Streamlining the sales process & using analytics
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In today's turbulent macroeconomic environment, trying to forecast the top line of a business that is driven by large capital investment decisions can be especially frustrating and cruel. Here is how FP&A can help with (1) a structured approach to the different parts of the sales process, (2) the use of common analytical tools and (3) a rigorous and systematic utilization of quality metrics to help the business drive for success.
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Streamlining the sales process & using analytics
- 1. “ Streamlining the Sales Process and Using Analytics in a Complex Top Line Forecasting Environment” Xavier Sansó /*IE. Barcelona/Oct 18-19, 2012 1
- 2. your speaker… Xavier Sansó has 17 years of experience in international finance/operations across different industries He is currently responsible for FP&A EMEA at ABSCIEX, a subsidiary of the Danaher Corporation in the life sciences industry 2
- 3. our story today… • The year is 2009 • The industry is life sciences • In the next-generation sequencing market, there is fierce competition: 454 Genome Analyzer $ 375,000 $ 425,000 SOLiD $ 475,000 3 Note: all data in the presentation will be dummy
- 4. …a challenging sales process… Few transactions of a high individual value Customer needs to take a complex technical decision Funding comes from often unpredictable capital expenditure decisions… (and by the way, Europe is in crisis since 2008)… 4
- 5. …the execution of your sales forecast becomes a Tetris game! 5
- 6. how to fix this? • Understand each phase in your sales process • Each phase needs a key metric • Each metric needs consistent and robust tracking • Business discussions and decision-making should be data-driven and systematic 6
- 7. breaking down the complexity What is your What is “home run” your rate out of How well do market the deals you you cover compete in? size? your market? Out of your Out of that addressable market, market, what which is your portion do market you share? address? 7
- 8. market size • Do not try to compete in a market whose size you do not know • You will sometimes have good market reports • If not, you will need to trust the judgement of the field • Is the market growing? According to expectations? 8
- 9. market size: metrics 1600 1400 1200 Market size $MM 1000 800 600 400 200 0 Jan Feb Mar Apr May Jun Last Year This Year (Actual) This Year (Plan) 9
- 10. addressable market • Addressable market (AM): a subset of the market size i.e. how big is your opportunity. • To manage your AM: salesforce.com, SAP, MS CRM, Oracle, etc. • Difference between AM and total market: disruptive market conditions, product specifications, regulations… or simply competitive strength • Technology shifts, new products… can dramatically change our AM • “Are we walking away from deals?” 10
- 11. addressable market: metrics 1400 1200 1000 Opportunity $MM 800 Not Addressed 600 Addressed 400 200 0 Jan Feb Mar Apr May Jun 11
- 12. market share • Market share= deals won as a % of total market size • You cannot talk about market share if you have not tried to size your market • Market share contextualizes absolute performance • By slicing and dicing our data we can gain a wealth of insight into our competitive position 12
- 13. market share: metrics 45% 40% Deals won/Total deals 35% 30% 25% 20% 15% 10% 5% 0% Jan Feb Mar Apr May Jun Prior Year This Year (Actual) This Year (Plan) 13
- 14. “home run” rate • “Home run” rate measures how successful you are in the part of the market you compete in • It is effectively a submetric of your market share • The metric is a function of: your core sales execution + your short-term market position • Any outliers? Key lessons can be learnt from individual deals 14
- 15. “home run” rate: metrics 70% % of deals won/deals competed, $ 60% 50% 40% This year 30% Prior Year 20% 10% 0% Jan Feb Mar Apr May Jun 15
- 16. market coverage • Coverage : total deals we compete for (not only the ones we win) divided by the total market size. • Getting to know your lost deals in detail is essential • With analytical help you need to slice and dice your data meaningfully • “Are we always fishing in the same pond, and it is getting smaller and more crowded?” 16
