The Ladder of Inference

The last couple of posts have been about maximizing employee ROI, and the importance of developing meaningful Mission, Vision, and Values statements to guide the team to a successful outcome. Even when we get it right, there always seems to be occasions when the employee rumor mill takes over and negativity creeps in.

Sometimes, the negativity is in response to actual bad things happening, so it is understandable. Perhaps there was a reduction in force, and the remaining team members are feeling down. Or, the company just lost a big deal, or a major customer just churned. Like a toxin entering the blood stream, a healthy corporate body can respond and ‘metabolize’ the bad news, so the company can move forward. There is a saying ‘that which doesn’t kill you will make you stronger,’ and often recovering from a negative event does make a company stronger.

However, sometimes the problem is a hyperactive rumor mill and corporate conspiracy mongering. Corporate grapevines are extremely efficient.  Managers think they are shielding the team by keeping secrets, but somehow the staff always figures out that something is going on. Employee rumors often follow what is referred to as the ‘Ladder of Inference,’ and leadership needs to instill a strong mechanism to defuse the ladder.

Suppose that every Friday the company provides bagels in the morning for the staff. Without fail, week after week, the staff shows up and the bagels are waiting. One Friday, Johnny is the first to arrive and there are no bagels. Horror of horrors! Jane is the second person to arrive, and Johnny turns to Jane and says “OMG, there are no bagels! I bet the company did not pay the bill. Maybe we are out of cash?” Mike arrives next, and Jane immediately tells him “the company is out of cash and we are not going to get paid!” Mike turns to the next person and says “the company is broke and going out of business. Quick get your resume on the street…”  Finally, Mary the accountant arrives and announces to the panic stricken team that the bagel guy’s truck broke down and he will be a little late.

This is a classic example of a company escalating up the ladder of inference based on a lack of knowledge and a rich rumor mill. In the absence of information, we have a tendency to jump to negative conclusions and quickly climb the ladder of inference to engage others in our negative view. We assume the worst. Part of building a strong culture is developing a posture of continuous communication that will enable the team to stay in a fact-based zone and seek clarity instead of imagining evil intent and bad outcomes. The team needs to embrace the value of being data and information driven, instead of rumor and conspiracy driven.

The key is to be open and support high-volume bi-directional COMMUNICATION!  In public places and on trains, the slogan is “if you see something, say something.”  The same applies to business (clearly for very different purposes).  If an employee sees something they think is wrong, their first instinct needs to be to say something to someone that may be able to offer an explanation, or who can help redress the problem.  It is far more productive than imagining evil intent or griping to a colleague.

Leadership’s responsibility is to demonstrate honest and open communications. If employees perceive that they can ask difficult questions without repercussions, and they grow to believe that the answers will be truthful, then the ladder never gets off the ground. When employees feel that management is secretive and hiding things, or worst of all, not honest, then employee paranoia and conspiracy theories take over, and we quickly climb the ladder.

Mission - Vision - Values

Last week, I wrote about employee ROI, and the responsibility and importance for each employee to be aware and maximize their contribution to employer success. The question is ‘how do employees know what is valuable to their employer?’

The principal source of guidance for every employee is their manager. It is a manager’s responsibility to coach, advise, and guide their team to success, and study after study of employee retention finds that the key factor in why an employee decides to leave or stay with an employer is their relationship with their manager. However, it is one thing to make a friendly work environment, and quite another thing to instill a sense of purpose and build belief in the direction of the company. Employees who believe in the company remain with the company.

What binds the whole business together is a shared understanding of how all of the teams and roles fit together, and a sense of culture and purpose that is driving the entire company toward a common goal. When employees see the big picture, they can assess how they are contributing and delivering ROI. To achieve this, the company needs an explicit statement of Mission, Vision, and Values (MVV). It is perhaps the most important role for the CEO to lead the process to develop a clear statement and shared understanding of the corporate MVV, and to repeat it over and over to all employees.

I am an advocate of a concise, aspirational mission statement. I read that Steve Jobs believed a mission statement should be so clear and concise that if you wake an employee in the middle of the night and ask them what it is, they will have no trouble stating the mission. When I joined one company, I went looking for a mission statement, and I found three completely different documents. Each one was over a page long, and each was prominently displayed on different employee systems. Nobody knew which one was current, or what they actually said. Having more than one statement was a problem, but the bigger problem was that nobody was paying attention. The mission statements had a lot of boilerplate words that provided no guidance. We have all seen the typical statements that go on for paragraphs about “being the best in the world at doing a specific thing that somebody cares about… blah, blah, blah.” In my example, we re-wrote the three different bland statements into a clear seven word mission, and everyone got it.

The often quoted saying ‘I would have gladly written you a shorter note if I only had the time’ is at the heart of a bad mission statement. Take the time! Mission statements are grand declarations that can, and should, be crafted in under 10 words. They provide team members with clarity, and a roadmap to determine if their contribution is furthering the mission (core), or secondary to the mission (context).

The second problem with bad mission statements is the dreaded conjunction: “and.” Frogs have very simple vision systems. When they see a bug wiggling in front of them, they strike with their tongue to eat the bug. The problem is when they see two bugs wiggling on the right and the left side. Their simple brain averages the two and they strike in the middle. The result is no food to survive.  Similarly, a test for a bad mission statement is to look for a conjunction in the wording - “we are going to do this AND that.” The conjunction shows that there are really two missions, and there is no common-ground that encompasses both objectives. Think of a company like the frog, and when the mission has a conjunction, it is like having a bug on both sides. If employees ‘strike’ in the middle, their contribution is lost.

The second critical element is the Vision Statement. The Mission Statement is what you want to accomplish; the Vision Statement is how you will accomplish it. The Vision Statement is a bit longer, and more specific about the strategy and where the company will invest to achieve its mission. This is where a team member can gauge how their role fits into the corporate direction. As an example, if the vision is to become a pure product company, and your role is to deliver bespoke services, you may be out of sync with where the company is headed.

Lastly, a company needs a clear statement of values. The Value Statement defines who we are and how we behave. It is the moral compass for the team. Managers should measure employees with the core corporate values in mind, and employees should consider their ROI in the context of their adherence to the corporate values. Even a productive employee is of diminished value if they are a cultural misfit. This is sometimes described as the ‘no asshole’ rule. A good test is to determine if the employee is someone people want to work with, or someone they intentionally work around. Values help frame what a good employee looks like. I strongly believe that developing the value statement should be a broad collaborative effort. Everyone has a role to play in building a shared understanding of how the team will work together to achieve the vision and mission.

With a strong and concise MVV, employees can determine how their role is contributing to success, and if they are in synch with the corporate culture. A clear MVV gives managers the tools to help employees grow consistently with where the company is headed so they maximize their employee ROI.

Creating Employee ROI

Last week, I wrote about creating a return on investment (ROI) for customers. Unlike customer satisfaction, focusing on customer ROI gets to the heart of renewals in a recurring revenue business. Customers may be satisfied with your product or service, but if they are not seeing adequate financial return they are unlikely to renew. I saw a recent post on LinkedIN that spoke about employee ROI, and it got me thinking.

