Mastering the Complex Sale to Compete and Win_11 doc

This is especially im-portant in sales, where HR can help shape the sales forceitself—facilitating the outplacement of salespeople whocannot or will not adopt the Diagnostic Business Dev

in order to establish a hiring profile and clearly describethe job requirements to candidates This is especially im-portant in sales, where HR can help shape the sales forceitself—facilitating the outplacement of salespeople whocannot or will not adopt the Diagnostic Business Develop-ment approach (which can be 20 to 30 percent of the salesforce, in my experience), and helping sales leaders recruit,develop, and retain sales professionals who can flourish inthe new environment.

Procurement

Traditionally, the role of procurement has been analogous

to the immune system in the human body: It was chargedwith protecting the organization from opportunistic out-siders (typically, salespeople) and obtaining the materialsand components needed to create solutions at a cost thatmaximized the company’s margins Procurement accom-plished this by adopting a standardized one-size-fits-allbuying process that forces all those who wanted to do busi-ness with the company into an apples-to-apples com-parison, whether they were selling paperclips or scarceresources of strategic importance

Today in Era 3, this focus on insulating the organizationfrom the outside and driving down suppliers’ prices has beenproven shortsighted It strips value from solutions by cuttingoff access to high-value innovative suppliers and raises totalcosts Instead, the role of procurement should be to optimizevalue throughout the value chain

Diagnostic Business Development Prevents Value Leakage 231

Procurement can prevent value leakage between thesupplier and the firm by monitoring and managing thevalue delivered by suppliers In fact, it can actually help cre-ate incremental value by teaching the Diagnostic BusinessDevelopment approach to the company’s operational man-agers and its suppliers, so the organization can buy in thesame way that it sells to its customers Wayne Hutchinsonhas been implementing such an approach at Shell Interna-tional He explains it like this:

You create value in procurement by working with suppliersjust as you would create value for a customer in the salesprocess We’ve done this with a major supplier of gas tur-bines that cost tens of millions of dollars We worked withthem to analyze everything from bidding and winning con-tracts, to the design, manufacture, and installation of theturbines As a result, we cut the delivery time on these criti-cal path components in half, and this has created multiples ofthe value that simple cost reductions would provide, for both

us and our supplier Now that we’ve won the suppliers’ trustand taught them how to sell to us, we are engaging inexactly the same way to work on reducing other costs in how

we work together, again, creating value for both of us

A Source of Organizational Alignment and Learning

An organization-wide Diagnostic Business Developmentcapability prevents value leakage and serves as a powerfulenabler of value and profitable growth for two reasons.First, it is a linking mechanism that is capable of generatingvalue alignment, deployment, and measurement within theorganization Everyone in the organization will be speakingthe same language and working in a coordinated fashiontoward the realization of customer value Second, it is amechanism for communicating and applying the learning

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that is generated as the value the company produces bumps

up against the realities of the marketplace

Strategic Alignment

The modern corporation depends on the division of labor.Around the time of the American Revolution, Adam Smithglowingly described the efficiencies inherent in labor spe-cialization using the example of a pin factory, in which heshowed how 10 workers could raise their output from fewerthan 200 pins per day to more than 48,000 pins by simplyassigning one worker to each task in the production pro-cess.6 Specialization enabled the growth of huge compa-nies, but it also had a downside that Smith did notanticipate Specialists don’t always see the big picture andthey often have conflicting goals

The division of labor created boundaries betweenfunctions, and when those boundaries become barriers tooverall performance, they create what has come to be calledthe silo effect When companies suffer from the silo effect,value creation is negatively affected Value formulation anddelivery are segmented and isolated into functions One de-partment completes its work in isolation from the otherfunctions within the company and tosses it over the wallinto the next function Each successive department doesthe same until the goal is achieved

In today’s complex organizations, this isolation isone of the primary causes behind the failure of corporatevalue initiatives The most common results of the cross-functional dysfunction created by the silo effect are in-efficient execution, inhibited communication, shallowthinking, and slowed response times to customers andthe marketplace For instance, I’ve seen engineers createnew products with little or no input from the rest of theorganization and even without the input of customers;

A Source of Organizational Alignment and Learning 233

marketers create advertising campaigns and value saging in a vacuum; and salespeople uncover major cus-tomer needs and fail to report them.

