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Sales

The Nuts and Bolts of Customer Value

By Jack Malcolm / 10.25.2022 / No Comment

Thanks to Dave Brock, I was introduced to an article in MIT Sloan Business School’s magazine, which details an 8-step process to improve workflows, starting with identifying and prioritizing problems, mapping the flow, implementing an improvement, measuring results, and making adjustments as necessary. It’s actually pretty straightforward, and I mentioned to Dave that I thought it was a bit simplistic.

He didn’t disagree with that assessment, but he made the important point that the reality is that too few understand even these basics. That rings true with me, because I often find that salespeople aren’t usually clear in their own minds exactly how they add value to their customers.

There is a lot of talk about creating value for customers. We all know it’s important, but it’s kind of like the recipe for rabbit stew: first, catch one rabbit.

How do we catch the rabbit to make the value stew?

Let’s first define value in B2B sales terms. Essentially, every business is a cash flow engine, which runs on cash to acquire resources and fund activities that customers will pay for—in order to create more cash. Financially, you create value in one way only: by increasing cash flow. To add value, you have to affect their business in such a way so as to either increase cash flow or prevent its reduction.

So, the big picture of value creation is that you must improve your customer’s cash flow engine in some way. There are three general ways to do this: increase revenues, lower costs, or make ore efficient use of assets. That will address “why” they should buy from you.

But we still haven’t caught the rabbit. To do so, we must answer the “How” question. How, specifically, do we cause those cash flow improvements?

The answer lies in process improvements. Carrying the engine analogy one step deeper, every engine is a collection of systems that work together to generate the results it’s designed for. Your customer’s business comprises a bundle of processes and workflows that all fit together. Every process receives inputs and applies work to them, to create an output that a customer values. The customer can be external or internal. External processes that create value for customers include manufacturing, outbound logistics, sale and support, etc. Internal processes are those that keep the lights on, satisfy legal requirements, account for results, and so on.

These processes are the levers that you can manipulate to create business improvements. It’s as simple—and difficult—as that. You create value by improving relevant processes in some way. You may reduce inputs, increase throughput, speed up the process, remove constraints, eliminate steps, improve quality, and any other myriad ways. Functional improvements are the route to financial improvements.

So, you can’t solve problems, produce profits, or even generate useful insights unless you have a deep and complete understanding of the processes you affect. That’s where ideas such as those in the MIT Sloan article are valuable. Whether you use their process, or one of your own, you must first understand in detail how the processes that you touch with your product or service currently work—the inputs required, the activities and work applied to those inputs, the outputs expected. Next, you must be able to clearly identify and articulate one or more of the ways you can improve the process. Basically, there are four ways you can improve any process: solve known problems (these are usually the low-hanging fruit because they are already aware of them); take advantage of opportunities; adapt to changes; or manage risks.

So, by understanding the nuts and bolts of the relevant customer processes, you can connect your solution to specific improvements that will lead to quantifiable cash flow improvements. If Dave Brock is right in saying that too few salespeople understand these basics, becoming an expert on your customers’ workflows presents an untapped opportunity for you to set yourself apart from your competitors and increase the perceived value of your solutions.

There’s an added benefit—and a caveat—to becoming an expert in your customers’ processes. You gain personal respect and trust—as long as you don’t leave the process improvement job to others. While your company may provide help from marketing and sales enablement with education and collateral material, it is absolutely essential that you become the expert. As Matt Dixon and Ted McKenna say in their book, The JOLT Effect, by owning the flow of information, you bolster the customer’s perception of you as the expert. They quote one rep, who said:

“I always want my customers to see me as the source of information and a subject matter expert. If I abdicate that role, they’ll only see me as a glorified admin and then they’ll start relying on their own research rather than looking to me as a guide and trusted advisor.”

Financial value rests on functional value, and when you can understand and credibly discuss both, you will be a rare and valuable resource that your customers will cherish.

The Path of Mastery

By Jack Malcolm / 10.18.2022 / No Comment

Some books you just have to be ready to read. I first read George Leonard’s, book, Mastery: The Keys to Success and Long-Term Fulfillment thirty years ago, soon after it first came out. I found it useful, but it is only now that I chanced upon it on my bookshelves and re-read it, that it has deeply affected my thinking. I feel like I am ready because for the past ten months I have taken up the challenge of learning how to draw.

What about you? Have you ever had ambitions of mastering a skill or activity, only to abandon it soon after the initial enthusiasm? Or do you find yourself stuck in a rut, needing a new challenge to occupy your attention and fire your enthusiasm? I’ve been in both situations—repeatedly—and I know how difficult and rare it is to master a new skill, especially later in life.

