A Dangerous Conflation of Terms and Mindsets
"Strategy" is one of the most abused terms in business.
Strategy is overarching plan or set of goals. Changing strategies is like trying to turn around an aircraft carrier—it can be done but not quickly. Tactics are the specific actions or steps you undertake to accomplish your strategy. fs blog
Much of what's discussed in staff and departmental meetings are tactics, or even simply coordination details. It's often labeled strategy incorrectly.
Even with a good definition and understanding of the difference, there is a lot of grey area.
For a capital equipment manufacturer, for instance, strategy should cover the kinds of topics that boards should be pushing management to address.
- Economy - scenario planning for stagflation, NIRP, supply chain disruptions, etc
- Technology - IIoT (industrial internet of things), remote support, 3D printing
- Markets - evolving consumer expectations, demographics, global shifts, their buyers' buyers' challenges
- Business model - accumulating and monetizing data, recurring revenue/subscriptions
- Revenue growth - macro changes in the ICP (ideal customer profile) and secular growth/decline
- and much more (take a deeper dive here)
Tactics might include the sales process they adopt for complex sales to large, risk averse buying teams, the long-term contractual and transactional payment terms they negotiate with vendors, and the prioritization of product roadmap iterations as dictated by strategy.
Between the two there's lots of important ground. How will channel sales be impacted? Should all vendors be preemptively on-shored - at least from certain regions? And, from a sales perspective, what kinds of companies should they proactively sell to, and how do they cultivate relationships in what has traditionally been a transactional business?
But solving strategic challenges requires rigorously executed tactical actions like those outlined below.
Awareness Born of Crisis
In November and December of 2019 many machinery manufacturers engaged in typical annual planning - a linear projection of revenue and cost into 2020.
While that prepared them poorly for events that would unfold, it's also unrealistic to criticize them for failing to anticipate the reality that emerged.
Nevertheless, here we are, and in today's environment I'm observing a bifurcation developing among capital equipment manufacturers.
They're either hunkered down, looking for tweaks and efficiencies and trying to weather what comes, or they're using the disruption as an opportunity to challenge their assumptions on how to sell and grow.
Among the latter group I've seen two common insights emerge.
First, far too much of revenue comes from repeat buyers. The revenue isn't the problem - it's the concentration risk. Companies are realizing that they need to proactively develop and sell new business.
Second, they've assumed that high-profit aftermarket sales were largely immune to downturns and have relied on inherent demand rather than cultivating ongoing, mutually beneficial and deep relationships.
Aware of those strategic challenges, many are scrambling to solve them. That involves important mindset shifts.
But it also involves tactics as part of a framework of activities required to drive results. That's an execution, reporting and accountability problem.
Software to the Rescue (Seriously)
Ask any manufacturer who's endured an ERP project whether software is a panacea.
Of course it's not.
Nevertheless, software does some things very well. One is to provide the means to scale repeatable activities and measure progress.
Software can assist in overcoming both of the challenges identified above; to expand the customer base and to really support and nurture existing customers.
HubSpot's recently announced improvements to its CRM software might be the right tool at the right time to help manufacturers adapt. They've recently announced some major improvements to their CRM/sales software category.
But lost amidst software marketing speak are some significant business implications. Three substantive changes now make it a really robust solution for middle-market capital equipment manufacturers:
- Robust ABM (account-based marketing) / target account / target industry sales and marketing tools
- Distinguishing between contacts to track vs. those to whom you want to market
- Incorporating custom objects (other types of data beyond the standard contacts, companies, deals and tickets) into the software
Let's look at what each of these in some detail.
ABM (account based marketing)
In the machinery world we've always called it target account sales.
But in today's world, we all know that a couple cold calls doesn't get you into an account. You can't drive around to the loading dock anymore to slide in. It takes a well designed and executed series of tactics - and much of it falls to marketing. Creation of content, product marketing competitive battle cards, persona development and the creation of the ideal customer profile (ICP) are marketing steps that provide enablement to sales.
That's why the name has shifted from sales to marketing - in reality it's built on cooperation between those departments.
Normally target account lists are generated in response to an annual request for reps to provide a list of their targets as part of the planning sequence. That list gets filed somewhere by sales management and maybe discussed in a periodic meeting. It's not generally, though, the object of sustained, rigorous execution.
But worse, the ad hoc way in which the lists are created means they're often of little value. Typically comprised of the biggest names or largest market cap businesses in the area, they may or may not be likely prospects. Maybe the best prospects (shortest sale cycle, highest margin, highest lifetime value, highest NPS respondents, etc) are all clustered in certain industry, company size and private ownership characteristics. If that's not understood, and then mapped to, then targets are silly.
It's a complex process - and one which might be taxing, albeit familiar, to SaaS companies but is often foreign to capital machinery manufacturers.
How does HubSpot help manufacturers with ABM?
Let's be clear; it doesn't do the thinking for you. Management, marketing and sales are going to have to collaborate on defining the ICP and agreeing on appropriate resources.
