Tuesday, March 28, 2006

Selling enterprise Software

Selling software to large corporations is vastly different than selling to individuals. Selling to companies is always a complex sale - involving several rounds of negotiations with senior executives: CTO, CFO, COO, CIO & CEO. While selling to these high ranking executives, the technical merits of the proposed solution will not be the matter of concern. Most often, technical merits of the solution will not even be discussed in these meetings. Instead all the talk will revolve around relationships and financial value of the solution.

In my earlier blog titled "Sales - Its all about money" - I said that customer will buy only if your offering increases his ROI. I will expand on this and explain value based selling in this article.

Value based selling

Value based selling can be defined as selling a product based on the value it generates to the customer. In consumer world, the best example of value based selling is Investments - Mutual funds or CDs or bonds. People will buy these investments based on the perceived value of the investments. Selling enterprise software is in many ways similar to selling investments to retail investor. The salesman has to convince the customer that there is a value in his product.
The term ‘Value’ is confusing for many. Often the perceived value of a product is the center point of the negotiations. The term ‘value’ often refers to either Return On Investments (ROI) or Total Cost of Ownership (TCO).

Lets take a look at couple of examples to understand ROI based selling and TCO based selling.

TCO based selling

Buying an enterprise software is a major investment. The company will invest in a new software only if it increases the profits. For example, consider a major bank which is considering to buy a transaction management middleware software. To sell, the vendor now has to prove that his solution has the lowest TCO.

Lets take a look at the major factors which the salesman must consider in order to make a sale:
  1. Annual Maintenance cost of the Current software used by the bank.
  2. Number of transactions handled by the current software
  3. Purchase price of the new software
  4. Purchase price of new hardware to run the new software
  5. Annual maintenance cost of the new software
  6. Number of transactions handled by the new software

Note: Maintenance cost includes Power, Internet & other costs incurred in running the software.

Say that the current software at the bank is running on a mainframe, has an annual maintenance cost of $1 million, and can handle five million transactions per year. This translates to $0.2 per transaction.

While the new software will cost $8 Million, and also needs a UNIX server which costs $500,000, has an annual maintenance cost of $120,000 an can handle fifty million transactions per year. Assuming that the expected life span of the new system is 10 years, the software and hardware costs are amortized over five hundred million transactions. Thus the cost to the bank is $0.0109 per transaction. This is almost 18 times lower than the cost of the current system.
Now selling this solution to the bank is a lot more easier - as the new software saves money and reduces the TCO to the bank.

Enterprise ROI Selling

ROI based selling is slightly more complex than TCO based selling. Here the seller has to prove that his solution produces a measurable return on investment. To understand this, lets consider the above example of transaction management middleware software.

The bank now has to invest $8.5 million. This investment will save $0.189 per transaction. So if the bank were to fully utilize the software, this will result in a saving of $9.46 million per year - or an ROI of 111% per year.

Note that the savings to the bank is dependent on the number of transactions it hopes to process with the new software. The new software has the max. capacity of 50 million transactions, but the bank may not plan to use the software to its max. capacity. In such cases, the salesman must now find out how many transactions does the bank intend to process with the new system and calculate the ROI for that many transactions.

50M transactions - 111% ROI
40M transactions - 89% ROI
30M transactions - 67% ROI
20M transactions - 44% ROI

To effectively sell enterprise software, one must use either TO based selling or ROI based selling. In addition to these two methods, there also exists another method of financial analysis called as NPV analysis. NPV analysis is often used to compare the financial benefits between various options available - for example comparing between various vendors. I will write more about NPV analysis in future.

Market insights

In a recent survey by CIO Insight and Computerworld, 80% of buyers rated financial justification as important for IT purchase approvals. However, more than 65% of buyers revealed that they do not have the knowledge or tools needed to perform ROI calculations. But ROI is required for purchase approvals. Therefore the burden to compute the ROI calculations falls on the vendors.

In a recent study by Ernst & Young, which states that more than 81% of buyers expect IT vendors to quantify the value proposition of proposed solutions, and 61% of buyers rate a vendor's ability to quantify its value proposition as important in the vendor selection process.
All these points to the fact that the vendor(salesman) must perform financial analysis - either ROI or TCO analysis to sell the enterprise software.

Closing Thoughts

The new value based selling methods represent a real and permanent shift in the way enterprise software solutions are bought and sold. In this new era of corporate accountability, buyers will remain in control of purchasing decisions. Companies are becoming more decentralized in their decision making, and more stakeholders are involved in every purchasing decision.

Quantifying value is vital to helping prospects rationalize their decisions to other stakeholders. It also helps them competitively analyze and align each purchase decision with all other opportunities, and prove value delivery on an ongoing basis.

