Why Sales Should Be at the Center of Strategy

CespedesHere is an excerpt from an article written by Frank Cespedes for Harvard Business Review and the HBR Blog Network. To read the complete article, check out the wealth of free resources, obtain subscription information, and receive HBR email alerts, please click here.

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For many years Document Security Management (a pseudonym) had a thriving business in retrieving and shredding or securely storing organizations’ documents. Executives and their assistants loved its one-stop-shopping value proposition, and the sales force cultivated deep relationships with them. By the early 2000s, however, it was clear that cheaper digital storage technology, especially the cloud, would disrupt the company. So DSM introduced its own cloud-based storage and directed the sales force to bundle it with traditional services.

The results were disastrous. Many of the salespeople lacked the technical knowledge to work effectively with clients’ IT departments. Pricing was a problem, because the physical and digital services had very different cost structures. And in spite of being trained to bundle offerings—a key to the new strategy—reps often sold only the lower-priced, digital service. Contract renewals for traditional services fell sharply, as did profits. DSM modified its sales compensation plan, but then digital sales dipped; meanwhile, new competitors began signing clients. Ultimately DSM spun off its digital unit.

What went wrong at DSM goes wrong at many companies: Management embarks on a strategy without considering the realities facing the people who must execute it with paying customers.

Research indicates that only a fraction—according to some studies, less than 10%—of companies’ strategic plans are effectively executed and that firms deliver just 50% to 60%, on average, of the financial performance their strategies promise. One reason is that strategists, years removed from customer contact, are often blithely unaware of the embedded strategic commitments that daily field activities represent and have an obsolete vision of the company-customer interface. I describe the problem as a divide between “strategy priests” and “sales sinners,” to convey that plans made in the C-suite can be “sullied” by the people who live and die by monthly quotas if those plans say nothing about how sales should allocate resources.

The sales organization should be part of every conversation about strategy. U.S. companies cumulatively spend about $900 billion annually on sales efforts—three times their spending on consumer advertising, more than 20 times their spending on online media, and more than 100 times their spending on social media. Predictions that the Internet would disintermediate sales have not panned out: Although sales forces in some industries have shrunk, the overall number of salespeople in the economy is unchanged.

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Here’s a direct link to the complete article.

Frank Cespedes is a senior lecturer at Harvard Business School and the author of Aligning Strategy and Sales

Aligning Strategy and Sales (Harvard Business Review Press, 2014).

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