Moving from Product to Solution Sales

It is no longer enough for most businesses to compete through product differentiation alone. With increasing competition on price as a result of globalisation, offering competitive value for money is increasingly unviable. In order to create a competitive advantage, firms are turning to solution, rather than product sales. But is their talent up to speed with this strategic change?

By Stephen Finley, Mercuri Urval Country Manager UK

The current markets 

Product differentiation is not what it was. After decades of investment in new product development and product management, product innovation is no longer creating the competitive advantage that it did. In some cases, the risks of sustained innovation are too great for companies to cope with and in other areas, innovation is just not as ground breaking as it once was. There are a few brands and products which are clearly exceptions, Apple’s success with the iPhone and iPad are notable examples, but this is a famous exception, and not the rule. Regulators are doing their part too as they seek to increase competition and reduce the monopoly status and super profits that patented innovation can bring. More and more it is the businesses that have close relationships with their customers based on insight, trust and brand value that are winning the competitive battle. Look at how Virgin Media, with a limited telecoms infrastructure, are stealing the show. Or how Talk Talk have successfully built their customer base using the telecoms networks of an older incumbent telecoms operator. Talk Talk have little by the way of a physical product infrastructure, but that has not stopped them from building a loyal customer base quickly.

In other sectors too, there are clear examples of a retreat from product differentiation. Major pharmaceutical companies have also begun to move towards solution sales. They are shying away from investing in creating the next great blockbuster drug and are relying on acquiring biotech companies in order to commercialise new drugs that some one else has taken the risk of developing. As they do this these pharmaceutical giants are investing more in sales and marketing and brand building than ever before.

Where are we heading?  

“Customer Intimacy” is the new catch phrase for securing future competitive advantage. This is not a new idea though, Michael Porter in his book “Competitive Advantage”, published in 1985, advocated that there are really only three ways to create competitive advantage: Cost Advantage, Product Differentiation and Customer Focus. Twenty-five years ago Customer Focus was generally represented as sector or geographical focus, distribution centres physically ‘near’ your customers or a team of sector experts. The internet and its associated tools make ‘physical’ focus far less necessary today, even redundant. Emotional closeness to customers is the new version of customer focus. Every business has to decide which of these competitive options to pursue – reduce costs so that prices can fall without effecting margins, invest heavily in sustaining product differentiation through innovation or get emotionally and intellectually closer to your customers? So close that you know their business better than they do. In the 21^st century many businesses are choosing the latter option because, in order to maintain revenue and margin growth, they move into ‘value added services’ or solutions. In developed economies with increasing price pressures from lower cost economies, this is often the only strategic option available.

How do we get there?

But how do you implement these strategies? Your behaviour towards your customers needs to fundamentally change. The competitive landscape has evolved, and as Charles Darwin highlighted back in 1859, when an environment changes, the incumbent species need to evolve in order to survive, or die. The development of customer relationships is traditionally the responsibility of sales and marketing, and can remain so, but to remain at the forefront of customer development, management sales and marketing as a function, as a profession, has evolved and needs to keep doing so. Customer expectations are changing and increasing. To quote one global brand name talking about its relationship with its main supplier - 

 ‘they deliver on time and always fix any problems, but they never call us with an idea’.

The concept of moving towards solutions, to move ‘up the value chain’ and become a trusted advisor to your customers, is not new. But, how do you make this transformation in your business model whilst continuing to sustain a successful business that satisfies shareholder expectations ? These are questions that many businesses are not sure how to answer. Like the example above, the actual behaviour required can be as simple as a phone call with a new idea. Making this happen is the current and future challenge for sales and marketing led companies.

It is dangerous to assume that everyone in a traditional product sales and service organization has the potential and motivation needed to adapt quickly to a strategy based on customer closeness, trusted advisor status. Trusted Advisors, traditionally found in professional services firms, have spent years developing the knowledge and skills that create the level of trust needed to help a customer open up to you about their deepest worries. In the ‘old’ product sales model, it would be a brave customer that would open his/her heart to a key supplier of products that it was negotiating with. This shows that to create a new dynamic in your customer relationships requires a fundamental shift in the emotions at play in those relationships. To assume your people can make this journey with a few briefings from senior management and a bit of training, which is how some have tried to do it,  is to risk finding out too late that many cannot make this journey or even don’t want to make it. You can spend years reorganising processes, organisational structures and training people, only to realise that some can’t change, or that they have no motivation to change. Despite your investment, your competitive advantage continues to be eroded. To encourage customers to keep buying, or to buy more, whilst protecting prices and margins, the customers experience needs to change. The right processes and structures are vital but if the people engaging with the customer are not behaving differently when in front of the customer on a daily basis, then results are unlikely to change.

