The Issue Of The Day

I’ve found that one of the most important things an executive can do is to regularly identify the “issue of the day” for their company or their team or their group and to address it with urgency.

Peter Drucker refers to this as identifying “what needs to be done?” Ideally, it's one thing, but definitely not more than two.

The discipline to continuously have this in mind and to have the emotional intelligence to be able to accurately identify the issue of the day is difficult and something that separates great leaders from the rest.

The issue of the day could be a number of things: some are opportunities, some are problems, some are strategic, some are tactical, some are elated to business problems, some are related to people problems. An example could be launching a product that will create a large growth opportunity or retain a specific set of customers; onboarding new managers and making them into productive leaders or something as small as fixing a commission policy or plan that is frustrating for top salespeople. The key is the ability to recognize the issue and measure its importance and urgency in comparison to the hundreds of other burning issues that could be addressed.

One of the most difficult things about determining the issue of the day is that different people will often have different perspectives on what the issue of the day actually is. The board, the CEO, the executive team, the line managers will often have different opinions. Getting alignment here is crucial. And, just as important, if alignment can’t be gained across all relevant stakeholders, the executive must make the call on what's most important now and focus on that thing more than any other.

Silo And Un-Silo

Back when I was working at Next Jump, an e-commerce company that enabled big brands to offer their products and services at a discount to large employers and customers of large consumer marketers, our primary objective was to drive spend through our website.

My specific job was to drive user acquisition. I was focused on acquiring more companies to buy the product for their employees and then to get employees (users) to register an account and keep coming back. My colleague, I'll call her Jane, was in charge of site merchandising and had the job of converting those users into buyers once they came to our site. So my job was to get people to our site, and her job was to get people to buy once they arrived.

Every week our teams would meet to review results. We’d start by focusing on the total spend on our site during the previous week. Some weeks the numbers would be up and some weeks they'd be down. In the weekly meeting, our leadership would look at Jane and ask what happened during the previous week. Frequently, Jane would look at me and say, “we didn’t have a lot of spend on the site because we didn’t have a lot of traffic.” Other weeks I would look at Jane and say, "we had plenty of traffic but that traffic didn’t convert into spend."

This was obviously unproductive. We were pointing fingers at one another and defending our impact on the overall number which meant that nobody was responsible for the overall number.  

Our solution to this problem might seem counterintuitive: we created silos.

We came up with something we called “the box.” My team had the job of getting people into the box (get people to the site) and Jane's team had the job of making good things happen once they were in the box (get people to buy things once they were on the site). My primary metric was weekly unique users and Jane’s primary metric was conversion of those users (spend per unique user).

This changed everything. We set up specific metrics for each team where neither one of us could ever blame the other. My team wasn’t measured on overall spend (something we couldn’t control alone) and Jane’s team wasn’t measured on overall spend (something her team couldn’t control alone). We were measured on our slice of the spend metric (users and conversions) and if we both did our job we had a great week. This change created crystal clear ownership and accountability which led to lots of creativity and powerful initiatives to drive each teams' numbers. Our overall spend numbers started heading up and to the right.

Over time, though, things started to break down. Because we were so silo’ed my team wasn’t focused on the overall company goal, we were focused on our team goal. So my team would do whatever we could to drive users to the site regardless of the impact on spend. We would repeatedly promote offers from Target and Best Buy (brands that had 'mass appeal’ and would drive traffic but had relatively low value discounts with low conversion rates). This would drive a ton of traffic to the site, but the traffic didn't convert. Similarly, Jane was focused on conversion so she would promote the best offers on the site (30% off Juicy Couture, as an example). Users would come to the site expecting to see an offer from Best Buy and would see a great offer from a brand they had no interest in and a not so great offer from Best Buy. This led to a low-quality experience, lower spend, and user churn. Overall growth in spend began to slow down.

In response, we quickly setup processes to begin working more closely together. We had to fix the disconnect. We had to collaborate.

We built a monthly merchandising calendar that every team member could access in real-time. We set up several 10-minute check-ins so that the acquisition team knew exactly what the site merchandising team was promoting each day and which offers were converting at the highest rates. The acquisition team would send all marketing emails to the merchandising team prior to sending to users to get their sign off. We used data from the acquisition team to convince the mass appeal brands to offer deeper discounts. 

At first, these efforts forced collaboration. But over time the collaboration became much more organic. The teams became inclined to be collaborative. After a few weeks, the numbers started to head back up. That said, we definitely didn’t abandon the silo’ed metrics for each team. Hitting those metrics was still the primary job of each team. What changed was the approach we took to hitting each of our metrics. It was about transparency and collaboration and a broader focus on what was best for the company as a whole.

