Panic sets in when the phones stop ringing!
In the frantic rush to drive revenue growth, sales pipelines have become the favoured business development tool of many professional service firms. Before your firm follows a similar path, I think there are five important limitations to note particularly when it comes to selling to existing clients. To address these problems, I’ve developed a complementary/alternative approach based on the McKinsey Three Horizon Growth Model.
Five key limitations
1. Revenue not value-focused
I recently reviewed the sales pipelines of a major professional service firm and over 85% of the opportunities listed amongst existing clients were focused purely on revenue generation. The language of “sales” orientates one thinking around revenue and, in my view, creates a blindspot around other opportunities to enhance perceived value, reduce cost and improve the overall profitability of the account.
2. Reactive not proactive
Sales pipelines can encourage lazy reactive thinking that relies mainly on the client to feed the top of the funnel. At worst, firms just sit around and wait for the next RFP to be issued. Effective strategic account management demands proactive discussions with clients, challenging their thinking, suggesting things not on their radar and, if appropriate, offering unsolicited proposals.
3. Internally not externally-focused
In an interview with a senior BD manager from a large global engineering firm he lamented the fact that pipeline meetings were very internally-focused. “90% of the discussion is about us. It’s about our specific project proposals and who we can influence to get our proposals accepted. This is okay to a point, but we spend very little time talking about the bigger-picture of where the client is at and their broader strategic needs.”
4. Sales ends at a sale
The concept of the sales pipeline was first developed for B2B product organisations with dedicated salespeople. In this context, once the sale is made the sale process ‘ends’ and accountability is then shifted to production or delivery teams. In many professional services, sales does not end at a sale. Delivery is critical for repeat purchase, on-selling and referral. Pipelines focused on new opportunities sometimes deflect attention from expanding the scope of current projects.
5. Awkward language
Many law, accounting and consulting professionals find the language used to define the key pipeline stages awkward and ambiguous. One law firm client recently relayed a story of protracted internal discussion around the definition of “Initial Contact”, and significant resistance to the term “Closing” as it implied some type of manipulation and counter to trust-based selling. While this is not a flaw in the pipeline concept per se, it is a common barrier to effective implementation.
A complementary/alternative approach
One approach I’ve successfully experimented with, is adapting the McKinsey Three Horizons Growth Model (see graphic below) and applying it to a firm’s strategic accounts. There are few points to note about this adapted model:
- The axes are Time and Value created in the relationship i.e. not just revenue or profit generated by the firm
- Strategic account managers need to focus on the three horizons simultaneously, not sequentially
- Each strategic account plan should reflect a good balance of H1, H2 and H3 actions and opportunities
- The traditional sales pipeline is not ignored but absorbed into the three horizons
- Sales pipeline meetings become “Three Horizon Meetings” with a broader agenda
- There is potentially much benefit is working with your client in creating and updating the key points under each horizon.
Your thoughts
I’d welcome your thoughts and experiences in using the sales pipeline. Does it work well? What are some of the limitations you’ve noted? Do you think the Three Horizon Model is a useful addition to your toolkit?
account planning, business development, innovation, internal collaboration, key account management, planning, professional service firms, Sales management, strategy management
What’s wrong with the sales pipeline?
In Articles, Commentary on 24 April 2014 at 12:19 pmPanic sets in when the phones stop ringing!
In the frantic rush to drive revenue growth, sales pipelines have become the favoured business development tool of many professional service firms. Before your firm follows a similar path, I think there are five important limitations to note particularly when it comes to selling to existing clients. To address these problems, I’ve developed a complementary/alternative approach based on the McKinsey Three Horizon Growth Model.
Five key limitations
1. Revenue not value-focused
I recently reviewed the sales pipelines of a major professional service firm and over 85% of the opportunities listed amongst existing clients were focused purely on revenue generation. The language of “sales” orientates one thinking around revenue and, in my view, creates a blindspot around other opportunities to enhance perceived value, reduce cost and improve the overall profitability of the account.
2. Reactive not proactive
Sales pipelines can encourage lazy reactive thinking that relies mainly on the client to feed the top of the funnel. At worst, firms just sit around and wait for the next RFP to be issued. Effective strategic account management demands proactive discussions with clients, challenging their thinking, suggesting things not on their radar and, if appropriate, offering unsolicited proposals.
3. Internally not externally-focused
In an interview with a senior BD manager from a large global engineering firm he lamented the fact that pipeline meetings were very internally-focused. “90% of the discussion is about us. It’s about our specific project proposals and who we can influence to get our proposals accepted. This is okay to a point, but we spend very little time talking about the bigger-picture of where the client is at and their broader strategic needs.”
4. Sales ends at a sale
The concept of the sales pipeline was first developed for B2B product organisations with dedicated salespeople. In this context, once the sale is made the sale process ‘ends’ and accountability is then shifted to production or delivery teams. In many professional services, sales does not end at a sale. Delivery is critical for repeat purchase, on-selling and referral. Pipelines focused on new opportunities sometimes deflect attention from expanding the scope of current projects.
5. Awkward language
Many law, accounting and consulting professionals find the language used to define the key pipeline stages awkward and ambiguous. One law firm client recently relayed a story of protracted internal discussion around the definition of “Initial Contact”, and significant resistance to the term “Closing” as it implied some type of manipulation and counter to trust-based selling. While this is not a flaw in the pipeline concept per se, it is a common barrier to effective implementation.
A complementary/alternative approach
One approach I’ve successfully experimented with, is adapting the McKinsey Three Horizons Growth Model (see graphic below) and applying it to a firm’s strategic accounts. There are few points to note about this adapted model:
Your thoughts
I’d welcome your thoughts and experiences in using the sales pipeline. Does it work well? What are some of the limitations you’ve noted? Do you think the Three Horizon Model is a useful addition to your toolkit?
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