Proving the ROI Doesn’t Mean Squat without Disclosing Risks

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Put a big, fat glob of risk in your product pitch, package it as “excitement,” and you have a powerful sales tactic. Even a disclaimer plays a crucial role, not that it would matter to a buyer to read one:

“Do not attempt. Really. Do not do this. Stunts performed at sanctioned events. Specially equipped rally vehicle. Professional driver. Closed course. Obey all traffic laws, always drive safely and wear your seatbelt.” Right! Where can I get one of these cars to test drive? Such statements are motivating when the target buyer is male, 18 to 29 years old.

In a different, far away sales universe, the B2B salesperson sells his or her product to an older, equally risk-aware buyer, but without testosterone’s helpful property of making risk seem wildly appealing. B2B buyers avoid stupid risks. But salespeople frequently toss all risks into the same negative bucket, and choose not to discuss them. Finding risk transparency in B2B sales is about as common as finding a teenager without a PDA.

It’s easy to say you’re transparent, but harder to be transparent. Here’s a personal example for how not to do it: One prospect I worked with had installed—and de-installed—two mid-range ERP systems in four years. I was there because the company was preparing to rip out #3 as well. As vendor-victim #4, the company’s CEO told me point blank, “we need you to tell us everything that could go wrong with your solution.” “What don’t you already know?” was the unsaid reply that flashed into my mind. But even that sarcastic response would have been better than the feeble one I offered. I was totally unprepared for the conversation he wanted.

Why? Risk discussions weren’t part of my sales tool kit. My kit had the expected implements: Problem/Solution/Benefit statements, features and capabilities collateral, key differentiators, and a smidgen of Return on Investment fluff. No risk insights adding weight to the bag. Salespeople are rewarded for mowing down concerns about their own products, and for raising them about competitors.

Would a street-smart salesperson disclose that just yesterday, his company’s chief software architect took an unannounced sabbatical to go mountain biking in Peru with his girlfriend? Or that his CEO has discussed selling the company in the next 12 months? Stuff happens, and it’s classic FUD (Fear, Uncertainty, & Doubt) material. When our sources are credible, we spread this about the other guys, never about ourselves.

How transparent a salesperson should be about such sensitive matters tiptoes into the shadow of the Ethical Elephant, and I’ll stick to the periphery. Anyway, there’s a more pragmatic side to this discussion. Prospects aren’t deer in sales headlights. Not anymore. They’re fully capable of learning about risks. But as many salespeople know from we’re-putting-this-on-the-back-burner-for-now conversations, prospects are also prone to the stasis of no-decision purgatory. Could risk confusion be one cause? Could salespeople be more valuable by intelligently guiding buyers to recognize and consider the risks that change creates—even if it means discussing their own?

Author Sharon Drew Morgen believes they can. In her book, Dirty Little Secrets: Why Buyers Can’t Buy and Sellers Can’t Sell, and What You can Do About It! she wrote, “Until buyers understand, and know how to mitigate, the risks that a new solution will bring to their culture, they will do nothing.”

Risk matters. If it didn’t, the shortest closing sales pitch, “nobody ever got fired for buying IBM,” could not have helped sell tons of IBM iron and services against arguably superior technology. But the sword cuts both ways. One thing I’ve learned: when I haven’t identified my risks, they will be identified for me—never a good thing. Too much perceived risk and my opportunity is toast. Too little, and I might win—but when the first glitch occurs, my prospect will never forget how I over-promised and under-delivered.

Back to “Proving the ROI.” Accounting Professor Bob Kemp told me this year that business decision makers ask three questions about value: what do I get, when do I get it, and how certain are the answers to the first two questions? Déjà vu. That’s what the CEO wanted to know. And because his company was a candidate for the Guinness Record for Most Scrapped ERP Systems, he was screaming for help. But without a clue about my own assumptions and without understanding the CEO’s risks, I was only slightly more useful to his decision process than a Ouija board.

Which risks did he need to learn? Ideally, the causes for the failures of his first three ERP systems. But most salespeople don’t have the luxury of performing detailed project retrospectives. A general rule of thumb: any risk that has high likelihood and high impact on a financial claim, estimated performance improvement, or outcome is a candidate for discussion.

Had Steve McConnell’s 660-page book, Rapid Development, been available at the time, I would have presented this adapted list of project risks:

Feature creep: escalating the project by adding new feature requests

Gold-plating: insisting on the “latest and greatest” technology, instead of “good enough.”

