Tomicide Solutions, Jan 2018

7 Causes That Can Bury Your KPIs In 2018

By Tom "Bald Dog" Varjan


Have you ever heard about the so-called granny shot? It's used in basketball.

Or rather, it could be used if players recognised its effectiveness.

Or rather, if players could dock their egos for a moment.

The granny shot is something some players start from a low position and shoot it with two hands.

Rick Barry has been one of the best free throwers in the world. Having mastered the granny shot, in his final three years, his free throw success rate was 92.4%, 94.7%, and 93.5%.

Shaquille O'Neal's best was around 50% and Michael Jordan's around 70%.

Technically every player could do granny shots and they could win game after game.

But there is a snag.

The granny shot looks childish, uncool, wimpy and amateurish, and highly-paid NBA professionals don't do wimpy stuff.

They do pro stuff.

No matter how effective the granny shot was, most players flatly refused to use it because they worried about the image they would create about themselves by using it.

And this is the problem in IT business development.

Firm leaders are so entrenched in their methodologies that they rather compromise on their goals but refuse to change their methods.

For instance, more and more IT SMBs have fallen victim to the nonsensical notion of content marketing.

What is content marketing? Essentially, flooding the Internet with content (very often, cheaply written in third-world countries) and waiting for the world to discover you.

According to content marketing zealots, you can't put even a single letter of promotion in your content.

It's a bogus concept that software vendors started hawking in order to sell more of their software (while they make their sales through multiple call centres in Asia).

Why bogus?

Because they present content marketing as though it were a new concept. But it's not.

These pieces of prove that content marketing is not a new thing but has been around for a while.

Or look at the other bogus concept: Account-based marketing. It states that you make a list of companies and you orchestrate intelligent campaigns in order to get them as clients.

How new is that?

David Ogilvy extensively used it between the 50s and 70s to build his advertising agency Ogilvy & Mather.

So, if you fall for these new-fangled fads, you can quickly castrate your firm and undermine its productivity turning it from a stud to a dud.

With that in mind, let's look at a few traps that you'd better avoid in 2018 to finish the year with some impressive KPIs.

Trap #1: Reactively Waiting For Being Found And Proudly Saying, "We Do Inbound Marketing"

Some years ago, I heard an interview with a famous model/bodybuilder who advertised some vitamin supplements in a magazine.

Then one of the readers wrote to the magazine and said that he'd been taking that very supplement for a long time, but hadn't experienced improved the same muscular growth as the model guy.

Then the magazine contacted the bodybuilder and relayed the reader's message.

In his response, the bodybuilder wrote that just because he didn't talk about the other stuff (some hard-core steroids) he took, the readers shouldn't be so dumb to believe that the bodybuilder had become a muscle head only from some vitamin supplements.

By the same token, take a look at the inbound marketing industry and the main proponents of inbound marketing.

What do they have in common?

They all are software vendors who sell inbound marketing software. How interesting.

It reminds me of the dentist who is the co-owner of a mercury mine and zealously promotes amalgam fillings.

His active income comes from drilling and filling and passive income from hawking mercury to his patients.

Back to the software sellers,,.

Where the story becomes a tad convoluted is that the same software purveyors employ gigantic call centres in India, Bangladesh and the Philippines and conduct hard sell-based outbound marketing campaigns.

You register for their content and two minutes later a salesperson is on your phone trying to sweet-talk you into signing up for some inbound marketing software.

But as far as the wild wide world is concerned, these firms would never stoop to doing outbound marketing since it's so ancient and obsolete.

Well, they just do it secretly.

Yes, inbound marketing is a good thing, but you can't base your future on inbound marketing alone. Why? Because far too many moving parts are outside your control, so inbound marketing alone may or may not help you to reach your KPI numbers.

In a way, inbound marketing is just as nice as referral, but as unpredictable too.

Trap #2: Not Having An Institutionalised Client Acquisition System

Instead of having a highly automated and fully documented client acquisition system that can be scaled without hiring more people, most IT SMBs have haphazard selling in place.

What makes the situation even worse is that since many firms regard sales as a bastard child, key people are not even involved in selling. Firms hire salespeople, often on straight commission, to go out and drum up business.

But there is a huge divide between these mercenary salespeople and their firms.

When it comes to business development, you have to consider two important factors.

  1. The mercenary factor: This is the attribute of the businessperson who knows he has to make a profit to stay in business and serve his market. The businessperson focuses on capturing value, that is, collecting money for the created value.

