How To Structure A Commercial Organization

There are several different ways to structure a commercial organization. Markets, products, segments, etc. The model I prefer is to structure the teams around metrics. This does a few things:

1/ It ensures that the organization has a metrics mindset. Sometimes people forget what metric their work moves. Building the org around metrics makes this nearly impossible.

2/ It ensures everyone knows they’re contributing. There’s nothing worse than coming to work each day and doing a bunch of work that doesn’t actually contribute to a business objective.

3/ It helps with prioritization. Teams should prioritize their work based on the impact it’ll have on the metrics. Focus on low effort/high return work, and avoid high effort/low return work. It’s amazing how few people have this mindset.

I separate a commercial org into three buckets. If you’re not directly contributing to one of these three buckets or supporting someone that does then you’re on the wrong team. Commercial orgs only do three things:

1/ They sell stuff.
2/ They implement stuff.
3/ They retain stuff.

Everyone should be impacting at least one of those things. Then assign a set of metrics with targets against each. Here are some examples:

1/ Selling stuff (bookings, upsells, expansions, new logos).
2/ Implementing stuff (speed to go-live, quality of implementation, cost of implementation).
3/ Retaining stuff (retention, renewals, net promoter score, user activity).

I’ve found that structuring the team around these three activities and some set of metrics ensures that everyone has clarity on their role, their value, and how they’re impacting the business in a positive way.

The Job Of A Sales Leader

A sales leader’s job isn’t to hit the number.

A sales leader’s job is to hit the number while simultaneously ensuring that those prospects that choose not to buy have a positive experience and that the sales team doesn’t overcommit or redirect product and engineering resources.

The best way to do this at scale is to hire a sales leader that shares this perspective and knows how to build the right kind of sales culture from the start. It’s extremely difficult to change a sales culture once counterproductive norms have been established.

*adapted from this podcast with David Sacks.

Sales Forecasting: Supply & Demand

A common mistake made by sales leaders when building out a sales forecast is only considering the "supply-side" of their forecasting model.

That is, the model will include some version of the following inputs:

• # of Reps

• Quota

• Discount on quota

• Ramp-up time

• Rep turnover rate

They'll put all of those inputs into a spreadsheet and come up with a projection. 

This is a crucial step in the process. If you want to generate $100 million in revenue, you need a model that will tell you how many reps you'll need to hire; e.g what is the "supply" of reps you need to get to your number? 

But this is only half of the equation. The other half of the equation is the demand-side. You have enough reps to sell $100 million but is there enough market demand to sell $100 million? If there isn't enough demand, you now have two problems: 1/ you're not going to hit your number and 2/ you have too many reps.

To avoid that outcome, a sales leader must put an equal amount of energy into the demand-side of the model. Typically, that will include these inputs:

• Total addressable market (TAM): this is the number that you could hit if you sold to every potential buyer of your product in the current period.

• Serviceable addressable market (SAM): this is the number you could hit if you sold to every potential buyer in the markets that you serve in the current period. For example, if your product is only live in half of the U.S. market your SAM would be 50% of TAM. This could also be limited by specific verticals or buyer types that you’re currently servicing.

• Serviceable Obtainable market (SOM): this is the amount SAM that you can realistically obtain. Because of competition, delivery constraints, etc. you're not going to be able to sell 100% of SAM.

So, in order to be comfortable that there's enough market demand to get to $100 million, your SOM must exceed $100 million. There's no doubt that great salespeople and great sales teams can create demand that isn't there, but this doesn't scale and it’s a dangerous assumption to make. It’s crucial that sales leaders understand the actual market demand for the products they’re selling as it exists today.

The demand-side of the model is often more difficult to calculate than the supply-side because it's generally harder to understand and control — particularly in the early days. But there's a long line of sales leaders that made the mistake of not paying enough attention to demand and thus over-hired and missed their numbers. That’s the kiss of death for any sales leader. Applying equal rigor to both the supply-side and the demand-side of a sales forecast is the best way to avoid that outcome.

The Importance Of Customer Discovery In A Crisis

A few weeks ago, I wrote about some best practices on how sales organizations can keep their revenue machines running through the COVID pandemic.

One thing I didn't spend enough time on in that post was the importance of understanding how things have changed for your existing customers. Your customers were living in a different world when they purchased your product. At the time, your product was likely solving a top 3 problem for your buyer. With COVID, things may have changed. Your product might be significantly more valuable now than it was prior to COVID — or significantly less valuable. Either way, you need to find out quickly.

