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Best practices in business development

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1. Best Practices in Business Development prepared by David Fatlowitz July 2010 2. 2 Topics ã Today’s typical corporate structure ã Forecast vs stretch goal (gap…
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  • 1. Best Practices in Business Development prepared by David Fatlowitz July 2010
  • 2. 2 Topics • Today’s typical corporate structure • Forecast vs stretch goal (gap analysis) • 2009 to 2011 forecasts & plan for reaching goals • Innovation plan for entering new markets • Some worthwhile targets • BDG concept • Recommendations & best practices
  • 3. 3 Preface • Today’s globalized business environment moves with ever increasing speed, and entails many new risks. To succeed at growing into new markets requires strong co-ordination, tireless communications and exceptional risk management… • The following slides integrate commentary from numerous business executives and academic thought leaders and represents a working guideline for best practices in developing new business…
  • 4. 4 Today’s Typical Sales Dept Structure (Company X) VP TYPICAL METHOD: ‘Military Style’ Top Down Command & Control structure “By decree you will…” ASM West ASM Southwest ASM North ASM Southeast ASM Northeast Regional Acct Execs Regional Acct Execs Regional Acct Execs Regional Acct Execs Regional Acct Execs Eastern Regional Sales Manager Western Regional Sales Manager Add’l mngmt layers RESULT: Little co-ordination with other depts, focus mainly on closing deals …
  • 5. VP Marketing 5 Today’s Typical Organizational Structure (Company X) President VP Finance (F) VP IT (I) VP Technology (T) VP Sales (S) Regional Sales Mngr Finance Dept IT Dept Technology Dept Sales Dept Regional Sales Mngr (M) Marketing Dept INFORMATION SILOS Issues: • conflicting priorities • misaligned compensation • politics & turf wars • poor comm across depts Takeaway: Interests often Departmental” not “Customer Centric” or aligned to growth targets…
  • 6. VP Marketing 6 Today’s Typical Organizational Structure (Company X) President VP Finance (F) VP IT (I) VP Technology (T) VP Sales (S) Regional Sales Mngr Finance Dept IT Dept Technology Dept Sales Dept Regional Sales Mngr (M) Marketing Dept INFORMATION SILOS Impact: Organization lacks flexibility & essential knowledge to make good decisions at critical times… Results: • low morale • poor customer satisfaction • missed opportunities
  • 7. 7 Typical Result: Projected Sales (Company X) Rev-A Existing Accounts (7% Annual Growth) $239M Stretch Goal = $280M $223M Opportunity Cost = $ 57M Gap ! $208M $195M $182M 300 250 200 150 100 50 0 Based on current market opportunities alone Company X falls short of their target… 2006 2007 2008 2009 2010
  • 8. 8 Business Development Motivation (Company X) Example: Projected 3 Year Sales Trend Market Segments % Fiscal Year '08 % of Next 3 Years Market A 26% 37% Market B 16% 14% Market C 15% 14% Market D 14% 14% Market E 13% 7% Market F 8% 5% Market G 3% 4% Market H 2% 3% Market I 2% 2% Market J 0% 0% Market K 0% 0% Totals 100% 100% Growth expected only in top market, otherwise little revenue growth or diversification expected over next 3 years …
  • 9. 9 Core Business Issues & Results Scorecard #1 – maintain cash flow to finance ongoing operations Business Horizon: close sales within 1 year or less Current Grade: ~ B #2 – growth, diversification & flexibility Business Horizon: close sales within 2-3 years Current Grade: ~ C or D Why? Lack of co-ordination across departments limits information flow & adaptability Wrong people trying to execute bus dev process Result: information & decision making “firewalls” are created within the company limiting their ability to penetrate new markets…
  • 10. 10 Some Growth Possibilities • New market 1 • New market 2 • New market 3 • New market 4 • New market 5
  • 11. 11 How to break into new markets ?
