Version 1
Q1: Why are we failing to adequately qualify leads?
A1: Because we didn’t know what the impact of this failure might be.
Q2: Why didn’t we know the impact of not validating leads when they entered the pipeline?
A2: Because we have an inexperienced board of directors and sales staff.
Q3: Why do we have an inexperienced board of directors and sales staff?
A3: Because we focused on hiring technical staff, not sales staff.
Q4: Why did we solely focus on hiring technical staff?
A4: Because the assumption was that large sets of platform features would attract inbound sales from promotions.
Q5: Why did we assume that platform features would attract inbound sales?
A5: Founders’ assumption/inexperienced founders.
The first time through was very high-level. The results make sense, but are very backward looking and not very actionable. Looking at the preceding, which answer represents the root cause? One could blame the inexperience of the founders, but that is not very helpful. The kicker is the assumption that large feature sets will automatically drive inbound sales. There is a lesson everyone can learn from.
Many organizations would stop there, but NewCo returned to the Ishikawa, following the next causal path.
Version 2
Q2: Why didn’t we know the importance of not validating potentials when they entered the pipeline?
A2: Because we had no baseline best practice for B2B sales.
Q3: Why did we have no baseline best practice for B2B sales?
A3: Because we didn’t develop a sales execution strategy.
Q4: Why didn’t we develop a sales execution strategy?
A4: Because it was not seen as a priority.
Q5: Why was it not seen as a priority?
A5: Because the salespeople were out in the field with no time allocated to develop the execution strategy.
And so on. Back to the Ishikawa for path three.
Version 3
Q1: Why are we failing to adequately qualify leads?
A1: Because they are not being tracked in the most efficient and effective manner.
Q2: Why are they not being tracked in the most efficient and effective manner?
A2: Because we didn’t invest in a real customer relationship management (CRM) system.
Q3: Why didn’t we invest in a real CRM system?
A3: Because the executive team did not understand the impact that a real CRM system has on the sales organization.
Q4: Why didn’t the executive team understand the impact that a real CRM system has on the sales organization?
A4: Because we have an inexperienced board of directors and sales staff.
Q5: Why do we have an inexperienced board of directors and sales staff?
This is sounding familiar. The root cause for this leg might be at Answer 3 because recognizing the lack of understanding might push the organization toward getting some training to get it up to speed on sales best practices. Stopping too early might result in a great CRM system, but if the executive team still doesn’t understand the need for it, then there’s not much chance for real improvement.
So the solutions from the full analysis include:
The development of a sales-execution strategy with emphasis placed on learning and validation.
Mentoring for all executives, especially in business development and sales.
Investment in an appropriate CRM system.
Performing a full-feature review on the product, distilling the 10 percent of features that actually have benefits, and integrating them into the sales-execution strategy.
Pushing harder on military sales. It’s a longer cycle, but once a need is established, then validation is straightforward.
Big, Old, and . . . Lean?
It’s pretty easy for us to sit back and declare that large, successful—even dominant—businesses should act like startups in order to maintain, regain, or protect their success. But there is truth in the idea.
The point isn’t to be critical of large businesses; heck, they’ve achieved more than most. There’s also truth, however, in the observation that the tactics, strategy, and branding that made them big aren’t the same as those that launched them in the first place.
The idea is to put a startup culture in place in order to find that completely new value proposition that leads them to huge growth again.
It sounds easy, right? Build a startup inside your existing business. Charge it with the clarion call “Be innovative.” Hold meetings where employees ideate. Give everyone a bit of autonomy. Big businesses know they need to innovate. Without some amount of innovation, it’s unlikely they will compete successfully in the market at all.
The problem is that the term innovation has ceased to have real meaning. It’s a buzzword. To many, disruptive innovation and sustaining innovation have come to mean the same thing. You can’t go a day without hearing how company x is innovating, is the innovation leader, or is discovering new ways to innovate. It’s innovation by branding. Invention has become the measure, rather than finding a market for an application of the invention. The number of patents held receives more attention than the number of loyal customers.