If so, it helps to have a mentor to place you on the proper path and guide you along it. Leonard died in 2010, but his short and insightful book can provide the wisdom and instruction that can improve your chances of success.

The key insight, for me, is that mastery is not a goal. It is a never-ending path. Once you step on the path, you will never reach your destination, but you can go far. How far you go depends on what you do while on the path, and how long you stay on it.

Your progress will vary; you will probably make quick progress at first, and then you will inevitably hit a patch where you don’t see any improvement at all and may even regress. That’s when it’s so easy and common to get frustrated and quit, or impatiently double down on your efforts and possibly get even worse.

Many people never get past this first plateau, but those that stick with it are generally rewarded with another burst of improvement, and on it goes. Leonard’s key point is that the real improvements are actually occurring during these plateaus, as your brain and body gradually figure out how to turn the required behaviors into unconscious habits. The bursts of improvements are merely the markers of that progress.

You will spend most of your time on the path on one of these plateaus. Plateaus are good. Mastery, therefore, comes from embracing those plateaus. For me, this is the most important point: learn to love the practice for its own sake. Practice, according to Leonard, is not a verb but a noun: you have a practice—an approach or a process—that is worth following for its own sake. Masters love to practice.

This idea resonates with a concept I’ve written about before:

There are two general types of goals that people set for themselves, performance goals and learning goals. Performance goals are about reaching a set target, which is frequently related to how you compare to others. Learning goals focus on learning, getting better and comparing yourself to yourself.

The idea may seem to counter results-oriented business activities. But even in sales, one study has shown that salespeople who pursue learning goals outperform those who chase performance goals.

What is success? Is it the reaching of a difficult and meaningful goal, or the enjoyment and fulfillment that comes from being dedicated to the pursuit? The beauty of following Leonard’s advice is that you will not only enjoy the journey, but you will be more likely to reach a worthwhile destination.

As for drawing, I have no expectation of ever mastering the skill. But after ten months I am no longer terrible at it, and next month I’ll be better, and the month after that. Most importantly, I am so enjoying the effort—and that in itself means I’ve already succeeded. Mastery is not the destination, but the path.

Book reviews - Sales Books

The JOLT Effect: Don’t Fight Fear with Fear

By Jack Malcolm / 9.28.2022 / No Comment

As a student of my profession, I’ve probably read about 100 sales books. Of these, there are only a few that I would read more than once and even fewer that I would enthusiastically recommend. To qualify, the book must teach something new, be backed up by hard data, and be well-written. I’m happy to say that The JOLT Effect: How High Performers Overcome Customer Indecision, by Matt Dixon and Ted McKenna, easily meets all those criteria.

Here’s the gist of the book in one paragraph. The single biggest reason sales are lost is because customers can’t or won’t make a decision. The way that most salespeople have been taught to sell doesn’t’ work against indecision, and actually makes things worse. Using the counterintuitive approaches described by the acronym JOLT can more than double your chances of winning deals.

Let’s take these one by one.

Your biggest competitor

For any sales opportunity to succeed, the customer must take action to buy from you. That means that they must intend to change, select your offer, and follow through with their intent. In other words, your three competitors are status quo, competitive vendors, and indecision. The first surprising insight from this book is that indecision is the most common reason that deals don’t close, comprising 40-60% of losses. Indecision is not the same as deciding to stick with status quo; it occurs when the customer has expressed an intent to change, but is either unwilling or unable to actually pull the trigger on the decision. Amazingly, even after customers have said they’re willing to buy, conversion rates are only 26%!

You can’t fight fear with fear

Since sales is about change, most sales approaches are designed to overcome status quo bias. In this battle, fear is the salesperson’s friend. Because change is hard, salespeople have learned to bring out the fear of loss—to make the cost or pain of not changing greater than the cost or risk of changing. It’s extremely effective in getting the customer to agree that they need to change.

But there’s a problem. Once the customer has decided that change is necessary, another more powerful fear kicks in, called commission bias. We are more afraid of making a mistake through action than inaction. Especially in a large organization with a lot of people involved in the decision process, it’s easier and safer not to decide. Fear of missing out is not as strong as fear of messing up.

When the customer delays or dithers, the average salesperson assumes they haven’t done a good enough job on making their case for change, so they double down on the fear. But this just injects more fear into the customer’s mind and actually backfires. Statistics gleaned from literally millions of sales conversations show that while dialing up fear works 16% of the time, it does not work 84% of the time.

