Model visioning

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February 12, 2011

The challenges of big sales and the promise of model visioning

Posted by bridgeland under Model visioning
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I work in big sales. Sales is of course the business function of convincing customers to exchange money for goods or services. But what is big sales? Big sales is simply a question of size: when a customer pays at least $10,000,000. Selling a Ford Explorer to Joe Sixpack is sales. Selling a fleet of 10,000 Ford Explorers to Hertz is big sales. Selling a new credit card to Joe Sixpack is sales. Selling IBM on providing American Express to all their employees: big sales.

The line between sales and big sales is not precise. There is no sharp difference between a $9.5 million deal and a $10.5 million deal. Rather there is a gradual continuum between regular everyday sales and the larger deals.

But big sales are truly different from regular everyday sales, different in a number of ways. First, the customers are different. An individual person buys a bag of groceries for $40, a computer for $1100, or a car for $27,000. But the big sales customers are not individual people. Few people pay $10 million for anything in their life; few have the money. Instead of individual people, big sales customers are big organizations: companies and governments. For the most part, only big companies and governments have the money to make big purchases.

Second, big sales are interactions between teams, not individuals. When Deloitte sells an accounting system installation to Chevron, a team of people at Deloitte make the sale, and a team of people at Chevron make the purchase. Multiple people are involved on both sides. Multiple stakeholders at Chevron must be convinced.

Third, big sales take time. Much time elapses between the initial meeting and the day the deal is inked. At least months elapse, sometimes years. Big sales have long sales cycles. When Accenture sells Visa International new IT system for approving credit card transactions, the sale takes more than a year.

Fourth, big sales are never anonymous. When a Ford dealership sells a new Explorer to Joe Sixpack, the dealership may know very little about Joe. But when Bechtel sells construction of a new subway line to the Washington Metropolitan Area Transit Authority, Bechtel knows WMATA well. There are Bechtel employees whose sole responsibility is to understand WMATA, to know all the key employees and decision-makers, and to understand WMATA’s challenges as well as WMATA does. Joe Sixpack is a customer, but to Bechtel, WMATA is a client, an organization known intimately.

Fifth, big sales have complex effects on the procuring organization. When British Airways buys a fleet of new A380s from Airbus, the procurement has significant and complex impacts on BA. Their pilots must learn to fly the new jets. Who will train? When will they train? What is the impact on the existing routes? The BA mechanics must learn to service the new jets. Who? Where? The new jets will fly some routes, and not others. Which routes? What schedules?

At least British Airways flies jets today, and so understands many of the complexities of acquiring a fleet of A380s. These are known complexities. When the United States Border Patrol acquires a new surveillance system, there are not only many complex effects, but some of these effects are unknown. How should Border Patrol change their staffing: what skills do they need more and what less? How should Border Patrol change their training? How will drug trafficking organizations adapt their tactics to the new surveillance, and hence what should Border Patrol do differently to adapt to those new tactics?

Finally, big sales often fail to launch. Safeway does not worry about customers entering their stores, filling their shopping carts with groceries, and then changing their minds and leaving without making a purchase. But it is common for a big company or a government to spend years planning a big procurement, to decide on the vendor, to negotiate a deal, and then before signing the final agreement, to decide not to purchase anything after all. The big procurement is judged to be too risky: better to not launch now.

Simulations are useful for purchasing organizations. With a simulation WMATA personnel could explore different strategies of subway construction. Should the eight new stations be opened all at once, or should one station be opened at a time, as they are built? Which routes should be underground and which above ground? When should roads be closed to permit construction, and which roads? What roads should be rerouted for the subway, and when?

Simulations can provide cost estimates for the different WMATA alternatives. But just as important as cost estimates are nonfinancial results. How much inconvenience and traffic delays does the subway construction incur on the driving public? How popular is the resulting infrastructure? What is the impact—positive and negative—on the surrounding retail?

Simulations conquer complexity, allowing people in a procuring organization to better understand their options. Simulations are also uniquely useful for helping a group of stakeholders reach as decision. As Ron Zahavi and I describe in our book, simulation models can be used in a model-based workshop, allowing all the stakeholders to collectively arrive at a decdision. Ideas can be tried, and results can be shared.

Finally simulations lower the risk of a major procurement, both the actual risks and the perceived risks. Working with a simulation leads to a better understanding of the consequences of the purchase. Better understanding means lower risk.

Simulations are useful for procuring organizations but today they are rarely built for this purpose. Procuring organizations do not spend the time and money to create a simulation around their major procurements. Who has the time and money?

Sellers do. Sellers have the time and money to create procurement-oriented sims. Sellers know their products, the alternatives for the customers, and the tradeoffs involved. Sellers know their clients, and understand the details of the clients’ problems. And sellers have the motivation, to reduce the likelihood of a failure to launch.

We call this model visioning, creating simulation models for big sales. Model visioning sims help customers understand the ramifications of major procurements. Model visioning sims increase the likelihood that a customer will act. Model visioning sims increase the likelihood that a customer will make the right decisions.