Universities have a similar issue: lots of research and few applications. Lab-to-market programs teach the 4 Ps (product, place, price, promotion) of marketing and how to write business plans, but not how to discover a market.
When that fails, technology is licensed to big businesses to bolster their patent portfolios. More often than not, the new technology never sees the light of day.
Governments that get involved often exacerbate the problem, doling out money to startups comprised only of university researchers occupying space in an incubator. The researchers research; they don’t create marketable products.
Part of the issue is the old idea that scientists, researchers, and engineers who invent must partner or turn over their inventions to the business side of the house. If this is what they prefer, then so be it.
We believe, however, that things would be better if the inventors were taught to be entrepreneurs. In order to build things that matter, inventors need to be closer to the market, closer to problems their technology might solve. Second best is to find domain experts, perhaps other scientists, who are entrepreneurial. The last resort is to use local business experts. This will all but kill the disruptive portion of the innovation.
The business side of the house is used to asking two fundamentally disruption-killing questions:
1. What is the return on investment to the organization?
2. When will the organization realize the return?
It’s not that business executives are wrong in asking these questions. They are very rational to do so. In large, successful organizations particularly, money is invested in projects that have the highest likelihood of generating significant revenue. Additionally, executives are often compensated for short-term thinking. Bonuses for protecting the business a decade from now are of limited use. In short time horizons, the projects most likely to produce returns are those that address the needs of existing customers.
Existing customers’ needs are well understood, marketing and sales channels are proven, and business processes exist that close the circle between learning what customers need and delivering that value. This describes sustaining innovation to a T. All innovative endeavors will be sucked into the sustaining vortex, because they will be measured against the performance of existing (or recent) products.
Startups and startup-like ventures cannot be held to the same measures, which is not to say they aren’t.
It’s a good way to send a startup into a death spiral, however, wherein execution of best practices is favored over learning and one moves with great efficiency toward failure.
When Steve Blank suggests that accountants not run startups11 and Eric Ries talks about “innovation accounting,” they are demonstrating how to track a startup’s progress toward finding a scalable business model. A startup must learn its way, and a large organization that seeks to find new revenue opportunities must learn its way, too. It’s simply not going to cut it when a team of managers is allowed to nix ideas because of their pay grade. Management hierarchy is not structured based on ability to predict the future. Yet, that’s what we’re doing, only we use analysis as a euphemism for “reading tea leaves.”
A large, hugely successful communications company in southern California made two impressive moves toward improving internal innovation:
First, they formed (and funded) an organization to create internal startup teams to create products that would, if successful, generate demand for core products.
Second, they adopted lean startup principles with the aim of finding working business models versus formulating a presentation with impressive spreadsheets and pie charts representing crystal ball planning.
Early in the process, we led the teams through a workshop to posit market segment assumptions and problem-solution hypotheses, and to identify core business risks. We established how the teams should get out of the building to learn through customer development, what viability experiments they might run, and what data they should track as they moved through the learning process.
In the end, the teams presented to an internal venture funding group. The problem is that like many of their venture capital firm counterparts, the group evaluated the startups based on their own mythological ability to envision the future, rather than the real-world learning presented by the startup teams.
In fact, the whole program was scrapped. It was a repeat of an oft-told story: When the core business needs resources, both capital and human, the internal startups are the first sources to be tapped.
Creating a startup culture is, in our view, the right way to create truly innovative products inside large organizations. There also needs to be a fundamental shift toward long-term thinking. Many U.S. businesses seem to have a cyclical, love-hate relationship with long-term thinking. When the economy is going great—or at least is bubbly—short-term shareholder value is revered, coinciding with stock-option-based executive compensation plans.
To succeed in today’s economy, businesses must be focused on creating real value for customers, not paper value for executives or investment bankers.
The issue remains: How to do that?