Measure is to Know
Lord William Thomson Kelvin was a pretty smart guy who lived in the 1800s. He didn’t get everything right (e.g., he supposedly stated, “X-rays will prove to be a hoax.”), but his success ratio was far better than most, so he possessed useful insight. I’m a fan of his quote, “If you can not measure it, you can not improve it.”
Business Intelligence (BI) systems can be very powerful, but only when embraced as a catalyst for change. What you often find in practice is that the systems are not actively used or do not track the “right” metrics (i.e., those that highlight something important – ideally something leading – that you have the ability to adjust and impact the results), or provide the right information – only too late to make a difference.
The goal of any business is to develop a profitable business model and execute extremely well. So, you need to have something people want, deliver high-quality goods and/or services, and finally make sure you can do that profitably (it’s amazing how many businesses fail to understand this last part). Developing a systematic approach that allows for repeatable success is extremely important. Pricing at a competitive level with a healthy profit margin provides the means for sustainable growth.
Every business is systemic in nature. Outputs from one area (such as a steady flow of qualified leads from Marketing) become inputs to another (Sales). Closed deals feed project teams, development teams, support teams, etc. Great jobs by those teams will generate referrals, expansion, and other growth – and the cycle continues. This is an important concept because problems or deficiencies in one area can negatively affect others.
Next, the understanding of cause and effect is important. For example, if your website is not getting traffic, is it because of poor search engine optimization or bad messaging and/or presentation? If people visit your website but don’t stay long, do you know what they are doing? Some formatting is better for printing than reading on a screen (such as multi-column pages), so people tend to print and go. And external links that do not open in a new window can hurt the “stickiness” of a website. Cause and effect are not always as simple as they seem, but having data on as many areas as possible will help you identify which ones are important.
When I had my company, we gathered metrics on everything. We even had “efficiency factors” for every Consultant. That helped with estimating, pricing, and scheduling. We would break work down into repeatable components for estimating purposes. Over time we found that our estimates ranged between 4% under and 5% over the actual time required for nearly every work package within a project. This allowed us to profitably fix bid projects, which in turn created confidence for new customers. Our pricing was lean (we usually came in about the middle of the pack from a price perspective, but a critical difference was that we could guarantee delivery at that price). More importantly, it allowed us to maintain a healthy profit margin to hire the best people, treat them well, invest in our business, and create sustainable profitability.
There are many standard metrics for all aspects of a business. Getting started can be as simple as creating sample data based on estimates, “working the model” with that data, and seeing if this provides additional insight into business processes. Then ask, “When and where could I have made a change to positively impact the results?” Keep working until you have something that seems to work, then gather real data and validate (or fix) the model. You don’t need fancy dashboards (yet). When getting started, it is best to focus on the data, not the flash.
Within a few days, it is often possible to identify and validate the Key Performance Indicators (KPIs) that are most relevant to your business. Then, start consistently gathering data, systematically analyzing it, and then work on presenting it in a way that is easy to understand and drill-into in a timely manner. To measure the right things really is to know.
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Where Ideas, Experiences, and Lessons Learned Intersect 