The tech industry has seen massive reductions in headcount across the board from large employers to small. I read numerous posts from former employees who were caught in the downsizing, and were totally surprised. Terminations for cause or failure to perform should never be a surprise, but corporate reductions in force are often surprising. For the suddenly terminated employee, the question is always ‘why me?’

Reductions in force are typically driven by the need to improve profitability, or to restructure as a result of a strategic pivot. Of course, there are always staffing decisions related to ‘death’ and ‘marriage,’ better known as bankruptcy and M&A, but run of the mill reductions in force (RIF) are what typically leave terminated employees surprised. I have read all sorts of comments like “this was the best job I every had,” or “my manager just told me how much they appreciated me,” or the worst of all “I was just promoted and given a raise, and then this…”

What is the calculus that is leading an employer to choose one employee instead of another? When I wrote about customer ROI and churn, I proposed that there are really two separate scales involved. One is satisfaction, and the other is financial return on investment. Customers can be satisfied, but just not see the economic value. In a RIF, there is a similar calculation being made. An individual may be a ‘good’ employee, but not in a role where they are contributing more than they cost. This is not a simple financial calculation because there are many factors that influence how a manager evaluates contribution, but in the end it can be thought of as employee ROI.

The employee shock factor arises when they cannot see the handwriting on the wall. Despite solid performance reviews, they miss the signs that their contribution is not adequately benefiting the bottom line, or an awareness that in a down-draft their role may not meet the bar for retention. When an organization has decided to cut employee costs to a defined level, managers are forced to make decisions about which individuals’ contribution outweighs their cost.

So what can an employee do to avoid being swept up and surprised by a RIF? Sometimes, the answer is nothing at all, but just like a vendor needs to understand the calculus and strive to create a positive ROI for customers or face churn, employees need to focus on their ROI contribution to their employer. It starts with candid probing conversations between the manager and employee about how contribution is being measured. Is the current role the highest and best use of the employee’s talents? Is the current role core to the business, or peripheral to the mainstream? What can the employee do to become more valuable to the business?

Employees need to have ‘spidy senses’ about how the business is performing, and how they are personally contributing to success. They need to develop situational awareness and EQ about how they are interacting with others, and if they are seen as a ‘go to’ resource or a siloed contributor. Working with their manager, the employee should take an inventory of their skills and determine how they can diversify or stretch to become more valuable. In a RIF environment, managers are often looking for employees that can do ‘more’ in favor of employees that are siloed or narrow in their skills. One way to think about the manager’s calculus is to place each employee on a 2-by-2 grid charting contribution and skills.

Low contribution and low skills are ‘First to go.’  High contribution and high skills are the ‘Keepers.’  Low skills and high contribution create a dilemma for the manager because it is an indication that the employee is maxed out, but they are good at their job, so they may be hard to replace. Employees in the final quadrant are the employees that have low contribution but high skills. Most managers will try to find a spot where this individual can become more effective, but if the manager perceives that this is simply an employee who is not striving to contribute, that may be a ticket to a RIF.

Nobody wants to manage through a RIF, and nobody wants to be the ‘surprise’ victim of job loss, but more and more it is a fact of business life. Employees can help make themselves more bullet-proof by focusing on the ROI their employer is getting from employing them. Managers can help employees avoid the door by coaching them to expand their skills and contribution to become go to resources, and more RIF-proof. Individuals need to be aware of the ROI they are creating for their employer.

Is Your Customer Achieving An ROI?

We focus on our own business metrics and results, but in a SaaS or recurring revenue business, we also need to consider the results our customers get from doing business with us. What is the return on investment (ROI) our customers are realizing from our product or service? Recurring revenue businesses only succeed if their customers continue to renew their contracts, so our goal is to create a win:win valuable relationship for both parties. Customers may say they are happy with your team and your products, but if they do not see ROI, then they are on a path to churn. 

A customer’s definition of ROI can take many forms: closed business, or pipeline growth, or customer / employee engagement - to name a few. It sometimes takes a lot of probing to figure out exactly how a customer views the ROI from your offering, but you need to keep digging until you have a clear articulation of how they measure success. It could be the original reason for purchasing from you, but more often than not, that is not the ultimate ROI measure. When teams license a platform to make themselves more efficient, efficiency is not always enough for the senior executives to approve the renewal. Execs do not always see team efficiency in the same light as the hands-on team, and they often do not measure ROI in the same way.

Defining how a customer measures their ROI from your offering requires detective work. Particularly in an enterprise environment where different constituents within the customer’s organization may have significantly different measures for ROI. As a vendor, you need to map the various views of ROI, and ensure you are delivering on the promise across the board. Unmet needs will sow the seeds of discontent, and in an enterprise setting, just one unsatisfied team can play their ‘veto’ card and suddenly the whole customer is churning. Account Management or Customer Success teams need to ferret out all of the influencers within the customer’s organization. It is not enough to just talk to the teams that are eager to talk to you - you have to find the quiet teams and the influential execs to ensure you are meeting their needs.

Traditional customer satisfaction surveys are a great tool to get directional feedback, but understanding customer ROI and ensuring they are achieving their critical results is typically not easy to discern from a customer satisfaction survey. Positive scores do not necessarily mean they are receiving value, and negative scores may be feedback about minor issues, even though they are getting great value. The CSAT answers rarely give you the real ROI answer you need, so a survey is just one step. You need to go much deeper with a real conversation to determine what is important.

A methodology I have used is to create an anonymous customer survey with a twist. Making it anonymous creates a safe space for customers to be candid, but here is the twist. Include conditional logic in the survey that determines if it was a positive of negative response. For negative responders, have the survey include a simple message from the CEO: “You gave us a low score and I am sure you have more to say. Are you willing to have a short conversation with me? Please share your contact info so that we can connect and I can learn what led to your opinion. It is important that we hear it, so we can improve.”  In my experience, a surprising number of customers will accept the offer, and as painful as it will be to make these calls, you will learn a ton from speaking directly with detractors.  For the most part their feedback will be constructive, and provide a window into what their organization really sees as the key to ROI.

Whatever you discover, continuously measure it and report about it. Open every customer meeting with the metrics and the trends, and never lose sight of your team’s role in achieving your customer’s ROI goal. You are only getting a renewal if the customer is receiving value that is greater than the cost of doing business with you.

Different is Better

In physics, the law of entropy tells us that without applying an external force, things will drift toward decline and disorder. The corollary in the competitive tech market is when a company fails to invest in innovation and differentiation, their products will drift into market decline. It is also true that over time, in a well-served, highly competitive space, every new feature from one vendor is immediately covered by all competitors, and differentiation only occurs at the fringes of buyer needs, so all products drift toward commodities. The dilemma is do nothing and drift toward competitive decline, or invest to remain on parity with competitors, and drift toward a commodity market.

Vendors need to go beyond pure product tech investment to avoid decline, and apply investment in other areas that matter to buyers. Ease of purchase and ease of doing business, unique services, attractive packaging, and a vibrant user community are all examples of areas to invest in differentiation.