- 17. coverage: metrics 2000 1800 1600 1400 Revenue, $MM 1200 Addressed-won 1000 Addressed-lost 800 Not addressed 600 400 200 0 Jan Feb Mar Apr May Jun 17
- 18. time to see the big picture! 18
- 19. a systematic, data-driven approach Market size Market share Mkt coverage Addressable Mkt “Home run” rate • Your conclusions? • What are you going to do about it? 19
- 20. key takeaways • Products and technology are commoditized -- analytics become a source of competitive advantage • … But not everything in this world can be summarized in a 2x2 matrix. Life is not a management school • Establish your framework and foster data-driven discussions in the company • Learn from your lost deals • Quality-dive into the data, the trends, the ultimate causes… use problem solving methodologies once the data has been sliced and diced • Make sure decisions are taken, deployed and followed up 20
- 21. Recommended reading 21
- 22. thank you 22
Editor's Notes
- >>We are in 2009. In the molecular biologymarket, a new technologyisquicklybecomingmainstream: thenext-generationsequencers. Thisisbasically a more highthroughputtype of DNA sequencing, essentiallyprocessingmillions of samples at thesame time and likethisbeingabletoincrease performance thousands of timesfold.>>Thefirst box youseehereisthe 454 from Roche whichistheincumbenttechnology, thefirstoneto be launched, and theonewiththelowestprice.>>Thesecond box isthe Solid fromLife Technologies. Secondtoappear in themarket, more expensiveonthebasisthat LT invented DNA sequencing and istechnologically superior>>More orless at thesame time as Solid, a third box islaunchedbyIllumina, theGenomeAnalyzer, at anintermediatepricerange.
- In thisindustry, youtypicallyhavelessthan 2,000 transactionsannually (worldwide, in Europe youhavelessthan 500) and eachone has a highunitvalue as well as specificcharacteristicsifyouwanttowinthedealEspecially Europe has been in a deep crisis withlots of difficultiestomakesuchimportant capital expenditures, bothforprivatecompanies and forthepublic sectorSometimesyou compete technologically, sometimesthecustomerisnot so educatedortheneedisnot so high and technologyisnotthemain factorIn thecontext I describedbefore, As an FP&A professional, youusedto do yourforecastwiththefieldtothebestyoucould, calibrateitwiththerest of themanagementteam in sales and operations and be readyto compare forecastwithrealityWhathappened?
- Once youhave a forecast and youstartmonitoringwhathappens in reality, results are prettymuchalloverthe placeItislike a TetrisgamewhereyoustartseeingtheblocksfallingfromtheskyAnd they are nottheblocksyouhadoriginallyforecastedSo you try to do yourbestwithpiling up the new blocks in a meaningfulwayIn theendyouend up prettybadlybruised and thinkinghow can theforecastingprocessgone so wrong, and whethernext time youshouldtreatthis as a scienceor as an art and justletthingshappenifthereis so muchvolatility and so littlestructureButguesswhat – theprocess can be improvedbig time and you can regain control onhowyour sales processplugsintoyourforecastprocess. Hereishow.
- The sales process has differentphasesthatyouneedtoidentifyunderstand and trackHowmany times haveyouseen sales addressed as a one-phaseprocessthateitherhappensordoesnothappen?The concept I am goingto show todayisnotgoingto be dramatically new butmaybethe rigor isgoingto be newA gooddescriptionis “commonsenserigorouslyapplied”
- >> Partone of the sales processisyour total marketsize>> Parttwoisdefiningyouropportunity in thatmarket, eitheryouseethemarketoryoudon’t. Wemovefromthenotion of total markettothenotion of addressablemarket. I’llspeakfurtheraboutthislateron>> Partthreeistheportion of the total marketthatyou control>> Partfourisyourwinrate in thepart of themarketyouaddress>> Partfiveishowyoucoveryourmarket, meaningtherelationshipbetweenthe total market, thepartyouaddress, and insidethatpart, thepartthatyouwin and thepart and you lose, and whyyou lose. We’llseelateronhowcriticalistostayon top of yourlostdeals.