Effective salesmen will have several types of tools to help meet the new value based selling requirements. These include:

1. Web-based ROI/TCO calculators, which are primarily used for basic analysis, education and lead generation

2. Spreadsheet-based selling tools, typically developed by an in-house, financially savvy marketer, or by a consultant.

3. More advanced software that encapsulates spreadsheet models into a better presentation and report-building package.

More savvy vendors are even drawing up contracts in which they will be paid only if the new software saves money to the customer. At Accenture, Triology, IBM & other firms have established value based selling as a standard practice. This in future will become an industry standard procedure.

Tuesday, March 21, 2006

Books I recommend

I have been writing this blog for nine months now. Most of the writings have their roots in some books. So I compiled a list of books that I would recommend.

  1. Marketing Management By Philip Kotler
    This is a classic textbook on marketing. I read this book for my MBA, I still read this book on regular basis. Every time I read this book, I get new ideas on how marketing has to be done.

  2. Marketing Services by Parusaraman & Leonard L. Berry
    Services have become critically important to all firms. Even when selling products, there are added services that has to be provided with the product. Marketing services poses its own challenges and requires new theories and processes. "Marketing Services" is a guide book for all marketers.

  3. Consumer Behavior by Hawkins, Best, & Coney
    Marketing strategy works best when consumer behavior is taken into consideration. This book gives an insight into psychological and social behavior of consumers and its managerial implications. Customer behavior towards buying technology has to be incorporated into marketing strategy. This book ties marketing strategy to consumer behavior.

  4. Mind & Heart of a Negotiator By Leigh Thompson
    Sales process in a B2B market is mainly that of negotiation. This book explains the theory and process of negotiations. I would recommend this book as a ‘Must Read’ for all sales & marketing professionals. Professionals can learn how to negotiate better - and create more business opportunities.

  5. Crossing the Chasm By Geoffery A. Moore
    This path breaking book has been on the best sellers list for more than 5 years. I love this book and is a must read for all marketing professionals who work in a technology startup. The book explains various marketing functions & its implications. I’d also recommend the sequel to this book titled "Crossing the Chasm:Marketing and Selling Technology Products to Mainstream Customers" by the same author.

  6. Competing for the future By CK Prahalad & Gary Hamel
    A break through book on business strategy. Dr. C.K.Prahalad and Dr. Gary Hamel have written on how companies must transform themselves to compete effectively in future. This book is a must read of marketing professionals at established firms who are facing competition for startups. If ‘Crossing the Chasm’ is all about maketing for startups, ‘Competing for the Future’ is THE book for established leaders.

  7. How to influence people & win friends by Dale Carnigie
    An evergreen classic. A self-help, personality development book and also a salesman’s bible.

  8. Kotler on Marketing: How to create, win & dominate markets. By Philip Kotler
    This is the latest book by the Marketing Guru - Dr. Philip Kotler. This book revisits marketing concepts which are very relevant for today’s high tech firms.

  9. Market Research: A Guide to Planning, Methodology and Evaluation By Paul Haque
    A concise book on market reserch. Market research is essential for marketing anything. This book explains it all. For those who want to know more about the theory of market research I’d recommend this book "Marketing Research: Methodological Foundations" by Gilbert A. Churchill & Dawn Iacobucci. This book is a classic textbook on marketing research.

  10. Strategic Management by Gegory Dess, Lumpkin & Taylor.
    This book is written by my professor at University of Texas. A must read for all corporate executives. Marketing is largely driven by business strategy - so one must know all about strategic management to succeed in marketing.

  11. Art of War by Sun Tzu
    An ancient Chinese text on strategies to be used in War and adminstration. This book is very much relevant today in the era of "marketing is war". I read this book regularly atleast once in 6 months. Another book of this class is "Chanakya Arthasharta" . A 2000+ year old book on political science and adminstration. English translation of this book is titled "The Arthashastra".This classic book is all about adminstration and political science. Running a huge business is part politics and part management. So this book is a must read for all senoir managers & executives.

  12. How Winner’s Sell: 21 Proven Strategies to Outsell Your Competition and Win the Big Sale By Dave Stein. This book is all about sales. Dave Stein talks in great length on preperation and execution of sales. This book is more like a manual for all salesmen.

Monday, March 20, 2006

My article is published in EDN

Last year I wrote a white paper on Economics of Structured ASICs and Standard Cell ASICs. That paper has been published in EDN, which is a premier trade magazine. One can also read this article on-line at:


For me personally this has been a great success - as it is my first article to be published in a world renowned magazine.

Hope you enjoy it.

Thursday, March 16, 2006

Sales - Know thy customer

"The secret of success is to know something nobody else knows" - Aristotle Onassis

In my previous blog titled "Sales - Knowledge is strength" , I had written about why it is important to know about financial information of the prospective customer. In addition to financial information, a salesman need to know several other pieces of information about the prospect. In this article, I will write about the other types of information a salesman needs to know in order to close a deal.

In my current firm, information about the customer is collected in an organized way - called as Target Account Selling Form or TAS form in short. The exact details contained in the TAS form is confidential - so I won’t write it here. Instead I will tell you the kind of information that can be collected as Business Intelligence - and is vital in closing a deal.

