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A Guide to Implementing the Theory of
Constraints (TOC) |
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Sales Constraints & Mafia Offers We briefly mentioned sales constraints in the supply
chain section. A sales constraint
appears to be an external constraint – we can produce more than we can
sell. However, we also we learnt in
the introduction to the supply chain section that most external constraints
actually have internal solutions. In
fact they must have internal solutions as there is most often no other way
that we can influence the external environment. So, too, with sales constraints. We must find internal solutions if we are
to succeed. This page is not a how-to-sell page, but rather a
page that draws attention to some rather important research on selling that
shows that for larger sales the way in which we sell is most often a
considerable constraint. Nothing more
than a self-inflicted limitation on potential throughput. The research is by Neil Rackham (1) and
uses a scientific approach to the analysis of successful sales. The Theory of Constraints, of course, also
adopts a scientific approach to business and therefore we shouldn’t be too
surprised if there is some commonality and indeed synergy between these two
methodologies. So why leave this page until the very last? Why wasn’t it in the supply chain section
after the supply chain solutions?
Clearly if we have overcome our self-induced supply chain problems
then all we really have left are sales constraints. The answer is that before we could examine
sales constraints we really needed a true understanding of paradigms and we
really needed a true understanding of the Thinking Process. We have that now. We needed this understanding because we must make
some important distinctions that I believe have been muddied to date. We need to make distinctions between the
following; (1) Detail complexity sales within a
paradigm. (2) Detail complexity sales across
paradigms. In the past, in order to provide value, the detail
of selling the Theory of Constraints as a product or as a service has been
used as an example to illustrate the Theory of Constraints sales
process. This confuses many people –
we are using the process to illustrate selling the process. Moreover, the process that we are trying to
sell is the outcome of a new paradigm.
Phew! No wonder people get
confused. So let’s investigate sales
constraints from a generic point of view using the Thinking Process tools as
our building blocks. We will use these
building blocks to illustrate the process as we go. We will still eventually address the
problem within the problem; why Theory of Constraints presents a sales
constraint to itself. But along the
way I hope that a better understanding of some truly outstanding sales
research will become apparent. What, then, is a sales constraint? A sales constraint occurs when the
marketing has been completed and we have a client or customer – the buyer –
to whom we can offer real measurable value but whom we force to abandon the
transaction. Truly outstanding sales research sounds like an
oxymoron – but it’s not. It probably
sounds like that because true research into sales techniques is so very
rare. However, Rackham published the
results of research into successful large sales that is relevant to anyone in
the supply chain; the resulting methodology is called SPIN selling. While more recent “spin doctoring” in some
corporate and political spheres may have debased the acronym, don’t allow
that to detract from the message in this work. Rackham presented a simple sales model to explain
the typical sales process. Here is the
model.
The research found that in successful small sales
the two latter stages received greater emphasis. A small sale is defined as one “which can
normally be completed in a single call and which involves a low dollar value
(1).” Let’s show this preferential
emphasis and call it the small sales model.
It is drawn below.
Rackham found that successful tactics used in small
sales did not translate up into larger sales. Larger sales are characterized by a much
longer sales cycle, a much greater customer commitment, and an on-going
relationship. Maybe the differences
can be best summed up as not closing a sale but rather as opening a
relationship (1). Demonstrating features
and trying to obtain a close in a larger sale had the effect of causing sales
people to create their own sales constraints.
Sales people in successful large sales spend much more time in the
investigating phase or stage and in the demonstrating capability. Let’s call this our large sales model.
The research found that small sales and large sales
generated different needs. These were
called implied needs and explicit needs (1). Implied needs are; “statements by the customer of
problems, difficulties, and dissatisfactions.” In the language of Theory of Constraints
these are undesirable effects or “UDE’s.”
