Transcript
brian: Hello and welcome to another episode of Close Mode, the enterprise sales show. I'm Brian Dietmeyer CEO of Close Strong. home of Precision Guided Selling. And today, I'm more than legitimately excited to introduce you to Frank Cespedes
brian: Frank was a managing partner of a professional services firm for 12 years. he's He sits on board of consumer goods, industrial products, services companies, PEs, VCs, author of six books. And in fact, here here are two of my favorites of Frank's books right now. i'm going to talk a lot about how these influence my thinking.
brian: know, Gartner called one of his books a must read. Forbes said perhaps the best sales sales book ever. that That's quite a statement, Frank. Frank is also a senior lecturer at the Harvard Business School.
brian: With that introduction, Frank, welcome to the show.
Frank Cespedes: Brian, thank you. It is really and truly a pleasure to be here. And I don't say that just because obviously that's the sort of thing you're supposed to say at the beginning of sessions like this. I mean it.
brian: Thank you. Well, and today we're going to be talking about executing strategy at the deal level. And for for our listeners, I was telling Frank this before the call and on previous calls he and I have had that I read Aligning Strategy and Sales a while back.
brian: And it influenced my thinking so much so that the this business Clothes Strong that we're building is is highly tied to the problem that that Frank ah ah sort of laid laid out in this book.
brian: So, you know, I and want to talk a little bit about this notion of connecting strategy and sales. One of my board members and advisors, Jim Dickey, yeah said this to me about a year ago. where He's like, you know, what companies make these strategic shifts.
brian: they They might build the capabilities. Marketing might build a deck. They announced it at SKO. And then on Monday, customers go back to buying the same way they bought last week. Sellers go back to selling things. the same way they sold last week. And and again, like I said, this is this is the conduit that i've I've tried to build is to make this connection. So we're going to talk about that, but I want to start high level if that's okay first. You said something to me last week about this thing of of executing strategy at the deal level.
brian: is more important. and yeah And you talked about the cost of capital and interest rates elevating the importance of this subject. So can can we start there? Why has it made this more critical?
Frank Cespedes: Well, I mean, if you think about the times we've been living through after the financial crisis of 2008, we lived through almost 15 years of record low interest rates. In fact, in real terms, after inflation, they were negative.
Frank Cespedes: That's what allowed you know the venture capitalist firms to throw money adventures that did not make any money and some went public and still haven't had a positive bottom one line because of that lower cost of capital.
brian: Yeah.
Frank Cespedes: Those days are gone. You know, obviously they're gone. And ah ah when interest rates go up, when cost of capital goes up,
Frank Cespedes: you do have to worry about the alignment issue that you mentioned. And the reason, and let me just say the current last few months, you know, the the uncertainty, and I mean the radical uncertainty surrounding tariffs, surrounding the decision makers, do they really know what they're doing?
brian: Yeah.
Frank Cespedes: All of that lengthens selling cycles. interest rates up, cost of capital goes up, time to cash is later, that puts a lot more pressure, not only on lead generation, but lead qualification.
Frank Cespedes: You've got to identify false positives sooner rather than later.
brian: Yeah.
Frank Cespedes: And any false positive has to be one that doesn't align with your strategy, assuming you have a strategy. that That's what I was trying to get at.
Frank Cespedes: That's why it is very, it's always important, obviously, but it's very important in the current environment.
brian: Yeah.
brian: Yeah. It's, it's a, and, and grad school, it's about the only thing I remember from economics, Frank, is this, these, these, the macroeconomic shifts that are driving the, the micro execution that we're doing at the deal level. And I loved when, when you talked about that a couple of weeks ago. So when, when you wrote a aligning strategy with sales,
brian: What was your motivation? What were you seeing? What problem needed to be solved? What, what, yeah, what pushed you to write that book?
Frank Cespedes: Well, I mean, yeah basically two motivations. I mean, since the time I started in academia, you know, my my my area of ah ah research publication was distribution, distribution channels. That inevitably gets you interested in sales.