Software defects, interoperability problems, and operating system instability

Schedules developed without factoring constraints

Inadequate software design and poor usability

“Silver-bullet” syndrome: expecting software or technology will solve problems they’re not intended to solve

Weak personnel: not having the right talent in the job at the right time

Communication problems and interpersonal friction between developers and customers.

You’ve probably already recognized the same risks can occur for customers and vendors. But discussing these risks would have provided me the opportunity to describe how my company managed them.

How much better would my meeting have been had I brought these risks to the forefront? How much more effectively would my prospect have been able to make calculations about financial return and estimate time to value? How much more trust could I have fostered in the buying experience? Much. For all three questions.

Oh—the outcome of my sales call? Despite fumbling the CEO’s question, I won the order. After three failed vendors, he was running out of alternatives. Best of all, my software ran on IBM.

7 COMMENTS

  1. Excellent perspective, Andrew. I agree! Sales reps today need to be well-rounded business people. That implies expending the not-insignificant effort to calculate an ROI to begin with. Not to mention including risk in the analysis – like Best, Worst & Most Likely case scenarios. – Todd

  2. Todd: thanks for the comment. Framing a sales discussion with Best/Worst/Most Likely outcomes enables both prospects and vendors to manage risk. The salesperson shares that his or her claims are subject to many forces and variables. The prospect recognizes that they have a contribution to make to the success of the project as well.

    Most important, both parties can break down risk into pieces so that the potential causes for failure can be identified, understood, and managed.

  3. I am a customer, and I appreciate this perspective. I read it from a bit of a different perspective than most readers of this blog.

    I reference this post in my blog where I am trying to make the point that the normal sales cycle of feature set, ROI, and product superiority does not serve the average customer. There needs to be a lot more focus on risk of change, and they need to resist that change necessarily means a new vendor.

    Particularly, customers need to look in to the mirror and understand that they, themselves are usually the reason their ERP fails. How many times have you seen customers get into trouble simply because they refuse to realize that they really are not quite as “special” as they think they are? 🙂

    Increased probability of project success is good for everyone involved. I have had very few sales professionals help me understand that my own organization is the critical piece of the puzzle. Too many want to peddle new code. If they would realign their values away from quota and towards helping, then I think the quota takes care of itself.

    And, to be clear – I know that lots of times a change of ERP is in order. But, that decision comes a long way down the path. After you have looked in to the mirror, and asked all the risk questions. Too many customers jump right to that ROI equation.

    Thanks for a great post.

    Ken Smith

  4. Ken: thanks for taking the time to post your comment. Your perspective on risk is most valuable for me and other sales professionals. Your thoughts highlight difficult conflicts for salespeople: how do we present risk in a realistic and useful way without jeopardizing a sale? Is it ethical to withhold information? Are customers just as responsible for understanding risks, as you suggest?

    The reality is that most sales organizations are not truly customer-centric, and do not look out for their customer’s best interests when it comes to the risk of trading off a revenue opportunity. I believe there’s no such thing as a trusted advisor salesperson–despite the hyperbole. I’m interested in your ideas about how salespeople can be more valuable customers in the buying process, and what you believe are the minimum responsibilities of buyers and sellers in disclosing and understanding risks.

  5. I apologize for the length, but I am passionate about this issue.
    I have been in your shoes myself, having been a salesperson.

    Getting customers out of traditional thinking modes is a challenge. I myself blog about it. People’s needs differ. These thoughts are how I respond to the issue of how a sales person delivers value to a customer (i.e. mostly me, personally). I do differentiate folks like myself, who want a Trusted Advisor from those who are adversarial.

    First, a word about plausible deniability. Some people and companies need you to make their decisions for them. They need you as their scapegoat, as well. The traditional sales cycle works fine for them because it gives them a viable excuse to not hang their butt on the line. Only loonies (like me!) routinely do that. There is an inherent mistrust built into the equation – so I say go ahead and exploit every revenue option to the hilt.

    But, how about dreaming a little? Wouldn’t you like to have customers who are devoted (and dare I say rabid) advocates of you and your company? I am exactly that for a few select sales people who I trust. I admit that prospects like myself are rare, but we are worth a whole lot more than some simple multiple of the other kind. You need to look for us and find us. When you do, your job becomes cake, and you will definitely be a trusted advisor.

    So, what allows me to make that step with a sales person? Trusted Advisers..

