Executive Guidance for 2012


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Drive Growth by
Challenging Customers

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Executive Guidance for 2012

  1. 1. Executive Guidance for 2012Drive Growth byChallenging CustomersRealigning the Organization to Teach,Not to Just Sell
  2. 2. Today’s business leaders face an enormous challenge: how do you drivemarginal growth in a sideways economy? Particularly at a time when leadershave largely maxed out opportunities for additional bottom-line savings—cutting, saving, downsizing, and restructuring virtually everything theycould across the last four years. Going forward, growth must come largelyfrom improved top-line performance. But how do you sell more whencustomers aren’t necessarily buying more and are absolutely unwilling topay more?Surprisingly, extensive CEB research indicates that the primary obstacle togrowth for business to business (B2B) commercial organizations today haslittle to do with the economy and everything to do with long-term shiftsin B2B customer buying behavior. And, those shifts render even modestaspirations for growth nearly impossible to achieve with current sales andmarketing strategies.In particular, customers now approach most purchases—especially complexones—armed with more information and a stronger will to battle over pricethan ever before. As a result, the widely held belief that long-standing, well-nurtured customer relationships provide the most direct and reliable pathto growth proves completely false. Instead, the best companies increasebusiness by challenging customers, not by serving them. To do so, they havealigned not just Sales and Marketing but their entire organization to delivercustomer interactions specifically designed to disrupt customers’ currentthinking—to teach customers something, not to just sell them something. 1
  3. 3. A Dramatic Shift Toward “Established Demand”A recent CEB study of B2B customer purchase behavior determined that,on average, B2B customers have completed nearly 60% of a typical purchaseprocess before seeking supplier input. Driven partly by a desire for more“objective” information and partly by the increased complexity of theirneeds, today’s customers are instead much more likely to turn to either theInternet or third-party consultants to identify and vet potential solutionsto their challenges. This is a deeply troubling trend, since demand istypically born in the earliest stages of “discovery” (e.g., needs identification,requirement determination, priority setting).Customers Proactively Contact Suppliers Too Late in the ProcessCustomer Purchase Decision Timelinen = 1,460. 57% CompleteCustomer Customer’s CustomerDue Diligence First Contact PurchaseBegins with Supplier Decision Through this period, customer needs are well scoped, priorities are set, requirements are largely defined, solutions are compared, and price is initially benchmarked.Source: CEB, “Rewriting the Playbook: How High Performers Win the Consensus-Based Sale.” 2
  4. 4. Companies find themselves on the receiving end of what we have cometo call “established demand,” in which customers enter commercialconversations with a strong sense of both what they want to buy and, moreoften than not, what they are willing to pay. In this world, the only needleft for sales reps to discover is customers’ invariable demand for deeperdiscounts and more favorable terms and conditions.Not surprisingly, leaders frequently attribute the inability of theirsales teams to “get in earlier” (i.e., to shape customer demand) to theshortcomings of individual sales reps. However, CEB research suggeststhat evolving customer buying behavior renders many traditional salesskills obsolete. In a world of established demand, where customers havebegun buying long before suppliers have begun selling, conventional effortsto help reps ask better questions and more effectively diagnose customers’known needs only allows suppliers to compete earlier for the exact samerazor-thin margins.Ultimately, much of the solution lies well beyond the scope of individualrep skill and squarely in the realm of organizational capability. While salesreps must still engage customers in a very different kind of conversation towin sales, the basis of that conversation—much of the content, framework,and collateral—will have to come from others in the organization:■■ Marketing teams who generate very different kinds of customer research, value propositions, and messaging■■ HR teams who source the necessary talent■■ Leaders who ensure the entire organization, not just Sales, is aligned around delivering a very different kind of customer experience altogether 3
