A comment from a loyal reader Parkite was added to yesterday’s post Companies Learn How to Deliver Financials:
Great points…….but, if there is a weak link in any *single* function (back office, billing, provisioning) it compromises the integrity of the rest of company and the culture you are trying to build. I see this regularly with companies that have great sales and marketing but abysmal fulfillment and back office functions.
I know blog etiquette is to not argue with loyal readers, but I can’t help myself.
Parkite, I agree with the weak link. However, I disagree with: “I see this regularly with companies that have great sales and marketing but abysmal fulfillment and back office functions.“ What I have seen is telecom companies who THINK they have great sales and marketing while blaming the back office for the problems. What I have come to believe is that these companies don’t understand what great sales and marketing means and, in reality, are weak across the entirety of “Opportunity to Billing” process. The weakness is what fools them to believe the front end is strong and only the back end is weak.
Let me be more specific. It is easier to sell if there are less constraints in what you sell, where you sell it, and how your price it. If ambiguous financial accountability exists within the organization, then sales often become even easier. Why? It often isn’t known whether or not a sale converts to profitable revenue. And it is unclear who is responsible for ensuring this.
In many telecom companies, this is the situation. This is particularly the case where leadership has primarily a sales background or, generally speaking, if leadership is not experienced at making money in telecom. When a company is in this situation, it appears that sales are anything but a problem. Companies often perceive that demand is plentiful, they could sell even more than their already impressive sales numbers, and that the company only needs to “fix” their factory.
In reality, the process is broken starting with the very front end. The company doesn’t understand the real constraints it has. It therefore sells orders that it doesn’t have the capability to fulfill. Or, it is learned as the order snakes its way through the process that the order was extremely mispriced given the true cost of fulfillment. Or, the order takes a lot longer to install because information that is required to fulfill the order (and should have been gathered during the time of sale) takes many extra weeks to discover.
The results:
- Reported sales are strong, leading the company to conclude demand is good and they have a great sales and marketing capability.
- Customers and account execs are frustrated because of a slow and unpredictable service activation process.
- Much of the sales are never converted into revenue.
- For those sales that are converted, the true economics are far worse than anyone understands.
The most fascinating part of this is the enormous amount of time it takes for a company to change its beliefs about the nature of its problem. The notion “Demand is robust. Our sales engine is effective. We need to fix the factory” lasts for months and months. Countless dollars are spent on systems to try to “fix” the service activation problem. It is explained to investors with a positive spin. “At least we know we can sell.”
Extreme discomfort sets in when the problem is more fully understood. Imagine if, after providing the explanation above, you then had to explain it as follows:
“Much of our reported sales should never have been sold in the first place. We didn’t have good discipline on what to sell and what not to sell. We were selling to locations that our network doesn’t easily reach. We were selling products that we cannot support. We were pricing services without a good understanding of the true cost–especially capital–to provide the service. In the meantime, we spent the past many months and an embarrassing amount of money trying to fix the back end, when the fist order problem was really the front end.”
If you are reading this and thinking “he’s talking about us”, know that the situation plays itself over and over again in telecom.
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Dan–You could take this one post on the road with the right audience and rescue the bulk of the telecom industry from their own demise. I have to be careful not to mention company names, but I can tell you WITH 100% certainty that from both sales and marketing sides–I have seen this first hand in ways that can destroy an organization from the insanity that trickles down from orders without understanding applications of the customers or lack of understanding of the organization/products for whom you are selling. Some of the best deals we ever had in the Williams Communications days (according to sales and upper management) were deals that ended up not only void of profitability for the company, but they also ground the shop to almost a halt due to not understanding what it would require of the organization to support the deals. Sales seems to be taught “Sell it and they will figure out how to execute it.” Deals were signed by people who had little experience or understanding of the execution details, the costs, and the potential barriers to success. If I could share specifics (the SBC Williams deal would be perfect example), then we would all know why this post should ring true for more people than it will. Sadly, those type deals to this day (no profit/paralyzed shop/distractions from good core business), are believed to be some of the greatest in the history of these companies. I’m not an expert, but I would certainly question the validity of those beliefs as per your post today.
