Sales Management

The difference between beer and surgery, and the implications for selling beer and selling surgery, respectively

OLYMPUS DIGITAL CAMERAThere has lately been an interesting discussion in Dagens Næringsliv about the difference between selling and producing beer, and selling and producing surgery (in the context of optimum organization of the hospital system in Norway, and the benefits of competition vs. those of scale).  Jan-Erik Støstad in LO has stated that yes, there is a difference, and yes, this difference should have implications for how we at a societal level organize the production of health services.  Dagens Næringsliv’s chief editor appears to be of the opinion (see http://www.dn.no/meninger/leder/2014/08/31/2051/Helse/l-og-sykehus ) that yes, there is a difference, but no, this difference should have limited implications for how we organize the production of health services.  In a completely unrelated thread (see crispideas.wordpress.com/2014/08/19/new-ideas-for-effective-sales-in-norway/), Andreas Folkvord in TrueNorth Consulting appears to express the opinion that products and services are of course different, but selling products is same as selling services.

Restricting ourselves to the métier of sales, there are of course two key issues here: i) What are fundamentally the differences between a product and a service; and ii) if there are differences, what are the implications for how we configure a sales process for best performance in the two cases.

I will start with four hypotheses here:

  1. In general, products differ from services, but it is not necessarily because one is per se a physical product and the other one is a service offered by a person. Rather, it is because many services are: i) intrinsically complex (for example in terms of educational level needed to provide such service, or length of requirement specification document); ii) vaguely defined, by provider or by purchaser; iii) fairly easy to customize / malleable and often delivered in series of 1; and iv) delivery person-specific: the person is the delivery.  (Would a pipeline integrity solution from vendor X be more credible if suggested by NN with a Ph.D. in Mechanical Engineering from MIT?  Would you care if your jogging shoes from Nike were made by worker 1 rather than by worker 2?)
  2. In general, and for reasons outlined above product-centric organizations tend to organize their sales activities in a dedicated sales function, while services-centric organizations tend to organize their sales activities with significant involvement of resources from their delivery teams. Examples of such product-centric organizations with dedicated sales functions: Microsoft, SAP, and Oracle.  Example of services-centric organization with delivery doing sales: major consulting firms like McKinsey and Accenture; most Norwegian VC firms; and most Norwegian research organizations.
  3. That said, in general, the general sales activities carried out appear to be exactly the same in the two cases: i) generate leads (for example through professional network, from social media or from trade shows); ii) qualify, pursue and develop opportunities (for example in sales meetings); iii) propose solutions; and iv) negotiate and close deals. Indeed, and as further evidence, sales training for auditors appears to be fairly identical to sales training for software sales people (from personal communication with participant in sales training for auditors).
  4. Maturity-wise product-centric organizations tend to do cluster in the high end, while services-centric organizations tend to exhibit much more variability (with plenty of examples of highly successful service-centric organization at very low maturity levels). Even seemingly very similar services businesses may exhibit significant variability, as evidenced by the difference between the sales maturity level of a typical general practitioner medical practice, and the sales maturity level of many dental practices.

The interesting part of this discussion begins when we start to search for examples that could refute the above hypotheses.  There are indeed many examples of service-centric organization with a dedicated sales function, including those selling low-end training programs, conferences, temps, and carpenter services.  There are also a few examples of organizations having attempted to sell high-end services through a dedicated sales organization, including I understand CGEY in the late nineties.  There are finally plenty of examples of product-centric organizations with delivery being actively involved in sales, including ABB and most other engineering firms.  However, all these apparent counterexamples (with the possible exception of CGEY) are about product-centric organizations selling products with the characteristics of a service (in terms of (i)-(iv)), or about services-centric organizations selling services with the characteristics of a product.

The regular reader of this blog may at this point observe that hypothesis (3) above corroborate the claims of Andreas Folkvord, with whom I had the initial discussion about possible difference between selling products and selling services, see crispideas.wordpress.com/2014/08/19/new-ideas-for-effective-sales-in-norway/.

What are the practical implications of the above hypotheses:

  1. For service-centric organizations: You may want to assess your maturity level, and consider whether and how the tools, practices, and processes of high-performing product-centric sales organizations could be leveraged in your organization.
  2. For service-centric organizations: You may want to consider the possibility of packaging your service offerings so that they may be sold through a dedicated sales organization.
  3. For product-centric organizations: If you have started to move up in the value chain, by providing services around your products or by selling products exhibiting the characteristics of services, you may want to consider whether your existing sales people are up to the task, whether to recruit say technical sales support or products managers, and generally how to involve your delivery people in your sales processes.
  4. For all organizations: You may have star sales material in your delivery organization just waiting to get involved in sales. If so, you may or may not want to move him or her to the dedicated sales organization, the important thing is to create a relevant model for the involvement (in terms of for example recognition, compensation, and career path).

Grim

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