The Impact of Digitalization on the Commercial Function
Digitalization of the commercial function requires a significant investment in commercial intelligence. So let us start with the definition of what commercial intelligence is. Wikipedia is my go-to source for that!
Digitalization and all the systems that go with it will bring no benefits without the proper information going through it.
Remember that a fool with a tool is still a fool. A CRM system without complete and systematic customer data is useless.
A pricing optimization solution with incomplete and uncleaned data will not make proper pricing recommendations.
Finally, dynamic value-based pricing on an e-commerce platform needs real-time competitive information feeding the system. You get my point. Systems, tools, and models form the engine of digitalization. Data is the fuel of the engine. And because of that, the role of all commercial functions have changed with the need for more complete, deep, and relevant information.
Here, we also include the need for qualitative information which can bring lots of value when combined with quantitative ones.
The Transformed Role of the Commercial Function
The need for commercial intelligence is real across all go-to-market functions to be able to deploy value-based strategies. At every stage of the go-to-market process, commercial functions play a critical role to gather information and to conduct specific value-based activities.
We are far away from the traditional sales role which used to be focused on order taking. Because of digitalization, order taking has been automated in procurement software and e-commerce platform. The sales function is transitioning to be more commercial i.e. wider in scope and much connected to marketing and pricing. Finally, other functions besides sales are also very relevant to commercial intelligence: sales ops, demand generation, customer sevice, customer success, and strategic account management.
The level of sophistication in what is asked of traditional sales force is amazing. I list a few dimensions of the new role of sales below. The future is sales is moving towards a combination of commercial excellence and commercial intelligence. Could we call is “commercial excelligence”?
As you can imagine, the role of pricing in this new era of commercial excelligence is that of a turbo booster! Pricing enables sales with the right information and recommendation at the right time, for the right customer and the right product. In that context, commercial
organizations need to be transformation to include these five considerations listed in the figure below.
Both Forrester and Gartner predict a revolution in the way traditional commercial organizations are structured. That includes the inclusion of the pricing functions under the sales operations functions to work in full alignment. Imagine the power of the combination of technology, sales and pricing working together under one roof without organizational silos and constraints. We also see the emergence of unique commercial team designs with the separation of transactional and transactional activities. Therefore the account management function is booming right now. So digitalization is forcing to have a discussion around this potential functional redesign.
Implications for Commercial Skills
The impact of digitalization on pricing skills is real. These skills were mostly soft skills to complement the improving pricing science and technology. For commercial functions, I posit that the reverse is true. Sellers and developers do not lack soft skills. They need to develop more hard skills to be able to manage technology and to understand data and its science. I list some of the hard skills in the figure below.
Of course it is not about turning our sales force into data geeks. But they need to understand and embrace the rationale of pricing and commercial decisions and what models do in the background to derive intelligent decisions. The development of these hard skills are essential in building confidence and adoption in the commercial teams of the digital tools.
All major consulting companies have written about the renewed roles of pricing and commercial teams to recover from this crisis. We made the case in this paper that both the current crisis and the accelerating rate of digitalization will change this two functions forever. So here are three concluding points in this context:
1) ROI, ROI, and ROI
In the end, success breeds investments and more success. This crisis is a wake-up call for short term impact and long-term ROI.
You cannot make your transformational roadmap too theoretical or too fuzzy. You now need to apply a strong discipline of calculating and promoting ROI for all your transformation initiatives.
That is the only way to get attention from the C-suite and to secure the next wave of investments for pricing and commercial programs.
Every dollar is going to be counted. Be ready for a fist fight!
2) Digitalization is just accelerating the need to transformation sales and pricing
Speed is the new currency of business. Huge investments in digital tools and systems provide a boost to business cycle and accelerate the need to go faster in pricing and commercial transformations. That includes speed in design, speed in execution, speed in technological deployment, and speed in mindset disruption. What used to take 10 years needs to be done in 1 to 3 years.
3) You Cannot Transform Pricing Without Sales And Vice Versa
The interdependencies between sales and pricing are increased because of systems such as CRM, CPQ, sales automation, and business intelligence platforms. If you decide to utilize pricing transformation, there will be a modification in the commericial policies and processes.
If you transform, your commercial approach to inject a boost in productivity, you will most likely use CRM or CPQ and therefore will have to get pricing take care of. Both are joined at the hip especially now when companies are focusing on synergistic actions.
Commercial excellence 1.0 is dead.
Long live commercial excellence 2.0.
This new version is fast, furious, focused on impact, grounded in pricing science, and leveraging technology for efficiency.
Are you ready to get on the departing high-speed train?