Best practices in business development

Best Practices in Business Development

prepared by

David Fatlowitz

July 2010

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

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…

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VP

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

Today’s Typical Sales Dept Structure

(Company X)

Add’l mngmt layers

TYPICAL METHOD: ‘Military Style’ Top Down Command & Control structure

“By decree you will…”

RESULT: Little co-ordination with

other depts, focus mainly on closing

deals…

5

Today’s Typical Organizational Structure(Company X)

President

VP Finance(F)

VP IT(I)

VP Technology(T)

VP Sales(S)

Finance Dept IT Dept Technology Dept Sales Dept

Regional Sales Mngr

Regional Sales Mngr

VP Marketing(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

Today’s Typical Organizational Structure(Company X)

President

VP Finance(F)

VP IT(I)

VP Technology(T)

VP Sales(S)

Finance Dept IT Dept Technology Dept Sales Dept

Regional Sales Mngr

Regional Sales Mngr

VP Marketing(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

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$239M $223M

$208M $195M

$182M

0

50

100

150

200

250

300

2006 2007 2008 2009 2010

Rev-A Existing Accounts (7% Annual Growth)

Typical Result: Projected Sales (Company X)

Opportunity Cost = $ 57M Gap!

Stretch Goal = $280M

Based on current market opportunities alone Company X falls short of their target…

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Growth expected only in top market, otherwise little revenue growth or diversification expected over next 3 years …

Example: Projected 3 Year Sales Trend

Market Segments % Fiscal Year '08 % of Next 3 YearsMarket 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%

Business Development Motivation(Company X)

9

Core Business Issues & Results Scorecard

#1 – maintain cash flow to finance ongoing operationsBusiness Horizon: close sales within 1 year or lessCurrent Grade: ~ B

#2 – growth, diversification & flexibilityBusiness Horizon: close sales within 2-3 yearsCurrent Grade: ~ C or D

Why?Lack of co-ordination across departments limits information flow & adaptabilityWrong people trying to execute bus dev process

Result: information & decision making “firewalls” are created within the company limiting their ability to penetrate new markets…

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Some Growth Possibilities

• New market 1

• New market 2

• New market 3

• New market 4

• New market 5

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How to break into new markets

?

12

How to break into new markets

Create a Business Development Group…

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Business Development Group

Guiding Mantra:

Key Lever: Virtual Teaming

“Everyone works in Business Development”

Focus: Opportunities with 2-3 year horizon

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Business Development GroupDefinition:• 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

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• 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

BDG – Features & Benefits

Net Result: better morale, improved decision making, increased competitive advantage and higher profits…

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Creating Value in New Markets combining resources and capabilities creates new

competencies and beneficial outcomes…

New Competencies

Competitive Advantage

Value Creation

Above Average Returns

ValuableEx. save customers time to

market

RareEx. Industry expertise

Costly to ImitateEx. Highest production

capacity

Non-SubstitutableEx. 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…

•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

High Margin & Profits

Start of Industry Shake Out

Some Basics of Good Strategy…

Key Take Away: these are all important elements of strategy but

requires good co-ordination…

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To Develop Winning Strategy Apply Porter’s Five Force Analysis

(Example for POF use in fiber telcommarket)

•Small number of suppliers (POF, connecters, etc.)•Low product differentiation•Inevitable components(LEDs, connecters, etc)

•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 powerSupplier power

RivalryRivalry

Barriers to entryBarriers to entry Threat of substitutesThreat of substitutes

LOW

HIGH

LOW

LOW LOW

Buyer powerBuyer power

Ref: Prof. Michael Porter, Harvard University

1: ?

2: ?

3: ?

4: ?

5: ?

BDG2

34

5

What are the five key elements for successful organizational change ?

1

19

20

1: STRATEGY

2: ORG STRUCTURE

3: INFO & DECISION MAKING (PROCESS)

4: REWARDS

5: PEOPLE

BDG2

34

5

The five key elements for successful organizational change…

1

Source: Dr. Don Hambrick, Professor of Organizational Change, Penn State Smeal College of Business

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1: STRATEGY:• pick strategically important markets

• set guiding principals* Example:

- product “quality” leader

- premium service capability

- premium pricing

• maintain high touch and communication with customers

• penetrate new market segments using market experts & integrated marketing campaigns

• continue efforts to enhance brand

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

• create & apply new metrics and scorecards3: 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

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 ?