However, my “there’s always more than meets the eye” mind immediately jumps to a few places for discussion. Sales is driven by management with specific objectives defined by investors/boards/mgmt. Is the way most sales teams are evaluated causing the very demise you write about? Could it be that how the sales team is trained, motivated, paid, etc. generates the wrong behaviours? Or, at the end of the day, as I have heard in past lives, do front-end, quota retiring revenue numbers matter more than profitability to some? Is there a time/place where these should matter more? Other than being trained by a West Point Captain Sales VP that you will do good business–business that we will not be embarrassed of when it’s reviewed–does the way we judge sales teams in the industry today generate this behaviour that is unhealthy for the entire organization?
To add to that–from years of attending or coordinating “Sales Kick Off” events where inordinate amounts of time are spent on marketing downloads and internal process updates with weighty powerpoint decks (no offense Matt) and very little time educating sales on the applications, why the customer buys, what sets our network apart, constraints of the network to set the right stage with customers to help position issues with in advance, what information it takes to get an order through our company and why–and how not knowing one piece of critical information can kick us back to ground zero on timing, as well as what kind of deals are truly the most profitable and the most valuable (and for what reasons)–could it be that in general, we all need a little more clarity on the definition of sales success and just how we want to get there??? (sorry for the run on) I think the business is infinitely more successful when the sales people act and are trained like business owners rather than just sales people. We have to teach sales to be partners linked with the success and profitability of the business and not just the quota number. Sales people are reviewed religiously every 30 days–and rarely is one of the criteria that they did good business if they didn’t meet their numbers.
Finally–on the flip side, to be the devil’s advocate a bit. We all know one of the most common (and lame) excuse from sales for not selling is price. I think we would have to be careful on the side of delivery/back office that we don’t fall into the trap of the most common excuse for not delivering service being that sales did it wrong. Could this become the newly accepted excuse that hides the fact that the company doesn’t have an organized process for product delivery (which falls in product management) or a solid, educated project management organization for delivering service (which falls in service delivery/CPM org) or for that matter even a qualified sales training program that enables sales to sell the deals we want? What if the process for back office is truly broken or non-existent? How do we really get to the bottom of the whole “the buck stops here” dilemma and leave pointing fingers behind?
I’m cursed (or blessed) with a twisted mind that believes even the most profound discoveries could have layers upon layers of to sort through in order to make the organization better. I truly both agree with your post today and yet believe there is more than meets the eye. How can we use what we discover here in this world to improve upon our own?
Awesome screed, Dan!
Teresa….excellent post. I agree wholeheartedly with the point that the back office and product (and engineering and finance) are always major contributors to the “service activation” problem. It is never that “sales” is the only or even primary source of the problem. It is important to understand “Opportunity to Cash” process in all of its piece parts. In fact, the front end/sales can only work well if product, engineering and service activation are doing their jobs. The front end/sales cannot work well if the rest of the company is weak.
You should have your own blog! You are articulate and your content is good. And you sneak some humor into it. Fantastic!
Great post. Reminds of a time where a company put a big sales office in Manhatten, far, far away from their fiber because, we can sell in Manhatten
2nd attempt..i forgot the math the first time!
Glad I could proivde you with content. You make a number of good points. My comment was meant to point out that a weakness in any area of a business (front or back office) compromises the whole. And yes, the telco industry does seem to promote to “general mgr” from the sales organization primarily. Needless to say, most sales personnel doesn’t really understand the relationship b/w revenue, margins, and profitability.
You comments remind of the CLEC industry around the turn of the turn of the century when capital seemed to be free and unlimited (if you build it, they will come).
From what i have been able to observe via this blog, you seem to be building a truly different company at Zayo. It appears you have been able to build *awareness* about good business practices in an industry with very few. I don’t know anyone at Zayo, and I don’t have first-hand knowledge about your operations, but I predict you will do very well as an organization. I knew you were different when you started quoting Buffett!
I didn’t have a post ready for today….am behind…so your comment gave me good material…thanks.
Great post and great comments.
Imagine taking over a leadership role in a Company that was growing rapidly, had hundreds of high performance, high maintenance (though not necessarily correlated) sales professionals and was beceoming more and more unprofitable. I had this particular experience, and I can say we focused a huge amount of effort on fixing the front end. It was absolutely the right thing to do, but we did not focus enough attention on the back end. You don’t want to be the person in charge of the back end when the front end gets fixed and you did not keep up, because then it will be clear where the problem lies.
Obviously the inverse of this example is just as valid. The point being, the problem rarely lies just with sales or solely with finance, operations, etc. The key is to work collaboratively to improve all of the processes.