This is the second installment in our thought leadership series from our Portland roundtable. We will cover three topics:
- Maximizing sales adoption
- Sales and marketing collaboration
- Driving trust in the sales forecast.
Sales and marketing collaboration proved to be a lively topic. Not surprisingly, the cats and dogs don’t get along much of the time. However, an actionable sales forecast can foster productive discussions that lead to better collaboration not just between sales and marketing, but between sales and other areas like operations. Our key learnings follow:
Key learning #1: Each area of the company has a different view and something to add to the party.
Our thought leaders had many different processes for getting from sales forecast to fulfillment. One company’s process was that sales generated the forecast, marketing vetted it and gave it to operations who built exactly to their forecast. Another’s was that the factory built to maximize their profit margin and then sent it to sales and marketing to sell, sell, sell, regardless of whether their customers wanted it or not. Either extreme doesn’t do a good job of linking feedback to the forecast. In the former, inventory is not optimized. In the latter example, the company could be doing 10-20% more revenue per year if marketing and sales had the product they wanted, not just what the factory built. Both of these companies put sales forecasting systems in place to bring the various views together, as the forecast application can capture the different views of sales, marketing and operations into a common system of record, while tracking changes. This lets the organizations focus collaboration on what the data is telling them, not on whether or not the data is good. This is a much more productive discussion for these companies – focus on optimizing the unconstrained customer demand forecast with what the company can deliver.
Key learning #2: Responsibility and compensation drive behavior.
Regardless of the process, compensation drives behavior. When marketing runs the forecast, they can impact sales compensation by constraining product to make their inventory bonus, while sales doesn’t have the right products to sell. When the factory runs the process, their comp is to optimize inventory, not revenue which impacts both marketing and sales compensation. When sales runs the process, they can affect operations compensation (e.g. sales may have visibility to margin, but if they’re not comped on it like operations, they won’t optimize their forecast for margin in addition to revenue). Putting in the right compensation drivers is difficult for most companies. Many focus on one end or the other of the sales forecast to fulfillment process. As one thought leader asked another, “Your marketing forecast affects the sales team’s comp when the units are wrong. How does sales like you then?” The reply? “More when inventory is available.” All of the companies recognized that aligning compensation across all the functions is an area of opportunity to drive better behavior for their company.
Key learning #3: New product introductions are the most fun.
New product introductions (NPI) are the riskiest part of any forecast. Run rate or recurring business is much easier to forecast, and is more predictable. But creating a forecast for an NPI is a work of art, not science. One thought leader’s company has the product team focus on the idea of what the product will look like in the context of macro level items, like input from big customers, consumer data, and competitive products. Sales, of course, has a different view. Their forecast for NPI starts with sales, then goes to marketing, and then to sourcing. This insures that input from sales on new items is definitely seen by marketing, and seen earlier. It is better to have sales call the baby ugly, and let marketing know. And many times, sales was right.
The best analogy of this session — one of our thought leaders likened a new product introduction to flying an F18 by the wire. For those of us who don’t know, when an F18 takes off from an aircraft carrier the pilot is not actually flying the plane. Pilots make too many changes to the stick and the on-board computers can’t keep up. The computer takes care of the plane’s takeoff, then the pilot takes over once airborne. For a NPI, marketing should launch the product, and then sales can fly it. Of course, operations had to build the plane first!
Tags: adoption, customer, sales forecast, thought leadership