The Five Forces Transforming the Commercial Model
Digital technology – notably the advent of advanced analytics and AI – offers tremendous potential to improve the productivity, engagement, speed, and visibility of sales teams.
After watching the sales and marketing technology space evolve over the past 16 years as an investor and board member – I strongly believe these technologies offer tremendous potential to accelerate sales growth, multiply the return on selling assets, and create firm value.
This is about to change. A mix of customer, demographic, financial, and market forces will finally force enterprises to take the digital transformation of sales seriously. These combined forces are being brought to a tipping point by the current pandemic induced displacement of sales teams and recession. This will accelerate the adoption of a 21st Century Commercial model that is digital, data driven and more measurable across all major sales organization in the next 18 months. And accelerate the effective adoption of critical technologies like AI, 5G, Sales enablement, and virtual selling channels in selling at scale.
The sales and marketing technology sector has been hamstrung by a lot of issues. The overall return on investments in CRM, digital sales technologies, and analytics remain lower than expected. But these technologies are not the problem. Rather, most of the headwinds holding back the immense promise of technology to fuel and accelerate growth involve failures in leadership, measurement, teamwork, incentives, and change management.
Another major obstacle is the inability of business leaders to “connect the dots” across an increasingly large and complex technology ecosystem to create value. This ecosystem of growth assets now includes a large and growing set of thousands of sales infrastructure and customer facing technology solutions (exceeding 8,000 point solutions and even more applications and algorithms) as well as dozens of customer touch points and data sources. This inability to string together technologies in ways that create value stems from the disjointed manner in which enterprises purchase, manage and measure their growth assets. The portfolio of growth assets necessary to drive revenue growth have grown in the past 20 years to represent a significant portion of the sales and marketing mix and balance sheet. Most firms have a robust set of dozens of sales support infrastructure and customer facing channel technology solutions in their portfolio. In fact, two thirds of what most of us still call the sales and marketing mix are really owned digital channel infrastructure and resources (content, data scientists, bloggers, and promotions) necessary to fuel them. Yet these critical growth assets are still managed tactically and in silos.
The fragmented and tactical management of these expensive growth assets makes it very difficult to connect technology and data to the five ways they create value: delivering better channel performance, resource allocation, people management, measurements, and product channel readiness. It’s also a primary reason why three decades after the advent of CRM, most (67%) enterprise CRM implementations are characterized by lower than acceptable return on investment, less than satisfactory user adoption, and lots of unrealized potential according to the Sales Management Association.
That’s about to change dramatically and quickly. Businesses are being hit by a wave of disruptions that are accelerating the transformation of the commercial model in ways that will significantly improve selling performance. A health crisis, a massive shift in buying demographics, channels, and behavior. And an economic recession fueled for the first time by both drops in customer demand and the ability to access those customers. These combine to create a “perfect storm” of 5 macro trends that will force the emergence of a 21st Century Commercial model that is digital, data driven and more measurable.
- The entry of a new generation of digitally savvy, data-driven, and customer-focused growth leaders – or CXOs – who are reimagining the design, organization and focus of selling models to transform sales, marketing, and service silos into high performing revenue teams;
- The maturation of advanced analytics and AI applications in sales combined with the rapid emergence of huge sales engagement data sets to support Machine Learning and data-driven decision-making at scale;
- The sudden displacement of all employees to working, buying, and selling remotely is transforming sales cost structures, reallocating growth budgets, and increasing the role of digital or virtual selling in the channel mix;
- Boards and CEOs are putting pressure on sales and marketing leaders to prove and quantify the contribution of selling assets to the business in terms of firm value and financial performance – including the technology, data, people, content, and owned digital infrastructure assets which make up the majority of growth investment today.
- “New school” digital buying behavior has finally overtaken “old school” face to face selling approaches as millennials enter middle management ranks. These buyers are shifting engagement to digital, social, text and online collaboration platforms and demanding faster answers, better content, and more personalized solutions.
These forces – combined with the establishment of advanced analytics and AI into mainstream sales and marketing operations at over 90% of enterprises – will compel business leaders to finally transform their commercial models and lead to a golden age of selling technology. This will involve a major shift from a physical to a digital and data-driven selling infrastructure that will drag a range of critical but underutilized growth technologies – including digital commerce, sales enablement, and advanced analytics – from the “trough of despair” into mainstream adoption.
