For our August Webinar, Nick Nalepa, Director of New Ventures at Echobreakers, shared a monetization framework for sustainability within the value chain, as well as actionable strategies for B2B organizations to get paid for demonstrated excellence in this increasingly critical performance area. After the session, he answered questions from the webinar audience. In this blog, we share part two of his live answers.
How well does sales adapt to highlighting performance points? Is it a big lift to get them to shift their thinking?
It’s like a lot of things that happen with sales. In my experience, when you’re punching for the customer’s revenue, typically the sales force gets it. The experienced strategic account managers and key account people that handle the vanity customers know their customers will be ready with the boxing gloves on if they come with them with this new pricing. Instead, think about a different set of customers – let’s prove this with their competition and then they’ll come pull it from us when they see it in the market. That’s a different kind of conversation.
In terms of doing this effectively, I’ve not seen an organization without at least some people that sell value well. You have to find these folks, pull together a team of champions, and make it worth their while to do it. They’re now going to get the recognition; they’re going to perhaps get enhanced bonuses – bonuses do great wonders for sales. Once this team starts to have success, everybody wants to be on it. And then you can start pushing this out, designing the programs and everything else.
One of the advantages that big companies have is the ability to compartmentalize. There is usually the luxury of a test market, an advocate team, as well as a sales champion team that’s going to do this new crazy thing in a certain market where we think we can make it happen. We’re going to learn from it and then we’re all going to see what we can do about it. It’s a classic technique and it works very, very well. If you’re smaller and you can’t compartmentalize like that, you probably still have somebody in the sales team who gets it. The lights go on and then you can simply compartmentalize by customer. Identify a few targets where there is a pretty robust relationship with low risk and we’ll start there and we’ll learn how to make it fly in our particular context.
Are there any companies out there that you see doing an exemplary job in communicating green value?
There’s one that I used in the presentation for a good reason – that was Tesla. Think of the ways Tesla could have gone. Their answer is obvious because it’s out there, but it was not at all that obvious when they launched. I remember the Wall Street Journal page just rakes them across the coals in an editorial. It suggested that Tesla was going to be dependent on government subsidies and pointed to failed models that are not in the market anymore as the way they ought to be doing it. The difference was that those failed models were pointed at the mass market.
Prius was kind of a use case that did that, right? Toyota’s Prius was built before there was a demand for it, but that was more about Toyota creating an option without having it pointed at anything that was entirely production-related. Their attitude was basically “We’ll show that we have the production and the capability and a demand for such a thing, and then we’ll figure out where to launch it.”
Tesla recognized right away, “Well I’m going to do something really weird and inconvenient at first, but it’s really cool. So who’s that person?” And Musk hit the right answer. It’s not about going discount and offering low entry prices. Instead, he attached this thing to the top of the car market as far as it will go. Musk went after the luxury people because of the luxury and the premium. Those are the folks who like the widgets, they’re willing to pay for the car. That’s the first one to have a digital screen in the dashboard before that was commoditized out. They were willing to buy those things, so Tesla decided to be the first to market with this car and they went after them.
That’s what you’ve got to do with green folks. Green is, I hate to say it this way, a bit of a luxury when those are the people you want to go after, especially when it’s not regulatory. Regulatory compulsion is a great value destroyer, but the innovators, the folks who are willing to come alongside your company as innovators and make this thing go and tell you that’s great. And I saw not too long ago an interview with Elon Musk. He talked about that why he had been confident from the beginning we were going to go after the luxury market. He called it the luxury. We’re going after the luxury market where you find the early adopters and the innovators spot on.
How far back in the NPD process should organizations look into defining performance points?
This is a good question. I’m going to give you the glib answer: right at the beginning. It needs to be at the beginning, but you need to think in terms of “how do I keep the performance side visible.” New product development, especially if it’s product, but even if it’s service for that matter, is going to look at the elements of cost, the elements of value chain, everything we have to do to make it get to the customer and they install it. Or it’s a service and it’s gone down the channel of service providers and they arrive at the customer’s doorstep and they start doing their thing and then it ends because we forgot all about why we started doing it.
We got into the cost savings. You usually have, for example, the $90.40 from my canned example, and that’s what will become the focus if you’re not careful. So just bringing it to the beginning doesn’t mean it’s going to happen because the performance point tends to be invisible. There’s nothing about the products.
Use the example of a delivery truck that wants to be green so you can access the high-end play in the market. There’s nothing about the high-end of the market that makes it immediately visible. When automotive telematics first came out in the trucking industry it was radically undersold by the entrepreneurs that brought it to market. Install the widget with that damaging your warranty and it will tell you where your vehicle is. Isn’t that cool? But wait a minute – I can get it in without getting your warranty and it’s really small and it doesn’t have any power demand, it won’t torque you out. You’re not going to have any issues.
They ended up selling the thing far, far below, I mean massive orders of magnitude below what it was worth, because what it was truly worth included the newfound ability to deploy route optimization and see the vehicle in real-time to make sure it’s on the route. Route compliance was a big problem for them and they lost this value driver during development. They got wrapped around it not invalidating the warranty of the truck and everything else. This is tough to do. That’s just a cautionary tale – go back and research telematics and where they’ve been. It should have been a very premium market and it got commoditized fast.
The other thing I would remind you when you’re under that pressure because you’ve now decided, “Okay, I’m going to go be the premium person and the buyer points out (and quite possibly rightly) that you’re the only one. As a result, you walk away with that sinking feeling like our market’s commoditizing out, while the conversation happening behind you is “Who’s really good at doing this? Well, there’s only one group out there that thinks they ought to be paid for it.” In a B2B motion that tends to be the authenticator of competence. You think you should be paid for it. You might know what you’re doing, making you the right vendor for them.
Their internal discussions often go along these lines. “Even though they’re coming in at the high end of the bidding right now, they seem to know what they’re talking about. They know what it’s worth and they have a really interesting pitch and they think they ought to get paid for it.” These are the things you’ve got to keep when you’re in product development. It’s hard because it’s an invisible attribute at its start and you don’t know what it is until you know it. But you’ve got to kind of keep asking yourself “How am I going to enhance their performance? What do I think it’s worth?” Update, update, update. But always have it there and don’t lose focus and get into the cost game, which is so easy to do.