Buyers need competitors to help them find differentiation that can support a purchase decision. I was recently shopping for a new band for my Apple Watch, and every vendor had tons of colors and styles. Some vendors were selling what looked like identical products for wildly different prices. In all likelihood, any choice would have been just fine, but I was so overwhelmed with the colors and styles and price points that I ended up in buyer’s paralysis. I simply gave up and decided to just keep the band I have. This same outcome happens in the enterprise tech market. Mature products have so many features and capabilities that each vendor’s pitch only adds to buyer confusion. When buyers are confronted by a dizzying array of features they sometimes just shut down. Paralysis sets in, and they may even choose to put the project on hold rather than make a murky decision. We all know that our number one competitor is ‘Do Nothing.'

Most tech vendors strive to innovate faster than anyone else, but it is critical that the innovations differentiate the vendor in a way that is mainstream for buyers’ needs, rather than edge cases. At some point, the current product is largely ‘complete.’ It solves the tech needs of mainstream buyers, and further differentiation has to be in the form of innovative services or packaging or pricing.

Price is the trickiest differentiator. Most sellers have an automatic bias to offer a lower price to beat the competition. When buyers cannot differentiate vendors and their products, they too will fall back on price - “I can’t tell you apart, so I will buy the cheapest solution.” However, price can also be used as a signal of differentiation. There is a message in pricing. The lowest priced offering conveys a message of lower quality or capability or vendor desperation. The highest priced product conveys brand confidence and quality, but it can also convey a message that this offering is for buyers that are not cost conscious or ‘bigger than me.’  The goal is to price competitively, while remaining consistent with your brand. There is a difference between the Mercedes brand and the Chevrolet brand, and price is an element that conveys that difference. Asking for a premium price creates the opportunity, and the requirement to demonstrate why we deserve it. Hence it creates the opportunity to differentiate based on capabilities. Whenever a vendor is a price outlier, it causes buyers to ask ‘why?’ Sellers need to be able to position the vendor and support the message conveyed by the price. It is OK to be the premium-priced offering, if the whole-product (tech and services) supports the difference. Mercedes does not have to meet Chevrolet’s price - they are doing just fine with a premium priced offering.

The seller’s job is to guide buyers to focus on the differentiations that matter, and help them avoid pitfalls or getting distracted by features they are unlikely to ever use. The key to differentiation is to make it easy for prospective customers to see the difference between us and everyone else, so it is easy for them to quickly decide to buy from us.

Are You Attending The Game or Playing It?

One of my favorite metaphors for how people participate in a business is based on a sporting event. Think about a stadium filled with fans in the stands, a coach on the sidelines, and teams on the field. Each constituency is focused on the game, but each is participating in a unique manner.

The fans in the stands talk about all of the things the players did right or wrong, the actions of the coach, and how they should do things differently. However, the fans are not actually on the field and they don’t have to take responsibility for the outcome. They are just spectators and critics.

Coaches are in a different position. They stand on the sideline and direct the plays on the field.  They set the game strategy and select the players that will make up the team on the field. But, once they field the team and send in the play, they are not actually a part of the action, and they are not the ones that have to make split second decisions to respond to the opponents actions on the field.

It is the players on the field that have to know what is going on and how every member of their team will respond to the action of the game. They take direction from the coach and put it into action, but they also have to adjust on the fly as the play unfolds, and they have to be equipped to make those split second adjustments autonomously. 

In business, there are lots of people around the edges of  any decision, and many of them behave in a manner similar to the fans in the stands. They have an opinion, and at times they freely express it, but they are not really in the game. It is not their responsibility. Leaders and executives are more like the coaches. They select the team and strategize the ‘plays,’  and they are responsible for the result, but they have to rely upon the members of the team to actually execute.

The players on the field are the front line of the business. For example, a sales person in the middle of a sales call cannot just pause the meeting and run back to the coach every time a prospect asks a question. They need to be able to operate autonomously with enough knowledge and depth of understanding to keep the ball moving forward. They also need to know the role of each of their teammates in the sales call, and how each will respond to challenges. If you have ever seen a sales executive and a sales engineer that are totally in synch with each other, their interplay in a sales call is like poetry. No matter what the prospect throws at them, they know their roles and have the confidence to rely upon each other to be brilliant.

The same sort of poetry is necessary in nearly every corporate situation. Successful teams act as one, and have a shared understanding of the game and the strategies to win. Less successful teams rely upon the coach to tell them what to do, and lack the ability to be nimble and respond to a changing situation. As leaders we need to create a culture and environment that drives employees out of the stands and onto the field, and fosters teamwork and the ability to efficiently move forward autonomously without relying too heavily on the coach.

For the leader to gain trust in the team, and be confident that the players have a solid understanding and judgement, I suggest three questions: “What do you think?” “Why do you think that?” “What would you like to do about it?” 

We want individuals to have an understanding and an opinion, so the first question is “what do you think?”  It requires thinking, and observation, and an understanding of the goals and objectives, and is the first indicator that the individual’s opinion is informed.  

The second question is “why do you think that?”  In active listening, we try not to ask a ‘why’ question because it generally puts people on the defensive, but in this exercise, the purpose of the question is to ask the speaker to defend what they think. They may have just made a good guess at the answer to the first question, or they may be parroting someone else’s opinion, so we want to go deeper. “Why do you think that?” will elicit the inputs and reasoning behind the answer to the first question. It moves the speaker from being in the stadium seats to being on the sideline. It should illuminate the speaker’s logic and understanding of the situation, and it can open the door to dialog and sharing differing perspectives.

Lastly, question 3 asks “what would you like to do about it?”  Now we are down on the pitch actually having to put the play into action. Notice, the question was not “what should we do about it?”  While we may get this type of response, a ‘we’ answer moves the speaker back up into the stands, opining about what others should do.  As a player, it is about what do ‘you’ plan to do. This is where we get commitment and action. Instead of suggestions for others - we want informed individuals who will take action. We want to move people out of the stands and onto the field.

Whenever I participate in a business meeting or observe a team, I am always sorting the participants into the three categories: spectator, coach, and player.  By watching the interactions and behaviors, it is easy to spot who is who, and which individuals will move the ball forward. Those are the ones you want to put in the game.

Goldilocks Goals - Not Too Big and Not Too Small

When we develop plans and goals, we talk about 'how to' but we often avoid discussing 'why not.’ In a growth-focused environment, it is easy to develop a sense of bravado about taking on a goal that is way bigger than anything we have ever achieved. This is particularly true in a top down planning environment because founders and CEOs tend to be eternal optimists. They are typically bold and confident, and sometimes they drive too hard for unattainable results. It is important for the team to at least discuss ‘is this goal possible, and is it necessary for success?’ It forces everyone to support their optimism with facts and discuss their assumptions.

Small goals are easier to achieve, so the probability of success is high. Conversely, larger goals generally have a lower probability of success. At some point, the goal is so big that it is totally unattainable and the likelihood of success drops to zero. A good practice is to balance the probability of achieving the goal with the value of achieving the outcome. Find the sweet spot that aligns with the team’s risk profile. The equation may show that setting a large goal with a low probability of success is too risky and less valuable than setting a more modest goal with a higher probability of success. If we truly understand what success looks like, then we can construct achievable goals that get us there.

