What enterprise-technology
companies must know to drive digital-sales growth
B2B
companies often achieve subpar results from digital-sales initiatives—and tech
companies are not immune to this problem. How can they reverse the trend?
Over the past few years, many
B2B companies have taken a cue from their B2C counterparts by increasing their
investment in digital sales. But most have achieved limited bottom-line impact,
with expected gains failing to materialize or falling far below expectations.
Often, the problems arise because companies have trouble achieving benefits at
scale, with many promising initiatives losing momentum after the pilot stage.
·
Enterprise-technology
companies are not exempt from these problems. In fact, they grapple with more
complications than most B2B or B2C players do when they undertake digital-sales
efforts. That said, the enterprise-technology
companies that persist in improving their digital-sales execution can achieve
incredible value. In the recent McKinsey Digital Quotient Diagnostic, the
companies with the best digital capabilities generated an 18 percent total
return to shareholders, compared with 10 percent for the rest of the field.
They also reduced their cost to serve by between 40 and 60 percent, and their
five-year revenue growth was five times greater than that of their peers.
We have identified five
steps that will help enterprise-technology companies to emulate the leaders in
the diagnostic and tap the full value of digital-sales growth.
1. Creating a comprehensive and focused digital-sales
strategy
According to McKinsey’s
Digital Quotient Diagnostic, only 25 percent of enterprise-technology companies
have developed a comprehensive digital strategy, encompassing sales and other
initiatives, that relates to their overall business strategy. Instead, many
players launch numerous small-scale initiatives in different business units.
Few ask themselves what they are trying to achieve or how much impact they want
to obtain. These scattered efforts may modestly improve costs and revenues, but
they fail to deliver big returns.
Enterprise-technology
companies may struggle with strategic questions because they are still
adjusting to the new landscape. In the Digital Quotient Diagnostic, only 20
percent of respondents stated that they understood how digital is disrupting
their industry. It is also clear that many enterprise-technology companies do
not understand what value digital will deliver, making it difficult to
prioritize initiatives, including those related to sales.
To address these
issues, enterprise-technology companies need to treat digital as a strategic
priority, giving it the full attention of top executives and a place on the
C-suite’s top agenda. For instance, leaders must develop a clear view of their
digital-sales gaps and determine what value they can attain by closing them.
They must also establish long-term, company-wide goals, prioritizing
initiatives by their impact.
Different business
units can take the lead for individual initiatives, as long as they work in
coordination. Every project they launch—from large ones that could potentially
create significant new revenue streams to small-scale initiatives—must have
clear goals relating to the larger vision. Digital-sales programs should also
take advantage of a company’s established capabilities, such as those related
to user-experience (UX) design tools.
In addition to
coordinating initiatives, the best companies refine their existing processes,
adopting best practices across the business and creating capability-building
programs for employees. If one group develops a successful digital-sales
solution or identifies a novel use case, it should share these insights across
the organization and create solutions that other groups can use.
2. Concentrating on customer needs
Enterprise-technology
players garner most of their profits by developing complex products with
leading-edge features. When it comes to digital sales, however, the focus on
technology can lead these companies to overcomplicate and overcustomize their
efforts, making the sales process difficult for customers. Adding to the
problem, most enterprise-technology companies have been slow to automate and
simplify the customer decision journey—the path buyers travel as they make a
purchase. Instead, they focus on automating internal processes. Not
surprisingly, many B2B customers report a subpar sales experience.
Enterprise-technology companies
may have difficulty developing a customer-focused strategy because they tend to
have far less knowledge of their target segments than B2C companies do. In the
Digital Quotient Diagnostic, for example, only 40 percent of respondents stated
that they thoroughly understood their customers’ changing needs and
expectations. This lack of insight
may explain why traditional enterprise-technology companies often lose business
to digital natives—recent entrants to the B2B space, such as Amazon—which
provide simple, customer-friendly solutions at lower prices.
The best
enterprise-technology companies will address their deficits by examining their
target segments’ needs along the customer decision journey. As a first step,
companies must identify the factors that influence the key decision makers at
each of the journey’s stages, including the points where they assess their
options, conduct research, and evaluate possible choices. Later in the journey,
companies must gather information on the purchase experience, product usage and
service, repeat-purchase rates, and customer loyalty. Ideally, they will obtain
insights about the customer decision journey from multiple sources, including
their own observations, internal and external data, and research about customer
behavior and preferences. Some of the most useful real-time customer insights
may be obtained by using advanced analytics to detect patterns in customer
behavior or by consulting a standing customer panel that can suggest new
solutions and provide feedback.
Enterprise-technology
companies should provide digital options along the entire customer decision
journey, since buyers increasingly expect them. For instance, over 90 percent
of B2B customers conduct online research when making purchase decisions, and 84
percent prefer to make repeat purchases through digital channels. In one case, a telecom
operator’s major customer threatened to switch to another vendor because it
could reorder only through a representative. This is not to say that companies
should completely abandon offline channels, however. In fact, customers
prefer in-person interactions at many points, such as the first stage of a
complex purchase.
