Sales Forecasting

When managing a sales force, the most difficult process is forecasting sales. The more pressure you place on the sales force, the lower the quality of opportunities that show up in their pipeline and with unrealistic probabilities. Only qualified opportunities should be foretasted.

What is a qualified sales opportunity. No, it is not one just because they agreed to a meeting or a demonstration! You need to regularly do a line by line audit of a sales pipeline to sort out fact from fluff. There are some simple questions to be asked about each opportunity to validate that it is qualified:

1. Is there a budget? Most tire kickers love to meet with sales people to gather intelligence. Vendors are a great source of competitive information, gossip, and price metrics. A qualified buyer has a budget already approved to so something. The salesperson must determine whether there is an approved budget and for what. It will be difficult to pin down an actual amount but it is important to get a definitive yes or no.
2. Is there a definitive mandate to enter into a contract for something like you are selling? You may feel that you provide a better option than what was budgeted, but what was mandated will almost always prevail.
3. Have you determined that there is an acknowledged need for what you provide? You may be selling benefits but do they agree that they need those benefits? Assuming interest because of ongoing dialogue does not cut it. You have to get them to fully acknowledge they have the need.
4. Have they acknowledged you have a potential solution that matches what they are seeking. Too often you will get later surprises if you do not specifically ask. Bravado and assumptions lose the deal.
   

Helping buyers make informed purchase decisions is the primary sales function but proper qualification is the key success factor for your organization at large. Too much energy is wasted and wrong decisions made based upon unqualified sales forecast data. The first phases of the sales cycle are Interest Development and Education and these phases earn the right to ask the above four qualification questions before investing your professional time and organization time further. If you do not have an affirmative on all four, the salesperson must continue to work on the first two phases until you do or you walk away. Forecasting anything until you have qualified opportunities is putting your head in the sand with wishful thinking. Using a forecast to measure salesperson productivity is also a poor metric. Audit each forecast one-on-one with the salesperson and you will see improvement not only in your own forecasting but with salesperson productivity.

Unique Selling Proposition

Build it and they will come. Sounds easy but what is "it"? No matter how many ways we tackle that challenge analytically, the old adage remains true... that you must "find a need and fill it". If you are in any business that is focused on ongoing relationships, what makes you unique must be worthy of repeat transactions with the same customer. No hit and run snake oil scheme will work.

A USP is derived from latent needs. Needs are latent either because the pain has yet to be felt or it has been felt but they have given up looking for a solution that does not appear to exist. Looking at competition will never uncover the latent needs that will inspire your USP. They do not have the answers for you or the need would no longer be latent.

Like most business strategy, the way forward is defined by people, process, and technology.

People - the type of person who can uncover latent pains has a very different profile than you usually have in a business organization. They see possibilities conceptually. You will recognize them as individuals that are often referred to as being composers, architects, and catalysts.

Process - many business strategy books provide useful thought catalytic frameworks that are useful communication tools between the conceptual and non-conceptual people on your team. You absolutely need subject matter expertise through the eyes of those with the latent needs. Most often those in sales and service within your own organization regularly hear about the latent needs but no process exists to collect these thoughts. The key process is scheduling regular latent need review meetings to consider new offerings and the USP of your business.

Technology - these days communication is the key to uncovering latent needs and nothing creates a buzz better than social network optimization. Social media has become the modern Roman Forum for thinking and learning. Your CRM is the other key repository of information that can uncover patterns that suggests latent needs through your records of client interactions.

If you do not have a disciplined process to help you uncover latent needs through your interactions on an ongoing basis, you cannot expect to have a unique selling proposition. The Cirque de Soleil success shows that you can keep creating USP's if you foster an innovative culture that listens to your clients.

Books Provide Inspiration

Let's face it. All business books try to create a packaging according to the KISS formula. Being simplistic does not make them any less inspirational. As humans, we tend to get into a rut and sometimes need a "whack on the side of the head" to see the obvious. Oh, right! That was from an inspirational business book too.

Blue Ocean Strategy

Through some great business strategists, I was recently introduced to this book and concept. In many ways, I find it to be "thinking outside the box" lite. They remind us that all the sharks battle over the same feeding areas creating a "red ocean" and too often forget that there is a larger "blue ocean" with many more uncontested fish that can be had, all of your own.