Here is a thought exercise: If 35% growth is considered success by our investors, but we set our goal at 50%, what happens when we deliver 40%? We failed to achieve our goal and we all feel bad, and we may have put the company in jeopardy. However, we actually delivered more than we needed. In other words, we snatched failure from the jaws of success. Nobody likes failure, and it is demoralizing for the team when we consistently fail to meet outsized goals.

By contrast, we cannot set low, easily attainable goals just to make us all feel like winners. The team needs to acknowledge the expectations our investors have set for the arc of the business trajectory. In a dynamic company, things change every day, but the objective is to follow a journey that is generally ‘up and to the right’ along a pretty steady growth curve. If we do tomorrow only what we did yesterday, then our business is stagnant and nobody will be happy, so growth-stage companies are by definition not a steady-as-she-goes predictable environment. 

One of my favorite descriptions of life at a growth company is: 'if you are not living on the edge then you are taking up too much room.'  Often, it feels like reaching for our goals might tip us over the edge, but that is where the 'how to' moment comes in. Figuring out 'how to' stay right on the edge creates the excitement of being in a dynamic company.

Planning ‘how to’ live on the edge often means stepping back from the status quo to question what we do and how we do it, and to consider what we should stop doing. It may inform us that it is time to forge a new path to our goals. We should not be afraid of the often dreaded word ‘pivot.’ Being nimble is an attribute of dynamic companies, and sometimes you have to detour or change paths to get around an obstacle to growth. It may mean changing a process or practice, or shifting spending, or just looking at problems differently and doing deeper analysis to understand how to get the job done. Whatever form ‘how to’ takes, we have to be able to adapt and adjust and be willing to change in order to achieve a stretch goal. As long as we remain true to our mission and vision, pivots can be a positive thing. For a dynamic company, status quo is rarely the answer.

Leaders also need to recognize that big goals can be a challenge for the rank and file to accept. Just because managers and executives drink the Kool-Aid and get comfortable with big targets, it does not mean everyone will just fall in line. Building consensus and buy-in is critical for the culture of the business, and that means providing space for everyone to have a voice in the process, even if they start with 'why not' instead of 'how to.'

The leader’s job is to engage the team and win their hearts and minds. The first step is to provide context so that the entire team has a shared perspective. Help the team to recognize that the goals are not random or just plucked out of thin air. Team members may be suffering from siloed thinking and limited awareness. Take the time to show them the bigger picture. Explain the context and the impetus behind each goal. Help team members develop trust and belief that their input is heard, and the goals are being set rationally and with careful thought and analysis. Acknowledge the 'why not' and share the analysis of the scale of the goals and the probability of success. Make it clear that we are all in this together, and nobody wants to fail. Most importantly, enable the team to craft a bottom-up approach to achieve the goals. Empower them to own the 'how to’ that will achieve the optimal available outcome, and not just to succumb to all of the reasons for 'why not.'

Step Back and Go Deeper

I am always amazed at how much we learn when we produce quarterly results and tally up our metrics. This is typically a step on the path to holding a productive board meeting or corporate business review. Sometimes, the preparation for the meeting is just as valuable, if not more so, than the actual meeting because in preparing for the meeting we have to think critically about how to explain the results and what they mean.  It forces us to step back and gain a deeper understanding of what is really going on.

When we look at the entire business, across all departments and functions, we see the mosaic of the company and how the pieces fit together. Stepping back and creating some space between the day-to-day tyranny of the urgent, and the broader strategic view of the business provides an opportunity to take it all in. It enables us to connect the dots and understand the interconnectedness of the whole. It also lets us discover patterns that emerge from the interactions between each group’s metrics, and enables us to explore the possibilities.

Consider a common example. What if we saw a spike in support tickets being passed to engineering for resolution. If we just look at engineering we see a need to assign more resources to drive down the backlog and address the ticket volume. However, with a little space from the urgent, we can ask questions. Most importantly, why are we seeing more tickets going to Engineering? Is it a result of recent product enhancements? Do we have a coding problem or a QA problem? Maybe the tickets reflect issues with old code that was never stressed, and for some reason customer applications have just exposed lingering hidden problems. If we dig a little deeper, maybe we will find that half of the tickets were resolved without the need for a code change. Is that a reflection of Support passing things to Engineering that should have been resolved without Engineering’s participation? Maybe the items passed were problems that did not require code, but to figure out the resolution required tools and data access that only engineers possess. If that is the case, then should we look further and figure out if we need more tools or training to equip support. Maybe we need to look at how we implement customer sites to see if something changed, or if we can preemptively avoid future issues by changing our implementation strategy. That might make us consider if there is a documentation need, or a customer training need, or perhaps it goes back to a product definition challenge. If we go even further back, does it take us to how we sold the product and what we said it could do, and is that adding stress to the code that was not seen before. Did our marketing message change, and are we attracting a different kind of customer?

This is a long and winding path, and it is only one example of how the business is all connected, and of the discoveries we can make when we step back and look at the business holistically. There are similar threads that weave between all of the other areas of the business: from sales to implementation to documentation and training, or from marketing to sales to product. Every part of the business is connected, and it all has to work together. 

One of my favorite authors and management consultants is David Marquet. He wrote a great book about his time as a submarine captain —“Turn The Ship Around”. On his ship, he banished the word “they” from the vocabulary. One department could no longer refer to another department with the word “they.”  People were forced to use the term “we” instead. Magically, it eliminated all of the finger pointing and reinforced the idea that everyone on the ship was a part of the same team. 

This same concept can apply to the interconnectedness of a business. When we look at metrics in departmental silos, we are effectively introducing “they” into our thinking. We look at one group and say “they did XXX,” and look at another group and say “they did YYY.”  

If we banished the word “they” and had to use “we”, then our view of metrics and business performance would change radically. Instead of “Engineering had more support tickets,” it becomes “we had more support tickets.” That means we each have to explore why we had more tickets, and all of those leaps and questions I raised above will naturally evolve because we each have to apply our departmental expertise and look at why we have more tickets. It is no longer Engineering’s metric and responsibility, it is our metric and our challenge to get to the root causes of the result. Similarly, it is no longer “Sales oversold,” it is “We oversold” so we need to address it. No longer is it “Product needs to set the priorities,” it becomes “We need to set the priorities,” and if we don’t like them it is our challenge to set new priorities. It isn’t “Sales has a bookings target,” it is “We have a bookings target,” and we have to do everything in our power to meet the target.

Banishing the concept of “they,” and taking a moment to step back and look at the entire connected business is a critical part of driving for success. An energized team will look forward to business performance reviews and board meetings because the process brings the team together. We are all forced to look at the whole business and we all take a step back from the tyranny of the urgent so we can see the arc of where we are headed. 

