leadership
Innovation, Optimization, and Business Continuity
Originally posted on LinkedIn.com/in/chipn
Recently I read that the U.S. is experiencing a significant jump in unemployment claims. Much of that is understandable given the recent decline in many businesses, concerns about how long this crisis may last, and the need for business owners and executives to protect ongoing viability. But, in the near future, business activity will resume, and it will be very important that businesses maintain a business pipeline and retain qualified staff to deliver their products and services.
Now could be the ideal time to challenge your team to focus on improving your business. Look at business processes and identify:
- What works well today? Can you identify what makes it work so well? Simplicity, automation, and a lack of friction are typical attributes of effective, efficient systems and processes that positively impact any business.
- What could be improved and why? Specific examples and real data will help quantify the impact and support prioritizing follow-up activities.
- What is missing today?
- Good ideas have likely been raised in the past, so why not revisit them?
- What are competitors or businesses in other segments doing that could be helpful?
- Brainstorm and consider something completely new that could help your business.
- Start a list, describe the needs and benefits, provide specific examples, and then estimate each idea’s potential impact and time to value.
- Take the ideas with the greatest promise and estimate the cost, people/skills needed, and other dependencies to see how they stack up.
Another option is to create or update Business Continuity Plans. Now is a perfect time – while everything is fresh in the minds of your team. This will help in the future, and you may also find several useful ideas for the coming weeks.
For example, do you have enough documentation for someone who isn’t an expert in your business to take over with a relatively short ramp-up time? How will you maintain quality and control of those processes? Are your plans stored in a repository that is accessible yet secure outside of your organization? Do you have the processes and tools to collect documentation and feedback on things that did not work as documented or could be improved? Are your Risk Management plans and mitigation procedures up to date and adequate?
Investing in your business during this slowdown could have many benefits, including maintaining employee morale, enhancing employee and customer loyalty, retaining employees and their expertise and skills, and increasing sustainability and long-term growth potential.
Could this Pandemic Create New Business Opportunities?
Originally posted on LinkedIn.com/in/chipn
For most businesses, now is a time of caution and uncertainty. Mitigation and emergency planning are likely underway. The CDC has provided solid guidance, and new information is forthcoming daily. Communication Plans are being rolled out and revised as needed. Travel and meetings are being curtailed. Disruption may become the new normal for the next several months.
Alexander Fleming, the Nobel Prize winner who invented Penicillin, is quoted as saying:
“The unprepared mind cannot see the outstretched hand of opportunity.”
More people will be working from home, face-to-face meetings will be limited, large gatherings will be avoided, and travel to those meetings or gatherings. Working from home can be challenging for people not accustomed to it, so helping them transition may be very important to your financial bottom line.
Collaboration tools like Slack, Basecamp, and Asana can help maintain productivity and foster necessary interaction. Some tools include video conferencing; tools like Zoom or Webex can help internally and externally. Seeing the person you are speaking with increases engagement and leads to more effective communication by helping you spot nuances, such as facial expressions, that could otherwise be missed.
Secure, easy-to-implement tools (cloud-based solutions have an advantage here) that are easy to learn and use can be a cost-effective way to keep your business on track. Another benefit is building an effective distributed workforce.
But wait, there is more!
You may have important projects you can pull in and start now. That is another way to keep your teams engaged and focused. This could also be an opportunity to enhance skills with online training or research new technologies or business models.
This could also be a great time to buy and sell products and services. Business demands could temporarily decrease in many market segments.
- Sales organizations could use that opportunity to offer appealing deals to customers and prospects.
- Buyers could use their ability to purchase quickly to secure better deals during this lull in business.
Reasonable concessions can be mutually beneficial and a boon for both parties.
Negative events like a pandemic are not ideal and should not be taken lightly, but they can create opportunities to advance your business and position you for even greater success once the situation is under control. It is like that old saying, “When life gives you lemons, make lemonade.”
Continuous Improvement, Growth Mindset, and an “Attitude of Better”
This was originally posted on LinkedIn.com/in/chipn
When I had my own company, we focused on providing the absolute best services in a few niche areas. Our goal was to succeed in the spaces that were important yet underserved. We identified those areas, validated the need, evaluated the competition and our competitive positioning, determined the market potential, and then made an informed decision based on that data.
But this was not a plan for winning. It was a roadmap to places we could win, but nothing more. What would our strategy be? What specific problems would we solve? How would we create awareness around the potential impact of those problems? And how would we position ourselves as the best candidates to address those business needs? In short, what was our real purpose or raison d’etre?