Once you done that, though, HubSpot's ABM tools facilitate the scoring, identification, and prioritization of accounts according to the ICP. Using a "workflow" - an automated database process - HubSpot will look at account information you've provided along with publicly available enrichment info which the software provides automatically (e.g. size, public vs. private, etc.) to identify those that match the profile. Then you can tag accounts with tiers for ABM activity.
From there you can nudge your team to research and add contacts in roles common to the buying team, and create campaigns of content, knowledge and omni-channel (email, phone, direct mail, paid ads, social media, sales video) outbound sales.
The point is, you can create manageable, measurable, repeatable target account sales processes to proactively build your new logo business to reduce the repeat business concentration risk many machinery manufacturers have identified recently.
Contacts vs. Contacts
One of the least productive conversations around marketing automation software is the process of trying to delete contacts to avoid paying surcharges for contact counts.
Contacts whose email addresses have bounced, or who are targets for your firm but not opted in for marketing email are important to track. But it's frankly offensive to have to pay surcharges to keep them in your database.
That's the strange contrast between marketing automation software - which charges for software and contacts (and embeds email service and other features) - vs. CRM which charges per user seat without contact constraints.
When they categories were distinct, it didn't create conflict. As they merged (Salesforce.com purchase of Pardot - now Salesforce.com Marketing Cloud - and HubSpot's emphasis on CRM) it's created a friction point.
HubSpot has now addressed that by providing companies a way to differentiate contact types - those to which they'll market vs. those to which they won't - and to have up to 1MM non-marketing contacts in the CRM at no additional charge.
Now contacts can be managed based on business value rather than silly surcharges.
Cultivating Full Lifecycle Relationships
Falling aftermarket sales have alarmed many capital equipment manufacturers.
There are many factors at play. What's become clear to many companies as they try to understand the change is that they have precious little proactive engagement with the full range of contacts that manage this part of the machine lifecycle.
The structure (actually, the absence of structure) of systems reflects this.
CRM (for those companies that use one) has contacts and some recorded activities from during the 6-24 month sales cycle, and perhaps a bit of the project management and commissioning process.
Typically an ERP holds the information on the machine construction - supplemented by some database or collection of spreadsheets with additional details like software version, component SNs and other machine centric details.
The ongoing support activities are often captured in contact details and communications within peoples' Outlook files and notebooks on their desks, while aftermarket orders are captured in a different order entry system.
Is it any wonder there's no continuity in the ongoing relationship? And therefore, should we be surprised that when we see aftermarket sales start to droop (with the outsized bottom line impact of falling high-margin sales) that it's hard to put in place steps to arrest that fall? Or even to collect data to analyze to understand what's happening?
What's the solution?
"Systems" that pull those threads together.
But off-the-shelf systems rarely do, and the prospect of customization is one that most companies have learned is challenging out of the box, and virtually impossible to support long-term.
HubSpot has dramatically simplified that with the addition of "custom objects."
In short, a custom object is a category of information to track - often relative to others. Contacts, Companies/Accounts, Deals/Opportunities, Products, and Tickets are common standard properties.
But they're inherently limiting.
For instance, think about what changes when we add "Machine" as a custom property.
Now we have the ability to see the tickets, service trips, parts orders, warranty details, controller type, software version, install date, etc. etc., by machine, in a single place relative to the contacts involved in the procurement, and later the maintenance of that machine, the ticket history and the service history.
If we add a custom property for "Service" we can now track the types and amounts of service by machine, contact, company. Which machines have factory PMs and refresher training vs. nothing? How does that correlate to the ticket history and parts orders?
A custom property for "Contracts" provides easy management and visualization of service agreements, preventative maintenance parts subscriptions and more.
Companies that sell through sales channel (reps, dealers, distributors, agents) can benefit from a "Partners" object which facilitates deal and customer registration, pipeline forecasting, service delivery tracking and more.
Taken together these related objects (and others which might be unique to your business) let you understand what's happening, devise and execute tactics to improve results, and save time spent researching (instead of one place for warranty expiration date, another for the last rebuild quote, another for the open service requests) and improves the quality of the customer experience.
In addition to reporting, they support robust automation for internal and customer facing communications, tasks, deadlines and more.
The beauty of HubSpot's solution is that it's all accomplished with the simple user interface that's easily customizable without IT or special skills.
And HubSpot includes great, readily available and generally domestic technical service as part of their products with no separate support agreements required.
Software Engineers Haven't Run Machine Companies
But....there's a big caveat.
Trying to bend proper capital equipment sales and support process to meet software limitations is silly. Similarly, replicating silod processes in new systems is absurd.
And IT folks and software sales engineers that haven't carried P&L, don't make decisions on carrying costs of slow moving spare parts, haven't had to have embarrassing conversations with customers because nobody can find documentation, and can't easily know who's got machines with components approaching EoL, don't understand what's required.
New changes in HubSpot software make it a potentially game-changing tool for machine companies - particularly in light of challenges related to growth and revenue that the pandemic has highlighted.
But it takes a special set of skills to help companies fully leverage it. Capital equipment sales, digital marketing, general management, digital transformation, strategy and customer support are all required. That's what Ed Marsh brings to industrial equipment manufacturers.
Maybe that's something we should talk about? Book at 20 minute online meeting now.