Saturday, September 30, 2006

Wal-Mart is in Trouble in UK too!

A month ago I had posted a blog on why Wal-Mart had to exit Germany after series of losses. In September 30th issue of ‘The Economist’ has published that ASDA - a subsidiary of Wal-Mart is struggling in UK. This news follows the spate of bad news for Bentonville based Wal-Mart. Wal-Mart withdrew from Germany, South Korea and is making loses in China & Japan.

As stated in my earlier blog, troubles for Wal-Mart mainly stems from its cultural insensitivity to local culture - in terms of store layout & store merchandise.


ASDA is a Wal-Mart subsidiary in the UK. Wal-Mart acquired ASDA and replicated its big storeformat in the UK. In the initial years, this proved to be successful and ASDA grew. In 2003 ASDA became the second largest retailer in the UK. But by 2006, growth had slowed down and problems started became visible.

In case of ASDA, the problem is different - Wal-Mart does not enjoy any price advantage over its chief competitor TESCO.

Unlike in the USA where Wal-Mart enjoys a significant price advantage over its competitors, TESCO, Sainburys have managed to match ASDA in prices and also have a better merchandise mix. According to ‘The Economist’, a basket of 100 common items purchased at ASDA costs just £0.74 less than at TESCO. This difference is too small for shoppers to notice.

ASDA competes in grocery segment and in this segment ASDA has got it wrong. ASDA stores are modeled after a big store format. I visited ASDA today at Burnt Oak and the greens were a bit old & withered. The fresh ready-to-eat sandwiches were placed far away from the cash counter - making it unattractive for a casual customer. The merchandize is no way near the range & quality that as in the US.

Food subsidy is eating away ASDA’s advantage

If ASDA wants to compete with others in grocery segment, then it needs to change is positioning statement - "Always low prices" is no longer applicable in the grocery segment in the UK. In UK, the general market is shifting rapidly towards organic foods and people are willing to pay a premium for it. In addition governments are providing increased farm subsidy - which is reducing the cost of food products. This subsidy has two major impacts on ASDA’s strategy:

  1. Cost of food products is going down rapidly - thus the cost advantage of ASDA is diminishing rapidly. Even the price difference between organic foods and regular foods is dropping.
  2. Lower food prices means grocery spending as % of household expenditure is falling. Thus selling grocery alone means reduces reduced incomes.

May be Wal-Mart should change ASDA’s merchandise mix - and concentrate on garments - where ASDA has a good range, have more house furnishings and in general have more of nonperishable items - just like most of the Wal-Mart superstores in the US.

Cultural Differences from the US

UK has a long history of superstores - the shopping culture in UK is quite similar to that of US. This has led to success of superstores in UK. But there are few small but important cultural differences between UK & US customers. UK customers like the convenience of small stores on the high street. TESCO has capitalized on this by having TESCO Express - a small convenience stores in the high street. But ASDA has not.

A significant number of UK customers use public transport - particularly in London and other big cities. This implies that these shoppers would shop in little quantities but shop often - and mostly from the stores near the public transport facilities. ASDA’s big superstores are away from public transport facilities - which turns off customers who rely on public transport facilities.

British customers are also more aware of environment issues than the Americans. The concept of "Green Business is Good Business" is more prevalent in UK/Europe than in the US. As a result people are shifting towards Organic foods, public transport systems and eco-friendly products. ASDA’s American image is not helping when it comes to selling "green" products.

Closing Thoughts

The idea of a global standard is not applicable when it comes to retail products. Wal-Mart’s successful model in the US cannot be applied uniformly in other countries - even in UK which is culturally very similar to that of US. Global markets are attractive - but will need a large scale localization. It may help Wal-Mart to look deeply at McDonald’s and see how they have customised to meet the local demands and learn about localization to succeed in other countries - especially if Wal-Mart has to succeed in China and India.

Also see:

Trans-cultural Business Failure: Wal-Mart Exits Germany

Wednesday, September 27, 2006

Strategic Outsourcing

In 1990’s outsourcing IT services was a mere cost saving operation. But by 2005, outsourcing has become an important element in creating a winning strategy. For example, in 2004 Barthi Airtel of India outsourced all its IT needs to IBM in a $750 Million deal. In 2006, Airtel signed another $100 million deal with IBM to manage and deliver services delivery platform.

"The implementation of SDP will enable Bharti Airtel to have an integrated environment that will incorporate all of Airtel's content and applications services under one platform," said Mr Manoj Kohli, President, Bharti Airtel.

The above example shows how outsourcing has grown from a mere tactical solution to that of a strategic solution.

Global Sourcing Strategy

Until now, outsourcing has been considered by most companies, particularly in the telecom services industry, as little more than a tactical form of reducing the cost of acquiring ancillary services. However, enlightened telecom services providers have come to focus less on achieving incremental cost improvements (10 to 20 per cent) and are evaluating all their capabilities to define a winning global sourcing strategy.

Global sourcing strategy can be defined as:"Acquiring the right competency, at the right cost, from the right source, from the right shore."

Specifically, it stands for sourcing operational and technology activities and resources from global "competency" centers. For example, as part of its global sourcing strategy, a Barthi Airtel may turn to Siemens/Nokia for network maintenance, IBM for IT services and 24x7 customer for customer service. Global sourcing also means sourcing the best services from the best locations. For example: Bank of America uses India for getting IT services and market research, England for Derivative analysis, and Ireland for customer services.

In these situations, sourcing needs to become a strategic process whereby companies accept the idea of unbundling their value-chain and focus on operating it in the most optimal way to achieve transformational cost savings (30-60 per cent) and transformational revenue growth. For many organizations, this type of analysis will often lead to the adoption of a global outsourcing strategy.

Sourcing Strategy relies on Control

It’s control, not ownership that matters - The need to define a comprehensive sourcing strategy is rooted in relatively recent geopolitical, macro economic and technology developments. These developments have fundamentally changed the world by making business capabilities portable on a global basis. Leading organizations realize that what matters most isn’t the ownership, but the control of business capabilities.


Look at all the organization's capabilities and only keep captive those unique capabilities that offer competitive advantage and are critical to revenue growth. All other capabilities, as core as they may seem, can be considered for outsourcing.

The financial services industry has been at the forefront in taking advantage of the global sourcing opportunity. Led by pioneers such as GE Capital, Deutsche Bank, HSBC and Citigroup, almost every financial services firm is engaged either in using global sourcing or in planning for it actively. The high tech industry for years has exploited global sourcing for its manufactured processes. Led by giants such as Dell, Texas Instruments and Intel, the industry has begun to utilize globally dispersed locations for R&D, customer service and related business processes as well. Other industries increasingly taking advantage of global sourcing include retail, telecommunications and media.

Which sourcing model is right for me?

On-shoring, near-shoring or off-shoring are the various ways companies can implement their captive sourcing and outsourcing strategy. Off-shoring and near-shoring bring the well-known opportunity to reduce costs.

Moreover, in many cases, the decision to offshore or near-shore is also driven by a quest for better quality, access to specific skills and reduced cycle times (via 24/7 work shifts), all critical to support revenue growth and reduce time to market for new product and service initiatives. Leading firms will consider a mix of these three sourcing alternatives based on the optimal balance between rewards and risks.

Off-shoring or near-shoring is not to be limited to the well known IT or contact center functions. Business Process Off-shoring (BPO) is showing considerable growth particularly in the areas of finance & accounting, transaction processing (i.e. credit cards and claims), data and customer order entry, customer service, collection and sales and marketing. Furthermore one can see emergence of Knowledge Process Off-shoring (KPO) in the areas of financial research, competitive intelligence, Market research, engineering R&D, etc.

Implementing a successful strategy

Defining a comprehensive and successful sourcing strategy is not easy. The key obstacles that most firms have encountered when developing it are workforce resistance, concerns about reliability, security, a loss of control, and communication difficulties, particularly when the strategy involves a near-shore and/or offshore element that comes with linguistic, cultural, distance and time-zone barriers. To overcome these various obstacles, it is critical to link the sourcing strategy with a well established overall operating model. Defining this new operating model is the first step in implementing the sourcing strategy.

The next step is to re-engineer the various processes across the company and to ensure that they properly integrate with and support the new global sourcing framework.
Technology augmentation (not replacement) can facilitate this process considerably and further improve the newly defined processes from a cost, control and service level perspective. Workflow, self-serve portals and digitization integrated with the legacy solutions are typical examples of non-intrusive technology augmentation.

To obtain the optimal capabilities mix when outsourcing, it is critical not to shortchange vendor due diligence and to not hesitate using multiple vendors.

Over-investing in program management and proactive change management will allow mitigating risks to achieve a successful implementation. A successful global sourcing strategy will provide cost reductions, improved controls and better service levels to internal and external clients.