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

Some Key Recommendations

BDG

1

2

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5

22

New Organizational Structure with BDG

President

VP Finance VP IT VP Technology VP Sales

Finance Dept IT Dept Technology Dept Sales Dept(Acct Execs)

RegionalSales Mngr

Regional Sales Mngr

BDGDirector

BDGExec VP

BDM’s

VP Marketing

Marketing Dept

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New Organizational Structure with BDG

President

VP Finance VP IT VP Technology VP Sales

Finance Dept IT Dept Technology Dept Sales Dept(Acct Execs)

RegionalSales Mngr

Regional Sales Mngr

BDGDirector

BDGExec VP

BDM’s

VP Marketing

Marketing Dept

entrepreneurs with alliance and deal building skills…

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New Organizational Structure with BDG

President

VP Finance VP IT VP Technology VP Sales

Finance Dept IT Dept Technology Dept Sales Dept(Acct Execs)

RegionalSales Mngr

Regional Sales Mngr

BDGDirector

BDGExec VP

BDM’s

VP Marketing

Marketing Dept

entrepreneurs with alliance and deal building skills…

extensive market knowledge & BD

experience

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New Organizational Structure with BDG

President

VP Finance VP IT VP Technology VP Sales

Finance Dept IT Dept Technology Dept Sales Dept(Acct Execs)

RegionalSales Mngr

Regional Sales Mngr

BDGDirector

BDGExec VP

BDM’s

VP Marketing

Marketing Dept

extensive market knowledge & BD

experience

well connected at CXO level with

thought leaders & major industry

players

entrepreneurs with alliance and deal building skills…

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President

VP Finance VP IT VP Technology VP Sales

Finance Dept IT Dept Technology Dept Sales DeptISE’s, SE’s, ESE’s

RegionalSales Mngr

Regional Sales Mngr

BDGDirector

BDGExec VP

BDM’s

VP Marketing

Marketing DeptPM’s, MarCom, Other

Sales & Marketing focus on “mature” & tactical opportunities

ready to bear fruit

BDG concentrates on strategic “horizon”

opportunities that need focus & nurturing…

Key Message to employees: EVERYONE works in business development, participation is thru BDG projects…

BDG: Segments Sales Activity…

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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 P&L for specific product lines

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PM, RM, BDM Roles

Products Sales

Marketing Finance

PMPOR

M1

M2M3

M4

M5

R2

R1 R3

R4

R5

PM’s WIG: Sell Productsinto as many markets & regions as possible…

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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 P&L for Specific Regions

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PM, RM, BDM Roles

Products Sales

Marketing Finance

PL3

M1

M2M3

M4

M5

ROR

PL5PL2

PL1 PL4 RM

RM’s WIG: Grow sales in Region by selling all products into as many markets as possible…

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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 P&L for specific markets

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Products Sales

Marketing Finance

PL3

MOR

PL5PL2

PL1 PL4

R2

R1 R3

R4

R5

BDM

PM, RM, BDM Roles

BDM’s WIG: Grow sales in Market by selling all products into all regions…

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requires embracing teamwork, sharing decision making & overlapping responsibilities…

Products Sales

Marketing Finance

PM RM

BDM

Reaching the Pot of Gold…

Opportunity

34

Business Development GroupNew Market Projects (near term targets)

NM 5

NM 4 NM 3

NM 2

NM 1

BDG

35

Business Development GroupNew Market Projects (near & long term targets)

NM 9

NM 8

NM 7

NM 6 NM 5

NM 4

NM 3

NM 2

NM 1

BDG

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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

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$ 318M

$277M

$ 241M

$209M

$182M

0

50

100

150

200

250

300

350

2006 2007 2008 2009 2010

Rev-A (7%) Rev-B (10%) Rev-C (15%)

Company X: BDG Benefit Example (Projected Revenues)

~ On targetRev A = Today’s Customers Only

Rev B = Today + Tomorrow’s Pipeline

Rev C = Today + Tomorrow + BDG

Stretch Goal = $280M

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STRATEGY: ?

STRUCTURE: ?

Collaboration and share responsibilities among subsidiaries on global accounts & opportunities

INFO & DECISION MAKING PROCESSES: ?

REWARDS: ?

Outsourced Sales: revenue recognition for subsidiaries that initiate new business

PEOPLE: ?

BDG

Future: Global BDG(networking with subsidiaries)

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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)

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BDG Implementation:Best practices in

driving culture change…

To UN-FREEZE… To EXECUTE CHANGE… To RE-FREEZE…

1 - Communicate need for change

Redefine top metrics & rewards to establish credibility

Monitor acceptance & make adjustments

2 – Implement change initiative

3 – Reinforce new culture thru symbolic actions

Source: Dr. Dennis Gioia, Professor of Leadership Excellence, Penn State Smeal College of Business

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Tomorrow’s Shining Star(Company X with new Organizational Structure)

Bi-directional

information flow

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End