New Thinking, Research in Progress hbr.org PHILANTHROPY 26 Consumer initiatives can drive engagement— when done right

New Thinking, Research in Progress hbr.org
PHILANTHROPY 26 Consumer initiatives can drive engagement— when done right
DEFEND YOUR RESEARCH 30 People don’t like anything moving toward them
VISION STATEMENT 32 Which jobs will grow fastest over the coming decade?
Putting Sales at the Center of Strategy How to connect the C-suite’s grand plans with the field realities your salespeople face by Frank Cespedes
EXECUTION
Daily Word Search or many years Document Security Management (a pseudonym) had a thriving business in retrieving and shredding or securely storing organiza- tions’ documents. Executives and their as- sistants loved its one-stop-shopping value proposition, and the sales force cultivated deep relationships with them. By the early 2000s, however, it was clear that cheaper digital storage technology, especially the cloud, would disrupt the company. So DSM introduced its own cloud-based storage and directed the sales force to bundle it with traditional services.
The results were disastrous. Many of the salespeople lacked the technical knowledge to work effectively with clients’ IT departments. Pricing was a problem, be- cause the physical and digital services had very different cost structures. And in spite of being trained to bundle offerings—a key to the new strategy—reps often sold only the lower-priced, digital service. Contract renewals for traditional services fell sharply, as did profits. DSM modified its sales compensation plan, but then digital sales dipped; meanwhile, new competitors began signing clients. Ultimately DSM spun off its digital unit.
October 2014 Harvard Business Review 23
What went wrong at DSM goes wrong at many companies: Management embarks on a strategy without considering the reali- ties facing the people who must execute it with paying customers.
Research indicates that only a fraction— according to some studies, less than 10%— of companies’ strategic plans are effectively executed and that firms deliver just 50% to 60%, on average, of the financial perfor- mance their strategies promise. One reason is that strategists, years removed from cus- tomer contact, are often blithely unaware of the embedded strategic commitments that daily field activities represent and have an obsolete vision of the company- customer interface. I describe the problem as a divide between “strategy priests” and “sales sinners,” to convey that plans made in the C-suite can be “sullied” by the people who live and die by monthly quotas if those plans say nothing about how sales should allocate resources.
The sales organization should be part of every conversation about strategy. U.S. companies cumulatively spend about $900 billion annually on sales efforts— three times their spending on consumer advertising, more than 20 times their spending on online media,
and more than 100 times their spending on social media. Predictions that the internet would dis- intermediate sales have not panned out: Although sales forces in some industries have shrunk, the overall number of sales- people in the economy is unchanged.
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