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Best Practices in Business Development
prepared by
David Fatlowitz, MBA
April 2014
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
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…
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Structure of Typical Sales Dept
(Company X)
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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
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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
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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
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$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…
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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 YearsMarket 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)
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Core Business Issues & Scorecard
#1 – maintain cash flow to finance ongoing operationsBusiness Horizon: close sales within 1 year or lessCurrent Grade: ~ B
#2 – growth, diversification & flexibilityBusiness Horizon: close sales within 2-3 yearsCurrent Grade: ~ C or D
Why?Lack of co-ordination across departments limits information flow & adaptabilityMay 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…
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Some Growth Possibilities• New market 1
• New market 2
• New market 3
• New market 4
• New market 5medical
aerospace
semiconductor
electronicsautomotive
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How to break into new markets
?
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How to break into new markets
Create a business development group…
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Business Development Group
A guiding mantra:
Key Lever: Virtual Teaming
“Everyone works in Business Development”
Focus: Opportunities with 2-3 year horizon
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Business Development GroupDefinition:• 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
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• 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…
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Creating Value in New Markets combining resources and capabilities creates new
competencies and beneficial outcomes…
New Competencies
Competitive Advantage
Value Creation
Above Average Returns
ValuableEx. save customers time to
market
RareEx. Industry expertise
Costly to ImitateEx. Highest production
capacity
Non-SubstitutableEx. 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…
•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…
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To Develop a Winning Strategy Apply Porter’s Five Force Analysis
(Example for POF use in fiber telcommarket)
•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
1: ?
2: ?
3: ?
4: ?
5: ?
BDG2
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What are the five key elements for successful organizational change ?
1
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1: STRATEGY
2: ORG STRUCTURE
3: INFO & DECISION MAKING (PROCESS)
4: REWARDS
5: PEOPLE
BDG2
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The five key elements for successful organizational change…
1
Source: Dr. Don Hambrick, Professor of Organizational Change, Penn State Smeal College of Business
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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
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5
New Organizational Structure with BDG
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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)
RegionalSales MngrRegional
Sales MngrRegional
Sales MngrsRegional
Sales Mngrs
BDGDirector
BDGDirector
BDGExec VP
BDGExec VP
BDM’sBDM’s
VP TechnologyVP Technology
Technology Dept
Technology Dept
Entrepreneurial typeswith good alliance building and deal making skills…
extensive market knowledge & BD
experience
well connected at CXO level with thought leaders & major industry players
BDG: Segmenting of Sales Activity
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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)
RegionalSales MngrRegional
Sales MngrRegional
Sales MngrsRegional
Sales Mngrs
BDGDirector
BDGDirector
BDGExec VP
BDGExec 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…
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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
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PM, RM, BDM Roles
Products Sales
Marketing Finance
(PM)POR
M1
M2M3
M4
M5
R2
R1 R3
R4
R5
PM’s Goal: Sell POR into as many regions & markets as possible…
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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
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PM, RM, BDM Roles
Product Lines Sales
Marketing Finance
PL3
M1
M2M3
M4
M5
ROR
PL5PL2
PL1 PL4 (RM)
RM’s Goal: Grow sales in ROR by selling all products into as many markets as possible…
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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
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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…
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requires embracing teamwork, shared decision making & overlapping responsibilities…
Products Sales
Marketing Finance
PM RM
BDM
Reaching the Pot of Gold…
Opportunity
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Business Development GroupNew Market Projects (near term targets)
BDG
NM 1
NM 2
NM 3NM 4
NM 5
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Business Development GroupNew Market Projects (near & long term targets)
BDG
NM 1
NM 2
NM 3
NM 4
NM 5NM 6
NM 7
NM 8
NM 9
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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
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$ 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 targetRev A = Today’s Customers Only
Rev B = Today + Tomorrow’s Pipeline
Rev C = Today + Tomorrow + BDG
Stretch Goal = $280M
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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)
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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)
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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
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Company X with New Org Structure
BDG
Sales
Finance
MarketingIT
Technology
Bi-directional
information flow
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End