Most companies are going to be cutting expenses, and you must understand whether or not your product is on the shortlist of things to cut. Reversing that reality may require hard pivots, so you need to know now.

Here are some key questions to ask your customers as you have conversations or complete account reviews:

1/ How has COVID impacted you? How has it impacted your customers?

2/ How have your top 3 or 4 priorities changed due to COVID?

3/ What kinds of products are you buying now (if any)? What kinds of products are you cutting?

4/ Are you cutting staff? Will the users that historically have used our product change?

5/ Before COVID hit, our product was addressing a top 3 priority for you. Is that still true?

6/ Is our product more or less important to you than it was prior to COVID? Do you expect to use it more? Less? Why?

7/ Are you using our product differently now than you did prior to COVID? How?

8/ What parts of our product are more useful to you now? Less useful?

Push your customers to give you hard answers to these questions — even if you don’t want to hear them. And make it easy. Send simple surveys. Quickly run through these questions at the beginning or end of calls or Zooms.

Finally, it’s worth noting that commercial teams tend to be extremely optimistic. This project requires intense pessimism and a search for the real truth. This is not the time to sugarcoat what's happening in your market. Get to the truth as quickly as possible. If needed, reset expectations, find ways to repackage your solution around new problems, or (in rare cases) rebuild your solution to solve the emerging problems your customers are facing in this new world.

Selling Through A Crisis

2020 will mark the third economic crisis I've been through in my career — the dot-com crash in 2000, the mortgage crisis in 2008, and now the COVID-19 pandemic.

Economic busts are inevitable. And although this one feels a lot different than the first two, in many ways, it also feels the same.

Selling in these kinds of crises can be extremely difficult. Prospects are getting laid off or furloughed. Companies are cutting back on expenses and doing very little new purchasing. Leadership teams are distracted with getting their companies back on track. Getting a prospect's attention can be difficult if not impossible. Finally, the notion of cold calling or pitching your product in this kind of environment can seem trivial or even insensitive.

That said, our companies and our sales team have to get moving again. Standing still is the worst thing for all of us. 

Here are some hopefully practical lessons I've picked up during past economic slowdowns that might be helpful as you sort through how to get your sales numbers back on track. 

Quickly disqualify 10%-20% of your opportunities. This sounds like a counterintuitive thing to do in a downturn, but it's more important than ever. One of the most important things a salesperson can do is to identify opportunities that are a waste of time. With this downturn, a lot of opportunities that might have looked real a month ago are no longer real. Go find them. Segment opportunities that are more or less likely to buy in this environment. Filter by industry or geography or product or whatever attribute might lead to disqualification. Make a list of your active sales opportunities. Put an X next to any opportunity that you suspect isn't actually interested in buying your product in the near future for whatever reason. Within the next week ask each of these prospects directly if they're interested in buying in the short term. If not, no problem, you'll come back later.

Empathy, empathy, empathy. Empathy is always important in sales. It's even more important now. I'd recommend sitting down for a few minutes, closing your eyes and trying to put yourself in the shoes of your prospect. What's on that person's mind? What are their priorities? What are they scared of? How will they view your product in this new world? What's changed in their day-to-day? Before you make another sales call, really try to get inside their mind. You should also talk to your CFO or members of your leadership team or individuals that buy things within your organization. Ask them how they're thinking about new purchases in this environment? What's their frame of mind? Your first task in a crisis is to get inside the context of your buyer. The person you were selling to a couple months ago is likely a very different person now.  

Be 50% more direct. Most buyers are going to be a lot busier than they were a month ago. They'll have less time to talk to salespeople. Respond to that. All of your emails should be less than 100 words. On calls and in meetings, get right to the point. Small talk is fine. You need to be empathetic and understand how the crisis is impacting them, but when you're talking about your deal, get to the point more quickly than you normally would. Focus on movement and when you suspect a lack of interest or a slow down in a deal, call it out. Don't be shy in these times. Ask the hard questions. Be direct.