It was apparent that the authors shoehorned their examples from a rear view mirror perspective to fit the hypothesis. Cirque de Soleil is a good example. The book infers that the founder went through an analytical strategy process to uncover the blue ocean with a new form of entertainment. In actual fact, we used to watch him and his fellow buskers collaborate on the streets of Old Montreal in what looked more like a theatrical jam session. The new offering emerged from trial and error honed to audience feedback and voluntary donations. What led them from coins to billions was simply being very talented and their willingness to pay their dues. There was no instant strategy or Eureka.

The Blue Ocean Strategy analytical premise and tools are very good ones. What we can't forget is that you do not create new winning categories of your own in a vacuum. It is an iterative process of testing reactions and evolving until the market declares you a winner. You have to pay your dues working with and learning from those who can choose you or not.

Top Line or Bottom Line Focus?

The real strength of any services company is having happy clients who provide recurring revenue. Focusing on the top line provides many more opportunities that can be managed to generate a positive bottom line.

In the current market value driven economy, the only real focus tends to be ensuring the next quarterly report meets earnings expectations. Having a bottom line focus is not a bad thing. What is bad is when the obsession with bottom line forecasts result in bad decisions that will damage client and employee relationships over the longer term. The service business is all about people and their loyalty which is built upon mutual trust. When you throw trust out of the window, you are unleashing unseen termites in your business framework. You do not see the damage until it is too late.

What can you do to prevent the termites? Ensure every decision is viewed not only from a bottom line standpoint but also from a client loyalty impact.

Perception versus Reality

A corporate vision statement is really only a perception. So, how can we discern whether the vision is realistic and attainable? The simple answer is that we cannot as reality can only be validated through a rear view mirror. Only reality is finite while perceptions are subject to interpretation and manipulation.

Interpretation is very personal and is based upon each individual's state of mind at the given point in time when the interpretation is rendered. Perceptions are fickle. They change constantly based upon ... well almost anything that dynamically changes a personal perspective - learning, emotions, events, demands etc. Whenever more than one person is involved, anything other than maybe the status quo can create a state of chaos.

Manipulation is a harsh word that conjures up illicit definitions. The simple fact is that every person manipulates to try to shape other's perceptions to match personal desired outcomes. It is a natural tendency that started from birth. Manipulation is subtle art form that defies discovery until the reality becomes more evident. Manipulation excels in situations where reality constantly remains too abstract or too much in a state of flux to become evident. Economic demand, the stock market, and politics are all good examples of how manipulation of perception is the primary success driver.

Managing and making sound decisions is not an analytical process as much as it is a process of defining and challenging perceptions. Because perceptions are personal, a perception governance process is required to ensure that there are checks and balances in place. Hierarchial organization structures limit the effectiveness of the traditional controls. Through each level, manipulation can occur that alters the interpretation, creating gaps between the original vision and the various execution visions. These gaps create chaos and freeze an organization over time. Many new attempts at change are made and become the flavour of the week when viewed through the eyes of the workforce.

If your organization is ambitious but... you may find that implementing a Cubic Counterforces (see earlier post on this concept) framework may help you finally move forward as a team. The interpretations and manipulations need to be addressed in a clinical and coherent fashion. Too much functional autonomy and too social a cultural bias is never a good thing for a business!

Cubic Counterforces

Why do business schools teach that the business world can be analyzed in a series of two dimensional charts?

Through my decades of experience in business organizations, I have drawn the conclusion that managing is much like working to unscramble a Rubik's Cube. Individual executives each take a shot at it. Each one figures that working in a focused way on their favorite color is the only right approach. Each one later skulks away in frustration leaving the cube for somebody else to fix.

What I think goes wrong is that the two dimensional myopia limits executives from seeing the rest of the story - the impacts on the other intersecting organizational dynamics. Like with the cube, one business perspective is always intertwined with at least two others and always must have equal and opposite forces at play. I call this The Law of Cubic Counterforces which is governed by the following truisms:

1. Every change from a given perspective must also be considered from the directly opposite counterforce perspective.
   
2. Any change scrambles any previous alignment of all adjacent elements.
   
3. When multiple managers individually try to sort out the same cube simultaneously, organizational energy disappears into a paralysis state.