Rewards are significant

When properly implemented, global sourcing strategies offer significant benefits. Leaders in global sourcing enjoy unparalleled competitive advantages by way of lower costs, improved quality and responsiveness. According to Deloitte, financial services firms in the developed world could save $138 billion over the next five years from off-shoring. However, more than cost, it’s the quality and other benefits that are providing further fodder to off-shoring. According the 2003 TPG/Baruch offshoring Survey, two-thirds of the businesses surveyed reported gains in quality, Access to skills, reducing cycle time, etc., were other key benefits.

Closing Thoughts

Its time to reconsider traditional outsourcing approaches that focus on incremental cost savings. While it requires more careful decision-making and coordination, strategic sourcing, effectively implemented, offers tremendous benefits that simply cannot be overlooked.

Also See:

Virtual Scale - Alliances for Leverage
Cutting Edge R&D in India
Global R&D Network
Managing Outsourced Projects
Developing a Global Mindset
Managing in the Global Organization
Leadership for a Global Enterprise
Global Product Development Teams

Monday, September 25, 2006

Organization Development in High Tech Startups

Silicon Valley is home for thousands of high tech startups. Most of these companies started in the valley and blossomed into Fortune-1000 companies. The success of several startups can be traced to several common traits one of them being their HR policy. This article is about the HR practices followed at these startups - and how such practices helped them succeed. The lessons we can learn are: How one can reduce attrition, How to select employees and Means to control & guide the energies of these people.

Silicon Valley startups typically do not tend to have a strong HR departments - at best HR department will be staffed by one or two persons, yet the founders of the company have usually incorporated the best HR practices - this is done by sheer experience of the founders or is driven by venture capitalists or lawyers or consultants who are deeply involved in any startup. It is this ecosystem which gives Silicon valley companies a better chance for success. The HR policies and organization development practices at these startups makes them "built-to-last".

Blue print for a High Tech Startup

At the very beginning, the founder’s have to present a 'blueprint' for their company to powerful brokers (Financiers, Venture Capitalists etc.). Every CEO in the valley will tell that their company is built by their elite employees. It is therefore no surprise that the organizational ‘blue print’ must contain strategies for hiring the right people, retaining them & compensating them. This can be broken down into three distinct strategies:
  • Employee Selection
  • Employee retention
  • Employee motivation
Employee Selection

How to companies select employees. Founder’s of these startups are deeply involved in hiring the right people for their company. Founders often take it personal when it comes to hiring for key posts. They are involved in every step and personally call on potential candidates, interview them and even negotiate salaries, stock options, performance incentives etc. before hiring them. Time and money are of paramount importance to the company - this makes the founders look for the right skill sets, right attitude and experience in the potential candidates. The objective is to bring the new employee onboard as cheaply and as fast as possible.

Founders play a direct role in selecting employees having the skills and experience needed to accomplish the immediate tasks. Entrepreneurs also look deeply at the long term potential, values and cultural fit - emphasizing on how the new employee would connect with others in the organization.

Employee Retention

Employee retention in startups is ingrained into the organizational DNA. Most founders envision creating a strong family-like feeling and intense emotional bond with the workforce. This has a deep impact on the employees - they are motivated for superior performance and reduce chances of attrition. Imagine if the CEO is a friend of the employee - say director of engineering, then it will be very difficult for him to leave the company.

This emotional bond between founders and employees is carried out at levels of the organization. Director of Engineer - will in turn create a bond with his managers & it flows downwards. When I worked for IDT, I had a great bond with my immediate supervisor.

Employees are compensated adequately for their efforts - even startups pay a competitive salary to attract talent and sweeten the deal via stock options. The possibility of making it big via an IPO is a strong retention tool. Even when a company has gone public, the money value in the non-vested options make it attractive for the employees to stay on.

Once the compensation is taken care of, highly skilled employees - especially engineers and scientists seek challenges. In Silicon Valley - the competition for highly skilled people is so high that every startup must pose enough technical challenges to attract and retain these talented employees. Founders of these companies are often highly skilled and have a futuristic vision - which implies that a vast number of challenges must be overcome inorder to succeed. Since founders are passionate about technology and are personally involved in hiring, they will be the ones who set the work standards and performance metrics at the very beginning.

Employee Motivation

Talented employees are motivated by the work environment and work challenges. This means that efforts needed in employee guidance and control are minimized. Most startups rely on informal control through peers, friendship and organizational culture. Formal control structures are not usually used - instead organization culture of highly committed employees becomes a key motivational source.

Work related challenges and business objectives are tightly coupled with the emotional bond between founders and employees - this acts as a major motivation factor.

An Example

In an interview to Fortune Magazine, CEO of a startup said:
"We worried about the IPO a lot because from the earliest days that was a clear corporate focal point. Get to the IPO point, get the company public. It’s the big payoff for people who have stock. Every person in our company is a stockholder. We grant them options when they join. Everyone worked very hard for six years to get to that point. Our concern was, after the IPO and after the lockups expire [so that] people have the ability to sell stock, we were concerned what the motivation levels in the company would look like [and] what we could do to influence that motivation level. One thing we are working very diligently on right now is identifying what the next corporate milestone will be. 25% growth isn’t the kind of corporate objective or singularity of purpose that gets people riled up. We are looking for something a little more specific, like that $100 million benchmark. We’re in the process of making a final decision of what that overall, superordinate goal is going to be."

By articulating enduring overarching goals from the outset and by creating a powerful sense of belonging, the Commitment model can help companies avoid or minimize the "Post partum depression" syndrome that sometimes accompanies an IPO, release of the first product, or achievement of other key corporate milestones.

To paraphrase what one prominent venture capitalist said: "I automatically ding anyone who comes in here pitching their business plan. If they tell me that their goal is the IPO. If that’ s their goal, there are going to be huge organizational problems down the line. An IPO might be a means to an end, but it shouldn’t be an end in itself."

Corporate Philosophy

Startups often adopt the highest standards. Google, Yahoo or Redback etc. openly & proudly announce that they hire only the best. Most of the companies make statements such as:
  • "We recruit only top talent, pay them top wages, and give them the resources and autonomy they need to do their job."

  • "We wanted to build the kind of company where people would only leave when they retire."

  • "We make sure things are documented, have job descriptions for people, project descriptions, and pretty rigorous project management techniques."

  • "We were very committed. It was a skunk-works mentality and the binding energy was very high."

  • "You work well, you get paid well"

These statements are followed up in action as well. Companies rigorously follow-up on these statements, As a result the credibility and the company image is high among the employees.

Change is Disruptive

In today’s high tech industry - change is the only constant, and high tech startups are the ones who are ushering the rapid changes. Yet in these startups, one can observe an ever enduring and unchanging value system. The company philosophy remains unchanged even after several decades. For example, look at HP or Intel or Oracle or Apple, the corporate philosophy of these companies have not changed even after so many years. These company follow the same high standards of recruitment, they are committed to innovation, committed to work on latest technologies, committed to having a highly skilled, highly motivated work force. These examples imply that many of the HR practices are deeply embedded into their organizational DNA - and that is reflected in their corporate philosophy - And it is unchanging.

Changing the basic HR blueprint is highly disruptive and destabilizes the high tech startups. Changing the blueprint significantly raises turnover, especially among the employees who have been with the enterprise the longest. The evidence of this can be seen in mass attrition - when a CEO or a leader leaves the company. In 1999, 45+ engineers left Motorola and joined Intel - when Intel hired Mark McDermott from Motorola. The attrition at Motorola’s chip unit continued for few more years - even after spinning off the semiconductor unit into ‘Freescale Semiconductors’.

Organizational Performance

Organizational performance is the bottom line. Founder’s early organization building choices, or subsequent changes in organizational blueprints, have a deep impact on companies.

A prominent and highly successful Silicon Valley entrepreneur, who argued founders to articulate a particular model of organizing in the early days of a new enterprise:
"Organizational models and culture are a source of failure for startups. . . . In order to have a successful company organization, one must first have a successful company. Companies that strive to put in place organizational norms and models, cultures from the outset have been successful"

Yet companies in Silicon Valley are reluctant to document and publish their core practices. Hewlett-Packard's written document of seven corporate objectives got written almost 20 years after the company was started, after more than 20 years of practice building a successful company to develop its norms and culture.

Lessons for Entrepreneurs and Managers

For many companies, the costs and risks of transitioning to a new organizational model might outweigh the advantages. Therefore, selecting an initial organizational blueprint that adequately suits the present and anticipated future strategy and environment is better than selecting one that is ideally suited to the current situation but likely to be dramatically mismatched in the future and to therefore necessitate disruptive changes.

