An Effective Board

Not all boards of directors are created equal, and not all CEOs and management teams have figured out how to have an effective working relationship with their board. I have observed more than a few CEOs who view their board as a necessary burden, but not a helpful business partner. In some cases, the relationship is ‘chilly’ at best and ‘hostile’ in the extreme. In early-stage businesses, where the board may be dominated by representatives from the financial institutions backing the business, meetings can drift toward the CEO putting on a ‘show’ to deliver metrics and financial results with very little consideration of strategy and direction. In my own experience, I once asked board members to participate in a discussion of potential future markets, and one investor-member declined and actually said he was only focused on the numbers, and did not know anything about the market. It is critical for a board to be engaged with management at a level that they clearly understand the market and strategy of the company, and can actually add value. 

Teams go through stages of development from Forming to Storming to Norming. It is a process of finding normal and becoming productive. In striving to operate as a team, CEOs and Boards follow a similar development. In a new CEO/Board relationship, Forming is a time of getting to know each other, characterized by polite, generally non-controversial conversations. This is the time when everyone is getting up to speed and on the same page about the business. To accelerate the process, it generally requires much more involvement than simply a few hours every quarter. The CEO needs to engage with board members beyond board meetings, and board members need to do their homework. Nobody is closer to the business than the CEO and the executive team, so the CEO should feel responsible to provide board members with sufficient background to enable them to be effective participants in the business.

Once everyone is up to speed on the fundamentals of the business and the market, the CEO/Board team will move on to the Storming phase. Smart people will form their own opinions and challenge the opinions of others. This is when the board and CEO are able to have real conversations where they compare and debate strategies and direction. Meetings become meaningful and helpful to the business, and no longer performative reporting exercises. As the board coalesces on strategy and direction, the relationship moves into Norming. Finding normal sets the foundation for ongoing relationships among board members and with the CEO and executive team. This is when boards become truly productive and CEOs welcome their participation.

In a healthy board environment, the CEO and the functional leaders of the company should feel comfortable and free to reach out and engage board members in between board meetings. They should welcome the advice and counsel of board members. It doesn’t have to be all sunshine and positive results. In fact, these periodic check-ins should communicate brewing issues or concerns so that the board is aware of them long before they reach crisis levels. It is an opportunity to solicit the advice and assistance of board members to head off future disasters.

The most effective boards have ongoing and continuous conversations with the CEO. No secrets and no surprises. Similarly, the most effective board members will have open and frequent conversations with each other. The more the board members converse and get on the same page, the better they are able to speak with a unified, non-confusing voice when interacting with management. I am an advocate of establishing a digital channel such as Slack or MS Teams for ongoing board discussions. Most board members are busy people, and scheduling conversations is a burden. Asynchronous messaging is an effective way to move discussions along without requiring members to schedule calls or meetings. When the entire team is aligned, everything moves forward more smoothly. The key is to recognize that the CEO and the board of directors are on the same team. In order to become effective the full team needs to develop a collaborative approach to driving business success. Turn the board into a competitive weapon and not a business burden.

This Is Not Normal

The first quarter of the new year is typically an uplifting time for companies. Most businesses create annual operating plans, and the first quarter is when they launch them with enthusiasm and optimism. We typically know more about where we stand going into the first quarter than we know about how things will look twelve months later, so the goals seem more believable and attainable in Q1. Sales teams have their annual kick-off meetings with lots of fanfare, and marketing teams launch new and exciting campaigns in Q1. Based on Q4 sales successes, implementation and customer success teams enthusiastically engage new customers with renewed optimism for retention and expansion. First quarter rocks - normally.

However, with all of the recent economic and market turmoil, I am having a Covid-like moment as we enter Q2. I vividly recall when the Covid pandemic hit us just as we were wrapping up Q1 2020. Commerce came to a halt and every business went into survival mode. Unfortunately, it feels eerily similar right now. Back then, uncertainty about supply chains caused panic buying on one hand, and paralysis on the other. Today, nobody knows how permanent the tariffs will be, or exactly how the economy will evolve. There is reluctance to make big financial decisions, and that introduces uncertainty into every business.

For recurring revenue companies and SaaS technology vendors, this is a time to focus on retention of existing business. To do so, it is critical to understand your value to your customers. Is your offering a “vitamin or a cure?” Are you a “nice to have or a gotta have?” Do you really know why your customers do business with you and what value they attribute to your offering? Have you asked? You might be surprised to actually learn where your customers derive the most value, and that knowledge will be the key to ensuring you maintain the business you already have. Absolutely understanding your unique value proposition, based on real client feedback, will also be fundamental for you to convince nervous prospects that they should proceed to buy, despite the economy being in turmoil. The imperative in these crazy times is to recognize that it is not business as usual.

Step one is do not panic. However, take the time to formally assess how current events may impact your business. Determine your vulnerabilities and opportunities, and consider creating a revised plan that addresses the potential impacts. Establish the trip-wires that will cause you to activate your revised plan. This is not a time for ‘happy ears’ or blind optimism, rather it is a time for honest appraisal and realism. Consider the implications of rising costs of goods and operating costs. Evaluate your pricing model and the implications of increasing your price to offset increasing costs. If you anticipate the need to remove cost from your business, when do you expect to pull the trigger, where will you look for savings, and how will it impact your business moving forward? The objective is to put enough time into contingency planning to create a foundation on which to act if the world continues to spiral, and to identify the indicators you will watch in order to determine if / when it is time to act.

As a CEO, this is an ideal moment to engage your board of directors. Members of your board are likely to be involved in other companies, and you will benefit from the portfolio effect of their ability to look across different markets to understand the business landscape. Board members should insist on having this discussion with their CEOs. These are not normal times, and economists are all over the map in their predictions of boom or recession. The only prudent thing to do is to have a measured discussion of the implications and to formulate a shared perspective and plan for how the business should navigate the choppy waters ahead.

Practice Productive Paranoia

We like to look on the bright side, and focus on successes and positive elements in what we do. It is great to approach work with a positive attitude, and that outlook will rub off on everyone around you. However, we also have to be wary of what may be around the corner or lurking in the shadows that is going to get us. I used to work with a sales leader who constantly challenged his team to identify the “should have, could have, would have” elements of any deal they were working on. In other words, what could go wrong that you “should’ve, could’ve, would’ve” avoided if you had just looked for it? Another sales leader referred to this as Productive Paranoia, and I love the term. 

Productive paranoia means a range of things. Late in a sales cycle, if the buyer suddenly says they need to arrange “just a quick demo” for our execs before they sign. It could be a good thing that shows we are one step closer to winning, but productive paranoia also tells us something could be wrong. Most likely, some exec is objecting to the purchase or the price or wants to add to the requirements before they buy, or is pushing an alternative and wants to demonstrate that we are not the right choice - something has gone off the rails. When a customer is going through an implementation and they suddenly slow down or ask to pause, we could see this as normal, or even think this is great because it gives us more time to get other things done. But, productive paranoia alerts us that  something is probably wrong and we need to figure it out fast. One last example, if we don’t hear from a customer for a stretch of time, it could mean everything is going fine and they are happy, but productive paranoia tells us we ought to initiate a conversation and assume something is amiss. Worst case in all of these scenarios, you over-prepare for a positive outcome. Best case, you saved the day by being paranoid.