  2. The missionary factor: This is the attribute of the practitioner who gets busy doing excellent work. The practitioner focuses on creating value but often neglects to capture it.

The problem is that many IT SMBs are either in one or the other category.

Missionary-Mercenary Continuum

But the ideal situation would be somewhere in the middle.

So the two factors result in four distinct situations or attitudes about business development

Missionary-Mercenary Matrix

Market Focus is all about generating revenue, and advancing your firms' position from a commercial perspective.

Good examples of full market focus are Bernie Madoff or the younger, the "Wolf of Wall Street" version of Jordan Belfort who did almost anything to make money.

The other good example is many salespeople on straight commission. They are good people, but a retarded pay structure forces them not to care about anything but the money they bring in.

In my experience, paying salespeople straight commission is sure-fire way of replacing integrity with expediency, character with cosmetics, innovation with imitation, effectiveness with efficiency and pretence with competence.

Oh, and they don't work for your firm but for themselves.

Just look at the highly-paid car salespeople who represent borderline bankrupt dealerships.

Mission Focus is all about pursuing your firm's commercial objectives within legal, moral and ethical boundaries. The legal part is given by the law; the moral and ethical parts are defined by the firm's and the individual's core values.

Good examples of full mission focus are volunteers at many charity organisations who incur massive debt in order to give away their work.

A good balance can be this:

For instance, your firm does IT consulting for industrial plants. Let's say, your new client is a slaughterhouse, but the assigned project manager is a vegan. While it's perfectly legal to do the work, this PM is likely to step aside based on her personal values and beliefs.

Similarly, if you do work in a church, true atheists are likely to ask you to reassign them to other projects.

Hapless Hopeful: Low Mission Focus And Low Market Focus

This is typical of many IT start-ups but it also applies to many IT firms that have been in business for some years.

They do great work but it's all for work's sake. They don't have worthy causes that their work supports. They just churn out work at competitive rates and operate on a day by day basis.

It seems the only mission of these firms is to make enough money to pay their bills and make payrolls.

Although the payroll is pretty low because most of these - mainly fly-by-night - firms are based on low-priced outsourced labour, very often in third world countries.

Realistically, I can't even regard them as businesses because their core services are performed by contract workers who serve multiple clients.

Have you noticed that in law firms, the lawyers are NOT subcontractors? Or in engineering firms, the engineers are NOT subcontractors.

Yes, many projects require very oddball niche expertise that doesn't make sense to have on a full-time basis. In 2016, one of my clients needed some serious Cobol expertise for one of their projects. Of course, they didn't have full-time Cobol experts in house, so they hired one for a few weeks.

But how many IT SMBs have you met that call themselves, say, managed services, firms, but the so-called key experts, rendering core services, are located in Bangladesh, Pakistan or Albania? I've seen far too many.

Many years ago, I came across a company where, after 10 years in business, even the operations manager was a subcontractor. The only two employees were the owner's wife and mother.

The hapless hopeful also describes many IT SMBs that are neither vertically not horizontally positioned. They are the "We do any IT for anyone" firms.

But in a world where clients are seeking specialists, is it surprising that those firms live hand to mouth?

Well, hardly.

Meek Missionary: High Mission Focus And Low Market Focus

This is the illness many methodology-based firms suffer from.

They provide specific technical solutions for any industry under the Sun. The problem is that most of those solutions are really the muscle work of an approach someone else has developed.

For instance, firms that provide Salesforce administration. Someone else has developed the client's business development strategy and after our hero has settled with Salesforce, the company hires a Salesforce administration firm.

These firms are usually sta(u)ffed (the "u" refers to the fact that those firms are stuffed for high-volume, low-margin, and low-skill work) with certified Salesforce administrators.

These firms eat, drink, live and breathe Salesforce, but are forced to compete on price because of the nature of the work and because of their own inability to sell the service as a means to business improvement.

There is a good way of describing these firms. They have a fanatic devotion to their methodologies and equally fanatic resistance to selling their methodologies.

Why?

Because this superior methodology ought to sell itself without selling.

In this example, Salesforce is so famous and so many people use it that everyone should use it.

Sadly, starving missionaries are so laser-focused on their callings (talking to more people about their methodologies), that they don't even see their audiences as markets.

They see them as people at a church service that can be preached to.

Merciless Mercenary: Low Mission Focus And High Market Focus

This usually happens to salespeople on straight commission.

You ask them about mission and they tell you: To make as much money as humanly possible.

