In March I had the pleasure to attend the Technology Services Europe (TSE) – Conference in Munich. Most of the presentations focused on the business model revolution going on in Tech Industries worldwide. One of my conclusions: there are huge challenges coming up for Sales!
New Business Models change Tech Driven Industries
J.B. Wood, President and CEO of TSIA painted a vivid picture of the future of especially IT (related) industries that are moving from selling complex, expensive, capital investment goods to IT-Departments to selling “Outcome Services” (solutions that directly support business processes of customers) to business executives.
What are the resulting challenges for sales?
3 Mayor Challenges for Selling Investment Goods:
Different Decision Makers – different Sales Strategies
Today customers are increasingly interested in the outcome of chosing a technology than in the technology itself. The purchasing power shifts from e.g. IT departments to business executives representing the users and benefiting from the sold technologies.
“According to Gartner, twelve years ago technology spending outside of IT was only 20% of total technology spending: by the end of this decade it will become almost 90% – A Teutonic shift in IT purchase decision making.” (Source: blog.alinean.com/2012/11/gartner-reveals-changing-it-buyer.html).
This represents a huge challenge: these new decision makers need to be convinced in their terms. The resulting Sales Strategy needs to include different arguments, a different language and different offers.
“Business Outcome” instead of “Features”
Business executives are usually much more interested in the benefits of technologies for their job and not in the features of the technology itself.
This means that Sales needs to know the business challenges the users of the technology are facing and how solutions based on these technologies can help executives to reach their business goals. The result: a fundamental paradigm shift for sales people who are used to focus on talking about tech features.
The needed knowledge and abilities exceed today’s requirements towards Tech Sales People by far. Sales Strategies have to take that into account. Additionally search profiles for new staff will change fundamentally. While in the past we were looking for Engineers we do now need CRM specialists, marketeers or manufacturing experts.
Service Contracts (Opex) instead of Investments (Capex)
Along with the shift in decision-making, business customers demand other business models:
- They don’t want to spend huge amounts of money in Capex any more.
- They do not expect their suppliers to deliver a great tech products whose abilities exceed their needs and excellent product related services any more.
Instead they are looking for new ways to save money and improve their business:
They need simple, flexible and efficient solutions that provide business benefit. This in turn leads to demanding new, more outcome-related, business models such as pay-per-use or even pay-by-outcome. Not that this is completely uncommon. In some industries these models are already in place, e.g. in the Printer and Copying Machine business (today aka Document Management), but they are gaining ground even in traditional industries like Power Tools (e.g. Hilti Fleetmanagement). And they will spread further into other product driven industries.
This confronts Sales with completely new challenges: now you need to prove the business benefit of an offer. Negotiations do not only include prices and terms of delivery but also Service Levels or the duration of contracts. Additionally the solution will include services that cannot be calculated on cost-plus bases any more because their costs depend on the future usage. Therefore new risks arise and have to be managed.
Wanted: Innovative Sales Strategies
In this new world of tech based services the old Sales Strategies designed to sell big-ticket investment goods do not work anymore. We need flexible and creative Multi-Channel Strategies that give the right answers to the challenges mentioned above.
One of these Sales Channels will be the Service Organization. They have much more customer contact (especially to the users of technologies) than Sales. This makes even more sense if the new (outcome or usage) based business models apply.
Consequently some IT companies already started to transfer the responsibility for the business with existing customers to their Service Organization.
So, if are working on your future Sales Strategy remember the word of Albert Einstein: ‘Problems cannot be solved with the same mind set that created them.’