1. You have the wrong sales model. Companies early in the growth cycle typically need direct sales forces – teams of individuals who are inside the company and know what’s going on. While service-oriented companies normally rely on practice leaders (leaders who are responsible for profit and loss and have a vertical market expertise like telecommunications or energy) to sell, product companies normally rely on traditional salespeople. These are the bag-toting salespeople you see out there selling stuff. As the company develops a more mature product and begins to offer training, service, and other add-ons, it becomes time to change the channel models. For example, that’s the time to get into affiliate marketing on the Web or build channels of distribution for your products and services that can leverage your mature product line. Yet many companies try to off-load their sales responsibilities too soon. A company’s product or service may not be well defined enough to command respect in the marketplace and the company may not have a support infrastructure to handle calls or complaints from customers so all sorts of problems can happen. Practice leaders in the market still have a role to build relationships, and traditional salespeople may still be needed-not everything fits into an Internet shopping cart. However, close scrutiny of the sales model your company is using is important.
2. Any revenue is good revenue! No, it isn’t. Executives who feel that way are coming from a scarcity mentality in which they believe that if they don’t scoop up every piece of revenue, regardless of whether it makes sense for the company, they’re going to starve to death. They get used to selling anything to anyone. By contrast, an abundance mentality means focusing on a niche and dominating it. If a company doesn’t dominate a niche market, when it comes time for the marketplace to put a value on it, the market won’t know what kind of company it is. A prospective buyer will not be able to determine if the acquisition will be a good fit. A company needs to develop a sustainable market advantage, focus on that advantage, and brand itself in the eyes of its marketplace or it is not likely to succeed.
3. We won, but we don’t know why. For a company to secure a superpremium valuation, it must show how it dominates a niche and sustains business in that niche. Far too many companies can’t figure out how to repeat what they did well. When you ask their leaders how they succeeded, they have no idea. They rarely run a postmortem of their winning or losing bid with the objective of building a knowledge base of the lessons they learned. They also fail to perform what politicians call “opposition research.” They don’t know what positives or negatives people are saying about them or about their competitors. Typically, the last item added to a budget and the first item chopped in tough times is marketing, even though the information a marketing team provides adds value.
4. The wrong people are in the wrong seats on the bus. In Good to Great, Jim Collins offers the outstanding analogy of having the right people on the bus-the best possible mix of managers, technical people, sales and marketing folks, and so on. It’s not just about having the right people on the bus: make sure that they’re also in the right seats. As a former CEO, I have a degree in computer science and an MBA, so if you have great energy, I like you. If you are really working hard and have a great attitude, you’d have to mess up a lot for me to fire you. But as for salespeople, I can’t read them. I can’t tell who’s going to be good at sales because the candidates all have great energy, at least in job interviews. Many CEOs who come up through the finance or technical tracks don’t like salespeople because they are constantly making promises that the rest of the organization has to somehow keep. Brad Antle, the successful former CEO of SI International, suggests getting your team involved so they’ll be invested in the success of the new hire. Clarify the metrics of success with all parties so you can objectively assess your team. The challenge is to build a team who can hire the right talent even if you personally don’t have the competency to recognize it.
5. You have misalignment of your core values. Jack Welch once wrote that you can tell a company has reached maturity when you can fire the top sales person for a breach of ethics. In other words, if you’re making so much money that you can afford to let go of your biggest revenue-generating employee because her ethical values are not consistent with the company’s, then you’re in a really good place. You have to be very clear about what your values are. This doesn’t mean your company can’t be diverse. Companies need diversity of thought and appearance to benefit from the broadest range of knowledge and opinion, but companies also need to be aligned in terms of values. One way to avoid misalignment of your staff with your vision is to be very clear from the beginning.
During the interview process or when making a selection for your inner circle, make sure you check the “alignment” box. Make certain each team member’s values are aligned with the stated values of the company and your personal values (even if “make money at all costs” is your company’s core value). At TiVo, the most important value is “creating a work/life balance for the employees.” Bringing a hard driving, make-money-at-all-costs manager into an environment like TiVo’s, would create a huge and unnecessary conflict.