And they believe that as long as the end is justified, using any means to achieve that end is justified too.

Their job is to drum up business, but more often than not, they don't receive the required information they need to bring in business?

Salesperson: "What do we sell?"

Company: "Anything IT."

Salesperson: "Who do we sell to?"

Company: "To anyone."

Salesperson: "Can I discuss XYZ important issue with marketing?"

Company: "No. They are busy with branding issues (or other non-revenue-generating nonsense activities)."

So, our sales hero is set up for failure right from the start.

At this point, most salespeople quit, but some hard-core mercenaries stay and go to work.

Everyone knows what sort of salespeople straight commission positions attract: Very special people; people who feel all right to screw people over for money.

One of the worst examples of this type is a fellow Hungarian, the financier, George Soros.

In spite of being Jewish himself, he felt perfectly at ease with selling Hungarian Jews out to the Nazis for good money. There is an interview with him somewhere on YouTube, and he seems to have no regrets about it.

Essentially, he told the reporter that if he hadn't robbed those Jews blind and handed them over to the Nazis for execution, someone else would have done it. And doing it himself, at least, he made good money on them.

When the reporter asked him about the thousands of lost lives, he pretty much brushed it aside as irrelevant.

Today, the worst examples of merciless mercenaries are car salespeople neck and neck with real estate agents.

The way you can recognise them is that they are all about image.

Just as the saying goes, "If you can't dazzle them with brilliance, then baffle them with bullshit."

And since these people are totally money-driven, they are all about image and bullshit. After all, they can't offer substance, so empty style must suffice.

Business Developer: High Mission Focus And High Market Focus

These people are somewhere in the middle of the missionary-mercenary continuum. Some are a bit shifted to the left or right, but they have a pretty well-balanced sense of craftsmanship (quality services) and entrepreneurship (sold profitably).

The problem is that this is a pretty small group.

It's usually subject matter experts who've decided to move over to the seller's side of the table and, after several years of "doing IT", they start selling IT.

That's what I did when the Canadian engineering cabal barred me from practising engineering in Canada, because they said my British engineering degree wasn't up to Canadian standards, it wouldn't be worth more than a high school diploma.

Luckily for me, after one fulfilling career, I found another one.

And my subject matter expertise and 16 years of tech industry experience have been a tremendous help to succeed in my new career.

In a traditional sense, I'm not a great salesperson, but as an engineer, I'm pretty good at diagnosing situations and I've found that when buyers allow me to diagnose their current situations, I don't need the typical Zig Ziglar, Tom Hopkins or Brian Tracy type heavy-handed sales tricks and closing techniques.

After the diagnosis, I just ask buyers, "Based on what we've just discussed, do you need help with moving forward?"

And whatever they say, I'm fine with it.

Call me a wimp, but I've found it takes far too much energy to handle objections, so I don't even bother.

I've found that highly successful companies value my technical background, while the rinky-dink small potatoes get bogged down on where I got my MBA or journalism degree.

Then I tell them about my Stanford MBA which I bought in 1998 for $30 from a Chinese print shop that advertised American University credentials on the Internet and got caught in my spam filter. I bought it out of curiosity.

If you want to have a real business developer on board, treat her as any other team member and pay her the same way.

Pay her enough so she doesn't have to worry about money as she is going about doing her work.

Based on various studies, like Gallup's Daniel Kahneman and Angus Deaton, have found that it's around an annual salary of $75,000 when people stop worrying about money, so they can fully focus on their work.

Besides, why would a business developer worth his salt take a job for under $100,000 a year?

The funny thing is that a few weeks ago, a friend of a friend referred me to a small, 43-person carpet- and upholstery cleaning business that was looking for an experienced business developer for an annual salary of $145,000 plus various percentages.

Yes, you've read it right.

Many Inc. 500 IT firms pay half of that.

I reckon, they know something that many IT firms don't know.

Although I didn't take the project, as it's not my area of interest, I talked to the COO and mentioned the seemingly high base pay.

He said, they paid that much because for this kind of money you have the right to expect serious performance from the person and the person can also take your business seriously.

An that creates commitment.

They had lots of applications from salespeople but salespeople are not business developers any more than a cruise ship captain is a shipping tycoon.

I told them I wasn't interested, but connected them with some of my contacts who may be interested. And for that money, I think they will find a great business developer.

And this wasn't a large carpet cleaning company. It was a small business whose owner appreciated the expertise of a good business developer.

Trap #3: Using Delusional KPIs

It's surprising what sort of key performance indicators (KPIs) some firms use.

