Chief sales officers must evaluate and select the right strategy options for achieving sales and corporate goals
The military leader and philosopher Sun Tzu, who helped King Helu of Wu defeat King Zhao of Chu during the Spring and Autumn period of ancient Chinese history, wrote his treatise The Art of War to formulate the principles of strategy and planning that he had learned. Sun Tzu wrote, “Victorious warriors win first and then go to war – while defeated warriors go to war first, then seek to win.”
B-to-b sales planning, which should begin well in advance of a new fiscal year, requires careful reflection, calculation and coordination to increase the likelihood of a successful year for the sales organization. In this issue of SiriusPerspectives, we define key sales planning terminology and introduce sales strategy levers that CSOs, sales operations and other sales leaders can apply to achieve corporate goals.
It’s not uncommon for conversations during sales planning meetings to confuse goals, strategies and initiatives. To keep this from happening, define terms to keep planning on track, including:
Goal. This is a specific result that the governing body (e.g. executive leadership team, board of directors) desires to achieve. Examples of sales-related corporate goals are to grow sales, increase market share and improve profitability.
Strategy. This is the means of achieving a goal. Goals are what the company aspires to achieve, and strategy is how it will happen. In the discussion below, we discuss sales strategies in more detail.
Factors such as the competitive landscape, market conditions and the macroeconomic environment are beyond a CSO’s control; however, there are sales strategy levers that the CSO can control in pursuit of achieving goals. They include:
Sales expansion. Expansion is defined as adding resources to the organization, either through hiring or acquisition. When evaluating whether to add headcount, make sure the organization is ready to plan and manage onboarding efforts. Consider new hire time to productivity, quota ramps, potential compensation draw expenses, and additional expenses (e.g. application licenses, training and certification costs). Model these factors in collaboration with finance, human resources and sales enablement. Sales expansion can be expensive and time consuming, and it may not yield full results for two years or more. However, while expansion may only partially contribute to current-year goals, it can pay dividends in years two and beyond – additional periods when the CSO will be asked to grow sales.
Sales productivity. Driving incremental results from existing sales resources through a partnership between sales operations (focusing on sales efficiency) and sales enablement (focusing on sales effectiveness) is the right approach to make sales more productive. When applying this lever, start by assessing current productivity levels and identifying opportunities for improvements. When setting targets, present the most likely scenario, disclose related assumptions and dependencies, and also describe worst-case and best-case scenarios.
Strategic investment. Strategic investments are large in scope and involve not only sales, but also organizations that support sales. They may or may not be funded in the sales budget, but the CSO can be a powerful advocate for enterprise-wide investments such as new products, enhancements for existing products, sales force automation tools, configure/price/quote tools, new office locations, and major innovations. As is the case when discussing sales productivity targets, lead with the most likely scenario and related assumptions and dependencies, but also be prepared to discuss worst case and best case.
Coverage model. Analyze customers and prospects to discover commonalities, and then define coverage models in ways that enable increase productivity when meeting their needs. Common ways to define coverage models include geography, historical spend, potential future spend, number of employees and industry. There may be instances when it is efficient to serve customers using an inside sales force or to classify and to further refine customer segments as existing and prospects. Coverage model adjustments should create a better customer experience as well as an economic benefit for sales. This is not a sales exercise alone; be sure to include marketing, product management, finance and other organizations as appropriate.
Channel variation. Direct and indirect channels are the broadest channel options. There are many variations of indirect channels, including value-added resellers, distributors, systems integrators, service providers, and agents. Channel shifts will affect top-line revenue as well as margins, because of profits that channel partners will retain. When calculating channel-driven growth, make sure that increased volume will offset margin and revenue changes.
With support from sales operations, sales leaders should analyze sales strategy levers to assess the relative impact each may have in contributing to corporate goals. If the sum of a selected lever’s contributions does not equal the goal it is intended to achieve, there is a gap in the plan. Articulating that gap can provide the CSO an opportunity to discuss planning assumptions with senior company leaders. These stakeholders will undoubtedly challenge the CSO on these assumptions, so the CSO must be prepared to provide clear evidence and analysis.
Resist the temptation to spread the gap – i.e. to merge known shortfalls with other levers prior to sharing the strategy. If shortfalls or gaps are not identified, the organization will never address them. In discussing gaps, the board or executive group may offer suggestions to remedy them, or they may offer additional investment.
Once the plan is adopted, sales operations must create data structures to track actual results from the application of each strategy lever. Report results at least quarterly, if not monthly. Use the information to adjust current plans and improve future planning cycles.
A visual diagram of sales strategy levers and their relative contributions can help structure the strategy development process. It also provides a useful way to communicate strategic options and decisions to organizational stakeholders. Because identifying and sharing potential strategy gaps that may impede the achievement of goals is an essential part of the strategy formulation process, do not fear highlighting these gaps and asking for suggestions of ways to overcome them. This exercise alone can make the difference between achieving or exceeding goals and completely missing them.