What sparked these decisions?
- Wal-mart to buy more from women-owned firms
- Rolls Royce to design experimental electric vehicle
- UPS will eliminate the need for drivers to carry keys
I suspect that each didn’t follow a single, cataclysmic event. “Steve in South Dakota lost the keys to his truck! We’re changing everything!” Instead, these decisions were influenced by many developments that percolated over time. Wal-mart felt pressure to demonstrate corporate social responsibility and to overcome consumer perception that management doesn’t care about economic parity for women. Rolls Royce realized that luxury car exhaust was as objectionable to people as emissions from Fords, Fiats, and Suzukis. And UPS recognized that the lingering global recession required the company to achieve greater logistics efficiencies.
Major announcements keep sales adrenaline flowing. Who can’t spot one or more right-now selling opportunities in these announcements? There are good reasons Jill Konrath dedicated eight pages to explaining how to capitalize on trigger events in her popular book, SNAP Selling. “Trigger events shake the status quo to its core,” she writes. Go us! Keep those newsfeeds rolling!
But there’s irony. Salespeople are moved by status quo-shaking news, but frequently, more subtle forces shape, influence, and motivate major business decisions. That disconnect creates strategic sales problems: what to do when you don’t know about golden opportunities, and how to avoid the risks that result from being late to the buyer-seller collaboration. If your selling strategy fails to get your salespeople plugged into buying networks earlier than your competitors, you’re missing opportunities that emerging forces sent into motion weeks, months, or years earlier. You hear the symptom every time a prospect tells you “we’re already working with another provider on that project.” Translation: your competitor got a clue before you did.
And although it’s borderline impossible to pinpoint conception for a buying activity, I’ll wager that it falls between the moments when someone in an organization becomes aware of an escalating force, and when he or she believes that a strategy must be adapted in response. Which probably explains why there are no Senior Managers of Panic, and no Vice Presidents for Unplanned Capital Acquisitions. I just checked on LinkedIn.
Sales Triggers vs. Strategic Forces
You already sense the conflict: opportunistic, alerts-monitoring salespeople, swooping in on the prospect at the ideal moment—the more dire the motivation, the better. “Press hard, fifth copy is yours!”—except now it’s done on an iPad. Call them ambulance chasers. You won’t hurt my feelings. Salespeople wouldn’t suffer from that ugly image if their radar were tuned to longer-term developments, and if they followed a strategy of opening relationships before everyone begins to hyperventilate.
Opposite the ravenous salesperson sits the strategy-driven prospect—frustrated, angry, and disappointed with street smart, but strategically clueless salespeople whose problem-solving zeal lasts just up to his or her commission check. Environmentalist author Rachel Carson wrote over 60 years ago, “. . . events are much easier to spot than trends. But fixing the problems isn’t necessarily better or easier.” A prescient observation in many ways. Perhaps she foresaw customer-vendor friction as a component of global warming.
Teaching salespeople about forces and their impacts can be difficult. Forces are not always apparent, and once forces are recognized, they combine in nearly infinite permutations, creating outcomes that are fiendishly hard to predict. Forces unfold in what seems like geologic time. Yawn. If you want excitement at your next sales kick-off, remove the Emerging Forces slide from your PowerPoint deck. Instead, just announce the latest customer or executive defections at your archrival competitor. No one will be playing Angry Birds or checking email while you have the podium.
But force effects are quickening. According to The Economist, “… in today’s world, gale-like market forces—rapid globalization, accelerating innovation, relentless competition—have intensified what economist Joseph Schumpeter called the forces of ‘creative destruction.'” Add frictionless interaction platforms (I just call it Social Media), next generation mobility, social network effects, information superabundance, inherent transparency and openness, rise of social capital, Green (and all that comes with it), outsourcing, virtualization, and cloud computing. The list goes on.
Forces—and the risks and opportunities that accompany them—keep decision makers up at night. No need to ask. Most of all, forces drive change, and change creates uncertainty, which executives, their bosses, and shareholders eschew passionately. Think of the trillions of dollars spent every year to make things more predictable! Hello! People coalesce around ideas that are influenced by forces. (Check with your prospects. It’s happening as you read this.) Force effects remind us that the customer decision mega-cycle has a longer timeline than we once imagined. So quit assuming major events like plant openings or new executive hires initiate buying momentum or catalyze purchases.