Financial Information

Financial information about the prospect is the single most important information one needs to know. When selling a complex service or a product, you cannot win unless you can relate your product or service to the ROI or ROA or other specific, measurable financial terms of your prospect. You have to connect your product/service to the bottom line or top line or ROI or ROA or any other measurable financial results of your prospect.

General Information

Other than the financial information, there is a whole lot of general information that a salesman needs to know. This information falls into three broad categories:

  1. Information about the prospect’s Industry
  2. Information about the prospect’s company
  3. Information about the decision maker(s) at the prospect company

Gathering this general information is time consuming and difficult. In most well managed firms, this information gathering activity is done by marketing department - under business intelligence function. Few firms have well defined offices of business intelligence.

Initially getting information about a prospect will be tough & daunting, but with practice a salesman will learn. Also many a good salesmen will build a network with other salesmen in other companies - and then use this network to gather information.

Knowing more about a prospect will help the salesman to better scrutinize the prospect, and give him/her the confidence to talk and hold the conversation with the customer.

(For those who are new to sales or marketing try collecting the general information of your own company. Collect the industry details, company details - growth, market share, profit margins, EPS, etc.. Also collect the names of all executives & if possible their interests and hobbies. Doing this exercise will help you understand the importance of information gathering)

Industry Information

Every successful salesman will be able to talk about great length on the industry he/she is selling into. For example, a EAI tool vendor salesman will be able to talk about IT consulting industry. TI salesman selling DSP chips will be able to talk about cell phone industry, etc..

Industry information consists of several segments:

  • History of the industry
  • Trends in the Industry - Market size, technology, etc.
  • Current market leaders & challengers in that industry
  • What made the leaders successful in that industry
  • Who are the key persons who made an impact in that industry

This information can be gathered over time by reading trade magazines, analysts reports, research reports from Gartners, Dun & Bradstreet etc.. Most salesmen will subscribe to one or more trade magazines and know all about the latest happenings in that industry.

For example, a successful salesman selling IT services to Telecom industry should know about the latest technology trends such as VoIP over WiMax, Fiber to Home, IP television etc.. He/She should also know the history of telephone, life & achievements of Alexander Graham Bell, latest product lines from Lucent, Nortel, Alcatel, Cisco etc..

I agree that collecting & knowing all this information about one industry is tough - but the efforts are worth it. Having in-depth information about your prospect’s industry is an essential step in convincing your prospect of your personal credibility.

Company Information

Knowing all about your prospect - in B2B markets, the company details is vital in the sales process. Apart from the financial information about your prospect organization, a salesman should know:

  • History of the company - Who, when, how, why the company was started. Names of the founders, past CEOs and other key contributors to the company.

  • Company’s products or service. Know as much as possible about your prospect’s product or service - market segment and price positioning. This will help you to position your sales pitch to be inline with their product lines.

  • Current market position of the prospect. Know the prospect’s market share, its main competitors, also know the past trend of the prospect company’s market share. Know the current stock price, EPS etc. also the trend of these parameters ( EPS, Stock price, P/E). Effective salesmen will know their prospect’s current market position, and also know what was their position few years ago.

  • Alliances/Joint Ventures in which your prospect is involved in.Knowing who are the partners of your prospective customer will help in closing the sale. For example knowing that your prospect has a joint venture with your competitor - will help you decide on your sales pitch (or abandon efforts to sell to that prospect)

  • What is the USP of your prospect? Is it quality, price, reliability etc.. Knowing how your customer wins in the market will help position your sales pitch.

  • Who are the competitors for your prospect? How does the competition to your prospect win? What type of competitive pressures does your prospect face - Price, quality, service levels etc..

  • Key investors in that company. Names of the members of their board of directors - is it all insiders or share holders or independent directors.

  • Names, designation, background and tenure of all the senior executives. If the senior executives have joined the firm from other firm, know their previous firm and designation. It is also important to know the turnover rate of senior executives. In B2B environment, knowing senior executives personally - their hobbies, interests, background etc.., is vital to close the deal.

  • Know the organization chart of your prospect. How does the organizational chart look like? Knowing the organizational trends can help you anticipate changes and enable you to talk to the right persons.

  • Mission statement of your prospect. Knowing the mission statement will help you to position your product/service in the same terms as their mission statement. For example if the mission statement of your customer firm involves quality - then you can pitch in the high quality of your product or service.

  • What are the social causes your prospect supports? Are they involved in community activities?

  • How often does your prospective customer gets involved in legal lawsuits? How often does prospect sue its suppliers/vendors or competitors. If your prospective customer has a known propensity to sue its suppliers/vendors or competitors, then as a salesperson, you need to be very careful in reading all contract documents and build in the potential cost of a legal entanglement into your price quote.

  • Organizational Culture at your customer firm. Knowing how the people behave - will help you in your sales pitch. Few firms practice a AM to FPM work timings. In such cases you can avoid setting up late evening meetings.

