The often heard mantra of business is that CEOs are Captains, charting a voyage for their company to destinations that promise riches to those who invest and great new experiences to those who brave with them on their journey. With talk of navigating rough seas or unchartered waters, catching a tail wind or riding a wave, there the metaphor usually ends. Getting down to business involves shifting attention to the new Decision Sciences of management, including sales analytics. To the seafarers of entrepreneurship, however, these new sciences would do well to take some lessons from the long established rules of physics and travelling at sea.
After a significant round of investment, a Captain has three broad choices to make before venturing out. Adjust the size and shape of the vessel in consideration of potential new cargo, upgrade the boat’s equipment for greater efficiency or increase the engine size to move faster. In other words, increase your capacity by investing in product development, focus on growth through operational efficiency bringing on more and better talent to execute on the mission, or aggressively hire more sales people to accelerate growth. Urgency for growth oft times reverses this order. Put a bigger engine on the boat that exists, adjust operational capabilities out of necessity as new orders flow in faster, and work with the product cargo you have.
Investors are well practiced at their craft, pushing the Captains to move faster, knowing well that being first to arrive can bring the greatest riches. The questions Investors ask are demanding, familiar and not unreasonable: How many sales people do you currently have? What are their quotas and what numbers are the top performers reaching? How long is the sales cycle and what can be done to shorten it? How long to get new sales people up to speed? Why not hire more and do so urgently? The result is typically some form of the following: hire faster (perhaps even more than you need), onboard newbies faster and cut the underperformers faster. Build horsepower. It is business. Those who succeed are rarely the equivocators.
Science of Sales Analytics
The new science of sales analytics helps to optimize performance of sales people you put into play. Enhance your odds of winning with better data driven sales decisions. Segment your sales group between those who are best at farming existing clients versus those most capable hunting for new. Enable your hunters by providing intelligence on their prospects and buyer behaviors. Lead-score your sales opportunities. Salespeople’s effectiveness depends in the first, on how well you get organized.
Much of the science of sales analytics is predictive in nature. Absent new market dynamics, history is the best predictor of future performance and the job of the Sales Operations leader is to direct efforts at pipeline management with the assistance of insights. Revisit win/loss statistics by digging deeper into pipelines, using length of time and conversion from one stage of the sales process to the next as your indicators.
Sales Analytics also becomes prescriptive in nature. Which sales reps are stumbling and at what stage? If it’s individual error, find and correct with coaching. If that fails, bring in new talent. If it’s systemic and the sales group is stumbling, make investments to improve shortcomings (e.g., intelligence gathering and training) and make organizational changes to align roles with requirements (e.g., shift more early stage activities to marketing, increase the role of sales engineers and put more domain experts in the field).
As your sales grow, so does your opportunity for better sales management, through greater granularity and detail on how and why deals go through. Smoother trend lines appear, replacing the “lumpiness” of earlier data reporting. No single win or loss defines your company success. Recalling our seafaring metaphor, deal flow and speed become objects of attention. You keep adding horsepower, hiring more salespeople. You get a clear sense of when your vessel runs at its optimal speed and you enjoy trying to push it beyond.
There are difficult moments when the engine chokes, with too many RFPs leading to shoddy proposals. Poorly qualified leads may have you spending too much time on opportunities that go no where and not enough on those with highest promise. These are all correctable. Sales analytics prescribes which opportunities should be prioritized ahead of others based on risk factors and levels of engagement. These are not horsepower problems. Sales discipline and outcomes improve with good instrumentation and helmsmanship.
As you move from artisanal to institutional mode, sales decisions need to become data-driven. Sales forecasts ought to become more accurate.
All goes well until sales stall.
Investors want growth that is predictable and scalable. If a forecast is off for two to three quarters, how did the predictions of growth go awry? How did the predictive analytical models go wrong? As urgency increases, one of two narratives takes hold. One revolves around an assumption of overcoming human shortcoming. Growth demands trying harder and making more difficult decisions. The other narrative revolves around how things have changed, of how the past no longer predicts the future. The market has changed. In either case, some of the questions first raised, reappear. Why did we not hire and onboard more sales executives faster? Greater horsepower to drive the speed of growth surely would have helped.
The Physics of Speed
It may be informative to return to our seafaring metaphor in more detail. The hypothesis is simple. Businesses, like vessels, are built to carry a certain amount of product and they have an optimal speed. There are laws of physics involved.
For boats, going fast is a balancing act between its length and the power driving it. 1 A boat moving through water creates waves and at low speeds, multiple cycles of waves pass down the length of the boat before meeting the stern (back) wave. As a boat speeds up, you observe the waves getting larger and moving faster. Finally, there is only one cycle of the bow (front) wave before it meets the stern wave; the boat’s maximum speed is reached when the wavelength is equal to the boat’s length. This is what happens once a boat achieves its full “hull speed”.
At hull speed, the boat is well supported at its bow and stern by the respective waves it has created. It moves very efficiently. However, if you try to get it to move any faster, the bow wave pushes the stern wave back behind the boat and effectively the boat begins to fall backwards into its own trough, slamming it up against a nearly impenetrable wall of water resistance. Prior to reaching this speed, adding more horsepower made lots of sense. After reaching optimal speed, you would have to add exponentially more horsepower to achieve even a small increase in speed.
There are ways to cheat physics.
Speedboats are designed with long waterlines, are light and travel with limited cargo, and they cheat the standard law of physics by having their hulls reshaped such that with enough horsepower they are boosted above their hull speed and plane above the water. They no longer displace water; they skip over it.
Hull speed can also be exceeded for short bursts by surfing. No different than a person on a surfboard, a boat can get on the front side of a wave and be carried faster than its hull speed for short periods of times. This demands good luck and exceptional helmsmanship.
Why Physics Matter
Physics matter because you are the Captain of the boat you are in. It was designed to carry a certain amount of cargo and to achieve a certain level of speed. What many consider the vagaries of markets up and down may not be; instead, simple laws of physics govern the company you lead. Given its shape and length, there is a theoretical but real speed and amount of revenue it can achieve. Every quarter can not be better than the last. Speed has a real, physical limit and at some point, adding horsepower is very inefficient and ineffective. There is an optimal speed and unless you get lucky and are incredibly deft at riding a wave not of your making, you will reach limits. Once this happens, ploughing more money into sales, adding to your horsepower, simply will not help. As Captain, you can not just order everyone to try harder or work smarter and expect to go faster.
I believe what Sales Analytics is sometimes missing is an understanding of basic physics, of the speed that can be achieved to increase sales, and the real limits that are inherent in how companies are designed with the products they carry. When you are in the process of growing a B2B company, achieving success with quarterly improvements in real revenue, that is the time to soberly look forward and consider the basic physics of movement knowing that eventually your full and optimized speed will be reached.
The decisions you face at the beginning of your journey never go away. Invest to build more and varied product, bring more operational talent along to execute on the mission, or aggressively hire more sales people to accelerate growth. Successful captains balance their investments. Horsepower is incredibly important. Continued growth also requires product development, operational reshaping, and sufficient investment in people to both create and manage growth.