Andy Grove, the founder of Intel, wrote a book titled “Only the Paranoid Survive”. His whole message was to always be on your guard. Always look several steps down the road and plan for the worst. A quote attributed to Joseph Heller is equally true “Just because you're paranoid doesn't mean they aren't after you”. In a competitive environment, you can always assume your competitors are trying to torpedo your sale, or steal your customers. Even in a friendly customer relationship, it is prudent to assume there is at least one user or executive that is not happy with your solution and is out to get you.

In a sales setting, the best defense is a well thought out sales cycle that defines the Actions, Artifacts, and Timing of every step of the journey. Actions, refers to who is doing what at each stage of the cycle—on both the vendor’s side and the prospect’s side. Artifacts, refers to measurable outcomes from the Actions. They demonstrate that the actions occurred. Examples may be proof that a demo happened and the right attendees were present, or a plan was delivered and the prospect responded positively and agreed to a project plan. These are the items a sales manager wants to see to be assured that the seller is doing the right things in the right order.

The third element of a solid sales plan is Timing. This is where productive paranoia comes into play. Sharks suffocate if they stop moving, and the same is true for enterprise sales opportunities. If a qualified buyer has engaged in a sales cycle, then you should assume that like the shark, the deal should be constantly moving forward or it is dying. The sales cycle plan should have an anticipated range of duration assigned to each step. For example, if the next step in your plan is a demo, then the plan should say how soon it should occur. If a demo is typically scheduled within 1–2 weeks of the prior step, and it has been a month since the last contact, something is wrong. Every step of the process should have a planned duration, and if a deal stalls on some step of the process for longer than the allotted duration, productive paranoia should kick in immediately. Think about it like the shark, and assume that a stalled deal is a dying deal. Something went wrong and you need to resuscitate the opportunity.

In an ongoing customer relationship, the triggers for productive paranoia may be more subtle. Once again, however, the best defense is to construct a plan for a healthy customer relationship and track Actions, Artifacts, and Timing. Most enterprise platforms capture usage data, and this is a great source of metrics for Actions and Artifacts. As in the sales cycle example, the customer success team needs to marry the usage artifacts with anticipated timings. How long is it taking to launch the platform, how fast are users coming up to speed, was there a delay in the rollout, etc. I am an advocate of planned and scheduled routine customer meetings. Productive paranoia should kick in when a previously scheduled meeting is delayed or cancelled, or when key participants stop attending.

Assume that there is always someone lurking in the shadows trying to steal the business away. Do I sound paranoid? I am a firm believer that we have to celebrate success and look at life through a positive lens, but that doesn’t stop me from always doing the “should’ve, could’ve, would’ve” conversation. By the way, Joseph Heller probably did not write that line, and it does not appear in the book “Catch 22” as is generally assumed. It does however appear in the movie version of Catch 22, and some people think the screen writer Buck Henry came up with the line.

Map The Journey

When a customer decides to license your enterprise platform, it is valuable to consider the long view of the journey that lies ahead. Vendors often focus on “implementation” as if it is a monolithic single step. In reality, implementation has several discreet components, and beyond what is typically seen as implementation, the buyers journey has many more phases. Vendors that are savvy about managing their customer base for extended lifetime value (LTV) and ongoing license renewals are typically looking out beyond the initial implementation and plotting the entire journey. These vendors understand that success will require them to become the customer’s long-term partner in order to ensure customer retention. The team that made the buying decision may stay with the project, but there will likely be new participants, and as the journey passes through inevitable milestones, the jobs and the participants will evolve. Savvy vendors anticipate the changes and design their Customer Success offerings accordingly. 

Licensing is just the start of the journey. The first job is to configure the new platform and turn it on. This is the implementation step that sets the stage for the jobs to follow. The vendor’s services team will work with the customer implementation team to define the flow, look, and design. Next, the jobs shift to filling the system with content.  Encouraging buyers to discreetly think about this step of creating and loading content from the beginning will help them to recognize that it is distinct from making the platform work. Early on, it is imperative that the customer’s team become trained and proficient with the platform so that they are prepared for the next phase of the journey. Launching the new environment to their internal peers and the broader team within the customer is a discrete job. The vendor needs to ensure that the customer’s team has become experts, and that they have a viable plan to train their peers to gain internal engagement. Success requires engagement and spread within the customer’s teams, so the platform vendor must have a plan to facilitate this phase of the journey.

If the ultimate users of the new platform are external to the customer, then the next phase is to roll out the platform and drive uptake in the field. An engaged vendor will recognize that success lies in the adoption of the platform by the ultimate users, either internal or external to the buyer. The vendor needs a clear understanding of the value their platform is providing, and the customer success team needs to see it as their job to drive toward that value.

Expanding on the concept of taking the long view, vendors have to guide customers to understand that nothing is static. All enterprise platforms require continuous improvement and enhancement, and that requires ongoing investment. If we think about implementation as winding up a clock, then we can envision that during the customer journey the clock slowly winds down. The system will become stale and satisfaction, if not engagement, will start to drop off. The ‘clock’ will need to be ‘wound up' again and again in order to remain relevant for the long run. The Customer Success team will need to drive customers to allocate resources and budget to refresh the platform, and this is best accomplished if you enter the initial engagement with an explicit long-term plan.

If we are clear from the start that a prospect is embarking on a long journey, and we articulate the major phases of achieving success, then we open the door to position our range of value-added services to augment their team and guide them through the journey.  We can clearly differentiate implementation from creating and loading content.  We can create a space for training the customer’s team, and position it as a prerequisite to launching internally and if appropriate externally. And, we can open the customer’s eyes to the need to receive feedback and keep the site fresh with dynamic ongoing investment.

Too frequently, vendors mix it all together in a single soup called implementation, and prospects always try to negotiate to minimize the cost of implementation when they are buying. If a vendor presents it as a mechanical step to turn the system on, then the buyer is insufficiently aware of the challenge that lies ahead to actually achieve value.  As they progress through the project, the scope of the journey will start to become clear and they will see the project demands and investment expand. At some point, the customer will become unhappy because it is taking too long and requiring more effort than they anticipated. Helping the customer to appreciate the journey and the unique jobs along the way will create a positive path to success. A vendor that demonstrates expertise and best practices in a way that shows they know what it takes for a buyer to be successful will build confidence during the sales cycle, and if the vendor holds its head up high and acts like the experts that they are, customers will recognize the value of their guidance and realize that this is the vendor that can help make them become heroes.

Customer Retention Matters

I recently wrote about the seeds of churn being sown in the first few weeks following the sale. A wise friend and colleague pointed out that often the seeds are actually planted during the later stages of the sales cycle. Buying decisions take on a life of their own, and buyers get wrapped up in their commitment to get “something” done. Sometimes, they fall out of love with their choice before the deal is ever closed, but the deal momentum carries them through to signing. When this happens, they are disengaged before they ever become fully engaged, so the post-sale tasks become even harder.

SaaS businesses focus a ton of attention on new-logo sales. They closely monitor key SaaS metrics such as ‘Customer Acquisition Cost’ (CAC), and the CAC Ratio which measures the relationship between bookings and the sales and marketing expense required to achieve the new revenue. However, once the deal is signed, they metaphorically throw the new client over the fence to the post-sale team. From that point forward, our next important measures are ‘gross retention’ and ‘net retention,’ which do not become visible until long after the deal is signed.

It got me thinking about how vendors allocate their investments to maximize retention and avoid churn. How do companies know if they are adequately investing in their post-sales functions to ensure client satisfaction and avoid churn? According to SaaS Capital’s “2024 Spending Benchmarks for Private B2B SaaS Companies” https://www.saas-capital.com/blog-posts/spending-benchmarks-for-private-b2b-saas-companies/ the median percent of annual recurring revenue spent on customer support and customer success was 8.5%, down from 10% the previous year. The same study found that companies spend about three times as much on Sales and Marketing for customer acquisition.