  • What is the nature of the relationship between your prospect and their vendors? Is cooperative, supportive and helpful or is it confrontative, hard bargaining type? This information will help the salesmen to better prepare for negotiations.

  • Learn how the prospect measure themselves. Know how success is measured and rewarded at your prospect: Revenue, profits, market share, profit growth etc.. Know their targets for this quarter, for the year and long term goals.

A lot of the company information is available through their SEC 10K, 10Q, 8K reports (or similar reports for non-US companies) These reports are available only on public companies. For information regarding private companies - one needs to refer to paid database services such as www.hoovers.com or www.lexus-nexus.com or www.gartner.com.

Information can also be collected by talking to suppliers & customers of your prospect. Talking to a noncompetitive supplier will help you get an idea of their buying decision process.

Knowing all this information will enable a salesperson to talk to the customer in their financial terms - which makes it easier for the salesperson to communicate - and it impresses the decision maker. If I am the buyer, I will be happy to hear what the salesperson has to say about my company and in the terms which will help me achieve my goals.

Information about key decision makers

At the end - the buying decision will be made by a few decision makers. In most B2B deals, there will be a committee which makes the final decision. In most cases there will be couple of decision makers who yield a wide influence on the buying process. Knowing their names, designation, role, work history, hobbies, interests, even their spouses & kids names - will be useful. Knowing a person and bonding with that person creates an image that can be used by salesperson to close the deal.

I recall a story when a sales manager was able to close a multi-million dollar deal with a major network equipment supplier. Both the sales manager and the buyer had graduated from the same university, liked to listen music of "Grateful Dead". The sales manager and the purchase manager created a bond. This is also called as "Halo Effect" - and has been studied very intensively by physiologists. It has been noted that people like to bond with other people who are very similar to themselves. This human nature can be used in sales - by developing the same set of interests as that of the buyer. This is also called as "relationship selling". I will write more about it in future.

Closing Thoughts

Sales is a complex process. Knowing about the customer, knowing what the customer cares for, knowing how customer takes decisions, sharing values & interests with the customer is all vital to close a deal. Every successful salesman will be able to talk to customer in terms customer cares the most. Successful salesman will always have the interests of the customer in his/her mind.

Wednesday, March 08, 2006

Women's day: A brief history and Implication to firms

International Women’s Day first emerged from the activities of labor movements at the turn of the twentieth century in North America and across Europe. Women in Europe and America began to demand better working conditions. This was the first step in the social movement that led to several changes in labor policies.

A brief history of women's day

1909: The first National Woman's Day was observed in the United States on 28 February. The Socialist Party of America designated this day in honor of the 1908 garment workers’ strike in New York, where women protested against working conditions.

1910: The Socialist International, meeting in Copenhagen, established a Women's Day, international in character, to honor the movement for women's rights and to build support for achieving universal suffrage for women. The proposal was greeted with unanimous approval by the conference of over 100 women from 17 countries, which included the first three women elected to the Finnish Parliament. No fixed date was selected for the observance.

1911: As a result of the Copenhagen initiative, International Women's Day was marked for the first time (19 March) in Austria, Denmark, Germany and Switzerland, where more than one million women and men attended rallies. In addition to the right to vote and to hold public office, they demanded women’s rights to work, to vocational training and to an end to discrimination on the job.

1913-1914: International Women's Day also became a mechanism for protesting World War I. As part of the peace movement, Russian women observed their first International Women’s Day on the last Sunday in February. Elsewhere in Europe, on or around 8 March of the following year, women held rallies either to protest the war or to express solidarity with other activists.

1917: Against the backdrop of the war, women in Russia again chose to protest and strike for ‘Bread and Peace’ on the last Sunday in February (which fell on 8 March on the Gregorian calendar). Four days later, the Czar abdicated and the provisional Government granted women the right to vote.

In 1975, during International Women's Year, the United Nations began celebrating International Women’s Day on 8 March. Two years later, in December 1977, the General Assembly adopted a resolution proclaiming a United Nations Day for Women's Rights and International Peace to be observed on any day of the year by Member States, in accordance with their historical and national traditions. In adopting its resolution, the General Assembly recognized the role of women in peace efforts and development and urged an end to discrimination and an increase of support for women’s full and equal participation.

* Source: United Nations

Women in Business

Today women have equal rights. Several women have become CEOs, VPs etc - that would not
have been possible without a sustained effort to bring gender equality in all forms of life - including business. Co-incidently today, my company promoted Chitra Hariharan (a rare women engineer in semiconductor industry, who is well known for her leadership skills) to the role of Sr. Director Engineering

Women rights & needs have been incorporated into HR policies of most companies. Few companies such as HP, Accenture, Container Store etc, have implemented path breaking labor policies to help women employees. HP was the first company to have a day care to help mothers. Accenture in India is organizing a company wide event to help women network with other women & discuss issues facing women at work - this is hallmark of a progressive organization which is willing to learn the current issues with employees and seek to solve it.

