The challenges of big sales and the promise of model visioning
Blog: Bridgeland and Zahavi on Business Modeling
I work in big sales. Sales is of course the business function of convincing customers to exchange money for goods or services. But what is big sales? Big sales is simply a question of size: when a customer pays at least $10,000,000. Selling a Ford Explorer to Joe Sixpack is sales. Selling a fleet of 10,000 Ford Explorers to Hertz is big sales. Selling a new credit card to Joe Sixpack is sales. Selling IBM on providing American Express to all their employees: big sales.
The line between sales and big sales is not precise. There is no sharp difference between a $9.5 million deal and a $10.5 million deal. Rather there is a gradual continuum between regular everyday sales and the larger deals.
But big sales are truly different from regular everyday sales, different in a number of ways. First, the customers are different. An individual person buys a bag of groceries for $40, a computer for $1100, or a car for $27,000. But the big sales customers are not individual people. Few people pay $10 million for anything in their life; few have the money. Instead of individual people, big sales customers are big organizations: companies and governments. For the most part, only big companies and governments have the money to make big purchases.
Second, big sales are interactions between teams, not individuals. When Deloitte sells an accounting system installation to Chevron, a team of people at Deloitte make the sale, and a team of people at Chevron make the purchase. Multiple people are involved on both sides. Multiple stakeholders at Chevron must be convinced.
Third, big sales take time. Much time elapses between the initial meeting and the day the deal is inked. At least months elapse, sometimes years. Big sales have long sales cycles. When Accenture sells Visa International new IT system for approving credit card transactions, the sale takes more than a year.
Fourth, big sales are never anonymous. When a Ford dealership sells a new Explorer to Joe Sixpack, the dealership may know very little about Joe. But when Bechtel sells construction of a new subway line to the Washington Metropolitan Area Transit Authority, Bechtel knows WMATA well. There are Bechtel employees whose sole responsibility is to understand WMATA, to know all the key employees and decision-makers, and to understand WMATA’s challenges as well as WMATA does. Joe Sixpack is a customer, but to Bechtel, WMATA is a client, an organization known intimately.
Fifth, big sales have complex effects on the procuring organization. When British Airways buys a fleet of new A380s from Airbus, the procurement has significant and complex impacts on BA. Their pilots must learn to fly the new jets. Who will train? When will they train? What is the impact on the existing routes? The BA mechanics must learn to service the new jets. Who? Where? The new jets will fly some routes, and not others. Which routes? What schedules?
At least British Airways flies jets today, and so understands many of the complexities of acquiring a fleet of A380s. These are known complexities. When the United States Border Patrol acquires a new surveillance system, there are not only many complex effects, but some of these effects are unknown. How should Border Patrol change their staffing: what skills do they need more and what less? How should Border Patrol change their training? How will drug trafficking organizations adapt their tactics to the new surveillance, and hence what should Border Patrol do differently to adapt to those new tactics?
Finally, big sales often fail to launch. Safeway does not worry about customers entering their stores, filling their shopping carts with groceries, and then changing their minds and leaving without making a purchase. But it is common for a big company or a government to spend years planning a big procurement, to decide on the vendor, to negotiate a deal, and then before signing the final agreement, to decide not to purchase anything after all. The big procurement is judged to be too risky: better to not launch now.
Simulations are useful for purchasing organizations. With a simulation WMATA personnel could explore different strategies of subway construction. Should the eight new stations be opened all at once, or should one station be opened at a time, as they are built? Which routes should be underground and which above ground? When should roads be closed to permit construction, and which roads? What roads should be rerouted for the subway, and when?
Simulations can provide cost estimates for the different WMATA alternatives. But just as important as cost estimates are nonfinancial results. How much inconvenience and traffic delays does the subway construction incur on the driving public? How popular is the resulting infrastructure? What is the impact—positive and negative—on the surrounding retail?
Simulations conquer complexity, allowing people in a procuring organization to better understand their options. Simulations are also uniquely useful for helping a group of stakeholders reach as decision. As Ron Zahavi and I describe in our book, simulation models can be used in a model-based workshop, allowing all the stakeholders to collectively arrive at a decdision. Ideas can be tried, and results can be shared.
Finally simulations lower the risk of a major procurement, both the actual risks and the perceived risks. Working with a simulation leads to a better understanding of the consequences of the purchase. Better understanding means lower risk.
Simulations are useful for procuring organizations but today they are rarely built for this purpose. Procuring organizations do not spend the time and money to create a simulation around their major procurements. Who has the time and money?
Sellers do. Sellers have the time and money to create procurement-oriented sims. Sellers know their products, the alternatives for the customers, and the tradeoffs involved. Sellers know their clients, and understand the details of the clients’ problems. And sellers have the motivation, to reduce the likelihood of a failure to launch.
We call this model visioning, creating simulation models for big sales. Model visioning sims help customers understand the ramifications of major procurements. Model visioning sims increase the likelihood that a customer will act. Model visioning sims increase the likelihood that a customer will make the right decisions.
I work in big sales, creating model visioning sims.