Recognizing that void led to a couple of powerful revelations –
1. It is great to have a goal of being the best at something, but don’t use that as an excuse to procrastinate. Learning and improving is an iterative process, so that goal alone wasn’t enough.
2. Adopting an “Attitude of Better” became a game-changer. We focused on continuous improvement and winning. We became customer-obsessed, driven to provide better service and better results for every customer. We gauged our success by customer satisfaction, repeat engagements, and referrals.
3. But it wasn’t until we adopted an intentional Growth Mindset that our business evolved and improved.
· We leveraged every win to help us find and create the next one.
· Our team constantly pushed each other to raise the bar of knowledge, expertise, and performance.
· Just as important was what occurred next. They became each other’s safety net. Failure for one meant failure for all, and nobody wanted that. They became a high-performance team.
· We created standard processes and procedures to ensure consistency and maintain the highest levels of quality. This applied to everything we did – from working on a task to writing trip reports, status reports, and proposals. It also reduced our risks when we chose an outsourcing partner to help us take on more concurrent projects.
· Whenever possible, we automated processes to maintain consistency while increasing efficiency, repeatability, scalability, and profitability.
· We measured and tracked everything, analyzed that data, captured lessons learned, and continuously worked on improving (and documenting) every aspect of the business.
· A byproduct of this approach was that we could offer leaner pricing based on accurate estimates with very small error margins. Our pricing was competitive, we could fix the price for much of what we did, and our profit margins were very good. This allowed us to invest in further growth.
Our “attitude of better” also came across as confidence when selling to and working with new customers. Not only could we tell them stories of our success with tangible metrics, but most of our customers also became references willing to talk about the value we added. Their stories included discussions of how much better things became because of our work.
Better became the foundation of what we did and the foundation of those customer success stories.
Could a New Channel Model Lead to Sales Amplification?
Over the years, I have helped successful companies and start-ups improve and strengthen their Channel and Strategic Alliances programs. The results have been good, but could they have been better? Keep reading to learn about the benefits of enhanced business ecosystems.
Most traditional channel models support Distributors, Resellers, OEMs, and ISVs. The business mainly flows upwards to the main vendor. If that vendor has popular, widely used products (think Microsoft and Oracle), partner business can be good because the demand stays consistent. But sales pipelines suffer when that is not the case.
Sales Channel business is not the main source of revenue for most companies, but it can become the largest and most scalable revenue source for nearly any business. Just think about the money left on the table by not adopting a growth mindset and executing a new and better strategy.
In the summer of 2016, I attended the “Sage Summit” in Chicago. It was impressive to see the Sage Group’s efforts to build, strengthen, and protect their Customers and Channel Partners community. They tried to foster higher levels of collaboration between the various types of partners – implementation services, consulting, staff augmentation services, complementary product vendors, etc. They had created their own highly successful Business Ecosystem, which is an excellent proof point.
When designing a channel partner program, my focus has always been on balancing promoting and protecting partners’ business with ensuring end customers have the best possible experience (and some recourse when things do not work out as expected). I have used a variety of methods to accomplish those goals, including creating a systematic approach to seeding relationships between partners’ complementary offerings and facilitating even greater business activity.
Nearly a year ago, I began working with a management consultancy run by Robert Kim Wilson, whose business vision is based on his book, “They Will Be Giants.” Links for this book and other relevant resources are provided at the bottom of the post. Kim asserts that Entrepreneurs with a Purpose-Driven Business Ecosystem (PDBE) are more successful than those without one, and he provides examples to support his point. Having experienced Kim’s PDBE, I see how purpose fosters trust and collaboration.
As I did more research, I found that thought leaders in this space have increasingly focused on Business Ecosystems and Business Ecosystem Organizers (such as Sage in the earlier example). Those findings reinforced the PDBE approach, and external validation like this is always good.
From my perspective, it was just as important that this concept apply to businesses of any size – especially for small to midsize businesses. The fun part for me is exploring a specific business, analyzing what they do today, and quantifying the potential benefits of adopting this new strategy.
So, how does this new type of Business Ecosystem work?
- The Business Ecosystem Organizer expands the overall network, vets new “Business Ecopartners,” and provides a framework or infrastructure for the various Business Ecopartners to get to know one another, exchange ideas, and discuss opportunities.
- This can become an incredibly sustainable revenue source for companies willing to invest time to collaborate and share ideas in order to grow and support the Business Ecosystem.