Frank Cespedes: But after 10 years in academia, I left with some others. We started a business. And as I'm sure you've discovered, b Brian, once you've got to meet payroll every month, that increases your respect for sales.
Frank Cespedes: So that was motivation number one.
brian: Yeah.
Frank Cespedes: I get lucky in business. We sell. I go back to Harvard Business School. And I simply saw a gap. There are many, many books and articles about strategy.
Frank Cespedes: It's not like the world is breathlessly waiting for yet another book about strategy. And there are also many, many books and articles about selling.
Frank Cespedes: But if you look at the link that you and i are talking about, there's virtually nothing there.
brian: yeah
Frank Cespedes: The strategy books talk as though sales doesn't exist.
brian: Yes, yes.
Frank Cespedes: And the sales books basically talk at the level of the individual salesperson making a pitch, not linking it to what drives enterprise value.
brian: Hmm.
Frank Cespedes: So, you know, those were my motivations. One is in the real world, I saw how important it is. And secondly, like a good academic, you you figure out where the gap is and you try to fill it with with good empirically based ah ah research.
brian: Yeah. Yeah. and And I think that's one of the things I liked about it is is the strategic and tactical thought simultaneously. And I agree with you. ive And maybe that's the reason before I met you that this book resonated so strongly with me. You you mentioned in the book that a really simple definition, and tell me if I got this wrong, strategy is kind of where we want to go and tactics are how we get there.
brian: You also mentioned that salespeople often sell what's easiest and not strategic. Why do you think it's so hard to get that behavior change to execute that strategy at the deal level?
Frank Cespedes: Well, I mean, a couple of reasons. One is sales is a performance art. All right. I mean, that's the bottom line. and that means it's about behaviors.
Frank Cespedes: It's not simply about attitude, although that that helps. It's not about dress for success, although depending on the sales context, that can help. But at the end of the day, selling is about what people say or don't say, what they do or don't do.
brian: Yes.
Frank Cespedes: And behavioral change, we know from lots and lots of great research for decades, is different than the classroom, right? in Knowledge acquisition and behavioral change are linked, but they are not the same thing. And behavioral change is tougher. So that's that's one reason.
Frank Cespedes: The other is, and I i find that executives... in effect, ah ah sometimes ignore this basic fact about their companies. we We've got to step back every so often and remember in virtually all companies, how important the go-to-market sales channel is.
Frank Cespedes: So many other organizational decisions depend on sales forecasts and the ability of whoever's selling to actually make those revenue forecasts, hiring decisions, capacity decisions in operations, et cetera.
Frank Cespedes: As a result, the pressure on sales is always make your numbers, right? And the metrics reinforce that, make your numbers quarterly, monthly, sometimes even weekly.
Frank Cespedes: As a result, change especially difficult in sales and marketing. Now, sales and marketing people always talk a good game about innovation and change. They talk hip, they dress cool, but there's a lot of inertia there because of the metrics and the pressure.
brian: yeah
Frank Cespedes: They tend to stick with the devil they know. That's how companies get disrupted. But it's not because of their genetic makeup, Brian. It's because, frankly, how important they are in the organization.
Frank Cespedes: And ironically, that predictability expectation does not exactly lead to change and innovation.
brian: Yeah, I wonder. Frank, as ah ah as I have this discussion with people, ah ah there's two areas I want to ask you about. One is, i'm wondering your reaction to this.
brian: I feel like this notion of a rep's job now is not selling stuff. it's It's solving customer problems, of course. It's always that. But it's executing strategy.
brian: like to To me, this elevates the role of the rep to say, your job, here's here's where we're going, and your job is is to execute strategy now, execute company strategy. and And I'm wondering how how you feel about that. I feel like it elevates the role of the rep.
Frank Cespedes: i well I agree with the both things of what you're saying. You know, this notion that somehow sales as problem solving is something we only discovered in the last five years.
