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The world can’t wait for 2020 to come to an end. Even though things won’t change dramatically at the stroke of midnight on December 31, you will get a fresh start in 2021. Now is the time to start preparing your tech sales business for this new beginning.
I’ve been asked by many of our members what are the key areas to prioritize for technology sales leaders in 2021. In this blog, I describe my top five priorities specifically for technology firms that are looking to accelerate the growth of subscription or XaaS offers.
This is harder for some firms than others and it obviously depends on the maturity of your XaaS offers. But, at a philosophical level you have to make the shift so that your salespeople sell XaaS as a preference over your traditional offers.
We spend a lot of time working with executive teams to ensure there is alignment around their journey to becoming a XaaS or subscription business. For many, this is a journey that will take five to ten years. It’s not something that happens over night for many reasons.
One of the first things companies need to do as part of this alignment is to model out what the revenue mix is going to look like for the next 3-5 years. This is a simple theoretical exercise that will evolve and adapt as the business matures.
In its most basic form, it’s a table that shows the percentage of revenue that will come from traditional CapEx and XaaS OpEx offers over the next few years. Subsequent iterations will take it down to an individual offer level.
Simply knowing that the company’s objective is to grow XaaS revenues next year from 8% to 17%, for example, is invaluable. It helps to inform so many downstream decisions and will give you an indication of what percentage of new business needs to be based on new offers. It won’t surprise you to know that this will probably indicate that the majority of new bookings will need to be for new offers.
There are many reasons why you should prioritize having a very clear strategy and plan for the migration of existing customers to your new XaaS offers.
The two most common internal drivers are that:
From an outside-in perspective there are also good reasons to accelerate your planning around which customers should be prioritized to move to XaaS offers. For example:
We’ve written a paper on this topic which describes how you should go about planning your approach. It includes a framework to determine which customers you should incentivize to move, which you should intentionally delay moving, and which ones you should “keep a close eye on.”
The overarching advice we have is to be purposeful around this subject and don’t leave it to chance or to your individual salespeople to decide which customers they think should move. They’re probably not the best people to make that call, although obviously they will have a valuable opinion.
Based on how you have decided to address these first two priorities, you need to revisit the way you are allocating responsibility for quota achievement. This is a critical part of any organization’s move to selling new recurring revenue offers. It’s something that you have to plan very carefully and will be influenced very much by how aggressively you are looking to grow your XaaS revenues.
Your sales organization has three roles as outlined in the figure below:
When we refer to new deals here we’re talking about new contracts, not incremental revenue from existing contracts. We assume that a CSM or other role will have this responsibility.
Bear in mind that in the first priority described in this blog you will hopefully stop selling traditional offers as soon as possible so the blue boxes in the above figure will fall away quickly. But, while you are transitioning to this new world, you may want to consider creating specialist teams to focus on some of these activities. For example, you may want a new specialist team of new logo “hunters” who are skilled at positioning and selling your new XaaS offers. You may also elect to have a team dedicated to migrating existing customers to new offers.
Your approach to this will clearly depend on your segmentation strategy. Larger accounts will likely retain a sales account executive role to coordinate account activities. Smaller accounts will not justify this expense and therefore may be targeted by your new offer specialist team. The other dependency is the maturity and capabilities of your customer success managers. For more detail on the difference between sales account managers and customer success managers click here.
The move to outcome and value-based selling is gaining momentum across the technology industry. We’re seeing most companies looking to change the way that they hire, train, and develop their people to be more capable of leading a different type of customer engagement. This is being driven by two factors:
The role of the business buyer in technology purchasing decisions is increasing year over year. Microsoft reckons that over 80% of new tech spend will be primarily influenced by business buyers. And these folks want to talk about outcomes and value, not features and functions.
Their discovery conversations have to start with an articulation of what business value and outcomes similar companies are typically looking to achieve. The picture below describes what an outcome-based customer engagement looks like:
Building these “playbooks” based on real examples of what you’ve done for existing customers is the best place to start. And then you have to provide your salespeople with a toolset that allows them to deliver these messages consistently and capture the priorities and stories from each of the different personas they will need to engage throughout the customer’s journey.
This then can be shared with the CSM prior to implementation. All of this forms the basis of the customer success plan and can be fed back to product, marketing, and sales leadership to drive continuous improvement.
This is a BIG topic and one that won’t be easily fixed in a single year. But we’re encouraging our members to drive a combination of tactical and strategic initiatives in the area of digital sales transformation in 2021.
To help frame the business challenges, we’re providing the following definitions and framework which offers a useful way to identify and prioritize initiatives that will deliver the most value for the optimal investment.
Digital sales transformation is the intelligent use of data and analytics to optimize sales and go-to-market resources and processes. The goal is to match the right GTM resource (direct, indirect, online) with mutually rewarding activities and outcomes throughout the customer’s journey.
We’re recommending to our members that they identify 2-3 tactical initiatives that they can implement in a calendar year against each of the three workstreams described above. Some of these will be as simple as defining more detailed objectives and scope. For some, it may involve the deployment of a new capability.
Trying to predict what 2021 will bring is an incredibly hard task. From all the data that we’ve seen, companies are not going to be rushing to put their people back on planes or back on the road. The world of virtual selling is here to stay for a while longer – who knows if it will ever return to pre-pandemic levels – and we need to prepare for a year of more disruption and change.
These five areas of focus are, based on everything that we’ve seen, the ones that are most likely to position you for future success as you look to grow your XaaS and subscription revenues.
Good luck and we’ll see you on the other side!
Post Date: November 19, 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.