Discussions in
digital: Moving B2B companies into the digital world
Digital
has changed how B2B leaders meet customer demands, but not in all the expected
ways.
As digital continues to
disrupt every aspect of
commerce, B2B organizations face challenges and opportunities when they come to
terms with this new reality. In our latest Discussions in Digital podcast,
Dianne Esber, a partner in McKinsey’s San Francisco office focused on driving
digital growth, explores this topic with Robert Chatwani, CMO of Atlassian, and
Larissa Pommeraud, global general manager of emerging business for Art.com.
They are joined by Dianne’s colleague Brian Gregg, a senior partner who leads
retail marketing for McKinsey in the Americas. An edited transcript of their
conversation follows.
The impact of digital on B2B enterprises
Dianne Esber: When it comes to B2B
companies, what are some of the biggest areas of impact where you can actually
see digital as the driver versus
more traditional face-to-face interactions?
Robert Chatwani: We don’t even have a sales
force, so we rely really heavily on solutions partners and channel partners to
fill the role of the face-to-face-conduit to customers, particularly large
enterprise customers. Some 85 percent of Fortune 500 companies use our products,
and in most of those cases, the decisions about buying software are made within
the company, as opposed to a sale made by the CIO.
Part of that is driven
by the price point of our software, since it’s relatively accessible and often
doesn’t require a procurement team to actually be involved. We see opportunity
less around the traditional sales force driving our growth and more in
investing heavily in technology, data-driven personalization, and effectively making our marketing more efficient.
In instances where it’s
not a full-blown enterprise-wide implementation that needs the involvement of
the CEO and the CIO, I believe increasingly decisions about buying software are
being made in the depths of the organization. In those instances, I believe a
low-touch, high-efficiency business model is actually going to be a driver for
the next generation of growth for a lot of database companies. For a lot of
those companies, sales and marketing as a percentage of revenue ranges from 40
to 60 percent. That’s remarkable.
Larissa
Pommeraud: Art.com has grown up as
a purely B2C online buyer, and is really good and getting even better at online
marketing. But we do not have a sales force to speak of. I have to decide
whether to build one and follow the traditional model in the art and design
industry. They have a really old-school, rep-based model, so I would need to
create regions and territories and have people going door to door with sample
kits, and I just find it hard to believe that’s the best way forward in this
day and age.
The next generation of marketing: Harnessing humans and
machines
Brian Gregg: The ultimate leading edge
right now is when you combine science with human curation. I think of Stitch Fix, which has 200-plus data scientists
being thrown at what sort of combination should show up in your inbox based on
what you did last time. But in the end, a set of merchants is also curating
that based on what’s happening in the trends. The combination of those two
feels like a generation ahead of just letting machines do their work.
Robert Chatwani: It’s funny, because I have an
example of this trend that a friend of mine shared with me today. She works
here in San Francisco for Macy’s and was very specifically targeted with a
promotion from LinkedIn to do a complete makeover on her LinkedIn profile, so
perhaps they detected something. The offer was an event at a J. Crew store to
learn how to dress for an interview combined with a stylist to act as your
personal shopper. It also includes a makeup session where they’ll take your
headshot for your LinkedIn profile.
They’re also offering
three months of free LinkedIn premium access if you attend the event, which was
invitation-only. She was very specifically targeted based on demographics, but
it’s interesting because it’s a data-driven campaign that requires human
interaction offline. So I would have to agree that this combination of machine
and human coming together in that convergence is a remarkably powerful mix that
I think will absolutely define great marketing.
The impact of digital on B2B enterprises
Dianne Esber: We almost take for granted a
lot of the capabilities we see in B2C companies, such as customer-centricity,
market insight, etc. And sometimes when you talk to B2B companies they
say, We’re different. We’re different industries, and we’re a different
selling environment. So what’s the reality here?
Larissa Pommeraud: Everything just moves faster
in the B2C world. B2B businesses are going to need to pick up the pace just to compete as more B2C
companies like Art.com move into that world. It’s fascinating because Art.com
B2C customers will say, You’re not fast enough. Amazon is the benchmark.