An important implication for entrepreneurs: There might be a powerful tradeoff between risk and reward in selecting an HR blueprint for new enterprises. Companies that embraced the right HR blueprint managed to weather the inevitable crises and challenges of a young technology venture and then avoided the need to recraft the blueprint at a later date. These companies tend to survive and prosper.

For managers in established companies, being clearer and more explicit about the HR blueprint can also be enormously useful in dealing with two challenges facing most large organizations: balancing the need for global consistency against the need for local flexibility; and managing mergers and acquisitions.

As companies of all stripes fight the "War for talent," they would be well advised to devote as much careful thought to building a brand in the labor market as they do in the product market. The organizational blueprint seeks to brand the company as the "The employer of choice," a company that takes long-term development of its people seriously in a world is the one which gets the best talent.

Sunday, September 24, 2006

Knowledge Management - The blood & lifeline of any company

Knowledge management (KM) is vital to the success of any IT company. Organizations have created knowledge management teams with IT experts and business leaders and external consultants included. This team does have a definite mandate - but can never have a finite duration for an ongoing knowledge management operation. This article is about how companies, large & small have built KM into their organizational DNA and that has helped them achieve true business value from their knowledge base.

The idea of Knowledge Management means different things to different companies. I have seen a wide range of responses from "duh?" to "Google" to "simple databases" to "complex software systems".

Small startups in Silicon Valley often have built knowledge management into their organizational DNA. By that I mean - in these companies knowledge is shared openly through a computer systems. Knowledge sharing for these companies is just as natural as breathing. During the startup phase, knowledge sharing will usually be informal and personal, knowledge is usually shared via conversations or via emails. As these companies grew, they have installed complex Intranets, databases, and dataware housing systems.

But outside the silicon valley, the use of KM system has been patchy. While most of the fortune-1000 companies are on par with the best in terms of KM, Other companies including several Indian IT companies have been slow in building KM systems. I recently came to know of an Indian IT company in UK - which does not have any system for sharing knowledge. People in company had to call on others to find out if they have the information and have it sent by e-mail. Yet this was not a small company - it is the biggest IT service provider to BT w and employees more than 10 thousand people!

Challenge of Knowledge Management

In the world of quick fix mentality, many companies approach knowledge management as a software implementation - install the software & ‘presto’ you have implemented KM in the company. The reality is far different. Most of KM systems need a basic knowledge of IT in order to extract data from large data warehouses, training & knowledge on how to use this data and ability to transform into knowledge based in cognitive needs.

Most KM implementations have failed because organizations have lacked skills to use the KM system and most importantly, organization have no idea of how people learn from the information being provided to them. The lack of training and support groups to employees who are not IT savvy - ensured that the vast KM system was useless to most employees.

Value of KM

Business leaders understand the for best results to be obtained from a KM system, it is necessary to have a deep understanding of the business needs and perspectives. Without a good business case it is quite likely that KM will end up wasting money and effort simplifying and improving something that won’t give any noticeable return on investment.

From a theoretical perspective, almost everyone accepts the fact that knowledge is part of an organizational assets — its intellectual capital. Few organizations would let retiring employees leave with their computer or phone, yet every day people with years of organizational knowledge in their heads walk out the doors of corporations, taking that knowledge, years of investment, with them. KM systems help to institutionalize the knowledge into the organization through systems and procedures. While a system will never replace the value of a 20- year veteran, it can help to mitigate the loss of critical knowledge, methods and best practices, intellectual capital, if that person leaves the organization.

However, the corporate world runs on profits and results. Businesses must take a fundamentally different approach than "lets capture our intellectual capital".

Investment for KM

Fortunately, KM does not need to be a large investment in time and resources as some companies have tended to tackle it in the past. Instead, business leaders should choose a focused area where improvement will result in a measurable change; for example, to improve success rate of the sales group by improving communication between marketing, engineering and sales teams.

This will require creating a small focused team to implement a KM system. The aim of this team is to find cognitive barriers for both explicit and tacit knowledge sharing, develop a solution that can over come these barriers, create user experiences in knowledge sharing and allow the target audience to be successful.

After a number of such small successes, KM teams would have learnt enough that they can implement strategies for leveraging knowledge across organizational boundaries and across various types of users. However, if KM teams cannot succeed at these smaller efforts, then they do not have the expertise or resources necessary for more strategic efforts.

Team membership

So, who should be present in a team, and what duties must be performed? A successful KM team requires six key roles to be performed.

  1. Interface design lead: This role specializes in computer - human interaction and integration of content into work processes - typically an experienced line manger who knows how people would like to use the system.
  2. Training lead: He specializes in knowing legacy content, cognitive needs, and learning strategies
  3. Technical architect: This roles is for an IT designer who will implement the IT aspects of the system.
  4. Business lead: He understand the measurable results to be obtained from the KM system.
  5. Organizational lead: He develops the communication plan, motivational incentives, and other organizational needs for the project to be a success.
  6. The "super user" A visionary user who can influence the user community, this person helps the system stay grounded in pragmatism

In small companies (or small implementations), some of these functions may be combined. In large companies or projects, however, several people may be assigned to one or more functions. Software developers, technical writers, graphic designers and others, for example, often supplement IT.

Challenges encountered at most KM projects

Implementing, or building a KM system is not easy. There are several challenges that must be overcome. Most difficult of them are changing the management leader’s mindsets. For example, at one Indian IT company, the COO was not convinced of the need for a centralized system, particularly one that competed for already scarce resources and other business priorities. The VP of marketing liked the idea but did not appreciated the value of knowledge management. Fortunately, the project had its champions. The CEO acted as an overall driving force, realizing the advantage of arming sales with rapid and accurate customer/prospect data.
In most cases, success of KM system needs an executive level sponsorship.

IBM approach

"IBM realized we could drive a lot more growth in the EAI sector, but we were constrained by an inability to reuse what had already been learned" - Scott J. Smith, Global Practice Executive, Knowledge & Content Management for IBM Global Services in Cambridge, Massachusetts.

Over the past decade, IBM has established a sophisticated KM infrastructure. At its core is a central unit consisting of three distinct elements:

(1) Developers who work on the technology side;
(2) Strategists who are forward-looking pragmatists; and
(3) Deployment, who work with other business units within the company to implement specific projects.

The developers create tools and systems that the strategists seek to harness to maximize business value. But it is the deployment group that exports KM, based on a perceived organizational need. Here is an example of how it works in the real world from Big Blue’ own Enterprise Application Integration (EAI) Practice, where skill sets once existed in isolated pockets around the world. Due to this situation of dispersed know-how, EAI professionals in London, for example, might end up repeating work already done in Hong Kong.

Two members of the deployment team were assigned to form a team. It consisted of the EAI Practice leader; an EAI Practice member skilled in training and business processes. An EAI Practice member focusing on reuse of knowledge and human/cultural aspects. None were KM experts, but all wanted to use it to expand the area.

Why not use KM specialists?

KM experts often lack context, so it is extremely difficult to generate a valuable and dynamic knowledge network when only KM experts are involved. For example, a KM system for sales function cannot be built by KM experts alone - who do not have knowledge or experience in sales. The best results are achieved with salesmen are deeply involved in building a KM system.
Knowledge networks play a focal role in the IBM process. IBM’ Knowledge Network Launch Process makes use of a six-step process to facilitate a KM team.

  1. A team leader is appointed who is a business expert, not a KM specialist.
  2. Identify a community/group who need a knowledge network. Knowledge moves much more effectively in such a network.
  3. A core team is assembled.
  4. A specific knowledge domain is defined.
  5. A knowledge database is prepared for this community and well maintained.
  6. The knowledge network is made operational based on feedback from the community.

In essence, a knowledge network is formalized networking. From a technology perspective, IBM sets up a portal and utilizes AssetWeb, an in-house collaboration and intellectual capital management application. (This infrastructure is used by as many as 50 specialized communities.)

By means of once-a- year meetings of members (starting with a launch event), more regular national and regional events, and conference calls, KM experts establish these knowledge networks as potent forces.


IBM projects routinely result in a 40 percent reduction in proposal preparation time, a 30 percent decrease in the time taken to create deliverables, and expansion in EAI and other units.

Team duration

Although IBM generally completes its KM projects within 8 to 12 weeks, that doesn’t mean that it implements and moves on. KM executives monitor how well the technology is being utilized via "Health Checks" that detect the degree of participation in knowledge network events and discussions, the amount of usage of portals, and other indicators.

In other companies, however, KM initiatives are rarely dispatched with such velocity. And in many cases, the team members go on to form an ongoing KM section. At one of the Big Five accounting firms, for example, the knowledge management team that began in the early 1990s eventually evolved into a permanent unit composed of about 20 people. It began as a Lotus Notes project and has evolved into a Lotus Domino-based intranet that acts as a central repository and clearinghouse for company knowledge.

