Hunting Elephants in the Corporate Jungle

Nick Turner, Director of UK Partnerships at AXA UK

Many companies look for fortune changing distribution deals, the one they can retire on, the deal to fix the company, the opportunity of a lifetime.

These opportunities are rare, that’s true, but there are many steps that can be taken to make sure that when they come, your company is at the front of the line, and ready to do business. The following tips are some of my hard won lessons learned, from nearly 10 years of business development.

Right place right time…

Firstly, do not underestimate the importance of networking and being externally proactive. Almost every company executive I meet, I find myself eternally curious about their business and what they are trying to achieve. High quality questions and simply listening hard, sparks ideas about how we could do business.

Make sure your networking is structured and purposeful, and make sure the people within the network have the power to make things happen in their business. That goes for your own business as well. If the deal is large, the client will want to see the senior executives, and probably the CEO. Knowing that the leadership team are prepared to prioritise resources in favour of a large deal is almost certainly a critical factor in success.

Develop a range of potential targets…

Understanding the kind of deals that you wish to do and the type of organisations that you should do business with is always a powerful first step. Too many companies adopt poor targeting strategies. When I started hunting deals, I asked a very experienced business development executive what my target win ratio should be. He replied 100%. I realise now that he was making a point, but having that kind of success level in mind drives some definite behaviours. For example, defining a target universe and really defining what you want to win and are capable of winning at 100% win ratio really focuses the effort. In no other area is a “busy fool” more damaging. Hunting these deals is usually costly and should be undertaken carefully.

Identify what deals you have done so far, and why, and try to determine filters to apply to cut down your target list to a chosen few. In large deals, less is usually more.

Understand what your company does…

Be clear on your company proposition. Many larger organisations have lost track of what they are best at. Large deals can help your business grow, but they also have the potential to become huge distractions. As odd as it may seem a large deal may actually put significant strain on an organisation diverting attention from the core business.

Management time and energy is a valuable commodity. Their focus on developing and running your core business should not be lightly sacrificed for a deal that takes your business in a different direction – keep tight with what you do. It is unlikely that the deal will be won if you have to play in too many non core activities anyway.

Evaluate opportunities ruthlessly

Define a method to work out which deals make sense through an evaluation tool. I use a “SCOTSMAN” assessment process. Scoring opportunities quickly helps to determine whether to engage or not. SCOTSMAN is a mnemonic which stands for the following:

Solution Does our solution meet their needs? 5 Existing product available which will exceed their needs - we can delight them and it is superior to our competitors
4 All key requirements can be met - some smaller needs will require bespoking
3 We can meet their main needs but we have insufficient infrastructure or capacity
2 Significant development of product and infrastructure required
1 No product and system available
Competition How do we match up against competitors? 5 This is a new area for this competitor (but we need to understand why they are bidding)
4 Competitor sometimes (<50% conversion) wins deals like this one
3 Competitor rarely (<25% conversion) wins deals like this one
2 Competitor can demonstrate abilities to deliver customer needs - they have recently won a similar deal
1 Competitor has significant market reputation and product advantages
Originality How original is our offer? 5 We have unique selling propositions (USP’s) in areas which are the prospect’s critical requirements
4 We have some USP’s - some are in areas which are critical requirements
3 We have several USP’s but they are not in critical requirement areas
2 We have one or two differentiators - but not core to the on-going relationship
1 We have no identifiable USP’s - a “me too offer”. In fact we struggle to deliver base expectations
Timescales Can we meet the required timescales? 5 We are the only company who could launch the service in the prospect’s timescales
4 We can deliver it but it will be tight
3 We can deliver this service but in the following Quarter to their plans
2 Significant time delay > 4 months
1 We cannot deliver in the foreseeable future
Size Is the size of the deal acceptable? 5 In reality we are the only business that can deliver this operationally
4 A competitor could do this deal but would cause them integration difficulties
3 Size of deal will not deter our competition
2 Traditionally our competitors win these sized deals
1 We have never integrated a deal of this size before whilst others have
Money Does the client have the budget for change? 5 We can demonstrate a significant quantifiable business case in our solution - we believe we have a compelling offer
4 We can demonstrate quantifiable revenue and cost savings in our solution - we have yet to present these
3 We have not produced a business case to the prospect to date
2 Our business case is only marginal or is me-too
1 We do not have the data to prepare a business case
Authority Do we know the decision makers? 5 We have a close relationship with ALL the decision makers
4 We have relationships with some but not all the decision makers
3 We have identified who are the decision makers, recommenders and influencers
2 We have yet to identify the procurement process
1 We have tried but cannot access the decision makers
Numbers Are they profitable for us and make sense to the prospect? 5 We have submitted our pricing - it is acceptable and we are confident of achieving an acceptable ROE
4 We have issued indicative pricing - no major pricing issues identified
3 We have yet to submit detailed pricing
2 We envisage a substantially lower yield than we would normally expect to get approved
1 We cannot price this deal

 

Anything less than a score of 30, and I am considering walking away…

Communicate, communicate …

As soon as a large distribution opportunity arises, planning should commence right across the business. One thing is certain, if a deal implementation goes badly, reputations are destroyed and it becomes very unlikely that any other organisation will trust your business for some time.