- Business Ecopartners will have access to trusted resources to augment existing business and take on new, bigger projects by leveraging the available expertise.
- Suppose that you have products or services that work with commercial CRM (Customer Relationship Management), ERP (Enterprise Resource Planning), or SCM (Supply Chain Management), and have seen a growing demand for functionality that relies on highly specialized technologies like:
- Cryptocurrency support.
- Blockchain for financial transactions and things like traceability in your supply chain or IoT data.
- AI (artificial intelligence) and ML (machine learning) to detect patterns and anomalies – such as fraud detection, Deep Learning/Neural Networks for image recognition or other complex pattern recognition.
- Graph databases to better understand a business and infer new ways to improve it.
- Knowledge Graph/Semantic databases to create deeper meaning and understanding with data from multiple sources – assisting in deeper understanding and Transfer Learning (which also has an AI tie-in).
- Building these practices in-house would not be practical or cost-effective for most businesses, so partnering becomes very attractive.
- This type of business relationship can also be very attractive to a Business Ecopartner because someone else handles prospecting, sales, billing, account management, etc.
- Suppose that you have products or services that work with commercial CRM (Customer Relationship Management), ERP (Enterprise Resource Planning), or SCM (Supply Chain Management), and have seen a growing demand for functionality that relies on highly specialized technologies like:
- Other Business Ecopartners can leverage your products or services for their projects and engagements, expanding their addressable market and creating additional revenue sources for the other ecopartners.
- By actively participating in this network, any business can now compete on imagination and innovation – providing a more comprehensive solution that could become a major source of differentiation from their competitors.
Value realized from this New Business Ecosystem model:
- These new sources of business and talent can become a real competitive advantage for your business.
- This becomes the source for Sales Amplification because each business is, directly and indirectly, expanding its reach and growth potential.
- The weighted (based on capabilities, capacity, responsiveness, and Ecopartner feedback) Business Ecopartner network model could lead to exponential business growth – a winning strategy for any business.
Next Steps
If this sounds interesting and you would like to discuss how it could look for your business, contact me to schedule an exploration call.
References:
- https://kimwilson5.wixsite.com/theywillbegiants/the-book
- https://www.bcg.com/publications/2019/emerging-art-ecosystem-management.aspx
- https://www.gartner.com/smarterwithgartner/8-dimensions-of-business-ecosystems/
- https://sloanreview.mit.edu/article/the-myths-and-realities-of-business-ecosystems/
- https://www2.deloitte.com/us/en/pages/operations/articles/business-ecosystems.html
- https://www.accenture.com/_acnmedia/pdf-56/accenture-strategy-your-role-in-the-ecosystem.pdf
- https://www.bain.com/insights/shifting-from-assets-to-ecosystems-video/
- https://hbr.org/2019/09/in-the-ecosystem-economy-whats-your-strategy
Shouldn’t Sales Forecasting be Easy?
Of course it should… or maybe not.
First, what are you measuring? The answer to this seemingly simple question is something that anyone with a sales quota should be able to succinctly answer, since this is what you are being paid on.
But context matters, too. People at different levels of the business are likely reviewing multiple forecasts for multiple reasons. So, the first rule is to never assume.
So, what are you measuring?
- Bookings – Finalized Sales Orders
- You have a PO, but has the deal really been closed? What else is needed in your business to finalize an order?
- Billings – Invoicing Completed
- This includes dependencies that may introduce unexpected delays and/or be outside of your control, such as a deal that bills on October 31st versus November 1st. Are they still part of the same period (October)?
- Revenue – An in-depth understanding of Revenue Recognition rules is key.
- How much revenue is recognized and when it is recognized varies based on a variety of factors, such as:
- Is revenue accrued or deferred? This is especially key for multi-year prepaid deals, or when services are packaged with software as part of the deal.
- Is revenue recognized all at once – such as for the sale of Perpetual Software Licenses? (even this is not always black and white)
- Is revenue recognized over time – such as with annual subscriptions that are ratable on a monthly basis?
- Is revenue based on work completed/percentage of completion? This is more common with Services and Construction. How is that percentage determined?
- Are there clauses in a non-standard agreement that will negatively affect revenue recognition? This is where your Legal team becomes an invaluable contributor to your success.
- Cash Flow – Is this really Sales forecasting?
- The answer is ‘no’ in terms of Accounting rules and guidance.
- But, if you have a start-up or small business, this can be key to “keeping the lights on,” in which case the types of deals and their structure will be biased towards cash flow enhancement and/or goals.