The company loosely bases its KM efforts around a three-pronged structure: technology, business process, and people (human/cultural). Members from all three sectors are needed to conduct a successful KM project. You don’t find all these skills in one person, so you have to ensure that all are represented in the team.

Do not focus too closely on technology. Without the process and people (human) elements, projects go astray. Currently, the human and cultural duties fall on group head - whose group will use the system. The group head will then have to drive the usage of the system.. Users will always cite different reasons not to use the new system.

In my previous company, we had implemented a knowledge sharing portal - but in the initial phases sales group did not use this portal citing: "they don’t have time", "difficult to use it" etc.
The business leaders must drive the adaptation and knowledge-sharing efforts, he must places strong emphasis on KM in all meetings and conferences. Further, the company highlights the achievements of team members on the company’ Web site. This includes photographs, quotes, and success stories to show the value of KM from a business standpoint.

Think small

Large-scale KM projects tend to be the province of major companies specializing in service and knowledge-intensive industries like consulting, high-tech, and finance. That does not mean, however, that smaller operations in other zones cannot receive value from knowledge management. But they, too, must put together a KM team, however rudimentary, if they hope to realize project objectives.

Specialty chemical provider Advantis Technologies Inc. of Alpharetta, Georgia, wanted to add a business intelligence/reporting package (by Cognos Inc. of Ottawa, Canada) to its existing JD Edwards ERP system. Reason: generation of monthly sales reports took the IT department two weeks. According to Keith Lewis, Vice-President of Business Development at Advantis, they had plenty of valuable information that they simply couldn’t gain access to in a timely Manner.

Lewis advocates a strong business presence in any KM team rather than leaving everything to IT. He headed the team and relied on key salespeople for input on report definition. An individual from systems integrator C.D. Group Inc. of Atlanta provided the JD Edwards/Cognos expertise. Lewis also added specialists in SQL Server, networking, and AS/400 to cover all technical bases. Now completed, the sales department has its reports almost instantly without involvement from IT. Instead of worrying over the accuracy of the numbers, Lewis can focus on analyzing them to detect opportunities and situations. With his experience in KM, he plans to expand its influence into general ledger and inventory Management.

Closing Thoughts

What should you look for in a KM team member? There are certain characteristics that exemplify all successful participants, including:

  • A genuine belief that people are strategic assets and are the reason organizations succeed
  • An entrepreneurial instinct coupled with the urge to see the vision become a reality
  • An openness to new ideas, to seed them, to listen, and keep focused on the long-term vision to ensure that new ideas are making sense and adding value
  • A strategic understanding of the value and opportunities within information systems, as well as a strong sense of organizational design and the development requirements of cultural change.
  • An ability to be seen as someone who genuinely shares knowledge and is passionate about learning
  • An ability to energize the organization, to build momentum to support the knowledge management initiatives
  • An ability to work effectively with the CIO, HR, and business units leaders and see the synergy's among these roles and leverage them effectively
  • And finally, as all change agents face challenges and opposition, they must ensure that near-term value is displayed, while helping the organization understand that knowledge management is a " way of life," not a " quick win."

Having a committed members of a group to use and leverage their "intellectual capital" is the first step. Actual implementation of KM system is relatively easy. Finally the value of the system lies in its usage.

Also see:

Sales - Knowledge is strength
Marketing - Developing Market Intelligence

Wednesday, September 20, 2006

In the Mind of a Salesman

The role of any salesman is highly demanding. Company’s management demands such high revenue growth rate - that everyday of work starts to look like running a championship race. At the same time, the accountants in the finance department are reluctant to increase any expenses thus curtailing potential investments needed to achieve the required sales targets. This creates a situation where it appears that its almost impossible to succeed in sales - but there will be few who always seem to achieve their targets with ease. These are people who are known as "Born Salesmen" - but in reality a good salesman is a good drill master who knows the sales drill down to the last details - which can be learnt. In this article I will write about what it takes to be a good salesman in a B2B world.

Start with Conviction

Whenever I see a business opportunity - the first thing I need to do is to convince myself that this deal can be done. Once I am convinced that this is a good deal, convincing others is relatively easy - but you need to work on it on daily basis. Remember, the conditions out side contribute only 1% and your own reaction to those conditions make up for the rest 99% in the results.

In my life, I see a lot of people who say "This deal cannot be done" or "We do not have the capacity to do it" or " Our costs are too high & therefore there is no profits in this deal" etc.

Just today morning - I got this big proposition of taking over an business from my customer - wherein the customer wanted to outsource their existing operations to us. I had a quick word with out finance expert. He had developed a very sophisticated spreadsheet model - and all that his model was telling me was that this deal should not be done as we will lose money. Yet my gut instinct told me to go ahead at full speed. After some investigation it because clear that his financial model was built on wrong assumptions. This further emboldened my enthusiasm to go ahead with this deal.

The situation could have changed quite a lot if I had bought the argument from my finance expert. He after all comes with excellent credentials - A Chartered Accountant with excellent reputation for financial analysis and a long experience at the company. But the reaction to his negative response was the key to get this deal going. I was convinced that this was a good deal - and I had to convince our financial expert in order to win the deal.

Winning against negative sentiments

Every winning salesmen can tell you hundreds of stories where he had to go to extreme lengths to convince his own folks in order to win the deal. How is this done?

  • Firstly, restore your enthusiasm to same high level by talking to yourself often about it. Its easy - begin the day with all the deals you have on the table - go over them and tell yourself why you need to win them.

  • Secondly, do not let the negatives of the proposition come in your way of conducting business. Do this by questioning your self each time you feel like withdrawing from some action.

  • Thirdly, start using effective selling techniques, some of which are given in this book How Winners Sell: 21 Proven Strategies to Outsell Your Competition and Win the Big Sale By Dave Stein.
Working on these would lead you to other useful techniques.

Preparations are the Key to Success

Every salesmen knows the mechanics of a routine first time sales call - ensuring preparedness in all respects; opening the call; making a presentation; obtaining a commitment etc. You have known it all, like the back of your hand. But that’s what every salesman will do. So what differentiates a winner? It is in their superior preparations and the perfect handling of the show.

Good selling often begins with the understanding of the buying process and what is being bought. The understanding of the buying process will give you an insight into the buyer's decision making mechanism. Make sure the people you meet are the ones who take decisions.

Find out why and what are they currently using. Once you will know whose opinions or what factors are likely to influence the purchase decision you will improve chances of achieving a successful sale.

Do not spend your time with people who want something that can't deliver. These are time
wasters - your time is better spent elsewhere.

Use Emotions in the sales process

The understanding of "what is being bought" will tell what benefits of your offering will appeal to the prospects. You might be offering the latest and best piece of equipment well known for its modern design and high productivity, but your prospect might want to buy what he had seen when he was learning the ropes of the business or studying in college. The central idea being, the prospect usually looks forward to some emotional experience of his choosing with in your proposition. So, you have to make it possible for the prospect to over come his previous emotional ties and experience the use your product.

Whenever you are able to arouse positive emotions in prospects you will lead them to favorable decisions. During a sales call, your perfect performance shall arouse in the prospect, the desired
emotional response like nothing else will. So, when you meet your very next prospect, be mindful of delivering a flawless performance. Power of your performance shall not only determine your income but also shall open new selling opportunities for you.

The emotional process that leads to a purchase decision usually begins with a new development in prospect's self image. The prospect secretly starts behaving as a user of your offering and having spotted such a change in his self-image; you should immediately reinforce it and keep the prospect in the same frame of mind throughout.

Develop your interest in the subject of your offering. To learn the details fast, try and visualize the edge you will come to possess after you have mastered even the smallest of the details about the offering. Your buyers are also an important source of learning more about the subject.

Each sale creates a unique bond between the buyer and the seller. Common feature of these bonds being that in each the seller has given to the buyer the comfort that his decision has been a correct one and seller will live up to the expectations. This bond is an important source of future orders and referred leads. Pay good attention to leads so received as they are going to improve the looks of your order book. However exercise some caution: ask for such leads only after the customer has experienced your service/product.

Complete focus on the customer

Whenever you are face to face with a prospect, shut yourself from past worries and future exigencies. Concentrate fully on the prospect before you, his needs and attitudes. Remember, the prospects have the unusual ability to be completely oblivious to your persuasion. See or hear what they want to see or hear. Do what you have to do in order to make prospects see or hear what is favorable for your deal.

Therefore, when you give a presentation or demonstration, make sure it ultimately develops into a two-way communication. Make use of the words, which will have leading effect on the prospect. You can even be bold and take a few risks by saying striking things which will seize audience attention and if that makes them ask some questions you will know they have been listening. Answer in a manner that will improve involvement of others who are present.

If you know any statements, which have worked well with prospects, half of your job is done. All you have to do is to master the use of all the possible variations of those statements tailoring the variations for various situations usually encountered. This may be time consuming but the results shall justify the effort.

