In previous blog posts, I have introduced the idea that we may meaningfully discuss how society (including sellers, intermediaries, and buyers) will chose to configure sales processes, in the form of dominant sales models.
I have also indicated that we need to analyze the determining factors for sales models, to understand why certain sales models dominate / do not dominate today, and what may become the dominant sales models in the future.
Let me briefly start with some determinants of today’s dominant B2B sales models: globalization and homogenization of supply and demand; pursuit of business opportunities at the fat tails of demand distributions; availability of effective two-way digital / electronic channels; tight margins in combination with costly physical sales activities; positive indirect network effects of electronic market places; massive costs of a complex RfP response, typically in the range of USD 100m or more (in defence, infrastructure, and telecom), to be split between seller and buyer; significant professionalization of sellers and buyers (many with good MBAs from major universities in US, Europe, and Asia); and finally removal of various asymmetries between sellers and buyers. And the list goes on.
Having explored some determinants of sales models, we are in a position to say something meaningful about what sales models may dominate in the future, say within a 10-20 years horizon. Here are my hard predictions (again primarily focused on B2B space):
- Conceptual split between management of major or strategic accounts, and that of other accounts: If we look at the major trends in the software space, including Microsoft, IBM, Oracle, and SAP, there is a clear trend towards a bifurcation of sales organizations: really big accounts (say 5-15 in each country) are managed at national or regional level; all other accounts are managed through lower-cost channels. Implication: Know your account profitability, and adapt sales approach to account size.
- Customer expectation of provision of free insight / thought leadership: This was the issue that started my interest in exploring ‘the future of sales’. See for example “The End of Solution Sales”, by Brent Adamson, Matthew Dixon, and Nicholas Toman, all in Corporate Executive Board . The short answer is: Yes, I think the ability to articulate stark insights will be a key differentiator for any successful sales person. Implication: Access to pool of insightful, bright, visionary sales executives with deep industry knowledge will be instrumental for management of strategic accounts.
- Emergence of highly effective lower-cost sales channels: In practice, an inbound call center or an internet-based customer portal is just massively cheaper than then traditional account manager. Not only that, it provides a much more attractive channel for the customer: 24/7, more insight, less non-relevant information, always updated. Implication: The bread and butter of junior account executives will disappear.
- The revenge of buyer-driven sales: It used to be that hunters (stellar people doing proactive new sales) were seen as the stars; farmers (solid, but boring people doing reactive after sales) were seen as OK, but replaceable. In my opinion, there will be a change of the relative importance of proactive / reactive revenue streams, and that creating a good system for reactive revenue generation will be key for most organizations. Implication: As said, the revenge of reactive sales.
- Continued disintermediation: Intermediaries will disappear, and direct contact between manufacturer and end customer will be the norm. Example 1: Most software downloads today are directly from the software provider (e.g., Microsoft, Digia) rather from the reseller or distributor. Example 2: When I recently wanted to have my fuelband from Nike fixed, I contacted Nike Europe, rather than some sports store in New York (in which the fuelband was originally purchased). Implication: At least, disappearance or marginalization of agents, distributors, and resellers.
- Further digitalization / electronification of sales channels: It is a trivial observation that much oral and / or paper-based communication between seller and buyer will be moved from voice (and possibly electronic representation of same) and paper to various electronic versions of same, ranging from digitally encoded voice to video meetings to extra-net Sharepoint sites. Implication: Less wining and dining,
- Use of social media and unmanaged discussions in broader on-line communities: Social media is becoming a key channel for thought leadership, as a much more effective channel than say white papers and company journals, like McKinsey Quarterly. Examples of successful use of blogging: Gartner (an analyst firm following the IT industry), McKinsey (a management consultancy), and Accenture (also a management consultancy) are all using social media to market their offerings. Not only that, the evaluation of specific vendor solutions takes more and more place in informal on-line communities between peers inside and outside own organization. Implication: Use of social media as sales channel, but also exposure to unmanaged discussions with third-parties.
- Tight integration of physical sales and distribution channels, and virtual sales and distribution channels: In practice, most B2B sales processes will have some sub-processes that take place in the physical world, and some that take place in the virtual world. Examples include Amazon’s physical sourcing and delivery chains, and Steve’s (see some previous blog posts) use of free-of-charge physical meetings to plan delivery projects. What we will see is tight and seamless integration between the physical processes and the virtual processes. Implication: Though there are apparent example of pure-play vendors (say Amazon in the virtual economy, or the local sports shop in the physical economy), winning players will integrate and align their presence in the physical world and the virtual world.
- Trend towards digital search as entry point to any sales process: We have all tried it, using Google as search entry point. This is in consistency with the generic sales process that I have presented before (with the possible exception of Type II-sales process: intermediary-centric sales processes). Implication: SEO will be important also for organizations with significant physical presence.
- Creation of dominating two-sided market places: It is a well-known property of two-sided market places that they tend to exhibit significant positive indirect network effects: the more sellers I see (as buyer), the more attractive the market place is for me; the more buyers I see (as seller), the more attractive the market place if for me. Examples: eBay, Finn, and Monster. Implication: You must be willing to pay to be able to participate.
- Productification, rather than customization and bespoke solutions: There is an increasing understanding that homebrew thinking is a poor and expensive starting point for requirement specifications. There is furthermore an increasing understanding that for most systems, there are massive commonalities across companies regarding ‘best practices’, and especially ‘good practices’. There is finally an increasing understanding that leading suppliers to an industry, not major players in an industry, are repositories of ‘best practices’ for same industry. Implication: Sell what you have or want to have, not what the customer wants. (This is also linked to insight-based selling.)
- Professionalization of the sales profession and general availability of high-quality sales talent: We will see a general trend towards professionalization of the sales profession. This trend will manifest itself both at individual level (as availability of high-quality sales talent) and at organizational level (as increased organizational sales maturity, relative to a sales maturity model). This trend will be most visible in cultures that today have limited appreciation for sales as a profession, as exemplified by some of the Nordic countries. Implication: No organization will be able to get away with poor sales performance.
I would finally like to make two comments about methodology: i) I have been making predictions about the future of sales based on what we know about selling in Europe and North America. That would have been OK if most sales activities will in the future actually take place in Europe and North America. With the emerging dominance of China in the world economy, we will however probably see new patterns in sales emerge, and there is an argument to be made that my conclusions above may not hold in such world. Similar arguments can be made about Russia, India, and Africa’s allure as the next big thing in business. ii) There is a significant possibility that I am mixing the general cross-industry trends in sales (an understanding of which we are hoping to establish here), with intra-industry seller-side trends in sales (which are to a large extent driven by the seller-side industry life cycle), and that this mixing may skew results.
In my next blog post, I will try to conclude this fairly (and possibly overly) ambitious discussion about the future of sales, by reviewing some known unknowns (borrowing the words of United States Secretary of Defense Donald Rumsfeld).