Every year, SaaS vendors aim to renew and expand their recurring revenue (ARR). Hopefully, there are multi-year contracts in place that auto-renew, but invariably a large percentage of the ARR needs to be re-signed each year. If a SaaS business has been around for a few years, and if they have been relatively successful at retaining customers, then the retention ARR is far bigger than the new-logo ARR. After all, the base is the sum of all of the years of new-logo selling. And yet, on average we are spending one third or less on retention than we are on new sales and marketing.

Simple math tells us that investing to retain a customer is a solid investment. Consider a $100,000 annual revenue account, with a retention expectation of four years. That account is worth $400,000 to the vendor, not to mention upsell potential. At 8.5% average investment, we will spend $8,500 per year to keep the account. Depending on the business, that may be an adequate amount, but if churn is a problem, then we have to view our post-sale investment with a different perspective. It will cost us $50,000 or more to replace the same revenue, so maybe spending a bit more to make the customer happy is a better investment. Understandably, winning a new logo is typically harder than keeping a satisfied customer, but still it seems a bit odd that the investment in retaining the vast majority of the revenue is so much lower than what is spent on new logos.

I suggest that in addition to tracking the gross and net churn numbers, SaaS businesses should also benchmark their investment in retention. My suggestion is a Customer Retention Cost Ratio (CRC). Just as the CAC Ratio measures the relationship between bookings and the sales/marketing expense for new revenue, the CRC Ratio should measure the relationship between renewal  revenue and the investment in customer support and customer success. For good measure, we could include any investment in customer marketing, and maybe even the engineering investment in bug fixing. The goal of measuring the level of investment in retention is to complement gross and net retention measures. If retention is dropping, the CRC Ratio will give us a perspective on what we are investing to keep the revenue, and provide a benchmark for comparison to other companies.

From an investor’s perspective, companies with strong customer retention and low CRC should be highly valued, while companies with high CRC and low retention are exhibiting a low value problematic profile. ‘Growth rate is positively and exponentially correlated with net revenue retention. Increasing Net Revenue Retention (NRR) from the 90% to 100% range to the 100% to 110% range improves growth rate by 10 percentage points. Companies with the highest NRR report median growth that is more than double the population median. This is a rare example of increasing returns from investment in upsells and cross-sells.’ (https://www.saas-capital.com/blog-posts/growth-benchmarks-for-private-saas-companies/)  It is also estimated that ‘for every 1% increase in revenue retention, a SaaS company’s value increases by 12% after five years’ (https://churnzero.com/churnopedia/net-revenue-retention/) Investing in retention is one of the most capital efficient paths to growth and maximizing value.

The bottom line is that retention is a powerful growth lever, and companies need to be thoughtful about the relationship between what they are investing to retain customers, and their actual rate of retention. Small increases in retention can manifest significant increases in corporate valuation. The Customer Retention Cost Ratio is a tool to understand the relative investment in retention and the impact it is having on revenue.

I Feel The Need For Speed

A great line from Top Gun has a place in every tech company —“I feel the need … the need for speed.”  There are a lot of clichés that come to mind: ‘The early bird catches the worm’, ‘Never put off until tomorrow what you can do today’, ‘If you are early, you are on time.  If you are on time, you are late’, etc.  In business tech-speak, we refer to ‘time to value’ and ‘response time.’  No matter what part of the value chain we are describing, faster response to client/prospect needs is better. Here are a few examples I experienced.

One company suddenly saw a dramatic uptick in qualified leads being passed to the sales team. The marketing message had not changed, nor had the number of impressions, so the team went looking for the cause. What they found was one SDR changed their approach and the metrics skyrocketed. They committed to respond to every inbound within minutes. Not that they were terribly slow to respond in the past, but consistently responding to every request within minutes meant that when buyers finally raised their hands to ask for info, this vendor was more likely to be the first to respond. In today’s digital market, buyers do the bulk of their research long before they contact any vendors directly. That means that when a prospect finally reaches out, they are ready to talk. The first vendor to respond gets to set the tone and agenda for the buyer’s journey. Speed makes all the difference, and being first, being responsive, grabbing the buyers’ attention, resulted in more than doubling the number of opportunities for the sales team to pursue. Buyers feel the need for speed.

A second example of the need for speed came from a post-sale situation. A vendor lost a deal to a competitor because the competitor promised a faster implementation. The winner presented proof points in the form of references to make their claim seem credible. The buyer acknowledged that the first vendor had a superior product, but the winning competitor was “close enough and good enough,” and time to implementation was what really mattered. It turned out that the buyer had a hard deadline due to an upcoming user conference. The sales team from the first vendor never explored what was really driving the deal. Their implementation team had been burned in the past by sales over-promising the implementation time, so the sales team never even considered offering an accelerated delivery. They simply presented to approved implementation schedule, and said that they could not make any adjustments to meet the prospects need for speed. The result was that the deal was lost. [In an ironic side-note, the winning vendor failed to make the deadline, and after an embarrassing user conference, the buyer cancelled their agreement. They were serious about their need for speed. They ended up going back to the first vendor for the superior product.]

The third example is product performance. Gone are the days when users are willing to wait for products to respond or refresh. We expect instant response times. An enormous client of a platform vendor complained that the product “just seems slow and sluggish.” They reported that their users were unhappy with the wait times and as a result they were going to have to look for an alternative solution. There had been other customer complaints about performance, but the vendor’s engineering team dismissed them saying there was no room for improvement. However the scale of the relationship with the “big guy” forced an attitude adjustment. The engineers dug into the performance issues and discovered that the customer’s use of the platform was way beyond anything they had ever seen. There was so much data and so many assets that the usage was far outside the deign parameters. The engineers understood that although the customer liked the features, they were prepared to move to a lesser platform if it could deliver better performance. Fortunately, the vendor’s engineering team rose to the occasion and managed to redesign and rebuild key elements of the platform that were contributing to the bottlenecks. The result was a dramatic improvement for the target customer, but equally important, the entire customer base benefitted from delivering greater scalability and speed. The engineering team learned a valuable lesson about listening to customer feedback and the ‘need for speed.’

All of these examples are quite different, but the underlying theme is that speed matters, and faster is always better. We cannot be happy to just complete something or just make it work. In nearly every area of a growth business, we need to press down on the accelerator and infuse the entire enterprise with the “need for speed.” Prospects and customers are not patient. Back to all of those clichés from the start of this post, they are all true, and every team member needs to understand how their ‘speed’ will impact a buyer or prospect’s perception and actions. Speed drives satisfaction and growth.

When Does Churn Happen?

Churn is the bane of a SaaS company’s existence. The beauty of a recurring revenue business is that once we sell a new customer we have the opportunity to enjoy an ongoing stream of renewal revenue. Year after year, SaaS businesses grow by adding to their base of recurring revenue from all of the prior years. Even with modest account retention, the renewal base very quickly grows to exceed net-new sales. Failure to renew is lost revenue that offsets the gains of new sales. Although we place a ton of emphasis on winning new logos, and we track bookings like a hawk, churn is the hole in the revenue bucket that can eat up all of our new logo successes.