Objections are buying statements

Don't hate prospects' objections, actually a prospect airing objections is inviting you to book his/her order and coming in disguise it should be very stimulating for you. Begin by believing that an objection is an announcement of buying intentions. Learning, observation and drill will show you the way through such situations, starting point being prospects' own fear of unknown, which is required to be handled with a certain degree of deftness. The key to objection handling being, seeking out all the possible objections in advance and to be well prepared instead of trying to avoid those during a sales call.

Prospects have always demanded more than what their money can ever get them in a fair transaction. Therefore don't get perplexed by their attempts to squeeze more from you. Usually in every deal a compromise is reached between the buyer and the seller, which seals the deal. You will discover the process of arriving at such a compromise is a very healthy exercise, as this will expose you to the prospect's current as well as future frame of mind.

Learn to over come fear of refusal by understanding the refusal in its correct perspective. All salespersons, at some time or the other have been refused/rejected by their prospects. Do not expect prospects to show fairness only by accepting your offering, actually they are being quite fair in giving you a chance to make a presentation, a chance to practice your skills, a chance to develop superior performance. Remember as long as the sales profession exists, refusals will take place and someone has to bear its burden, so bear it with a smile and don't let a previous refusal affect the outcome of the next call. Never take a refusal personally. It's after all a free market.

Closing Thoughts

These are best summarized by:

  • Don't let events take charge of your day; instead you take charge of events and remain highly sensitive towards avoidable delays.
  • Believe in the benefits of your proposition and remember your proposition always comes before you.
  • Make good use of telephone, it is the second most important selling tool available, first one being your own mouth.
  • Create your visit/call in your mind before you approach the customer.
  • After every call analyze your performance and record the prospect's attitude and the mutual commitments.
  • Focus on doing the most rewarding thing at any given time.
  • Celebrate every win - Analyze every loss.

Also See:

Sales - Its all about Money
Sales - Knowledge is strength
Sales - Know thy customer
Selling enterprise Software
Consultative Selling - Way to sell Enterprise Software
Make a successful sales presentation Part-1
Make a successful sales presentation. Part-II
Customer Relationship Management & Sales
Sales - Importance of Planning

Thursday, September 14, 2006

Partnerships for Increasing Business Opportunities

Today in IT services world there is a web of partnerships between various product vendors, value added resellers, IT consulting companies and IT services providers. To illustrate, Wipro has partnership with SAP, Oracle, HP, IBM, Seebeyond, Cramer, Infovista, Metasolv, Oblicore, Openet, Subex & several others. eSilicon has alliances with Cadence, TSMC, Agilent, TSMC, ASE, Amkor etc.

Companies enter into multiple alliances because it is one of the cheapest, fastest and easiest ways to grow your business and test new market opportunities. For example, Wipro can now sell IT services to an European Telecom operator because the telecom operator is using Subex software - and wipro know how to integrate Subex's billing software with SAP & Oracle. Product vendors on the other hand win by getting IT service providers to do marketing for them. Since Wipro supports Subex, Wipro will recommend for additional software licenses of Subex to the telecom operator if necessary. This prevents a competing product from Convergys being sold.

Another good example is the relationship between Cell phone operators and cell phone manufacturers: See how Nokia markets its handsets through Cingular.

Today the joint marketing efforts are seen everywhere. However, managing marketing partnerships is not easy. There are several challenges to make it successful. To build a successful marketing relationships, I follow the following rules:

  • Define what you want
  • Define who you want as a partner
  • Develop a fair business sharing model
  • Be creative
  • Keep it simple

Rule 1: Define what you want

If you want access to a particular market, partner with a company who will help you to sell into that market. For example, Wipro can partner with Convergys - wherein Convergys will train Wipro engineers on it's "Geneva" software and together Wipro & Convergys can pitch for Telecom billing solution at British Telecom. Similarly, eSilicon can have an alliance with ARM and jointly market their silicon solution for HP.

Before you begin talking to partners, know why you are seeking partnerships, and how you will measure success. Start with a small test first, to see if the results meet both parties' expectations, then roll out the partnership in a larger way. The small test should be a business opportunity - wherein you can test: Working relations, sharing the gains, work cultures etc.

Ask yourself:

  • What are you testing?
  • How big is the opportunity?
  • What economic terms will work?
  • What are your showstoppers? Areas where you can't be flexible?
  • What metrics will you be using to evaluate success?

You also might ask, "How will we know if this partnership is successful?" You can't expect the other side to know what is important to you - make sure that you know!

Rule 2: Know who you want to partner with

Once you have decided on what you want, the next question is to decide on who you should partner with? Today most IT services companies get dozens of calls each day from suitors wanting to "partner." These callers might include the following:

Technology partners: They have a product that can make the company more efficient.
Resellers and agencies: They will work on commission to sell the company's product.
Providers of complementary products and services: They want to bundle their products/services with yours

It is up to you to know what it is you want. Look at your corporate objectives and the metrics you are using to assess success, and talk only with potential partners who can help you achieve your goals.

I'm currently developing vendor partnerships with a leading Silicon Valley company. My objective is to offer value added services on top of my partner's products to a telecom service provider. My objective is clear - to provide IT services. My partner's objective is also clear - to sell more software licenses & have a secured future revenue through annual license fees. My customer's objective is to ensure that they get the best quality of service and network reliability for their money.

This situation has a potential to create problems between partners. My company which is providing the IT services has to ensure that the customer is getting the value for money - so in order to do that, we recommend a certain number of software licenses from my partner - say 8 copies of that network management software is needed. But my partner thinks that the customer will need 10 copies. Extra copies means more money for the software vendor - and that comes out of the existing budget - which in turn means less revenue for my company. This problem may get out of hand - and result in an acrimonious dispute between partners.

To overcome this problem, my recommendation is: Don't partners with those who are driven to sign a deal that they don't think through the issues; but do partner with the one who is motivated to work together.

Also, when thinking about who to work with; make sure you like them. If you find them difficult, unreliable or rude during the courtship phase, you probably don't want to work with them! After all, companies are just groups of people, so it's important that the relationships be strong.

Conversely, keep a list of people you've turned down, especially those you liked; after all, objectives can change, and people can switch companies. Maybe, down the road, that person could be a great partner. Keep track of people you like and trust.

Rule 3: Be fair

Being a "tough negotiator" works great in bazaars or used car lots. But not when you are going to be working with the other party long after the ink is dry. I like to start my negotiations with a good, fair offer for a few reasons.

First, it saves time. If it's good for you, and fair to them, there's a good chance they will accept the deal and you will have a fast close and be able to quickly start growing your business together.

Second, let's say you are able to "trick" the other side into a lopsided deal. Once they figure out that they aren't getting a fair shake, they will feel resentful of you (never good to have an angry partner) or will be no longer your partner in the next engagement try to maximize the value of working together.

Don't get me wrong, there is a big intersection between "fair for me" and "fair for you," and
within that range I'd like to maximize my side. But even if I can get a partner to sign a deal that I know is not going to make economic sense for the other side, I don't do it.

The most lucrative partnerships are always the ones that are profitable on both sides.

Rule 4: Be creative

Negotiation is not a zero-sum game. If you want new customers, and they want a great brand image, they may let you market to their customer base as a way of creating excitement through your brand. There are dozens of ways to measure success, and you and your partner may have complementary objectives.

Here are some very public examples of symbiotic marketing partnerships:

  • Lay's BBQ Chips made with Masterpiece BBQ Sauce (Lay's added to its reputation for quality, Masterpiece got some branding and a big customer)
  • Toys "R" Us using Amazon as its online channel. Amazon moved beyond books, and Toys'R'Us got traffic and someone to manage its online operations.
  • Bayside Design partners with Open-Silicon Inc. Open-Silicon has a wider reach of customers and Bayside design has a niche package design technology - Open-Silicon can win high end semiconductor designs with Bayside's package technology. Bayside in turn allows Open-Silicon to market its customers.
  • EDA tool vendor Synopsys has a tie-up with manufacturing fabs - TSMC, UMC etc. so that TSMC's customers will use Synopsys's tools for timing closure.

Spend at least a few minutes with prospective partners to build rapport, understand their objectives and explain yours. The broader the understanding, the more likely you are to find a way to let both sides win.

Rule 5: Keep it simple

This rule I learnt at Silicon Valley - Keep it Simple (stupid) a.k.a.. - KISS. Companies in Silicon Valley are rife with business partnerships - new partnerships are formed, old partnerships are dissolved on the fly - based on business needs.

Just as you want to start the discussions with a workable deal and quickly get to the final details, you also want to keep the implementation simple. Resist the temptation to include all kinds of protections, extra reporting and paperwork, as well as lavish integration plans to streamline data and communications.

