Winning the Competition for Corporate Funds
This post is part of a series to help B2B organizations improve sales and marketing cooperation. In part one, you’ll get the basics of beginning the process along with the information and agreements you’ll need to put in place in order to ensure success.
“Because of the state of euphoria over what (software vendors) thought they could deliver, there was a time over the past two or three years where they over-promised and dramatically under-delivered. And they didn't have a great tendency to listen.”
- Steve David, CIO at Procter & Gamble
“So, if you want to sell to me, come into my office with a demonstrated solution to a problem I've got. ... That means you've got to understand my business, how I make my money and what my problems are.”
- Roger Krone, VP & GM of Boeing Rotorcraft
Faced with this kind of corporate reaction, high-tech vendors are getting frustrated with the stiff barriers erected by corporations to making IT investment decisions these days. In fact, many software company executives and sales reps - especially those who grew up professionally during past years - are finding it extraordinarily tough to adapt to the challenges of today's marketplace. To be fair, the situation is worse than one might have ever imagined just 18 short months ago. "The worst software buying environment in memory," is one complaint I regularly hear these days. So, what more can one do to develop and close deals, except just try harder and harder against all odds?
To look at this situation another way, one can argue that tough times call for tough, and even different, tactics. In fact, I would go so far as to argue that two key qualities in today's sales force and management ranks count for more than any others: firstly, contrarian, inquisitive thinking, and secondly (believe it or not) solid sales discipline. In my view, both of these qualities will be rewarded significantly more than the aggressive, even brazen, marketing/sales approaches that characterized the past. Puzzlingly, many firms still seem unable to give up their hard-sell tactics, despite all the evidence that they don't work today, even for 'established' product categories, such as ERP, Supply Chain, and CRM. In this article, I shall share with you an approach that, after over 20 years in enterprise sales (including a start at IBM), I know will work, provided you apply it in a consistent manner. The approach I am about to describe can ensure success to any company with decent (i.e., not necessarily exceptional) product offerings in a relevant product or service category (i.e., not necessarily a recognized hot category). Furthermore, I will make the following assertion: Unless your company is a bonafide leader in an established, growing product category, every time you lead with a product (as most software vendors still do), I can assure you that you are likely to fail in today's market.
First, the case for considering a 'new' selling approach:
As we all know, the scenario inside large corporate organizations today is quite different to what it was just 3 years ago, when arguably the top 10 or so IT projects at any one time may have got funded at some point. True, this was probably due partially to the profligate nature of corporate IT investment management at the time - profligacy which has now come home to roost, as billions of dollars of unimplemented software and equipment lie on the shelf in these organizations. The goes for legacy and SaaS software vendors. In contrast, the situation in most corporations today is that, in relative terms, only the top three IT projects on the list at any given time stand a chance of getting funded. And it is every sales rep's job to make sure that the deal they are trying to close be a part of one of those few funded projects. Put another way, the obstacle course that most technology vendors face today can look as daunting as this:
- First, you have to 'compete' against all other proposed IT projects to be one of the customer's 'top three' funded investments (knowing that even these can be deferred at any time);
- Then you have to compete against existing in-house initiatives and workarounds;
- If you are still standing at this point, you must then compete against the threat of the customer using some of the excess 'shelf' software acquired during the past two or three years;
- Then you confront the threat of vendors from an adjacent product category who may claim to solve the same set of problems as your category addresses;
- Finally, you may be competing against vendors in your own category! (it wasn't supposed to be this difficult, but this is the nature of the game nowadays.)
Looking further, the way in which corporate budgets are being managed can send misleading signals to understandably antsy sales reps. For example, instead of the lines-of-business getting to use up their budget allocations, they now need to obtain sign-offs from not only the CFO but also the increasingly involved CEO for anything above, say, $100k in some companies. Besides expecting to see clear corroboration that the project has been well researched, and that it will generate a payoff in the short term, the chief executive is asking one simple, but critical question that is enough to put a nail in the coffin of many a promising investment proposal: "Why now?"
Just as software vendors in the early 2000s all became versed in such skills as finding the where the budgets are in their customer's organization, the puck has now moved to a different spot on the ice: let's face it, enterprise customers have become used to fending off vendors' advances with the 'vanishing budget' argument. And when customers apologize late in the sales cycle that their budget has been 'frozen', it may be no exaggeration these days. Despite what some sales professionals might want to believe, corporate budgets are nothing more than best-guess funding allocations made in a prior fiscal year or quarter, and liable to be temporarily or permanently 'frozen' or 'reallocated' at any time that economic conditions warrant greater caution or resource scarcity.
Regarding the financial justification for IT investments, I believe that customers resist vendors' "ROI" arguments for a number of reasons - apart from the fact that they often come across as no more than sales-enablers designed to serve the vendor's interests:
- The ROI study does not focus on a specific, sufficiently critical problem that the customer admits to being desperate to solve to prevent an unacceptable outcome, such as lost market share, lost profits, or worse;
- Often, vendor-driven ROI calculations only take into account the cost of licensing and implementing the vendor's software, rather than considering the entire investment required to solve the problem;
- It fails to show clearly what assured short-term, incremental gains will result in a first phase, in order to fund the remainder of the project in a second, then a third, phase;
- The study does not necessarily create a case for doing it NOW versus later - after all, companies manage to live with many problems, even serious ones on an ongoing basis; and,
- It usually fails to establish clearly enough in the customer's mind why they should buy from this vendor 'X' versus vendors 'Y' or 'Z'.
Above all, I cannot over-emphasize how critical item (c) above, regarding short-term gains, can be in today's market. Every enterprise customer knows that any project worth its salt will take time to implement. Nonetheless, the initial payoff needs to occur early in the life of any significant IT project. Many vendors, it seems, have misunderstood this to indicate that large corporations have become unreasonably concerned with achieving all the gains immediately (i.e., in two-quarters or less). This is just not the case. In fact, in any significant investment, customers are quite amenable to the idea that benefits will accrue in stages over time, with some occurring in the mid-term and even the long-term - provided they can be sure of achieving some tangible benefits within a three-month or so window. Importantly, these early benefits help in a very direct way to 'fund' the remaining investments. More than any other consideration, though, investments in relatively new categories don't get funded out of existing budgets (because these have usually been set up to cater for investments in known product/service categories), but out of the only reliable source of funding in tough times: in other words, the savings or new sources of revenue unleashed by solving a critical operational problem. So, how can companies - many of them 'designed' in anticipation of a 'tornado' of internet-generated demand during the investment bubble - overcome such extraordinary challenges to find the necessary funding for the deals they are trying to close?
Next week I’ll drive into my second approach I recommend - “Provocation-based Selling.”
In part II, I will cover three topics related to the hand-to-hand combat required for high-tech sales teams and executives to close deals: (a) what do you say to the ‘top dog’ to get them interested in your potential solution?; (b) what are the main priorities for marketing to support the field?; and (c) how do you take account of the differing interests of the various target constituencies you must deal with in typical enterprise-level sales cycles?
I would love to hear your thoughts, so comment below and share this post!
Learn more in Part II of this series. Go here>>>