Great products that you understand thoroughly only get you to the starting line. If growth is to be sustained and profits maximised you need to understand your clients’ business needs better than they do. You need to be proactive in building relationships with a complex group of multiple stakeholders within your customer. And you need to take new, unique solutions to your customer. To create these new solutions requires an exceptionally high level of internal leadership within your own firm in order to create the multi disciplined teams capable of delivering this efficiently. Otherwise, whilst sales growth is being praised, costs could be escalating and profits disappearing.

Do not underestimate the process 

Our work leads us to conclude that the rigour needed to develop these new capabilities cannot be underestimated. A high level of competence is needed in translating the new strategies and processes into detailed skills profiles for key roles. You then need to assess whether existing key people have the potential and motivation to develop new behaviours, and define the actions required to close skills gaps through development and training, redeployment or new talent acquisition.

Below is a comparison of the traditional skills needed to be successful in product sales, in contrast to the capabilities at the heart of successful solutions based sales.

The behaviours needed by value creating solution sales people are so fundamentally different, that you may never develop a traditional product sales person to work in this way. But maybe you don’t need to. Our experience is that if a company starts on this journey early enough, then only the people leading the most important customers need to work in a new way. The product sales people can keep selling products, providing they are working with the customers that are happy to keep buying products, for now. This can allow you to focus the implementation of a new strategy on a core group of people who will act as the vanguard of the new strategy. This group can ‘prove’ the new operating model, adapt it, test it, highlight early successes and win the hearts and minds of other, perhaps more sceptical or resistant, colleagues. You probably will have to communicate with everyone about what you are doing and why. You should probably look quite hard and deeply at the vast majority of the sales, marketing and service organisation to find out who should join this vanguard, but you should implement wholesale change with care, and in a managed way.

A Process for developing solution sales capabilities

Work on the required skills and behaviours needed for the future should start when the strategy work and any organizational redesign is nearing completion.  Specific roles and job families often need to be redesigned as part of a new organization.

There are therefore four key questions that need answering :

• What skills do you need? – specific detailed job and competency design

• What skills do you currently have? – have you got the right people in the right jobs

• What skills can you develop? – can you increase the capability of existing people to implement the new strategy through development or re-deployment, and within what time frame

• What skills do you need to acquire? – skills you cannot develop quickly enough will need talent acquisition solutions to close capability gaps

What skills do you need? - Role Design

Role design should draw on best practice and there is need to have a high degree of expertise to translate redesigned strategies and processes into the practical skills, knowledge and attribute based behaviours for specific jobs. This creates a detailed and robust framework for assessing current skills, identifying future potential and development needs and selecting new people.

What skills have you got? - Assessment of Key People

Proven people assessment methods need to be applied by people highly skilled in business transformation and in understanding the capability and potential of key people. If business results are to be improved, this work must have a high level of objectivity and validity that this approach could create. This process needs to allow you to understand with a high degree of objectivity what the high, medium and low distribution of skills and potential is amongst the people in key roles. Getting people to be open about their development needs, when they may perceive that it could impact on their career opportunities and even their reward, is never easy and it needs careful, skilled and objective handling. The needs of the business, however, demand that whatever assessment process is used that it must be highly valid and able to make clear, objective and honest recommendations about who can do what, who can be developed, who should ideally be redeployed to a different role and what new skills need to be acquired.

What skills can you develop? - Development & Redeployment of People with Potential

You should reach a level of detail of insight into people capabilities and potential where it is possible to recommend which person should lead which clients and by so doing create an early step change in performance. High potential people need to be identified and their careers accelerated. The best form of development for high potential people is a new challenge and new responsibility, they would rather be stretched than trained. Those people whose natural capabilities are not well aligned with their current role can, at the right time, be coached and helped to look at alternative roles or career options.

The timescale over which people can be developed must be considered. Sometimes people are identified as having potential but this is not formalised within a timescale and it must be. Without a development timescale a business cannot plan its future resource requirements properly. You need to recommend and support specific development activities for individuals, groups or populations that the organisation is comfortable with and has the resources to support. There is no point raising expectations about future development interventions if the organisation cannot support them.

What skills do you need to acquire? - Strategic Recruitment

Recruitment of the right people who have the potential to work in a manner aligned with the future direction of a company, is the single most important strategic activity a company can do. This is why enlightened organisations are building an employment brand with future employees, whilst they are still at school. Strategically, graduate recruitment should be the area into which the most thought and planning goes. Current recruitment needs should be addressed with the long term positioning of a company in mind. For example, to recruit people who do not have the potential to work in a solution sales way to fill a current vacancy, is to waste an opportunity. Recruitment should be done to address the future skills that a company needs and the future potential of new people who are to be hired must be properly understood with every new appointment if a company is to evolve and work with new competitive strategy effectively.

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