Yes, while they are drowning in tactical indicators, like email open rates or click-through rates, they ignore important strategic indicators like mean profit margin on a specific client or net profit per employee.

You can read about businesses and their incredible growth rates as one single percentage: The Sweet Cherry Pickle-Numbing Corporation has grown by an astonishing 120% this year.

Okay. What does that mean?

Yes, gross revenue has doubled, but headcount has been quadrupled and other variable costs have tripled too.

So, when you look at net profit per employee, the joint operates at a loss.

But following conventional wisdom, the company is one of the fastest-growing businesses in the land. I guess, this is who so many problematic companies end up on so-called prestigious lists.

A few years ago, I visited a friend at her workplace. The CEO had just been written up as one of the most successful CEOs in Canada.

At the same time, the company was shut down because due to non-payment, the gas company turned off the gas, Telus (the local phone company) turned off the phones and the electricity was off too on most of the premises.

And the CEO was busy peacocking around from one interview and photo shoot to the next.

KPIs are interesting beasts and many firm owners get them wrong.

They get obsessed with monitoring lagging indicators that indicate something that's already happened, so it can't be controlled.

At the same time, they grossly neglect indicators that are indicative of future performance and can be controlled.

It's like saying that my speed to ride my bicycling speed has grown by 50% from last year.

Well, for instance, last year I rode every day regardless of the weather, but this year, I've been riding very selectively; only in strong following winds, so I can easily do 20 mph even without pedalling.

Trap #4: Basing The Firm's Value On Manual Labour Performed

When you look at IT work, there are three levels.

  1. [Highest value]: Strategic work - Designing technology based on business requirements. The work is diagnosis and prognosis. You help your clients to make and/or save money and you can quantify your contribution.

  2. [Medium value]: Tactical work - Implementing the technology to serve specific business goals and objectives. The work is the implementation of the above prescription. Using the prescription, you perform the required manual labour to implement the plan.

  3. [Lowest value]: Maintenance work - Monitoring and maintaining the above technology. The work is general maintenance, the required re-performance of certain tasks and fixing minor problems.

Most IT SMBs give away the strategic work in their client acquisition processes and then try to sell the commodity tactical work and implementation.

And now look at your contact-to-contract process.

If you're like most IT SMBs, there is a good chance that you give away the strategic work during the negotiation process and end up bidding on the commodity manual labour.

Trap #5: Wasting Money On "Big Corporation" Type Image Marketing

There is a huge difference here.

Most big corporations are engaged in making mass-produced commodities.

If you've ever eaten both $15/kg supermarket steak and $300/kg homestead steak made from grass-fed heritage beef, then you know the difference.

By contrast, your firm offers highly differentiated and highly customised services. And this difference alone screams for a totally different marketing approach.

While image-based mass marketing is like the proverbial shogun cartridge, the direct response niche marketing is the proverbial rifle bullet.

What's the difference?

Shooting with a shotgun, you can cover a bigger area but with a smaller impact. You also have a very low probability to miss.

Shooting with a rifle, you cover a tiny area with incredible impact. You also have a higher probability to miss. The other disadvantage is that your missed shot can disturb your target.

Just think of a salesperson when he feels he's "got the sale in the bag", and says something that stops the buyer in her tracks.

Weeks of hard work can be undone with once sentence.

And the more in the premium range your firm is, the more bullet-ish NOT cartridge-ish your marketing development has to be.

And that requires that you have a specific target market and offer specific services. It also means that you need to give up the one-stop-shop mindset and adopt the "one-step-shop" mindset.

That is, instead of offering every kind of IT service under the sun, you select what your firm is the best of and offer nothing else.

One client of mine does nothing else but setting up and maintaining Linux-based systems for SMBs in the A/E/C (Architecture/Engineering/Construction) sector. They don't touch Windows or Apple systems or other industries.

Yes, their market may seem to be limited on the surface, but this tiny 11-person firm rakes in about US$17 million a year.

And they have no intention to grow on headcount.

And as we polish our business development, the profit per associate KPI keeps climbing.

We've been working on making their services more valuable, so they can charge more.

I believe this is growth. Increasing headcount is mere enlargement.

Now people may say that this direct response marketing thingy requires a hell of a lot of manpower.

Well, yeas and no.

It needs time and attention when you design it and build it, but after that, it's highly automated.

And the next time it needs manpower, when prospects indicate that they are ready to meet your people and discuss doing business with you.