  • 12. 12 How to break into new markets Create a Business Development Group…
  • 13. 13 Business Development Group Guiding Mantra: “Everyone works in Business Development” Key Lever: Virtual Teaming Focus: Opportunities with 2-3 year horizon
  • 14. 14 Business Development Group Definition: • Purpose - to develop and align growth strategies • Focus – turn long term horizon (2-3 years) into real sales • Structure - composed of real & virtual HR assets • Range - global network of subsidiaries, alliance partners, etc • Goals - drive communication, knowledge & sales • Benefits - to enhance value & profits and enter new markets Structure: • Director - Broad powers to set vision & goals for BDG • Exec VP – executive decision making rights over Dept VP’s • BDM’s – business development management responsibilities
  • 15. 15 BDG – Features & Benefits • Adds focus to activities: - Separates short term cash flow creation (sales) from long term strategic opportunity engagement (business devel) - Clarify priorities i.e. “beneficial” (profitable) opportunities • Leverages cross functional teams: - improves networking within without the organization - assists information flow up down org hierarchy Puts market opportunities in the hands of experienced decision makers (BDM’s) and reduces overall risk Net Result: better morale, improved decision making, increased competitive advantage and higher profits…
  • 16. 16 Creating Value in New Markets combining resources and capabilities creates new competencies and beneficial outcomes… New Competencies Competitive Advantage Value Creation Above Average Returns Valuable Ex. save customers time to market Rare Ex. Industry expertise Costly to Imitate Ex. Highest production capacity Non-Substitutable Ex. Unique combination of products services Takeaway: Need to spend sufficient time on this ! A clear plan demonstrates strong commitment to customers in new markets not presently served…
  • 17. Some Basics of Good Strategy… Start of Industry Shake Out High Margin Profits •Invest to grow market share •Exploit economies of scale •Cut costs and prices to drive volume •Develop strong brands •Control channels of distribution Reference: London School of Business Key Take Away: these are all important elements of strategy but requires good co-ordination… 17
  • 18. LOW LOW 18 To Develop Winning Strategy Apply Porter’s Five Force Analysis (Example for POF use in fiber telcom market) HIGH •Small number of suppliers (POF, connecters, etc.) •Low product differentiation •Inevitable components (LEDs, connecters, etc) Barriers to entry Threat of substitutes •Few competitors •Low brand equity •Low exit barrier •Low product differentiation •Small number of buyers now •Low competition among buyers •Low purchased item differentiation •Low brand equity •Low economies of scale •Low capital requirement •No patent •Low product differentiation (3 standard) •Know-how •Many substitutes available (e.g. copper, coax, wireless, etc) •However high switching costs (POF is cheaper than others) •POF has strong product differentiation: - good for short distances -light weight (good for aircraft use) - high reliability/long service life - high popularity/readily available Supplier power Rivalry LOW LOW Buyer power Ref: Prof. Michael Porter, Harvard University
  • 19. 1: ? What are the five key elements for successful organizational change ? 2: ? 3: ? 5: ? 4: ? BDG 2 4 3 5 1 19
  • 20. 20 1: STRATEGY The five key elements for successful organizational change… 2: ORG STRUCTURE 4: REWARDS 3: INFO DECISION MAKING (PROCESS) 5: PEOPLE BDG 2 4 3 5 1 Source: Dr. Don Hambrick, Professor of Organizational Change, Penn State Smeal College of Business
  • 21. 1: STRATEGY: • pick strategically important markets • set guiding principals* Example: - product “quality” leader - premium service capability - premium pricing Recommendations • maintain high touch and communication with customers • penetrate new market segments using market experts integrated marketing campaigns • continue efforts to enhance brand 21 2: STRUCTURE: • add BD Director BD Project Managers • SMTFI team members with defined roles: - new opportunity analysis (ROI estimates) - assign sales marketing by projects - develop mentorship program Some Key 1 BDG 2 4 3 • create apply new 3: metrics and scorecards 5: PEOPLE: • hire add’l S-M-T-F-I star players from industry • leverage virtual teaming @ global level • maintain individual accountability • maintain family culture • create career development paths (ex) -Exec Sales Marketing BDM project leads -create dedicated IT solutions team focused on BD issues -establish technology team for BDG projects -hire entrepreneurial business financial experts 5 4: REWARDS: • compensation: team based metrics and milestone bonuses • add’l project management opportunities • incremental (tiered) development opportunities •career advancement opportunities • career fulfillment morale boost • other ? KEY INFO DECISION MAKING PROCESS: • leverage knowledge databases (formal informal) • planning and goal setting based on opportunity analysis (SWOT ROI) • frequent meetings (S-M-T-F-I) • decision making: strategic- centralized, tactical - local
  • 22. 22 New Organizational Structure with BDG President VP Finance VP IT VP Technology VP Sales Regional Sales Mngr Finance Dept IT Dept Technology Dept Sales Dept (Acct Execs) Regional Sales Mngr BDG Director BDG Exec VP BDM’s VP Marketing Marketing Dept
