Sales and Risk – Achieving the Right Balance

by Darrell Woods, Senior Account Manager at Devoteam UK

August 2018

My last article contained my thoughts on the topic of Proof of Value and helping your sponsor to justify what you are both trying to do. This article is an attempt to scratch the surface of a much bigger topic – the risk factor and what can sales do inside the engagement process to mitigate as much of this as possible. This is a true unified objective – less risk for you as the supplier means improved probability of making the anticipated return; less risk for the client means their personal commitment to you and the project forges the link between success and their career reputation.

Sales and risk

Business risk is a much wider topic, of course, so here my intention is solely to pen a few thoughts on where risk fits within the sales process. Some sales people I have known would look at the title and take it simply to mean: “what are the clawback terms on commission payments?”, but we can do better than that!

No-one would argue that less risk and all associated implications is not a good thing. But less risk in selling is like High Availability – it is attainable but at a cost that graduates and probably narrows the more you strive to remove it, indeed at a steepling cost both to the supplier and the customer. If data centres are run on 99.99% availability, then surely a degree of risk is similarly endemic (obviously at a different percentage) and could then be similarly factored?

For a long time the explanation of market forces was put forward as the way to mitigate risk – so the RFI and RFP ruled. If the opportunity was big enough, prospective organisations would deploy whole teams into responding to these slabs of documents, entirely without any commitment in return, and knowing often that you were one of multiple responders for multiple alternatives, allowing the client to say they had performed due diligence. The internet and other communication methods have reduced the legitimacy of the RFI, but for most customers procurement rules mean that the RFP remains their chief weapon to fire at downtrodden suppliers.

There seems to be a belief that the more detailed the RFP the more risk is magically eliminated and mutual alignment certain. Clients will still make a “leap of faith” if time is against them – but here, only trusted existing suppliers really have an opportunity. Most IT companies I know make most of their money from existing clients – but this is itself dangerous. New clients are the injection for innovation and growth. Crucially they also allow the experience of others projects, good and bad, to drive better follow-on outcomes for both parties. If winning new business becomes a barrier to entry then stagnation is not far away.

Time and risk

So my first area of debate is time – how much time should be applied to removing risk when selling and is this genuinely removed or wrapped in some black bin liners and left on the back step for collection by the delivery team? Here it seems to me there is a mis-alignment: customers do not appreciate the time and cost involved in removing that risk – there is an impatience to find out “well how much is it?” and the only thing prospects hate more than “it’s a lot” is “it depends”!

I still believe that an intelligent, well-informed customer can make a decision superior to any scoring system devised off the back of an RFP exercise.

One of the consequences of the world of work in 2018 versus when I started in sales in the late 80s is the impact of flattening organisations – on every side of every type – to remove cost. Yes, access to information has never been easier but the irony is that we are under too much time pressure to benefit fully. So we make imperfect decisions – I’m fine with that – I still believe that an intelligent, well-informed customer can make a decision superior to any scoring system devised off the back of an RFP exercise. Sales should be about supporting this decision process to try to ensure that opinions are replaced by more objective measures and, most important of all, that decision criteria are sufficiently broad and up to date and not being made on experiences from 10, five or even two years ago. This is even harder than it sounds given how much our world view is shaped by previous events, positive and negative. The “right” decisions with all the implications for minimising risk should then emerge right? Happy Days. Except…

One of my most profound learning experiences was a customer win a few years ago. It was the right solution at the right time and we had “our best people” on it. Yet the project failed. Environmental factors that I can’t present here meant the project was doomed, our sponsor resigned, and our brand in that prestigious account tarnished perhaps irreparably. In debrief we agreed that there was not a whole lot we could have done differently. Marriage guidance educates that no breakdown is solely one person’s fault. What it leaves out is my addendum: in IT doing the very best job you can no longer guarantees success.

You can’t buck the market

If the rules of engagement aren’t fully understood and agreed well before consultants arrive on site, then no commercial offer can possibly be de-risked.

Market forces aren’t too happy about this and counter in two main ways:

Firstly, the classical approach: let’s remove the risk via the delivery methods – waterfall, micro governance, lots of gates, super fat contracts with addenda added until you run out of letters, but this is obviously now too slow for most modern businesses and assumes, sometime with devastating consequences, that before you start the client knows exactly what they want! Given the lean nature of organisational structures, the workload burden across all roles and the rapid rate of change, this would seem to me to be a near-impossible assumption.

The second approach is through agile and shared responsibilities: “These are all the sized tasks – what are you going to do, what am I going to do?” Such a method, while now predominant, presumes equal commitment, skills and availability. How often as suppliers do we truly test this? Everybody we are engaging with already has a day job! They might want to contribute, be well intentioned and say the right things yet be flawed from the outset. Have you ever run a training course for a customer? Assuming they even all attended, how many would you say were able to give it their full undivided attention? Yes exactly.

