Transactional Differences Between B2B and B2C

Recently I heard a quote from Steve Jobs about B2B businesses.  He pointed out that one of his favorite things about working at Apple was that, in some ways, his job was easy.  All he had to do was create amazing products and eventually consumers would buy them.  This, he noted, isn’t necessarily true in a B2B environment.

It’s an interesting and important insight.  To sell an iPhone, all Apple has to do is build it, put it on its website or in a retail store and an independent actor with full decision making authority will come to the store, give the cashier their credit card and make the purchase.

Imagine the same scenario in a B2B environment.  Apple makes the same great product, but there are a multitude of differences that make the actual sale dramatically more complex.  In a B2B environment before a simple transaction can happen, the following things must happen first.  The buyer needs to:

• Be sure they’re not already buying iPhones (in a big company it’s possible that the buyer doesn’t know)
• Assign a procurement team to survey a variety of teams within the organization on what features are most important to them in a smart phone
• Prioritize those features
• Build a framework for valuing smartphones
• Review that framework with multiple teams
• Research other smartphones to see if there’s a better option
• Potentially request a proposal from those other options
• Determine a budget for smartphones
• Negotiate pricing with the vendor
• Once a decision is made to go with the vendor, they must get buy in from multiple groups and multiple levels (this is where its more about emotion than process, any person at any level could stop the deal based on their own whims)
• Check vendor references
• Write up an agreement with the vendor
• Have legal team review the agreement
• Negotiate legal and business terms with the vendor
• Circulate negotiated agreement among senior managers and executives
• Request sign off from the appropriate executive
• Get sign off from appropriate executive
• Issue purchase order
• Receive and process invoice
• Pay invoice based on negotiated terms

Finally, if Apple is able to get through all of these obstacles, they’ll finally get a check.  These transactional differences illustrate why a super strong sales team can be a true competitive advantage for B2B businesses.

Random Insights

Here are some somewhat random insights that I picked up this week...

There’s no such thing as the “Internet Bubble”.  Yes, the stock market went way up and way down.  But if you look at internet traffic over the last 20 years, you’d have no idea when the bubble occurred.  Internet traffic has increased steadily.

Large companies that are working with small companies prefer that any disputes that arise go to arbitration, as opposed to the courts.  Reason: the general public is far more sympathetic to the underdog than a third party arbitrator.  The arbitrator must go by the book and has a reputation of fairness to build and uphold.  Big companies will push to have arbitration in their agreements with startups.

When betting on a startup, there are 3 things that matter: 1.) people 2.) a huge commitment to be successful from the management team and 3.) a large market opportunity.  If those things are in place, nothing else matters -- the plan, the product, the pitch, the competition, all of that will change pretty quickly anyway.

25% of Groupon’s revenue comes from health care related daily deals.

Mastering the Complex Sale

I just finished Jeff Thull's bestselling book, Mastering the Complex Sale. 

I highly recommend it for individuals focused on complex and exploratory sales.  It gives some excellent perspective.  It points out that there have been three key phases in selling over the years. 

Era 1: Cold Calling, Presenting Your Features (me, me, me), Answering Objections

Era 2: Consultative Selling: Asking questions that lead the prospect down a path into your solution

The third era, and the one that Thull promotes, is around truly understanding a prospect's business and key business process and to diagnose problems and their impact.  Much like a doctor, Thull encourages you to spend time asking questions to determine whether the patient (prospect) has a problem at all and what is its impact.  Only after you and the prospect have a detailed understanding of the problem and the impact can you discuss a solution.  And in many cases, you may find that the prospect doesn’t have a problem or it isn’t a material problem, and you should walk away.  Just like a doctor wouldn’t operate on someone that didn’t need an operation, you shouldn't make a sale if there isn't a problem.  

Here were some of the key insights I took away from the book.  