Position your product as relevant to the crisis (but don't go overboard). Sales of home fitness equipment and computer monitors have exploded over the last couple of weeks while sales of luggage and swimwear have nosedived. The world is different now, and nearly every company is responding. It seems like every company in America has a product to help with the COVID crisis. Some people might find this annoying. I find it inspiring. I love to watch companies fight and scrap to align themselves with the new normal. Find out how your customers are using your product differently in this environment and share that with prospects. But don't embellish. Tell real stories that deliver real value. You know if your product will help in the crisis. And if it does, you should tout that. But be genuine and honest. Spin or inappropriate embellishment in a crisis will backfire.

Help your prospect keep their job. Your buyer likely has some concern about being laid off. Purchasing a new product often creates new value that needs to be implemented and managed. Helping your prospect drive the sale through their own organization can increase the likelihood that they'll stay with their company and, ideally, get promoted. If your prospect sees your product in this light, they'll be a lot more willing to pick up the phone when you call.

Celebrate small wins. Wins can be hard to come by in a downturn. A few months ago, a million-dollar deal may have been cause for celebration. In this environment, a good meeting or even validation that a prospect is still planning to buy your product may be enough to celebrate. Find ways to broadcast these small wins. Do it through Slack, or email, or mention them in a team meeting. Everyone is looking for good news. Share it. Over time these little wins will get bigger and bigger. 

Share learnings with your team. There are no experts on how to sell your product in a pandemic. Create a Slack channel or email list where every rep can enter things they've learned that day or that week. After a few weeks, the whole team will be experts. 

Give your prospects something. With a little bit of extra downtime, now is the time to double down on drip marketing. Send your prospects data, or an article, or a tweet that you know they'll find interesting. Do the work to find interesting things and share them with your prospects without asking for anything at all in return. 

Sharpen your skills. If you do find yourself with some extra downtime, use this time to sharpen your skills. Go back and look at the last few months of sales activity and do some self-analysis. Where are you slowing down? Look at the quality of your sales conversions against your peers — prospect, presentations, proposal generation, negotiating, closing, etc. Find out what you're not doing as well as you could be and focus on improving that. Professional athletes practice way, way, way more than they play games. That's because they have the time. Actual football games happen once a week for three hours. Suddenly you have a lot more time to practice. Do it. 

Don't devalue your product. When demand decreases, sellers quickly use price as a lever to keep up the momentum. Don't do this. Your product delivered some amount of value a year ago, and it will deliver the same or more value when we come out of this downturn. Proactive price concessions devalue your product in the eyes of the buyer and weaken sales reps and teams. Raise the bar and find ways to hold your price steady through the downturn. That said, as I wrote above, do be empathetic. Understand the challenges your prospects are facing and respond to them if you can. If they see the value in your product but legitimately can't afford or can't comply with standard contract terms, hear them out and respond if you can. This isn't about being difficult to work with; it's about pushing yourself to keep the bar high for demonstrating the value of your product.

Perhaps the best advice of all is to stay positive. I know from experience that as bad as it seemed at the time, we came out of the downturns in 2000 and 2008 just fine. This one will be no different. Have empathy for your buyer. Amp up your focus. Celebrate small wins. Most of all, keep grinding. 

Stay safe.

Hiring Your First Head Of Sales

By far, the most frequent question I get from founders is this: How do I go about hiring a Head of Sales? I've literally received this question four times in the last six or seven weeks.

Hiring a Head of Sales at a startup is a very difficult, important, and scary thing for a founder. Making a mistake on this hire can set the company back several quarters. I try to avoid making declarative statements to founders because context is so important and each situation is unique. That said, here are a few things that will help reduce the risk associated with hiring a Head of Sales for the first time:

1/ Ensure the candidate has been an ultra-successful individual contributor. I know, I know, the best salespeople aren’t necessarily the best managers. You don't need the best salesperson in the world, but you do need someone who has done it before. In startup sales, you can't lead the calvary if you can't sit in the saddle. Strong sales capabilities (both to sell direct and to sell salespeople on joining the company) are crucial in this role. If this candidate can't sell, they likely can't recruit. It’s not worth that risk.

2/ Ensure the candidate has sold into (roughly) similar-sized organizations in the past. If you're selling to large enterprises, don't hire an SMB expert, and vice-versa. It's not impossible to make the transition, but it's relatively unlikely that it will be successful. Often, the things that make people good at SMB sales make them bad at enterprise sales. Also, do consider the candidate's experience with the vertical you're selling into. Ideally, you will be able to find someone who has sold into that vertical in the past. I wouldn't make this a requirement in every situation. The importance of this is industry dependent. But if the industry has a steep learning curve, optimize around that set of experience.

