Practices for Pipeline Management-White Paper

W H I T E PA P E R Best Practices for Pipeline Management W H I T E PA P E R Introduction In today’s highly competitive and volatile marketplace, the ability to effectively manage the sales pipeline can have a profound impact on a company’s financial health. Examples abound of companies that either fail to realize—until it is too late—that they are going to miss their quarterly revenue number or realize that problems loom ahead and are unable to identify how to change course. The impact can be harsh on companies with insufficient visibility into their pipelines. Not only will companies that fail to meet quarterly expectations likely face the wrath of Wall Street, but they will often experience an equivalent amount of pain at the operational level as well. Sales forecasts, after all, serve as the basis for planning a company’s expenditures on everything from marketing and product development to new capital equipment. An inaccurate sales forecast can produce misguided corporate planning, hurting profitability. As the CRM market leader, Siebel Systems has helped thousands of companies of all sizes—in a wide variety of industries—improve their pipeline management processes. Pipeline management is defined herein as diligently forecasting the state of the business, diagnosing and pinpointing the specific problems affecting sales performance, and planning appropriate actions to fix any shortcomings. It may sound straightforward, but Siebel Systems has found that it is rare for companies to adequately address all three elements of pipeline management. In fact, most companies stop at the forecasting stage, and even then, the forecasts often prove to be inaccurate. This paper will discuss some common factors that impact a company’s ability to effectively manage the pipeline and focus on the following process and organizational best practices that can help companies overcome their challenges and establish a critical competitive advantage: • Have a clearly defined sales methodology • Capture quantitative and qualitative information about each opportunity • Focus on performance and effectiveness metrics • Develop forecasts from multiple perspectives • Translate forecasts into action INTRODUCTION 1 W H I T E PA P E R Challenges That Impact Pipeline Management Organizations today face tremendous pressure from multiple angles. Economic uncertainty and market volatility threaten companies’ ability to accurately develop and execute upon their business plans. At the same time, investors continue to exert pressure to increase profitability and manage costs, while competitors continue vying to win market share. Meanwhile, companies are dealing with their own increasing organizational complexity as they manage multiple sales channels, geographies, and lines of business. Along with this added complexity often come different forecasting needs and methods of revenue management. For example, some departments may recognize recurring revenues, while others recognize revenues on a fixed-fee basis—not to mention the multiple currencies that may need to be reconciled (often manually) as well. The inclination of companies to sell through multiple sales channels has also complicated the pipeline management process. Selling through a direct sales force, resellers, a telesales organization, or through the Web—or a combination of these channels—makes it more difficult to consolidate critical sales data into one forecast. Moreover, companies with broad, complex product lines often sell “solutions” that are comprised of multiple individual products and/or services—frequently resulting in the assemblage of teams of sales representatives that report to different product organizations. As a result, when it comes time to roll up a forecast from the field, the information may be scattered in multiple locations. 2 BEST PRACTICES FOR PIPELINE MANAGEMENT W H I T E PA P E R Challenges That Impact Pipeline Management Best Practices Market Complexity Organizational Complexity Sales Execution Complexity Key Performance Indicators Figure 1: Organizations today have multiple challenges that impact pipeline management. C H A L L E N G E S T H AT I M PA C T P I P E L I N E M A N A G E M E N T 3 W H I T E PA P E R Process and Organizational Best Practices for Pipeline Management Leveraging the experience from more than 2,000 deployments of sales force automation applications, Siebel Systems has documented some very valuable lessons for maximizing companies’ success in pipeline management. Have a Clearly Defined Sales Methodology Without a clearly defined sales methodology, sales representatives lack a common framework and language for assessing opportunities. For example, sales representatives in one geographic region may have a very different understanding of “qualified opportunity” or “80 percent chance of closing” than the representatives in another region. Moreover, some representatives may have a tendency to be either overly optimistic or pessimistic. As a result, even small differences of opinion or judgment within a sales team can negatively impact the accuracy of the sales forecast. By implementing a clearly defined sales methodology, organizations can eliminate inconsistencies in the way information is entered into a sales forecast and, hence, greatly increase overall forecast accuracy. Moreover, with a clearly defined sales methodology, sales representatives across the company will interpret pipeline data more consistently, which facilitates coordinated action. By standardizing on a CRM application such as Siebel CRM OnDemand, an organization can ensure that its sales representatives are consistent in the language that is used and in the type of data collected. Capture Quantitative and Qualitative Information about Each Opportunity In many organizations today, individuals on multiple sales teams create separate forecasts using a spreadsheet-based process. Qualitative information—for example, whether opportunities are in the early or late stage of a sale—is rarely incorporated into these forecasts. After the individual sales teams have completed their forecasts, a sales operations team at corporate headquarters manually consolidates the spreadsheets to develop a forecast for the enterprise. 