Ready to Fire the Sales Team (again)?
Updated: Jul 2, 2020
Market Development vs. Business Development:
Do You Know the Difference?
Although these two titles and responsibilities appear to be the same they are not. Making this assumption is where the misunderstanding of the begins. Both roles are necessary at different times in the technology adoption curve to achieve Product-Market Fit (PMF). Market development consists of researching the market to gain the knowledge and insight into its current state as it pertains to the viability of your current solution. Early-stage companies should establish this market status first. Larger, later-stage companies should revisit this when they have a new product or service they are looking to launch. It's typically not a product marketing type of person who can fulfill this function. It takes a highly skilled person who has both sales and marketing experience; we call them Smartketeers™ - market-oriented salespeople.
Market development does not create immediate revenue so the next big mistake companies make is to set revenue metric KPI’s on market development activities. This is better reserved as part of the business development efforts once the market fit is fleshed out and early adopter trials begin. Even in the business development stage, KPI metrics should be based more on management by objectives (MBO’s), rather than pure revenue, until the company enters the ramp stage after crossing the chasm.
These market versus business development mistakes are commonly made by early to later-stage companies. The obvious marker for this issue is the hiring and firing of as many as two, three, or even 4 successive sales and marketing teams by the executives and their boards. Sales by definition is the lifeblood of any company, so it has the easiest and most tangible metric to measure performance by compared to any other part of the organization. As a result, we have seen numerous top-flight sales teams blamed for not achieving revenue goals only based on metrics. Lack of selling skills is often the 'reason' given for failure. The root cause of the lack of sales is incorrect PMF. Product Market Fit should be the first thing looked at before any blame is assigned.
The lack of or poor performance of sales is usually a clear symptom something else is wrong. The successive hiring and firing of salespeople is a clear indicator that the management team and its board do not understand where they are on the technology acceptance curve. It's rare to see bad sales or marketing professionals at these companies. What we have seen is that they are engaged in the company too early in its life cycle, pre-PMF. These teams are best hired after crossing the chasm, post-PMF when the ramp stage occurs.
The reality is deploying the wrong type of resources at the wrong time leads to frustration from the CEO, its Founders, and the Board of Directors. If these entrepreneurs looked back at their prior successes or failures and carefully analyzed them, they would easily see what has lead to their respective outcomes. Many times the product is not tuned for the market or the market is not ready for the solution yet - there is no PMF. We have even seen in some cases both the product and the market are not ready! Understanding the difference outlined above will alleviate a tremendous amount of frustration and save precious capital.
It's inefficient and expensive to cycle through sales teams. Be patient, evaluate where you are with Product Market Fit, and bring on the best sales professionals in the industry once the chasm is crossed and the product is ready for the market. This could make the difference between success or failure of your endeavor.
Managing Director, Momentum Technology Partners