Closing thoughts

In a knowledge economy trained & Skilled employees are highly valued. Organizations cannot afford to discriminate against women employees. Progressive organizations take path breaking HR policies which will make their company a great place to work for women. The onus on creating innovative HR policies lies squarely on senior management - but implementing these policies must be shared by all employees.

Tuesday, March 07, 2006

PCMM & Creating a learning culture

In my previous posting on PCMM and Organization Capability, I had written about the value PCMM brings to the organization. However, implementing PCMM in an organization is a tough challenge - mainly because it involves changing the culture of the organization: from being what ever it is now - to becoming a learning organization.

As described in my previous post, in a service industry, the organization’s competitiveness is largely dependent on employee skills - i.e., when employee skills are aligned with customer needs. Today we see that the market requirements (customer requirements) are rapidly changing. Globalization, technology revolution etc., is driving this change. So in order to be competitive, firms must continually train their employees in new skills as needed.

Companies can conduct training programs - but the effectiveness of the training depends on the employees willingness to learn. Or in other words organization must build a learning culture. (By culture, I mean organizational culture)

Creating an environment for employees who want to learn will be beneficial to both business and employees. The learning environment will enable employees to be creative and innovative, dare to experiment, try new things, innovate new methods, processes, and new solutions for the problems.

To develop a learning culture, employees have to have the opportunity to put their learning into practice. This will encourage them to look at the way they work, to improve their performance and to further learn to benefit in their workplace.

I have listed ten ways to develop a learning culture in the organization. They are as follows:
  1. Top management’s commitment:
    A learning culture can be developed in an organization only when the top management is committed and deeply involved. The learning culture has to be top down. Learning should be imbibed in the work culture and the people must live and breathe learning culture.

  2. Aligning learning culture to business needs:
    The training professionals should change their modus operandi of developmental activities. The developmental programs have to be aimed at learning. Management must make the employees feel that learning is aligned to business strategies. HR professionals should regularly talk with the line managers or section heads about the issues and problems they are facing and enable the employees to find solutions through the learning process.

  3. Setting clear objectives:
    There should be a clear and firm idea of the goals and objectives to be achieved. The strategic nature of the job must be reflected through plans. Best plans are developed not in isolation but through joint involvement of colleagues, clients and other stakeholders in business. The business objectives are set after a thorough inquiry with clients, senior managers, HR team, and the target employees on how they want to develop their learning culture and best strategies to be adopted.

  4. Personalizing learning:
    It must be understood that learning is work and work is learning. The learning content must be appropriate and timely for every employee. The learning content and pedagogue must be customized to each employee. The learning needs can be identified through performance appraisals. Employees should be made to analyze their learning needs vis-à-vis their performance to achieve the organizational objectives. Employees can be encouraged to work in teams, share information, learning and knowledge through team learning process. The peer group networks must be encouraged so that employees learn from others in teams.

  5. Create the right environment for learning:
    A learning organization without active learners is like a college without students. In order to build a learning culture we must cultivate active learners by creating a learner centric environment. Employees must be provided with necessary tools and the relevant content to become self-learners. Refining our approach to learning must continually develop learning culture. It is possible to refine learning approach after getting feedback from employees. The refined learning approach can be implemented by piloting learning zones. After assessing the success of the pilot zones the learning approach can be implemented in the organization.

  6. Developing contract for learning:
    In developing a learning culture employees are expected to play a role in their career development. The ownership and accountability for learning should be on the employees. The contract of employment shall be clear about what the company is prepared to offer and what the company expects from the employee towards continuous learning. But the learning contracts may not be appropriate in all situations. The main objective of a learning contract is to create a clear learning strategy and communicating the same to employees. The learning contract through communicating the clear-cut strategy to employees must get their tacit commitment for the learning process to achieve the goals of the organization.

  7. Removing barriers in learning:
    The main aspect in self-learning is that the learners may not tolerate any obstacle. The obstacles if any should be removed and the work life must become hassle free for learners. The learning courses must be intuitive to use and must be available in one place and easily accessible. As the learning is important, cost must not be a hurdle in implementing a learning culture.

  8. Building learning culture:
    One may come across many barriers particularly the reluctance of employees to change their behavior. This barrier can be removed by developing a cadre of coaches and mentors to help employee development. Coaches are to be rewarded for their services. The coaches and mentors love to perform the tasks because the rewards are personalized. In building learning culture in an organization the work culture must have democratic principles. The coaches are to be assessed about their attitudes. The organization culture shall not be of command and control. The learning culture cannot be built in such an atmosphere. Organizations to become learning organizations shall have to invest time and provide resources for learning.

  9. Encourage experimental mindset: Employees must be encouraged to experiment with new ideas and to take calculated risks. Organizations should encourage employees to take advantage of changes taking place in business. In fact they must be able to foresee changes and be prepared to ace changes. Employees must be encouraged to try new things at their workplace and within the context of the organization. Employees who are innovative, creative, and experimental must then be rewarded.