mes-What’s missing here is the alignment of functionsaround corporate value creation Whether you are buying

or selling (whatever role you are playing in the valueexchange), Diagnostic Business Development is a mecha-nism for creating a cohesive, cross-functional team thatcommunicates and reinforces strategy, gets everyone work-ing toward the same goal, and measures net value achieved.Everyone in the organization should be concerned withhow to create value and leverage it for corporate and cus-tomer success Everyone should feel a responsibility for thewelfare of the organization as a whole and its customers.Here’s how Greg Lewin, former president of Shell GlobalSolutions, describes the focusing effect of customer valueand Diagnostic Business Development:

The model that we used in Global Solutions was a globe thathad the customer at the center of our world Deliveringvalue to the customer became a shared vision All of the vicepresidents knew that if there was tension between them, Iwould start by telling them that this is all about deliveringvalue to the customer and how we can best accomplish that

No matter what the issue was, they knew that the customerwas where I was going to start When we did our strategy-away days and our operational meetings, the customer iswhere we started When we worked on technology or effi-ciency or delivery issues, the customer is where we started

Organizational change is difficult in the best of times.You need to use every means that you can to achieve it Themost powerful forces are market forces and customers, and

if you expose the organization to them, it will drive change

By starting with the customer—and I think you can startwith the customer in any business problem—a lot of the

Develop-The pharmaceutical industry is a good model of howthis alignment can play out in the real world When theR&D function of a prescription drug maker undertakes thecreation of a new product, it uses a process that can beframed around the four phases of the Prime Process R&Dseeks to discover a market of patients that is large enough tosupport the investment required to create a new drug It di-agnoses the physical symptoms, causes, and consequences ofpatients’ problems It seeks to design a drug that will bestsolve the problems, including recognizing the side effects(constraints to value) that the patient may experience And

it delivers the new drug through a highly regulated process

of testing and government approvals

The process is repeated as the drug maker’s marketersand then its sales professionals create and align their efforts

to bring the drug to the health-care providers who will scribe it This time, the discovery process is used to seg-ment and refine the markets for the drug The indications

pre-of each segment are diagnosed, the solution design isaltered to fit each, and the solution is delivered

The doctors who prescribe the medication repeat thePrime Process yet again They discover at-risk patients bymatching them to the profile of patients who are likely

to need the drug, diagnose the individual patient, designthe proper dosage and related therapy, and then prescribe thebest solution and monitor the patient’s compliance to thetherapy and his or her progress throughout the delivery phase

A Source of Organizational Alignment and Learning 235

Each cycle of the Prime Process builds on the onebefore it; each is aligned with and supports the total effort.These same four phases can be applied to the value propo-sition of any product or service that grows out of a corpo-rate strategy In the absence of the Prime Process, there issignificant value leakage as the organization moves fromcreating a strategy to achieving results.

Organizational Learning

The second mechanism that derives from the DiagnosticBusiness Development capability is an organizational capac-ity for learning MIT’s Peter Senge popularized the idea ofthe learning organization in the early 1990s A learning or-ganization, he wrote, is an organization where people con-tinually expand their capacity to create the results they trulydesire, where new and expansive patterns of thinking arenurtured, where collective aspiration is set free, and wherepeople are continually learning how to learn together.7Interestingly, when Senge identified the seven learningdisabilities common in today’s organizations, the first wasthe fact that employees tend to identify with their jobs andlimit their loyalty to their functional responsibilities Thisidentification and loyalty, said Senge, does not extend tothe purpose and vision of the larger organization The siloeffect and cross-functional dysfunction strike again!

The problem, of course, is that when learning is stifled,

so is the ability of the organization to adequately adapt itsvalue capabilities and respond to its customers’ value require-ments This ultimately negatively impacts a company’s ability

to retain customers and create profitable growth

Whether an organization must respond to new valueopportunities, make changes in the market environment, orcorrect miscalculations in its current value strategy, it musthave a mechanism capable of capturing and responding to