3/ If you have the capital, hire a headhunter to help. Doing this search right requires an expertise and time investment that most founders can't afford. This is a good opportunity to outsource.

4/ Hire a “stretch VP.” A stretch VP is a rising star (generally Director level) that needs to level-up a bit to become a sales leader at a larger organization. This type of candidate will generally lean towards execution but will have the potential to recruit and run a team. This is a good hedge. If the candidate levels-up and can run the whole sales organization, that's great. If they can't, it'll be easier to “level” them with a more senior candidate. If you hire someone too senior, you run the risk that they won't be execution-focused, and it will be difficult/impossible to level the candidate if things don't work out. A stretch VP is a good way to reduce risk.

5/ Overinvest in intrinsics. This candidate is going to be accepting a very difficult job. Make sure they have the intrinsics that will make them successful in a high-pressure startup environment — grit, humility, adaptability, and curiosity. More on that here. Also, this is hard to do, but make sure the candidate is someone that is at a stage in their life and career they simply aren’t willing to fail. Some call this “personal exceptionalism” — more on that here.

Some Thoughts On Enterprise Software: Increasing Consumerization, A SaaS Bubble & Cross-Company Network Effects

Here are some thoughts related to enterprise software that have been rolling around in my head for the last few weeks.

’Consumerization’ Of Enterprise Is Accelerating

Aaron Levie (founder of Box) tweeted this the other day following the Zoom IPO:

The tectonic shift causing a new era of enterprise software is that product development, distribution, adoption, customer service, and design look vastly more like a consumer company than a traditional enterprise company.

— Aaron Levie (@levie) June 23, 2019

I’m not sure we’re fully there yet, but the tectonic shift Aaron refers to is absolutely happening faster than I had thought.

Back in 2011, Chris Dixon wrote a blog post discussing why consumer tech is so much better than enterprise tech. I posted this comment:

“In a [B2B] transaction, one good salesperson (the “seller”) only has to sell one person (the “buyer”) on the value of the technology. Once the product is sold, the buyer forces their 50,000 employees to use that technology whether they like it or not. A good salesperson with a good deck can do this fairly reliably.

And a good account manager can typically retain the client for a while; employees usually get used to the product and rarely complain enough for the buyer to cancel the contract and force the seller to improve the product. As a result, an enterprise product can suck and still flourish.

With a B2C product, this is much, much more difficult. The seller has to sell 50,000 individual “users”, one by one, on the value of the product without the luxury of a face to face meeting or 18 holes on the golf course. The B2C model forces the seller’s product to “sell itself”. As a result, a consumer product can’t suck if it wants to flourish. It has be good. Much better than the enterprise product needs to be.”

In light of the Slack and Box IPOs, things are looking a lot different than they did back in 2011. There are a few trends causing enterprise software to look more like consumer software.

1/ Bottoms-up enterprise distribution is expanding. This is where an employee within an organization signs up for a service and tells a few colleagues. Soon, when enough employees are using the product, a sales call is triggered and the salesperson tries to sell the product into the organization top-down. Unlike the old days, this strategy only works if the product is really solid.

2/ Micro use cases are increasing the number of buyers inside an organization. The purchase of a CRM or ERP system will likely always be a complicated, top-down decision. But because of the emergence of SaaS products with narrow use cases that require relatively small budgets, the purchase of a SaaS product that, say, improves the efficiency of making sales commission payments to salespeople, will lie with a middle manager in the sales operations or finance function. When buying responsibilities are spread more widely and the decision maker is closer to the user (or is the user), the quality of the product has to improve.

3/ Buyers are getting smarter and products are getting more transparent. The internet has enabled thousands of micro trade groups and private communities to form, allowing professionals to share insights and best practices and advocate for one another. I recently joined a collective of revenue leaders from all over the world. We have a Slack account that we use to share information, ask one another questions, etc. There’s a #techstack channel where we discuss different SaaS products focused on sales and marketing organizations and our experiences with them — Outreach, Gong, Troops, Docusign, etc. I’ll never buy another sales-oriented SaaS product without consulting this Slack channel. At some point, nearly every buyer within a company will be a member of one of these groups (if they aren’t already). This only accelerates the transparency of information for buyers and makes product quality and delivery equally important — and in many cases, more important — than distribution.