    1.) …build my credibility. Religiously. Reliably. Always. Needlessly jumping over my head is an incredibly stupid thing to do to me, but it happens all the time.
    2.) …understand organizational change. I know no CFO who splits hairs over sub-ledger functionality. I know plenty who fear losing AP clerks over ERP.
    3.) …let me “own” their solution. They sit in the back of the room in demos. I own the long term risk. So, they let me make the sale. Trusted Advisors know how utterly powerful this approach is.
    4.) They let me control the sales cycle. Their “relationship” talk is 80%. Their “business” talk is 20%. I exaggerate to prove a point, perhaps, but it stands. I do the selling to my peers and superiors on my own timeline. It makes sense because I am the one who manages my IT Roadmap.

    This approach obviously won’t work with everyone or every situation. But, you need to be really aware when you are working with guys like me. Seek us out. Know us. If you treat me like you do the Sheeple you normally deal with, you will not have an advocate, to put it mildly.

    If folks like me are nurtured, we can become extremely powerful referral tools. For example, when I deployed the first ever eProcurement platform built on SAP back in 1999, I actually joined their product launch team, did a few TV spots, and wrote several articles – all for zero compensation. My payback was my increasing credibility, personal brand, and influence. I probably hosted 25 prospects on my floor in Houston. The sales resulting from that must have exceeded $10 million, easily. I probably sold more than they did.

    Now I will share something I find truly amazing. I tell all new potential sales partners my needs, almost verbatim to what I wrote above. I am routinely gobsmacked that 90% of them immediately mess up on the care and feeding of Ken Smith, usually within days. I just don’t get it. Are they even listening?

    As for what to do with those other folks… Hmmm… I think that Change Management works for them as well, but you have to package it differently. Their fear is Change. Not your implementation of function X.

    How about concentrate on helping the customer create a situation where he can successfully own the change towards your solution. It is all about positioning and perception. It is inherently soft, not technical.

    Here is an approach I use often. It is based on ProSci’s ADKAR model.

    Awareness – Help the customer become Aware of a need to Change
    Desire – Foster a Desire for Change
    Knowledge – Educate the customer what a favorable outcome looks like (and it definitely needs to touch their fear button, not their functionality button)
    Ability – Give them the Ability to change
    Reinforce the change.

    Sure, feature and function plays in to this, but notice that it is one of the last things you bring into the mix. An approach like this helps get you out of the hell of a formalized fit assessment.

    Believe it or not, using a similar approach, I have actually sold other companys’ enterprise systems to the Board without even doing a public formal fit assessment! Not every organization will buy off on this approach. But some will. More than you think, I contend.

    Thanks for allowing me to comment. This is a great topic, and as always on blogs, YMMV.

  6. Ken: First of all, thank you for your comment, which is valuable for this discussion. When people who buy tell salespeople what not only what they need, but how they want to buy, we should listen and take action. Too often, we breath our own air, which creates distorted thinking.

    I’m curious, when you say “90% of them immediately mess up on the care and feeding of Ken Smith,” what are the most common and consistent errors that you’re experiencing?

  7. Thanks for asking.

    Of course, all this is going to be within the context of who I am as a Myers-Briggs INTP. I admit that I highly over-value these things compared to other folks and I am a bit eccentric customer. FOr some personality types, obviously the the very things that drive me nuts are probably appropriate.

    The theme of my answer is this: Try to understand my basic personality and how I process information. I am an intuitive type, I want to feel understood. I do not need agreement so much as understanding. If you do the things below, I feel manipulated or patronized.

    1.) They name drop. I unconsciously reject name drops because I need to get a comfort zone with a person before I resepct his authority.

    2.) They they do not have objective data to support claims – and I mean real statistically significant analysis. For example: “Oracle is easier to implement than SAP.” Oh yeah?

    3.) They “tell” me. I do not want to be told. I want to discover. Take me through a process. “Hey Ken we have a new product that will make PBX admin easier…” Wrong. “Hey Ken how is your PBX treating you?” Right. Let me tell you.

    4.) They only use one form of logic – deductive. Don’t insist on feeding me deductive reasoning when my objection is inductive. “Hey Ken, Bob likes us, doesn’t that reduce your discomfort?” Nope. It pisses me off. “Hey Ken, your experience must be telling you something beyond what the simple data suggests…” Right.

    Those are the big ones for me, personally. I realize that others’ issues will be different.

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