They are problems in our current reality. Problems that we would like to be rid of. Explicit needs are; “specific customer statements of
wants or desires.” In the language of
Theory of Constraints these are desirable effects or “DE’s.” They are potential outcomes in our future
reality. Problem symptoms that we have
got rid of, or that we have replaced with something that is more beneficial. Once we can see this mapping between Rackham’s work
and the Thinking Process then SPIN selling begins to look very powerful
indeed. We need to start describing
the argument using the Thinking Process as the building blocks. The number of implied needs in successful small
sales calls was found to be higher than in unsuccessful small sales calls –
in fact twice as many. In a small
sales call the buyer is well aware of the problems; the seller doesn’t spend
much time investigating these, they are small enough to be known to the
seller too – often implicitly. In fact
the seller concentrates on demonstrating capability – describing features,
and letting the buyer make the connection between the problem and the
solution. The seller then closes. One might argue that the buyer actually
made the sale. Let’s try and draw a model of a successful small
sales call.
Most often the solution to the problem will be a
simple product or service – something that the buyer currently does not have,
but that the seller does. Both the
problem and the solution are immediate both in time and space. The perceived value of the solution is
commensurate with the perceived cost or current loss arising from the
problem. Unfortunately this approach – demonstrating
capability and closing doesn’t work as the scale of the sale increases. It doesn’t work for two reasons; (1) The whole problem is no longer
immediate in time or space. (2) The price of the solution is
perceived as more than the cost of the perceived part-problem. Let’s draw a model.
In the model we have “deepened” the extent of the
problem symptoms in our current reality tree.
The buyer still knows many, but not all, of the implied needs. Some of the needs now occur in different
places or at different times, and although they may all directly affect the
buyer, the buyer no longer makes a full connection between the cause of the
problems and the resultant effects. The seller who may well see all of these cause and
effect relationships through experience with many sales may continue to
stress features which the seller now equates with increased cost of the
solution. A more expensive solution to
a problem that is perceived by the buyer to be smaller than it really
is. This is where the small sales approach
to larger sales begins to break down.
Some years ago I learnt that all buyers are
liars! Unfortunately I took this at
face value and thought that the idea reflected rather poorly upon the person
making the comment. What the speaker
actually intended to convey, but that I failed to understand, was that most
buyers don’t say what they really want.
Or, more to the point, most buyers can’t say
what they really want. Nonaka and Takeuchi describe the situation as
follows. “Most customers' needs are
tacit, which means that they cannot tell exactly or explicitly what they need
or want. Asked ‘What do you need or
want?’ most customers tend to answer the question from their limited explicit
knowledge of the available products or services they acquired in the past
(2).” In other words they can not
verbalize their intuition. As the sale
becomes larger and larger, so too does the difficulty in verbalizing the
underlying needs. This disconnect, in
time and space, between the individual problem symptoms becomes too great for
the buyer to make all the necessary re-connections. The SPIN model, through exhaustive research into
successful large sales, also comes to the same, but empirically derived,
conclusion. It recognizes the importance
in verbalizing underlying needs. Let’s
have a closer look at this model. The SPIN model addresses the deficiencies in the
small sales model by a different approach to the investigating stage and also
the capability stage. SPIN stands for Situation, Problem, Implication, and Need-payoff
(1). This comes from the questions
found to be successful in the investigating stage. We will examine this first and then look at
demonstrating capability later. Note
that the SPIN model only addresses the sale of a pre-existing product or
service, it does not address development of the product or service. In terms of the sales model the SPIN
investigating stage is as follows;
In successful large sales the seller develops the
implied needs to a much greater extent.
The seller probes the situation (defines the system) more thoroughly,
and then probes the problem. By
probing the problem more fully the seller is able to establish far more of
the problem symptoms – those that the buyer hasn’t thought to connect in time
or space. Let’s have a look.
However successful salespeople don’t stop at that
either. The research also found that
the number of questions probing for explicit needs increased substantially in
successful large sales. Remember explicit
needs are those about some future state – positive outcomes that the purchase
will bring about – the need-payoff.
Let’s add this to the model.