Frank Cespedes: That's nonsense, right? we
brian: Right.
Frank Cespedes: That's always been part of what good selling is. And I agree with you about sales and executing strategy. In most companies, you know you you know the data from the book that you so kindly ah ah mentioned.
Frank Cespedes: In most companies, sales is by far, nothing else comes close, by far the most expensive lever of strategy execution.
brian: Mm-hmm.
Frank Cespedes: So that's what they get paid for. But it's got to be a two-way street. At the end of the day, real knowledge is at the account level.
Frank Cespedes: you know it's what I tell my students.
brian: Yes.
Frank Cespedes: Markets in the history of business have never bought anything. Only customers buy. Value is created or destroyed out there in the marketplace with customers and that local knowledge, to use the academic term,
Frank Cespedes: generally resides up here in the salesperson, not it some you know not with some guy or gal at headquarters looking at a spreadsheet.
brian: Yeah.
Frank Cespedes: So it's got to be a two-way street. that that's That, I think, is is is the the leadership a challenge and responsibility.
brian: Yeah. I wonder how you how you feel about this. Again, this is kind of a follow-up to the the previous question that when I have this discussion with people and I mentioned to you earlier, i have I have your book cover in every presentation I do to investors, to customers, because that's this the problem we're solving for is is executing your strategy. I find that I need to almost define this for people because i think as to to the point you were making, there's a lack of thought even about this notion of linking linking these two so direct. and And one of the ways I try to make it actionable for folks is saying, look, you've you've got a broad corporate strategy, might involve some M&A stuff.
brian: Sales has nothing to do with that. You've got a sales strategy or go-to-market strategy. And it's not even that whole thing. There are pieces of strategy that will not come alive until... a human changes behavior at the deal level. Is that is there a better way?
brian: Because I feel like we need to net this out, right, to make it tangible for people.
Frank Cespedes: Yeah, no, I think I agree with that.
brian: Yeah.
Frank Cespedes: and I think, again, I think your phrase deal level is is a way of not only making actionable, but tangible what I said. Markets don't buy, only customers buy.
Frank Cespedes: That's the deal level.
brian: yeah
Frank Cespedes: The other thing I would say, and and this is sort of a dirty fact about business that I think people ignore, There's a reason that you've got to educate smart, well-educated executives about this. I had a colleague here at Harvard Business School, Julie Wolf, she did some great research. She looked at the C-suite in the Global 1000 over the last 25 years.
Frank Cespedes: And what she found is that on average in these firms, the number of executives reporting to the CEO had doubled twice as many.
Frank Cespedes: But then if you ask yourself, who are these people? Where do they come from? What were they doing before they became senior executives? Actually, very few of them were general managers in the sense, Brian, in which you and I probably use that phrase, you know, someone running a line of business with P&L responsibilities.
brian: Hmm.
Frank Cespedes: Mainly they were specialists, right? The CIO, the CMO, legal counsel, you know, now data analytics or AI.
brian: Yeah.
Frank Cespedes: They had never in their previous career had sustained contact with customers. And that affects things when you're
brian: yeah
Frank Cespedes: basically doing one of the things every C-level executive gets paid for, and that is putting together market-relevant strategy. That gap is wider now than it was 20 years ago.
Frank Cespedes: That's one of the reasons that I think you run into the need to educate smart people about something that I think you and I would say, duh, isn't this obvious? It is not that obvious, these folks, because of the previous 20 to 30 years of their lives.
brian: Yeah. Yeah.
brian: Yeah. I was trying to sort of put, put some numbers associated with this problem of, of like what happens when you don't execute strategy at the deal level. And and Frank, I don't know if these were your numbers, so I apologize, but I, it's it's somewhere around and to tell me what, what you think of this, that like,
brian: half Half of strategy ends up getting executed. i think maybe even been worse than that. and And only 50% of the value promised in the strategy is ever delivered. How would you quantify the problem?