4 BEST PRACTICES FOR PIPELINE MANAGEMENT W H I T E PA P E R At the end of this roll-up process—which can take weeks—organizations often find that their forecast is off quota, yet they have no information regarding the causes of the shortfall. As a result, management must go back to each sales group—via email and phone calls—to identify the various reasons for the gap. By the time the reasons have been identified, it is likely that a new set of issues will have emerged and the diagnostic cycle must begin anew. In many cases, management never gets to the bottom of the problem, and the quarter closes before a targeted action plan can be put in place. To overcome these problems, an organization must first have a single repository of opportunity data. This eliminates the need to manually reconcile disparate spreadsheets to create an aggregate forecast. Next, the company must capture both quantitative and qualitative information about each opportunity. Quantitative information includes data such as deal size and expected close date. Qualitative information includes information such as deal stage (for example, 1=qualified opportunity, 5=closed sale), key competitors involved in the deal, and the key decision-makers involved in a deal and their current feelings about the proposal. Having both quantitative and qualitative information at the individual opportunity level—stored in a central repository—enables organizations to diagnose problems early enough in the quarter that they can implement action plans that address the problems. Leading sales force automation applications enable sales representatives to easily capture and analyze the critical quantitative and qualitative data that is needed to accurately diagnose problems. By creating a standardized system for collecting this customer information, organizations ensure that the entire sales force is consistent in its reporting— allowing for much more accurate data analysis. P R O C E S S A N D O R G A N I Z AT I O N A L B E S T P R A C T I C E S FOR PIPELINE MANAGEMENT 5 W H I T E PA P E R Focus on Performance and Effectiveness Metrics Effective pipeline management demands that sales organizations focus on both performance and effectiveness metrics. While performance metrics—such as sales by region or revenue per product—are important, they provide only after-the-fact insight into the results of the sales period. Effectiveness metrics, on the other hand, enable a company to track—throughout the sales period—the specific reasons for sales performance. Examples of effectiveness metrics include the number of customers deferring their purchases, the average length of the sales cycle, and the win rate within a specific product line. Companies that monitor effectiveness metrics can obtain critical information during the sales period, which allows them to predict results and quickly execute strategic actions to improve performance. Balancing Performance and Effectiveness Metrics Sales Analytics Attainment Forecast Margin Market Share Win Rate Sell Cycle Length Opportunity Aging Pipeline Coverage Performance Effectiveness By Geography, Product, and Customer Segment Figure 2: It is essential to balance performance and effectiveness metrics to understand not only how the company performed after the fact, but also why the company is performing a certain way, in real time. 6 BEST PRACTICES FOR PIPELINE MANAGEMENT W H I T E PA P E R Through the use of robust sales force automation applications, companies can thoroughly analyze the wide range of performance and effectiveness indicators to better understand the causes of sales performance. This involves conducting comparison and trend analysis with current and historical data. Moreover, the leading applications can provide continuous, upto-the-minute analysis that enables organizations to change their sales strategies in real time. Develop Forecasts from Multiple Perspectives Too often, organizations rely only on the perspective from the field when developing their sales forecasts. As a result, they fail to recognize the broader issues and historical context that can add much-needed clarity to sales forecasts. To maximize forecast accuracy, organizations should assess forecasts from three perspectives: a field perspective, a pipeline perspective, and an analytic perspective. Siebel Systems refers to this approach as triangulated forecasting. The field perspective is created by asking sales representatives to submit individual forecasts based on the specific opportunities in their pipeline. This perspective is valuable because it provides management with a bottom-up view of current market conditions. The pipeline perspective is created by analyzing the number of opportunities in each stage of the sales pipeline. This perspective helps management assess the pipeline from an aggregate, top-down viewpoint. The analytic perspective is created by analyzing current pipeline data against historical trends, enabling the company to apply the knowledge gained from prior periods to the current forecast. P R O C E S S A N D O R G A N I Z AT I O N A L B E S T P R A C T I C E S FOR PIPELINE MANAGEMENT 7 W H I T E PA P E R Triangulated Forecasting Opportunity by Sales Stage Pipeline Assessment Organizational “Rollup” “Triangulated” Forecast