Affording all impacted areas of the organisation maximum planning time reduces the risk of failure and also forces out internal challenges and conflicts at the beginning of the deal process.

Identify decision makers, decision processes, and stakeholders early…

As a deal progresses, invariably at some point decisions need to be made and commitment given, on both sides.

Understanding how that decision needs to be taken in your own organisation is important. It is easy to leave an executive off the stakeholder list, or forget that the large deal is beyond the delegated authority of the usual signatories.

Building commitment to any deal or opportunity is also important. I have spent many hours internally selling opportunities to executives. In fact often it is the internal sales that are the hardest to achieve given the complex web of competing objectives.

Work the business case from the get go…

As the deal progresses from “hunting” to “shaping” it is vital that the commercial aspects of the deal are understood. Too often additional items are loaded into the requirements which materially damage profitability. Negotiation always starts earlier than many people recognise and influencing the shape of the deal using a clear understanding of the financial drivers is essential. There are many opportunities, long before negotiation officially starts to shape the deal in your favour.

Understand the real cost of “out of framework” requirements…

Often an item is requested by the client that is not currently provided by an organisation. This means that a business must decide whether to refuse to supply, outsource, or build a solution in order to satisfy their client.

Each approach has a different impact on the business case or the chances of securing the deal. In the past I have often found that a busy executive team will not examine the details of the deal as it is hunted and shaped. I have used one page “key design decisions” to highlight to the board, approaches that will impact the running of the company, this prevents corporate denial (“I was unaware of the approach you have taken and therefore cannot support it”) as the final stages of the deal approach

Know your own business well, and what it can do…

Being clear about your business’ capability is essential. To become contractually committed to provide something that your systems cannot easily accommodate could end up evacuating all profitability from the deal. Identifying experts within your business that really understand the IT and process capability of your organisation is key. I have often used a target operating model framework to drive out exactly how a deal will work and where the constraints and issue lie soon fall out. Do not contract until you are sure.

Strike for “win - win”…

Lopsided deals rarely prevail, and whether you strike transparent, open book deals or opaque arrangements, does not really matter. What is vital is that both parties are comfortable with what they get from the deal. This means both being entirely clear what value each party brings into any arrangement and clarity on what needs to be done to make the deal work. Structuring the financials in such a way as both parties are incentivised to drive out the value of the deal nearly always works best. I have seen many deals where the incentives are misaligned and unhappiness usually results.

Also, try to value the negotiation process for what it is – arguments that lead to a happy marriage. It is easy to lose sight of the purpose of this valuable process, and to dodge or fudge important issues that will only come up later and create “buyers remorse”, which usually costs real money to fix.

Implement well…

Often the implementation of the deal can be a point of differentiation. How you propose to deliver is a major part of winning deals – leave as little as possible to be planned after the contract is signed. It is also worth remembering that deals are not done until the ink is wet on the contract.

Often implementation starts throughout the negotiation stage, as almost always deals are against a tight deadline of delivery. Making sure that everyone knows the precarious situation implementation teams are in before contracts are signed is vital.

If starting is commercially required, then implementation can often be structured to reduce financial exposure until contracts are signed. Placing clear points in the project delivery plan can also help with the negotiation process itself and the threat of “downing tools” often relieves a tricky contractual point from becoming a laborious legal process.

Review your business cases against the out turn regularly…

Unless you know how your deals turn out against original plans, it is difficult to take real lesson away. Structuring time for “lessons learned” and documenting them properly over time builds up a powerful manual of ideas and concepts to apply in future situations. Also, developing a reputation as a deal maker that protects the profits and contracts well creates a virtuous circle of trust and credibility between both client, and employer. An asset worth protecting.

And finally…

Closing distribution deals are some of the most rewarding and nail biting experiences of my career. However, it is the lessons I have learned along the way that have been the most valuable. Invariably it is when I strayed from these key processes that I have got into trouble and had to report back to the board with my tail between my legs that something has gone wrong.

Follow these steps well and you will do deals, and more importantly, you will make money!

Nick Turner, Director of UK Partnerships at AXA UK