By: Kim Mi-yeon
Frank Cespedes teaches at Harvard Business School. His new book, Aligning Strategy and Sales: The Choices, Systems, and Behaviors that Drive Effective Selling (Harvard Business Review Press) has been called “the best sales book of the year” (Strategy + Business),“a must read” (Gartner Group), and “perhaps the best sales book ever” (Forbes). It will be published soon in a Korean translation.
He talked to the Maeil Business Newspaper in an-email interview.
1. Your book emphasizes the need for strategy. Can you define what strategy means and why it is so important in business and in sales in particular?
Strategy is about the future, not the past. In business, there is little profit margin in celebrating “the good old days.” Strategy is basically about the movement of an organization from its present position to a desirable but inherently uncertain future position. The path from here to there is analytical (a series of linked choices about objectives, where we will and will not compete, and our advantages in those areas where we choose to compete), and behavioral (the coordinated efforts of people who work in different functions but must align for effective selling to happen). A strategy should provide direction about how people, money and time in a company get prioritized and allocated.
It’s important for a few reasons. There is such a thing as luck in business as in most aspects of life. But you can’t count on luck, and it really is tough to accomplish good things in a competitive market without a strategy. Second, the goal of strategy is profitable growth and most businesses ultimately have no alternative to growth. As many Korean companies have discovered in the past decade, growth is required to meet the expectations of investors, to raise more capital, to attract and retain talent, and so on. And growth means sales, but effective selling is ultimately an organizational outcome, not only the result of smart and capable salespeople.
2. Your book focuses specifically on aligning a company’s strategy with sales and other customer-acquisition efforts. Why do many companies have a problem in achieving that alignment?
The research in this area indicates that, in companies around the world, less than 50% of employees say they understand their companies’ strategy and—here’s the really disturbing result—that percentage decreases the closer you get to the customer in responses from sales and service people in companies. It’s difficult for people to implement what they do not understand. So one big problem here is the failure of many companies to communicate their strategy effectively. When I ask executives why they do not spend more effort on communicating strategy, they cite “competitive” reasons. But that is a weak claim: you have bigger problems than competitors “knowing” your strategy if your own people—especially the people who talk to customers–do not understand it.
Second, many companies confuse things like “purpose” or “mission” or “values” with a strategy. Those are important but different and more abstract than strategy. As a result, many companies think they are providing strategic direction when they say things like “be customer focused.” But they are not. Those are fundamentally motivational speeches, not strategies that help managers make important choices about people, money, and priorities.
Third, strategic planning processes at many companies result in disconnection between strategy and the sales force. Most companies, including most Korean companies, treat strategic planning as an annual event, typically as part of the capital-budgeting process for the next year. Companies tend to do plans by business unit, even when sales sells across those units as in many larger Korean companies. The average corporate planning process now takes an estimated 4-5 months per year. While this is going on, the market does what the market will do. And sales people must respond issue by issue and account by account. So, even if the output of planning is a great strategy—clearly, a big “if”—the process itself often makes it irrelevant to sales executives.
3. How can firms deal with these issues and improve their alignment of strategy and sales?
The basic idea in my book is this. In any business, value is created or destroyed in the marketplace with customers. The market includes the industry you compete in, the customer segments where you choose to play, and the buying processes at customers that you sell and service. Those factors should inform strategy and required sales tasks—what your sales people must be good at to deliver value and so implement your strategy effectively.
Then, the issue is aligning selling behaviors with those tasks. Managers basically have three levers to do that. People: who you hire as salespeople, what they know, how you develop their skills so they can execute your strategy’s sales tasks, not those of a generic selling methodology or what they learned at another firm with a different strategy. Control Systems: performance management practices, including sales compensation, performance reviews, and the metrics used to measure effectiveness. Sales Environment: the company context in which sales initiatives get developed and executed, how communication works (or not) across organizational boundaries, and how sales managers (not just reps) are selected and developed.
