It's Not Luck (32 page)

“Good morning,” Stacey starts.

“Good morning,” she tries again. It takes a little while until the room quiets down.

“Here is Alex Rogo, our executive vice president,” Stacey introduces me. “He is here because he believes in the future of Pressure-Steam. He believes that it’s within our power to prevent it from being dismantled. Yesterday, Alex sat with the two senior board members to buy us time. He persuaded them that there is still a chance and succeeded in stopping all negotiations to sell our company, for the time being.”

Some sporadic claps.

Will Stacey back me up? Will she grab the baton? If she doesn’t, we are going to have another severe setback. A setback that we cannot afford. Early this morning I decided that I have to gamble on her. She can do it, no doubt. The question is, will she?

“Let’s hear what Alex has to say to us.” Stacey sits down. It’s my turn to stand up.

I look at them. They are confused and defeated. I’ll have to start by giving them the overall picture. But I must be careful to present things as they are, a pep-talk would be devastating. I also know that I must wake them up to take actions. But how?

“I am from headquarters,” I begin. “For me, numbers talk, especially the green numbers. All the companies in the diversified group have improved substantially in the past year, but none are doing well. They improved from heavy losses to roughly break-even, but what we are looking for is profits.

“UniCo needs money. UniCo needs money badly. None of our three companies is bringing in any money to speak of. It’s no wonder the board decided to sell the diversified group. It’s business. It’s hard, plain business.

“About three months ago, the board decided that all three companies were to be put on the block. All were under threat of being, in one way or another, destroyed. There is no way we can reverse the board’s decision. There is only one path open, to improve performance fast. To improve performance to the extent that no new owner will mess around with the way the company is being run.

“For that we need to increase profits. Not by ten percent. Not by a hundred. Not by five hundred. Each company needs to increase its abysmal net profit to staggering numbers.

“It is impossible to do it by cutting costs. It is impossible to do it by working harder. You probably think it is impossible to do it, period.”

At last I get some response. Unfortunately they are agreeing with my last statement.

“The only way to do it is to find new, smart approaches to increase sales.”

I don’t need to be a super expert to read their body language. If there was any hope left in them, it’s dissipating.

“Listen,” I demand. “One of your sister companies has already succeeded. Two months ago they were forecasting nine hundred thousand dollars net profit for this year. Now it’s clear that they are going to make well over ten million. No, UniCo didn’t give them a penny for investment. No, their market didn’t improve. They have done it themselves. They constructed a new, unconventional approach to the market.”

I stop to let them digest, and then continue.

“I Cosmetics was in a worse starting position than you are. Last year they lost almost a million dollars. This year their forecast was to break even. Now they, too, have found a breakthrough in marketing. Everyone is sure they will deliver over thirty million dollars net profit. You can imagine that in the rest of the diversified group, no one is now afraid of losing their job. They are secure.

“Now it is your turn. You must find a marketing breakthrough in your industry. You must think unconventionally.”

They look at me with poker faces. I can feel the cold front.

No wonder. They are beaten. Speeches and references will not make a difference. They are beyond this stage.

They need to see a clear and tangible way out. They need to see their marketing solution, and they must believe that it’s within their power to implement. Otherwise they won’t even lift a finger.

“What is preventing you from getting more sales?” I ask. Nobody volunteers an answer. I try again.

“What are the major complaints of your customers?” This is starting to be embarrassing.

“What demands do your prospects make?” I don’t give up. “What do they demand in order to place an order with you?”

“Cheaper prices,” comes the answer from several places. They are starting to enjoy my discomfort. They enjoy putting the big boss from corporate, who doesn’t understand anything about their real world, in his place.

I cannot even get their market UDEs. I’ll have to try another tactic. They take some distorted pleasure in showing me that there is no way out. Maybe if I can construct their cloud it will help? Maybe, if I’m able to bring them to agree on their cloud, I can use it to break out a solution? Fat chance, but what do I have to lose?

“Cheaper prices, I see. And what will happen if you do reduce prices?” I start to work on their cloud.

“Nothing,” Joe, the VP of sales, bluntly answers.

“Why?” I ask him.

“Because the competitors will match our prices on the spot.”

“So something will happen. Our profits will go down.” They don’t even bother to smile.

I switch on the overhead projector, saying, “The objective is to ‘Increase sales.’ In order to ‘Increase sales,’ you must ‘Respond to the prospect’s needs.’ Which means you must ‘Reduce prices.’

“On the other hand, in order to ‘Increase sales,’ you must ‘Take actions that your competitors cannot immediately imitate,’ which definitely means, ‘Do not reduce prices.’ ”

I look at the image projected on the screen for a moment, giving them a chance to let it sink in, before I turn to them. “Is this the case?” I ask.

“Yes,” Joe answers quietly.

“I am asking all the sales people here, is this your conflict?”

“Yes,” they all answer.

“Tough problem,” I admit. “A very tough problem. Joe, will you come help me?”

He stands up reluctantly. “Help you do what?”

“Help find out if there is any way out of this box.”

He twists his lips in disbelief, but comes to the front.

“Joe, which part of this cloud do you dislike the most?” I ask.

He takes his time examining the cloud before he answers, “I don’t have any quarrel with the bottom part. . . . And I like to please our customers. What I definitely don’t like is reducing our prices.”

“Does everybody agree with Joe?” I want to make sure that they are all in on it.

Some say yes. Others nod.

“Fine,” I acknowledge them. “Let’s expose the hidden assumptions. In order to ‘Respond to the prospect’s needs,’ we must ‘Reduce prices,’ because . . . Come on Joe, because . . . ?”