There are still a lot of old school industries where top-down purchasing is a requirement because of outdated buying practices, the need for legacy system integration, security concerns, etc. But in the coming months and years enterprise software will continue to look a lot more like consumer software.

A SaaS Bubble?

I’ve heard many people refer to the explosion of SaaS as “the unbundling of Microsoft Excel”. That is, Excel used to do everything for us but now a bunch of companies have peeled off use cases and have built SaaS products around those use cases. This is really true in many ways. Fifteen years ago the companies I worked with did just fine without many of the SaaS applications we have today. We just did all of it in Excel. Sales pipelines, expense reports, commission payments, time tracking for consultants, project management, OKR management, etc. Now all of these things are managed by products like Salesforce, Expensify, Exactly, Harvest, SmartSheet and 7Geese. Companies today use so many SaaS products that Parker Conrad, the founder of Zenefits, raised $60MM to start Rippling, a new SaaS company that helps organizations set up and manage access to all of these applications. Largely due to bottoms-up distribution, the number of applications being used inside today’s companies has gotten way ahead of many system administrators.

Related to all of this, we’re due for an economic slowdown. Recessions seem to come around every ten years; we had the oil price shock recession that started in 1990, the tech bubble recession that started in 2000 and the mortgage crisis recession of 2008. We’re just about due for another one as we head towards 2020. When economic growth slows, it’ll be interesting to see the impact on many of these SaaS products. Many of them seem like ‘nice to haves’ rather than ‘must haves’. If that’s true, you have to wonder how many CFOs will cut back on some of these products and force their teams to go back to using tools like Excel. ‘Bubble’ is a strong word. And those that are bullish on SaaS will tell you that the market share of enterprise software that sits on the cloud is still a small fraction of total enterprise software spend. But it does seem logical that the boom is SaaS is supported by the bull market we’ve been in.

Enterprise Network Effects

Perhaps the most exciting thing happening in SaaS these days is network effects across companies. Network effects happen when you have a product that gets more valuable to each user as more users use it. Facebook is a classic example — the more friends you have on Facebook the better your experience is on Facebook. But now we’re seeing cross-company network effects all over the place. Box.com allows companies to share files with their customers. Companies can invite their customers to Slack channels. My company, PatientPing, is a classic example of how this happening in healthcare. It will be interesting to see how far this goes. Competitive and privacy concerns cause companies to be hesitant to share and open up their data troves to competitors and even vendors in many cases. If a company like Salesforce could find a way to get their customers to open up their data it would change the world of enterprise software. The use cases would be infinite. A fun trend to watch in the coming years.

It used to be that employees would sit around the water cooler chatting about systems and processes that don’t work as well as they could or complaining that they’re spending too much time doing low-value work that could be automated with software. This is still true. But now that it’s so easy and inexpensive to launch a software company, many of those same employees are realizing that other companies have the same set of problems and they’re building companies around solutions to those problems. As we’ve seen with Slack, Zoom, and others, some of these solutions can be multi-billion dollar companies.

Enterprise software used to be considered the boring part of tech. It doesn’t seem so boring anymore.

The Sales Evangelist Podcast

Several weeks ago I had the chance to appear on Donald Kelly’s Sales Evangelist Podcast. The topic of the podcast was How To Deal With The Pressure Of Hitting Your Quarterly Number.

We discussed how to project sales results, how to be analytical about what’s working and what’s not, empathy, transparency and a bunch of other things related to working in a high pressure environment.

Check it out below on Stitcher or on iTunes.

I’ve done a bunch of these now so I’ve added a Podcasts category to the archive.

The Second Most Important B2B Sales Metric

As a sales leader, your most important metric is top-line revenue.

But a very, very close second is the percent of sales team members that are attaining quota. Ideally, this number should be around 60% to 70%

If you’re hitting your top-line number but only 10% or 20% of reps are hitting quota, you have a couple heroes but you don’t yet have scale. That’s a problem. You’re placing all your cards on a small number of individuals that could stumble. And you’re also wasting a lot of time and money on reps that aren’t carrying their weight.

Some reasons why you might have this problem:

• Product/market fit isn’t yet validated (broadly, or in specific markets or product segments).

• Inequitable territory allocation. 

• Quotas too high.

• Lack of training. 

• Inadequate management or coaching.

• Ramp-up times are too aggressive.

• Lack of quality sales talent.