Which forces matter, and which ones don’t? I’ve wondered the same thing. Happily, if you have a mobile device or laptop, or read a newspaper, you’re never far away from knowing. (For some ideas, click here or here. )
But for salespeople, knowing about forces is one thing. Conversing about them, and uncovering what they mean to prospects is another. Add to those talents the ability to prove to your clients that their business strategy will flat-out fail without your company’s products and services, and you’re one step closer to owning Irresistible Value! And that’s where the Porter’s Five Forces model can help.
Porter’s Five Forces
When I was in graduate school, a PowerPoint slide of this model grabbed my attention, and provided a Eureka moment. “This is what keeps my prospects awake, reduced to five boxes!” I immediately knew it packed power for sales.
Porter’s Five Forces model organizes forces, places them into strategic context, and enables people to identify the impact of change. Porter’s Five Forces was originally developed to analyze the profitability potential of an industry—something any VC or investment analyst would love. So you’re probably wondering why salespeople should care. I’ll cover that at the end, but the answer will become apparent after I explain the basics, which I promise to keep mercifully short.
The five forces are: 1) intense rivalry among existing enterprises competing in a market (red box), 2) bargaining power of suppliers to those enterprises (left box), 3) bargaining power of customers (right box), 4) threat of new entrants to the market (top box), 5) threat of substitute products (bottom box). So far, so good? Great! You can relax, because you’re already about 80% of the way toward mastering the model.
The horizontal axis represents the Value Chain in an industry. The vertical axis represents the new players considering entry into a market, and helps capture which developments might rip apart or replace the dependencies between members of a value-chain community. Forces influence change on both axes: the power of the trading partner relationship on the value-chain, or horizontal axis; and the vulnerabilities for companies entering a market as direct competitors or providers of substitute products, or vertical axis. The forces connect to each other, but all have impact on the central box, Industry Rivalry. By recognizing forces, and how they fit in Porter’s model, you can understand the stresses, fissures, fractures, destabilizations, and general tumult that cause your prospects to keep a bottle of antacid within arm’s reach. And you understand the risks and opportunities your prospects perceive—or should perceive—along with their magnitude.
I already sense the questions that are flowing. What meaning do the forces of virtualization and cloud computing have on how executives view barriers to entry? How do they threaten or enhance strategic goals? How do the efforts of women to achieve global economic parity affect the retail value chain? What do the Clean Energy and Green movements mean for the transportation choices consumers are likely to make? What does e-commerce, globalization, and transparency mean for changing relationships in a value chain? Why wait for a trigger to get in touch with a prospective customer who needs the love right now?
Limitations of Five-Forces Selling
Porter’s model is not perfect. When I’m working in the Washington, DC area, people often ask, “Where does government regulation and compliance fit?” No worries. If you’re more comfortable, add a Sixth Force, and personalize the model by substituting your name for Porter’s. This is sales, so why be constrained by rules? Besides, a model’s strength rests in its ability to extend its explanatory power to new situations.
There are some other limitations you should know about. According to Wikipedia three not-always-true assumptions underlie Porter’s Five Forces:
- that buyers, competitors, and suppliers are unrelated and do not interact and collude.
- that the source of value is in creating barriers to market entry
- that uncertainty is low, allowing participants in a market to plan for and respond to competitive behavior
Valid observations, but nothing that should cause people to give the model a heave-ho. And there’s nothing wrong with assumptions, so long as you know what they are.
I’m bullish on Porter’s Five Forces, despite the warts. If I could sum up what Porter’s Five Forces model does best, it’s connecting things in a meaningful way, and providing a better crystal ball. Think of what it can do for your prospects. The model helps salespeople work more intelligently, offer far greater insight and value to customers, and hold discussions just a tad earlier. Trigger events don’t do that. Call me a snob.
You’re already asking the right questions:
- Which industries and companies offer the best selling opportunities?
- Which developments are most likely motivating change for my prospective customers?
- How do I formulate questions, discussions, and communications with my prospects so that I’m perceived as valuable to them?
Take Porter’s Five Forces to your next sales meeting, and find out if you get closer to answering them.