To avoid churn, we talk a lot about driving customer satisfaction, but too many organizations look at customer satisfaction too late in the relationship. The trajectory of a new customer is determined within the first couple of weeks after they sign up. The day the buyer signs the paperwork they have the highest level of engagement and enthusiasm. If they are met with a high-energy, efficient implementation and training team, they are set on a trajectory for success.  However, if the first couple of weeks go poorly, they are set on a very different trajectory, and the seeds of churn are sowed.  It all happens within weeks of signing the deal.

As a new vendor, we have to embrace the customer’s perspective. They are about to move from their legacy platform to our new platform. In the process they may have to give up something from their old platform that they rely upon every day. Even though they clearly had issues with their legacy platform which led them to purchase our shiny new platform, change is hard. Often, they are particularly reluctant to change their processes, even if the new approach is more efficient, and do not forget that, there is usually a detractor on the implementation team who was not part of the purchase decision, or who preferred a different choice. They will be spreading discontent from the start. Our job is to quickly build confidence and smoothly transition the buyer’s team so that they can successfully launch.

The most important first step is to gain clear alignment on the definition of success. We need the entire team to agree on what features need to be up and running in what timeframe. If roadblocks were overlooked during the sales process, we need to face them head on. From day one, in addition to focusing on the immediate implementation job at hand, the vendor team needs to keep their sights on the contract renewal in 12 months. The most effective approach is to develop a full-year plan from the start. Differentiate the implementation phase from the launch phase and the operational phase. Collaborate with the customer to set meaningful measurable targets for every phase throughout the contract year.

Avoid the trap of setting vanity metrics and missing the real value metrics. A few years ago, I participated in a meeting with a huge client who had tens of thousands of potential users of our system. The junior members of the client team put forth goals to have dozens of users login to the new platform over the course of the next two quarters. I asked the senior person in the room if she was satisfied with the measure and the goal. I also asked what were her twelve month goals when she purchased the system. It turned out that she was measured on revenue that was directly generated using the new platform, and to achieve her goals, they needed to see thousands of active users within a few months, and not just logins but actual commerce. Logins were easy to measure, but that did not measure the leader’s value-driven goal, and the volume of logins the team was aiming for would result in revenues that were orders of magnitude less than what was needed. The lesson is to set goals beyond the short-term, and at least as far out as the contract year, but most importantly, measure what matters, not what is easy.

One more practice to avoid the churn trajectory is to establish a reporting cadence immediately following the purchase, and include the senior buyers right from the start. Often, the executive that recognized the need for a new platform, created the budget, and approved the purchase, hands the project to an implementation team and disappears. It feels like a fire and forget action. Periodically, they may check in, but their source of information will be the members of their team. If things are not going well, you as the vendor will always take the blame. The only way to head this off is to be a part of the conversation and to be the source of consistent, meaningful, and believable reporting. When you collaborate with the customer to set measurable targets, you also need to grab the initiative to be the source of reporting project progress. Most importantly, you need to include the senior buyer in your distribution from the start, and do not forget that the start means day-one of the project. If you ruffle feathers on the implementation team by communicating with their boss, seek forgiveness for over-sharing, not permission. Your renewal is dependent upon the senior buyer getting what they determined is valuable, so make sure they know what they are getting from day-one.

Recognizing that the path to churn is set within the first few weeks of a customer relationship is one of the most important lessons the post-sale team can learn. It is vital to establish clear, measurable, meaningful, value-based goals up-front, and plan for all phases of implementation, roll-out, and operation right from the start. And lastly, right from day-one, the post-sale team must establish a cadence of reporting with a broad audience that includes the ultimate decision maker. Tell them what you are going to do, do it, and tell them what you did.

Tyranny of Low Expectations

I read a post recently and one line stood out to me: “The Tyranny of Low Expectations.” If you do not believe you can achieve a goal, you won’t - it is that simple. Until Roger Bannister broke the barrier and ran a mile in under four minutes, nobody thought it was possible. However, slowly, incrementally, runners demonstrated that they could get faster and faster, and finally Bannister broke the Tyranny of Low Expectations. From that point forward, four minute miles were no longer seen as unattainable, and everyone’s expectations increased. Years ago, I was biking with a competitive cyclist, and I asked how he became so fast. He gave me the obvious answer - “I increased my cadence of peddling,” but then he went on to share a similar philosophy about low expectations. It took a lot of practice and training to increase his cadence, but the biggest hurdle was overcoming his belief that he was already going as fast as he could.

I recently decided to get back into running. I had pretty low expectations, but I signed up for a 30 day course to go from nothing to running a 5K. Day one was a low impact, simple interval alternating between two minutes walking and 30 seconds jogging, and even that was hard. I could not see how I was going to get from such a low starting point to my goal. I was suffering under the tyranny of my own low expectations. The intervals of running got longer, and the pace increased, and 30 days later I reached the goal. Each time the trainer upped the intensity, I had to overcome the tyranny. It was the trainer’s confidence that pushed me past my fears.

In a growth business, we are always striving to break new ground - sell more, do more, grow faster. The Tyranny of Low Expectations creates a headwind to slow us down in numerous ways. As leaders and managers, we have expectations for individuals’ performance, market opportunities, capital availability, engineering results, sales performance, and numerous other vectors of growth. At the same time, each individual in our organization has their own personal expectations for their abilities and performance, and their own perspective on the potential for the company. The board and investors have their expectations for the performance of the CEO, executive team, and the business overall. Actual performance is the result of a soup of all of these expectations swirled together. The challenge for the CEO is to overcome the collective Tyranny of Low Expectations. Like the trainer in my running story, the CEO needs to build a sense of self-confidence in the team that enables them to raise their expectations. If my running trainer had started with ‘We are going to run three miles on day 1,” The tyranny of my low expectations would have led me to quit immediately. Instead, his inspiration met my abilities and slowly overcame my low expectations.

Starting with modest, achievable targets serves to build confidence. Establishing a cadence of weekly meetings to review progress, take stock of the current situation, and align on the ‘baby steps’ for the week, will create a consistent opportunity to set targets and measure results. Each week, the leader should ask four simple questions:

1. How did we do on the commitments from the prior week?

2. What are the goals for this week?

3. What is the current working view of achieving our overall desired outcome?

4. What do we need to do (if anything) to course correct?

This process is how we build muscles to overcome the Tyranny of Low Expectations. The overall desired goal may seem beyond the teams expectations, but each week the CEO has to drive the team to raise their expectations just enough, while maintaining confidence and trust. In my running example, although I remained skeptical that I would run a 5K in 30 days, each week the trainer raised the bar just enough to build a foundation that supported increasing my expectations.

Too many CEOs and leadership teams set what are perceived to be unattainable goals on day 1, and by doing so, they fail to meet the team and the business where it is. The team has to buy into the potential to get there, even if they remain skeptical. When the gulf between executive expectations and the team’s Tyranny of Low Expectations is too wide, the tyranny wins out, and the team’s perception of leadership flips from inspirational to out of touch. The leadership art is to distinguish between a stretch goal, a leap of faith, and a bridge too far. The team should readily accept a stretch goal. Once a team has built confidence in the leader, they can be coaxed into accepting a leap of faith because they have faith in their leader. But, a bridge too far is just that. Nobody signs up for that goal, and the leader loses credibility.

CEOs need to recognize that the Tyranny of Low Expectations creates a natural barrier for teams, and limits our possibilities. Until we sell $1M in a month, it looks unattainable, but as we continue to grow, soon ‘only’ selling $1M in a month becomes a failure. Throughout the journey, leaders have to provide balanced inspiration to overcome the tyranny.  Teams can do amazing things, but first they have to overcome their built-in Tyranny of Low Expectations.