• Low employee engagement. 

One caution: be careful about the time period that you’re using to measure this metric. For SMB sales teams, it’s fine to look at quota attainment over a month or a quarter. For enterprise sales teams you probably want to look at this on a rolling 12-month cycle. 

Finally, view this metric as a journey that never ends. When a company starts, generally the founder is the only one that can sell the product, then a couple more can do it, then a few more and so on. As you grow, you’ll need to continuously evaluate and solve for the problems listed above. When you solve for these things and get quota attainment up to 60% to 70% it’s time to increase your quotas and do it all over again. 

The hardest part of building a growth machine is that it’s never finished.

Dealing With The Pressure Of Hitting Your Number

Like many jobs, sales leadership can be quite stressful. Success in many ways is binary. You set a goal at the beginning of a period and you either hit it or you miss it. Lots of jobs don't have that level of clarity around success or failure. In sales you can’t hide. There’s no grey area.

This kind of pressure isn't easy to deal with. Here are some of the things I've picked up over the years to make the stress a bit more manageable.

1/ First and foremost, set goals that are attainable and that you believe in. Don’t let finance or your CEO or your board dictate the number for you. You have to believe you can hit the number.

2/ Have your own financial model and forecast. Your finance team and others will have their own models. Have your own as well. Ideally, the elements of the model will consider the following assumptions: 1.) quotas by role 2.) headcount and hiring plan 3.) ramp-up time for new reps 4.) quota attainment % and 5.) rep turnover rate. If you have 10 ramped-up reps with a reasonable quota of $250k and, on average, the team hits 80% of quota then you should be comfortable with a $2MM quota. The math isn’t hard. The hard part is getting comfortable with each of the above assumptions. And that takes time. I'd encourage you to create some slack around your assumptions while you're still figuring out how accurate they are.

3/ In the early days, you won’t have any of those assumptions. You’ll have to calculate your target from a bottoms-up perspective; e.g. what you can accomplish based on current pipeline and your current understanding of deals are likely to close. This means you’ll have to set shorter term targets (monthly or quarterly instead of annual).

4/ Approach your job as a police investigator would approach an investigation. Always look for clues as to what’s working and what’s not working. Create your own dashboard in your CRM that shows you what's happening in real-time. The dashboard should include things like revenue, opportunities created, pipeline dollars created, speed to close, etc. All of these reports can be broken down by sales stage, rep, market and customer segment. Watch these numbers on a daily basis and have a borderline obsession with what's happening. Find the bottlenecks. Write up and document wins and learnings every week and have your team do the same. Those tools will give you the clues you need to track down what things you should do more of and what things you need to change. I’ve written a bit about pipeline management here, here and here.

5/ Create a weekly meeting where you review the learnings and findings above and invite your sales leadership. The topic of the meeting is one thing: are we going to hit our number? Don’t leave that meeting until you have consensus on that answer. And if the answer is “no” then get consensus on what’s going to be done that week to get back on track.

6/ Be as transparent as possible with leadership and your board. Think of this as a see-saw. When you’re on track to hit your number, the see-saw goes to the left (numbers up, need for transparency down). When you're not on track, the see-saw goes to the right (numbers down, need for transparency up). When things aren't working people want to know why. Don't wait for them to ask.

7/ Build a process around how you update various stakeholders (weekly meetings, email status updates, pipeline reports, deal reviews, etc.). Again, be proactive on this. Nobody should have to ask for these updates. Make sure people are getting what they need.

8/ Learn from others that have the same challenges. Some sales books and blogs are great but I've found sales and sales leadership podcasts to be the most effective way to get smarter about this topic. Listening to an actual person that does what you do is a great way to gain insights and generate ideas for what you and your team can improve. Check out a couple here and here.

9/ Finally, and most importantly, take care of yourself. Create healthy habits and get more aggressive about following those habits when the pressure increases. Get enough sleep. Eat well. Drink lots of water. Exercise. I also encourage meditation. I'm not as consistent with meditation as I could be but there's no doubt mindfulness gives you important perspective on the pressure you’re under. I use the Calm app and love it. Again, I've found that doing all of these things is more important when the pressure increases. When you're feeling good no problem is insurmountable.