- >> Whatwewereseeing in ourbusiness case, wasthatthemarketwaseffectivelygrowing versus lastyear, although at a lowerratethanwehadforeseen.>> Thisis a firstimportantstick in theground and thefirstcleartrendwesawfromthe data
- >> Again back toourexamplefromthenextgenerationsequencingmarket, wesattheopportunitywewerenotaddressingwasbecominglarger and larger.>> Itisnotthatsomeonewaseatingour lunch, itwasthatthemarket place had moved and wehadnotfollowedthrough>> Whatwerethosedealsthatwewerenotaddressing and whatcouldwe do toenterthatcompetition?
- Market share contextualizesabsolute performance (how are wedoing vs themarket)?Byslicing and dicingour data (bymarket vertical, bygeography, time wise,…) we can gain a wealth of insightintoourcompetitive position
- >> Theproblem as wehaveseenwasthatwewerenotonlyseeing a market share belowour plan whichwastogain share versus lastyear, butwewereevenerodingour position monthaftermonth
- Successrate
- >> Whenyou look at theproblemfrom a home runperspective, youdon’tappreciatethereisanissuebecause in themarketyoustill compete in, youhave a similar winrate as lastyear. >> Withtheexception of themonth of Aprilherewhichis a clearoutlier and wherewedidmuchworsethanlastyear and muchworsethanaverage. Whichspecificdealordealscausedthis? Whydidwe lose? Whatwereourlearnings? How are wegoingtoavoidthatthisdoesnothappenagain?
- >> Youneedtoknowwhich 3-4 keymetricscharacterizethepurchasingbehaviour of yourcustomers>> Forinstance: Maturity of thedecisionfrom a timingperspective? Sanctioned and availablefunding? Strongcompetitivesituation?>> Once thisisdecided, eachitem in youraddressablemarket has to be measuredagainstthesethreemetrics, thiswillgiveyou a calibrated (weighted) view of your real opportunityover a given time period, whichis as independent as possiblefrom a purelyqualitativeappreciationfromthefield, whichisusuallywherethe error resides.>> Thetypicalinconsistencyhereisthatyoustatethatyourmarketis 100 units per quarterbut in a givenquarteryoureport 20 deals as won and 60 as lost. Thisis 80 deals. Where are theother 20 deals? Are wenotseeingthe total market?
- Themarketcoverage chart illustrateswelltheproblem, we are stillfishing in ourtraditionalpond, and we are noterodingourcompetitive position ordoingworsethere.Theproblemisthatthepondisbecomingsmaller and themarket has moved somewhereelse, somewherethatweeven do notaddressIn this case, whatthe data miningdiscoveredwasthatthecritical factor waspricing and not so much performance. Themarketwasmovingto a lowerendpricebracket, and alsotodealswherethevendor (ourselves) isexpectedtocontributetothefinancing of thedeal, whichhadbecomeincreasinglyimportantafterthefinancial crisis.Thecustomerwasexpectingthevendortohelporchestrate leasing deals, sometimestorenttheinstrument, and alwaysto compete in pricingveryaggressively so thattheinitialinvestmentwasnot so highThe total cost of ownership of theinstrument, as well as thepurelytechnicalcharacteristics, whichhadbeenour bread and butterbusinessuntilthen, hadsuddenlybecomelessimportantWehad no presencewhatsoever in this new market and wedidnotknowhowtoreactinitially
- >> Hereis a dashboardwiththeresults of yourmetricsbeingtrackedconsistently>> Ifproperly done, thisisnothinglikeyourclassical KPI chart>> Theresult of ourdiscussionwasthatwedecidedtosegmentthemarket and addresseachsegmentwith a differentproduct: a lowendproductwherewe competed in price, a midendproduct and a highendproductforourtraditional “elite” of customers