The point here is simple: not having silo’ed metrics is a bad thing and being too silo'ed is a bad thing.

As an example, sales teams need to have silo’ed sales metrics that they’re accountable for to force ownership and creativity and high performance. But if the sales team is only focused on one top line metric and nothing else, over time they’ll be motivated to close deals that may be bad for the company and will lead to high churn rates. They have to have a silo’ed metric but also be forced to consider what’s best for the company as a whole.

Companies get in trouble when they lean too far towards one side. Telling groups to just work together to drive an overall number leads to a lack of accountability and creativity. And too much separation leads to a lack of collaboration and focus on the broader goal.

Well run companies find a balance and learn to silo and un-silo.

Writing To Learn

Tim Ferris had a great podcast with Daniel Pink a couple weeks ago. I'm a big Daniel Pink fan. I highly recommend reading his book To Sell Is Human

In the podcast, Daniel talks about the fact that one of the main reasons he writes is not to teach people something but rather for him to learn something. And often, when he sits down to write about an idea part of the way into it he realizes that the idea stinks. Or that the theory he set out to write about is just wrong.

This really resonated with me. The reason I've kept writing on this blog for more than ten years isn't to tell people things I know that they don't (though if that happens that's great). The primary reason is that I learn through writing more than other medium. If I have an idea or a theory I find it enormously valuable to get it down on paper. I'm no different than Daniel in that I have literally dozens of draft blog posts in my Squarespace account that I haven't published because halfway through writing them I realized the idea wasn't good or was wrong or wasn't fully baked. 

I highly recommend that people write down their ideas on a blog or an Evernote or a personal journal. Writing forces you to focus and think clearly and consider alternatives and ensure that an idea isn't just a whim but a well thought out, actionable concept that matters. The clarity that comes from writing is invaluable.

For me, that clarity has been the best thing about writing on this blog.

How To Know You're Hiring Great People

Recently someone asked me how I get comfortable that I'm hiring great people. Obviously there’s a ton of work that goes into making a hire so I won’t go into all of the detail. But just before I’m ready to pull the trigger there are four checkpoints I use to make sure I’m making the right call.

  1. I can clearly point to something about them (beyond functional expertise) that they can do (or I believe they will be able to do) at a world-class level.
  2. Credible, smart, successful people say amazing things about them.
  3. If I strip away their credentials, I'm still really fired up about making the hire
  4. The reason they bounced from one job to the next doesn’t concern me, it inspires me.

There are obviously lots of other things I could add to this list but I’ve found that I'm generally making a great hire when these four things are in place.

Four Productivity Apps

Here are four apps that I've been using recently that have increased my productivity.

Accompany. This app will scour your calendars and see who you're meeting with in the coming days and weeks and will build out a profile for each person that includes news mentions, bios listed on the web and updates from their presence on Twitter, AngelList, Crunchbase, LinkedIn and other social networks. It pulls everything into a one-page profile. Just prior to your meeting it will send you an email with all of these details. Last week I was at the HIMSS conference in Las Vegas and found it invaluable. As I walking between meetings I could read through the manifest for my next meeting and get a refresh on who I was about to talk to. Following the meeting it adds the people you've met to your network and it will continue to push out updates. You can set preferences so you only get updates on people you want to hear about. 

MobileDay. I’ve been using this one for a while but just started using it more often. MobileDay scours your calendars for upcoming conference calls and pulls the conference call dial-in details into the app and pushes you a notification just prior to the meeting so that you can dial into the call with just one click. You just literally just click on the notification and it will dial you in. This is so much better than switching between my calendar app and phone app trying to remember a ten digit number to get dialed in.

Brain.fm is an app that has ambient sounds on a timer that helps with intense focus. I often listen to music when I'm writing but I've found that if I really need to focus on something for a sustained period of time the sounds on Brain.fm work a lot better than Spotify. Note that the app requires you to be online so when I’m on a plane or somewhere without access to the internet I'll use the Noisli app. Not as good but gets the job done.

Astro is an AI-powered email application. It's pretty amazing and I'm not sure I'm getting everything out of it that I could. The more you use it the smarter it gets. It does a great job of building a priority inbox based on the emails you open and the people you email often. And it has a bot that pushes questions to you about your contacts and makes recommendations and reminders to follow up on important emails. It also can track email opens and has a send later feature. I understand that there's a lot more coming as Astro is building a big AI company around the app. The sooner you download this one the better. 

