Stephan Liozu, Chief Value Officer of the Thales Group shares in detail how commercial excellence can enhance failing pricing strategies, struggling organizations and the roles of pricing practitioners in these troubling times.
Read the full Whitepaper from Stephan Liozu on "Commercial Excellence" below.
The Need for Commercial Excellence 2.0
The experts have spoken. It will take 18 to 36 months to renew with the demand levels and growth rates we experienced in 2019.
There is a long road ahead.
Many of the same experts anticipate that business as usual is gone forever and firms will be on high alert to make the changes that are needed.
There are two massive forces that impact pricing and commercial functions at the same time.
One is obviously the COVID-19 crisis and the dramatic effect on the economy.
The second one is the accelerated rate of digitalization of the commercial process.
The addition and combination of these two forces act like a powerful earthquake that is forcing many companies around the world to rethink their go-to-market strategies and how they organize their commercial and pricing functions.
Let us examine the forces.
The Impact of the Covid-19 Crisis on Commercial Processes
Some industries are impacted for five years. Armies of sales and pricing people have been let go as companies cannot sustain the associated cost levels. For most sectors, it is a massive shakeup.
As a result, the sales and commercial functions are going to go through a transformation. Commercial intelligence and excellence as we knew them will morph into something else.
I predict that seven areas will experience commercial excellence changes over the next three years.
1) Support All Current Bids And Contract Negotiations
No doubt, the focus is on validating, securing, and closing the current deals in the pipeline and on making sure they do not evaporate.
That might require a few more concessions, short-term changes in proposed business models, and pricing engineering.
The essential priority is to give top management a reality check at what is real or not in the current forecasts and order pipeline.
2) Focus On Controlled and Profitable Growth
This is one of the biggest changes. We have to say goodbye to explosive growth. We must anticipate that businesses will scale back and might focus on profitable growth, sales opportunities close to the core business, or sales from adjacent innovations.
For the last decade, the focus was “growth at all cost” because the stock market expected that.
Profitable growth is the new name of the game, but that means your latest long-range plan and aggressive growth rates are useless.
It is back to slow and profitable growth.
3) Attention To Existing Customer Retention
We all know that the core business is the profit fuel of any business. It makes customer retention and focusing on core customers the biggest commercial priorities of the next two years.
I anticipate that sales leaders will allocate their best talent and most of their resources gaining back these customers at the expenses of non-essential segments.
Do not forget that your core and profitable customers will be under attack by your competitors. So it is all hands-on deck.
Top management and top sales leadership need to pay attention to these accounts and visit them more than before. It is all about relationship mapping and intense engagement.
4) Focus On Return Assets
Sales strategies will be impacted by severe reductions in CAPEX budgets, greater focus on cash flow, and higher ROI expectations for technology investments. We might witness a rationalization of investments in commercial excellence and sales enablement technologies.
However, at the same time, the best platforms with superior and documented ROI should thrive.
The sales enablement software space experienced explosive growth from nearly nothing to $5billion in annual sales in just 5 years. I am not sure they can sustain that level of growth over the next five years.
5) Zero In On Sales Efficiency.
We should also expect a rationalization of headcount allocation and distribution between all relevant commercial functions: sales, sales ops, strategic account management, customer service, sales engineering, etc.
Sales leaders must demonstrate the payback of each additional sales resource and the impact to short-term commercial goals. We might move away from a long-term orientation for a few years.
In fact, whether short term or long term, every headcount and every investment in new resources will have to be clearly justified. This is just the new reality.
6) The Emergence Of Customer Success And Value Consulting.
Companies that will win over this delicate period are those who can demonstrated concrete and justified customer value.
There is no more room for impact fuzziness or vague contribution to customers’ bottom line.
Both customer success and value consulting roles will become key players at the commercial excellence table. The winners here are software companies who support value-based strategies and allow sales teams to demonstrate realized economic value.
The value management software space is well positioned to succeed and companies like LeveragePoint Innovations and DecisionLink are promising enterprises.
7) More Proficiency In Pricing And Analytics.
In the future, sales reps need to be able to access and interpret sales and pricing analytics. Because of the previous 6 points, the level of expected sophistication is going to rise.
What was an option before because of robust growth, is now a requirement due to decision-making on which customers to service, at what price, and with what level of cost-to-serve. I believe we are entering an era of data-centric commercial decision-making.
This crisis has created a new sense of urgency to deploy new commercial solutions, new data analytics process, and more robust prioritization process. I call that commercial excellence 2.0.
Today's sales practitioners should be ready for a new way of working and new level of pressure for short-term impact.
Managing profitable growth and cash flow at the same time creates tension between multiple functions, but will be the new normal. Expect more rigorous budgeting and forecasting processes.
Expect to have to learn new technologies and to be much more agile. Disruption offers both challenges and opportunities. Your company needs you. Step up your game today!
About the author:
Stephan M. Liozu (www.stephanliozu.com) is Chief Value Officer of the Thales Group
(www.thalesgroup.com) and the Founder of Value Innoruption Advisors
(www.valueinnoruption.com), a consulting boutique specialized in value-based pricing, industrial pricing, digital and subscription-based pricing. He is also an Adjunct Professor & Research Fellow at the Case Western Research University Weatherhead School of Management.
Stephan holds a Ph.D. in Management from Case Western Reserve University (2013), an MS in
Innovation Management from Toulouse School of Management (2005), and an MBA in
Marketing from Cleveland States University (1991). He is a Certified Pricing Professional
(CPP), a Prosci® certified Change Manager, a certified Price-to-Win instructor, and a
Strategyzer Business Model Innovation Coach. He authored six books, B2G Pricing (2020),Monetizing Data (2018), Value Mindset (2017), Dollarizing Differentiation Value (2016), The Pricing Journey (2015) and Pricing and Human Capital (2015). He also co-edited four books, Innovation in Pricing – Contemporary Theories and Best Practices (2012) and The ROI of Pricing (2014), and Pricing and the Salesforce (2015), Pricing Implementation (2019). Stephan sits on the Advisory Board of LeveragePoint Innovation and of the Professional Pricing Society.