Adding clauses for exclusivity and "most-favored nation" status seem like strong additions to a contract, but they can often slow things down, or even stop the deal. I avoid both of these types of clauses in the contract, because they can prevent you from making the best decisions down the road, and because they are just difficult to enforce, especially as the number of partnerships you have grows.

Put up with manual data entry and hand-cut checks for the trial periods. Try not to bring in the rest of the company (legal/finance departments) until you know you've got a winning deal.

Closing Thoughts

Making successful marketing partnerships are tough. Especially for a new company - or for a new business venture. The odds are that out of every 10 partnerships created, only one will be work. And for the joint market opportunities, the odds are even worse. Therefore one must have patience, persistence, vision, strategy and above all have an opportunity to succeed. Yet, marketing partnerships are worth the effort and in a complex world of IT services - partnerships are the way to grow the business and be successful.

Sunday, September 10, 2006

Customer as Co-Innovator

"We’ve found that when we share our tools with customers rather than just demonstrate how much we’ve improved our technologies, we learn a lot more." - Randy Pond, Cisco senior vice president of operations, processes, and systems

"Several of our customers have become true partners in design with us." - Randy Pond, Cisco senior vice president

Involving customers in the innovation process can add value to new product designs. In my previous article on strategic account management, I had talked about how co-creation with customers is vital for the company. In the past I had worked on one such project where IDT Inc was co-developing a SoC router along with AT&T. The product went on to become a big seller for IDT. The idea of involving customer in developing a new product is not new to Silicon valley - but now that idea is catching up every where.

Shared Model for Innovation

In industry after industry, a shared model for innovation adoption is emerging. The most valuable "platforms" — the tools and technologies used internally to discover, design, and test new products and services — can be creatively and cost-effectively sold or lent to customers, clients, and prospects. Customers get a chance to "try before they buy." They can adopt and test new ideas and technologies before investing in them. And the purveyors of new technologies rapidly gain insights into the potential value of their wares — insights that might otherwise take years to gather.

One company that understands this is the networking giant Cisco Systems Inc. Over the years, Cisco’s architects and engineers have developed scads of internal tools that allow them to design, configure, optimize, and compare alternative network infrastructures. They often run sophisticated simulations, for example, to determine the number of routers and switches to recommend to customers, or to show prospects how a proposed implementation might work.

How did Cisco come to share this inside information? In the past, Cisco’s engineers and architects felt, often correctly, that most customers and prospects simply wouldn’t understand their internal, informally assembled aids. However, Cisco had several highly sophisticated customers who weren’t satisfied with "solutions"; they wanted to see and understand the thought process behind the company’s proposals.

Were these architectures really the best or most cost-effective that Cisco had to offer? So Cisco began showing these customers its in-house simulations. And the customers, in turn, expressed a desire to adapt these design, configuration, and optimization models for their own use.

Cisco’s marketers and innovators had not expected this. But they swiftly grasped the implications. With some thought and polish, they repackaged these tools as customer design interaction platforms. Instead of simply "selling" customers on a complete design, they now conduct collaborative meetings in which prospects literally see and play out the architectural implications of their network priorities.

There are conversion costs to changing improvised internal work tools into products accessible by external non specialists. But the challenge forces a valuable cultural change: Technological innovators become far more aware of and empathetic to customer needs and constraints. Cisco’s example may not be typical, but neither is it rare.

The Model spreads to Consumer Goods as Well

Procter & Gamble has begun to share some of its computer modeling and market research techniques with Wal-Mart, Tesco, and other distribution channels. This includes the celebrated P&G "moment of truth" research, which tracks consumer attitudes at two critical times: when the product is chosen and when it is used. To be sure, many of P&G’s biggest distributors are also rivals that offer their own private labels, so there are risks to sharing this type of proprietary innovation platform with them. But the rewards are even greater: They include ongoing close ties with retailers, who often share their own innovative tools for analyzing (for example) how store layout, shelf space, and signage influence purchase decisions.
Together, these manufacturers and retailers can develop a relationship that transcends any particular innovation tool or technique.

Also into Financial Markets

The world’s top investment banks, meanwhile, profitably peddle tens of billions of dollars’ worth of complex financial instruments, such as synthetic securities and derivatives, every year. Even sophisticated customers, such as Fortune 1000 companies and hedge funds, are often understandably reluctant to take a chance on new financial instruments. So the banks now give their customers the same computerized "wind tunnel" and "stress testing" algorithms that their own quantitative analysts have used to design the products in the first place.

"In the early days, we would run simulation after simulation demonstrating that our instruments would help them better hedge their risks," acknowledges one former Goldman Sachs and Salomon Brothers executive. "But, frankly, they didn’t fully trust either us or our simulations. It wasn’t until we started giving them the simulation tools we used ourselves that they took us seriously."

These free simulators proved to be the most profitable innovation that the Goldman Sachs derivatives group launched. Soon, clients began asking for custom derivatives and other tailored instruments. "Without the simulators, customers would never have known what to ask for, and we would never have thought to ask," recalls the bank executive. Yet, despite its success,
this innovation appeared nowhere in the bank’s R&D budget or prospectus. It was only a tacit, not an explicit, locus of value creation.

Closing Thoughts

The ongoing digitalization and virtualization of design and-test innovation tools ensures that the process of sharing innovation with the customer will grow. This will alter the innovation ecosystem, making it easier, safer, and more advantageous for suppliers and customers to take a chance on one another’s work — and to learn far more about each other, and themselves, in the bargain.

Speaking in broader terms, today, many companies resist the idea of bringing in customers as innovation partners. But the writing on the wall is clear - Its time to change the way companies think of innovation.

Also See:

CRM and Strategic Account Management
Customer Relationship Management & Sales

Saturday, September 09, 2006

Giving Your Top Performers a Reason to Stay

Right now, I am middle of resolving a thorny issue of making a team of excellent engineers to stay. The engineers are burnt out by sheer overwork in last nine months and have threatened to resign if the work conditions do not improve. At the same time, I am seeing a mass attrition at my previous company - the company I left few months ago. This made me look at the other aspects of employee retention. Since I have moved around different companies and have seen other people change jobs as well - there were several common things that caused employee attrition and is worth writing in this article.

Ambition and the Employee

When I look back in my own career - I can see that the most compelling reason for me to quit/change jobs was always to enhance my career. High performers often are capable of motivating themselves - and one thing that motivates them the most is ambition.

Ambition is a positive trait - that one looks for when hiring a person. Top performers achieve a lot because they are motivated by their ambition - but when the job no longer meets their ambition - employees start looking around for other venues to feed their ambition. Thus an employee’s ambition is an advantage when used properly and a threat if not handled properly.

Career Development

Today, companies are eager to hire accomplished employees - many companies even poach the top performers from their competitors. The scramble to attract top talent has led to fast growing industry of head hunters. In technology world - companies have become so used to the idea of hiring the right person to the job - that many a times managers ignore the prospect of grooming an existing employee to a greater role. The concept of career development within an organization is being ignored - see Hiring in high-tech firm: Build Vs Buying Talent

Career development is critical to keeping employees committed and engaged in their jobs. If they feel that their career growth is compromised they will change jobs. In another example, An employee had long wanted to move into a higher-level position, but he lacked the type of technological expertise that company policy required for that position. So when offered a similar job without that particular string attached, the employee jumped at the chance.

Why was his manager blind sided by the employee’s departure? Because he had never had any significant career-development discussions with the employee, and as a result had no idea what the employee wanted. If the manager had known the employee’s goal and what stood in the way, he could easily have helped the employee develop that skill.

Why tech workers get change jobs?

The reason they get antsy is partly in the nature of technical work itself. Many engineers feel they have finished their work when their project is functioning smoothly. Soon after that they need to find an interesting challenge. If they cannot find another interesting position internally, or if they want to continue developing software or projects, they have no choice but to look elsewhere.

Recent studies of high-tech employees suggests that three main factors affect IT employee retention:

  1. Work environment (e.g. challenging work, atmosphere, physical environment)
  2. Educational opportunities or Career growth
  3. Quality of life
Compensation and benefits were mentioned but to a lesser extent. Most of them are aware of the demand for their services and know that all they need to do to get a salary increase of 12-15% is to put themselves on the job market again.

This study shows how crucial career-development communication is to retaining talent. People who feel they’re going to have a chance to grow are much more likely to stay with an organization, even if they get slightly more money somewhere else.

Despite its importance to retention, many managers give career development short shrift. Managers find it perplexing, even onerous task.

The fear factor

Why do managers have such a hard time discussing career development? For one thing, many managers have never experienced such conversations themselves and thus have no models for how to go about them. What’s more, in today’s fast-paced environment, many managers simply don’t want to spend the time. But the biggest underlying reason managers avoid these conversations is the fear factor.