“Because that’s what they ask for,” Joe completes the sentence.

What an answer. “Joe, don’t avoid the issue. Try to relate to the prospects’ needs.”

He doesn’t like my remark. Salespeople are always supposed to relate to their prospects’ needs. A legend.

“Reduced prices is what they need,” he says in a formal voice.

“Why?” I play the ivory tower executive.

“Because almost all our clients are under financial pressure from corporate. They are industrial companies. They are like us. Always under pressure from corporate to improve on their financials.”

He still has enough spirit to fight me. That’s good.

“Now we are getting somewhere,” I pretend not to notice his cynicism and turn his words into a clearly verbalized assumption. “In order to ‘Respond to the prospect’s needs,’ we must ‘Reduce prices,’ because ‘The only way to respond to the prospect’s financial pressure is to reduce price.’ That’s what you said?”

“What our clients want is that we’ll reduce prices,” he repeats to himself. “That’s for sure. But if we listen to them they will try to put all their financial burden on us. You know that some of our clients want us to give them spare parts on consignment. Can you imagine such guts?” It’s apparent that Joe is irritated with the whole subject.

He’s not cooperating, but I see a way to use what he’s said. Maybe it’s not fair, but we have to make progress. I look at Joe, at the cloud and then turn to face the group. “So Joe doesn’t think that our assumption is valid. Reducing prices is not the only way that we can respond to the customers’ financial pressure. For example, as Joe said, we can respond to their financial pressure by giving them spare parts on consignment.”

Joe is too flabbergasted to speak.

Phil, the sales manager for the East Coast, can’t take it any longer. “But sir, what’s the difference? Isn’t consignment just another way to reduce prices?” If it weren’t for my position, he would have been more blunt. That’s for sure.

“Phil,” I patiently say, “there is a vast difference between reducing price and giving spare parts on consignment.”

“I don’t see it,” Joe returns to the battlefield.

“Let me demonstrate it by an example. Suppose that a client holds one hundred thousand dollars worth of spare parts, and he uses, on average, about ten thousand a month.” I write it on a transparency. “A typical medium-sized client. What will be the financial impact on the client, if we reduce the price of spare parts by ten percent?”

“That will be a disaster,” Phil cannot restrain himself. “We’ll lose income, and I don’t think that we’ll increase our spare parts, sales by even one unit. Are we really going to do that?”

“We are only going to do things that make business sense,” I assure him. “At this stage we are just trying to answer your question, what is the difference between reducing price and consignment? You claimed that there is no difference. I claim that there is. Shall we find out?”

Nobody is happy. I hear murmurs of “Academic discussion.” “We shouldn’t waste our time on that.” “Let him continue.”

I ignore it, point to the numerical example and repeat my question to Joe. “What will be the impact on the client’s finances?”

“If we reduce our spare parts’ prices by ten percent, then we’ll get one thousand dollars less per month. That’s all. It doesn’t look to me like a sensible business decision.” Joe insists on not looking at it from the client’s point of view.

As long as I do not bring them to see their offering from the market’s perspective, we don’t stand a chance of developing anything meaningful.

“In other words,” I rephrase his answer, “the client will have a direct positive impact of one thousand dollars a month on his profit and the same for his cash. Now suppose that instead we offer—from now on—to give him spare parts on consignment. What is the financial impact? On the client, not on us.”

Joe doesn’t answer.

Phil says, “For the impact on the client’s finances we have to ask his comptroller.”

I ignore him and continue to talk to Joe. “Joe, if we switch to consignment, what must happen? The first month the client takes from his inventory the equivalent of ten thousand dollars. We replenish it, but on consignment terms. The result is that the client improved his cash by ten thousand dollars and reduced the inventory he holds on the books by the same amount. This means that our offer is very attractive to him, much more than giving a ten percent price reduction.

“Now the month after that, the client . . .”

Joe can’t take it any more. “Yes, our offer is very attractive to him. No wonder, his cash improves by ten thousand dollars, our cash suffers by the same amount. His inventory is reduced by ten thousand, ours went up by the same amount.”

“Not correct. Steve?”

Steve, Pressure-Steam’s controller, answers as I expected. “Our inventory will go up only by two thousand five hundred dollars. That’s the value that we carry on our books. We don’t carry inventory at sales value.”

“So what.” Joe is very upset. “Excuse me, but if you are going in this way, why don’t we give the client the original equipment on consignment as well?”

“Interesting idea,” I calmly say. “That would solve his problem of an investment budget.”

“But . . .” Joe is out of words.

“It will also enable the client to improve his return-on-investment. His corporate would love it. And if your prospect belongs to a company like ours, you’ll have a really attractive offer, since it doesn’t put any immediate demand on his cash.”

“Are you joking!”

“No, I’m not joking,” I answer dryly. “I’m just examining what is attractive to our prospects.”

This pushes Joe over the edge. “Attractive! I can tell you many things that are attractive to our customers. The problem is that none of them make any sense for us.”

“Give me an example.”

“If you want something really attractive,” Joe doesn’t hesitate for a second, “give the customer everything. The best would be if we own and run the customer’s needs for pressure steam for him. This is ridiculous.”

I stare at him. For a long time. Here is the answer. So simple. Can it be?

He starts to fold under my gaze.

Suddenly Stacey speaks up. “Joe, repeat what you just said. Exactly, word for word.”

“If you want to be attractive to the customer, let’s run his pressure steam needs for him,” he says in angry desperation.