We should start discussing what’s beyond CRM.
I chose the word beyond advisedly. CRM is far, far from dead or even in decline so after would be completely incorrect. But CRM has already changed so much that it may be time for a rethink. Also, many of the tangential technologies that have turbocharged CRM in the last few years, like social media, have attracted so much attention—not all of it good—that some analysis is due.
First, let’s state the obvious, that CRM isn’t in eclipse. It’s a $30+ billion industry with a bright future. But the green field days have passed, most companies that need it have gotten at least some CRM apps but probably not enough. More telling, a report from CSO Insights “Running Up the Down Escalator,” that I studiously review each year, tells me that most of the sales organizations that ought to be using CRM are doing so poorly. Their sales processes aren’t efficient or productive. CRM adoption is not what it should be and there’s plenty of room for greater implementation.
On the other hand, we’re entering Q2 and tradeshow season. Two weeks ago, I was in San Francisco for Salesforce’s TrealheaDX developers’ conference, last week at the company’s World Tour in Boston. Next week I’ll be in Chicago for Oracle’s Modern Customer Experience conference and from what I’ve seen and been briefed on the new solutions on offer are very cool. The quarter continues with trips to Las Vegas, San Francisco (again) and elsewhere.
CRM is vibrant. But its role and nature continue to change. It was once seen as an efficiency tool and a commoditization of expensive IT. The combination of cloud computing (commoditization) and database management techniques over customer data (efficiency) raised performance and expectations of what we could achieve in the front office.
But today, the CSO Insights report tells us that last year only 53 percent of sales people made or exceeded quota compared to 63 percent five years earlier. It also says that well over half of sales organizations operate like the gunslingers at O.K. Corral flailing at their markets instead of using technology to bring order, precision, and efficiency to their tasks.
On the other hand, marketers are now empowered with sophisticated tools that enable them to take the randomness out of their efforts replacing it with accurate programs designed to appeal to targeted needs. Of course, many marketing organizations still have not internalized these ideas and their output resembles pasta on a wall because the technology has made it so inexpensive to spray and pray.
Lastly, with each new revelation of a data breach the business community shudders as vendors attempt to deal with risk, loss, and irate customers. At the same time, customers quake at another possibility that their identities could be stolen and their futures ruined. Trust in social media especially, has taken a hit with almost daily revelations.
But in the efforts around platforms and development technologies I can see renewal and reason for optimism. We are in an era of consolidation through mergers and integration into huge suites of functionality. Point solutions are still viable but increasingly they are coming to market as components of larger ecosystems based on a few prevailing platforms such as the AppExchange, a trend I expect to continue in CRM’s next stage. Here are some recommendations for that stage.
- For individual users the path forward in CRM is to adopt the new development technologies so that they can customize apps beyond anything a vendor, even one in an industry vertical, can provide.
- Customers should demand and vendors should give much better data security if we expect our society, already highly dependent on data and information, to further progress in that direction. New business structures for safeguarding data along with new certifications and a code of ethics have to be part of the mix beginning with encryption.
- There’s ample data suggesting that employees and the public now look to CEOs to articulate visions beyond profit and loss that position businesses as responsible corporate citizens. Young people are selecting job offers based on this according to a survey by Povaddo, an opinion research and issues management consultancy which said that more than half (57 percent) of those working in America’s largest companies feel that their employers should play a more active role in addressing important societal issues.
My two bits
CRM began life with a heavy emphasis on management but over time the attention paid to relationships has only grown as we’ve added needed functionality to shift focus. Interestingly, the emphasis on AI and machine learning has reduced much of the rote effort to manage situations while freeing up employee time to do what humans do very well, relate to each other.
That’s one reason relationships and CRM have become so central to business life. Another reason is the convergence of many markets as earlier disruptions are increasingly embraced and commoditized. Succeeding today means developing and nurturing relationships more than it references efficiency. So if you haven’t rethought your CRM deployment in a while or if you thought you had everything done, think again. We’re in the second half of a close game, the stakes are high, but there’s a lot of fun on the horizon.
Sales people and their managers should be celebrating the economic gains of the last few years but for many of them the gains may be illusory. In a new report compiled by CSO Insights, “Running Up the Down Escalator,” there’s evidence that these will not be remembered as the good old days in selling.
According to CSO Insights’ continuing research that stretches over more than two decades, 63 percent of sales reps made quota in 2012 but five years later despite an improving economy that number dropped to 53 percent. A variety of factors account for the drop. One nugget from the report,
Buyers are getting better at buying faster than sellers are getting better at selling. This creates downward momentum: Standing still (trying to maintain the status quo) is actually moving backwards. Successful companies are running up the buy/sell escalator fast enough to counteract the forces (buyer expectations, new competitors, etc.) that are combining to pull them down.
In other words some companies are just better at selling and in prior years that logic made some sense. But companies are still making their numbers which suggests to me that they may have over hired sales talent which is puzzling.
A traditional sales manager plugs bodies into territory to ensure no opportunity is ignored. That was once understandable. But today we have so much technology to plan territories, guide sales people, suggest next best actions, and which targets to go after given the time left in the quarter that it stretches the mind to think that much is falling through the cracks. In short all the sales tools that have come on line in the last two decades should have enabled everyone to do more with less.
If so then the clear conclusion I draw is over-hiring or under use of the technology but the question is why?
Perhaps, and this is just a hunch, although we have lots of sales tools today, we’re still planning and managing territories by hand. Estimating the number of target companies and dividing them up, keeping notes in our phones or scraps of paper, relying on memory to call someone back. It’s a long list.
Maybe a better analysis is that according to the data nearly half of the companies surveyed (48.4 percent) have mediocre sales processes while another 24.8 percent have chaotic ones.