Managers are fearful that they will have to deliver a message that will be met with resistance. For instance, having to tell someone hungry for a promotion that he is not yet ready for it.

What’s more, some managers fear that by helping employees grow, they may be helping them grow out of the unit. But if they resist the conversation because of the fear of losing the person, they probably going to lose them in any case. A talented employee who receives no encouragement from his manager to stretch and develop may believe that the manager does not value him or see his potential; indeed, leaving may seem the most sensible option.

What do they really want?

The first step is to meet with the employee and simply ask him/her what his/her goals are. Initially the employee may be less than forthcoming. If you are dealing with a highly talented and versatile member of your team, the employee may find it hard to identify a specific career path - because they don’t want to limit there options. At this point you as their manager can help identify the most promising possibility by using some probing questions:

  1. What assignments have you found to be most engaging?
  2. Tell me about an accomplishment in the past six months you feel good about.
  3. What makes for a great day at work?
You can also give some kind of formal career assessment. Identify their strong points and give some pointers as to how they can develop it further. A manager in an R&D group discovered that one of his employees like to do marketing. And during the initial career-development conversations with that employee, the manager suggested him to do an MBA degree.

Once you’ve helped an employee uncover his goals, you can then help him put together a development plan. At this point, it’s especially important to set realistic expectations.

If an employee isn’t ready to take on certain responsibilities, you need to discuss the specific skills he needs to develop first. False promises won’t work. Most of the steps for developing skills will involve on-the-job activities, for instance, serving on a cross-functional task force or shadowing a colleague.

Once you have a plan, you need to meet regularly, at least once per month, to track the employee’s progress. At each meeting, go over the development plan and next steps.

Be frank and honest

In some cases, career-development discussions require the manager to say things the employee may find uncomfortable to hear the details about the employee’s weaker areas, for instance. To make these conversations most effective, prepare for them carefully by gathering as many specifics as possible. Cite examples of where the employee’s weaknesses worked to her detriment, and highlight the benefits to be gained from building particular skills.

This is especially important for successful employees on the fast track who might not respond well to criticism: ‘A high performer whose progress within his company was being impeded by his abrasive interruptions during meetings. To make his point, the manager described a specific example of when the employee’s interruptions stopped a colleague from taking his side. He was able to see that, while his goal in that meeting was to get people to listen to his point of view, he wasn’t able to achieve it.

Discuss more than just vertical options

If an employee expresses interest in a job he doesn’t have the skills for or the position simply isn’t open, there are lots of other possibilities. For example, you can add responsibilities to an existing job.

A key employee wanted to become a team leader at a time when there were no appropriate openings. So the manager suggested the man run a group developing a new Internet portal to give him the chance to try his hand at leading and developing something new. Or you can suggest making a lateral move.

A store manager who wanted to move to a corporate role but lacked the experience. The company reassigned him to HR for two years to help him develop more management skills.
Another option is to have an employee shadow someone in a job the employee wants, so the employee can learn more about the job and gain a clearer sense of what it will take to get there.

Give Guidance to their careers

You need to have different discussions with your employees. If you have a highly ambitious employee who wants to move too quickly - before he’s quite ready - you should help him establish a more strategic plan for advancing, one that will allow him to develop the strength he needs to go further in the long term.

If you have an employee not interested in moving up too quickly, you’ll want to guide him in improving specific skills while exploring ways to keep him engaged. In addition, consider each person’s preference for just how involved you should get. One person might want you to provide a broad sense of the targets to hit, while another might prefer you go over things step by step.

Closing Thoughts

In today’s hyper-competitive world, hiring and retaining quality talent is essential for any firm. Many companies have developed a successful plan in hiring quality talent, but most of them fail to retain their best talent. This trend is more common in high tech industry - where the management emphasis has been to get the right person for the job - rather than groom a person into the job. But there again are few exceptions - European firms: Unilever, Shell, Seimens, BT, BP, Alcatel etc. have a long history of grooming employees to leadership positions. This lesson must be followed in high-tech industry as well. Indian IT companies - mainly TCS & Infosys have developed a well defined employee training program - but are still learning on how to manage an employee’s ambitions.

Also See

The Value of Talent

I have been writing several articles on hiring & retaining talent within an organization. Attrition rates in Indian BPO companies have reached 30% in some cases. Recently, I came across a case where an entire team of software developers threatened to resign if the work conditions do not improve. These engineers have been working more than 100 hours a week for last 9 months and the project does not seem to end anytime soon. Worse, they were not even recognized for their efforts. Most of this attrition is due to reckless use of human talent. Recent survey conducted by NASSCOM shows that about 40% of the employees who quit a BPO – leave the industry! This indicates a tremendous waste of human talent.

If these companies managed their financial assets as carelessly as they do with their human assets, then shareholders, auditors, and regulators would come down hard on them for inefficient use of funds. Although all CEOs and top management members tell "Our employees are the most important assets – or our employees are key to our success" etc., many companies cannot measure/manage their employees’ contributions to corporate value.

I have studied the Indian service industry very closely and based on my study and knowledge prompted me to write this article.

Causes of Inefficiency

Inefficiency in utilizing human resources stems from two fundamental mistakes by the company. Firstly the line managers are reluctant to categorize people based on their business impact, instead managers prefer to categorize into a larger buckets based on skills & experience. Secondly, the Human resource management policy is not aligned with the needs of the organization i.e., people are being classified by the roles or functions in which they work - but not one their experience or ability to perform the role. Often no attempt is made to map the person’s ability with the role he is supposed to perform. The ability of an individual to perform the assigned role has a huge value impact.

I believe that service providing companies need a far better understanding of the strategic value of employees; it is critical to success in the global marketplace. The company’s future growth and competitiveness depend more than ever on attracting qualified workers — an increasingly scarce resource— and helping them work efficiently together within the organization. In essence, companies which provide services to customers must think like theater troupes: Their success depends on timing and on every person executing his or her role, whatever it may be.

To cite an example: A large Indian IT company provides IT services to A British Telecom company. The Telecom project manager has huge project which needs to be executed carefully - i.e., the Indian IT company needs to understand the customer requirements in great depth. This implies that the person who should be sent to study the customer requirements must be experienced in conducting the study, must have excellent communication skills, and must know how to get the information he needs to conduct the study. But in reality, the person who is sent to London to study the customer requirements had never done that type of work before, had poor communication skills and was reluctant to ask questions. The result of selecting a wrong person to this task resulted in poor understanding of the customer requirement, wrong implementation of the solution, and a completely dissatisfied customer. At the end of the project, the person who conducted the requirement study was blamed - who got frustrated and left the organization.

The above example shows how inefficient mapping of the task to the person’s ability resulted in such a mess.

Understand the Business Impact

A strategic approach to managing the value of employees first requires a definition of the roles that must be performed on the corporate "stage." This means creating a taxonomy of jobs within the company that is consistent across business units and is separate from the individuals working at these jobs. This implies that an employee is expected to fulfill a function, with a number of tasks for which a number of skills are required. Some of these tasks are technical and some are related to the employee’s relationships with customers, coworkers and other outside agencies.

Line managers must first define the roles that needs to performed in that business unit. For example in an IT industry, the roles are: Business Analyst, Project coordinator, Technical Analyst, software developer, Test engineer, systems integrator, Customer assistance executive etc. Note that these roles are defined independent of the technical skills definitions.

A business analyst, for example, must be able to understand the business requirements of the customer, analyze the solution and communicate effectively with customers and coworkers. A project coordinator must be courteous, manage customer expectations and coordinate various activities on the customer side as well as service provider side. A test engineer must know how to perform the required technical tasks and meet the various quality standards.

Once these roles are defined, the next stage is to map the employee competency with that of role. Line managers must identify the various competencies of their employees - this includes technical skills and soft skills as well.

Understanding the Value Impact

Once the different roles have been defined, management is in a position to determine how important each is to the company’s ability to create value for customers and shareholders.
Certain jobs have a greater value impact on an organization; there is a substantial risk to financial performance or reputation if these tasks are not performed well. In some cases, but not all, these jobs merit higher compensation. Other roles carry a significant cost impact, because they require a good bit of training, development, and skill complexity to be performed adequately.

The roles which have the highest value impact These roles almost always command the highest salaries in the organization. See figure-1

On this basis, we can classify an organization’s roles into four broad segments, each of which requires a significantly different talent management approach.

  • Innovators
    These people devise and implement an organization’s distinguishing value proposition or business model. They include principal engineers, chief architect, scientists, etc., in a technology company. This also includes visionaries leader - CEOs, COO, CTO etc., who can innovate new business models and processes. Innovators are scarce resources with skills that take a long time to acquire and are costly to develop and maintain. As a result, they are paid very well and hence have higher cost impact.