Asking Good Questions During The Sales Process

One of the best salespeople I've ever worked with wasn't all that great at giving presentations. He wasn't great at building relationships. He didn't know the product as well as others on the team.

So what made him so good? 

He would ask the prospect questions. Lots of questions. I mean almost obsessively. When it got awkward with the prospect because he was asking so many questions he'd ask five more questions.

This helped him sell for several reasons:

  1. He fully understood the motivations of the buyer and could tap into those things to keep the deal moving.
  2. He fully understood in great detail what the buyer's buying process was and exactly what was needed to get the deal over the line and he could anticipate any bumps in the road.
  3. He uncovered things that the prospect didn't know about their own needs or things that exist in their own process that they were unaware of that might slow down the deal.
  4. He could uncover trends around problems and solutions inside the prospect's organization that he could leverage across other deals. 
  5. He truly got to know the actors involved in the purchase (influencers, blockers, etc.). 

Too often salespeople want to hear good news so when they hear it they don't dig in and ask lots of questions. I learned from my former colleague that it's much better to assume the worst and dig in with good questions to understand and confirm everything. 

Here are some of the questions that can be asked as a salesperson navigates the sales process. As I said, these may seem somewhat obsessive, but because buying things at a large organization can be so tedious and difficult I've found that most buyers appreciate the thoroughness.

  1. What are your priorities this quarter/year and do you think this product fits in?
  2. How would you explain to someone in your company how this product is going to help you reach your objectives?
  3. What are the other projects on your plate and how would you prioritize this one?
  4. When we launch this product will you personally be measured on its success? By who? How will it be measured?
  5. How do you typically buy products like this?
  6. Who is involved in the buying decision?
  7. Is there anyone that needs to sign off on this (IT, compliance, etc.)?
  8. Is there anyone that you think might object to buying this product?
  9. Have you come across any roadblocks in buying these kinds of products in the past?
  10. How did you get past those roadblocks?
  11. What committees need to see this product before you buy?
  12. When do those committees meet?
  13. Could we find some time to present this in the next committee meeting?
  14. What will each of the people in the committee care most about with regard to this product?
  15. Who will use the product? 
  16. How will they use the product?
  17. Where would the budget come from?
  18. Is there enough left in that budget to pay for something like this?
  19. What is the process to get the budget approved?
  20. What does it take to schedule implementation resources on your side?
  21. What specific measures will your company consider when looking at the success of the product after it's been launched?
  22. Who will sign the contract? 
  23. Does the contract signer need any approvals before signing?
  24. Can I be introduced to the contract signer’s assistant to make sure nothing gets missed?
  25. Is the contract signer in the office on the day we expect to sign?

I could easily list twenty-five more. Of course, it's worth noting that there is some art to how you ask the questions and the questions should be documented and placed at different stages of your sales process so it makes sense why they're being asked at the time.

I've found that in complex sales a salesperson almost can't ask enough questions. Those salespeople that have the discipline to use good questions to understand the prospect and uncover potential pitfalls significantly outperform their peers. 

The 10 Best Books I Read In 2017

For some reason I've stopped posting my summer reading lists on this blog. So instead I thought I'd start posting a top 10 list at the end of the year. As I typically like to do I read a lot of business books, history books and biographies. I also read a couple good fiction books but none that make the top 10. Here's the 10 best from 2017, in order:

