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“Why does it always take longer and cost more to build a technology company than anyone expects?” That lament is true for all high-tech firms, but nowhere so true as in the energy technology sector, which has all the usual challenges plus a target market (utilities) that is one of the most conservative on earth. Yet a simple fact defines every successful company —it figures out how to bring in more money than it spends. The Enterprise Sales Learning Curve may be the best way to solve this fundamental equation. What’s more, it is not a “soft” technique with vague parameters. Rather, it is a concept that can be measured and monitored with the same rigor as the Manufacturing Learning Curve (MLC), which determines how long it takes to reduce manufacturing costs.
The Sales Learning Curve Mark Leslie is an entrepreneur who took a startup company, Veritas, from nascent stages to over $1B in revenues and a $13.5B merger with Symantec. Along with Stanford’s Charles Holloway, he has developed a framework called the Enterprise Sales Learning Curve (ESLC) that is as powerful for the Smart Grid sector as the MLC for the manufacturing sector.
The Manufacturing Learning Curve shows how cost declines as volume increases. The Sales Learning Curve shows how the Sales Yield increases as learning increases. As illustrated nearby, the Sales Yield is simply the average production per full-time salesperson. Until salespeople sell more than they cost, they are a drain on cash flow and hiring more only makes that worse. Yet, according to Leslie, salespeople can’t sell more until the entire company has undergone some “organizational learning.”
The exact shape of the curve is different for every company and sector but the central tenet remains constant —during the “go-to-market” phase companies should “Go Slow to Grow Fast.” Just as athletes and musicians practice very slowly until they master a movement, companies must spend and hire slowly until they truly know what customers want and need.
Key message: You can’t speed up the process by hiring more people or throwing more money at the problem. Organizational learning takes time. Customers must spend time with the beta product; reps must spend time with customers, and then spend time with the company’s engineers and marketers to translate customer preferences into better products and better marketing. The gating factor is not the ability to add new features or pump out new marketing brochures. The limitation is the time for the entire organization to truly understand and internalize customer needs.
The All-Important Learning Process The classic “go-to-market” strategy involves hiring a VP of sales as soon as the beta product is complete and then hiring as many reps as the balance sheet will allow. But this strategy is doomed because the company has failed to understand the ESLC for its product in its market. Says Leslie: “Both entrepreneurs and venture capitalists underestimate the cost and time to move up the ESLC after completion of the Beta product. In fact, the company is only ready to begin the learning process.”
The last thing most CEOs and venture investors want to hear is “Go Slow” when they have a product that is out of beta testing. And yet, whether they are startups launching a brand new concept or established companies starting a new line of business, they usually have a poor handle on questions such as:
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