Telecommunication: Why are multi-million dollar deals hard to crack?

Large Telecommunication vendor corporations are increasingly facing a situation wherein they face few very large deals that make up for most of their business- old Pareto principle. This means huge risk to these organizations in terms of growing and retaining business quarter on quarter as more and more, few players in the market, compete for these few large deals. While, operationally these organizations seem to be equipped in terms of people, tools and resources, however from a sales perspective, this situation puts huge responsibility and focus on very thin sales organizations. These organizations make huge investments in developing and grooming their sales force, in the hope that all their investments would bear fruit when a transaction or deal happens. And glaringly those closer to these deals would tell you, that the picture is quite different, at the time when the bid happens.

A typical quarter 100M USD deal will require investment from pretty much the entire vendor organization and craft such a large deal from an individual’s perspective is more artwork than a science. While on the surface all activities might appear to happen as per the plan, however, anyone with a critical eye would see large gaps the way deals are executed. You may still win or lose a deal because your competition is equally bad or worse, however attributing these victories to assumed organizational capabilities or losses to just the price, is a trap that most leaders in these companies, knowingly or unknowingly fall into.

While creating shareholder value may not be the ultimate objective in these leaders’ mind, however leaving their personal success and thereby their organizations’, on a high degree of chance definitely concerns them. And despite their concerns, most might still be willing to go with the flow, not to cause any disruption and run the risk of jeopardizing any chance of success. Even with this benign approach, there are possibly some simple gaps that can be tackled effectively, with a very operational approach. The list is below:

No central intelligence on pricing.

Most close to the deal know that if they lose the deal then pricing will be blamed. And so the game begins even before work on large deal begins. The person who is the sales responsible starts to paint a grim picture right from the beginning that company pricing is at a premium over the competition. This is also the biggest worry for the top leaders, who on one hand have the responsibility to secure margins and on the other, have to negotiate on pricing at a stage of the deal when, the building blocks for the deal that are to be negotiated, are expensive by themselves. So any price cuts hit the margin.

Looking at it from an operations perspective, every large-scale deal in telecommunications is a built to order rather than the assembly line. So intelligent pricing of these deals requires a huge amount of intelligence on the vendor’s part to do market benchmarking of individual components to know market price, understand the scope in terms of what is needed of the customer and not asked, customer, region or worldwide strategy on pricing and so on. In most cases, all this is left to the intelligence of the local unit and the individual’s ability to cull this information from unofficial sources, which is more a reflection of personal heroics than a systematic approach. Pricing is also a regulatory and legal issue, so unless a company has a well thought of approach it will always be left to individual brilliance than a winning strategy.

The second issue with pricing is lack of skills in these organizations to price such large-scale deals. So in most cases, the price is a sum of parts of individual solutions and then aggregate margins. While a large part of the risks and benefits associated with a deal are expected to have been thought of by the solutions team, organizations can be really smart by benchmarking similar looking deals, lessons learnt from similar deals, manage cash flow assumptions on each of these components, reuse the already bought licenses, activation codes etc.
None of this happens today and the result is suboptimal pricing that kills the deal even before it goes to the negotiation table.

Hero culture in a knowledge economy and human insecurity

Most of these companies have a hero culture wherein top sales people are rewarded. The reality is that when a deal is happening, on the ground you need more than one person to contribute in terms of knowledge, relationships, connections et al. No one person, can effectively, be the sales responsible, and contribute fully individually as requirements of an effective individual for a deal are a combination of personal intelligence, technical knowledge, internal and external relationships, financial savviness, hard work, energy and enthusiasm, communication and negotiation skills and collaboration. Every sales person realizes the expectations on him and so everyone finds their own way to cope with it. Most build a shell around themselves wherein they pretend to know it all, steal from their peers and convince themselves after stealing that it was their own idea, underplay the importance of skills that they don’t possess, thwart people who they believe would be a potential threat to their recognition in future and so on. The price is a huge one for the companies. Most individual depend on the fact that they bring one or two very valuable skill or ability and thereby not just risk the deal but because of their short-sightedness, also their own career, by not acting in a way that enhances everyone’s chance of a success. This can also be called the pervasive sales culture in today’s corporations.

The other factor that is playing a key role in today’s sales person’s psyche is job security. Over the years, employees were expected till 60 and then retire. However, today’s corporations have a put a life of 3-4 years to sales roles. This has created a certain disharmony in a sales person’s professional and personal pursuits and this also reflects in the work style of the sales force. They put their personal interest over larger interest. Combined with this is also the issue of compensation structure. From a financial perspective, the risk/reward ratio now seems to be getting tilted towards operations and sales support role, where roles have certain longevity, compensation is only marginally lower- in fact in certain instances overall higher, making non-sales roles more lucrative. This is increasingly pushing top talent away from sales profiles, where a company would want to put its best people.

Technical complexity versus optimization

Most of the solutions required for large deals are very complex which are a combination of a lot of software, hardware and services. This volume of software, hardware and services brings in a lot of complexity. Theoretically, the problem is not very complex to solve however in reality given that information resides in different pockets of the organizations with different individuals and in even different parts of the world; makes it very complex to put all the information together and come up with a simple solution. And those who possess such a skill consider and behave with a lot of self-importance, making the solution process even more difficult. Different incentive structures, motivations, individual attitudes only add to the complexity of the problem. What is lost in this complexity of information pockets, individual attitudes, and complex solution is the ingenuity that is required to optimize the solution. Optimization requires intelligence and brains, and most of the teams and individuals avoid this harder problem and hide behind complexity.

A complex solution which doesn’t include the sharpness of optimized and smart solution is always more expensive from a technical and services point of view. By the time deal negotiations start, the deal is already lost somewhere in the complexity.

Lack of belief in the technical superiority

Organizations, both internally and externally are full of marketing material that claim their superiority. However, when the solution is being dimensioned, the teams involved, show a complete lack of trust in their technical superiority. This eventually reflects in their dimensioned solution proposed. It becomes very difficult to even argue with the sales team, on this topic as they know how to evade this discussion, by finding excuses or even making personal attacks on the people questioning them. It’s a complete break up of marketing with sales and a complete failure of all the investment that organization has made in internal training, knowledge sharing, sales development, and so on. Still, this phenomenon is everywhere and in every deal. An oversized solution which doesn’t capitalize on technical superiority is more expensive and this becomes another factor behind a deal-breaking even before the negotiations.

Organizational setup

Today’s matrix organization may have put accountability on the right heads, however, are these companies organized to ensure the same commitment from all needed and reward them suitably is a different story. When decision making with the customer is decentralized, getting the same level of commitment from group functions, local units and global units is very hard to achieve.

Also, the sales process may have been defined but decision making is not the only place where you need participants to nod their heads. What information do they have really to make a quality decision? Sales process has to ensure participation and commitment from the entire organization at every point.

These are just a few high impact points which if addressed can better ensure the result of a complex high value deal.

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