And since you have a good self-qualification process, less than committed buyers wash out and you end up with the best of the best.

And that alone must be worth more than a poke in the eye with a sharp stick.

Trap #6: Neglecting To Monitor Market Demand

Granted, market demand goes up and down, but the more of a specialist your firm is, the less the fluctuation is.

But the situation is a tad more complex than that.

New demand may increase only slowly for your services, but existing clients request more bespoke services. Some clients may request concierge service, which you can offer at the right price. With a sizeable client, it can be a 6-figure monthly retainer.

That is, your services are evolving. They become more valuable to your market, so you raise your price accordingly.

Some people say you should repeatedly do marketing analyses, so you can better forecast your revenues.

But doing forecast is like goal-setting.

It reminds me of people who set impressive fitness goals while munching away on their doughnuts and some drink virtually saturated with sugar.

Instead, you can set some leading KPIs and do what you need to do to fulfil them.

If one of your leading KPIs is to send out five cold emails and five snail mails to 10 new suspects, then do that.

If you want to lose weight, instead of obsessively weighing yourself and setting goals, just go to the gym regularly and put in some sweaty huff-and-puff workouts that make you, in the words of Dickens, as stiff as, a functionary presiding over an interview, previous to an execution.

Trap #7: Failing To Align Business Development With Organisational Strategy

This happens mainly in those IT SMBs that don't do proper business development only brute force selling.

They hire armies of salespeople on straight commission and expect them to hit the road running the next day after being hired.

And they do.

Then a few days later, they hit the road as they fall flat on their faces and that's the end.

Why do they fall?

No one's ever told them what they sell, why they sell it or how to sell it.

They just use the method they used at their last companies.

And if it was a used car dealership, they use that method.

But...

Unless your firm is brand new, you already have sales best practices that match your corporate culture.

You have hired your salespeople because of their track record. But their track records were with companies with different cultures and maybe pushy sales methods, and in your culture, they can't do hard-sell.

Now there is a problem.

They are used to doing hard selling, but can no longer do what they know so well.

That's why you need to integrate salespeople into your company before you let them represent your firm and meet buyers.

Document best practices and share them with new salespeople, so they are less likely bite the dust and more likely to hit pay dirt.

In The Relationship Advantage: Become a Trusted Advisor and Create Clients for Life, authors Tom Stevenson and Sam Barcus nicely summarise this salesperson problem through a typical problem...

"That's us! The first thing we ask new employees in my organization to do when we hire them is to sell! We delegate the responsibility of acquiring relationships to these people, and our top managers assume very little accountability for executive relationships. We have no objective way to measure the quality of relationships they build. We only measure their quota performance. If they make quota for a few short years, we promote them and let them manage. I can see now why we are so overmatched when we encounter consultants in our accounts."

So, the idea is to hire people off the streets and send them out to become the face of the firm and represent the firm's values and services without ever telling them what they are.

I don't know what the logic is to abdicate relationship-building to the least trusted, least respected, least reliable, most fickle and most troublesome segment of any business venture. Yes, the field sales force.

In the meantime, management carefully hides inside an impenetrable fortress and watches the salespeople from a safe distance.

Yes, integrating salespeople is not a cheap deal. It takes both time and money.

But if you want to make sure your salespeople properly represent your firm and brand, then take the time and make the investment.

Conclusion

Many years ago, I was listening to the monthly radio cabaret show in Hungary. It was happening on the first Monday of each month.

There was a joke about a hospital where the patients'' average temperature was perfect.

It turned out half of the patients had high fever and the other half were dead.

But the average temperature was just perfect.

Sadly, IT companies can also fall into this insidious trap by paying attention to some idiotic KPIs.

One of these idiotic KPIs is gross revenue. Yes, keep an eye on this baby, but don't make it the be all and end all of doing business.

Look at so many high-tech companies! They are drowning in gross revenue but starving for profit. Several years after their foundations, many of them still live on venture capital money.

How to avoid this problem?

Learn pricing. Increasing sales volumes by 1% adds 3.25% to your bottom line. Increasing your price by 1% adds 11.7% to your bottom line.

Don't fall into the typical "more clients" trap. Get better clients and learn to value price your services.

In the meantime, don't sell harder. Market smarter and your business will be better off for it.

Attribution: "This article was written by Tom "Bald Dog" Varjan who helps privately held information technology companies to develop high leverage client acquisition systems and business development teams in order to sell their products and services to premium clients at premium fees and prices. Visit Tom's website at http://www.varjan.com.