  5. 5. Customers Seek Insight, Not SolutionsTo understand the broad, organization-wide implications of this newstrategy, it is crucial to understand what exactly customers want fromsuppliers in the first place. In a study of nearly 6,000 B2B customerstakeholders around the world, the number one supplier attribute mostlikely to drive growth and deeper customer partnerships was—by far—not asupplier’s brand, product, or service but the purchase experience itself.That’s not to say that brand, product, and service don’t matter tocustomers—they absolutely do. However, in the B2B world, customersclearly indicate that excellent brand, product, and service are merelyminimum requirements for consideration, as they perceive multiplesuppliers’ offerings equally able to meet their needs. When the top two orthree players in any given industry can all deliver a wide range of similar,excellent capabilities, even the most comprehensive “solutions” canquickly become commoditized. While suppliers drone on and on abouttheir “world-class” features, customers see only minor differences andultimately look to price to make their choice. 4
  6. 6. Customers were, however, very clear that the purchase experience provideda potentially massive opportunity for a supplier to stand out—accountingfor 53% of long-term customer loyalty and growth. While customersperceived very little difference between suppliers in terms of what theysell, they identified significant differences in how they sell. Bottom line, thebest companies drive growth by disrupting customers’ current thinking,as customers richly reward suppliers able to demonstrate new ways tocompete more effectively. As the data dramatically indicate, the singlebiggest opportunity to drive growth and expand customer relationships isnot the products and services a supplier sells but the quality of the insightthat a company delivers as part of the sale itself. As a result, suppliersmust take a hard look across their company to ensure they have deployedboth the individual rep skills and the broader organizational capabilitiesnecessary to deliver on these findings.A Sales Experience Built on Delivering Insight Provides aDisproportionately Large Impact on Customer Loyalty and GrowthLoyalty DriversPercentage of Contribution to Customer Loyalty, n = 2,400. 53% 9% 19% 19% Company Product Value-to-Price Purchase and Brand and Service Ratio Experience Impact Delivery Drivers of Customer Loyalty The supplier: � Offers unique, valuable perspectives on the market; � Helps me navigate alternatives and avoid potential land mines; � Educates me on new issues and outcomes; � Is easy to buy from; and � Has widespread support across the organization.Source: CEB, “Rewriting the Playbook: How High Performers Win the Consensus-Based Sale”;CEB, Customer Experience Diagnostic. 5
  7. 7. Winning Reps Challenge, Not Coddle, CustomersWhat kind of sales rep does it take to deliver an insight-based, loyalty-driving purchase experience? In a breakthrough global study of nearly10,000 sales reps, CEB identified two insights that provide a compelling andsurprising answer.First, virtually every B2B sales rep falls into one of five profiles defined bythe specific subset of knowledge, behaviors, skills, and attitudes that makesup his or her primary posture when facing off with customers:■■ Relationship Builders focus on developing strong personal and professional relationships and advocating across the customer organization. They are generous with their time and strive to meet customers’ articulated needs.■■ Hard Workers always go the extra mile. They will make more calls an hour and conduct more visits a week than just about anyone else on the team. They also actively seek feedback and advice for improvement.■■ Lone Wolves are deeply self-confident, usually following their own instincts over the rules. They typically do things their way or not at all.■ Problem Solvers are detail oriented, focusing on post-sales follow- up and on ensuring that service issues related to implementation and execution are addressed quickly and thoroughly.■ Challengers use their deep understanding of their customers’ business to take control of the sales conversation and to push their thinking. They are not afraid to share even potentially controversial views and are assertive with their customers and colleagues.Second, when compared to actual sales performance, one profiledramatically exceeds the others in likelihood to achieve star performance:the Challenger. On average, 40% of star performers were Challengers. Incomplex sales, that number rose to 54%. 6
  8. 8. Challenger Reps® Are Much More Likely to Be Star PerformersDistribution of Sales Professionals by Performance LevelPercentage of Population, n = 683. Percentage of Percentage of core Performers High Performers 39% 25% 26% 23% 22% 17% 15% 14% 12% 7% challengers Lone Hard Problem relationship Wolves Workers Solvers BuildersSource: cEB, “rewriting the Playbook: How High Performers Win the consensus-Based Sale;”cEB, rep Effectiveness diagnostic.Meanwhile, the rep least likely to achieve star performance is theRelationship Builder. While quality customer relationships areunquestionably vital to commercial success, relationship selling is not—atleast not when it is designed solely to ensure customers are happy and welltaken care of. When it comes to growth, the best sales reps are challengingthe status quo, not reinforcing it.Indeed, Challengers succeed by delivering the very thing customers arelooking for the most from a supplier: disruptive insight that challengestheir thinking and increases their competitiveness. In addition, Challengersapproach every customer interaction in a tailored manner, aligning thatinsight to each stakeholder’s specific needs and priorities. Yet, Challengersare assertive enough to respectfully push back when stakeholders expressskepticism about the insight or resistance to pricing. 7
