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Best practices in business development

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Best practices in business development

  1. 1. Best Practices in Business Development prepared by David Fatlowitz, MBA dfatlz88@yahoo.com April 2014
  2. 2. 2 Topics • Today’s typical corporate structure • Forecast vs stretch goal (gap analysis) • 5 year forecast & plan for reaching goal • Innovation plan for entering new markets • Some worthwhile targets • BDG concept • Recommendations & best practices
  3. 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. 4 Structure of Typical Sales Dept (Company X)
  5. 5. 5 Structure of Typical Sales Dept (Company X) TYPICAL METHOD: ‘Military Style’ Top Down Command & Control structure “By decree you will…” RESULT: Little cross co-ordination with other depts, focus mainly on closing deals … Add’l mngmt layers
  6. 6. 6 Today’s Typical Organizational Structure (Company X) Issues: • conflicting priorities • misaligned compensation • poor communication by depts Results: • politics & turf wars • decisions by power not facts • dept interests not aligned with company growth targets PresidentPresident
  7. 7. 7 Today’s Typical Organizational Structure (Company X) Issues: Organization lacks flexibility & essential knowledge to make good decisions at critical times… Results: • low morale/high turnover • poor customer satisfaction • missed opportunities PresidentPresident
  8. 8. 8 $239M $223M $208M $195M $182M 0 50 100 150 200 250 300 Yr1 Yr2 Yr 3 Yr4 Yr5 Rev-A Existing Accounts (7% Annual Growth) Business Development Motivation (Company X) Opportunity Cost = $ 57M Gap ! Stretch Goal = $280M Based on current market opportunities alone Company X falls short of their target…
  9. 9. 9 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 % Sales Current Year % 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% Business Development Motivation (Company X)
  10. 10. 10 Core Business Issues & 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 May have people with poor internal selling & communication skills trying to execute business development process, etc. Results: information & decision making “firewalls” are created within the company limiting their ability to penetrate new markets…
  11. 11. 11 Some Growth Possibilities • New market 1 • New market 2 • New market 3 • New market 4 • New market 5 medical aerospace semiconductor electronics automotive
  12. 12. 12 How to break into new markets ?
  13. 13. 13 How to break into new markets Create a business development group…
  14. 14. 14 Business Development Group A guiding mantra: Key Lever: Virtual Teaming “Everyone works in Business Development” Focus: Opportunities with 2-3 year horizon
  15. 15. 15 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
  16. 16. 16 • Adds focus to activities: - Separates short term cash flow creation (sales) from long term strategic opportunity engagement (business devel) - Clarify “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) which reduces overall risk BDG – Features & Benefits Net Result: better morale, improved decision making, increased competitive advantage and higher profits…
  17. 17. 17 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…
  18. 18. •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… Take Away: these are all important elements of strategy but requires good co-ordination… 18
  19. 19. 19 To Develop a Winning Strategy Apply Porter’s Five Force Analysis (Example for POF use in fiber telcom market) •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
  20. 20. 1: ? 2: ? 3: ? 4: ? 5: ? BDG 2 34 5 What are the five key elements for successful organizational change ? 1 20
  21. 21. 21 1: STRATEGY 2: ORG STRUCTURE 3: INFO & DECISION MAKING (PROCESS) 4: REWARDS 5: PEOPLE BDG 2 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
  22. 22. 22 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 /&/ 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 34 5
  23. 23. New Organizational Structure with BDG 23 PresidentPresident VP FinanceVP Finance Finance DeptFinance Dept VP ITVP IT IT DeptIT Dept VP MarketingVP Marketing Marketing DeptMarketing Dept VP SalesVP Sales Sales Dept (Acct Execs) Sales Dept (Acct Execs) Regional Sales Mngr Regional Sales Mngr Regional Sales Mngrs Regional Sales Mngrs BDG Director BDG Director BDG Exec VP BDG Exec VP BDM’sBDM’s VP TechnologyVP Technology Technology Dept Technology Dept Entrepreneurial types with good alliance building and deal making skills… extensive market knowledge & BD experience well connected at CXO level with thought leaders & major industry players
  24. 24. BDG: Segmenting of Sales Activity 24 PresidentPresident VP FinanceVP Finance Finance DeptFinance Dept VP ITVP IT IT DeptIT Dept VP MarketingVP Marketing Marketing DeptMarketing Dept VP SalesVP Sales Sales Dept (Acct Execs) Sales Dept (Acct Execs) Regional Sales Mngr Regional Sales Mngr Regional Sales Mngrs Regional Sales Mngrs BDG Director BDG Director BDG Exec VP BDG Exec VP BDM’sBDM’s VP TechnlogyVP Technlogy Technology DeptTechnology Dept BDG concentrates on strategic “horizon” opportunities that need focus & nurturing… Sales & Marketing focus on “mature” & tactical opportunities ready to bear fruit Key Message to employees: EVERYONE works in business development, participation is thru BDG projects…
  25. 25. 25 PM, RM, BDM Roles • Product Manager (PM) Responsibilities: – Manage technical & marketing information for all products of responsibility (POR) 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 & applications – Manage P&L for specific product lines
  26. 26. 26 PM, RM, BDM Roles Products Sales Marketing Finance (PM) POR M1 M2 M3 M4 M5 R2 R1 R3 R4 R5 PM’s Goal: Sell POR into as many regions & markets as possible…
  27. 27. 27 PM, RM, BDM Roles • Regional Manager (RM) Responsibilities: – Manage sales activity within Region of Responsibility (ROR) – 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
  28. 28. 28 PM, RM, BDM Roles Product Lines Sales Marketing Finance PL3 M1 M2 M3 M4 M5 ROR PL5PL2 PL1 PL4 (RM) RM’s Goal: Grow sales in ROR by selling all products into as many markets as possible…
  29. 29. 29 PM, RM, BDM Roles • Bus Dev Manager (BDM) Responsibilities: – Identifies & communicates new opportunities within market of responsibility (MOR) to top mngmt and other dept mngrs – Analyze risk/reward for opportunities in his/her 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
  30. 30. 30 Products Sales Marketing Finance PL3 MOR PL5PL2 PL1 PL4 R2 R1 R3 R4 R5 (BDM) PM, RM, BDM Roles BDM’s Goal: Grow sales in MOR by selling all products into all regions…
  31. 31. 31 requires embracing teamwork, shared decision making & overlapping responsibilities… Products Sales Marketing Finance PM RM BDM Reaching the Pot of Gold… Opportunity
  32. 32. 32 Business Development Group New Market Projects (near term targets) BDG NM 1 NM 2 NM 3NM 4 NM 5
  33. 33. 33 Business Development Group New Market Projects (near & long term targets) BDG NM 1 NM 2 NM 3 NM 4 NM 5NM 6 NM 7 NM 8 NM 9
  34. 34. 34 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
  35. 35. 35 $ 318M $277M $ 241M $209M $182M 0 50 100 150 200 250 300 350 Yr 1 Yr2 Yr3 Yr4 Yr5 Rev-A (7%) Rev-B (10%) Rev-C (15%) Company X: BDG Benefit Example (Projected Revenues) ~ On target Rev A = Today’s Customers Only Rev B = Today + Tomorrow’s Pipeline Rev C = Today + Tomorrow + BDG Stretch Goal = $280M
  36. 36. 36 STRATEGY: ? STRUCTURE: ? Collaborate & 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)
  37. 37. 37 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)
  38. 38. 38 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
  39. 39. 39 Company X with New Org Structure BDG Sales Finance MarketingIT Technology Bi-directional information flow
  40. 40. 40 End