When I assess organizational strategy, I do not throw away all two dimensional analytical models as some are quite useful, but they confuse the analyis if introduced too early. First, I prefer to try to stand back and learn about the multi-dimensions of an organization in a clinical way and try to relate my findings to a scrambled Rubik's Cube metaphor. (I should mention at this point that I have never found a fully aligned organizational cube and I would not suggest that it is even attainable except maybe in a sole proprietorship.)

Confused? It's understandable as our brains have been hardwired through years of training to think in only two dimensions. I have found that the cube metaphor helps me bridge into multi-dimensional thinking processes. Why becomes clear when we dissect our cube. If you have ever broken one, you would have found an assembly of three little "barbells" with fixed blocks on each end plus 8 loose blocks in each of 6 different colours.

Can you picture the "barbell" assembly that connects opposite faces of the cube? It is actually a bar with end blocks in different colors. In our metapahor, let's think of those three bars as invisible magnetic force fields and their individual end blocks as visible magnetic poles. The cube is really a core assembly of three such invisible intersecting force fields and that is why I dubbed this analytical model as Cubic Counterforces.

I first try to identify an organization's three intersecting force fields. These are the three most critical intersecting organizational Counterforces. There may be more than three but three is more than enough to manage in any fiscal period. It is probably not surprising to learn that the force fields will usually be some variant of time, quality, and money respectively. Those are the three underlying fundamentals that we can truly manage in any business!

So what are the counterforces? Simply, every decision always has a customer-centric perspective and a stakeholder-centric perspective. In a fully aligned cube, these two perspectives arguably should live in balanced harmony through a shared vision. But... in our metaphor we know we will always be starting with a scrambled cube.

Every decision should be objectively considered and presented from both these perspectives. I am not suggesting that this concept is not recognized in most organizations. I am simply stating that our planning and analytical models are rarely multi-dimensional and as such a biased perspective is often too easily approved based more on political pressures than on healthy debate by well represented opposing forces. I have always found that the people in an organization know yet keep silent when "the emperor has no clothes". That voice of reality is one voice that needs to be raised and represented.

We have now defined our major Counterforce themes:

Stakeholder timing horizon versus Customer timing horizon

Stakeholder perceived quality versus Customer perceived quality

Stakeholder ROI versus Customer perceived value

So, what about all those other little blocks on each colored face. These are the planning factors that must be examined from each Counterforce perspective. Each face is a matrix of three rows and three columns that intersect at a Counterforce pole. There is no right way to identify each row and column. It depends upon what is important to an organization in a given planning horizon.

In most cases, I have found the following to be practical :

Columns>>>> People... Process.... Technology

Rows>>>>>> Revenue Creation... Products... Fulfillment

When you combine all of these dimensions into a Counterforce template, you have an exhaustive analysis not only of the individual combination of elements but also of the competing objectives, perspectives, and their interdependencies.

This sounds too complex for one person to digest? Absolutely correct!

In order to address this reality, I advocate using a responsibility grid reporting to the CEO as follows:

• There should be two Senior Executives, responsible for Stakeholder Perspective and Customer Perspective respectively.
  
• Each Senior Executive should have three executive reports responsible for Time, Quality, and Money respectively.
  
• Each executive should have six middle management level reports responsible for People, Process, Technology, Revenue Creation, Products, and Fulfillment who interact in a matrix model to manage their interdependencies.

In smaller organizations, roles may be combined at any level so long as the Stakeholder and Customer perspectives are never cross-pollinated. In effect, the suggestion is to create two fully mirrored strategic planning teams who are mandated to prepare, defend, and monitor on an ongoing basis their own Counterforce perspective within their assigned domain.

The end result is a solid plan and an ongoing governance approach with appropriate checks and balances. Counterforces are a reality and must be embraced and encouraged for an organization to prosper. In fact, adopting this type of approach might have prevented the recent "dot bomb" and corporate fraud era. It certainly is an approach that can be advocated to proactively address Sarbanes-Oxley governance requirements.

I encourage readers to visit often to help me explore this topic of Cubic Counterforces further.