The academics Thomas Steenburgh and Michael Ahearne set out recently to uncover why companies are so much more successful at developing innovations than they are at commercializing them. To get answers, they undertook a thorough review of the academic literature, conducted one-on-one interviews and led several formal studies with B2B companies. You can read a summary of their results in Harvard Business Review here. The following interview took place earlier this year between Steenburgh, of the University of Virginia’s Darden School of Business, and SAMA’s editors.
SAMA: Why did you set out to investigate new product sales specifically? Why are they so important?
Steenburgh: My observation is that if you look at where companies spend their money, new products always take a lot of energy. If you look at the types of organizational structures they use, they’ll have market development boards, product boards. No money gets put into sales. And yet the sales process for new products is totally different because you’re asking people to do a very different thing. We know most new product launches fail, so we wanted to find out: Why does it work that way?
There’s a McKinsey study that asked leadership teams about their confidence across a range of processes. Their confidence in developing beta testers is very high. But developing pilot users post-launch? No confidence. So as soon as you go to commercialize your new product, you have no idea what the customer wants? It’s craziness.
SAMA: Was there anything in your findings that surprised you?
Steenburgh: Probably the biggest challenge sales reps have when selling new products is emotional — managing your emotions, managing your perception of the product. My experience with salespeople is they have thick skins. But it turns out that with new products there are a lot of challenges that need to be addressed that you don’t have with existing products.
SAMA: Like what?
Steenburgh: The only training that gets done these days is product training: features and benefits. One manager told us, “When I talk to my reps, they know the product well enough, and they know the market well enough. But when I ask them, ‘Why aren’t you going in and selling the product?’ It’s because they don’t want to appear stupid.” The market is moving quickly, and they have a psychological need to be the expert in the market, and they just didn’t feel confident in their own abilities.
SAMA: You’re asking the customer to be a guinea pig, especially if it’s a brand new product. The reps are asking themselves, “Do I really want to risk my reputation with this customer I’ve worked so hard to create a relationship with?”
Steenburgh: We looked at differences in behavior between reps who were successful with new product sales versus ones who weren’t. One of the things the successful ones do is they anticipated that the challenges in the buying process would occur later in the sale, and they developed a plan to manage customer expectations at that time. Also, the reps who are really good at selling new products are much better at figuring out which customers to target and which to avoid.
SAMA: In your HBR article, you write that the best companies customize their training to meet individual needs and tie assessments to performance. Can you talk about why this is so critical?
Steenburgh: We did a couple of studies with companies where they did competency mapping, and it’s interesting. It depends on company sophistication. Some companies don’t do anything. Some will develop competency maps but never tie anything back to behavior. The better companies create job descriptions from the competency maps, and then they measure their reps through competency assessments and use this to drive continual improvement. They may try to look at quantitative performance metrics like revenue, profitability and customer satisfaction, and tie it to the competency assessments to give them a better sense of how to write job descriptions.
A step further would be to create company-wide training based on those findings. For example: I see reps need to have a growth mindset, so can I institute some training that speaks to this? Now, the very best companies go one step further and say, “I’m going to put this into my daily coaching process.” They measure reps individual by individual and then develop a coaching process that helps people in the dimensions that matter — and I know what dimensions matter because I tie the competencies back to performance.
We studied five companies and mapped competencies back to what actually worked in the market, i.e., what created the most revenue from new products, and if I were to advise companies on how to use this, I would tell them this: Use some kind of competency assessment, and introduce individual coaching to help reps become more open minded, to cultivate a growth mindset, to develop more long-term thinking and to become more adaptable. But it has to be a constant coaching process.
SAMA: In my own career, I found that solutions needed to be sold at a much higher level at the customer.
Steenburgh: Selling new products is very analogous to making the switch from selling products to selling solutions. It’s change management. A lot of companies think they can solve this primarily through incentives, but incentives alone won’t fix it. The behavior change is too big. Salespeople get excited at the beginning [when selling new products], but they don’t have the structure or support to make it work in the long run.
SAMA: And these are smart companies! Yet I see company after company that invests 5 or 6 percent in R&D every year – an enormous amount of money – but when it comes time to roll something into the marketplace, especially in B2B, the product just kind of “escapes.”
