Recently, I met with a long time colleague, Chris Morrison. In our discussions regarding bringing novel products to market, I reflected on the many times I’ve witnessed the premature scaling of a commercial sales force and asked Chris to author the following blog to better assist company leadership in assessing the best inflection points for hiring sales professionals.
Guest Blog | Chris Morrison
The commercial launch of a new technology is a time of great expectations. From the startup to the largest public company, it is the culmination of years of development and the gateway to the financial payoff. But it is also the moment of greatest risk.
- The great majority of startups fail
- 75% of VC-backed startups fail to return the capital invested1
- Less than one percent of big company launches end up having real impact2
By far the most common failure with innovation lies in market development, not product development. As Clay Christenson states in Competing Against Luck, “For far too long, companies have accepted that innovation success is just random and we’ve allowed ourselves failure rates that we would not tolerate in any other aspect of business.”
We can create new ideas and develop new products. Where we fail is the transition to early market development and early sales. Led by the technology startup community, new tools and models (see diagram) have been embraced to reduce the risk of bringing innovation to market. The Lean Startup movement has changed how we think and execute. And for good reason, it is now spreading into the rest of the business world.
Yet we have stopped short. The early sales of innovation remain the most common point of failure for startups and established companies alike. And with respect to the sales process, products are often treated the same regardless of market stage. As Scott D. Anthony states in his book The First Mile, “The ideas aren’t the problem. It’s the process.” And this is no truer than for the early sales process of innovation in Medtech, life science, and healthcare.
We need to confront our current thinking. The conventional professional sales model does not work when applied to innovation. In fact, it impedes success and often accelerates failure. Similar to the Lean Startup concepts mentioned earlier, the commercial launch and early sales of innovation, which I refer to as market entry, require different thinking, strategies, and tactics.
As Steve Blank states, “A startup is an organization formed to search for a repeatable and scalable business model.” What follows is the early stages of sales is the search for the repeatable sales process. Without it, the probability of success diminishes dramatically and meeting the revenue plan becomes a shot in the dark. Success becomes more a function of luck than skill and expertise.
- Every professional sales organization is designed and trained to execute a repeatable sales process for each product.
- Before being held accountable for a revenue plan, every sales leader (VP of Sales) should insist on a tested and proven repeatable sales process.
The diagram below lists some of the critical differences between the professional sales model and developing a repeatable sales process for innovation (or market entry). You will notice that most are diametrically opposed.
The critical question becomes what is an efficient and effective model to navigate market entry – from the assumption-based market plan to a tested and proven repeatable sales process.
First and foremost, leadership needs to realize that the professional sales model does not work when bringing innovation to market. It is designed and optimized to execute a repeatable and scalable sales process which by definition is unknown at the time of commercial launch for innovation. This realization is a quantum step for most companies and leadership teams but critical to success. Once accepted and taken, everything gets easier – but not easy.
A different model is required for market entry.
A Different Team with a Different Skill Set
Market entry is a testing, learning, iterative process designed to discover a repeatable sales process. Conversely, professional sales is a linear process designed to execute a proven sales process. Consequently, the skills to execute these distinct stages of sales are dramatically different. If your professional sales team is your highly-trained infantry executing leadership’s attack plan, the market entry team is your special forces inserted behind enemy lines, moving fast, operating on incomplete intel and empowered to assess their current situation and modify their plans on the move.
These are not your typical sales reps. In my experience, less than 10% of the best professional sales reps have the aptitude to operate through the market entry stage. In their 2007 HBR article titled, The Sales Learning Curve, authors Mark Leslie and Charles A. Holloway refer to these reps as the “renaissance rep, with skills differ[ent] from those needed to sell more mature products. [They] must be resourceful, able to develop their own sales models and collateral materials as needed.”
While the leadership style and management of your professional sales team is top-down, the style of market entry is much more egalitarian.