The proper management of these technologies at the C-level can create significant growth upside because while they are widely deployed, they are currently very under-utilized. For example, 25 years after the dawn of e-commerce only 12% of B2B sales are delivered through digital channels. And a decade into the era of big data – the impact of analytics on decision-making and firm financial performance remains basically flat over the last eight years according to research by the Duke Fuqua School of Business.
Adoption rates of other highly touted and ready to deploy technologies – such as 5G communications, Augmented Reality, and Artificial Intelligence – remain in the 5-10% range because these technologies require leadership commitment and change management to realize their potential to accelerate growth, enable virtual selling, and differentiate the customer experience.
Ultimately, this new commercial model will manifest itself in a complete rethinking of the sales and marketing technology stack. I predict this new generation of leaders will distinguish themselves by how they get their sales technologies to work together to support their processes and create value. They will stitch together the building blocks in their technology stacks around three logical technology ecosystems with the most obvious opportunities to generate higher returns on their selling assets to grow sales, profit, and firm value. Specifically, we are seeing growth leaders actively “knitting together” the various pieces of their technology portfolios to realize greater returns on their people, technology, and data assets by:
- Building digital selling platforms that automate, simplify, and speed up selling by addressing the major hot spots in the selling process;
- Leveraging Sales AI to dramatically visibility, speed, engagement and productivity of sales and marketing resources;
- Integrating learning and development with sales enablement and analytics to create a closed loop system of training, reinforcement, measurement, and improvement.
Other technology combinations or federations will emerge. But these three federations of sales technologies will immediately yield very big returns for two reasons. First, they will leverage existing and underperforming people, technology, and data assets. Second, they will connect these underperforming data and technology assets to value by measurably improving resource allocation, channel economics, salesperson performance, account health, and value-based performance measurements.
We’re already seeing this take shape. You can see the outlines of the 21st Century Commercial model come into focus in the form of large shifts in both investment and buying behavior in the past 120 days. At a time when buyers and sellers are cutting back on discretionary spending to match reductions in demand and client access, they are shifting their resources and spending to digital, data-driven, and virtual selling channels.
- Over 80% of firms are increasing their investment in digital technologies that improve customer experience and coverage according to an analysis by the Wharton Business School;
- Analytics budgets are universally expected to grow at a clip of over 50% to represent 9.5% of marketing budgets;
- The number of calls on collaboration platforms has grown over 30 fold since before the pandemic – to over 10 billion call minutes a day across all platforms – according to recent earnings announcements from both Microsoft and Zoom;
- The number of organizations that are reconfiguring their office space, sales overhead, and management models to enablement work at home or work from anywhere models has jumped five-fold – from just over 12% at the end of 2019 up to two thirds of organizations today;
- Sales through digital and ecommerce channels have increased across product categories in the past sales quarter with most purchasing agents spending more in B2B marketplaces and Target, Alibaba Group, and Walmart reporting record sales quarters during the pandemic fueled by sales in online channels and marketplaces;
- AT&T reports similar jumps in the use of bandwidth and unified communications since the pandemic, in particular sharp rises in bandwidth consumed by video.
The commercial model is changing and there is no looking back. With the recession predicted to run 15 months or longer, these forces will reshape 2021 budgets and redefine long term investment roadmaps. More significantly, the forces behind these large budget, demographic and behavior shifts have been underway for a long time. They have just been accelerated and brought into focus by the disruption and displacement created by the health crisis. The consensus among owners and leaders is these will change when the pandemic subsides. CFOs are already cutting back on sales overhead. Most firms will extend cuts to travel, face-to-face selling, trade show and events, and conferences in their 2021 plans to fund this transformation. And a third of growth leaders believe these changes to the commercial model will be permanent according to a recent survey conducted by Wharton School of business.
The expert faculty of the Revenue Enablement Institute has just completed a major research initiative – The 21st Century Commercial Model – that explores the trends and technologies that will transform sales, marketing and service. This 62 page in depth analysis will outline ways your organization can transform the commercial model to accelerate sales, grow profits and dramatically improve the return on legacy investments in technology, data and content.