Frank Cespedes: yeah
brian: Is it worse than that?
Frank Cespedes: Well, I think you've got it pretty close. You know, the book Aligning Strategy and Sales at this point is almost a decade old. But the research in that book and the research I cite is very much in keeping with what you're saying. It is only a of a relatively small percentage of strategies that actually achieve the numbers that the executives say they're going to achieve. There's a heck of a lot of value that is left on the table.
Frank Cespedes: And if you look at why that is, at the end of the day, it's about our interactions with customers. I don't much care if we call that interaction sales or marketing or asparagus, but that's where value does or doesn't happen.
brian: Yeah. Well, you, you, I'll paraphrase here. the The kind of strategic imperative, you've said, look, if we don't have that behavior change, this this remains a vision on a PowerPoint deck in a boardroom.
Frank Cespedes: yeah
brian: And to me, to me that, and then you look at the impact of that, which is 50% of what we promise with our strategy is actually being delivered in terms of value.
Frank Cespedes: yeah
brian: So in in sales management that works, you talk about the role of frontline sales manager and executing strategy. Give give me your perspective on that, if you would.
Frank Cespedes: Well, they're they're crucial people.
brian: Yeah.
Frank Cespedes: in any organization because, to use the jargon, for better or worse, they have a multiplier effect, right? They affect multiple salespeople dealing with yet another multiple of accounts.
brian: Yeah.
Frank Cespedes: If they're good, the leverage on the upside is good. If they're bad, the leverage on the downside is bad. In most companies, that frontline manager is the key person for hiring salespeople.
Frank Cespedes: for allocating territories, leads, opportunities.
brian: Thank
Frank Cespedes: They often determine compensation incentives and so forth. So, you know, my advice to executives is when you got a good person in that position, you take care of them.
Frank Cespedes: Those are the people you want to nurture and keep. And when you got a bad one, make the change sooner rather than later.
brian: Yeah, this is when when we were building our company, in a week we interviewed 65 C-level revenue sales execs and and some sales enablement, revenue enablement types.
brian: And we heard over and over and over again, frontline managers just don't have time. I i meet yeah or speak with companies who who say, well, we're going to train our frontline managers to coach.
Frank Cespedes: and
brian: And it's like, that's that's not the problem. The root cause is They don't have the time. i don't think they're going to find the time. Is that fair?
Frank Cespedes: I don't know. I think that's right. I think... you know i In my career, and you know ah ah compare your experience with mine, Brian, I rarely meet the manager at almost any level, and especially in sales, he says, coaching, what a bunch of crap, I don't want to do it.
Frank Cespedes: I think they understand the importance of that, but it is a calendar issue. Now, let me say this is an area
brian: Yeah.
Frank Cespedes: where technology can help.
brian: Yeah.
Frank Cespedes: This is an area where you can free up a lot of time through smart use of technology and AI.
brian: Yeah.
Frank Cespedes: We don't have to wait you know for the next... iteration of these large language models, they already exist to the point where you can free up a lot of those admin tasks for managers and reps, and frankly, create more time for the highly impactful coaching and performance reviews.
brian: Yeah.
brian: Yeah. it It's, I rarely talk about my stuff on this show because I want to, I want to talk to you. But again, what, what we do is when the way we view the world is so interlinked that, that I almost can't help but to do it, but that, that is what we're doing. And it's funny too, because I, I showed a buddy of mine, Gary, who's, who's ah ah a VP of sales at a tech company, uh, kind of a deal summary of what it guided deal, pre-guided deal looks like.
Frank Cespedes: Yeah.
brian: And he said to me, Frank, holy blank, I could three to five X the number of deals that I could coach against if I had this deal summary.
brian: And what he said further was I spend 50% of my one-on-ones collecting the basic data.
Frank Cespedes: yeah
brian: Is it qualified, which you pointed out earlier? Are we talking to the right people about the right things? Can we compete? ah ah All of that can be delivered to a frontline manager. And and to Gary's point,
brian: I can three to five X that thing.