This approach has very practical implications. If you’re a sales manager, this way of thinking may change how you select and use available selling resources, how you develop your people, and how you look at your own career. And if you are a CEO, strategist, or Board member evaluating sales numbers, it can help you to avoid glib generalizations about selling and enable you to dive deeper into the cause-and-effect relationships that help or hinder effective selling in your company.
4. Can you give some specific examples of companies that do this well?
Here are two examples. One is disguised and it’s about a start-up. The other is about a big corporation confronting market changes. So, it’s two ends of a spectrum.
In the book, I call the start-up “Business Processing Inc.” (BPI). Like many young companies, it grew to a certain level but then stalled. The leadership team had accepted any business and had never thought-through what its strategy and value proposition meant for target customers. When it did this, BPI sold more and faster and more profitably, with a smaller sales force. I cite this example because surprisingly few firms are clear about who is their kind of customer, and that’s essential to any strategy. Most sales compensation plans bonus salespeople purely on volume. So the message to reps is, any customer is a good customer. They then sell to customers who make many conflicting demands and fragment the selling company’s resources. Remember that most investments in companies are made to get and keep customers. Soon, it really does not matter what the strategy documents say. The real strategy of the firm is the aggregate investments driven by this essentially ad hoc sales process.
The other example is Dow Corning. For decades, Dow sold through a solutions-oriented sales force which bundled products with relevant technical services—a common approach for many big and diversified Korean conglomerates. But growth stopped in the late 1990s as smaller, low-cost firms entered the market through online channels. Dow eventually realigned its sales approach and strategy, developing different business models and sales approaches for different customer groups and then using the levers I highlight in my book: People, Control Systems, and Sales Force Environment. I mention this example because all the current talk about “disruption” leads many companies into a false either/or mentality that ignores market realities: most companies must deal with both transaction and solutions customers, and there are practical ways to do this. Conversely, when you are under attack by lower-cost competitors, you can worry all you want about “disruption,” but you need a sales effort aligned with strategy to do something about it.
5. We hear so much about digital transformation and how social media and online technologies are “disintermediating” or replacing sales forces. How does this affect sales and strategy?
Yes, based on the business press, you could easily assume that social media or digital marketing now determine business success. But consider the basics: US companies spend, annually, more than 3X on sales forces than they spend on all media advertising, 20X more than their total spend on digital marketing, and 40X more than their current spend on social media. It is simply not true that sales forces are being replaced by ecommerce or even getting smaller. In the U.S., for example, official labor statistics indicate that as many people now work in “sales” jobs as did in 1992—before the rise of the internet. And this almost certainly under-estimates the real numbers: in an increasingly service economy, business developers are often called Associates or Managing Directors, not placed in a “sales” category for reporting purposes. The same is true in Korea.
Digital media are changing sales tasks, not replacing sales people. For example, few cars—either in the U.S. or Korea—are actually bought online. But about 90% of Americans now research the purchase via online sources before going to the auto dealer. The average U.S. car shopper now spends more than 11 hours online and only 3.5 hours in trips to dealerships. This makes selling in the dealer more important, not less, because it puts more pressure on the sales person’s ability to add value during the shorter sales experience. Smartphones, online reviews, social media blogs—all these tools have a similar effect across many other buying/selling situations.
6. What advice would you give to executives at Korean companies who want to improve their ability to link strategy and sales?
First, make sure your company has a strategy and not just a mission statement or nice slogan. Many executives say things like “Our strategy is to provide superior products . . .” or “constant innovation” or “great service,” and somehow expect a coherent response in the field. But that’s unlikely if you have not specified what this means for the customer value proposition, sales tasks, and other activities.
Second, given a strategy, you need disciplined hiring, focused and customized training initiatives, and on-going attention to broadening salespeople’s skills as markets and sales tasks change. Someone once told me that many companies maintain their equipment better than their people. If so, you ultimately get what you don’t maintain.
Third, always remember that it’s not the market’s responsibility to be nice to your current strategy and sales process. It’s your responsibility to understand the changing market and adapt. And you cannot do that from headquarters or solely through data analytics. You must keep in touch with actual customers, no matter how senior an executive you are, because “a desk is a dangerous place from which to watch the world,” especially the sales world.