  1. America's Bitter Pill: Money, Politics, Back-Room Deals, and the Fight to Fix Our Broken Healthcare System by Steven Brill. This is a phenomenal chronicle of how the Affordable Care Act came into law. An in-depth summary of the issues in American healthcare and the troubling challenges that come with passing an important piece of legislation in today's environment.  
  2. Smarter Faster Better: The Secrets of Being Productive in Life and Business by Charles Duhigg. This is written by the same guy that wrote the Power of Habit, also a great book. This is sort of a business/self-help book but one of the few with actionable, useful insights to transform busy work into productive work. Probably a bit too long due to all the examples, but this one was worth the time.
  3. Hacking Growth: How Today's Fastest-Growing Companies Drive Breakout Success by Sean Ellis. This should be required reading for those of us focused on growing early-stage companies. Very focused on consumer businesses but the book is filled with really refreshing "out of the box" thinking that is so important in a high growth company.
  4. Dreamland: The True Tale of America's Opiate Epidemic by Sam Quinones. Probably the best-written book on this list, this tells the depressing story of the formation of the opiate epidemic in America. This should be mandatory reading for any politician interesting in fixing this crisis. There is so much context in here that needs to be understood before anyone can think about effective solutions.
  5. Why Buddhism Is True: The Science and Philosophy of Enlightenment by Robert Wright. No, I'm not a Buddhist but I've been fascinated by pieces of it for a few years now and I wanted to dig into it a little deeper. This is also a wonderfully written book that gives a great summary and strong defense of the religion's truths. 
  6. Extreme Ownership: How U.S. Navy SEALs Lead and Win by Jocko Willink and Leif Babin. Written by two former Navy SEALs that saw enormous amounts of brutal conflict in Iraq and Afghanistan, the book takes the lessons of being successful in war to being successful in business. And these two guys are just incredible human beings. They make a strong case for getting up at 4:30am each morning. Yes, "business is war" is definitely an old euphemism but this book is on point. And it is true that much of what we do in business translates to the battlefield. Jocko also has a podcast that continues the story that's worth adding to your list. 
  7. Leonardo da Vinci by Walter Isaacson. da Vinci didn't just paint the two most famous paintings in history he also obsessively studied anatomy, fossils, birds, the heart, flying machines, botany, geology, and weaponry. This is another book that was somewhat too long but understanding more about this man was enormously inspiring.
  8. Grit: The Power of Passion and Perseverance by Angela Duckworth. I had read so much about this book prior to reading this book that I really didn't need to read it. But the concept is great. The strong evidence of the fact that grit is the most important trait for one to have is fascinating and inspiring. A good one for parents.
  9. The Effective Executive by Peter Drucker. I've read this at least three times and it's always worth it. Timeline insights from the management guru.
  10. Thomas Jefferson: The Art of Power by Jon Meachem. I saw Meachem speak earlier in the year and took a look at what he's written. For some reason, I continue to find early American history to be incredibly interesting. This is really a big history book about the formation of the United States. Extremely well written, an in-depth history book. A good one for the beach.

I hope you like some of these recommendations. Happy New Year!

Hire Your Buyer

Today’s enterprise buyer can access a nearly endless supply of information on the products they're considering buying. From review websites to customer testimonials to video demos to the backgrounds of a vendor's leadership team, a buyer can compile a nearly endless amount of information on a product before talking to a salesperson.

This has shifted the seller’s role significantly. The work of an elite seller is now a lot less about becoming an expert on what the product does or how to run a great demo and much more about finding a way to truly empathize and understand the context of the person buying the product. Sellers still need to educate the buyer on their products, but they must do it through the specific lens of the buyer. That’s a seemingly minor but crucial distinction.

The more that the seller can “talk the talk” and truly understand the day-to-day and the specific needs of the buyer the faster deals will move. This isn’t about "credibility" — that can be gained in a variety of ways; it’s about real empathy and the ability to understand and share the feelings of the buyer.

The importance of this point for sales leaders has only increased as software eats the world and we’ve seen the emergence of “tech salespeople” that bounce to different jobs selling tech into a variety of verticals (ad tech, health tech, ed tech, real estate tech, etc.). Salespeople are getting a lot better at selling tech but have lost some of the natural empathy that existed when a salesperson sold different products into the same vertical and the same buyer for several years (decades). Often, today's sales formula is this: beautiful demo + positive ROI calculation = successful sale. Without a great deal of empathy, that formula will almost always miss the mark. 

One way to create instant empathy is to have buyers join the sales team. That is, identify the people that are in a role where they feel the benefit of the product or make the decision to buy the product (ideally both) and get them to join the sales team. It should go without saying that this doesn't mean poaching a prospect's employees; that's a really bad idea. Everyone should be in the loop and it should be above board. If done well,  the prospect will be supportive. Another option is to hire someone that was formally in the role.

Depending on the product, this might sound crazy. And there’s certainly some risk (the buyer must have some basic level of sales ability). But the benefit of having pure empathy living within the team will, at a minimum, force the sales organization to deeply understand the context of the buyer and in some cases level-up the performance of the entire sales organization. The greater risk might be building a sales organization that can run a great demo and talk up a great ROI but lacks the empathy needed to bring new value to today's enormously transparent buying environment.

Personal Exceptionalism

Harry Stebbins had a great interview with venture capitalist Michael Dearing on the 20 Minute VC Podcast a couple weeks ago. Michael talked about a trait that he looks for in founders and startup teams that he refers to as "personal exceptionalism". This is the idea that a person believes that they are special and that their outcomes are going to be "outside the bounds of normal". They’re not arrogant, they just strongly believe that they can produce results far greater than the mean.

This idea really resonated with me; not as an investor but as a person that hires a lot of people and builds teams and is constantly trying to scour through candidates to find the best of the best. The notion of personal exceptionalism really captures what I look for. Rather than try to explain the concept myself I've transcribed Michael's comments on it below. Spot on.