  9. 9. Building the ChallengerCommercial OrganizationMany business leaders fear that individual reps will fail to execute theChallenger approach on their own, and they’re right to be concerned.Identifying insights capable of reframing customers’ views is not easy, asit means a supplier must know their customers’ business better than thecustomer knows it themselves—at least the part of the business that relatesto the supplier’s capabilities. And while star performers might be able toidentify and deliver that level of insight some of the time, the majority ofreps will consistently struggle. After all, no amount of training is sufficientto enable these reps to consistently ask the right questions, turn the answersinto new and surprising insights on the spot, and then teach customerssomething new about their business.Instead, the best companies look beyond individual reps to build abroad set of Challenger capabilities across the entire organization—andparticularly in Marketing—to provide the front line the support they willneed to approach customers with compelling insight. To build a Challengerorganization, companies must follow four steps:1. Identify Your Unique but Underappreciated Capabilities2. Build an Insight Generation Machine Inside Your Company3. Align the Organization to Create and Deliver Insight4. Build a Sustainable Pipeline of Challenger Capability 8
  10. 10. 1 Identify Your Unique but Underappreciated CapabilitiesWhile it is true that customers place high value on teaching or insight, it isnot enough to teach them simply because they value it. It’s easy to imaginea world where the insight a supplier shares with a customer winds up in arequest for proposal (RFP) that their competitor ultimately wins. The bestcompanies use an approach we call “Commercial Teaching” to ensure thatthe insights they teach customers lead back to a specific capability that thesupplier is uniquely able to offer.In their excitement to tell the world about their broader solution, mostorganizations fail to identify the handful of capabilities that truly set themapart. Sure, their products are “faster,” “newer,” “smaller,” “bigger,” or“greener,” but so are everyone else’s. If customers see no difference betweenyou and the competition, anything you teach them will simply wind up inan RFP headed for a price-driven bidding war. Bottom line, if you cannotidentify the unique capabilities customers should be willing to pay youfor, they certainly are not going to do it for you.To articulate your unique capabilities, ask, “Why should our customersbuy from us over anyone else?” It is a simple question but often provessurprisingly hard to answer. Shockingly, many companies are unable toidentify what truly sets apart their solution. The best companies teachcustomers new perspectives and promote capabilities that customersundervalue, instead of reinforcing existing perspectives. However, mostcompanies naturally focus on already valued capabilities. The best teachingopportunities often spring from the question, “What do customers failto appreciate about their business that leads them to undervalue ourcapability?” The answer provides a strong foundation for generatinginsights that can challenge customers’ thinking and lead to more sales. 9
  11. 11. 2 Build an Insight Generation Machine Inside Your CompanyVirtually every supplier organization gathers and analyzes customerfeedback on their performance (e.g., net promoter score or customersatisfaction scores). Challenger organizations, however, are equallyinterested in collecting customers’ thoughts on their own business.Naturally, it’s important for suppliers to identify ways to better serve theircustomers, but it is even more important for those companies to identifyways to better teach customers. Deeper research into customers’ currentchallenges, priorities, and strategies provides vital raw material for thecreation of that kind of insight. The core of any good teaching conversationis the juxtaposition of a customer’s own assessment of their currentsituation with a disruptive, alternate view that reveals flaws in existingthinking.Typically managed by Marketing, the best companies ensure that theentire organization—at every customer touchpoint (e.g., sales reps,implementation teams, product engineers, customer service reps)—hasnot only a mental map of the type of customer information most useful tothe insight generation process but also a practical, easy means to regularlyreport that information back to the insight generation team.That team, then, is tasked with turning customer intelligence into disruptiveinsight, primarily by asking questions such as:■■ “Which assumptions underlying our customer’s current strategy are either flawed or altogether incorrect?”■■ “What do customers fail to understand or fully appreciate about their current business environment that would help them make better decisions?” 10
