CEOs of the time didn’t understand the efficiency
It was most often the likes of Albert “Chainsaw Al” Dunlap, the much-feared downsizer. Who headed such companies as Scott Paper, Crown Zellerbach, and Sunbeam. Dunlap and other top CEOs of his generation understood that the drivers of growth, in those days, were based on Sales Force Effectiveness. So they cut out the fat, introduced systems, automated, and reengineered. In other words, they sought out and used the key drivers that made their organizations more efficient and, in doing so, created substantial increases in shareholder value and became the superstars of their business generation. Less-successful CEOs of the time didn’t understand efficiency drivers, so they are remembered today only as minor footnotes in the history of business
CEO by tidying up the unfinished business of your predecessors
But business drivers change. A new generation of CEOs came along and inherited organizations that, even if they were not totally mean and lean, were at least most of the way there in terms of efficiency. You don’t get to be an outstanding CEO by tidying up the unfinished business of your predecessors. The winners in this next generation had to discover new growth levers if they ever hoped for stardom.
The new drivers of growth, it turned out, were mostly legal and financial. The business had entered an era of mergers and acquisitions. The quickest way for a CEO to grow sales by 50 percent was to acquire another company half the size. Boardrooms became dominated by lawyers, accountants, and M&A advisers who understood the new growth drivers of acquisition. The likes of Carl Icahn became the new darlings of the business world, and CEOs like Bernie Ebbers of WorldCom, whose misuse of these growth drivers landed him in jail, became notorious
CEO today based on the drivers of the acquisition era
It would be hard to become a rock star CEO today based on the drivers of the acquisition era. For one thing, capital has become inaccessible; moreover, there’s lingering shareholder cynicism because the promised growth in shareholder value was too often a smoke-and-mirrors trick of creative accounting. So where does growth come from today if not from efficiency and acquisition? Some say that the new drivers will be innovation and creativity. That’s fine and dandy if you say it quickly, but innovation is perhaps the most uncertain of all growth models. For every Apple and Steve Jobs, there are a thousand who tried but couldn’t make it.
Add to that the question of whether growth through innovation is sustainably profitable. It wasn’t so long ago that, if you made a better mousetrap, you would have a window of opportunity before competitors came along. It might have been months, or even years, before the first cheaper look-alike appeared, ending your uniqueness and eroding your margins. Today, that window of opportunity has shrunk to weeks or days, and all the signs point to the fact that it will continue to shrink further. So if innovation is your strategy, understand that it’s getting harder all the time. That’s why the smart money has shifted to a new strategy: organic growth. Jeffrey Immelt, CEO of GE, puts it well: “Our future cannot be just innovation. We need organic growth– and that will rest on our ability to sell more and take business away from our competitors.”
CEOs have been coming to the same conclusion.
Other able CEOs have been coming to the same conclusion. These new rock stars understand that the future drivers of growth are rooted in sales. Of course, the importance of sales has always received lip service. Even mediocre CEOs can trot out clichés, like “Nothing happens until somebody sells something.” The thing that is different about the top players today is that they understand why sales is the new engine of growth, and they have new drivers to make that sales growth happen. At the risk of oversimplifying a very complex issue, I would like to suggest that there are two important changes that underpin the focus on sales as the new growth engine for business:
The effects of globalization alone would make this seem probable
1. Competitor proliferation: It is widely said (and I think it’s true, although I’ve not been able to find the source) that the average company today has twice as many competitors as it had five years ago. The effects of globalization alone would make this seem probable. Not only are there more competitors but, just as significant, today’s customers can find them easily. Internet folklore says that the amount of information a customer can access about you and your competition is doubling each year. Add in another factor:
Differentiation between competitors has been decreasing. This means that the era of relying on a better mousetrap is coming to an end. No longer will your product sell itself because it’s better. In today’s sales environment, your product is just another way to kill mice. What does this mean for business growth? Statistically, if you face twice as many competitors, then your chance of winning any individual sale is cut in half. Competitors’ products are as good as yours, so your product won’t win the sale for you. Unless you do something different in the way you sell, your business will inevitably shrink. For this reason, the way you sell has become more important than what you sell. Traditional sales forces and the traditional levers of sales performance, such as recruitment, compensation, training, and motivation, are proving less and less able to cope in this increasingly complex and competitive world.
New sales-performance tools
2. New sales-performance tools: I once heard sales strategy described by an old-school Xerox executive as “simple tactics, ruthlessly executed.” And at the time, he was right. When I wrote Major Account Sales Strategy in 1988, it was the first book to lay out a customer-focused sales strategy for the complex, multicall sale. In those days, this was seen as something of a breakthrough, although one reviewer complained that it was “too complicated for most salespeople.” How times have changed.
In the last 10 years, the sophistication and complexity of selling has made it one of the most strategic and sophisticated of business functions. Individual salespeople today operate in a dynamic environment that requires ever more intricate decision-making. Their managers use increasingly sophisticated and data-driven strategic tools. Top sales managers now use sales force effectiveness frameworks and models to bring about dramatic improvement in overall sales performance. These are huge changes and, in the last 10 years, they have been accelerating. Organic growth, the new mantra for business success, is necessitated by competitor proliferation and enabled by the new sales-effectiveness tools. Thanks to organizations like ZS Associates, we now have a much better understanding of the drivers for sales growth, and we also now have many of the tools that can get us there. Read more on todayposting
SalesForce Effectiveness encompasses every component of sales force performance
The name was increasingly given to the body of knowledge, frameworks, models and tools that enable organic sales growth is sales force effectiveness, abbreviated to SFE. It’s not yet a term in wide general use, but I predict that it soon will be, along with TQM, CRM and other well-known business abbreviations. SFE encompasses every component of sales force performance, including sales strategy, sales force design, skills, incentives, processes and sales tools. Unlike the majority of past approaches to sales performance, such as CRM, SFE is multidimensional and aims to integrate all the levers of sales performance into one comprehensive system.
The cutting-edge developer of SFE frameworks has been ZS Associates, whose track record of sales improvement is impressive. The ZS SFE Navigator,™ described in the articles that follow, is being made publicly available for the first time. It is the culmination of a lot of thought from a lot of very talented people. And its time has come. Companies all over the world are struggling with difficult sales-performance issues that will determine their future success. SFE is not and was never intended to be a silver bullet. Its implementation demands hard, prolonged and thoughtful work. But if you want your business to grow in the hypercompetitive markets of tomorrow, SFE may be your only choice.