  10. Listen to the feedback: The management should listen to and consider the feedback from the learners about the effectiveness of the learning process practiced in the organization. It is better to have an online assessment tool and conduct surveys to find out the employees views on the learning process and build an improvement plan.

Closing Thoughts

In the global economy, organizations will have to be competitive. To be competitive the roles and functions of an employee must be aligned with the market needs. This is possible only when there is a sincere and conscious effort to build a continuous learning culture. Only then the organization will be able to face the global competition.

Friday, March 03, 2006

People Capability Maturity Model and Organizational Capability

I work at knowledge based services firm – which involves product design, manufacturing & logistic services. Our core competitive advantage is derived from the talent of the employees who deliver these services. So this article is all about managing and developing employee talent.

In a knowledge based service industry such as consulting, design services etc., employee talent is the key for success of a firm. When the performance of the organization depends on the talent of its employees, top management will have to look at ways to improve the skills of its employees.

Carnegie Mellon University’s Software Engineering Institute developed a framework to improve the capability of employees – called as People Capability Maturity Model (PCMM). PCMM helps organizations develop the skills of their employees in a phased manner. It also helps address critical people issues based on current best practices in HRM, knowledge management and organizational development. PCMM provides a guideline for developing and managing their workforce.

In my organization’s context, employee skills is the key for successful business performance and with the threat of losing key talent (to competitive firms), HR strategies has to focus on the latent and apparent needs and aspirations of employees. The challenge for the management is to align employee development program with that of the organizational goals.

PCMM levels

Carnegie Mellon University ahs defined five distinct levels under which any organization can be classified based on their employee development plans. The People CMM consists of five maturity levels that establish successive foundations for continuously improving individual competencies, developing effective teams, motivating improved performance, and shaping the workforce the organization needs to accomplish its future business plans. Each maturity level is a well-defined evolutionary plateau that institutionalizes new capabilities for developing the organization's talent pool. By following the maturity framework, an organization can avoid introducing workforce practices that its employees and managers are unprepared to implement effectively. These levels are:

  • Level-1: Initial level.
    Organization has only the staffing functions.

  • Level-2: Managed Level.
    Here the organization has mapped out a well defined compensation plan, has performance management policies, has developed work communication & coordination structure and has a training & development plan for employees.
  • Level-3: Defined Level. Here the organization has developed a competency based HR practices, career development plan for employees, Workgroup planning and workforce development based on competency analysis.
  • Level-4: Predictable Level.
    The organization has now developed a mentoring program, empowered workgroups, quantitative performance management is practiced, and Employee competency is treated as a key asset.
  • Level-5: Continuous improvement.
    The organization continuously improves its capabilities, encourages workforce innovation and organization’s performance is aligned with the market needs.

In depth explanation of each of these PCMM levels is beyond the scope of this article as it digresses from the intent of this article.

PCMM: New paradigm in HR

Till recently, there was no global standard against which an organization could benchmark it’s HR processes. Hence, there was no way in which an organization could comprehensively measure its HR policies and align employee development with the business process. The People Capability Maturity Model (People CMM) is a tool that helps an organization to successfully address the critical HR issues in their organization and align the employee needs with that of the customer’s or market needs.

The PCMM’s primary objective is to improve the capability of the talent pool. Talent pool capability can be defined as the level of knowledge, skills, and process abilities available for performing an organization's business activities. Talent pool capability indicates few parameters of the organization:

  1. Readiness for performing its critical business activities.
  2. Likely results from performing these business activities.
  3. Potential for benefiting from investments in process improvement or advance technology.

Hence, the People CMM framework is one which attempts to build strong linkages of people processes with business results. PCMM enables firms to develop a mature policies and practices for continuously elevating talent pool capability. i.e., have a well defined training & mentoring plan. This is a significant shift from the ad hoc and inconsistent mode improving people capability.

The philosophy implicit in the People CMM can be summarized in 10 principles.

  1. In mature organizations, talent pool capability is directly related to business performance.
  2. Talent pool capability is a competitive issue and a source of strategic advantage.
  3. Talent capability must be defined in relation to the organization's strategic business objectives.
  4. Knowledge-intense work shifts the focus from job elements to people competencies.
  5. Capability can be measure and improved at multiple levels, including individuals, workgroups, people competencies, and the organization.
  6. Organizations should invest in improving the capability of those people competencies that are critical to its core competency as a business.
  7. Operational management is responsible for the capability of the talent pool.
  8. The improvement of talent pool capability can be pursued as a process composed from proven practices and procedures.
  9. The organisation is responsible for providing competency and career improvement opportunities, while individuals are responsible for taking advantage of them.
  10. Since technologies and organizational forms evolve rapidly, organisation must continually evolve their people practices and develop new people competencies.

