Even within the realm of sales management, it’s important to recognize the interacting dimensions that must be managed to link selling effectiveness with strategy.
– Excerpt from the book, Aligning Strategy and Sales: The Choices, Systems, and Behaviors that Drive Effective Selling
Excerpt from tomorrow’s Business901 podcast with the author Frank Cespedes:
Joe: Well, I guess I’ll start where the book starts out at and as you call it, The Dialogue because sometimes that’s the most difficult part. I mean what is The Dialogue?
Frank Cespedes: What I’m referring to is the dialogue between strategy in a company and sales, the sales customer acquisition. Just to give you and the listeners some sense of the magnitude of what we’re talking about, let me throw some numbers at you. I’m not sure that people really understand the magnitude of this. Despite all the talk, you hear about digital this and digital that, this is the data. US firms spend annually on their sales forces about $900 Billion, that’s billion with a B. Now, to put that in context, that’s more than 3 times the amount of money that these firms spend on all their media advertising, Super Bowl, everything. It’s more than 20 times what they spend on all online ads and digital media, and it’s more than 40 times what they currently spend on social media. So, when I see numbers like that, I’m always reminded of Mark Twain’s comment, “If you put a lot of your eggs in one basket, it’s a good idea to keep your eyes on that basket.” If we keep our eyes on that basket, here’s what we find, linking strategy and sales is by far, that’s what the numbers tell us, by far the biggest part of implementation in most firms.
Here’s a couple of more numbers. There’s a company called Effectory. They’re basically the European version of the Gallup organization, and they have a great database. Every year they do surveys with companies around the world with their employees and every year they get a bit more than 300,000 responses. Here’s what their data tells us. One of the questions they ask in their surveys is “Do you understand your firm’s strategy?” Fair question. Less than 50% of employees say, “Yes, I understand my firm’s strategy.” Which means, more than 50% are saying, “No, not really. I don’t have a clue.” But, here’s the really perverse part of the Effectory data. The closer you get to the customer, in other words, in the responses from people who work in sales and service, the percentage of employees who say they understand their firm’s strategy decreases. It goes down. Now, obviously, it’s very difficult for people to implement what they don’t understand and it’s the people who are dealing most directly with customers who don’t understand this.
I’m going to give you 2 more bits of data. Because again, I think it frames this. This is research by MariCon is a firm that take a return on invested capital seriously as a measure of business success, and I think they’re exactly right about that. And, what MariCon finds is that on average, firms deliver only about 50 to 60% of the financial performance that strategies and sales forecasts promise. Now, think about that data. If you want to understand why investment bankers and other investors tend to be a cynical bunch, that’s why. They’re regularly dealing with managers and companies that over promise and under deliver.
One last bit of data because I think it’s especially important for our topic going forward, a good McKinsey study done just about 2 years ago. In the 21st century, the average S&P 500 company has decreased its cost of goods sold by almost 300 basis points. Now, I’m not sure, if our listeners fully appreciate that, but that is a big deal, 300 basis points is a lot. That adds up for S&P 500 companies over a trillion dollars. While they’ve done that, their SG&A costs have increased as a percentage of sales.
You can see what’s going on here. Part of the explanation for that McKinsey data is the recession, companies cut their cost of goods sold out of necessity, but there’s a shifting focus of productivity. Companies have in fact done a lot with the back office, with I.T., with Shared Services. But, where are we increasing the focus? It’s on the go to market because that’s where the money is increasingly being spent. I think both the good news and bad news for people in sales is that you will, in fact, get a lot more attention from your friends in the C-Suite in future years.
About: Frank V. Cespedes is the MBA Class of 1973 Senior Lecturer of Business Administration in the Entrepreneurial Unit at Harvard Business School. He has run a business, served on boards for start-ups and corporations, and consulted to many companies around the world. He is the author of five other books as well as articles in Harvard Business Review, the Wall Street Journal, California Management Review, Organization Science, and other publications.
Aligning Strategy and Sales: The Choices, Systems, and Behaviors that Drive Effective Selling