History, Trends, and Projections Field Assessment Analytic Assessment Figure 3: The triangulated approach to forecasting provides a set of checks and balances that enables an organization to identify potential problems more effectively. The triangulated approach to forecasting provides a set of checks and balances that enables management to quickly identify potential problems. For example, imagine that a company’s field assessment indicates that the organization is on track to meet its quarterly revenue number. However, the pipeline assessment shows that 80 percent of all current opportunities are below Sales Stage 3 (where Sales Stage 5 represents a closed sale). Additionally, the analytic assessment shows that, at this point in the quarter, the company’s forecasts are typically 20 percent above final attainment. Taking all three of these perspectives into account, management would realize that the company is unlikely to meet its original forecast unless corrective action is taken immediately. 8 BEST PRACTICES FOR PIPELINE MANAGEMENT W H I T E PA P E R Organizations can facilitate triangulated forecasting through the use of applications such as Siebel CRM OnDemand, which enable multiple departments to develop their own forecasts using a central source of data. This allows companies to leverage several distinct assessments of their sales opportunities to facilitate deeper analysis. Translate Forecasts into Action Companies should not view forecasts as stagnant snapshots of the business. Instead, they need to use the forecast to inform real-time decision-making across all areas of the enterprise. Once a potential shortfall is detected, management needs to determine whether the underlying cause is related to weak demand, poor sales execution, or heightened competitor activity. Moreover, management must pinpoint whether the shortfall is linked to a particular sales region, product line, or customer segment. Once a company has diagnosed the cause(s) for the shortfall, it must develop targeted action plans that have specific owners and clear timelines. Consider an example of a software company, Telesoft, Inc., which has diagnosed its sales performance problems as follows: • It sees an $11 million shortfall in Europe due to price competition from Filasoft in the French and Italian healthcare markets • It correlates a $4 million shortfall in Brazil to a lack of software demand in the financial services industry Telesoft is able to translate its diagnosis into an action plan, which involves the following: • By the end of the month, Telesoft will announce pricing incentives in France and Italy for all healthcare customers • By the end of next week, all Telesoft sales representatives in Brazil must develop a specific plan for achieving 2X opportunity coverage within their financial services accounts P R O C E S S A N D O R G A N I Z AT I O N A L B E S T P R A C T I C E S FOR PIPELINE MANAGEMENT 9 W H I T E PA P E R Summary Managing the sales pipeline is one of the greatest challenges facing organizations today. In Siebel Systems’ experience, the organizations that address these challenges most effectively are those that establish a single repository of customer data and follow each of the practices discussed in this white paper: They have a clearly defined sales methodology, capture qualitative and quantitative information about individual opportunities, track performance and effectiveness metrics, assess the forecast from multiple perspectives, and develop targeted action plans. By implementing these best practices, organizations can greatly improve pipeline management and dramatically reduce end-of-the-quarter surprises. 10 BEST PRACTICES FOR PIPELINE MANAGEMENT W H I T E PA P E R Making Pipeline Management a Competitive Advantage Understanding the pain points in an organization’s pipeline management process is an important first step toward improving sales performance. To develop a clearer understanding of whether Siebel Systems can help a company develop a competitive advantage through more effective pipeline management, a company needs to address the following five questions about its sales operations: • Has the company implemented a common sales methodology across all sales channels? • Is it capturing information about individual opportunities? • Is it forecasting from multiple perspectives? • Is it able to analyze forecasts and specifically diagnose problems? • Can it translate analysis into tactical action plans? Organizations that believe they could benefit from Siebel Systems’ ten years of market leadership in pipeline management and would like to obtain more information or speak with a sales representative may refer to the contact information below. To speak with a sales representative: 1-866-906-7878 To review customer references for Siebel CRM OnDemand: www.crmondemand.com M A K I N G P I P E L I N E M A N A G E M E N T A C O M P E T I T I V E A D VA N TA G E 11 Siebel CRM OnDemand Siebel CRM OnDemand is a hosted CRM offering delivered over the Web and accessible from an Internet browser at a fixed price per user per month. Customers can deploy Siebel CRM OnDemand quickly, easily, and affordably, without any up-front IT investments. Siebel CRM OnDemand delivers complete sales, marketing, and service functionality; built-in customer analytics; virtual call center technology; embedded best practices; and world-class hosting services and support. Siebel CRM OnDemand is the industry’s first and only hosted CRM solution designed to work in conjunction with on premise Siebel CRM systems. Sharing a common data model with Siebel 7 applications, Siebel CRM OnDemand offers an easy migration path to on premise Siebel CRM systems. 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