Rich or King

I have written in the past about entrepreneurs who are the center of their company’s universe. All information flows to them, they participate in all decisions, and they are the visible face of the company. These entrepreneurs relish being ‘King.’ However, it is a very rare individual who can be the right leader for all stages of a business. The spirit and creativity it takes to start a new venture is very different from the dogged determination required to get a company off the ground, and different still from the operational and administrative talents required to lead a growth company.

Most early stage companies experience turbulence as they transition these phases. For software businesses, the start-up phase, building revenue from $0 to ~$3M, requires a unique set of skills. At the start the entrepreneur has to make a leap of faith and commit to risk it all on the possibility that their big idea will have legs. They operate in creative survival mode doing whatever it takes to make a go of it.

Growing from ~$3M to more than $10M requires a different set of skills. Instead of just trying to find the first customer, the business now needs to establish product-market fit and broad appeal. It needs sales leadership, marketing talent, finance skills, product management, and customer management. For the entrepreneur that started at $0, this phase is exciting, but it is also when the path starts to diverge between wanting to be the center of the universe or recognizing the need to hire domain experts. The entrepreneur who wants to remain ‘king’ retains all operational control, and often hires lesser leaders into functional roles, or stifles qualified talent and diminishes their contributions.

As the business continues to grow beyond $10M, the need for experts and mature management accelerates. Rarely is a king-like leader able to successfully transition from a start up to running a $25M or $50M business, and almost never to a business above $100M. At some point, the entrepreneur has to build a team and step back from being the center of the universe, or else they become a bottleneck and an impediment to growth. A self-aware, mature entrepreneur will recognize that they are faced with the choice of remaining king or letting the business reach its full potential - the Rich or King dilemma. Either one can be a correct answer, but if there are outside investors involved, remaining king is rarely acceptable if it stifles growth.

Growth usually requires external fuel in the form of investment capital. Part of the calculus entrepreneurs face involves a fear of sharing ownership and ceding control. At the start, they own 100% of their baby, and they can make all of the decisions without any oversight. With external investment comes external involvement, and kings do not share power well. Along this dimension, the Rich or King dilemma can be viewed through a very simple economic lens. “Do you want to own 100% of a grape or 10% of a watermelon?” Entrepreneurs who choose ‘rich’ and truly believe in the potential of their business, will opt for 10% of the watermelon. Entrepreneurs who prefer to remain ‘king’ only see the downside of external investors, and are content with slow organic growth as long as they continue to own 100% of the ‘grape.’

Control is a different element of the calculus. Kings view themselves as the Smartest Person In The Room (SPITR). In a meeting, they bend the room to their will. I once listened to a ‘king’ describe his management meetings by saying “I can do all of my executives’ jobs better than they can, and they all know it, so sometimes it is just awkward.” Control is very important to a king. Inviting investors into the business, and accepting a board of directors means ceding some level of control. CEO SPITRs see little or no value in the input from their board. In their view, board meetings are performative and a waste of time. Conversely, CEOs who choose ‘rich’ are more focused on success, and carefully curate the involvement of investors and independent board members. They select their investment partners as much on valuation and money as on expertise and non-monetary resources. They choose independent board members who will complement their own skills and bring expertise or opportunity to the business. They value collaboration, not just control.

Rich or King, control or collaborate, grape or watermelon, are all sides of the same dilemma an entrepreneur has to navigate. The important thing is to have sufficient self-awareness and intellectual honesty to recognize the decisions you are making and the likely consequences.

NPS or Not So Much

It seems as though every company is crazed about surveying after every customer interaction. If you call a support line, you can expect a satisfaction survey. If you stay in a hotel, or rent a car, or buy something online, you will invariably receive a survey. For large-scale brands and high-volume suppliers, some of this may make sense, but what about the small-volume suppliers?

The concept of Net Promoter Score (NPS) was the result of insightful research conducted years ago and published in the Harvard Business Review in December 2003 “The One Number You Need to Grow” by Frederick F. Reichheld. The idea was that consumers will either be promoters, detractors, or neutral. Neutrals do not influence the market, but promoters are good for business because they tell their friends how great your products or services are, and they advocate for your business. Detractors are bad for business because they complain about your products or services to anyone that will listen. NPS is a single number to gauge the offset between the people praising your business and those trashing your business. NPS is a high-level measure, that is influenced by numerous actions and interactions. A simple analogy is the ‘Check Engine’ light in a car. The car is constantly monitoring hundreds of things and checking for optimal operating conditions. It doesn’t display all of this information or constantly show us the nuances of engine performance. Instead, we get one indicator — the “Check Engine” light. That one light masks a ton of complexity that is supported by numerous diagnostics. If it comes on, we know we need to take action. Similarly, the NPS score is a single indicator for a raft of underlying information. Clearly, you want more promoters than detractors, so NPS has become our “Check Engine” light for the business.

Unfortunately, over the years, everyone has learned to game the NPS process. We have all heard providers tell us we will receive a survey, and anything other than a 10 will be a failure. They ask if there is anything they can do to ensure a perfect score, and they beseech us to say we are promoters. That is not how it is supposed to work. There is nothing spontaneous about being told what to say. On the consumer side, we recognize the NPS question, and we know how to use our response to inflict pain. We know that giving a score of 8 is a passive/aggressive response, and a 0 is the loudest form of insult. We also know that a 10 is golden, and sometimes we just want to be nice, even though we have no intention of promoting the service. We have become informed consumers and we are wise to our vendors’ attempts to finesse a measure of satisfaction out of us.

I mentioned the difference between a large-sample vendor and a small-sample vendor because in small samples the result is not all that meaningful. Consumers are often trying to send a message with their answer, knowing that in order to be heard they will have to be extreme. I was involved with a survey where after the results were gathered, I personally called a number of the respondents to discuss their answers. What I learned was that even if a respondent gave a low score, during my 1:1 discussion it became clear that they were using their survey response to get our attention. In reality they were very committed and wanted to succeed with our offering, but they gave a low score to keep us on our toes.  One client, who gave a neutral score, opened our call by saying that they were telling all of their colleagues how happy they were and how much they were looking forward to continuing to work with us. They said it was the “most important thing they would do in their program this year.” Their score did not line up with their clear intent to be a promoter. NPS in small samples can give very misleading results because just a couple of promoters or detractors can change the entire character of the calculation. Individuals with strong emotions (usually negative), can skew the score dramatically. Even cultural biases can creep into the result in a small sample. Some cultures display more polar emotions than others, or are more subdued in their evaluations. The same level of service may receive different results across cohorts just because of cultural bias. Big samples tend to homogenize these variations.

When a company applies an NPS methodology to determine customer satisfaction, it is important to know what you are getting.  Consider your sample size, and cultural biases. In addition to thinking about the promoters and detractors, consider the message being sent by the neutrals. These are the customers who are not moved to promote or detract. They are passive spokespeople, but they are still meaningful contributors to understanding customer satisfaction. If everyone gave you an 8 (all neutrals), your NPS would be 0. But, considered on a 1 - 10 scale, the message overall would be fairly positive (80% satisfaction).

In a small sample, it is also important to check the numeric result against the overall sentiment. Does the number change dramatically if you eliminate the few extreme answers in each direction. In particular, look at the 1’s and 0’s. These are often emotional responses, and in a small sample they can have an outsized impact. If possible, go beyond the quantitative score and actually speak with the outliers to get a qualitative understanding of their responses.