• Don’t present.  Always have one foot out the door.
• You don’t want a decision on the solution, you want a decision on the problem
• There’s no such thing as a decision maker – there are multiple people involved in decisions.
• People make decisions based on emotion (Boeing is based in Chicago because the CEO wants to live in Chicago)
• There isn’t a decision to buy, there is a decision to change.
• Credibility comes from asking questions about the prospect's environment or situation that they haven’t thought of themselves.
• Most prospects have a positive present state, they don’t feel they need to change.
• Key question: How does the absence of my product manifest itself in my customer?
• Procurement creates a framework for a decision and they always make the right decision within their own framework.
• Most salespeople are selling with 90% of their product’s value behind their back because the problem isn't understood by the prospect.
• Include all costs in your ROI analysis – including the cost of their resources to implement.
• Talk about your top 3 pieces of value, but know all of them.
• When diagnosing, get to the people that are closest to the data.
• Don’t be a person that makes a sale, be a person that transforms your client’s company.
• Take the customer backwards to get them to move faster, focus on the problem.
• Don’t focus on bringing the prospect a positive future – a positive future implies they’re incompetent now.
• Good salespeople mention the side effects or potential negatives of their solutions (like a doctor).
• Don’t get emotionally involved, always be leaving.
• If you can’t quantify the cost of the prospect's problem then there is no problem.
• The decision to change is made during the diagnosis of the problem.
• Don’t talk about your value proposition, talk about value hypothesis (e.g. net profit).
• If you’re feeling pressure during the sales process you’re doing something wrong.
• Go for the no.
• Crisis drives change.
• You cannot sell a group.
• Find out out who owns the business metric that is impacted by your product and work with them to diagnose.
• The hardest part of a psychiatrist’s job is getting the patient to see that they have a problem.  Same thing for salespeople.
• When reaching out to someone cold, be sure that the message you send could not have been sent to anyone else in the world.
• When a prospect goes cold, use the rule of two to give them the opportunity to tell you the truth.  “When I don’t hear back from someone it’s usually for one of  two reasons: 1.) they’re really interested in moving forward but they have some legwork to do internally to get the pieces in place or 2.) they’re really just not interested.  Either one is fine of course.  Which one is the case here?”

A Couple Thoughts On LinkedIn

I’ve been using LinkedIn much more frequently over the last few weeks.  I noticed a couple of interesting things.

1. LinkedIn shows the number of connections you have to your connections, but they cap it at 500.  So if you have 501 connections or 1,500 connections, it will show the same thing -- 500+.  This feature is very consistent with LinkedIn founder Reid Hoffman’s perspective on networking -- I read about this perspective a few weeks ago in his book, The Startup of You.  The last thing Hoffman would want is his users to use their number of connections as a status symbol, leading them to make connections with people they barely know.  Hoffman believes that people should have smaller networks of very strong connections.  Further, much of the value of LinkedIn is the integrity of its connections.  If I see that you know someone I’d like to connect with, it’s important to LinkedIn that you know that person well.  If you don’t, the product becomes far less useful.  Capping connections at 500 was a smart way to preserve product integrity.
2. I’ve Tweeted about this in the past, but one of the most popular features of LinkedIn is the “See Who’s Viewed my Profile” feature.  You can click on it to see who’s looking at your profile.  This feature drives a ton of traffic -- users come back to LinkedIn regularly just to see who’s looking at them.  What’s interesting to me about this feature is that while it  drives a ton of traffic for LinkedIn, it would destroy traffic for Facebook.  If Facebook users knew that other users could see that they were looking at their pictures, users would look at far fewer pictures.  And because most of Facebook’s revenue comes (indirectly) through page views, releasing this feature would be suicide.  It’s an interesting paradox that illustrates a key difference between our personal and professional networks.

Complexity Creates Jobs

Doing a deal with a big company is extremely complex.  That complexity leads to lots of jobs.   There are multiple boxes within the big company that need to be checked to get a deal done.  And each of those boxes has an owner.  There can be hundreds of boxes and dozens of owners. 

Your inclination, of course, is to speed up the deal by simplifying the deal process by minimizing or eliminating the need to check some of these boxes.  While this is the right approach, and it must be done, it’s critical to remember that each of those “box owners” likely believes that their box is extremely important.  And that checking their box is a critical part of the company’s business process.  And they’re also likely to become extremely threatened when their box is minimized or eliminated. 

It’s important to be aware of this reality when attempting to speed up a deal.  Be respectful of every owner in the process, and coginizant of the consequences that come from speeding things up.

