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In some respects, developing strategy is the easy part. Executing that strategy in alignment with strategic priorities is where real mastery of management takes place. We asked Harvard Business School senior lecturer Frank V. Cespedes, who is faculty chair of a new HBS Executive Education program, Aligning Strategy and Sales, to give us a glimpse into how it's done.
Working Knowledge: Why is it so important for companies to create a stronger connection between their strategic priorities and their go-to-market initiatives? How critical is it to their long-term revenue growth? Frank V. Cespedes: For most firms, the largest, most difficult, and increasingly expensive part of strategy implementation is aligning field behaviors and go-to-market systems with espoused strategic goals. It's the largest because doing this well is essential for marketplace success and often essential for company valuations and growth options. A key to meeting growth potential is eliminating the gulf between big-picture strategy and day-to-day field execution. It's often the most difficult part of implementation because you're dealing with a combination of core factors in business: market
set price based on their costs, not the value of their products and services to their target customers. There are reasons why companies do this, but it's not how you maximize profits and growth. So in the program, we'll spend time on the allied issues of pricing, profitability, customer value, and what this means for account management. Market segmentation and account selection. Essential for aligning price and value is segmentationdecisions about where you do and do not compete. The great HBS marketing professor Ted Levitt once said that in business, "If you're not segmenting, you're not thinking." That's true. But I would also point out that, in the history of buying and selling since ancient times, a market has never bought a thing. Only accounts, individual customers, buy. So it's important that firms have clear criteria for choosing customers. But most firms don't. When you look at their business plans and sales incentives, they are essentially saying to their salespeople, "Go forth and multiply!" And that's indeed what their sales force does, fragmenting the company's resources and making alignment of strategy and sales difficult. Performance management practices. Performance management is not just performance measurement or compensation, although both are important. Performance management is a systemic process for moving from strategy to metrics to performance reviews and development initiatives aimed at aligning selling behaviors with market realities. Q: How can companies deal with these issues and overcome obstacles to set a strategic foundation for sales success? A: First, as the performance management
cycle implies, you must have a coherent strategy and be able to communicate that strategy in ways that people in your organization understand. Second, you need a systemic way of analyzing what your customer-contact personnel are (or, are not) doing with accounts and why. That encompasses many of the traditional areas of sales management, but it is ultimately a cross-functional issue that involves how other functions in the firm interact with sales. Third, and I want to emphasize this, aligning strategy and sales is ultimately a leadership issue, not just a sales or strategy issue. It requires leadership team alignment and (in a changing market) dialogue. That is why this program involves faculty from across disciplines at HBS, including David Collis and John Wells from Strategy, John Gourville from Marketing, Linda Hill from Organizational Behavior, Bob Simons from Accounting & Management, and me from Entrepreneurial Management. As we emerge from a global recession and financial shock, it would be naive to assume a return to business as usual. All companies need to reexamine the fundamental links between their espoused strategic goals and the nitty-gritty of field implementation. Q: Can you give examples of successful companies that have synchronized their strategies and field sales activities? What are they doing right? A: An important thing to understand about companies that are successful in aligning strategy and sales, and driving long-term profitable growth, is that you find them across industries: in fast-growing high-tech areas (for
example, Oracle and Intuit) but also in mature and seemingly commodity-like businesses. One example is PACCAR, a producer of heavy-duty trucks that has been consistently profitable for over 70 years. It commanded a 10 to 15 percent price premium versus its competitors throughout this period. And over the past 10 years it realized an average total ROE of nearly 20 percent, versus negative 1 percent for the S&P 500. Others are Cemex (historically, good returns in the cement business!) and Ryanair (good returns in the airline businesstraditionally an example of a poor industry structure). And there are many examples among smaller and lesser-known firms run by private equity companies and capable entrepreneurs. Too often leaders of firms use their industry as an excuse for not doing the things that can, in fact, improve strategy execution and profits. It's very important to understand your industry and its market dynamics. But industry is not destiny. As usual in business, the important levers in aligning strategy and sales are committed leadership and management behaviors. Our program is intended to help participants use these levers as productively as possible. Post a New Comment: Name: Position: Organization: Email: I would prefer to remain anonymous By hitting Submit you agree that your comment, in Comment: whole or in edited form, may be posted online. Comments are selected on the basis of relevancy and variety; not all will be posted.