I think my radar for personal exceptionalism has evolved over time but I think the constant is that I’m looking for people who have broken out of the bounds of normal for their peer group. Now that does not [necessarily] mean in business or as technicians or technical talent. It just means that whatever the circumstances were in their lives, that that was not the determining factor. They were able to break out either because they took some crazy personal risk, they took some very sharp left-hand turn, they ended up accomplishing more and seeing more and building a much better experience base because of that risk-taking. So that personal exceptionalism that says that they are special that they are destined for really unique outcomes relative to their peer group. I think that shows up early in somebody’s life and it’s quite independent of pedigree or brand name work experience. In fact, sometimes those things are negatively correlated. But the distinction you make between arrogance and personal exceptionalism is an important one. Personal exceptionalism just means that they see themselves as special and their outcomes are going to be outside of the bounds of normal. I think that they a lot of times are some of the most self-critical people I know and they beat themselves up when they do miss a goal or they fail in a venture they beat themselves up far harder than any third party could so the arrogance piece is easy to suss out. You see it in the form of the people they attract around them and the kinds of networks that they build how much are they are a taker versus a giver in those networks. So I actually have found over the years it’s relatively easy to separate the sheep from the goats.

A Sales-Cycle Acceleration Framework

I’ve written quite a bit about the topic of creating a sense of urgency in a sales process. See here, here and here. This is an enormously important issue for high growth startups as the timing of when sales will close impacts, among other things, investor expectations and perception, salesforce efficiency, financial performance, cash management and when sales commissions are paid. Sales pipeline review meetings often include more discussion about when specific deals will close as opposed to if specific deals will close. 

Before any discussion of creating urgency can happen, two things must occur: 1.) the seller must understand the buyer's priorities and how those priorities line up (or don't line up) with the seller's product and 2.) the seller must have a detailed understanding of the buyer's buying process and all of the stakeholders that need to be involved in getting a deal to closure. Once these things are understood, sellers can begin to think about how to create urgency and shorten the length of a sales cycle.

Good sales organizations will use a variety of tactics to accelerate a sales process; from the use of detailed ROI documents to help the buyer prioritize one project over another to offering discounts in return for a speedier close. There’s really no end to the number of tactics that can be used to create urgency and more predictable sales results. I’ve created the framework below to help sales organizations brainstorm solutions to this problem and come up with new tactics.

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Here's how to think about the framework. On the X-axis are seller focused versus buyer focused urgency tactics. In most cases, a seller wants to align urgency with what’s important to the buyer. That is, the seller wants to help the buyer understand the cost of the problem of not having the seller’s product and quantify the impact of not having that product. Good sellers will frequently remind the buyer of the value being missed by not having the product in place. It’s also ideal for the seller to line up a close date with a particular event that's important to the buyer (e.g. a life insurance seller lining up their close date with the buyer’s benefits open enrollment period). These are generally the most effective ways to drive urgency.

That said, while a seller always wants a buyer to be moving fast because it’s inherently good for the buyer, this doesn’t always have to be the case. The seller and buyer are on an equal playing field. The seller may have reasons why they want to move a deal faster than the buyer. Obviously, in some cases, the buyer may not care about the seller's priorities but I would encourage sellers to be transparent about them anyway. Recently, a salesperson was trying to sell me more software for my sales team and he told me he’d give me a substantial discount if I bought sooner rather than later. I asked him why he would sacrifice a lot of revenue for an earlier close and he was very transparent about the fact that his company's fiscal quarter was coming to a close and they had a revenue number to hit. As the buyer, I genuinely appreciated this transparency and he was able to get his sale. I don't support the use of tricks or dishonesty to get sellers buy quickly, but I absolutely support sellers being extremely transparent about their priorities.

The Y-axis outlines qualitative versus quantitative tactics. 

Quantitative tactics are those tactics that are driven by a financial impact to the seller or the buyer. On the buyer side this is the revenue that will be gained or the costs that will be reduced from buying the product; e.g. every day that goes by that the product isn’t in place the buyer is losing X dollars. On the seller side, this is about the value to the seller that comes if the deal closes sooner rather than later. This can be the ability for the seller to use idle resources, or the importance of hitting a sales target, or simply the fact that revenue today is worth more than revenue tomorrow.

Qualitative tactics, on the other hand, are more art than science. These are things like the quality of the relationship between the buyer and the seller, the emotional components of the product (e.g. the seller will 'look good' to certain stakeholders if they buy) and the fact that a competitor is using the product and the buyer is not. Qualitative urgency is fun to talk about because it’s a place where sellers can get really, really creative.