  • 23. 23 New Organizational Structure with BDG President VP Finance VP IT VP Technology VP Sales Regional Sales Mngr Finance Dept IT Dept Technology Dept Sales Dept (Acct Execs) Regional Sales Mngr BDG Director BDG Exec VP BDM’s VP Marketing Marketing Dept entrepreneurs with alliance and deal building skills…
  • 24. 24 New Organizational Structure with BDG President VP Finance VP IT VP Technology VP Sales Regional Sales Mngr Finance Dept IT Dept Technology Dept Sales Dept (Acct Execs) Regional Sales Mngr BDG Director BDG Exec VP BDM’s VP Marketing Marketing Dept entrepreneurs with alliance and deal building skills… extensive market knowledge BD experience
  • 25. extensive market knowledge BD 25 New Organizational Structure with BDG President VP Finance VP IT VP Technology VP Sales Regional Sales Mngr Finance Dept IT Dept Technology Dept Sales Dept (Acct Execs) experience Regional Sales Mngr BDG Director BDG Exec VP BDM’s VP Marketing Marketing Dept well connected at CXO level with thought leaders major industry players entrepreneurs with alliance and deal building skills…
  • 26. 26 BDG: Segments Sales Activity… President Sales Marketing focus on “mature” tactical opportunities ready to bear fruit VP Finance VP IT VP Technology VP Sales Regional Sales Mngr Finance Dept IT Dept Technology Dept Sales Dept Regional Sales Mngr ISE’s, SE’s, ESE’s BDG Director BDG Exec VP BDM’s VP Marketing Marketing Dept PM’s, MarCom, Other BDG concentrates on strategic “horizon” opportunities that need focus nurturing… Key Message to employees: EVERYONE works in business development, participation is thru BDG projects…
  • 27. 27 PM, RM, BDM Roles • Product Manager (PM) Responsibilities: – Manage technical marketing information for all products within product line – Set pricing guidelines on products – Support key opportunities with all necessary technical and product related needs, demo’s, troubleshooting, – Provide guidance to engineering on new product needs – Guide market research on target segments appls – Manage PL for specific product lines
  • 28. 28 PM, RM, BDM Roles Products Sales PM POR R1 R3 Marketing Finance M1 M2 M3 M5 M4 R2 R4 R5 PM’s WIG: Sell Products into as many markets regions as possible…
  • 29. 29 PM, RM, BDM Roles • Regional Manager (RM) Responsibilities: – Manage sales activity within Territory – Mentor ISE’s, SE’s and ESE’s on sales techniques – Assign SE’s to new accounts – Set strategy assist negotiations on key accounts – Co-ordinate customer service support – Assist VP Sales in new policy rollouts – Manage PL for Specific Regions
  • 30. 30 PM, RM, BDM Roles Products Sales PL1 PL4 RM PL3 Marketing Finance M1 M2 M3 M5 M4 ROR PL2 PL5 RM’s WIG: Grow sales in Region by selling all products into as many markets as possible…
  • 31. 31 PM, RM, BDM Roles • Bus Dev Manager (BDM) Responsibilities: – Identifies communicates new opportunities to mngmt – Do analysis on risk/reward in key market – Develop joint strategy with PMs RMs – Manage relationships with key opportunities – Co-ordinate SMFIT activity related to market segment – Manage PL for specific markets
  • 32. 32 PM, RM, BDM Roles Products Sales PL1 PL4 PL3 PL2 PL5 R1 R3 Marketing Finance MOR R2 R4 R5 BDM BDM’s WIG: Grow sales in Market by selling all products into all regions…
  • 33. Reaching the Pot of Gold… Products Sales PM RM Opportunity Marketing Finance BDM requires embracing teamwork, sharing decision making 33 overlapping responsibilities…
  • 34. 34 Business Development Group New Market Projects (near term targets) NM 5 NM 4 NM 3 NM 2 NM 1 BDG
  • 35. 35 Business Development Group New Market Projects (near long term targets) NM 9 NM 8 NM 7 NM 2 NM 6 NM 5 NM 3 NM 4 NM 1 BDG
  • 36. 36 BDG Project Scoring… • Purpose –set priorities for BDG activity resources • Methodology – establish numerical scoring system based on key attributes: - strategic value - financial return (IRR, ROI, etc) - technical requirements - implementation feasibility (degree of difficulty) - risk assessment
  • 37. 37 Company X: BDG Benefit Example (Projected Revenues) Rev-A (7%) Rev-B (10%) Rev-C (15%) $ 318M $277M ~ On target $ 241M $209M $182M 350 300 250 200 150 100 50 0 2006 2007 2008 2009 2010 Rev A = Today’s Customers Only Rev B = Today + Tomorrow’s Pipeline Rev C = Today + Tomorrow + BDG Stretch Goal = $280M
  • 38. 38 STRATEGY: ? Future: Global BDG (networking with subsidiaries) STRUCTURE: ? Collaboration and share responsibilities among subsidiaries on global accounts opportunities REWARDS: ? Outsourced Sales: revenue recognition for subsidiaries that initiate new business INFO DECISION MAKING PROCESSES: ? PEOPLE: ? BDG
  • 39. 39 Some Key Challenges – defining benefits of adding BDG in terms of opportunity costs vs present approach – gaining top mngmt support (Board, CEO, VPs) – defining 5 key elements: strategy, structure, rewards, etc – leadership needs (identifying key characteristics) – defining new roles for S-M-F-T-I personnel – gaining adoption of BDG goals across all departments – becoming a truly global company (e.g. gaining subsidiary alliance participation)
  • 40. 3 – Reinforce new culture thru symbolic actions 40 BDG Implementation: Best practices in driving culture change… 1 - Communicate need for change Redefine top metrics rewards to establish credibility Monitor acceptance make adjustments 2 – Implement change initiative To UN-FREEZE… To EXECUTE CHANGE… To RE-FREEZE… Source: Dr. Dennis Gioia, Professor of Leadership Excellence, Penn State Smeal College of Business
  • 41. 41 Tomorrow’s Shining Star (Company X with new Organizational Structure) Bi-directional information flow
  • 42. 42 End
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