In successful small sales demonstrating capability
is achieved by showing features.
However in large sales this becomes one of the main causes of
resistance or objection. Again the
SPIN research found that successful sales people in large sales used features
in a different manner to successful small sales. Features in successful large sales are recognized as
one of two types; (1) Advantages – unrealized features;
features for which there is no expressed need. (2) Benefits – realized features;
features for which there is an expressed need. This is the second part of the SPIN model.
Once again the perceived value of the solution is
enhanced through the demonstration of capability without raising objection or
resistance by mentioning latent capability (advantages) to which the buyer
might perceive as an additional cost. Rackham proposed a rule to differentiate between
implication questions and need-payoff questions (or if you like implied needs
and explicit needs). He called this
Quincy’s Rule after the 8 year old who first described it (1). “Implication Questions are always sad. Need-payoff Questions are always
happy.” We could do well to remember
this rule. Sad questions are almost
always about undesirable effects (“UDE’s”) of the current reality, happy
questions are almost always about desirable effects (“DE’s”) of the future
reality. Just common sense
really. Something that 8 year olds
have in abundance. There is however something more important about
Quincy’s Rule. It allows us to
multiplex between DE’s and UDE’s. In
some cultures, in some specific situations, it can be difficult to get
UDE’s. I have seen situations where,
arms-folded, UDE’s were not forthcoming – a consequence of inter-factory
pride. And yet 3 days later the same
group spent an hour describing 20 or so DE’s – the explicit needs of the
future reality. The explicit needs of
the future reality – the happy questions, can then be inverted back to the
implied needs of the current reality – the sad questions. Let’s add this to our model.
The SPIN model is excellent in avoiding
seller-imposed limitations in the sale of large scale transactions. It addresses the limitations of porting a
successful empirical sales model for small sales into a different
environment. However, reading between
the lines, it appears that the SPIN model becomes less sufficient the more
intangible the solution is that is being offered. It is possible to train a stand-alone sales
staff using the model above. However,
what happens when the solution is a service, a rather expensive service, or
even just an idea? Rackham alludes to this when he notes that many
professionals can be quite effective salespeople (1). He ascribes this to their skill and
experience in diagnostic questioning.
Undoubtedly this is true, but I think that this misses a deeper
issue. Can you imagine what this might
be? Let’s have a look.
If we look at the SPIN model through a Theory of
Constraints lens then it is apparent that the model doesn’t address the
reservations and obstacles that are characteristic of layers 3 and 4 of the
layers of resistance. If you like, the
SPIN model addresses layers 1 and 2 only.
The SPIN model certainly makes sure that the sales person doesn’t
cause unnecessary objections about parts of the solution that the buyer
doesn’t need, but that doesn’t mean that the buyer won’t have reservations
about perceived negative ramifications, or that there won’t be perceived
obstacles – even if the buyer wants to purchase. In fact, if the buyer wants to purchase
then you can guarantee that these reservations and obstacles will arise. They should be recognized for what they are
– signs that the buyer is buying into the purchase. The ability to recognize and handle these
facets is a valuable contribution or extension to the overall SPIN model. It goes without saying – and therefore we need to
say it – that SPIN selling is the selling of detail complexity within
an existing paradigm. Let’s draw the
model again.
Using the SPIN model to overcome sales-induced
constraints is a valid mechanism for increasing throughput. But what if the detail complexity outcome is
the result of a different paradigm?
Here the rules change. This is
where Theory of Constraints applications get into strife when the SPIN model
is applied without thought. We have
only ourselves to blame. Once again we want to sell detail, the detail of the
solution to the buyer’s need. In fact
there will be little doubt that the detail of the solution can meet the
requirements of the detail of the buyer’s need. However, rather like the insufficiency
case, part of the solution will be incompletely understood. Let’s have a look at the model.