As companies create
their digital strategy, they should focus on ensuring that customers can
navigate seamlessly between channels. They should also emphasize the importance
of strong omni-channel interactions, regardless of whether these occur
digitally, in person, or over the phone. In other words, companies should concentrate
on creating the best customer journeys and experiences rather than on making a
sale.
3. Shifting from rigid to agile
Across industries,
companies often emphasize the importance of agility and speed when
implementing digital-sales solutions, especially those that involve multiple
organizational units. By moving rapidly, companies can quickly adapt to market
changes, including the emergence of new competitors, economic shifts, evolving
customer preferences, and the introduction of innovative products.
Our Digital Quotient
Diagnostic suggests that many established enterprise-technology companies are
having difficulty applying agile processes, and this could interfere with their
digital-sales efforts. For instance, only 20 percent of the respondents stated
that they were comfortable with the rapid-testing and -revision cycles that
agile requires, and upward of 70 percent said they needed more than six months
to move from the idea-generation phase to implementation when developing
products or services.
To apply agile
principles at scale within the sales organization, established
enterprise-technology companies must significantly alter their current work
processes. Sales teams typically develop complex digital-sales solutions over
many years, testing them only when they are complete. A more agile approach
includes “growth hacks”—short, ring-fenced initiatives favoring a highly
iterative process of testing and learning, with the high involvement of the
sales front line. These hacks streamline progress and create value by helping
companies reduce the time spent planning initiatives on spreadsheets.
Although growth hacks
keep sales representatives motivated by delivering quick wins, they will not materially
improve a company’s overall performance unless leaders compile and disseminate
strategic knowledge gleaned from them. Companies can then improve existing
processes by using these new insights. As leaders roll out the new processes,
they should be flexible and make additional refinements based on lessons
learned in the marketplace.
To move from growth
hacks to large-scale initiatives, companies must assemble cross-functional
teams that are empowered to make decisions and have access to state-of-the-art
collaboration tools. As they launch initiatives at scale, they may also benefit
from a build—operate—transfer approach, which involves implementing new
technology solutions or software applications in a “sandbox”—a restricted
testing environment where companies can experiment with code changes and other
departures from standard IT practices. After creating a satisfactory test
solution or a minimum viable product (along with the skills to support it),
companies can expand usage into all business units.
Enterprise-technology
companies must make some organizational changes to gain the full benefits of
agile. These may include moving certain groups to one new location, so they can
collaborate on-site with other functions. Companies could also switch from a functional
structure to one that groups employees by solution or customer journey.
4. Recruiting and nurturing talent
Despite extensive
skills in software development, engineering, and related areas, only 34 percent
of enterprise-technology companies in our Digital Quotient Diagnostic stated
that they had the capabilities needed to implement digital-sales solutions. Lacking the requisite
skills, many players struggle to create digital content, apply advanced data
analytics, or implement social-media campaigns.
Addressing capability
gaps requires enterprise-technology companies to be more thoughtful when
evaluating organizational issues. Before any project starts, they should
identify the capabilities needed (both for sales technology and operations) and
develop a plan to fill those roles. While executive leadership is important for
any initiative, it is also crucial to find midlevel talent. Employees at that
level can make or break digital initiatives, and they are ultimately
responsible for bringing products, services, and offers to market. For
instance, companies will need talented scrum masters to lead cross-functional
agile teams.
As digital initiatives
proceed, sales organizations must identify their top performers, as well as the traits
and skills that lead to success. With these insights, they can effectively
invest in continuous coaching and capability building.
5. Monitoring results with relevant metrics
While more than half of
enterprise-technology companies consider digital-sales programs a top priority,
only 25 percent can quantify the return on investment for every initiative
implemented. This disconnect may
occur because companies often rely on traditional key performance indicators to
measure progress—ones that are often not appropriate for digital initiatives.
In other cases, companies create digital KPIs but fail to hold staff
accountable for performing strongly on them. Both of these errors can doom
digital-sales programs.
While traditional
metrics, such as those for conversion, are valuable, the best
enterprise-technology companies will find new ways to measure the success of
digital-sales programs. For instance, tracking release speed is always
important to gauge whether agile methods are becoming institutionalized. Other
metrics that might be valuable include digital adoption rates, content views,
and an increase in online customer interactions. For every metric established,
companies must diligently track their progress and share the results with all relevant
groups.
While successful
digital-sales efforts can take many forms, they all share one common feature:
successful implementation requires a combination of top-down direction and
bottom-up enthusiasm. Leaders should develop a comprehensive strategy and
create the systems, processes, and structures needed to support digital-sales
efforts—and that includes adapting products and pricing models when needed.
Together, these efforts will transform the customer experience, putting
enterprise-technology companies on par with B2C leaders.
By Dianne Esber, Wei Wei Liu, Åsa Tamsons,
Lareina Yee October 2017
https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/what-enterprise-technology-companies-must-know-to-drive-digital-sales-growth?cid=other-eml-alt-mip-mck-oth-1710
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