The Start-up of You

I read Reid Hoffman's (LinkedIn's co-founder) new book last week, the Startup of You: Adapt to the Future, Invest in Yourself and Transform Your Career.

The thesis of the book is that everyone (from CEOs down to the lowest level employees) should view themselves as entrepreneurs.  It argues that you need to manage your career the same way an entrepreneur would manage a new enterprise.

I agree with this concept completely, and for those that haven't been exposed to this thesis, it's worth the read.  If you're already familiar with this career approach, you won't find much value in the book.  It describes the concept effectively, gives several practical tips and action items to help get you there but largely it comes off as a long advertisement for LinkedIn.

That said, there were a few valuable insights that I took from the book.  Here are two:

The first is about managing your network and asking for help/favors.  When you ask someone for something like advice or an introduction, try hard to give that person something first: a link to an article they might be interested in, an insight you picked up that might help their business, a connection or recommendation that might help them do their job better.  Also, give them some thoughtful and insightful context on what you need.  Once you've done this, then ask for the favor.  Give them a "gift" before you ask them for help.  This is a neat approach to managing your network.

The second is about risk.  The book cites a Neurophysicist that explains that to keep our ancestors alive, Mother Nature evolved a brain that routinely tricked them into making three mistakes: overestimating threats, underestimating opportunities, and underestimating resources (for dealing with threats and fulfilling opportunities).  This caused our ancestors to be very good at avoiding dangerous tribes or animals that could kill them in favor of seeking out opportunities for more food or shelter or resources.  While this was a practical approach at the time (they had to avoid death), this instinct is far less applicable to the world we live in today; a bad investment or a poor career decision isn't going to kill us.  The book encourages the reader to keep this instinct in mind when navigating your career and to try to resist it.  You're likely vastly overestimating the risk and potential pain that could come from most career decisions.

In short, the book is a fairly engaging and quick read and the message is spot on.  If this is new concept for you, I'd definitely recommend picking up a copy.

8 Years of BlackBerry

I've been a loyal BlackBerry user since 2004.  Since then, I've had six of them (see photo below).  I finally made the decision to switch over to the iPhone 4s this month.  The iPhone is a significantly superior product.  The operating system is much slicker and the apps are phenomenal.

Apple's App Store took the PDA marketplace to a place that RIM never imagined it would go.  As evidence of this, the last BlackBerry I bought didn't even come with the BlackBerry app store installed.  You had to go out to the web and do a tedious installation process to start buying apps.

All of that said, I'm one of the few that believes BlackBerry is here to stay (though it may require an acquisition by a larger player).  The new BlackBerrys are superior devices for corporate users and more and employees are requiring a mobile device for work.  And the lack of a keyboard puts the iPhone at a nearly insurmountable disadvantage as an email device (email is the most used app for corporate users).  

I don't think it's implausible that most corporate users will have a work device (BlackBerry) and a personal device (iPhone or Android); just as most corporate users have a work computer (very often a PC) and a personal computer (very often an Apple). 

Regardless, BlackBerry is up for a big fight.  And it'll be an interesting one to watch. 

Stop Stealing Dreams

Seth Godin just released his free ebook titled, Stop Stealing Dreams. It's an excellent book. I highly recommend reading it and passing it onto your friends -- especially those that work in education. It's basically a series of blog posts so it's an easy read. Here are some lines from the book that I liked the most:

Our current system of teaching kids to sit in straight rows and obey instructions isn’t a coincidence—it was an investment in our economic future. The plan: trade short-term child-labor wages for longer-term productivity by giving kids a head start in doing what they’re told.

Large-scale education was not developed to motivate kids or to create scholars. It was invented to churn out adults who worked well within the system. Scale was more important than quality, just as it was for most industrialists.

Every year, we churn out millions of workers who are trained to do 1925-style labor.

Are we going to applaud, push, or even permit our schools (including most of the private ones) to continue the safe but ultimately doomed strategy of churning out predictable, testable, and mediocre factory workers?

There are so many examples in the mainstream news of companies not adapting and failing as a result (Research in Motion and Kodak are a couple of the most recent examples). The markets change, competitors take market share and the companies that don't adapt fail and fail fast.