Two final thoughts:

First, there are dozens of hooks that will drive urgency within this framework. Those listed above aren't appropriate for every organization. And when brainstorming it's important to get multiple stakeholders involved to come up with as many hooks as possible. Many of them may be totally unique to an individual organization.

Finally, I generally believe that sellers want to spend most of their time focused on the top-right quadrant. Ultimately, quantifiable, buyer-focused value is the most scalable and sustainable way for an organization to grow. But it doesn’t work every time on every deal. Selling into large organizations can get incredibly complex. The best sellers combat complexity with creativity. I hope the framework above helps sales organizations do just that.

Sales Commission Principles

Sales commission plans are a crucial part of a company's sales organization. They can be really complicated and difficult to get right. And for earlier stage companies they'll often change quite frequently. Managing this change can be really difficult as a sales leader has to balance several different components and several different stakeholders. Because of that, I think it's important to have a set of principles that guide the formation of your commission plan. I recently put these down on paper and thought I'd share them here. 

  1. Commission plans should value and prioritize impact over individual compensation. While the best reps should be very highly paid, the goal of the plan is to benefit the entire organization as opposed to individual reps.
  2. Potential earnings from commissions should be competitive+ and commission should be a large percentage of overall compensation. The percentage will vary depending on the role in the organization. The closer the individual is to the actual transaction the higher the percent of compensation will come from commission.
  3. Commissions should be paid out to reps quickly to ensure that they can easily connect the value they've added to the business with the financial reward they receive. 
  4. The plan should employ things like clawbacks and true-ups/down to reduce risk to the company when paying commissions ahead of cash collection.
  5. The plan should include consequences for customer churn and incentivize high-quality sales and smooth hand-offs. 
  6. The plan should be fair so that there's an equal playing field across territories and customer segments.
  7. The plan should be iterative and updated regularly to ensure that it remains competitive and consistent with the principles above. 

Using Incentives In Enterprise Sales

The 'daily deal’ boom and bust, if nothing else, taught us that consumers will respond to incentives. Deep, short-term discounts are extremely effective with consumers because the consumer generally has full autonomy and decision making authority to make the purchase.

This is not true in enterprise sales. When a seller offers a large enterprise an incentive if they agree to buy on a certain date, the work has only just begun.

I’ve written in the past that, very often, the most difficult part of an enterprise sale isn’t getting an enterprise to buy, it’s getting the enterprise to buy now, or to buy on the seller’s timeline. 

To help with this, here are four questions a seller can ask themselves to be sure that the incentive they’re offering is going to work:

  1. Does the buyer believe in the incentive? Gimmicks don’t scale. Incentives must be legitimate and make sense. There are all kinds of legitimate reasons why a seller wants a buyer to buy sooner rather than later. The seller should communicate these legitimate hooks to the buyer in a sincere and logical way. If it doesn’t make sense to the buyer then they won’t respect the seller’s timeline. 
  2. Does the buyer care about the incentive? Incentives that sound great to the seller may not always sound great to the buyer. Sellers should take the time to dig in and discover how impactful the incentive is to the buyer. It's helpful to say something like, “if this deal closes by the end of the quarter I can offer you a 20% price reduction. I understand that it may be challenging to move this through your process on such a short timeline, so is this something that’s important enough to you to accelerate this deal?"
  3. Does the buyer understand their own buying process? A buyer’s job most likely is not to buy things. They have their own set of priorities to worry about and they may have no idea what it takes to get a contract signed within their own organization. It’s hard for big companies to buy things. Sellers should be aware of this and push their buyer to be sure they understand their own buying process. A buyer can’t agree to buy on a seller’s timeline if they don’t understand what it takes.
  4. Does the buyer have the capability to drive their own buying process and stick to the seller's timeline? While buying decisions are often made at the top, the actual execution of the ‘buy’ often happens at lower levels. Sellers must make sure that the individual that is agreeing to the incentive has the authority to drive the accelerated timeline.

Of course, sellers should always strive to have their product’s core value proposition line up with their buyer's problems to create inherent urgency. But in many cases an incentive may help. Sellers should answer the questions above before they get comfortable that the incentive they’re offering is going to accelerate the deal.

Bottom-Up Enterprise Software Is Now Mainstream

Back in 2012 I wrote about the 'bottom-up' approach to enterprise software distribution. Bottom-up happens when a product is initially procured by an individual employee or group of employees and then, once a critical mass is reached, a seller upsells the product across the organization with additional features, bulk pricing, etc. This has now become a mainstream approach to enterprise software distribution. I recently attended a Go-to market conference held by a prominent venture capital firm and they advised everyone that the first question an enterprise startup should ask before designing a go-to market strategy is: are you bottom-up or top-down?