Frank Cespedes: Yeah, well, I think it's even more than that. I mean, you know, if you ask yourself the basic question about sales, how much time does the average salesperson spend in actual customer contact?
Frank Cespedes: And by that, I don't just mean making a pitch either you know via Zoom or in person.
brian: Yeah.
Frank Cespedes: I mean all forms of customer contact, email, demos, webinars. On average, it's about 30% to 35%. Now, if you can up that to 40%, 45%, 50% or more, not only is that a huge productivity increase, you know what your friend is saying, wow, three to five times,
brian: Yeah. Yeah.
Frank Cespedes: But in most businesses, better utilization there also increases the addressable market.
brian: And yeah, I,
Frank Cespedes: In other words, segments that were uneconomic now become economically feasible. That's it that's a major growth engine above and beyond the really significant productivity improvements.
brian: yeah and yeah i I read a stat the other day that 5% of deals in the pipeline are are touched in some way by a frontline manager. And, but the evidence is there.
brian: Like, and I think you make the point, I think you use maybe 50% of pipe. I think that's about the right number. You don't want a hundred percent of pipe guided or coached. You just want to, want to get to the top. So but the evidence is there that that that it makes a huge, huge difference.
Frank Cespedes: Yeah, but the only other thing I'd add, Brian, and again, I think, you know, this is a time, a calendar issue, but one of the things that's constantly surprised and to be honest, dismayed me in working with companies over the years, doing performance reviews,
brian: you
Frank Cespedes: is a very trainable skill. You know, most of the time when we talk about leadership, I sometimes feel I'm suddenly, I left the business school and now I'm in the school of theology, you know, a spiritual discussions.
Frank Cespedes: Performance reviews are a very, very trainable skill.
brian: Yeah.
Frank Cespedes: And a lot of companies don't train their managers in doing that.
brian: Yeah.
Frank Cespedes: And I think that is i think that's that's dumb because so much of the really relevant deal information is not in the CRM system.
brian: yeah
Frank Cespedes: That's notoriously noisy data.
brian: yep
Frank Cespedes: you know it's in It's locked up here in in the head of the account manager, and it only becomes visible and actionable when you do a good performance review.
brian: Right. So I often, and we we found this out in some primary research we just did, that there's a ah big differentiation between deal coaching versus skill coaching. You make a differentiation between coaching versus reporting. tell't Tell me, what's your view on that?
Frank Cespedes: Well, I mean, coaching is about what, again, getting back ah to the core alignment issue we're discussing, it's about the behaviors that we need to add value to our enterprise, right? That's what a good strategy does in our market. Again, there's no such thing as performance in the abstract. There's only performance in our market with our product at our prices.
Frank Cespedes: That's what coaching is about.
brian: Yeah.
Frank Cespedes: Metrics are lagging indicators. The metrics are about stuff that already happened. And, you know, one of the basic facts about business and humanity is you're not going to go back into the past.
Frank Cespedes: The past is history, as the kids say.
brian: Yeah.
Frank Cespedes: All decisions in business, all strategic decisions are about the future, not the past. That's what coaching is about.
brian: Yeah, i I feel like, you sorry, you just made me think of something that that makes this notion of executing strategy at the deal level even more important. Another one of my favorite books, Frank, alongside you is Rita Hunter McGrath from Columbia, wrote a book entitled The End of Competitive Advantage, which is a very sad title for those of us who sell for a living.
Frank Cespedes: Yep.
brian: But I think the point that she made was we used to have annual planning. We had our structural advantage and we'd leverage that structural advantage for a you know for the next year.
brian: and And what she says in the book, paraphrasing, is that everything's changing. Your value, competitors' value, customer needs are shifting. Maybe it's because of supply chain or some geopolitical issue.
brian: that our we now need to learn to compete on a series of short-term transient advantages, which means our strategy is shifting almost real-time. Frank, I spoke to an SVP of sales who said, I'm doing the equivalent of annual planning quarterly, and any one of those, including me, who's been a Fortune 50 VP, knows that annual planning usually shuts you down for a month.
brian: So I'm just wondering that that speed of change, it's what my advisor, Jim Dickey, calls selling at the speed of change. you know And I'm wondering... Like how you think this speed of change makes this problem that you wrote about 10 years ago, even more relevant today.