PCMM is an evolutionary framework. It guides the organization in selecting high-priority improvement actions based on the current maturity level of their people practices. Benefit of PCMM is in narrowing the scope of improvement activities to those vital few practices that provide the next foundational layer for developing an organization’s talent pool. By concentrating on a focused set of practices and working aggressively to implement them, organizations can steadily improve their talent pool and make lasting gains in their performance and competitiveness.

Talent management in turbulent times can be done effectively by using the PCMM framework, which helps organizations to manage their talent, in line with their business requirements and revolving around competencies. This results in more motivated employees who work to delight the firm’s customers, thus giving the organization a strong competitive edge.

New strategy

A new comprehensive HR strategy should be customer oriented and revolves around developing employee competencies required to meet the new challenges. This requires a shift from the traditional HR strategies which were centered on meeting organizational goals – and were extremely inward looking. Organization is this global economy will have to use HR strategies as core competitive strategies. For example, IT services firms from India – such as Infosys, Wipro, TCS and others tout their CMM & PCMM level-5 certification as competitive advantage over other IT firms. Wipro was the first firm in the world to get the PCMM level-5 certification – and has used it in their marketing campaigns.

As the market conditions change and become global, various HR programs and initiatives must become customer centric. For example, if training on customer needs analysis is given to front end engineers, they will impact the customer directly by understanding their needs well, and deliver much more accurately - hence this would be a primary impact on the firm’s performance.

Let me give you another example. If the organization defines career path for its employees and develops career development plan which takes customer needs into account, employees can then measure and build their career based on the value they (employees) are delivering to the customer. And when employees are able to chart out their career paths within the organization, there will be lesser propensity to leave the organization and lower attrition means lesser project delays for the customer.

Closing Thoughts

Developing a HR strategy based on customer needs will redefine the role of HR to be more objective and have a greater impact on the organizational performance. This is a major paradigm shift for the HR. Human behavior is very subjective and hence HR department has been very subjective in the past.

People Capability Maturity Model transforms HR department to be objective and enables the organization to compete effectively through it's empoyee capabilities.

Thursday, March 02, 2006

Marketing & Sales Funnel

The sales funnel is a popular tool to graphically depict the sales process and the timeline for a future sale. Sales funnel is universally used in B2B sales - where sales cycles are long (typically several months) and closure of the sale takes some level of executive relationships or executive level selling. Role of marketing in a B2B sales can also be linked to sales funnel. In this article, I will write how various marketing functions are associated with the sales funnel.

A typical sales funnel is depicted in figure-1. As the name implies, there is a large list of potential customers in the beginning of the sales process - and as the process continues, the number of potential customers decrease. At the end of the sales process i.e., closed deal - a few become actual customers.

Marketing functions in a sales intensive company must therefore be aligned with the sales funnel. The underlying theme of most successful marketing operations is about segmentation, focus and targeting. In most firms there will be more opportunity than what the company can successfully pursue. This makes in imperative for the marketing department to create a strategy or define the rules which will initiate a winnowing process - i.e., narrow down the list of prospective customers which the firm can successfully pursue and close.

One model of the marketing activities in the B2B world starts with branding, and then builds awareness and interest, targeted prospecting, lead management, sales funnel support and, finally, customer life cycle marketing i.e., repeat sales.


The top level of the marketing function is focused on branding and the building of awareness and favorable associations. Having written several articles on branding, I won't say much in this article. It is sufficient to say that brand is a promise you make to the customer - once the customer experiences the product/service and feels that the product/service has lived upto the promise made by the brand, a brand value is created. In short, "walking the talk" in terms of your brand promise is essential to retain the customer.

The branding stage could be defined as the art and science of creating an association or nexus in the mind of a potential buyer, highlighting your offer and/or company and a desired characteristic such as quality, dependability, good value, etc. Activities in this stage may include general advertising through traditional media - mass media(trade magazines, journals, newspapers, TV, WEB etc.,) publicity and buzz campaigns, etc. and seminars for large segments for key decision makers (such as CIO, VP of sales, and so on).

The main message here is that you need a lot of impressions to create an imprint on the market's psychic awareness as well as to begin to fill the sales funnel. Depending on how fragmented and competitive the market is, you may only get 1-5% in terms of qualified leads out of such activities.

Building brand equity, however, takes time; the results may not manifest themselves for months or years. Many companies in the B2B space usually don't notice the adverse impacts of less marketing until 6-9 months after the initial budget cuts, when it's often too late to fully recover.

Targeted Prospecting

This funnel stage is where you've winnowed down the focus to your target markets and accounts. It is a process of identifying, analyzing and educating the key decision makers in the targeted markets/accounts.

It's surprising how often salespeople pursue opportunities outside their chosen targets (and sales managers let them), and win few of them. Brand-building and awareness campaigns at the top of the funnel will help the prospect education process in this stage. As Harry Beckwith writes in What Clients Love, "Advertising warms every marketing and sales effort that follows it."