One of my favorite quotes comes from Brad Feld of The Foundry Group when he said, “The one thing I know is [the] revenue forecast is completely and totally made up. You have absolutely no idea.”
The metric of success for any sales organization is revenue. Each organization may track other metrics as well, but truth be told, revenue is the universal metric of success and failure. This is very dangerous for innovation when the critical path to success is the efficient identification of the repeatable sales process. Without it, a company cannot properly equip their professional sales team and cannot scale sales. The risk of using revenue as the primary goal and metric of success is it always impedes, and very often prevents, the efficient discovery of the repeatable sales process.
A Different Strategy – “Sell” Earlier
The idea behind the MVP (minimal viable product) concept is to shorten product development to get products into the hands of customers earlier. The underlying principle is that the only true customer feedback is when goods (products or services) are exchanged (sold) for something of value such as money, time or other currency. Voice-of-the-customer, customer discovery, Jobs To Be Done are all valuable and important advances but the resulting data falls well below the quality of real sales data.
Taking from the technology playbook, we need to adapt the MVP concept and apply it to our regulated world of Medtech, life science, and healthcare. In a regulated world, the product development cycle cannot be appreciably shortened. But we need to find regulatory-compliant strategies to deliver the intent of the MVP concept. At first glance, this might appear impossible. How can we “sell” or acquire sales quality market data prior to FDA clearance? In my experience, I’ve been able to find strategies to adapt and apply the MVP concepts at many stages of product/market development to answer critical questions and demystify “company-killer” and “product-killer” assumptions. It can be done; you just need to make it a priority and get creative. Here is a simple idea. Most companies approach clinical trials as a time to test product design and gather clinical (and safety) data to support FDA clearance and clinical validation. Of course! But what questions can be asked and addressed during the clinical trial to test and validate the economic value and market dynamics important to customers, strategic partners, investors and acquires? My guiding principle is at any given stage of product or company development to always ask, “What can I do today that will get me as close to selling as possible?”, and then do that. This will always return the highest quality market data.
Selling earlier de-risks the market, validates and invalidates assumptions, uncovers unknown issues, preps a company for early sales and increases the probability of success.
Avoid the Company Killer – Premature Scaling
The Startup Genome Report 2015 states, “More than 90% of startups fail, due primarily to self-destruction rather than competition. Premature scaling is the most common reason for startups to perform worse. In our dataset, we found that 70% of startups scaled prematurely along some dimension – [including] sales team and revenue. While this number seemed high, this may go a long way towards explaining the 90% failure rate of startups.” If the most efficient path to the repeatable sales process is the goal, then the measured sales burn is the tactic. Measured sales burn is leveraging the right resources, people, and capital, to efficiently navigate the path through market entry to the repeatable sales process. Too often companies scale the sales team and sales execution before they have a repeatable sales process.
Only once the repeatable sales process has been discovered, proven and codified can sales be scaled. At this point and not before, the product is ready for the professional sales organization.
Implications on the Hiring Plan
Just ask yourself, do you have a scalable sales model? Do you have any (paying) customers? Do you have a tested and proven model? If your product is an innovation and you don’t yet have sales, the answer is “no”. As a litmus test, at least three sales reps need to consistently meet plan using similar tactics for it to be tested and proven. If not, you and your company are not ready for a professional sales organization.
If you start “Selling Early” as I propose, you likely won’t need a whole FTE so contracting might be a viable option. Given the unique skill set involved in early market entry, working with a consulting firm might be the preferred choice. Irrespective, start by creating a list of open questions and probe. The questions will be quite different from what you would ask of a professional sales rep for a growth stage product. Here’s a hint – market entry is a discovery, learning, and iterative process. If your candidates don’t understand and speak to these truths, then they aren’t experienced bringing innovation to market. And if you are lucky, they will learn as they go. And if not, … we are back where we started.
1 Research by Shikhar Ghosh, Harvard Business School
2 Scott D. Anthony, The First Mile