  12. 12. 3 Align the Organization to Create and Deliver InsightThe very best Challenger Reps and staff will struggle to deliver compellinginsight without organization-wide support. To ensure success, teams musttake the following steps:■ Marketing must ensure that the insights it generates are effectively packaged in collateral and pitch decks designed primarily to teach customers about themselves, not about the supplier. The best sales presentations do not lead with a review of the supplier’s unique capabilities and solutions, they lead to them.■ Product teams must create products that meet underappreciated customer needs.■ Engineering teams focused exclusively on improving product performance in response to customers’ stated needs should reframe those efforts, at least in part, around building capabilities designed to disrupt customers’ understanding of what’s possible.■ Financial teams tasked with setting revenue targets and tracking commercial performance must account for the increased amount of time—and potentially cost—necessary to sell based on insight. At the very least, they must examine the degree to which common metrics, such as average sales cycle time and pipeline velocity, create a falsely elevated sense of short-term urgency, unwittingly driving the organization directly into the kind of established demand that closes more quickly but generates little to no growth. 11
  13. 13. 4 Build a Sustainable Pipeline of Challenger CapabilityWhile some Challenger Reps may be naturally gifted, many reps who fallinto a different profile can be equipped to behave like Challengers whenthey are in front of the customer with the right tools, training, and coaching.HR executives, along with learning and development and sales excellenceteams, must ensure both reps and managers receive sufficient training andcoaching to help reps perform as Challengers in the field.Our research indicates that even the best training programs fall short ofdriving long-term behavior change unless reinforced by the following:■■ A widespread awareness campaign prior to launch laying out why behavior change is necessary in the first place■■ A well-engineered transition from training to practice, including both coaching and structured practice in live settingsFurther, the best companies recognize that crafting compelling stories thatboth change the way customers think about their business and move themto action requires facility across a broad range of skills far beyond surveydesign and data analytics. As a result, Challenger organizations createinsight by paying particular attention to building strong cross-functionalability in areas such as hypothesis generation, root-cause analysis, modeldesign, and narrative construction. 12
  14. 14. For most companies, building a sustainable pipeline of talent able to producecompelling stories built on forceful, disruptive insights represents arguablythe biggest—and most urgent—opportunity for building a successfulChallenger organization.To get there, HR will need to create and launch new competency modelscapturing and measuring Challenger behavior across nearly every function.They will also need to introduce new hiring processes to ensure hiringmanagers are equipped to effectively test not only for Challenger skillsin Sales but also for insight generation skills throughout the rest of theorganization.When it comes to driving growth in a sideways economy, the best companiesrecognize the dramatic rise in established demand for exactly what it is: apath to price-driven commoditization and commercial stagnation. However,by challenging customers with quality, commercial insight that disruptstheir current behavior, Challenger organizations win disproportionatelymore business and help their customers do the same. 13
  15. 15. You can find more information on building Challenger organizations inMatthew Dixon and Brent Adamson’s The Challenger Sale published inNew York by Portfolio/Penguin in 2011.The Challenger Sale is available in hardcover, e-book, and audio versions atwww.executiveboard.com/challenger.Push sales forwardby pushing back.Learn how to create a Challenger organization.Download bonus materials, play The Challenger Sale game,and learn more about how CEB’s research confronts traditionalsales wisdom. 14
  16. 16. ABOUT CEBCEB is the leading member-based advisory company. By combining thebest practices of thousands of member companies with our advancedresearch methodologies and human capital analytics, we equip seniorleaders and their teams with insight and actionable solutions to transformoperations. This distinctive approach, pioneered by CEB, enables execu-tives to harness peer perspectives and tap into breakthrough innovationwithout costly consulting or reinvention. The CEB member networkincludes more than 16,000 executives and the majority of top companiesglobally. For more information visit www.executiveboard.com.COPIES AND COPYRIGHT STATEMENTThe pages herein are the property of The Corporate Executive BoardCompany. No copyrighted materials of The Corporate Executive BoardCompany may be reproduced or resold without prior approval. For additionalcopies of this publication, please contact The Corporate Executive BoardCompany at +1-866-913-2632, or visit www.executiveboard.com.© 2012 The Corporate Executive Board Company.All Rights Reserved. CEB2058811SYN 15