We are straying into delivery. But if the rules of engagement aren’t fully understood and agreed well before consultants arrive on site (physical or virtual), then no commercial offer can possibly be de-risked: “Your services are too expensive” nearly always means that common understanding has yet to break out, and here is my fundamental criticism of classical RFP / bid processes. Such mutual understanding is very hard to write down and really needs dialogue. An RFP shuts that comms down at the very time when dialogue should be increasing – and certainly way more than a couple of bid presentation sessions can weakly address. If an RFP is used to reduce the field, to validate positioning and focus internal understanding on what else needs agreeing, that’s great, but it really should be no more than awarding preferred status.

The second reaction is back to good old market forces. Much of what we do is in the cloud, under SaaS contracts that in theory mean the client can change suppliers at the drop of a hat and you are only as good as your last engagement. Pressure to maintain a level of quality is, of course, a good thing, but given what we have already said about how the client themselves can wreck even the best engagement, the burden of supply-side risk arguably has never been higher. Contracts mollify senior management on both sides, but expansive contracts, which attempt to drive out risk are hugely expensive to the cost of sale, and the elephant in the room is that should the output ever be required, then the relationship is already broken and all involved are trying to get their suitcases out of the boot after a car crash.

Agile delivery methods make this harder – the edge is blurred for the sake of speed and iterative learning. De-risking here involves different behaviour: so firstly aim to bring delivery much more into the sale process to head off “mind the gap” moments. Secondly, have a detailed set of assumptions that underpin sizing (and can be enforced for change control) not just the usual glib set of templated inserts, and thirdly, wherever possible engage initially solely for the design, the plan, the agreed outcomes. The output could then in theory be taken to any alternative supplier – and this may be enough to satisfy procurement competition rules. One of our customers was astounded to see what they took as Devoteam’s pre-sales resource arriving to be the TDA (technical design authority) on the project proper as they simply did not have this experience with other organisations! In another example they loved the initial session from a certain vendor until I reminded them they would never see any of these people ever again.

Know your customer

Relationship selling no longer of itself guarantees success as there are too many points of robust challenge.

You have to know and differentiate the customer. We are reminded of this every day in every management update, evidenced because not all customers are alike. Some need the hand-crafted 40 page Statement of Work, while others would baulk and view the delay (and cost) caused by producing such a document as an unacceptable alternative to cracking on with things.

It is something of a relief that relationship selling no longer of itself guarantees success as there are too many points of robust challenge. My golf is risible so to lose out to a “golf course” decision never felt like a good place to be. Now, one would argue that even the largest suppliers would be right to be wary of such a contract award as the risks may far outweigh the gains.

I like lists, so to keep the run going have tried to run in the opposite lane to some of the precise risk-scoring methods that exist out there and gone for some more basic (and tongue-in-cheek) questions to consider:

  1. Would you lend the prospect £100?
  2. Would he/she return the favour?
  3. What if it were now £20k?
  4. How pivotal and robust is the relationship aspect so that if you or your advocate stepped out would things still continue on schedule?
  5. We deliver against all commercial models. Can this assignment be fixed price? Why not? What are you worried about?
  6. How many of the delivery team are essential to our success and are there any single points of failure?
    Something unexpected turns up – is this your problem, their problem or does it feel likely that you would address it together?
  7. Can you test their CR process in advance? As a minimum, are they prepared for the eventuality?
    Shared risk and reward contracts are still rare – but role-play it anyway as the conclusions will flush out what each party has to win and lose and how these might be quantified and mitigated.

Openness is paramount

Sales managers have a duty to their organisations to assess the risks even where the sales person appears to be happily breezing towards a purchase order.

On closing, we have nothing to fear from smart reasonable customers. Good communication and openness should allow safe navigation of even choppy waters. If it were entirely easy and predictable we would all be doing something else and leaving it to the bots. How many of your prospects are clever enough and reasonable enough to trust “in sickness and in health”? Sales managers have a duty to their organisations to assess the risks even where the sales person appears to be happily breezing towards a purchase order. Doing this quickly and effectively (remembering that the client may be moving at a different pace) is a challenge for approval processes for which there are no shortcuts. At the same time, our Instincts are the outputs from hugely powerful computations – don’t let them be pushed to the back by the pressure to win that next deal. If it doesn’t feel right, then it isn’t right!

In my next article I will be looking at how the world of work has been transformed in the thirty year since I entered it. 

 

Contact

Darrell Woods

Senior Account Manager, Enterprise at Devoteam UK