The Golden Rule For Vendors

It takes a village to make a happy customer. Customer delight grows out of the entire collection of interactions the customer has with every member of your team. It is rare that just one interaction sends a customer over the edge, but one bad interaction can certainly deflate the relationship and move the customer from delight to satisfaction and then it doesn't take much to move to disappointment. 

One of the most common complaints is that a vendor shows a lack of urgency. Things just take too long. When customers and prospects are looking for an answer to a question or a quote or an estimate, or they have a product issue that is in their way, they are typically seeking an immediate response. Vendors have to deal with all sorts of requests, and it may seem nearly impossible to respond immediately to every issue. However, the vendor’s challenges don’t really matter to a customer or prospect that is seeking an immediate response. They want the vendor to match or exceed their level of urgency. 

The golden rule for vendors is “do unto customers as you would want a vendor to do unto you.” At a minimum, a vendor needs to be aware of when their team is taking too long to respond, and create mechanisms to escalate and accelerate their processes when they fall behind. The entire team has to act with urgency, and that means we don’t let issues languish, and we are vigilant following up every step of the way. It has to be baked into the culture of the company, and every team member needs to be onboard.

In sales, there are many studies that suggest when buyers reach out to multiple vendors, the first to meaningfully respond has the highest chance of winning the deal. There are tons of factors that influence the purchase, but quick response is near the top of the list because it sets a tone for the relationship, and a favorable bias. You snooze you lose.

In support, rapid initial response has to be wed to reliable and rapid follow up and resolution. When issues pass from one member of a team to another, we cannot let the customer fall through the cracks, and each team member in the chain needs to be aware of the total lapse time as perceived by the customer. It is not good enough for the first person to practice ‘fire and forget’ behavior. They have to own the relationship and practice ‘fire and follow-up’ instead. Like a relay race, vendors should track metrics on every passing of the baton. Measure the total journey, and all of the splits with the objective to achieve continuous improvement and accelerate each step. On the other side of the equation, the customer is expecting an immediate response, and the team’s objective is to delight them, not annoy them.

The easy, and often the default business communication method today is a digital response - email, chat, text, Slack, etc. The problem is that teams often lose sight of the number of back-and-forth messages, and asynchronous responses can feel slow and annoying to customers.  We have all attempted to interact with a vendor via a chat session. It usually takes a couple of back and forths to say hello, and ask your question (often more than once). Then the agent invariably disappears for what feels like ‘too long’ before coming back with an innocuous question that is clearly a stall tactic while they chat with another customer. Eventually, they get to the original question, and it takes a bunch of frustratingly slow back and forth messages to get a meaningful answer. I call this inside-out efficiency. It is efficient for the vendor (inside) because it enables agents to multi-task and touch several clients at once, but it is not efficient or desirable for the customer (outside). Inside out efficiency is never a good strategy to generate customer delight.

No matter what type of electronic communication, I am an advocate of a ‘three touch rule.’  Person A initiates a discussion (touch 1), person B responds with a question or comment about the request (touch 2), person A responds (touch 3). If the question or issue is not resolved at this point, if left to the normal course, the back and forth can go on forever.  We have all seen this in email, or text chains, both internal and external. Just think how frustrating it is for you and your teammates. Can you imagine how frustrating it is for a customer? My three touch rule requires a direct live contact after the third electronic response. Pick up the phone, or open a video call or start a huddle, and actually talk to each other. Short circuit the doom-loop of back and forth messaging. Think how much faster we can get to resolution if we let urgency dictate our interactions.  Think how much our clients will appreciate when we demonstrate a sense of urgency that matches or exceeds their own. Follow the Golden Rule for Vendors.

How Confident Are You?

How confident are you in your product, service, and business? Do you believe you have product market fit? Do you believe there are deals being done in your market, and are you confident that if you have the opportunity to compete, you will win? Now, look around you. Do all of the members of your team share your confidence? In particular, do your marketers and sellers share your confidence?

Confidence and attitude can make all the difference in a competitive market. It is said that dogs can sense fear. A corollary in business is that buyers and customers can sense confidence and commitment or lack of it, and it colors their behavior toward vendors. If you think you will lose, buyers sense it and chances are pretty high you will. On the positive side, if you have confidence and believe in yourself and your team, you can win over a skeptical buyer.

Think about your own personal experience. When you consider buying electronics like a TV, you probably do some research, and you may go to a big-box store to see the various models. If you have questions, you might ask a salesperson for help. Within seconds you can tell if they know what they are talking about or if they are just reading what is on the box. The ones that confidently differentiate models and explain features worth having versus features that don’t matter, become trusted advisors. The others are a waste of time and you will likely walk out without making a purchase. A lot of that is training and knowledge, but what really stands out is when a salesperson demonstrates confidence that they are the expert and you should listen to their opinions.

Magic happens when everyone on your team projects confidence in your product and makes it evident that your team knows its stuff and will provide buyers and customers with an unmatched level of service and expertise. Competitors come and competitors go, and on any given day, a competitor may have a feature or a function that stands out as different or better than your equivalent capability, but that never lasts for long. In the competitive market, you are running a marathon not a sprint, and customers and prospects need to sense your confidence and belief that you are their best choice for the long haul. Your team has to project confidence that the totality of what you bring to the table far exceeds the competitors’ offerings, and a feature here or there should not be determinant for a buyer that is taking the long view. 

Confidence is expressed in a lot of different ways.  A powerful message of confidence is the willingness to say ‘no.’  Deep down, buyers and customers know you can’t or won’t do everything they ask. If something sounds too good to be true, it probably is. If your answer to every question or request is ‘yes,’ at some point you lose credibility - it is too good to be true.  Acknowledging a limit or a shortfall by saying ‘no’ not only shows confidence, it also makes the rest of what you say sound more believable and true. If you are willing to say ‘no’ to this, then your ‘yes’ to other items must be true. Don’t say ‘no’ just to make a point, but if you are confident in your strengths and believe that your offering is solid, then sometimes an honest ‘no’ communicates your confidence and conveys that you are trustworthy. 

Many enterprise software companies are dependent upon a small number of transactions each quarter to reach their goals. Unfortunately, when dealing with the law of small numbers, if a few deals don’t make it across the finish line by the end of the quarter, the company will fall short of target. Without a surplus of opportunities to work, each deal becomes critical, and everything needs to close. Like a dog that senses fear, when a team is desperate to drive in every possible deal, buyers perceive the desperation and interpret it as risk. Risk causes them to slow down, rather than speed up their decision process.

By contrast, when the team projects confidence, it lowers the perceived risk level for the buyer. Like the dog that starts wagging its tail after you speak calmly to it, prospects start thinking “if you are not worried, then why am I worried?” Confidence is calming, and calm creates a moment of zen for buyers to develop their own confidence and commit sooner rather than later.

Building confidence in your team is one of the most important roles for the CEO and executive leaders. It has to be real and honest, or the team will never embrace it. Employees are smart and they have a keen sense of skepticism and a terrific BS meter. The starting place is to build trust based on honest and open dialog.  Not everyone sees the whole picture of the business, and it is human nature for junior teammates to fill in the gaps with skepticism. The leader’s job is to hear their concerns and help them gain confidence and belief.  Back to the start, if you truly believe in your product, service, and business, then it is up to you to project that confidence to your team and help them reach the same conclusion. If your team is confident, then they will take that into the market. Confidence wins.