CSO identifies four levels of sales process Random, Informal, Formal, and Dynamic and nearly 75 percent of sales organizations don’t get out of the first three process categories.
CSO has also identified five types of sales organizations as they present to the marketplace. From low to high they are Approved Vendor, Preferred Supplier, Solutions Consultant, Strategic Contributor, and Trusted Partner. The higher you go in the hierarchy the better things get. Trusted Partners have earned a place at the decision table, they discuss bigger deals, and those deals close faster.
It’s the trusted partners—with dynamic processes—that make the deals while the others are working very hard hustling to bring in some revenue—any revenue. Of course, this is an over simplification but aspiring to the combination of process optimization and becoming a trusted vendor have been around longer than SFA.
It’s hard to get to those lofty places. Reps who are new in their jobs know they have to produce or perish and the churn results in bad habits like using a random or informal sales process and not being too picky about what products the customer buys as long as they buy something.
Perhaps this results in too many sales reps chasing too few opportunities. Or maybe it just results in sales rep churn with the result that territories have new people running them all the time making the same rookie mistakes over and over. Whatever the analysis this all suggests that some attention paid to how people sell and how we support them might pay real dividends.
My two bits
One of the great thigs about CSO Insights is that they’ve been collecting the same data each year for a long time. The Sales Relationship Process Matrix has been around for a long time too and while the percentages move a bit from year to year, I have not seen an appreciable change in the distribution over time.
I wish there was more data. Things I’d like to know:
- How has sales headcount varied over the last 5 years as quota attainment has tanked?
- What’s the average time in position for sales people?
- Of the 53 percent of people who make or exceed quota, are they attaining more or less as a percentage of goal than the 63 percent five years ago?
Bottom line, sales is a GIGO business. Garbage in, garbage out. Most of all it’s a process and if you aren’t attending to the fine points of your process you are losing more often than you should. My hypothesis is that the people who make quota today are killing their numbers by bigger margins than they were 5 years ago. To change that dynamic we don’t need less software but we do need to spend some time learning how to optimally use it and we also need to think hard about why we still allow random or even informal sales processes to exist in our businesses.
I was a guest in the audience yesterday when Cloud9 Analytics came to Boston to meet with customers and talk about the releases that will be part of their offerings later this year. The presentation lasted a bit over an hour and included presentation of new sales management data by Jim Dickey of CSO Insights and a customer testimonial from Brainshark, EVP, Dave Fitzgerald.
Cloud9 CEO Swayne Hill spoke about the future releases and current status of the company. The company must be doing a few things right because Hill said they have more than 90 customers now and a 50% revenue increase quarter over quarter. That’s good news given that it’s so expensive to launch a SaaS company and capital is not exactly overflowing.
Last year was the worst year for VC investments since 1997, if you want to know. And the industry actually raised less money than it invested and I don’t know how long it’s been since that happened. Last year was also the year a competitor, LucidEra — another SaaS sales analytics startup — went to the boneyard. So, long story short, Cloud9’s advances in such a market speak volumes.
We also know that if last year had been terrible it would have been an improvement in most companies. Jim Dickey, whose company performs an enormous survey of sales and sales management professionals each year was there to talk about his most recent survey and analysis, which is due out shortly. Without giving away all of Jim’s IP (which I can’t do simply because it is so voluminous) some numbers that blew me away: Last year the win rate on forecasted deals was 44 percent. Forty-four percent makes picking red or black look like genius work. Forty-four percent makes a mockery of the whole forecasting process. It means you’re better off not forecasting.
But there is more. In the same year, in the face of an economic tsunami, 86% of the companies studied raised sales quotas. That’s right, they raised their expectations in the face of overwhelming odds against. I’m sorry but Tennyson is screaming in my ear about the Light Brigade,
Theirs not to make reply,
Theirs not to reason why,
Theirs but to do & die,
Into the valley of Death
Rode the six hundred.
Eighty-six percent is just about everybody. Now I can understand if the rise in quota had something to do with layoffs and consolidation of territories but you can’t have it both ways. If you jettison the underperformers in the face of the tsunami, you can’t simply put their quotas on the backs of others. If you have a realistic expectation that the quota can be attained, why get rid of some staff to begin with?
But I digress. Dickey’s big point, which I think is very good, is that too often management flips coins when it comes to forecasting and you can’t completely blame them. The sheer number of deals in a pipeline and forecast make it impossible to know much about any of them. That’s why Cloud9 Analytics makes so much sense.
The Cloud9 approach is to manage the exceptions. If nothing changes in a deal then it is assumed to be on track. When something does change notifications go out to relevant parties like managers and others who subscribe to a forecast’s or even a deal’s feed. The whole subscription and feed idea is very Sales 2.0-ish and a good thing to have.
But what Hill spoke of and Dickey gave numerical support for, is the next piece in a sales analytics maturity model that I see evolving. Hill’s contention is that we already use performance management tools in the back office for things like manufacturing. For instance, we don’t use spreadsheets to monitor quality or relationships with vendors in the supply chain but too often we do the equivalent in the front office.
Hill’s goal is to make sales performance management as rigorous as other performance management and his road map for additions and enhancements to the Cloud9 SaaS service point in that direction. All this reminds me of Davenport and Harris’s very good book, “Competing on Analytics” which discusses an organization’s need for an analytics maturity model ranging from tactical to strategic use of analytics to improve performance. Cloud9 appears to be on an interesting track to help customers do this and their further announcements for this year will be interesting to dissect.
I owe you an analysis of Dave Fitzgerald’s testimonial about how Brainshark is using Cloud9 as well as a broader constellation of tools but that will have to wait.