The VentureFizz Podcast
I did a podcast with Keith Cline from VentureFizz a few weeks ago. We talked about my career, how I think about growing startups and lots of other stuff. You can listen to it on iTunes here or on Soundcloud below.
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:
- He fully understood the motivations of the buyer and could tap into those things to keep the deal moving.
- 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.
- 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.
- He could uncover trends around problems and solutions inside the prospect's organization that he could leverage across other deals.
- 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.
- What are your priorities this quarter/year and do you think this product fits in?
- How would you explain to someone in your company how this product is going to help you reach your objectives?
- What are the other projects on your plate and how would you prioritize this one?
- When we launch this product will you personally be measured on its success? By who? How will it be measured?
- How do you typically buy products like this?
- Who is involved in the buying decision?
- Is there anyone that needs to sign off on this (IT, compliance, etc.)?
- Is there anyone that you think might object to buying this product?
- Have you come across any roadblocks in buying these kinds of products in the past?
- How did you get past those roadblocks?
- What committees need to see this product before you buy?
- When do those committees meet?
- Could we find some time to present this in the next committee meeting?
- What will each of the people in the committee care most about with regard to this product?
- Who will use the product?
- How will they use the product?
- Where would the budget come from?
- Is there enough left in that budget to pay for something like this?
- What is the process to get the budget approved?
- What does it take to schedule implementation resources on your side?
- What specific measures will your company consider when looking at the success of the product after it's been launched?
- Who will sign the contract?
- Does the contract signer need any approvals before signing?
- Can I be introduced to the contract signer’s assistant to make sure nothing gets missed?
- 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.
Some Thoughts On Apple And Personal Health Records
There was a lot of buzz going around this past week around Apple’s announcement that they're adding a personal health record to the iPhone.
Of course, this has been tried before; Google, Microsoft, and many, many others have tried and failed. This time Apple has a better shot in that they 1.) have a device in people's hand and 2.) they've partnered with several large hospitals & health systems and electronic health record (EHR) vendors to pull data down to the device.
Bijan Salehizadeh asked the right question on Twitter: did past efforts at consumer-driven personal health records not work because of poor user experience or did they not work because people just don’t care enough about their health records?
I’m in the camp of people not caring enough. Put aside the importance of what Apple is trying to accomplish and the incredible impact it could have if it were successful and get back to the basics of consumer behavior and what makes an iPhone app work.
In order for someone to choose to spend time on an app (when there are millions of them in the app store) the user needs to get something in return. And they need to get that return quickly. When I search for a restaurant on Foursquare I get a return (recommendations). When I use OpenTable I get a return (a dinner reservation). When I use WhatsApp I get a return (a conversation with a friend). When I use Spotify I get a return (music).
But what does the consumer get when they upload a bunch of health data into the Apple health record? Nothing. At least not immediately. At least not until they’re sick. Which they hope they never are. There's no clear return. This is the challenge with patient-driven health records.
This is part of the brilliance of Zocdoc (disclaimer: I worked there for almost 4 years). They are able to compile important health information from the consumer. Lots and lots of it. Every single day. They’re able to do it because the user gets something in return immediately for engaging and sharing their health information (a doctor’s appointment).
In my view, the companies that have failed on personal health records have failed because they didn't fully appreciate the way consumers engage with their own healthcare and they ignored the core tenets of consumer behavior. People are busy and have been trained to ignore everything unless it makes them feel good or gives them some near instant utility. Unless Apple's personal health record app can find a way to deliver utility back to the user (quickly) I fear that it may share the same fate as those that have tried and failed.
Time
I recently reread Peter Drucker’s The Effective Executive. The entire book is gold and much of it is centered around the way we manage time. This is how he describes time:
"The supply of time is totally inelastic. No matter how high the demand, the supply will not go up. There is no price for it and no marginal utility curve for it. Moreover, time is totally perishable and cannot be stored. Yesterday’s time is gone forever and will never come back. Time is, therefore, always in exceedingly short supply. Time is totally irreplaceable. Within limits we can substitute one resource for another, copper for aluminum, for instance. We can substitute capital for human labor. We can use more knowledge or more brawn. But there is no substitute for time. Everything requires time. It is the one truly universal condition. All work takes place in time and uses up time. Yet most people take for granted this unique, irreplaceable, and necessary resource. Nothing else, perhaps, distinguishes effective executives as much as their tender loving care of time."
Time is a pretty unique thing. I’ve recently started the habit of evaluating how I spend my time by looking back on my calendar every couple of months. When you’re going from meeting to meeting to meeting all day it’s really easy to think you’re spending your time wisely. I’ve found that I’m often not. And doing a frequent look back helps me change that.
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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.”
Startups & Commitments
Marc Andreessen and Clayton Christensen had a great talk the other day on the a16z podcast. It's definitely worth listening to the entire thing but Marc made one particularly interesting point that I wanted to capture.
He noted that the longer a company operates the more commitments it inevitably makes to its various stakeholders (customers, vendors, employees, partners). As these commitments pile up it becomes more difficult for the company to adapt to changing market conditions (to stay ahead of disruptors, respond to changing customer tastes, pursue new product opportunities, etc.). At the extreme, the company becomes virtually paralyzed and unable to innovate.
This is a much more accurate explanation of why it's difficult for big companies to innovate than the old notion that these companies get successful and turn incompetent or arrogant. To the contrary, they're actually quite competent and humble -- they're simply trying to honor the commitments they've made to various stakeholders over the years. On the surface this is a good thing. But when you look more closely you see that companies will eventually become nothing but a product of their past commitments made at a different time by different people with a different context. Stagnation is inevitable.
This point really resonated with me. Whenever I speak to a job candidate that's working with a company that's struggling they almost always explain the company's problem as some version of the 'commitment problem'. There's a great lesson in here for startups. When a startup finds itself making painful decisions only to honor past commitments, it's worth pausing and ensuring that those commitments are consistent with what's needed in the moment and what's best for the company in the long-term. Unraveling commitments that were made in the early days can be extremely challenging, especially for startups that rely on their early customers to fuel growth. But at scale too many commitments will lead to a stale product for everyone that's made by a company that may not be around for too long.
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.
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.
- 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.
- 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.
- 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.
- The plan should employ things like clawbacks and true-ups/down to reduce risk to the company when paying commissions ahead of cash collection.
- The plan should include consequences for customer churn and incentivize high-quality sales and smooth hand-offs.
- The plan should be fair so that there's an equal playing field across territories and customer segments.
- 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:
- 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.
- 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?"
- 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.
- 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.