Recipe For A Productive Board Meeting

The easiest way to have a positive board meeting is to meet your financial and operational goals and do what you said you would do — simple. However, in the real world, something is always going on that has an impact on the business.

After a tough quarter, a board meeting can be negative and dark and unfriendly. It is important for everyone to recognize that we are all professionals, and the board meeting is a collaboration, not a confrontation. Management and the board are all striving for success, so let’s work together.

Based on a bunch of CEO and board positions in VC and PE backed tech companies, here is my CEO recipe for a productive board meeting (assuming quarterly meetings):

1. Between meetings, practice radical candor and transparency, and maintain a continuous dialog with the board. Board members hate being surprised. There is a bright line separating management’s operating role from the board’s role, but it is incumbent upon the CEO and management to keep the board informed and aware of what is going on.

2. A couple of weeks (or more) before the meeting, contact the board members and discuss potential agenda topics. I like an annual baseline cycle for board discussions: Q1—FY Plan, Q2—Sales/Marketing, Q3—Competition and Product, Q4—Planing for the next year, but there are always hot topics that need to be covered in addition to the base topic.

3. Deliver board materials in advance. That means with enough time for the board to study them. Send out materials on the prior Friday (or earlier), to provide at least the weekend for review. Preliminary materials should be entirely retrospective about what happened since the last meeting. This is the foundation for the discussion during the board meeting, and the purpose is to ensure everyone is on the same page. Speaking of page, I suggest one ‘page’ or slide per functional area of the business or topic, with no small fonts. Force managers to focus on the metrics and trends that matter, and do not allow this to be a self-promoting “what I did on my summer vacation” narrative. For every claim or number or metric, ask ‘SO WHAT?’  Why does the board care, and how will it inform them? This is not an opportunity to “show up and throw up” data.  A well crafted presentation will demonstrate that management has a fine-tuned grasp of the key metrics that drive the business. The best pages show trends and explain what matters and why. No extraneous data or noise.  Resist the temptation to look forward and talk about forecasts in the preliminary materials. This is background - nothing but the facts. The actual board meeting will be about the future, and the ‘now what’ discussion. Preliminary materials are facts and the history that led us to this point. It should not be a lengthy novel — for most companies it is under 20 pages. Send it out with the financial pack and any board resolutions and minutes, and include the meeting agenda, time, and place or video link.

4. Schedule two meetings: This may be a bit controversial, but trust me it works, particularly with PE and VC investor-led boards. If you present the financial results cold at the start of the board meeting, it can go one of two ways: if the numbers are good, numbers people tend to check out of the softer parts of the meeting. If the numbers are bad, it is all they focus on and the meeting goes downhill quickly. Schedule the actual board meeting for Wednesday or Thursday, and schedule a preliminary finance call on Monday or Tuesday for the CFO to present the results from the prior period and field questions. If you don’t have the answers, you can find them prior to the board meeting. Have the executive team participate, and use this meeting to answer clarifying questions about the preliminary management materials. Doing all of this in advance of the board meeting lets everyone get grounded in the facts and prepare to be productive during the actual meeting.

5. Board slides are separate from the preliminary materials. Their purpose is to support the board discussion. The board has already seen the preliminary materials, don’t waste board time rehashing them. Hold the board meeting slides until the meeting. Again, this is controversial, but it works. If you send the slides out in advance, everyone reads ahead without the benefit of the narrative. The worst pattern is to send slides in the middle of the night prior to the meeting — disaster!  My recommendation is hold them for the meeting and use them to ‘support’ your board discussion, not to ‘be’ your board discussion. You can send them around after the meeting.

6. In nearly every board meeting I have been a part of, the sales forecast is the opening act. The preliminary materials already delivered the facts about what happened during the quarter, but this is an opportunity for more color and discussion. The focus, however, should be on the forecast and what the company is doing to ensure success. Concentrate on moving forward, not hand-wringing about what happened in the last 90 days. Facts are facts, now let’s move on together.

7. Avoid letting the meeting turn into a stage performance by the management team - the classic dog and pony show.  Make the meeting a collaborative discussion. If the preliminary materials did their job, the board is prepared for discussion, so do not just rehash the facts. The CEO should lead the discussion, but not dominate it. Provide space for executives to own their domains. It is a style question about who participates from the exec team and for how much of the meeting, but everyone does not have to get equal airtime. Board presentations should be in service of the agenda topic, and not a stage to present what was already sent out in the preliminary materials.

8. Schedule a portion of the meeting for the CEO to meet with the board without other members of the executive team present. It is a time for candor without the management audience present. The CEO and the board can discuss the business, the team, and other sensitive topics that may not be appropriate for the rest of the execs.

9. Make time for the board to meet without the CEO present. This is called an executive session, and the purpose is for the board to gather its thoughts and feedback for the CEO so they can speak with one voice.  At the end of the executive session, the CEO should rejoin and one board member should speak for the board and provide feedback. Manage the clock throughout the meeting so there is time for this important step. Too often, meetings run long and board members are unable to stay for the executive session. Avoid this behavior, and call it out if necessary.

10. Lastly, the CEO needs to acknowledge conclusions, requests and action items coming out of the meeting, and confirm them in writing back to the board. This is the “I heard you, and we are on it” step. Invite board members to respond and comment on your summary. Boards tend toward amnesia from one meeting to the next. It is up to the CEO to be accountable and to help the board ‘remember.’

One of my favorite lines came from a fellow CEO, Flint Lane.  He said that boards should be a weapon, not a problem. Consider how each board member can assist the company, and ask for (demand?) meaningful participation. Some of the most productive meetings I ever had were the ones where I gave the board homework and asked them to come to the meeting with a point of view to discuss. It is up to the CEO to make sure the board has knowledge and background, but collaboration is a two way activity and a productive board meeting requires participation.

Shock Absorber or Amplifier

“If we could only do one thing, what would it be?”  I was asked this question by one of our senior leaders (I believe it came from Lencioni’s “5 Dysfunctions of a Team”), and it triggered a lot of thought and discussion. It’s a great question for every CEO. It makes you think about what is most important right now, and what we are currently trading off against it. What is our top priority and what are we working on that may be detracting from that priority.

About the same time, an interviewer asked me for a lesson I learned over the years that has helped me as a CEO.  My answer was the need to figure out the vision and the ultimate goal, and never lose sight of it or get distracted by the ‘tyranny of the urgent.’ Something is always going to demand immediate action, and while it is important to deal with the urgency, the key is to stay on course for the ultimate goal. 

Each area of the business has a different ‘urgency horizon.‘ In sales, urgency is driven by the next deal or the quarterly target. Competitive challenges immediately escalate to urgent. For marketing, the horizon is a little longer, and for product and engineering it is even a little longer. The cycle-time for each group to effect change is different, so their urgency horizon is different. In responding to the interviewer, I went on to say that I learned that a CEO has to have a measured response to what is presented as urgent. We need to figure out when to act as a shock absorber to buffer the urgency, or an amplifier to spur immediate action.   