NPS is a tool, but despite the title of the HBR article, it is not the only number you should monitor. If you are a small-sample company, and do not have thousands of respondents, treat the NPS score with a healthy dose of skepticism, and dig deeper into the metrics and responses to get a true gauge of satisfaction.

Complicator or Simplifier

I recently reviewed several corporate overview presentations and pitch decks, and I have come to believe there are two types of CEOs: Complicators and Simplifiers. Complicators attempt to dazzle us with their brilliance by making everything seem so complicated that they are the only ones that can understand it, and we are fortunate to have them. Then there are the Simplifiers who can take a complex topic and make it so clear anyone can grasp it. Simplifiers are among the most important people in our companies, and having a Simplifier as the CEO is gold.

Simon Sinek recently wrote that “Visionaries aren't the only ones who have big ideas. Visionaries are the ones who can clearly communicate their big ideas to others.” These are the Simplifiers. I used to work with a VP of Engineering who had a PhD on his staff. The PhD had invented a wildly complex data management algorithm, but he had a very difficult time explaining it. The VP was the only person who understood what the PhD was saying and could interpret it for others to act upon. It is no surprise that the VP was the person in the leadership role and the PhD was relegated to a staff position (which he was happy with).

Simplifiers are great communicators, and great communicators make great leaders. They know how to read their audience and understand how to gauge the depth of the discussion so that everyone can grasp the content. I teach a seminar on Active Listening, and one of the concepts for a presenter is to “swim with a snorkel, not a scuba tank.” The goal is not to dive so deep that they ‘drown’ the audience — come up for air every now and then, and make sure the audience is still with you.

Great marketers tend to be Simplifiers. Think about how they can create a memorable tagline that captures the depth and breadth of a business in a simple message. Defining a company’s unique value proposition is an exercise in simplifying all of the things a company does into the one thing that really matters. Great marketing is not throwing everything against the wall and hoping something sticks, or as a colleague used to say “spray and pray marketing.” Great marketing is simplifying the message into something the target audience will recognize and appreciate.

Complicators, on the other hand, feel the need to highlight every detail, and point out every nuance. There is very little black and white for a Complicator, only myriad shades of gray. In meetings, the Complicator typically takes the role of SPITR —Smartest Person In The Room. They are the ones that ask the esoteric questions that have little relevance to the real world. In the classic Monty Python movie, when asked the speed of a swallow in flight, the SPITR responds by asking if it is an African swallow or a European swallow. The typical reaction from others is ‘who cares?’

When the CEO is a Complicator, things often go south.  Most board members have a limited amount of time to devote to the inner details of the business. They need the CEO to be clear and concise, and help them focus on the right topics without being distracted or dragged down any rabbit holes. Complicators tend to confuse their audience with a blizzard of details that obfuscate the important kernels of information. When presented with a possible direction by a board member, a Complicator CEO will make it clear that the suggestion is too simplistic, and respond with all of the nuances, alternatives, and potential pitfalls. They dive deep, and their audience drowns. Typically, the result is to shut down the discussion or table the topic, rather than reach a conclusion.

All of this is not to say that deep thought and analysis are bad. Critical thinking and exploring alternatives is necessary and important. Being a Simplifier does not mean there is a lack of depth of understanding, quite the contrary. Do not confuse a Simplifier with being superficial. Simplifying combines understanding with the skill to craft a concise, clear, and simple message. There is a famous line attributed to a lot of people (the actual origin is probably Blais Pascal, and it was in French): “I made this letter so long only because I didn’t have the time to make it shorter” It captures the essence of the skill. It takes hard work to Simplify and get it right. The Complicator is the one that writes the longer note, because they lack the skill or the desire to Simplify. Simplifiers take the time to polish their message into a gem — they are the great communicators.

Molehill person or Bulldozer

In life and business, we often run into people that have a unique talent for starting the day with a small problem [aka a molehill], and manage to build it into an insurmountable problem [aka a mountain] by the end of the day. These molehill people turn every challenge into a big deal. We have all experienced this behavior. When asked to perform some task, a molehill person will tell you how hard it will be, and how much work it will take. They will identify all of the pitfalls and issues as they build the molehill into a mountain. They will ask questions with obvious answers, as if they are just trying to avoid any possible ambiguity and therefore risk. They will speak in hyperbole as they describe every flaw or issue with the request.

Not to play amateur psychologist, but there is a lot to unpack in this behavior. Part of it is risk avoidance. A molehill person is putting you on notice that ‘there be dragons’ if they go down this path, so it will not be their fault if they fail. Part of it is self-aggrandizement. If they can make the task seem huge, and they accomplish it, won’t they be grand. The problem is that molehill people tend to stand in the way of progress and innovation. They slow things down. Like Eeyore in the Winnie The Pooh stories, they bring negativity into an organization. They deflate the enthusiasm of positive thinkers. Like a vampire, they suck the life out of good ideas.

By contrast, we have also all met the ‘bulldozer.’ The opposite of a molehill person, the bulldozer does not see any impediments and just pushes forward regardless of the destruction they leave in their wake. Once a bulldozer gets an idea or decides to achieve an objective, do not get in their way because they will run right over you. Sometimes, you have to applaud their ingenuity finding solutions, but often the achievement is diminished by the toll the process takes.

Molehill people and bulldozers are two extremes. We want to find the thoughtful people that are somewhere in the middle. We need people that can understand a request and successfully execute to achieve the goal, or recognize a bad idea and save us from a costly mistake. The challenge is how to identify who is who.

This is really the dilemma we have with delegation. A leader or manager has to decide what they can delegate and to whom. Delegate to a molehill person, and you will soon conclude it was easier to do it yourself and save the frustration of the molehill being turned into a mountain. Delegate to a bulldozer and they may charge off in the wrong direction and you will not get the result you intended. Delegation is an act of trust, and trust needs to be nurtured and earned.

The fundamental starting point is clear communication. The leader has to clearly define the task, and the parameters for success. Scope, time, and resources need to be articulated. Measures of success need to be understood. When delegating a task, a manager should practice a form of reverse active-listening. Ask the recipient to say back what they heard the task to be, in their own words — ‘tell me what you heard me say.’ In the early stages of building trust, the manager should also ask how the recipient intends to approach the problem - what is their plan. These simple steps will quickly highlight if the recipient is a molehill person or a bulldozer, or a thoughtful contributor in the middle.

David Marquet has articulated a progression of trust and delegation that lays out the path for managers to build a positive relationship with their team. The progression to build trust is:

• Tell me what you see

• Tell me what you recommend

• Tell me what you intend to do

• Tell me what you did

Mastering delegation is a force multiplier, but it is critical to avoid the molehill / bulldozer ends of the spectrum. Carefully cultivate trust and build a framework for increasing levels of delegation to recipients that can effectively execute. Creating a trusted team that can execute efficiently is a management super power we all need to develop.

Take A Step Back

In a dynamic business, the CEO and the management team need to stay on top of key performance indicators and metrics. We often obsess about them. One of my favorite old, old, old books is ‘The Great Game of Business’ by Jack Stack. He was a young manager who was assigned to a failing manufacturing facility ostensibly to shut it down. Instead, he decided to save it by leading the entire team to focus on improving the P&L and metrics inch by inch. Everybody owned a number, and they all knew how the numbers fit together and what success looked like. They met every week to review progress and recommit to achieving their numbers.

The same shared understanding of how the business operating system works is critical in every business. Each department or business function has a specific role to play, but they are all connected to the same drive shaft. Each area of the business is like a piston revving the engine, and we need all of the pistons firing in coordination with each other.