Activities in this stage may include targeted seminars(or Webinars), account management, mapping any un-penetrated opportunity and specific vertical campaigns. The main focus here is to allocate resources to the specific targets where your company can add value, offer up a solution and can extract a profit.

Lead Management

A lead is generally defined as someone who shows an interest, through various means, in a company's offerings, although it's often defined differently depending on the organization. The key is to have a fairly granular definition that everyone agrees with. A lead could be generated from seminars, advertising, account mapping or Web sites, among other myriad marketing or sales vehicles.

Generating, vetting and distributing leads involves numerous processes and coordination efforts. Various studies show that most leads, especially in the B2B space, are not followed up on by salespeople or fully audited by management.

In general, if weak or unqualified leads are continually distributed to the sales organization, salespeople are less likely to give them much attention going forward. For example, in a 2003 META Group report titled "Lead Management: The Hinge Between Marketing and Sales," the authors write that "many Global 3000 organizations report that 70 to 90-plus percent of marketing-generated leads are not acted on, because sales finds them unqualified (an often-provided excuse for not making sales projections)."

If it's worth the effort to try to generate leads, it's worth the time to follow up in a timely manner. Also, if you don't track the lead source, it's next to impossible to determine what's working. Marketing ROI is often dependent on the value created from lead management activities. It is in this stage sales reps can add great value by following up on the existing leads - thus freeing up the company resources for other activities.

In terms of lead metrics, for example, cost per lead is meaningless if most of the leads are unworthy of pursuit and never end up as closed deals (the quantity vs. quality problem). Cost per opportunity or closed deal may be a better measure. Also, it's important to differentiate the leads that need to be nurtured and developed from those that should be acted upon immediately. (You could develop a lead funnel to differentiate the stages that a typical lead passes through.)

Marketing activities in this stage may include white papers, various events, newsletters and creating customer touch point opportunities. The idea is to generate and qualify interest and to separate those who are intellectually curious from those who are economically serious, which should be further vetted by the sales force.

Sales Funnel Support

Accelerating, expanding and winning deals in the sales funnel is the essence of good sales execution. At this stage, the sales funnel has been winnowed down to the opportunity level. The customer has issues an RFQ or an LOI indicating an indication to buy. Main function of marketing in this stage is to help sales to deliver the right message, to the right people, at the right time in the sales process is the essence of customer message management and providing good opportunity support. As Hartman and Staudt aptly state, "if you want qualified leads—people that can progress from being prospects to becoming customers and on to advocates—take the time to fine-tune your data and make sure that your messaging is personal and relevant."

Marketing can ensure that all sales collateral and messaging is built on the premise of aligning the company's solutions with customer problems, and crafting and proving the value story in a way that is targeted, germane and believable.

Marketing activities in this stage may include executive sponsor support (e.g., inserting and extracting an executive sponsor at the right time in the process), reference calls, collateral and conversation support and message management.

Customer Life cycle Marketing

Once you've acquired a customer, it makes sense to ensure that the customer remains loyal by consistently listening for changing lifecycle needs and value drivers. Banking is one industry that is quite attuned to the lifecycle of its customers (consumer and commercial)—from opening a first checking (or business) account, to obtaining a mortgage (or business loan), to funding one's retirement (or selling a business).

We know that numerous studies have shown that it's generally easier to sell more to a satisfied (even better—delighted) customer than a dissatisfied one, as well as to get solid referrals and leads.

A closed-loop marketing funnel should help to feed itself as satisfied customers tell their friends and colleagues, and help to corroborate your brand promise. (Recent empirical research has demonstrated a powerful customer loyalty barometer—the net positive response to the following question: "Would you recommend this product [offering] to a friend or colleague?")
Activities in this stage may include the development of customer groups (blogs, user groups, online communities, etc.), external account reviews, value reviews and performance reviews. The key tasks in this stage are for you to get credit for the value that you've delivered and for you to anticipate shifting customer needs.

Closing Thoughts

The sales funnel is an effective tool to manage and execute a complex sales process. The sales process can be made more effective and successful by aligning marketing activities with the sales process - branding, advertising, targeted seminars, whitepapers, technical pre-sales, account management, closing deals and looking for ways to add incremental value to existing customers.

Like most framework tools, sales funnel can enable you to identify, isolate and improve marketing black holes and/or upstream dependencies.

In my experience, educating customers is more difficult if they have no awareness of the offering category and your company's place in it. Qualifying opportunities often takes longer if you have not refined your targeting. In other words, the marketing functions has to be aligned with sales funnel and this will make the sales process smoother & more importantly - efficient.

Finally, understanding the flow, the hand-offs and the overlap between the marketing and sales funnels would go a long way toward improving integration between the respective functions as well as to better pinpoint accountabilities and lessen finger-pointing. In many competitive selling environments, where exploitable differentiation is paramount, marketing and sales alignment is the Holy Grail for effective selling.