Frank Cespedes: Well, I don't wanna sound like the typical academic on the one hand this, on the other hand that, but on the one hand, I certainly agree about the importance of change.
brian: Yeah.
Frank Cespedes: Again, it is not the responsibility of the market to adapt to any company strategy.
brian: yeah
Frank Cespedes: It's the responsibility of the company to adapt to the market. And if in fact, what Rita and others are getting at is that call it what you want, product life cycles, market life cycles are accelerating. I would agree with that.
Frank Cespedes: There's data to support that. But change is perennial in business. You know, when I started at Harvard Business School, one of the required readings and strategy was the the the ah autobiography of Alfred P.
Frank Cespedes: Sloan, you know, the guy who turned around General Motors in the nineteen twenty s
brian: Yes.
Frank Cespedes: Read his chapter on change. If you substitute internet or AI for automobile, he's talking about changes that occurred over two to three years.
Frank Cespedes: right.
brian: yes
Frank Cespedes: So change has always been there. Agility is important, but my problem with the folks... that talk this way is that they come awfully close to saying because of the speed of change, therefore, you know, when it comes to strategy, as they say in New York City, forget about it.
Frank Cespedes: And I think that's a big, big mistake, a huge mistake.
brian: Yeah.
Frank Cespedes: It is difficult. to get good, sustained things done in business without a strategy. Now, does that mean our strategy is not going to last forever? And in fact, we've got to adapt it.
Frank Cespedes: Of course we do.
brian: Yeah. Yeah. yeah
Frank Cespedes: but But I think, you know, this talk about change and therefore throw out this, throw out that, I don't agree with that.
brian: yeah
Frank Cespedes: But that makes the mistake.
brian: yeah and and but Yeah, and I love what you were just saying. it it it's I think it's even more important now, but what's important is the way we think about strategy. It's not annual planning, that we need a strategy practically every quarter to say what shifted and what what do we need to adjust?
brian: And then the problem you and I talk about.
Frank Cespedes: Yeah, but but i go i'd I'd be even more blunt about this. And again, this is, I think, important recognize. Strategy has never been about annual strategic planning, ever.
brian: Right.
Frank Cespedes: And strategic planning in 99% of companies has nothing to do with strategy.
brian: Yeah.
Frank Cespedes: its It's deciding on the annual capital budget. right
brian: Okay.
Frank Cespedes: strategy, strategic planning and strategic thinking are not the same thing.
brian: Yeah.
Frank Cespedes: And you know strategic planning has always been something about the forms, et cetera. That's, I think, a basic confusion. And here I think good executives are smarter than the academics who point to that. Good executives know the difference between capital budgeting and the kinds of strategic choices and alignment issues that you and I are talking
brian: Yeah. Yep. Yeah. This, oh, I'm, I opened up with this and I'm going to close with this. I've been looking forward to chatting with you and I've appreciated our conversations outside of this podcast.
brian: You've been unbelievably generous with your time and your ideas. And I know you're also getting over a many week long cold. So I appreciate you being here and, and, You know, Frank, i I think of this podcast as sort of a body of knowledge of this selling environment that we all live in.
brian: And and and I love that you added to it, like, so people people can come here and think about this particular subject, which is something we haven't talked about. And I can't thank you enough for, again, your time and your ideas and being willing to come here and share.
Frank Cespedes: Well, again, my pleasure. We'll do it again. We'll talk about, i don't know, pricing or hiring or something in addition that's relevant to the topic.
brian: exactly great
Frank Cespedes: My best wishes.
brian: Thank you, my friend.