Steenburgh: I think the main difference with B2C is you don’t have as complex a decision-making unit. If you buy a car, that’s a complex decision, but it’s typically just two people. In B2B, you have a lot of players and that just makes it much more complex.
SAMA: Where do soft skills fit in?
Steenburgh: It’s definitely the emotional side, the psychological side, that doesn’t get addressed in these sales. The easy thing for me to do is product training because that’s what I know. It’s easier to talk about “speeds and feeds,” but it’s much harder to go out to the customer and talk about how a new product will change the game because there will be way more “window shopping.”
What I mean by that is that customers have an incentive to engage with you to learn about what’s going on in the marketplace. That’s not your incentive as a seller. If I call on 100 customers, five will be interested. It feels good, but 95% of them are going to be wasting my time. It’s seductive when you’re selling new products to be getting good feedback, but it evaporates in the long run. So it’s the soft side you need in order to read people, to figure out which customers will be genuinely interested and to handle rejection.
One thing that jumped out at me in our research is that businesses feel strongly about having great processes on capital approvals and project approvals for developing new products. But when it comes to having the right organizational structure in place to support bringing new products to market…having the right H.R. support network in place, for instance…they don’t feel so confident.
SAMA: 3M has always fascinated me because they are one of the few traditional B2B manufacturing companies, and they say that every year they aspire for 30 percent of their next year’s revenue to come from new product sales. Have they figured out something no one else has?
Steenburgh: There are companies that do it better than others, but I think it’s mostly a management challenge. If 3M makes that their mantra, then by putting that number out there it attracts a certain type of talent and it reinforces that there’s no escape, so to speak. It absolutely has to be part of the culture.
SAMA: We get asked a lot about the Challenger sales model and whether it can co-exist with SAMA’s more co-creative approach to creating value. What we’ve learned is that the Challenger is good — if you’re on the outside looking in. But if you’re the incumbent, you’re almost playing on the customer’s desire to stay with the status quo, where it’s better to not use that confrontational/challenging approach. It speaks to this whole not to sell the new product, less risky not to disrupt the customer.
Steenburgh: What you’re asking the reps to do is be a change agent externally in a situation where they have no control. They’re all leading without authority. So if you think change management is difficult internally, just imagine the external challenge.
One of the things we say in the article is that SAM can be a great place for establishing the right learning processes on the sales side. We know that co-creation of value is important, but mostly on the product development side. What we’ve seen is that if you can use some of those SAMs to help learn about the internal sales processes that they can be very helpful in designing a process for new product selling. It’s like a coach for the mainline rep. Management is much more likely to take a long-term view of strategic accounts than for mainline accounts. With new product selling, it’s going to take me a long time to sell. I need consistency, need to know how the buyer buys, and I need to know I’m not going to be jerked around. I can give the product the time it needs. Those relationships matter. The long-term focus mattes. It’s the right part of the organization to establish a beachhead.
SAMA: And based on the relationships they have, the customers are more willing to take that risk as well.
Steenburgh: That’s right. There’s that trust. It should be an easier leap for the customer to make on a new product if I’m a strategic customer, because what it means is that — if the vendor is really sophisticated — we’re having high-level quarterly meetings. The SAM might even have the CEO’s ear, or someone on the executive board. So if something goes wrong, I know I can raise the alarm and something is going to happen. Whereas, if I’m not a strategic account, if this thing breaks what am I going to do?
But it can cut both ways. If you have a great relationship, you don’t want to put it at risk. You need to have the culture of, “This is what we do. We’re going to work with you to get this right, and we’ll both be on the cutting edge together.” Those are the types of relationships you want to develop for new product sales.
SAMA: At SAMA we very much believe in competency assessments and their necessity for turning good SAMs into great SAMs. And we’ve seen research showing that the best SAMs can outperform their peers by a factor of three or more.
Steenburgh: I don’t have public data around individual performance, but I recall a study or a book showing the effectiveness of Net Promoter Scores across a wide variety of industries, and the results showed that the difference between average and below average is a 2x bump in revenue and profitability. And then the difference between average and superior was a 6x jump. In other words, the difference between poor performers and the very best performers was a factor of about 12. People that are really effective in this, they’re off the charts.
Want to learn how SAMA’s tailored, competency-driven training can transform your good strategic account managers into great ones? Click here to learn about our training philosophy, our Certified Strategic Account Manager (CSAM) program, and to see a schedule of upcoming training academies.