The SalesQualia Podcast

I recently had the chance to sit down with Scott Sambucci from SalesQualia on his Startup Selling Podcast to discuss: The Selling Process vs. The Buying Process in the Enterprise Sale. We covered a wide range of topics, including the most common mistakes entrepreneurs make when selling into large companies, selling innovation and building and managing teams. Check it out below on Soundcloud or on iTunes. 

Silo And Un-Silo

Back when I was working at Next Jump, an e-commerce company that enabled big brands to offer their products and services at a discount to large employers and customers of large consumer marketers, our primary objective was to drive spend through our website.

My specific job was to drive user acquisition. I was focused on acquiring more companies to buy the product for their employees and then to get employees (users) to register an account and keep coming back. My colleague, I'll call her Jane, was in charge of site merchandising and had the job of converting those users into buyers once they came to our site. So my job was to get people to our site, and her job was to get people to buy once they arrived.

Every week our teams would meet to review results. We’d start by focusing on the total spend on our site during the previous week. Some weeks the numbers would be up and some weeks they'd be down. In the weekly meeting, our leadership would look at Jane and ask what happened during the previous week. Frequently, Jane would look at me and say, “we didn’t have a lot of spend on the site because we didn’t have a lot of traffic.” Other weeks I would look at Jane and say, "we had plenty of traffic but that traffic didn’t convert into spend."

This was obviously unproductive. We were pointing fingers at one another and defending our impact on the overall number which meant that nobody was responsible for the overall number.  

Our solution to this problem might seem counterintuitive: we created silos.

We came up with something we called “the box.” My team had the job of getting people into the box (get people to the site) and Jane's team had the job of making good things happen once they were in the box (get people to buy things once they were on the site). My primary metric was weekly unique users and Jane’s primary metric was conversion of those users (spend per unique user).

This changed everything. We set up specific metrics for each team where neither one of us could ever blame the other. My team wasn’t measured on overall spend (something we couldn’t control alone) and Jane’s team wasn’t measured on overall spend (something her team couldn’t control alone). We were measured on our slice of the spend metric (users and conversions) and if we both did our job we had a great week. This change created crystal clear ownership and accountability which led to lots of creativity and powerful initiatives to drive each teams' numbers. Our overall spend numbers started heading up and to the right.

Over time, though, things started to break down. Because we were so silo’ed my team wasn’t focused on the overall company goal, we were focused on our team goal. So my team would do whatever we could to drive users to the site regardless of the impact on spend. We would repeatedly promote offers from Target and Best Buy (brands that had 'mass appeal’ and would drive traffic but had relatively low value discounts with low conversion rates). This would drive a ton of traffic to the site, but the traffic didn't convert. Similarly, Jane was focused on conversion so she would promote the best offers on the site (30% off Juicy Couture, as an example). Users would come to the site expecting to see an offer from Best Buy and would see a great offer from a brand they had no interest in and a not so great offer from Best Buy. This led to a low-quality experience, lower spend, and user churn. Overall growth in spend began to slow down.

In response, we quickly setup processes to begin working more closely together. We had to fix the disconnect. We had to collaborate.

We built a monthly merchandising calendar that every team member could access in real-time. We set up several 10-minute check-ins so that the acquisition team knew exactly what the site merchandising team was promoting each day and which offers were converting at the highest rates. The acquisition team would send all marketing emails to the merchandising team prior to sending to users to get their sign off. We used data from the acquisition team to convince the mass appeal brands to offer deeper discounts. 

At first, these efforts forced collaboration. But over time the collaboration became much more organic. The teams became inclined to be collaborative. After a few weeks, the numbers started to head back up. That said, we definitely didn’t abandon the silo’ed metrics for each team. Hitting those metrics was still the primary job of each team. What changed was the approach we took to hitting each of our metrics. It was about transparency and collaboration and a broader focus on what was best for the company as a whole.

The point here is simple: not having silo’ed metrics is a bad thing and being too silo'ed is a bad thing.

As an example, sales teams need to have silo’ed sales metrics that they’re accountable for to force ownership and creativity and high performance. But if the sales team is only focused on one top line metric and nothing else, over time they’ll be motivated to close deals that may be bad for the company and will lead to high churn rates. They have to have a silo’ed metric but also be forced to consider what’s best for the company as a whole.

Companies get in trouble when they lean too far towards one side. Telling groups to just work together to drive an overall number leads to a lack of accountability and creativity. And too much separation leads to a lack of collaboration and focus on the broader goal.

Well run companies find a balance and learn to silo and un-silo.