I have always been an advocate of a monthly meeting that includes a broad swath of cross-functional leaders to review the metrics for every area of the company. Taking a lesson from Jack Stack, I believe it helps all of the attendees to gain a perspective on the total business, and it creates a culture of accountability. It forces individuals to avoid the pitfall of having tunnel vision and focusing so much attention on their own metrics that they do not see the forest for the trees.

Here is a three-step formula to manage a monthly meeting that will be efficient and meaningful. First, direct each presenter to deliver their content at least 24 hours in advance of the meeting. It is helpful to have one person gather up the materials from all of the presenters and distribute it in advance as a briefing book. Limit each presenter’s content to only what they can fit on a single slide with no fonts less than 10 point. Insist that their content has sufficient context (historical performance, trends, goals, etc) to make it evident why it is important enough to be presented. In other words, it must pass the “so what?” test. Guide presenters to use a consistent format from one meeting to the next so team members can become familiar with the layout and content.

The second step is to conduct the meeting efficiently. These meetings can go on forever if you let them. My approach is to strictly limit each presenter to two or three minutes (we actually used a stop watch). Since the materials were delivered in advance, the presenter can assume we all read them, and there is no need to read the slides to us. Instruct presenters to only tell us what matters and why. Tell us what they see in the metrics they are presenting, and what needs to happen next. Do not allow any interruptions during the three minute presentations. I like to go through all of the presentations before there are any questions or discussion. Often, something said by one presenter will become clear in the context of what is said by another presenter. Also, if we stop for questions and discussion after each presenter, invariably we run out of time and have to rush through the later presenter. After the initial run-through of all of the slides, it is time for questions and discussion. We still need to be efficient, so I suggest proceeding one slide at a time. Ask for comments and questions specifically related to the topics on the slide, instead of a free for all.  Keep it moving. Lastly, time permitting, it is good to have a summary moment. A trick I learned from a fellow CEO is to (almost) randomly pick a participant and ask them to summarize what we heard during the meeting. Ask them to give us their view of the state of the business and the hot spots identified in the meeting. It can be a bit intimidating, so everyone needs to know the question is coming to make sure they are not caught off guard. Choosing someone other than the CEO to summarize helps to avoid the CEO becoming the only voice in the room, and it is a good way to gauge the tenor of the team.

The last step is to designate a periodic meeting to step back from the trees and talk about how the forest looks. The team should still produce and deliver the same content in advance, but for one meeting skip all of the presentations and just hold an open discussion of how we think the overall business is doing. It forces the team to look at the company as a whole, and creates a sort of ‘zen headspace’ moment. By doing so, we collectively expand our lens and look across the business, rather than just focusing on narrow aspects and daily urgencies. Individual metrics are great, but sometimes we fly into the target because we miss the big picture. Formalizing an opportunity to step back creates perspective.

There is no standing still in a growth business. If we do the same level of performance tomorrow as we did today, our growth business will not be successful, so it is important that we stay on top of all the metrics. It is equally important to occasionally step back and make sure we all see the same trajectory and picture.

Once The Deal Is Done

Last post, I wrote about the need to go broad and deep during an enterprise sales cycle. Lots of people get involved in an enterprise purchase, and a seller needs to ferret them all out and work the room, or risk some unknown actor vetoing the deal.

Once the deal is done, and it moves into implementation and ultimately when the platform is launched, the list of characters changes, but the need to discover and manage the new collection of actors is just as important.  Post-sale, we meet the front line participants, and we get to know who can sign-off on the implementation, but that doesn’t mean we know all of the influencers that will determine the success or failure of the launch.

The worst message is when our contact tells us that some other group or person has decided to cancel our contract. It typically means we did not have a complete picture of what was driving all of the players, and we did not make our case broadly enough. Equally disturbing is when our primary contact goes silent and we don't know who else to contact in order to determine what is going on. We need to know everyone.

Typically, once a new platform is licensed, the customer’s implementation team includes individuals that were not part of the selection process, and individuals that really wanted to buy a different product. The budget maker (see my prior post) had a vision for what the solution would deliver, but their vision and the reality of what the product can actually do are not always aligned. Maybe they were over-sold, or maybe they just filled in blanks by imagining how the product worked without validating its capabilities. In any event, the implementation team is now tasked with attempting to fulfill the vision.

The vendor needs to have a meaningful handoff from the seller to the implementation team, and it is equally important to manage the account to ensure that there is a similar structured interaction between the buyer/visionary and the customer team that will implement and manage the solution. It is up to the vendor to be the glue to force communication among all parties, and resolve challenges and conflicts. In a recurring revenue business, the value of a sale is typically realized in the years following sale, so the vendor needs to make sure the solution sticks, to avoid dreaded churn.

The best approach to manage this situation is to create an account plan that spans a full year (or longer) from the date of purchase. When the deal is signed, all of the parties are engaged and happy, so this is the ideal moment to document the goals and expectations, and gather commitments for ongoing engagement. The plan will clearly identify what to expect and when.

In every complex enterprise implementation, something is going to go bump in the night. There will be product limitations and tensions will arise. People will get pulled in different directions, commitments will be missed, and tempers will flare. The full team needs to be prepared so that everyone knows what to expect. There is a grocery chain in Connecticut called Stew Leonards, and in front of every store there is a carved granite block that says “Rule #1 — The customer is always right. Rule #2 — If the customer is ever wrong, reread Rule #1” When things go off the rails during implementation, the vendor will always take the blame, regardless of who was actually at fault —Rule #1. However, a proper account plan will help to mitigate blame and provide communication paths to defuse volatile situations.

An account plan has several elements. The first is a set of goals and measurements of success. We need to be clear about what everyone expects. Next is the timeline of what will take place when. This is more than the project plan for implementation and rollout, although that is a critical element. The plan should include a communication cadence, and a schedule of account reviews and meetings to take place throughout the year. There is always a hierarchy game afoot in an enterprise account relationship. Doers talk with doers, managers talk with managers, and executives talk with executives. Understanding the hierarchy dynamics is important, and the senior members of the vendor team need to own their responsibility to build rapport with their customer counterparts. An executive to executive relationship can be critical to defusing problems that occur lower in the hierarchy. The account plan needs to recognize this dynamic and the right people need to be scheduled to attend the right meetings.

I suggest weekly or monthly account meetings with the front-line teams, quarterly meetings with senior managers, and semi-annual meetings with executives. It is important to agree to the meetings up front and get them on everyone’s calendar right at the start of the project — particularly the executives. While the execs are still engaged, you can get them to commit to reconnect six and twelve months later, and you can lock the meetings onto their busy schedules. Best practice is to designate the first executive briefing to focus on the client’s satisfaction, wins, challenges, wants and desires. The second meeting, approximately 4-6 months later, should be more focused on the vendor’s roadmap to demonstrate that the vendor listened to the needs and wants and desires, and responded with product growth. The second meeting is the vendor’s showcase, and is intended to earn the license renewal.