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feedback It needs to be able to identify, communicate, andrespond to the customer’s situation throughout the valuecreation process Diagnostic Business Development serves

as that mechanism

The Prime Process requires that the various functionswithin the organization that are responsible for deliveringvalue to customers take to the field in one voice and oneprocess To effectively Discover, Diagnose, Design, andDeliver value, they frame their assumptions in terms of thecustomer, and they test those assumptions against the real-ity of the customer’s world We want the scientists in R&D

to view their ideas and creations through their customer’seyes via the Prime Process We want to push marketingand product development out into the real world wherethey can directly observe the symptoms of the absence ofvalue, and experience firsthand the challenges their cus-tomers are facing We want sales professionals to commu-nicate the issues they uncover as they conduct a diagnosis,and we want service and support staff to report the issuesthey find during the delivery and implementation of solu-tions This ongoing diagnostic feedback loop creates alearning flow that, in turn, can be used to generate continu-ous value improvement and breakthrough value innovation.How might this play out in the everyday world of busi-ness? Picture a financial software developer that has a 250-member sales force calling on CFOs around the world Asthe salespeople are busy diagnosing the problems that theirprospects are experiencing, they are collecting valuable in-formation If at the end of a month, they report back that

76 percent of the CFOs they have called on are experiencingand have identified ‘‘issue X’’ as their greatest concern, andrelay that information to marketing, how soon can 50,000messages aimed at CFOs having trouble with ‘‘issue X’’ bedelivered? If the company’s software does not already ad-dress ‘‘issue X,’’ how soon after the information is delivered

A Source of Organizational Alignment and Learning 237

can an existing product be modified or a new one be oped that can deliver the value? The crucial point: none ofthis can happen without a learning mechanism.

devel-The Value-Driven Company

Diagnostic Business Development offers a framework for thecreation of value (see Figure 9.2) An organization’s concept

of value grows out of its vision This vision provides the

FIGURE 9.2 Integrated Diagnostic Business Development

Process

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foundation from which a value proposition is derived andcorporate strategy evolves The value proposition, alongwith the products and services it generates, is delivered tothe customer through a series of strategies that togethercomprise a go-to-market strategy The foundational belief ofthis framework is that the value achieved by the customer isthe primary measurement of business performance

The market strategy defines the marketplace in whichthe company will do business It identifies the markets andmarket segments in which the company will sell its prod-ucts and services The competitive strategy defines a com-pany’s position with regard to other organizations withinits market spaces It identifies other companies vying forbusiness in the same marketplaces, evaluates their strengthsand weaknesses, and offers a plan to successfully competeagainst them The product strategy defines the company’sproducts and services It determines how each will fit theparticular market segment for which it is designed Finally,sales strategy defines how the company’s product and ser-vices will be offered to customers The sales strategy is cre-ated at three levels: the customer or enterprise level, theopportunity level, and the individual or appointment level

It details the content and flow of the sales process and nostic strategy, and it is defined by the market, competi-tion, and product strategy This is why an organizationalcapacity for Diagnostic Business Development is critical tosuccessful sales execution

diag-The corporate value proposition is the foundation foreach of the four strategies: market, competitive, product,and sales The purpose of these strategies is to deliver thepromise of the value proposition to market and, ultimately,value achievement to individual customers Through them,the value proposition is extended to the market, yielding ahypothesis about customers’ situations and the ability ofthe company’s offerings to address those issues; the value

hypothesis is explored, yielding clarity about the problemsbeing experienced and the value required by the customer.This leads to the collaborative design of the best solutionsand the value expected from implementing those solutions;and the value capability is delivered and, in turn, yieldsvalue achievement for both the buyer and the seller Valuehas successfully been exchanged and measured.

The Diagnostic Business Development process is eled twice in the creation and delivery of value The firstpass through the process occurs as each of the four strategiesunder the Value Life Cycle is developed In this way, a com-pany can ensure that each element of its strategic plan forcreating value is aligned with prospective customers’ businessrequirements and leveraged at the product, process, and per-formance levels of customer companies In other words, wewant to be sure that our strategies are capable of deliveringvalue before we devote costly resources to pursuing them.The second pass through the Diagnostic BusinessDevelopment process occurs during the execution of each

trav-of the four strategies In this pass, a company ensures thateach strategy actually works as planned and makes any nec-essary corrections in real time In other words, we want toensure that each strategy is capable of fulfilling the valueproposition we are bringing to market and creates theexpected value hypothesis, value requirements, valueexpectations, and value achievement

When the Diagnostic Business Development process

is successfully traversed, value is realized, delivered to tomers, and returned to the company in the form of in-creased profits The by-product of this end result is thelifeblood of corporate success—value, in the form of long-term, profitable customer relationships The corporatevision has been transformed into bottom-line results

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Epilogue The Era 3 Sales Future

You Can Watch It Happen to You or You Can Make

It Happen for You