So, to combat indecision, the trick is to flip the switch—from fear to reassurance. You have to lower the fear of deciding. Every business book needs an acronym and that’s where JOLT comes in.

JOLT them into action

Judge the indecision. The best sales reps qualify not only ability to buy, but ability to decide. This is probably the hardest part: being able to detect the presence and depth of indecision. Their research has shown that indecision is present in 84% percent of sales opportunities. It comes from three sources: valuation problems, which means they have trouble comparing options; incomplete information; outcome uncertainty, which is the risk of not getting the results they expect. This chapter explains how to gauge the source and depth of indecision through things the customer does and says during the sales cycle.

Offer recommendations. Another “aha! moment” for me. I’m a huge proponent of asking questions and talking less during sales conversations, but that’s not the best approach at this stage of the sale. Their research showed that the most effective reps actually talked more rather than less, telling more than asking. Too much choice and resulting complexity make it harder to decide, so the salesperson who offers proactive guidance and expert personal opinion makes it easier, boosting conversion rates from 13% to 48%. (I note that for this to be effective, the rep must have established credibility and trust, and asking a lot of questions earlier in the sales cycle is still one of the best ways to demonstrate customer orientation and to get the information needed to make credible recommendations.)

Limit the exploration. Every salesperson knows the frustration of analysis paralysis, where the customer is always asking for just a little more information. High performing reps learn to own the flow of information in three ways. First, they establish their own expertise. One of the ways they do this is by actually limiting the participation of subject matter experts like sales engineers. Another way is to anticipate objections or concerns the customer is likely to have, and bring them up before the customer does. This strategy of “pre-buttal” is extremely effective, as shown by a 45% increase in win rate when it’s used. Third, they are not afraid to challenge the customer’s request for more information, and follow up with questions to probe for exactly what uncertainty is driving the request.

Take risk off the table. When the book first came out, I texted Dave Brock to ask if he thought it was worth investing the $29 price. He responded by saying that it was well worth it, and if I did not agree, he would personally reimburse me. He demonstrated the effectiveness of finding ways to lower the customer’s downside risk and make it easier for them to decide.

Will adopting the JOLT approach pay off for you? Let me try my hand at taking risk off the table[1]. First, using JOLT does not mean you throw out everything you’ve learned to date about changing the status quo. That is still necessary. It’s an addition, not a replacement, for your sales playbook.

Second, I can’t totally reduce your outcome uncertainty, but let me stress what I said at the beginning about hard data. Dixon and McKenna did not make up the JOLT techniques; they discovered them in the patterns from the data. They have taken advantage of the explosion of virtual sales conversations caused by the pandemic, using machine learning to analyze 2.5 million sales conversations and uncover patterns of what separates the high performers from the average. As you can see from the liberal use of statistics in this review, they’ve measured what works and how well. If it worked for them, it will work for you.

It’s an easy decision: buy it, read it, apply it.

[1] I don’t have the resources to make the same offer Dave did to me.

Book reviews - Communication Books

Smart Brevity: The Power of Doing More with Less

By Jack Malcolm / 9.22.2022 / No Comment

Anyone who is familiar with Lean Communication knows how important it is to be brief and prevent waste. So, of course I was intrigued by the title of a new book, Smart Brevity: The Power of Doing More with Less, and read it immediately on receiving it this week.

My assessment? Well worth reading, but could have been shorter.

You write too much for the way your readers consume information. No one has the time or patience to read everything they are sent, so it is likely that most of what you write goes unread.

This matters to you personally because, as a knowledge worker, your contribution, influence and credibility depend on being heard, or in this case, being read. It matters to the organization when important information slips through the cracks and things happen—or don’t—as a result.

Smart Brevity will teach you how to grab attention and keep it, and so ensure that your message gets across crisply and clearly. The authors share a formula which they have developed over their work in print and electronic media. As you see in this review: tease them with a good subject line, craft a short opening sentence that tells the one big thing, explain why it matters, and then go deeper as necessary. Simple and effective.

As the author of Lean Communication, I am pulling for this book to take off, because it carries such an important message. But I do have to point out one caveat. The book could have been shorter by about 20%. There is too much backstory and puffery about Axios, the company the authors founded and run today, and after a while you get the feel that you are reading a corporate or product brochure.

Remember: write tighter, write better.

By the way, if you haven’t read Lean Communication, you may wonder which book to read first. If you want to focus solely on your writing, read Smart Brevity. If you want to focus on spoken communication, Lean Communication is the book for you.