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I previously wrote a blog that focused on the topic of outcome-based selling. Without a doubt, this continues to be one of the hottest topics with sales leaders that I speak to around the world.
I’m not sure what it’s like in your company at the moment, but it feels like there is a lot of pressure in the system to drive change initiatives in the Sales organization. As always, the challenge is that no-one’s getting a break when it comes to sales targets. The metaphor that people use is that they are being asked to change the engine on the aircraft while its flying at 40,000 feet!
There’s very clearly an acceptance from sales leaders that change is required. Last year I spoke to around 30 senior sales leaders from across the industry and 92% of them acknowledged that they need to make changes to their customer engagement model. I’ve attended a number of our Members’ sales kick-offs over the last few months, and they are almost all themed around becoming more focused on customer outcomes.
When it comes to the drivers for change, there are three major factors that are consistent across the hardware, software, and services companies that I engage with:
Everyone seems to acknowledge the need to make changes. Just adding more sellers with the same skill set is not going to work this time; there is a real acceptance that for the long-term good of the business some more fundamental change is required.
The five big areas of focus that keep coming up in my engagement with sales leaders are:
Over the coming months, TSIA is going to be running a specific survey to dive into more detail around how organizations can improve the hiring, training, and developing of the right people. We want to really understand what practices in this area are delivering the best results.
There is one play that we are super-confident is going to show up in the research as being a really positive move. That is the investment in industry vertical skills and capabilities. We’ve seen real evidence that this is a move that is paying dividends and can support so many other popular strategies that sales leaders are adopting.
We know from research that we conducted on this topic that revenue growth in organizations that have built vertical capabilities is significantly higher than in companies that haven’t yet made this investment.
The chart above shows that 67% of companies that have adopted a vertical go-to-market posture are experiencing growth rates of over 21%, compared to only 28% of companies that have a purely horizontal go-to-market approach.
Making the shift from being horizontal to vertical in the way you function as a business clearly makes sense, especially when you further consider that one of the imperatives of being able to engage with business buyers is that you have to speak their language. You must be able to demonstrate to them that you understand their business and that you can show a tangible connection between the solutions you offer and the business outcomes that they are looking to achieve.
Most companies will start by making the move to being partially vertical. We call this the “Thin Vertical Veneer”. As you can see from the results in the chart above, the benefits of doing this are worthwhile. Nearly double the number (49% vs 28%) of companies that have made this move are growing subscription offer revenues by more than 21% year-over-year.
Let me unpack what I mean by developing industry vertical capabilities:
Companies that have made this shift have highlighted the importance of changing the metrics and starting to introduce elements of compensation change to start driving the right “vertically-oriented” behaviors. The metrics that have been introduced as companies start to make the shift include:
For more about what you can do to improve your vertical capabilities, TSIA members have access to two research papers that we’ve written on the topic, “Why Improve Your Vertical Leap,” and “How to Improve Your Vertical Game”.
There is also a TSW keynote presentation, “Improving Your Vertical Leap,” in which Thomas Lah and I explain in detail the concepts that I’ve touched on here and offer tips for getting started. Speaking of TSW, I would like to encourage you to register for our upcoming spring conference, taking place in San Diego, May 4-6. There, you can expect to learn more about what it takes to sell subscriptions in a variety of informative session, including one I’m hosting called “Making the Move to Outcome-Based Selling".
Post Date: February 11, 2020
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Martin Dove is the vice president of subscription sales research for TSIA and brings a unique set of experiences and insights on outcome-based selling and subscription sales methodologies. In this role, he works with TSIA members to help them navigate the journey to being more outcome-based in the way they sell and to optimize their organization’s sales of subscription, or “as a service” offers, to both new and existing customers.
The Technology & Services Industry Association (TSIA) is dedicated to helping technology and services organizations large and small grow and advance in the technology industry. Find out how you can achieve success, too. Call us at (858) 674-5491 or we can call you.