There's no secret here. In fact, I would bet that most school administrators and politicians could explain exactly why Research in Motion is failing. But our schools -- possibly our most important public institution -- are doing exactly what RIM did, and to some degree are experiencing the same fate.  

Managing Up

I gave a short talk a few weeks ago on some of my thoughts on being effective at managing up.

 Managing up is critical.  Bosses want to be assured that you care, that you're getting results and that you're contributing to moving the business forward.  With that in mind, here are the three tips I gave on managing up:

1.  Have a Point of View.  That is, have an opinion, hopefully a strong one, on how you should grow your business, both for your group and the company as as whole.  You may not get your way, that's life, but you should always have a point of view.  Be interested and passionate and opinionated.  Don't be annoying and try to push all of your ideas through but have an opinion and advocate for it.

2.  Drip Your Insights.  I like to say that "insights are just as important as results".  Obviously results are what everyone wants and they should be the primary tool for measuring success or failure.  But when you get results, you should be able to tell your boss exactly how you did it.  You should have insights that are repeatable and scalable.  Of course, the opposite is also true.  When you're not getting results, you should be able to tell your boss exactly why.  It's ok to not get results in the short term if you're showing that you're making massive gains and getting smarter every day and closer to success.  As you gain these insights, be sure to "drip" them to your team, your clients, your boss.  Send emails, share them in meetings, write them on a whiteboard.  Sharing your development and how you're getting smarter is critical to managing up.  Show that you're obsessing over figuring out how to hit your goals.  And that you're getting smarter everyday -- when you're getting results and when you're not.

3.  Build Trust.  This one is the hardest and I'm reluctant to give too much advice on how to build trust.  People do it in their own way and you should build trust with your boss in a way that works for you.  But one thing that's clear is that you're never going to be the lynchpin in your organization if you aren't trusted.  One way I've built trust in the past is to effectively walk the fine line between being a complainer and being a trusted advisor that speaks up when it's needed.  In short, you have to learn to not sweat the small stuff.  Your boss has a lot to worry about -- likely a lot more than you.  Taking problems on yourself and not complaining upstream makes your boss's life easier.  But, when a problem is important enough, raising it up the ladder is also critical.  When you've proven you can balance what's important and what's not your boss will be inclined to shift the more important projects in your direction.

You're Going to Spend More than $2 Million on Health Care in Your Lifetime

Yesterday when writing about David Goldhill's piece on health care in the Atlantic, I noted that he noted that the average American will spend $1.77 million on health care in their lifetime (this includes their employer's contribution).  This is an astounding number.  I thought I'd do my own math.  And when I did, I actually got a number slightly higher than Goldhill's.

Here's my math.  Assume you start paying the average family health insurance rate of $12,000/year beginning at the age of 26.  You continue paying that rate until your death at, say, 85.  Assume the cost of health care increases at a rate of 3% per year.  Using the future value function in excel, that's a total of $2.02 million in health care payments over the 60 years that you're paying for health care. And keep in mind that this assumes that the rate that health care costs are rising is only 3%.  Given the increasing cost of health care over the last several years this is a very conservative number.  If health care costs continue to increase at their current rates, we could be paying twice that amount.

Some Health Care Insights

David Goldhill had a great and very long piece on health care in the Atlantic a few years back titled, How American Health Care Killed My Father. The premise of the article is that Goldhill's father catches a hospital-borne illness while in the hospital that eventually leads to his death.  Goldhill argues that had America had a consumer-centric health system in place, his father's death may have been avoided. I don't feel like diving in the consumer-centric argument today.  But there were a series of excellent insights that I took from the article that I want to call out.  Regardless of where you land on this issue, it's an excellent read and you should read the whole article when you get a chance. In the meantime, here were some of the most interesting insights for me:

• 100k people die every year from infections acquired while in the hospital
• the U.S. government spends almost 18 percent of our GDP on health care
• we spend 8 times as much on health care as we do education
• health insurance is a unique type of insurance in that it pays for all of our health care expenses, as opposed to just catastrophes
• this is the equivalent of paying for our gas with our auto insurance or our electric bills with our homeowners insurance
• most pregnancies are planned and known about many months in advance, yet they're financed the same way we finance an unexpected catastrophe
• the result of this unique insurance coverage has contributed to high costs; the average consumer could care less about the price of even the simplest procedure
• group health insurance was introduced in 1929
• employer based insurance grew significantly during WWII, when wage freezes prompted employers to expand other benefits as a way of attracting workers
• by 1954 most people still didn't have health insurance but that's when Congress passed a law making employer contributions to employee health plans tax deductible without making the resulting benefits taxable to employees.
• this led employer funded health insurance becoming by far the most affordable option for financing any type of health care
• for every two doctors in the U.S. there is one health insurance employee
• in 2007, the average health care insurance cost 12k per family up 78 percent since 2001
• the average American will pay 1.77 million dollars for health care, assuming growth rate of 3 percent a year, from age 26 to age 85
• hospitals may be shifting costs inappropriately to the ER to show the losses/investment they're making in charity care as most ER services aren't paid for
• when looking for an MRI he learned that prices vary widely between hospitals and that some hospitals wouldn't quote a price until the service was actually ordered
• some hospitals won't quote a price unless the patient is uninsured or is seeking financial assistance
• it's odd that it's been such a struggle to get medical records online, but that the billing for services that are included in that health record is all online and extremely sophisticated
• an individual would typically pay 2.5 times what an insurer would pay for the same treatment
• the price of LASIK treatment, an uninsured procedure, has nosedived over the last several years because it is subject to the forces of competition.
• conversely the price of an MRI hasn't changed, it's paid for by insurers and Medicare and thus not subject to traditional market forces that would make them less expensive
• the government has proposed investments in electronic health records of $50 million, only 2% of the health care industry's revenues
• but who's to say that doctors will adopt them, most of the benefit of this would go to patients, not providers, and patients aren't the real customers, insurers and the government are
• the bill for his father's five week stay was $636k -- $5k per night for the room, $145k for drugs, $41k for respiratory services,
• his family's share of the bill was only $992, the rest was paid for by Medicare at some huge discount

Sleep

Bill Maher made a great point the other night on his show.  He pointed out that that it seems that when relatively young celebrity deaths are drug related, it's most often partially caused by some kind of "downer", i.e. sleeping pills.  Whitney Houston, Michael Jackson, Anna Nicole Smith, Heath Ledger; all of them died from complications related to sleeping pills.  I looked back a few years.  Elvis Presley, Marilyn Monroe, Jimi Hendrix -- same thing.  The list goes on and on.

Celebrities with lots of fame and fortune are able to control nearly everything in their lives; what they eat, where they live, when they work, who they spend time with.  They control everything.  Except one thing: sleep.  

So it's not hard to understand why celebrities turn to pharmaceuticals to put themselves in control of the one thing in their lives that can't be controlled.

This is a scary reality, particularly as sleep aids such as Ambien and Lunesta are becoming more and more popular and readily available.  And it's not just celebrities that are trying to control their sleep.  These drugs are becoming a normal part of lots of people's lives.  The Today Show recently reported that 30% of women use some kind of artificial sleep aid.

One major danger associated with these "downers" is that users build up a tolerance and quickly need more and more of the drug to experience the same effect.  So even if the drug isn't technically addictive, the users become addicted anyway and have to ingest more and more to get to sleep.  So the use of these drugs can turn a minor sleep problem into a serious sleep problem.  Combine the use of these drugs with more common sleep aids -- alcohol or over the counter products -- and they can cause serious health problems.  They can quickly depress brain function and the central nervous system leading to unconsciousness, respiratory failure and death.  

I'm obviously not a physician.  And I recognize that when used properly sleep aids can impact people very positively, and they're probably very appropriate for patients with more serious sleep issues.  But sleeplessness is not caused by a lack of Ambien or any other drug.  It's caused by other factors.  Treating those factors, rather than covering them up with pharmaceuticals seems like the best bet to me. 

The best advice I've ever been given to cure sleeplessness is to simply stop trying to sleep.  Get up, read a book, write something, clean your kitchen.  Distract yourself from the thought of sleep and your body will most often get you back to bed when it's ready.  In the short term, this approach may lead to some sleepless nights and yes you'll have to give up some control.  But it's far safer than the artificial approach that seems to be taking so many celebrities before their time.