The tyranny of the urgent and the ‘one thing’ question led me to thinking about how they shape our progress and direction toward our goals. Most companies are about to complete their first fiscal quarter. Some things are probably going well, and some not so much. CEOs and boards of directors are thinking about where they are on their plan for the year, and what they need to course correct. For many leaders, the focus will be on bookings and revenue, or profits and cash, and leaders will be looking for pivots and actions to ensure the business is on track for the remainder of the year.

Businesses are complex organisms, and course corrections are never easy. We may have to weigh bookings against customer satisfaction, or investing in innovation against profitability, or a host of other tradeoffs.  We also have to balance near-term urgency against staying true to our longer-term vision and goals.

The hardest tradeoff for me was balancing customer satisfaction against anything else — bookings, profits, employees, innovation, investors, etc.  A business will not survive very long (or at all), if the customers are unhappy. Customer goodwill affords us a tiny bit of room to address other urgent needs, but that only goes so far.  If there is a choice of what to do next, and we can only do one thing, then how do we prioritize which urgency to address? 

Here is a thought exercise: imagine you promised your customers you would deliver a high-demand feature in September, but your innovative team has come up with an idea to alternatively apply resources to complete a new premium feature that you can sell and grow your bookings. You are off of your bookings plan, and the new premium feature could save the year. Your choices are: fulfill the customer promise in September and raise customer satisfaction but miss bookings targets, or put the resources on the premium feature to sell in September and miss the customer promise but maybe make your bookings target.  You could try to do both, but will likely slip both beyond the end of the year. In the land of ‘one thing,’ do you opt to finish the premium feature and drive bookings, or do you stay true to your customer commitment? The question comes down to a choice between bookings and customer satisfaction.

The ‘one thing’ question forces a priorities decision. It brings clarity, and avoids the muddled decision of trying to do both options and likely failing on both. Making hard decisions well is a key strength leaders need to develop, and the ‘one thing’ test helps to build that muscle.

So, how does that relate to the second conversation about being calm and staying the course and having a measured approach to urgency? The key is in the word ‘measured.’  A measured approach to urgency says we don’t drop everything and just run around chasing the latest emergency.  A measured response may mean finding a way to act on customer commitments that might create a new premium offering to sell to others (two birds, one stone).  A measured response is recognizing when a short-term focus will create a long-term disaster, and not making a foolish decision intentionally. We should never lose sight of what great looks like as we acknowledge the present urgencies. We need to balance the mix of urgency horizons across the various functions of our business. Our role is to find the path between acting as a shock absorber to dampen the perceived urgency, or acting as an amplifier to spur the company into action.  Keeping the long-term north star in focus, and asking the ‘one-thing’ question will often illuminate the right choice.

Are We On The Same Page

In a typical hierarchical organization, information is passed up the line (escalated) to the top for decision making.  At each step along the way, the information is watered down or colored in some way. When it reaches the top it is less than perfect, which leads to imperfect decisions. Most companies have smart, skilled team members at all levels, and most of the unfiltered, hands-on knowledge and information exists closer to the front-line than it does to the top of the organization. As great companies mature, they build strength throughout the team, and move decision making down the org chart to harness the brilliance of the team to efficiently make better decisions.

The first key to moving decision making to the people with hands-on knowledge is to ensure that we have a shared understanding of the goals, objectives, strategies, and culture of the organization.  For way more years than I want to admit, at the companies I led we created an annual plan book to make sure everyone was on the same page. I think I first learned about the annual book from Colin Angle the brilliant founder/CEO of iRobot (apologies if it actually came from someone else — it was a hundred years ago and my memory is fuzzy).

Here is the idea: Every year we published a book that stated the mission, vision, and values of the company, and the overarching corporate and financial goals for the year. We included a page about our market and our ideal customers, and a statement of our unique value proposition.  It also included a statement about our ideal team member, and quotes from employees and customes. We produced it as an actual printed and bound 5”X8” book with a graphical theme that set the tone for the year ahead. This was not a long, wordy novel.  Each topic had one page with big fonts and just a few simple sentences that were easy to read and digest.

Even though it was a little old fashioned to print a book on paper in a digital world, I believe it was important to print the book and hand it out to every employee at our kickoff. The tangible card-stock pages made a statement.  Once we put the plan in place and printed the book, the die was cast. No moving the goal posts or editing the corporate direction. It kept us all focused on the same goals and outcomes for the entire year.

We restated our mission, vision, and values every year so that every team member was reminded of who we were and why we were in business.  When I met with new employees, I would hand out the book and walk them through each page as an introduction to the company.  We wanted a positive culture that was highly contagious and easily caught - the book was a means to transmit our core essence to everyone.

Once we have everyone on the same page, the second key to moving decision making closer to the hands-on knowledge is to build trust in the capabilities and judgement of team members.  We need to know that they have the skills, capabilities, experience, and judgement to make informed decisions.  In other words, we need to trust them, and building trust is not easy.

I think of it like giving the car keys to a new driver.  Before they go solo, they need to demonstrate that they have learned how to drive. We do that by riding along with them at the wheel. We ask them to narrate what they are seeing and doing, and what decisions they are making. We don’t grab the wheel or step on the peddles  (mostly), but we need to see them in action before we trust them to take the car.

In a business setting, this translates into constant communication and asking probing questions to understand why and how team members are reaching their conclusions.  A leader needs to resist the urge to tell them the answers or make the decisions for them, but we still need to see how they will drive the ‘car’ before we turn them loose. In other words, we want to retain the ability to influence the decision before it takes effect. The more we give team members the opportunity to make informed decisions and demonstrate their capabilities, the more we build trust and are willing to let decisions happen without prior approval. However, trust is a two way street. Team members also have to trust their leaders to create a safe space for them to succeed, and sometimes that includes the space to make bad decisions and learn from them.  Both parties have to be committed to growing the muscles that enable solid decision making.

With a solid grounding in the shared culture and core business model of the company (the ‘book’), and team members have earned managerial trust, then they are prepared to take on more decision making responsibilities.  When managers commit to the idea of moving decision making down the corporate hierarchy, they also have to commit to working with team members to build trust and confidence. All of this only happens if there is ongoing meaningful communication. If we stop talking, the whole process loses momentum. It is a process, but when it works, companies accelerate and job satisfaction skyrockets.

Are You On Top Of Your Ladder?

The concept of product positioning was described in a classic book by my marketing heroes Trout and Reis (Positioning: the battle for your mind). It is human nature to categorize competitive offerings. Buyers create mental ‘ladders’ and position competitors on those ladders from top to bottom as a way to segment and differentiate products. Marketing’s role is to give the buyer a path to categorize a brand at the top of a ladder with a unique offering. In other words, marketing differentiates and positions a brand or product to distinguish it from the pack and make it stand out in the mind of the buyer.