With successes like Atlassian and Slack and others the bottom-up model has come a long, long way in recent years. 

However, bottom-up doesn't work for every industry -- at least right now. Take healthcare as an example. To sell a product into a large healthcare organization you must get IT approval, work with compliance, promote workflow changes, train staff, potentially integrate into an EHR, address HIPPA concerns and do lots of other stuff before the first user can log-in. The top-down model can be a requirement.

That said, I believe we’ll start to see this change. The bottom-up model will only become more mainstream and will take market share from vendors that don’t adapt. Traditional enterprise vendors should take note and start to evolve.

Some specific implications:

Software vendors need to prioritize the user of their product over the buyer of their product (they're quickly becoming the same person). Engagement and user satisfaction metrics should be equally important as sales metrics. Employees are increasingly demanding that the software they use at work function at an equivalent level to the apps they use on their phone. And switching from vendor to vendor continues to get easier. If a product isn't adored by its users its ripe for disruption.

This change also means that product must play a much larger role in distribution. The product must be remarkable so people will talk to their colleagues about it and it must be easy to spread the word about and nearly effortless to access. If you look at the fastest growing enterprise startups (see below) the one thing you’ll find is that nearly all of them make it extremely easy for a new user to sign up.

Finally, this trend will bring big changes to sales and marketing teams. Marketing (messaging from one to many) will play a larger role in the selling process as it'll be responsible for acquiring the product's early users. This changes messaging and use of channels in a big way. When any employee within a company is a potential buyer your marketing starts to look a lot more like Apple's than Oracle's. And salespeople will need to increase their selling competence to represent both the user (human factor data insights, workflow changes, usability) as well as the enterprise buyer (product context, integration, ROI).

The line between enterprise software and consumer software is continuing to blur. And while there are industries where top-down will continue to thrive, the processes and systems and beliefs that have enabled this approach are beginning to crumble.

In the end, the real threat that bottom-up startups present to top-down vendors isn't just that they may have a more effective way of getting a product into market, it's that their approach requires them to build something that's very unique in enterprise software: a product that people love.

Buyers Aren't Rational

Perhaps the biggest challenge in enterprise sales is getting a large organization to act and act quickly. Because of size and complexity and bureaucracy it can be very difficult for large organizations to make quick decisions. When an enterprise becomes a certain size it inevitably creates a series of checks and balances to protect its assets and competitive position. This protects shareholders but also makes it difficult to innovate and to make decisions to invest in innovative technologies.

Selling into these organizations requires one to find an external champion that is willing to break through blockers and jump over walls. One of the ways to do this is by helping the buyer see a future positive state. This is what great sellers do. They get a buyer to see a future state that is better than their current state that will require a relatively small investment. If the buyer is rational then they will buy.

Of course it's never that simple.

Over the holidays I had the chance to read Michael Lewis’s new book, The Undoing Project, and it shined some light on some of the many reasons why it's never that simple. The book takes on the issue of “decision theory” and tells the story of two Israeli psychologists and their mission to better understand how the human mind makes decisions. They found that people are absolutely not rational decision makers. I thought I'd capture some of their ideas here.

One of the most interesting ideas discussed in the book is the notion of 'loss aversion'. People will irrationally avoid losing what they have -- even if it could result in a much larger gain. Here's a summary of one their experiments.

When you gave a person a choice between a gift of $500 and a 50-50 shot at winning $1,000, he picked the sure thing. Give that same person a choice between losing $ 500 for sure and a 50-50 risk of losing $1,000, and he took the bet. He became a risk seeker. The odds that people demanded to accept a certain loss over the chance of some greater loss crudely mirrored the odds they demanded to forgo a certain gain for the chance of a greater gain. For example, to get people to prefer a 50-50 chance of $1,000 over some certain gain, you had to lower the certain gain to around $370. To get them to prefer a certain loss to a 50-50 chance of losing $ 1,000, you had to lower the loss to around $370.

People’s desire to avoid loss significantly exceeds their desire to secure gain.

This is the reason insurance companies make money. They take margin from our irrationality. For most people, the happiness involved in receiving a desirable object is smaller than the unhappiness involved in losing the same object.

Not only do people act irrationally (from a probability perspective) to avoid loss, they'll also make decisions based on descriptions of probabilities.