- How much revenue is recognized and when it is recognized varies based on a variety of factors, such as:
- Profitability – In this case, what expenses are factored in that offset revenue?
- Cost-Volume-Profit (CFP) analysis tends to be one of these exercises where you learn that there are often several takes on what is or is not a related expense.
When I was a VP running two global regions, I would meet with the CFO prior to the end of a quarter to discuss what mattered most for the coming quarter. Sometimes the goal was more upfront cash; other times, it was guaranteed multi-year revenue. Sometimes it could be both, and I would be authorized to provide additional discounts on prepaid multi-year deals. The goals would change based on our banking covenants (revenue, investments, cash on hand), investor goals, valuations, etc. I often tracked multiple goals at once for various reasons.
My advice is to work closely with your CFO, Finance Team, Sales/Revenue Operations Team, and Legal team to understand their goals and guidelines, then take that one step further by creating policies approved by those stakeholders and share the highlights with the Sales team to avoid any ambiguity around pricing rules, process changes, and expectations. Great communication and a common understanding of the goals and rules help you and your team win.
So, now the hard part is over, right?
It could be that easy if you have one well-established product, a stable install base, no real competitive threats, a steady, predictable growth or decline rate, and consistent pricing and average deal sizes. I haven’t seen a business like that yet, but I’m sure at least a few exist.
Next, what are you building into your model to maximize accuracy? Every product or service may be driven by independent factors, so a flat model that evenly distributes sales over time (monthly or quarterly) is likely to be inaccurate when you have royalty revenue or progress-based billings.
For example:
- One product line that sells perpetual licenses may depend on release cycles every 18-36 months to maintain a steady revenue rate, with peaks and valleys within that window.
- A second product line may be driven mainly by renewals and expansion on fairly stable timelines and billings. In this case, annual uplifts may be needed to maintain profitability.
- A third product line may be new with no track record and in a competitive space – meaning that even the best projections will be speculative and likely optimistic.
- Finally, services could be associated with each product line and driven by more dependent and independent factors (new implementations, upgrades, implementing new features, platform changes and modernization, routine engagements, training, etc.) How and when are the revenue and expenses recognized, and what impact could they have with related items sold with (or close to) that deal?
Historical trends are one important factor to consider, especially because they tend to be the things you have the greatest control over (i.e., they should not change that much). This starts with high-level sales conversion rates and goes down to average sales cycle, seasonal trends, organic growth rates, churn rates, and more.
Having accurate sales and customer data over time that can be accurately correlated is extremely helpful. But factors such as Product SKU changes, licensing model changes, new product bundles, etc., increase the complexity of that effort and potentially decrease the accuracy of your results. These self-inflicted issues are often introduced without considering downstream implications. Fun!
Correlating those trends to external factors, such as overall growth of the market, relative growth of competitors, economic indicators (inflation metrics like CPI, interest rates, foreign exchange rates, corporate indicators (profits, earns per share, distributions, various ratios, ratings, etc.), commodity and futures prices (especially if you install base tends to skew towards something like the Petroleum Industry), specific events, and so forth increases the complexity of the model but can add an extra level of accuracy.
The best case is that those correlations increase your forecasting accuracy for the entire year. In all likelihood, they provide valuable inputs that allow you to dynamically adjust sales plans as needed to ensure year-over-year success. But making those changes should not be done in a vacuum, and communicating the potential need for changes like that should be done at the earliest point where you have a fair degree of confidence that change is needed. Simple, eh?
Unexpected events will always negatively impact your forecasts and plans. Changes to the competitive landscape, reputational changes, economic changes, etc., can all occur quickly and with “little notice.” That is especially true if you are not actively looking for subtle indicators (leading and trailing) and nuances that highlight potential problems and give you time to do as much as possible to address them proactively. The best advice is to anticipate the unexpected and have a contingency plan!
Forecasting accuracy drives confidence, which helps you secure funding for new campaigns or initiatives. Surprises, even positive ones, are generally disliked because the results differ from expectations, which can fuel other doubts and concerns.
Confidence comes from understanding, good planning, helping everyone meet a quota, and supporting teams to do what is needed, when it is needed, to optimize the process. This also assumes you can determine whether deals are really on track and intervene with guidance before deals slip or are lost.
It may not be easy, but it helps drive companies to the next level through a predictable, sustainable growth trajectory. In the end, that consistency often matters the most to the owners and stakeholders of a business.
Where Ideas, Experiences, and Lessons Learned Intersect 