Even if the seller has very skilled professionals
who can show the cause and effect from the seller’s solution through to the
buyer’s desired results – in other words we overcome SPIN model insufficiency
– it is still very likely that we will not be able to overcome the obstacle
of “we don’t understand/believe the cause of your solution.” This is the buyer’s obstacle. And it is our problem. As sellers of this paradigm derived solution what
are we going to do? Maybe part of the response is that we can’t sell the
paradigm. We can only sell the
resultant realized benefits.
Essentially we must transfer the paradigm at no cost. Without the paradigm the resultant benefits
will not be realized. There is a
danger that the benefits may simply become unrealized advantages – features
that are expensive and for which the connection to the explicit needs becomes
lost. If we want to sell detail complexity across a
paradigm, then we must supply the effective transferal of the paradigm
first. There is no choice. If you think that there is a choice then consider
how quality as a solution was first evaluated in the U.S. It was first evaluated in cost reduction
terms – always. It was not evaluated
in terms of product competitiveness, or corporate competitiveness, or in
terms of increased throughput. The
existing paradigm blocked and (to a large extent) still blocks proper
understanding. There is nothing wrong with the SPIN methodology, we
should however be aware that it was developed within the cost-world
paradigm. Therefore we must be very
careful when using it to guide us in selling solutions from different
paradigms. To successful sell detail
complexity across paradigms, it may be necessary to use Mafia Offers. We have seen how assumptions about the
transferability of the sales methodology from small sales to large sales can
resulted in a self-imposed constraint on sales. A constraint, however, that can be overcome
by changing these internally held sales policies. But what happens when there are other
internal policies that also act as constraints to further sales? What can we do about these? Let’s no longer restrict ourselves then to just the
policies of selling, instead let’s expand our attention out to the policies
of the production and delivery and payment of the products or services that
we wish to sell. Let’s expand outwards
to these polices, and at the same time lets move back in from our indirect
sphere of influence over the buyer to the much more direct span of control
that we have over ourselves – the seller.
This is the essence of the Mafia Offer (3, 4, 5). Moreover, the Mafia Offer is no longer concerned
with only the sale of a pre-existing product or service. It may also be concerned with the development
of a product or service. In fact the
solution may be nothing more than the development of an idea that results in
a change that produces greater throughput from an existing sales stream. The underlying dynamic is that we don’t expect our
buyer to change; we must be the ones who change. After all, we have total control over
that. Well, actually, we might expect our buyer to change but it is probable that
the expectation will be short-lived.
Let’s have a look at the process in more detail
The buyer’s policy might well be within our sphere
of influence, but what is the chance of changing the buyer’s policy? Not much chance at all. That doesn’t mean that we shouldn’t try,
especially using the tools of the Thinking Process at our disposal. However, once we have exhausted that
possibility we should begin to have a look at our own policies.
It is important to remember that we need to know the
buyer’s problems and the buyer’s implications. Too often we will mistakenly confuse the
buyer’s problems with “our problems with the buyer.” These are not the same. There is a skill required here in being
able to stand back and look at the buyer’s problems dispassionately from our
own. Sometimes this is hard. Equally we must look dispassionately at our own
problems, once again being careful not to confuse them with “our problem with
the buyer.” Essentially we must
construct a current reality tree of the buyer and a current reality tree of
our own – the seller. Let’s have look.
Note that the model presented here isn’t of the
development of the Mafia Offer; rather it is of the end product. Layers 3 and 4 of the layers of resistance
have an important part to play in the internal development of the offer, but
they are not shown here. By using a Mafia Offer, we reach out to the external
constraint – our market – which we have failed to change and we change
instead. The buyer’s original policy
problem may still exist but it is more likely to have been mitigated or
removed by addressing our own seller’s policy problems. We are trying to affect the buyer, not
through our sphere of influence, but rather through our own direct span of
control – success is therefore much more likely. What happens then if our seller’s policy problem is
the result of a deeper conflict? What
happens if our seller’s policy problem is the outcome of a compromise to this
deeper conflict? Let’s see. |