I work in big sales, creating model visioning sims.

 

January 18, 2009

Model visioning

Posted by bridgeland under Model visioning, Practice
1 Comment 

In the book, we describe how business models are useful for persuasion, for changing someone’s mind about something. Of course business models have many other uses as well: analysis, training, etc. Seven other uses are described in the book.

Among business models, business simulations are particularly persuasive. In the book we say:

… simulation can be a powerful tool for persuasion, and this use of simulation is not widely appreciated. In fact, simulations are used so rarely for persuasion that sims are something of a secret sales weapon, an advantage to the people and companies who make use of them.

BJ Fogg, the director of the Stanford Persuasive Technology Lab, says, “Cause-and-effect simulations can be powerful persuaders. The power comes from the ability to explore cause-and-effect relationships without having to wait a long time to see the results and the ability to convey the effect in vivid and credible ways.” [Fogg 2003] Today when people want to persuade, they typically uses verbal techniques, numbers and graphs, or images and video. All these media have limited effectiveness. People dismiss words, ignore numbers, and are sophisticated critics of images and video. But simulations give them the ability to try things out, to experiment and build up their own understanding inside the simulated world. Simulations encourage people to reach their own conclusions through their own trial and error, but faster and more safely than they can in the real world.

[From the book Business Modeling: A Practical Guide to Realizing Business Value, by David M. Bridgeland and Ron Zahavi, published by Morgan Kaufmann Publishers, Copyright 2009 Elsevier Inc. All rights reserved.]

Let’s look at an example. Suppose you are attempting to sell Indian offshore call center services. Like most offshore call centers, yours provides telephone-based customer service cheaper than can be done by onshore call centers in North America. The main value proposition is price. Of course price can be easily understood without a need for simulation.

But the situation is a bit more complex. You differentiate yourself from other offshore call center services (who also offer low prices) by your relentless focus on accent. Most offshore call centers speak Indian English, but your call center employees speak American English with a South Carolina accent, thanks to hundreds of hours of training, monitoring, and coaching. You even focus your hiring on dialect. Your call center is based in Mumbai, home of Bollywood, the Indian movie industry. You hire aspiring and out-of-work actors and actresses to fill your cubicles, hiring employees who delight in playing characters from Charlestown and Greenville.

But so what? Why should your clients care about accent? There are several business advantages that accrue to your clients. First, some residential callers from North America have difficulty understanding Indian English. Communication with someone speaking American English is easier and more natural. Second, some residential callers from North America become uncomfortable when they realize they are speaking with someone from the other side of the world. Many people have not realized that telecommunication is free, and have little day-to-day experience with international calls. These callers never realize they are speaking to Amita and not Amy. To someone from Ohio or Oregon, South Carolina feels familiar to them; Mumbai does not. Finally some residential callers are politically opposed to speaking with Indian call centers. They see call centers in India as the “export of American jobs”, and they become angry when they talk to someone speaking Indian English. When they talk to your staff, they are usually fooled into thinking the call center is really based in South Carolina.

You have a compelling value proposition for your call center, but how do you show that value prop to your prospective clients? Of course you provide demonstrations. You play recordings of calls between North Americans and your call center, to show how natural the conversation is.

In addition, you provide a simulation, a web-based strategy sim that allows your prospective clients to try different alternative strategies. Working in the sim, your clients can experiment with different call pickup times, how quickly the calls are answered. They can experiment with different targets for time spent on the level 1 calls. They can experiment with different strategies for when to escalate to level 2 and to level 3. And of course they can experiment with different degrees of accent and dialect.

Their experiments have results. Your clients can see the results on time spent, on costs, on success rate for solving their customer’s problems, and most importantly on customer satisfaction. They can see for themselves the big and lasting effect accent and dialect has on customer satisfaction. And they can experience for themselves the difficulties of making an offshore call center work when customers are uncomfortable or angry. (Customer satisfaction is a “soft variable”. Soft variables will be explained in a future posting.)

You have built a model visioning sim. Model visioning is the use of business simulation for sales pursuits.

Model visioning is most useful for big sales, sales of a $100 million system integration project, or a $200 million outsourcing contract, or a $300 million construction plan. These big projects have big business consequences, positive and negative. Anticipating and understanding all the consequences is hard. Buyers need help in thinking through the big project. They need a custom-built business simulation to experiment with.

Traditionally what do people do to sell big projects? Big projects are sold with meetings and presentations, long written proposals, and demonstrations. A model visioning sim does not replace any of these techniques. Instead it complements these techniques. At the meeting, the sim is presented. Since it is a websim, the URL is provided to the prospective client. He can try it on his own, experimenting with different approaches to the project.

Model visioning is new: few people have employed sims in the sales process. It is virgin territory. When I create a sim for a big pursuit, and show it a client, I feel like the Dutch explorer Aerjan Block seeing Long Island for the first time. Who knows how big this is, or how important?