The more a vendor can differentiate from the competition, the easier it is for a potential buyer to make a choice. When all of the vendors and their products look alike, buyers have to dig deeper and deeper and work harder and harder to figure out which vendor meets their needs the best. If there is no difference, then any choice will do, but it is not human nature to randomly make a selection. If there is no clearly differentiated offering, then skeptical buyers are forced into endless evaluation. The more we can differentiate our offering, the shorter the sales cycle because buyers will not need to spend as much time trying to pry apart the competitors. 

However, the differentiation has to be with respect to something that matters to the buyer.  Sounds obvious, but often when buyers have to search for the differences between vendors, they start looking at the edges or corner cases and get all wrapped up in things that ultimately just don’t matter. They fixate on some tiny difference and end up making their purchase decision on criteria that will never impact their success.

Over time, in a competitive market, all products trend toward commodities.  Every new feature from one vendor is met by a covering feature from another.  Eventually, all of the basic customer needs are met by all of the products, and innovations are happening around the edges where it simply does not matter to the majority of buyers.  It is like word processors competing on who has a better footnote feature when hardly anyone uses that capability or cares. When buyers are confronted by a dizzying array of features, they can become overwhelmed by the possibilities and the complexity, which leads to analysis paralysis.  They may just choose to put the project on hold rather than make a murky decision. Sales people often say that the biggest competitor is ‘do nothing.’

As products become commoditized or indistinguishable, the differentiating elements shift toward price, services and market presence or brand.  This is when a vendor’s reputation and customer connections become critical.  A vendor’s messaging has to demonstrate that they truly know their ideal customer profile and critical use cases. They have to show a real connection with customers, and they have to remember that buyers trust their peers, so case studies and testimonials can win the day.

In the end, if buyers really cannot differentiate vendors on anything meaningful, then it often comes down to price — “If I can’t tell you apart, then I will buy the least expensive alternative.”  Unfortunately, some vendors start out with price as their primary differentiating factor. They make up for product/company deficiencies by offering a bargain price, or they focus on grabbing market share and not building a sustainable business. Bargain pricing is their ticket to adding lots of logos.  Buying or selling solely on price rarely ends well.

In a sea of all the same, marketing’s challenge is to stand out as the clear choice.  Positioning is the path to painting a stand out picture. I wrote about creating marketing messages with ‘edge’ in a prior post, and this is where it matters.  Marketers have to develop a deep understanding of their target customers so that their marketing messages connect with buyers in a way that differentiates and positions the vendor at the top of a buyers mental ladder. When it works, the marketing magic acts like a magnifying glass to propel a vendor to stand out. 

Will They Stay or Will They Go

I have been thinking a lot about a vendor’s view of the  two ends of the buyers’ journey - finding a lead and dealing with churn.  On the front end, we focus on marketing messaging, positioning, key differentiators, and Ideal Customer Profiles (ICP).  The goal is to find more great leads and increase our conversion rate from leads to customers. On the back end, we fret about churn and down-sell, and we perform churn analysis to determine why accounts fail to renew, or what went wrong.

I am a fan of both of these forms of analysis, and every organization should be all over this.  However, lately I have been exploring the connections between the two, and coming to the conclusion that we often miss the opportunity to learn from one and improve the other.

We always hear the same typical rationales from churn analysis:

• Bad service

• Bad product

• Bad product fit / competitive takeaway

• Death and marriage (bankruptcy and merger)

• Management / strategy change

All of these are legitimate and we have to understand how each plays a role in churn and down-sell.  Great - we need to do that analysis and figure out what we can do to improve the results on all fronts.  However, what I think is more interesting than churn analysis is ‘Stay Analysis.’  The reasons why customers are staying can tell us much more than the reasons why they are leaving.  Understanding customer retention can be the key to future growth.

In an earlier post, I wrote about churn and down-sell as a leaky bucket.  Revenue that we worked very hard to secure is leaking away as customer decide to leave. Churn analysis and acting on the findings helps to plug the holes and slow the leaks, but it will not do anything to drive growth. While it is imperative to stop the leaks, the real goal is to grow the business with increased sales.  To do that, we have to look at the other end of the journey and hone in on the quality and quantity of leads, and their conversion ratio into closed sales.

I see a ton of tech marketing messaging, and frankly most of it is pretty bad.  When I say that, I mean it is lacking clarity and ‘edge’, and it simply is not compelling.  On the continuum from hard-sell — ‘buy from me,’ to no-sell — ’thought leadership,’ a lot of marketing messaging leans too far in the direction of no-sell.  There is nothing wrong with thought leadership.  It has its place in the vendor’s arsenal and the buyer’s journey, but I am an advocate of thought leadership with a purpose - an ‘edge.’  A vendor’s thought leadership message ought to lead shoppers toward the solution that the vendor wants to sell.  We should educate the market to understand the ‘right’ way to do things, and, oh by the way, let them know that it is the way we do them.  Without edge, a lot of thought pieces just deliver generic, bland messages that could have come from anyone, and generally the most visible market leader reaps the most benefit.  We need to say something unique, or present a differentiated point of view if we want to stand out.  It does not need to be a hard sell ‘buy from me,’ but at least it ought to imply ‘buy like me.’

When we are fishing in the sea of prospects for a specific Ideal Customer Profile (ICP), we need to use ‘bait’ that will attract more of those prospects, and fewer leads for non-ICP shoppers.  A generic message is like casting a big net that does not differentiate what it catches. The result is it takes more sales effort to qualify and find the real ICP buyers. If the solution is easy to buy (low price, low impact), a bland message can entice less than ideal buyers to become customers who then quickly figure out the product was a bad fit and churn.

I suggest the issue starts with marketers that do not really have a deep understanding of their ICP and unique value proposition.  If you are unsure of who you are looking for and what they are interested in buying, then you just throw out generic thoughts and hope that something sticks.  There is also a sprinkling of marketers that are committed to avoiding being too ‘salesy.’  Their ‘thought leadership’ messages intentionally avoid any whiff of sales, and in the process avoid any competitive differentiation or biased point of view - no ‘edge.’

That takes me back to stay analysis.  To really understand our ICP, we have to look at the customers that stay with us.  Why are they happy?  What unique benefit caused them to buy, and what is contributing to their success with our product? Win analysis may tell us why they made the purchase, but the more interesting information is what is making them happy post-sale and driving their success. It may be completely different from their core reason for buying.  One company I work with discovered that companies that stay are nearly all using a module that the vendor thought of as a minor element of the sale.  It turned out to be the feature that delivered the stickiest value post-sale, but it rarely came up in win analysis and was not a big part of their marketing and sales messaging.

Stay analysis is a valuable tool for determining our ICP and our unique value proposition.  Directing marketers to interview the best customers and personally perform the stay analysis will be eye opening for them.  It will improve their understanding of the buyer and enable them to create thought leadership with informed ‘edge.’  It will help them to refine the bait so the quality of leads improves and sales can be more efficient at catching customers that will stay in the boat.  There is a virtuous cycle when we market a clear message to our ICP — we attract more ICP shoppers, close more ideal customers, and they stay with us longer without churning. When we start by listening to our customers, good things happen.