Another useful example from the book is a study done with lung cancer patients:

Lung cancer doctors and patients in the early 1980s faced two unequally unpleasant options: surgery or radiation. Surgery was more likely to extend your life, but, unlike radiation, it came with the small risk of instant death. When you told people that they had a 90 percent chance of surviving surgery, 82 percent of patients opted for surgery. But when you told them that they had a 10 percent chance of dying from the surgery — which was of course just a different way of putting the same odds — only 54 percent chose the surgery.

People facing life and death decisions will not respond to probabilities, they will respond to the way probabilities are described to them.

Lastly, the book notes that most people will respond to probabilities using their own context and view of the world, as opposed to the actual probability. Here's a great example. 

Ask yourself the following question:

An individual has been described by a neighbor as follows: “Steve is very shy and withdrawn, invariably helpful but with little interest in people or in the world of reality. A meek and tidy soul, he has a need for order and structure, and a passion for detail.” Is Steve more likely to be a librarian or a farmer?

The vast majority of people would say that Steve is a librarian despite the fact that there are 20 times more male farmers in the United States than there are male librarians. People ignore probabilities and give more credence to “resemblance” or context or experience. We don't make rational, probabilistic decisions.

The lessons from all of this for enterprise sellers are simple:

Most buyers will prefer to buy something that will help them avoid loss (keep their job) rather than increase gain (get a promotion). Sellers need to find a way to appeal to loss aversion or find a champion that's willing to take a risk.

Buyers are not buying your product, they are buying your description of your product. The way you explain what you do is incredibly important and needs to be constantly tested and iterated.

Finally, buyers may not make rational buying choices based on the probability of success. They’ll rely on “resemblances” and their own context. They’re more likely to buy the thing that 'feels' like it will be successful than the thing that has the highest probability of creating a positive future state.

What Qualifies As A "Good" Meeting In Enterprise Sales

What one salesperson defines as a good initial meeting in enterprise sales can often be quite different from another salesperson's definition. This is natural as different people have different perspectives and definitions of success. I've found it useful to standardize the definition of a high quality meeting to remove some of this ambiguity and get everyone aligned on what success means. Here are four simple checks to determine whether or not you had a high quality initial meeting with a prospect. 

  1. Did you gain a solid understanding of the customer's buying process (who needs to be involved, where budget comes from, timeline for decisions, potential roadblocks, etc.)?
  2. Did the prospect agree to a short, weekly check-in to keep the buying process on track?
  3. Did you identify an executive sponsor and project lead?
  4. Does the prospect understand and feel some level of urgency to get to closure?

Note that of course you can still have a positive interaction and discussion with a potential customer and not do all of these things. Often it's not appropriate to get through all of this in an initial meeting. But from a pipeline velocity perspective, if you haven't accomplished these four things there's definitely some work to get done.  

How To Diagnose Bottlenecks In A Sales Funnel

When sales aren't moving fast enough, the first thing a sales leader should do is look at the sales funnel to identify the bottleneck. Are we not filling the top of the funnel? Are we not converting meetings to proposals? Are we not getting the contract signed quickly enough?

I've written in the past about how to build and analyze a sales funnel

But in some cases the sales funnel might not be granular enough to tell you what's really going on. 

With that in mind, I've come up with a set of questions to ask to help you identify trends and areas where things aren't working. 

Look across the entire pipeline and ask the questions below about each individual deal. if the answer to any question is 'no' put a checkmark next to the question. If the answer is yes leave it blank. If the question isn't relevant because the deal isn't far enough along in the sales process also leave it blank. 

After going through each of these questions for each of your deals you should get a good sense of trends and what's slowing things down and you can now focus on fixing that problem area. Do it again in a month and focus on that newly identified problem area. Repeat.

This is a super simple and quick way to find out what's going on in the funnel. It can be used for an entire team or an individual rep.

  1. Is there adequate top of the funnel activity -- are we working hard?
  2. Are we getting meetings with people we want to meet with?
  3. Do the people we’re talking to have a problem that we’ve diagnosed?
  4. Do the people we're talking to believe that the problem they have is a large and important one?
  5. Do the people we're meeting with have decision making authority?
  6. Is our message (solution) resonating with the people that have the problem?
  7. Is there excitement around moving to a proposal?
  8. Do we have agreement on a proposal?
  9. Are we getting insight into the buying process and the actors that need to be involved in the buying process?
  10. Are we executing the closing process at a rapid pace?
  11. Are we having weekly check-ins with our project sponsor?
  12. Have we identified a contract signer?
  13. Is there urgency around the close date?
  14. Is there anything preventing our signer from signing?