You know, I want delivery in one day or two days. Whereas the B2B clients
will tell me, Wow, you guys are amazingly fast. That’s why we use you,
because you can turn things around like when I have a fire drill. And so
it’s just such a different competitive set when old-school, physical B2B shops
are taking weeks or even months to deliver on a project.
Brian Gregg: My other observation on how
the DNA of B2C businesses has started to affect B2B players is what you can
call customer-centricity. Obsession with the customer is paramount at Amazon,
where you can’t listen to CEO Jeff Bezos for more than 30 seconds without him
saying the customer matters. And so in a world where you might be selling to a
CIO, or you’re selling to a group of procurement officers, or—fill in the
blank—how do you keep them center?
Robert Chatwani: As I hear you speak, I would
almost argue that making an IT or a software decision or a B2B purchase
decision can be just as emotional, and in some cases more emotional, than
making the decision about buying something as a consumer.
The decision makers for
B2B software are in many ways, depending on the magnitude and the scope of what
they’re buying, actually making a career bet when they decide to purchase
software. If it’s something in the millions of dollars, you can absolutely
guarantee that there’ll be multiple decision makers. But it is a career bet.
They’re staking their reputation on getting behind a decision that
says, This is what I choose as a decision maker to bring into my
organization, that dozens, hundreds, thousands of people will use.
Larissa Pommeraud: I think that’s exactly right.
But I also would love to pick up on something else you talked about, which is
multi-stakeholder decision making, because for me, that’s one of the more
different things about B2B versus B2C. And yet each of the
stakeholders involved does have to connect with you emotionally and/or
functionally, which means the value proposition has to be a little more robust.
For example, when I’m
mining our data, there’s always a purchasing and finance person involved.
There’s also the designer or marketing person, who is thinking about something
totally different, like the brand and the artistic element. And then there’s
the executive, the senior decision maker. They all kind of need something
different. But we can know and appeal to all of them with our tools and data.
How B2B players can exploit digital to unlock value
Dianne Esber: We have some research that
shows some industries, like the chemicals industry—of all places—could unlock
$200 billion worth of value if they enhance their digital experience. But part
of the reason they haven’t been able to capture this is that it’s really hard,
and it requires change both in terms of talent and working culture. So what’s
the most effective way in evolving B2B companies to become more digitally
driven?
Larissa Pommeraud: The fastest way I can think
of to make an evolution like that is just to bring in talent that’s done it a
lot before—some new DNA. The risk of doing that is there’s always the
possibility of tissue rejection. But if you’re really very committed to making
the change or at least trying, bringing in somebody who’s done it before and
can lead that change, I think, would be very interesting and very helpful.
Robert Chatwani: Some of the most attractive candidates to me are those who follow the career path of
discovery and curiosity and are able to mix competencies from different
verticals, different industries. So, for example, one individual we’re speaking
to right now comes from a really, really strong communications and agency
background and has worked for about a year in cloud security. She made that
leap because she realized she’s in Silicon Valley.
She has this incredible
design and communications background, but she really wants to jump into
technology. Through the combination of these two things, she has this
remarkable competency of being able to take very, very complex cloud-security
concepts and communicate them really easily to end users. And she’s fallen in
love with this merger of these two disciplines.
The future of the digital B2B sales force
Dianne Esber: So how does a salesperson
evolve in a digital B2B world? Are we looking for different skill sets? How do
we think about this?
Robert Chatwani: Well, I don’t think you have
to look far to see that challenge actually happening today. I’ll use the
example of Cisco, which is a company that’s moving really rapidly from a very
hardware-driven business to a software and solutions sales business.
However, you had tens
of thousands of salespeople who have historically been incentivized, wired, and
motivated to sell hardware. If you speak to Karen Walker, their CMO, she’s
driving a remarkable transformation at that company today. But it can’t go fast
enough. The challenge is taking a very effective sales organization with
nothing but a phenomenal record at customer-centric sales and making this shift
to selling services and software at a recurring-revenue model, which is very
different than the traditional hardware sales model.