In addition to defining the players and the schedule of activities and meetings, the account plan needs to identify responsibilities. The best tool is a Responsibility Assignment Matrix or RACI chart. RACI stands for: Responsible, Accountable, Consulted, Informed. Every major task or milestone will have a collection of people associated with it, and a RACI chart clearly defines their roles. A task is assigned to the Responsible person or persons to get it done, and they actually do the work. The Accountable person is typically in a leadership role, and there is only one person per task. They oversee the Responsible person(s), and they are accountable to the organization for the project. There may be many people who are Consulted and asked for input, and there may be many people that are Informed of decisions and progress. [for a thorough discussion see https://www.forbes.com/advisor/business/raci-chart/ ]

Most teams focus on identifying the Responsible and Accountable people. I suggest that the most important people to identify in the account plan are who should be Informed, and who can add value if Consulted. Clearly identify the executives and senior managers that need to be kept in the loop and informed, and document a routine communication plan that they accept at the start of the project. When the entire team knows and agrees to a communication schedule, there is a permission structure for publishing achievements and missed commitments so there are no surprises. Too often, when there is no routine communication to the upper levels of management, if a problem arises it is the first they hear of it, and the vendor is thrown way under the bus. An account plan can avoid this catastrophic outcome by defining the flow and frequency of project information.

Identifying the individuals that should be Consulted is important because their knowledge may help guide the project to success. Ignore them at your peril because they are usually vocal in the form of “if anyone had asked me, I would have told them that was the wrong direction…” These are the folks with institutional knowledge, and usually they have considerable informal influence. The account plan needs to rope them into the mix.

The bottom line is that post-sale success takes a village. The key is to create a comprehensive plan for the account and diligently build buy-in from all of the members of the village. Use the plan to formalize commitments from senior managers and executives to remain involved. Document a communication calendar and cadence in the plan to avoid surprises. An account plan incorporates the implementation project schedule, but must go way beyond the initial projects and extend throughout the year and beyond to ensure ultimate customer success and contract renewal.

Go Broad and Deep

A typical enterprise sale involves approximately 12 - 16 people on the buying side. There is the leader that identifies the need, the people tasked with finding potential solutions, the collection of individuals that will be impacted by the selection, the IT team that has to validate the acceptability of the solution and its security profile, and then the procurement, legal, and finance teams, and ultimately an individual or committee makes the purchase decision. Enterprise sales people know that they need to coordinate and manage all of these influencers. They have to tease out and handle any objections in order to win the hearts and minds of the whole team. 

Great sales people bank the influencers and invest in the detractors. Instead of focusing solely on the buyers that are supportive and willing to engage with the seller, a skilled seller has ‘good’ paranoia, and goes looking for trouble. They know that a deal can be torpedoed by any number of people, so they are constantly looking for the soft spots and the potential veto votes. Instead of donning their ‘happy ears’ and only hearing support, great sellers avoid flying into the target by managing all of the buying influences until the deal is inked. They know they have to go broad and deep to manage the panoply of actors, even the ones that may only have a minor say in the deal.

Years ago, I attended a sales lecture that described “budget makers” and “budget takers.” Sorry, I don’t recall who deserves credit for the concepts. The idea is that there are people on the buyer side that are given a budget and seek to find a solution to a pre-approved and known problem. These are the budget takers. Then there are individuals who have vision and see a problem or opportunity and create the budget to solve it. These are the budget makers. As a seller, you want to find the budget makers because they have the ability to get a deal done, and they appreciate the value of buying a solution. They tend to be less risk averse, and they are willing to champion a purchase decision. Unfortunately, they do not always know how their organization buys things, and they may overlook steps that will trip up a deal, so as a seller, you cannot solely rely upon the budget maker, but you definitely want them in your camp, and you want to engage them to assist you to discover all of the other influencers. In some instances, you will need to teach them how their own organization purchases things. You do not want to fall victim to the trap when a budget maker says “I will make the decision alone.” It is never a true statement.

The other type of buyer is the budget taker. Somebody else decided there is a business need, and approved a process to go find a solution. They handed the challenge to a budget taker, and said go find a vendor. Budget takers tend to be very risk averse. They may not fully grasp the value of solving the need, or the potential impact to the business, but they know they have a budget and they do not want to make any mistakes. Budget takers ask everyone they can think of what features they want in the solution, and they make lists of ‘requirements.’  They research all of the vendors and demand detailed presentations, demos, proofs of concept, trials, and anything else they can think of to cover themselves and avoid being blamed for a purchasing mistake. Budget takers will suck up seller’s time like a vampire, and they are typically the creators of RFPs.

A Request for Proposal (RFP) sounds like a great idea. Create a list of everything you need and ask vendors to tell you how their solution achieves your goals. Great in theory, horrible in practice. In their zeal to avoid risk and not be blamed for a bad purchase, budget takers pollute RFPs with ‘requirements’ for every feature they can dream up. Wild future scenarios and corner cases that will never occur make their way into RFPs. The result is a list of items the company probably does not need and will never implement, and no vendor can fully satisfy. The immediate real need is lost in the volume of superfluous possible future needs. Vendors will twist themselves into pretzels to answer positively to every feature on the list, but in the end, no vendor will have a perfect score. The budget taker now has ‘cover.’ No matter what solution they select, they can say “it is not a perfect fit for our RFP, but it meets many of our needs.” An RFP provides job security and insurance for the budget taker in the event of a failed purchase because the budget taker can remind everyone that they clearly said it was “not a perfect fit.”

An alternative flaw in the RFP process is when the fix is in for a single vendor. A buyer falls in love with a vendor, but knows that their organization requires an RFP to make a substantial purchase, so they game the system to get what they want. They already know which vendor they want, so they allow the vendor to co-author the RFP. All of the requirements magically line up with the chosen vendor’s offering. Other vendors stumble and stretch to provide positive answers, but the chosen vendor will clearly stand out. As a seller, there is nothing sweeter than finding a buyer who is willing to let you author the RFP. We have all seen RFPs that clearly have a competitor’s fingerprints all over them. It rarely ends well if you were not the co-author.

Knowing that there can be bias in the process, some organizations rely upon a neutral procurement team to manage the purchase. In the worst application, procurement teams have so little trust in their business groups that they prohibit vendors from directly interacting with business users once an RFP process begins. They effectively remove institutional knowledge of the business need in order to avoid purchaser bias. Once we end up in procurement we are not only dealing with a risk averse budget taker, we are also dealing with a team that is not directly involved in the business need, and is typically motivated just to get the best ‘deal.’ In many situations, driving for the best deal either means forcing bad economics onto the best solution, or forcing the company to buy an inferior solution because it is cheaper or the vendor is more desperate. In their neutral assessment of vendors, procurement teams treat vendors as if they are fungible, and rarely acknowledge the nuances and soft items of relationships, service mindset, vendor team competency, vendor reputation, etc. For complex business solutions, the outcomes are often less that ideal.

From the seller’s perspective, understanding the purchasing landscape and getting to know all of the players is hard work, but successful sales people earn the big bucks because they do it well. They know who are the budget makers and who are the budget takers. They focus on objection handling and seek out every participant to ferret out the potential vetos. They know that if they are not defining the dialog and telling their story directly to every influencer, then someone else is, and that someone may not have their best interest in mind. Great sellers also recognize when they need help. Sometimes there is a hierarchy game - execs will only talk with execs, managers with managers, techies with techies, etc. A great seller knows that it is imperative to build relationships at all levels and in all corners of the buying organization, so they bring their full team to the dance. They lead the process like a conductor leads an orchestra.  

Here is my baseline rule of thumb for selling to an enterprise: we need to know at least four people in different roles on the front-line, and deep connections with people in at least three levels of the hierarchy (doers, managers, execs).  We also must have strong contacts with the IT team, and the procurement person. Once a buyer declares that we are the vendor of choice, we need to quickly establish a positive rapport with a specific named person in legal, and ensure that the buyer’s executive contact remains in the loop in case legal becomes too aggressive.

Going broad and deep to truly know the buying organization requires skills and perseverance, but it pays off with more predictable sales outcomes.