  • Ambassadors
    Ambassadors represent the organization’s public face and are responsible for customer experience. Ambassadors can work in all levels of an organization. From the entry level position to that of a CEO. In an IT industry, the common ambassadors are: Project managers, project coordinators, Application support engineers, salesmen, account managers etc. The value impact of these ambassadors is very high - because if they don’t do their job well, the business can suffer significantly. Consequently, these people are paid according to the value impact they have on the business - i.e., CEO, Client partners, Account Managers are highly paid. Whereas front-line employees who are easily replaceable and their skills do not have to be particularly specialized are not highly paid. As a result the overall cost impact if fairly low.

  • Craft Masters
    Craft Masters ensure the quality, timeliness, and cost-effectiveness of an organization — the essential ingredients for the faultless execution of a business strategy. These are the design engineers in a high-tech business, the project managers, the marketing managers, etc.

  • Drivers
    Drivers keep the business running. They are back office operators, programmers, developers, IT support staff, administrative assistants etc. Although they are neither crucial to the success of a venture nor hard to hire, in most companies they represent the largest category of human capital, and bad management of this group can lead to operational disruption or quality problems.
The differences among these four segments are expressed in terms of talent valuation — such attributes as knowledge, experience, skills, and personal interaction capabilities — and not in terms of organizational structures (such as business units) or in human resources management terms (such as age, education, seniority, or compensation).
This concept for strategically managing the value of employees brings human resources approaches to a new level. Basic management processes — sourcing, development and training, compensation, retention, and separation — are conceptually the same for all four employee segments.

However, since each segment differs in how critical it is to an organization’s success, the practical tools used in applying these processes will also differ. Take sourcing, for instance. Depending on a company’s business model and operational plans, employees in some segments, such as Innovators and Ambassadors, are generally hired and trained as part of the permanent corporate head count. In other instances, however, Craft Masters and Drivers are brought on as temporary or contract staff or engaged as independent consultants.

People Management

Once the right people are cast in the right roles, they must be managed according to those roles. For example, consider two training officers, Tom and Dick. Tom is highly professional, and his training efforts are almost always successful; he is a Craft Master. But Dick is more creative and is expected not only to train staffers well but also to improve the quality of the teaching materials. He was hired through a headhunter, is paid more than Tom, and knows that he is depended upon to expand the limits of the training organization. Dick is a Creator. Tom and Dick have the same job title and, in general, do the same work. But Tom and Dick are in separate business critical categories, thus their salaries, evaluations, and promotions must be handled differently.

Closing thoughts

Dealing with employees based on their skills and the roles can be a complex balancing act for management. But it is exactly what every should do. For example, the manager of an opera house must continually handle a number of distinct segments of people: the singers, the conductor, the casting director, the cast, the musicians, the bartender, the box office cashier. To do this, he uses varied sourcin techniques, compensation principles, and motivational approaches in a relatively instinctive way.

But in many cases, the management rules and procedures of an organization can be obstacles to segmentation and a force for "averaging" the treatment of individuals’ roles. This tendency is a dangerous handicap that makes it impossible to measure the value of employees and, ultimately, to compete successfully in the global marketplace.

Also See

Retaining People in Technical Jobs
Retention of top managers
Use Marketing to Hire and Retain Talent

Wednesday, September 06, 2006

Sales - Winning Big Deals

Every salesman know that the future sales can be predicted by looking at the prospects in the funnel. Often times this implies that to meet the number targets, a salesman has to either stuff his funnel with a large number of small prospects or plan on winning a few big deals. On the surface, the obvious choice is to go for the later - aim to win few big customers. But the challenges of winning a big customer is so huge that most salesmen prefer not to chase big customers - instead aim on winning a large number of small customers.

Being a marketing professional, I can vouch that winning a big customer is a challenge and to overcome such a challenge one needs a dedicated focus. Currently I am concentrating on winning a big order from UK’s largest telecom operator. Based on this experience, here are a few tips on winning a big account.

Big Deal is a Big Advantage

To win big you will need a big customer - who has the ability to spend big amount of money and who is also into selling big. Larger companies have larger budgets - its that simple to understand. Often times to win a $1,000,000 deal, the work involved is not 10 times as much as a $100,000 deal. The real effort is only a few times more. Therefore as a salesman, if I were to look at my ROI - winning a big deal is the way to go.

But the challenge is that one needs to be twice as creative and work twice as hard to win a big deal - when compared to an average deal.

Selling to a big company does not mean one will win a big deal

The revenue of your customer has nothing to do with the size of the order you are selling. As a salesman selling IT services to UK’s largest telecom operator, I see that many of the deals we have won are small deals - mostly in $100,000 range or even lower. But these small wins helps me to gain a foothold in areas where we can snag a big contract. I can quote a situation where we entered with a small order for about $120,000 - but that opportunity is now becoming a multi-million dollar deal. Remember: without the small wins, big wins will never happen. In other words, to win big you will need to win small deals.

What the little win does is that it opens the door to another, bigger deal. If you do a good job in the small deals, then you will know the key persons required to win the big deal. These contacts will be your coaches, mentors - secretly working for you within their organization - trying to influence other stake holders. So your chances of winning a big deal greatly depends on winning the small ones first.

Learn to get around the Roadblocks

Big deals also means intense competition and numerous roadblocks. A salesman must know how to get around these roadblocks. In all big deals there will be numerous stake holders and each of these stakeholders have their own agenda and interests to protect. If these stakeholders feel threatened - they will create barriers to your big deal. So the first step is to identify all the stake holders for that big deal, then identify their objectives - both implicit and explicit objectives. Getting around the road blocks involves:

a. Start with building a Business Intelligence System.
See Sales - Knowledge is strength & Marketing - Developing Market Intelligence . I have written about this topic in great details in the earlier articles - so please refer to them.

b. Create a cross functional consultative team. The members of the team must be selected such that each functional member in the buying team has a counterpart in your sales team: An technical architect is paired with customer’s technical architect, your financial manager is paired with the customer’s financial manager, your legal advisor with the contract manager, your business strategist is paired with that of the customer’s strategist etc. The basic idea here is that your sales team should always be in a position to offer intelligent, meaningful consultation to the customer. At any point of time, your team should not be in a position where it cannot answer the customer’s questions. Or in other words - your sales team is now doing consultative selling. See: Consultative Selling - Way to sell Enterprise Software

You, as the salesman must be in charge of selecting the members for this sales team. While selecting team members looks for intelligence and judgment, their capability to anticipate challenges and their ability to work around the obstacles. ( Note that selecting your sales team is not easy. Often times political compulsions may force you to select members who are not the ideal members to have in your team )

c. Be flexible. Often times the vendor needs to be flexible in order to get around the road blocks. One must be flexible and creative with big accounts. You have to do things the way they operate and fit into their process. This implies making exceptions and customization to win the customer. Large companies always expect customization.

Learn How your customer sell to their customer

In other words, treat your customer the same way they treat their customers. Typically any large deal will involve some upfront investments at the beginning. So if your customer is experienced in selling big - or making big deals, then it is beneficial to follow their selling techniques. If they invest in a deal to win a big account, you too should do the same. If they use sophisticated marketing tools: High profile seminars, presentations, sponsorships etc., you too need to do something similar. By mimicking the customer, you are making the customer feel comfortable by making them think that you are also one of them - "Just like us".

Learn how to Close the Deal

Winning big deals depends a greatly on the salesman’s ability to close. Often times, salesmen are reluctant to bring in a closure - because they are afraid that they might lose if they try to close the deal early. So instead, the salesman keeps feeding more information to the customer that the customer now has too much information on hand - and that results in a "analysis paralysis".

Knowing when to push for a closure is an art. It varies with deal to deal, customer to customer. The one way I use to decide on when to push for a closure is called as "50-70% rule". This means that if my probability of winning the deal is greater than 50% and my confidence to the win the deals is about 70%, then I go for it. This is based on my gut feelings and not on experts opinion. Remember that your sales team may recommend against it and they have their "expert" opinion - but experts often lack judgment, So go with your gut instincts

Closing Thoughts

Developing relationships within the customer organization is critical for any deal. By developing relationships inside of large companies, you often have the chance to pursue big deals. To win big deals, one needs a lot more than just relationships - one needs a sales team, business intelligence, flexibility to tailor your offerings and the ability to close the deal. It takes confidence in your selling ability to keep your sales funnel lean and tackle big deal opportunities, but the reward inherent in winning them can be huge. Your sales skills and your organization's flexibility may be put to the test, but big deals can ultimately lead to more stability and growth within your company.

Also Read
  1. Sales - Knowledge is strength
  2. Marketing - Developing Market Intelligence
  3. Consultative Selling - Way to sell Enterprise Software \
  4. Marketing & Sales Funnel