Why Sales Silos Don’t Work
Posted on January 8, 2015
A few months ago, I was on a flight to visit with a globally-respected company that owns a portfolio of branded technology service companies. I had scheduled a meeting with the CEO of one of their portfolio companies to get to know each other and to exchange ideas for how they can grow a segment of their business advisory services targeting CMOs. Specifically, I had piqued the interest of a couple of the company’s executives by showing them how they could be increasing their revenue per account and increasing buyer switching costs if they could leverage cross-portfolio cooperation to sell advisory solutions instead of individual products/services. After spending several enjoyable hours together, the CEO was simply unable to rationalize expending the effort to cooperate across the corporate portfolio despite the greater good it would generate for his parent (holding) company and the value it would generate for his direct customers. The CEO had generated two decades of good financial performance by focusing on his fiefdom so he had no incentive to rock the boat. As Jim Collins poetically stated years ago: “good is the enemy of great” and this guy was being paid well to simply maintain the status quo.
I am passionate about this topic because in my last CMO role, I spent the better part of a year arguing this point with the CEO, CFO and VP of Sales. Specifically, technology buyers purchase solutions to problems – not “products or services” that they have to assemble themselves to achieve a desired business outcome. I was hired into a newly created CMO role within a company operating four lines of business (various flavors of Internet hosting) under three separate brands resulting three sales teams, three customer support teams, and three invoicing teams. Talk about wasted SG&A! All the while, our biggest competitors (e.g. Rackspace, Softlayer, etc.) were delivering an integrated hosting experience (cloud, managed, self-managed) that was routinely landing them on the Gartner Magic Quadrant report.
The problem with sales silos (and the commission structures that impeded cross-product selling) is that they create “tribes” inside a company that operate contrary to what is in the best interest of the customers: seamless, integrated solutions and a single point-of-contact for account management. Well-run companies mask back office fragmentation and dysfunction from their customers. Simply put, customers wants agile vendor/partners.
These sales “tribes” undermine M&A, strategic alliances and other forms of sales cooperation where sales professionals must venture outside the comfort zone. Great sales people never develop a comfort zone — as Andy Grove once said “only the paranoid survive.” When we consider M&A, companies typically acquire other companies to expand product and service portfolios or access to incremental customer markets. A portion of the M&A ROI is typically calculated based on assumptions of penetrating and cross-selling the combined product/service portfolio to the existing account base. Aside from M&A, organic product line extensions and adding of value-add services are cost-justified by the incremental profits they should be able to generate being sold into existing accounts. Sales silos undermine the realization of this financial value.
In the technology industry, everyone is scrambling to position themselves as a trusted advisor in the eyes of the customer to own the relationship: semiconductor manufacturers, computer OEMs, ISVs, systems integrators, VARs, distributors, IT consultants, software developers, etc. However, customers have limited time to spend engaging with suppliers so those that can position themselves as solution providers can command more attention span than those selling individual product lines. Companies selling solutions in sales silos are poised to fail. Landing the customer is the hard part, staying abreast of their needs and adapting your service offerings to keep pace should be easy.
The old saying remains true: “if you don’t take care of your customers, someone else will.”