I think whether it’s a
large company like Cisco, or even a midsize one, disrupting your own model is
probably one of the most effective ways to make this leap. It comes with a lot
of complexity and perhaps pain. But figuring out how to balance delivering the
present and creating the future at the same time is not a real choice for most
companies. They have to do both.
Larissa Pommeraud: I’m probably oversimplifying,
but it seems to me that the migration will be from more outside sales to more
inside sales, from more phone to maybe more video chats, etc. Some of the media
will change from more manual to more automated, AI kind of stuff. So you’ve got
more tooling that’s enabling faster responses. I think there will be sort of a
migration, and hopefully the sales job just gets easier, more scalable. You
need fewer, more technologically enabled people to do their jobs more
effectively.
Robert Chatwani: There will be always be sales
competencies in companies. I think what you’ll see is the model becoming more agile and more flexible. And how can that happen? So that’s one trend. But this
shift toward a more gig-based or freelance economy—I haven’t yet seen it make
its way into the sales organizations, but it’s starting to emerge.
There’s a remarkable
company called SwarmSales based here in Silicon Valley which attracts freelance
sales individuals and matches them with early-stage companies. SwarmSales
says, Hey, you’re an individual who’s worked in a particular industry or
for a particular company for many years. It’s not your knowledge of that
company and its products that matters, but the relationships that you’ve built
over years or over decades. That’s valuable to a lot of different
companies. If I’m a B2B company and I want to expand my sales force or expand
my reach, why not tap into that kind of capability?
What B2Cs learn from B2Bs
Dianne Esber: We’ve talked a lot about what
B2B companies can learn from B2C. What about the reverse?
Robert Chatwani: Defining a value proposition
and mapping it to industries, to verticals, to functions within companies, and
really getting sharp on the relevance of your product offering to that
customer, is critical. I think a lot of B2B companies do that particularly well.
Monetization is
absolutely another one, especially in a software as a service-driven business
model with recurring revenue. What’s magical about that is the recurring
revenue model and how predictable it can become, particularly if you manage
well for churn.
Larissa Pommeraud: I think on the monetization
front a lot of B2C companies get overly focused on the demand generation, on
the consumer. And there’s actually a lot of value to be had in other parts of
the value chain that sometimes they don’t think about.
So, you know, B2C to
can easily turn into B2B by just looking toward the supply side and thinking of
services there. Or the wholesale intermediary that you may ignore and consider
a competitor could actually become a customer. The other point is that there’s
a lot of science behind the sales process in B2B. Again, whether it’s digital
or not, you have to think about winning pitches and why you’re going to win and
how you’re going to differentiate from competition in a very tactical way
that’s very specific to a customer segment.
The lesson of Amazon
Brian Gregg: I’m just wondering what the
two of you think of as you look at Amazon just being almost the ultimate B2B
and B2C company. They’ve taken things that they dump in the B2C universe and
monetized them in the B2B space. And then they’ve taken the B2B cash and
invested it back in the B2C. I mean, there is an amazing phenomenon happening
up in Seattle that I think has still not played out.
Larissa Pommeraud: Amazon’s definitely a B2B
player now. They have a really effective sales engine. You know, they called me
to sell me on their B2B product as I was trying to get into their B2B
marketplace. I think we’ve seen that with Staples as well. But you know, the
scale that B2C has provided can create scale in B2B without that much effort. I
think we do have to watch out for B2C players moving into B2B.
Robert Chatwani: Well, what’s remarkable about
their business also is that they’re taking capabilities and competencies
they’ve built in their core business and turning them into products that they
can then sell to businesses. I think these offshoots and extensions of the
horizons of growth that they’re able to evolve into, a lot of it really comes
from leveraging the capabilities they built to serve themselves.
Podcast September 2017
https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/discussions-in-digital-moving-b2b-companies-into-the-digital-world?cid=other-eml-alt-mip-mck-oth-1709&hlkid=4e97608d8e4f455ab96337cb81a476dc&hctky=1627601&hdpid=14071dfb-c7cd-4822-be01-f97f7d9f72de
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