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We’ve recently read several articles discussing the shrinking tenure of Sales VPs over the last decade or so, and similar stats for sales representatives themselves. In some cases, the data suggests the tenure is as short as 19 months, down from 26 months only 2-3 years ago.
When exploring why this may be one of the first insights is that it may be unrealistic to bring-in a senior executive and only give them effectively 5 quarters to assess, strategize, ramp-up and impart the changes the rest of the senior leadership team expect to change performance. But even then, as we explored a number of cases there are some common themes emerging in the literature:
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- Experienced sales executives may not have kept pace with the shift in buying habits including online research, digital communication, etc.;
- The cultural impact of making frequent change(s) on the rest of the organization may not be adequately considered; and,
- The CEO’s responsibility in making a bad hire based on all of these factors.
While all of these are certainly reasonable considerations, there is another one we feel needs to be considered and is related to the CEO’s responsibility theme. That is, has the organization undertaken an accurate assessment of the type of solution being sold and its market-positioning, which is a foundational component of any commercialization strategy?
Our experience suggests that the dramatically shortened tenure of sales professionals in new roles is directionally correlated with the growth of entrepreneurial, “innovative” solutions entering markets. The explosive growth of startup and venture-backed “innovative companies” has created a corresponding increase in the need for new sales & marketing teams. This in turn has created new jobs. And these jobs are frequently being filled by individuals with (typically) track-records of success at established companies. But this may be the problem.
The pattern we see at play goes like this:
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- Entrepreneur / innovator conceives a new solution
- They start a company, including potentially bringing in angel, seed, or series A investment
- They build their prototypes and commence pilots
- Things go well, so they start recruiting for a sales leader
- They hire someone with a great track-record of sales success, often-times in the same market or industry
- 12-24 months later the Entrepreneur / innovator is frustrated with a lack of sales success
- They make a change in sales leadership
Our analysis suggests a common cause of the breakdown stems from the fact that forecast and pro-forma models the CEO initially developed and depends upon in fund-raising is based on the sales cycles of “similar products” or in the same market. This modeling may be flawed because of two key possibilities:
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- If the solution is “similar” to others, by definition it’s not innovative, so what is the competitive differentiation and its value? If there is a lack of differentiation and/or a unique value proposition compared to competitive offerings, why would a customer choose the newer, less-proven, and potentially riskier solution? And,
- If it is truly differentiated, it will take time to educate the market about that differentiation and its value, lengthening the sales cycle and requiring a different initial commercialization strategy.
Simply put, selling a truly innovative solution requires a different commercialization model than selling well-established solutions. And this unique commercialization model requires unique skills from sales & marketing leaders.
When we recruit “top performers” from vendors offering competitive products or within the same industry, the majority of candidates will have great skills in selling well-established, “understood-by-the-buyer” solutions. Others before them did the initial education, the market understands the value-proposition, and has obtained organizational budget to purchase such a solution. In such a case, the most successful salespeople we see are adroit at competing amongst a list of “similar” solutions. However, that’s a different skill set than selling something truly innovative. And it requires entirely different strategies in terms of lead-generation, pricing, and contracting.
For example, if what you are bringing to market is truly innovative (and that requires honest analysis & introspection), according to Everett Rogers’ theory of “Diffusion of Innovation”[1] and the subsequent works of Geoffrey Moore[2] and Clayton Christiansen[3], your addressable market size is likely on the order of 15% of the total market, as that defines the “innovators” and “early adopters.” A first consideration the CEO should take into account is whether or not “sales success” is likely only going to come from a market 1/6th the size of the total market, or is it being defined in terms of competing in the remaining 85% of the market who are simply seeking well-established solutions? Put another way, is the forecast reasonable?
Furthermore, generating leads from these 15% of innovators is more likely dependent on cold-calling and direct 1-to-1 personal relationships than the techniques used by marketers when trying to compel the 70%-80% of the “early” and “late majority” portions of the market. In such scenarios the salesperson’s approach to, and management of the sales process will be vastly different as it will be more about education, value-definition, and risk-mitigation than it will be about “beating the competition.” Similarly, the marketing materials sales will require are different when the initial focus needs to be on educating the market about something truly novel, and its value.
Case in point, Requests for Proposal (RFPs) are typically based on purchasing well-established solutions, often times “commodities.” An RFP is the antitheses of looking for a truly “innovative solution.” A great litmus test here is if the RFP requires references. If the successful proponent of the RFP is required to have a significant number of references, again by definition, that means other clients have used the solution, ergo, it’s not really innovative but established in the market.
Therefore setting-up a commercialization strategy including the ensuing processes to respond to RFPs and hiring salespeople with a great record of winning RFPs when the company is still needing to target the 15% of early adopters in the market would be a mistake.
Additionally, when one considers the target market is only 15% of the total, and we are likely dependent on 1-to-1 relationships to get sales opportunities started (and those needing to be with sr. leaders at the customer sites to approve taking the risks for an innovative solution), how big a sales team do we really need? This also extends into lead-generation. If we are trying to find those few businesses and leaders who truly want to do something innovative and are willing to assume the risk of doing so, conventional main-stream lead-generation approaches won’t work, as they are typically focused on “mainstream adopters” of solutions, not “early adopters.”
For example, if what your organization is bringing to market is truly innovative in the sense that no one before you has really done it, why would buyers be searching for your solution? They don’t know it exists yet. Therefore, why would you pay to highlight your solution in search ranking algorithms (think Google Adwords) as a primary lead-gen strategy? We’re not suggesting SEO isn’t important. But it should be balanced with an honest consideration of whether the market is actually going to search for solutions for something they don’t know exists.
Unfortunately we have frequently seen founders and CEOs of early-stage companies with truly innovative solutions believing that hiring a “rock star” sales leader or marketing leader from an established industry leader will lead to rapid sales growth. This may be flawed reasoning if the individual has gained their success by fine-tuning the skills necessary to compete in established markets with well-understood (by the customers) products.
But this is not just the CEO’s failure; the new hire has some responsibility as well. If they don’t realize that either (a) the commercialization models that have led to their personal success in serving the 70%-80% “mainstream” market won’t work as they bring something truly innovative to market, or (b) the messaging and packaging of the solution doesn’t truly make it innovative, they are complicit in the failure.
CEOs and founders should both be more considered and honest when considering if their offering is truly innovative as defined by offering a unique value proposition – not new features – and then in clearly defining the commercialization strategy that will lead to success. If the solution is not truly innovative and they are simply offering “another mousetrap,” they need to plan and hire for a commercialization strategy based on having something that may actually lack significantly valuable innovation. Conversely, if what they have is truly innovative, how they build their pipeline, revenue-stream, and market will require a different set of planning, management, and skills than selling into an established market. They should understand that hiring the top sales executive or performer from a dominant player in the market or that they wish to displace may lead to failure if what they have is truly innovative.
This initial consideration and assessment may require bringing in advisors or consultants. But it will be time and money well spent rather than hiring a successful sales or commercialization leader and watching them implement the strategy they know has worked for them in the past and have perfected, when that strategy is mis-aligned with the solution and market this new role will be serving.
Selling something innovative takes unique skills. Not all sales “rock stars” have those skills.
[1] https://en.wikipedia.org/wiki/Diffusion_of_innovations
[2] “Crossing the Chasm” https://en.wikipedia.org/wiki/Crossing_the_Chasm
[3] “The Innovator’s Dilemma” https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma
