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futurethink article: What Innovation Programs

Can Learn from Sales

futurethink article

What Innovation Programs Can Learn from Sales April 2006

Turn innovation Turninto innovation action into action Future ThinkFuture LLC Think © 2005–07 LLC ©Reproduction 2005–07 Reproduction prohibited prohibited New York NYNewwww.getfuturethink.com York NY www.getfuturethink.com

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futurethink article: What Innovation Programs

Can Learn from Sales

Management Summary Selling is a core function of every business. Businesses must make money to survive, so they place great significance on their sales efforts and success. Given this importance, sales is an accepted practice with dedicated resources, well-articulated strategies, defined cultures, clear metrics for success, and an established system of rewards and recognition. Clearly, businesses put a great deal of focus on how they sell. Why is it, then, that they don’t place the same importance or structure around what sales is selling? Why is innovation such a hard practice for so many businesses to adopt and support? A look at corporations today reveals an extremely sporadic approach to innovation. While businesses typically pride themselves on organizational efficiency and streamlined processes for just about everything they do, innovation remains an area regarded as critical to business success but with little dedication and focus on how it gets done. Borrowing principles from sales management and the culture of sales can provide an initial roadmap for organizations getting serious about improving their investment returns from innovation.

Turn innovation into action Future Think LLC Š 2005–07 Reproduction prohibited New York NY www.getfuturethink.com

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futurethink article: What Innovation Programs

Can Learn from Sales

Introduction Most CEOs today would agree that innovation is important to their business. It gives them a competitive advantage and offers an engine for growth. In a world of increasing competitive pressures, innovation is a critical component in keeping ahead. But a look inside companies today reveals relatively few well established and supported programs for innovation. While leaders like Shell, P&G, and Samsung inject innovation into everything they do, the majority of companies address it on a sporadic project basis rather than as a strategic platform for success. With innovation, luck rather than leadership seems to be the process by which many breakthroughs occur. This is hardly the way to approach such a critical component of a business’s success. Organizations can achieve higher growth and stronger competitive advantage by borrowing techniques from sales to manage innovation. Doing so will help management better frame its programs and generate ideas, while improving the way it qualifies and funds innovation proposals.

Why Isn’t Innovation More Widely Adopted? It’s new. The first issue is that of newness and acceptance. Innovation, as a company-wide practice, is relatively new; sales is not. Few companies have organization-wide innovation efforts, but everyone has a sales force. It’s necessary and common, so we don’t challenge it as much.

It seems that with innovation, luck rather than leadership is the process by which many breakthroughs occur.

It doesn’t have a home. Second, the creativity aspect of innovation is unfamiliar territory to many, sometimes intimidating management and alienating its proponents. As a result, innovation can be treated like a foreign object, prompting confusion on where exactly it should reside within the organizational structure (Strategic Planning? R&D? Product Management? Marketing?). Related to the uncertainty around where it sits in the company is the fog around how it works. Innovation is seen as a purely creative process centered on free-thinking and brainstorming, activities that people historically struggle with putting a process around and measuring. It takes time. Third, while sales identifies a quantifiable opportunity to pursue, with innovation, revenue targets are largely best-guess business plan projections, and results aren’t necessarily immediate. As businesses must operate in a bottom-line driven market, the lack of guaranteed, immediate financial results makes investing in such efforts less palatable.

Turn innovation into action Future Think LLC © 2005–07 Reproduction prohibited New York NY www.getfuturethink.com

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futurethink article: What Innovation Programs

Can Learn from Sales

What Makes Sales Standard Operating Procedure? 1. Sales is about action and survival. Sales teams are not paid to talk about prospects; they are paid to convert prospects into customers. They are encouraged to network, build relationships, ask questions, and propose ideas that can lead to new prospects. They must continually go beyond the thinking and strategy phase and execute a plan of action to meet clear, quantifiable goals. If they don’t, they don’t survive very long. 2. Sales efforts have an expected and accepted level of risk. No sales team expects to close 100% of its deals. Even after rigorous efforts to qualify a prospect and craft detailed proposals, not every one is a winner. But managers continually help teams understand the difference between a qualified prospect and one that is less qualified, committing corporate resources against those prospects that may achieve strategic goals while not crippling the business in the process. While long-shot proposals are sometimes pursued because of the potential for larger payoff, managers strive for a balanced pipeline that doesn’t put all their eggs in one basket. 3. Sales generates revenue. The goal is to make money. A company without sales is…not a company. Sales is a practice that is measured and managed; it has to generate revenue on an ongoing basis. In an age where companies can only cut expenses to a point, an engine for top line growth is critical. Arguably, businesses can’t afford NOT to invest in innovation. The key is getting a roadmap that sets the organization up for success.

A closer look at the way sales organizations operate to convert prospects into customers offers some useful insights and reusable management tools for innovation.

Turn innovation into action Future Think LLC © 2005–07 Reproduction prohibited New York NY www.getfuturethink.com

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futurethink article: What Innovation Programs

Can Learn from Sales

What Can Innovation Learn (and Borrow) from Sales? While sales organizations vary by industry and company size, the fundamentals are similar. Teams, tools, and processes are organized around consistently moving prospects (ideas) through the pipeline to close a deal (launch). The objective is to better qualify leads at each stage, committing more resources and effort as the likelihood of success increases over time. The use of a sales dashboard By summarizing performance data using a pipeline or “dashboard” approach, managers are able to troubleshoot problems and track the effectiveness of their sales investments. For this dashboard, we use the following titles for people involved in the process: A suspect is anyone that has a problem your product solves. A prospect has the money to buy, but may not immediately do so. A proposal represents an investment in a prospect that is qualified to buy from you right now (or the next 30 days), and close means commitment (or cash in hand). Table 1: The sales pipeline process Suspect

Prospect

Proposal

Close

Number of leads

100

10

5

2

What

Identify lead, introductions

Qualify lead, present credentials

Engage prospect, detailed discussions

Sign-on, begin relationship

Participants

Sales person

Sales person, senior manager

Sales person, other business specialists

Transition to delivery, business unit

Support tools

Standard letters, brochures, Web site

Marketing materials, Proposal templates, credentials presentations estimating worksheets

Contracts

Conversion rate

10%

25–30%

50%

Dashboards make sales more effective Managers often say, if you can’t measure it, you can’t manage it. No one believes this more than sales managers. By putting a structure in place to follow sales activity, they are able to measure sales effectiveness and performance. For example, if half your proposals generally convert to deals, you know how many offers need to be on the desks of your prospects at any given time. The sales pipeline dashboard also helps monitor conversion ratios and helps pinpoint where sales needs additional help. For example, when proposal close ratios fall, sales managers can collaborate with sales people and product managers with things like “sunset reviews” to get clarity on the location of the problem. Then, they can collectively solve the problem together. Similarly, when conversion ratios improve, it provides evidence that certain sales initiatives are working. This gives sales managers ammunition to protect the investments they are requesting for continued sales support or marketing and promotion efforts.

Turn innovation into action Future Think LLC © 2005–07 Reproduction prohibited New York NY www.getfuturethink.com

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futurethink article: What Innovation Programs

Can Learn from Sales

Using the pipeline process for innovation How does innovation map to all this? While differences exist, the similarities between sales and innovation processes are striking and worth noting:

Prospect á Filter

Proposal á Focus

Close á Fund

Number of leads Number of ideas

100

10

5

2

What

sales

Identify lead/ introductions

Qualify lead/ present credentials

Engages prospect/ detailed discussions

Sign-on, begin relationship

innovation

Gather rough ideas

Refine promising concepts

Build detailed business plan proposals, Pilot–test–refine

Launch

Sales person

Sales person, senior manager

Sales person, other business specialistes

Transition to delivery, business unit

innovation

Product development or innovation team

Product development or innovation team/ management champion

Product development or innovation team/ business specialists

Transition to product/ brand/service team

Standard letters, brochures, Web site

Marketing materials, Proposal templates, credentials presentations estimating worksheets

Contracts

Idea capture form

Concept frameworks, idea screeners, scorecards

Business plan templates, financial worksheets, portfolio matrices

Launch and marketing materials

10%

50%

25–30%

Participants

innovation

Support tools

sales

Suspect á Find

sales

Table 2: The innovation pipeline process (compared to sales)

Conversion rate

Using a similar pipeline approach, managers of broader innovation efforts can monitor their program’s successes and identify areas for improvement. For example, if innovation teams find that the number of promising ideas in the pipeline are decreasing between “find” (rough ideas) and “filter” (those worth further review), they may want to spend more time fueling the organization from a variety of different sources or try new idea generation techniques to break the barriers that result in staid thinking. Similarly, if the pool of good ideas continually increases, they know their efforts to provide diverse information to employees and create an innovative climate that recognizes ideas are paying off. “Corporations are willing to accept a certain level of risk in sales for one critical reason—accountability,” says Steve Brown, Director of Marketing for KitchenAid at Whirlpool Corporation. “Metrics are positioned throughout the sales pipeline process that monitor and control the sales function’s effectiveness. We’ve adapted similar best practices to make our innovation efforts more creative and accountable. To us, innovation is about more than just ‘pure creativity’­—it’s about business. Like sales, we use several tools and specific metrics to qualify ideas at each stage of development. For my team, this minimizes our risk, lets us build better ideas, and ultimately allows us to develop products that impact the bottom line, he stresses.

Turn innovation into action Future Think LLC © 2005–07 Reproduction prohibited New York NY www.getfuturethink.com

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futurethink article: What Innovation Programs

Can Learn from Sales

The Four Lens Framework: Apply Sales Best Practices to Innovation Both sales and innovation efforts strive for efficiency to get the best results and grow the business. If the target for sales is prospects with established budgets, the target for innovation is ideas with revenue generating potential. Analyzing innovation programs using the following four key lenses can help frame innovation efforts in a way that is understandable and palatable to management: 1. Strategy and Metrics

Communicating your vision and measures of success

2. Process and Tools

Detailing roles, the roadmap and tools to support it

3. Ideas and Information

Fuel that keeps teams aware—and ahead

4. Climate

Creating an environment that rewards, recognizes, and sustains efforts

Turn innovation into action Future Think LLC © 2005–07 Reproduction prohibited New York NY www.getfuturethink.com

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futurethink article: What Innovation Programs

1. Strategy and Metrics

Can Learn from Sales

Communicating your vision and measures of success Sales Best Practices:

Innovation Application:

Goals are set and efforts are measured. Sales strategies are set at the corporate level with timely milestones attached. Sales teams and management are clear on what they need to do (close “good” deals). Weekly call reports, team meetings, and closely managed pipelines are essential to tracking conversion close rates. Such success metrics are closely watched by management.

Ensure participants understand the common objective of your innovation efforts. Establish a variety of metrics to measure progress and success, such as: $ New revenue generated # of new products/services/programs launched % Category share increase from new products # of new customers # of new ideas in the pipeline (pipeline health) # of new ideas per employee Avg. development time from concept to launch % Contribution to bottom line Articulating metrics like these will create a baseline for an acceptable level of “risk” for the organization.

Participants are accountable. If you want to be on the team, you have to deliver. Period. If you’re not contributing to the goal, you’re distracting from it and hindering it.

Establish metrics for participants involved. For example: Turnaround time: idea reception to evaluation Milestones status from funded ideas to gauge progress % Success rate

Ownership is defined. Good sales people are motivated by results and protective of their turf. They know exactly what their territory is and who gets what lead.

Create clear roles. While innovation is inherently a team process that is strongest with diverse participants and perspectives, clear guidelines around when team members are expected (and not expected) to participate are important. Let people know what part of an idea or process they own.

Turn innovation into action Future Think LLC © 2005–07 Reproduction prohibited New York NY www.getfuturethink.com

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futurethink article: What Innovation Programs

2. Process and Tools

Can Learn from Sales

Detailing roles, the roadmap and tools to support it Sales Best Practices:

Innovation Application:

There is a clear process in place. Management communicates requirements for making investments in prospects and existing customers. Sales teams learn how to qualify, lead, and convert a prospect to a customer.

Innovation must become more than a series of random or orchestrated brainstorms to be sustainable. Established processes focus efforts and ensure that good ideas are captured and acted upon.

There are resources to support it. Budgets to entertain prospects, meet with leads, and create proposals are planned for at the corporate level. Willingness and the ability to tap business unit specialists as well as management to win a deal is commonplace. Sales is a team effort.

Successful organizations don’t make the process of selling something people do on top of their existing job or in their “spare time.” Similarly, innovation teams must have bodies and budgets dedicated to the effort.

There are consistent tools available. Sales teams are given a suite of standard tools that garner leads and close business. Introductory letters, emails, credentials presentations, and proposal templates all tie in to the larger corporate and sales strategy, and take into account the needs of the organization to deliver. Lead management software tools such as www.salesforce.com are implemented at the corporate level.

Like sales relationships, ideas need to grow and develop. Give people the ability to try new things and contribute diverse perspectives and unique skills.

There is “Freedom in the Framework.” While a process exists, selling styles can vary widely. This can be positive, as different approaches appeal to different prospects. Most sales managers are comfortable with variations in the sales process (within acceptable business, legal, and ethical boundaries) as long at the overall goal is reached.

Manage your idea pipeline like you would a sales pipeline. Ensure every idea is reviewed. Task resources to support those most likely to succeed, and halt those that prove to be less viable.

Turn innovation into action Future Think LLC © 2005–07 Reproduction prohibited New York NY www.getfuturethink.com

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futurethink article: What Innovation Programs

3. Ideas and Information

4. Climate

Can Learn from Sales

Fuel that keeps teams aware—and ahead Sales Best Practices:

Innovation Application:

Information comes from a variety of sources. Through industry journals, Web sites, newsletters, and conferences, sales people keep on top of activity in their industry (and outside it) to continually fuel lead generation and help capitalize on new opportunities.

Help participants continually fuel new thinking by keeping their antennas up on a variety of issues, in and out of your industry. New ideas can come from both the everyday and the unexpected. Encourage teams to share information in both formal and informal ways.

Creating an environment that rewards, recognizes, and sustains efforts Sales Best Practices:

Innovation Application:

Teams are recognized and rewarded. While most sales people are motivated through rewards and incentives, commission structures vary by business culture. Many companies offer non-monetary rewards and recognition, such as extravagant trips, days off, annual sales meeting awards, etc. Sales organizations set the structure that fits their culture and best motivates the team to consistently meet goals.

Reward results and motivate through recognition. Choose a few rewards and types of recognition that fit your culture and do them well.

Big deals and strategic wins are celebrated. Big wins are big news to be touted and shared in and out of the organization.

Showcase successful business concepts in and out of the organization. Share results to encourage broader participation, generate excitement, and convey commitment to ideas.

Management supports and participates. What management chooses to participate in speaks volumes to employees regarding what is important to the overall organization. Management often wants to go on sales calls and help close deals.

Management must participate in meetings and be part of the rewards and recognition process for innovation programs to get real traction. Many companies put management participation metrics in place as part of its measurement process: # of innovation meetings attended Amount of time dedicated to innovation # of ideas championed

Turn innovation into action Future Think LLC Š 2005–07 Reproduction prohibited New York NY www.getfuturethink.com

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futurethink article: What Innovation Programs

Can Learn from Sales

Getting Started While establishing innovation efforts can be complicated, there are some simple ways to break it down to be more manageable: 1. Diagnose your current innovation efforts. Where are you strong and where can you improve? Understanding where you are today will help you more clearly define where you need to better concentrate efforts. Getting an innovation dashboard is just one way to put definition around innovation—makeing innovation tangible and visible. 2. Identify your hotspots. Many businesses have formal and informal innovation efforts in place, but still have specific areas that need improvement. Got plenty of ideas but no agreement as to which to choose? Look again at your selection criteria to see how they might be better defined. Amount of idea submissions tapering off? Take a look at the rewards and recognition system in place for ideas for how it could be more effective. 3. Start with a few specific challenges. Innovation efforts often start out with a bang and end in a whimper. This is because we take on too much before we’ve worked out the kinks. Start your efforts by proactively focusing on a few key challenges and attacking them: “Let’s get ideas that address our need to appeal to the college market” or “We need to improve our service around the check-in experience at our hotels.” In the process, you’ll learn better resources to tap, the issues your teams have in working together, and new ways to evaluate and build ideas. 4. Refine and expand. Listen carefully to the feedback you receive in the early stages of your efforts. Revise your process accordingly and prepare for larger roll-out. Once this is achieved, you can be both proactive (pre-determining challenges that need to be solved) and reactive (seeing what ideas come in the pipeline and choosing the best to pursue).

Getting to YES When will you know that innovation is an accepted part of your organization? When the corporation treats innovation as Standard Operating Procedure. When it spends as much time on what it’s selling as the sales process itself. And when the CEO doesn’t just boast that “Everyone in my company is a sales person,” but “Everyone in my company is an innovator.” Now THAT’S a big idea.

About futurethink futurethink helps companies move innovation from theory to practice. We offer research, tools, and services to build innovation programs and skills. We provide a clear framework for understanding innovation, and a clear path for driving results.

Turn innovation into action Future Think LLC © 2005–07 Reproduction prohibited New York NY www.getfuturethink.com

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Innovation Is Like Sales: How do the principles of sales management relate to innovation?