Desh Deshpande is speaking to the Founder’s Journey class at MIT and I am blogging live. He is being interviewed by Prof. Tom Magnanti who was Dean of Engineering at MIT until 2007. He is one of 14 faculty members to carry the title "Institute Professor", the highest honor that MIT can offer. It was under Prof. Magnanti’s leadership as Dean that Desh Despande was inspired to create MIT's Deshpande Center for Technological Innovation. Many people, after being named Institute Professor and after retiring as Dean, would take a break and rest. Not Tom Magnanti. He has just taken on the task of creating a new university in Singapore, described in this press release:
http://www.moe.gov.sg/media/press/2009/10/professor-thomas-magnanti-name.php.
With two of the most respected people at MIT on the stage before me, we are in for an incredible evening densely packed with pearls of wisdom.
The conversation kicked off with “when do you know you should persevere, and when to give up?”. The class came up with lots of interesting suggestions, including “if it’s VC money, keep on spending, if it’s personal debt, quit!” :D
Desh’s advice on this topic was as follows:
- Distinguish between what you can control and what you cannot control
- Trust your gut
- Set milestones and timelines: when you don’t meet a milestone or the expected results aren’t there, read the writing on the wall and move on.
On the topic of tensions between entrepreneurs and VCs, Desh made the following points:
- It’s not possible to achieve a big vision purely through bootstrapping. VC money is necessary.
- If the entrepreneur hits every milestone as promised, VCs will respect the entrepreneur both for their ability to set realistic milestones as well as their ability to execute.
On how he got into entrepreneurship after a PhD:
Met Peter Brackett who was working on a start-up. Joined him at his invitation. The start-up was acquired by Motorola soon after. The business eventually grew to 100s of millions of dollars. If he could do this for Motorola, why not independently? Thus the seed of entrepreneurship was sowed.
Tom Magnanti is doing a fantastic job of guiding the conversation, and seems to be a natural at this. He’s asking all the questions that are on the top of the audience’s minds as we hear Desh speak.
On the topic of luck in entrepreneurial success:
- Analogy of kids playing soccer. The kids have fun kicking the ball around. Parents get upset because the kids are not kicking the ball a certain way. Entrepreneurship is like that. When you are having fun doing what you do and are passionate about it, you will play to have fun. How many goals you shoot is a bit dependent on luck. Chances of having a huge exit as an entrepreneur is like shooting a goal. If you are not playing for the fun of it, you are going to be very unhappy like the parents who are onlookers.
How to identify big ideas:
- Big ideas are the usually the result of a shift in the market. They are very simple ideas in hind sight.
- Pick a small simple idea that’s easy to bootstrap. The bootstrapping allows for much easier course correction. Once you build credibility by tackling the simple problems successfully, you will be better prepared to tackle the big problems.
On how to build the ideal team:
- Once you get a few good people, it snowballs
- Develop an eye for good people; learn to see each individual’s strengths
- Best people to hire are the people who have the potential but haven’t achieved the peak yet
- When you hire people, you never know whether they are going to work out or not. If you made a mistake, fire them quickly.
If you make a mistake, admitting to a mistake and correcting it as a very important trait.
Qualities of an entrepreneur:
- Naive
- Wildly optimistic
- Don’t get hung up on why the world is fair/unfair.
- The mentality that “I am giving up so much to play this game” - the sacrificing mentality, instead of “I love playing this game!” is fatal. An entrepreneur should do it for the opportunity and fun of doing it, instead of getting hung up on the outcome.
Parting advice:
Entrepreneurship is about taking the leap to jump in and solve a problem. Don’t get hung up on whether you’re rewarded for it or not. Judge the quality of an opportunity by assessing the ability to make a difference. Make a bigger difference in whatever you do. You will be the CEO of your life, your family, your career - cultivating this attitude will make a difference.
Prof. Magnanti just wrapped up the conversation by asking the audience to call out the key lessons they took away from the conversation. It’s clear that the audience recognizes the privilege they have been offered, and between the 75 odd people in the room, the lessons get cemented into memory and is capped off by thundering applause.
Monday, March 8, 2010
Sunday, February 14, 2010
Lessons in negotiation Part 1
This semester, I am taking a class called "Power and Negotiation" at MIT. Last class was a very interesting one and I thought I would summarize the lessons learned. First, the acronyms and basic definitions:
RP = Reserve Price. The minimum price one's willing to pay to achieve desired outcome. For example, my reserve price for selling my used text book will be based upon the value of the book on half.com. Since half.com is my other option if the current negotiation does not come through, it is also my "Best Alternative To Negotiated Agreement" or BATNA. Therefore, by definition, BATNA = RP. I know, complex math there.
AP = Aspiration Price. This is the price that I would like for my textbook if my negotiations are successful. For instance, if a new American edition of the textbook costs $200, half.com has an international edition for sale at $50, my aspiration price for my book maybe $100.
With the definitions out of the way, these were my takeaways from the class for successful negotiations:
1. If the value of the deal is clear to both parties, be the first person to make an offer. In my example of textbooks, the buyer had access to the same market price information I did. In this case, it's to my advantage to name the asking price.
2. If the value is unclear, allow the other party to name the price. For instance, if buying an antique car which can't be priced easily, have the other party name a price first.
I am not completely clear on the rationale behind this advice, and is something I am hoping will become clear in future classes.
3. When going into a negotiation, do your homework and know your RP and AP going in.
4. Don't let yourself be anchored to a price named by the counter-party or by your own BATNA.
5. Don't let your reservation price determine the aspiration price or your negotiation strategy. The aspiration price should strictly be determined by market research only.
6. Don't fall into the "happiness trap". People who get anchored by their RP are happier because they set low thresholds and allow this to determine the success of their negotiations. Don't fall into the trap!
RP = Reserve Price. The minimum price one's willing to pay to achieve desired outcome. For example, my reserve price for selling my used text book will be based upon the value of the book on half.com. Since half.com is my other option if the current negotiation does not come through, it is also my "Best Alternative To Negotiated Agreement" or BATNA. Therefore, by definition, BATNA = RP. I know, complex math there.
AP = Aspiration Price. This is the price that I would like for my textbook if my negotiations are successful. For instance, if a new American edition of the textbook costs $200, half.com has an international edition for sale at $50, my aspiration price for my book maybe $100.
With the definitions out of the way, these were my takeaways from the class for successful negotiations:
1. If the value of the deal is clear to both parties, be the first person to make an offer. In my example of textbooks, the buyer had access to the same market price information I did. In this case, it's to my advantage to name the asking price.
2. If the value is unclear, allow the other party to name the price. For instance, if buying an antique car which can't be priced easily, have the other party name a price first.
I am not completely clear on the rationale behind this advice, and is something I am hoping will become clear in future classes.
3. When going into a negotiation, do your homework and know your RP and AP going in.
4. Don't let yourself be anchored to a price named by the counter-party or by your own BATNA.
5. Don't let your reservation price determine the aspiration price or your negotiation strategy. The aspiration price should strictly be determined by market research only.
6. Don't fall into the "happiness trap". People who get anchored by their RP are happier because they set low thresholds and allow this to determine the success of their negotiations. Don't fall into the trap!
Thursday, February 4, 2010
Dearth of women entrepreneurs in Technology
Vivek Wadhwa authored an excellent article in Business Week today titled "Addressing the dearth of female entrepreneurs"
While I do agree that one explanation for the phenomenon is that it's a supply issue, I am not convinced that it's the sole explanation. As an engineer, an entrepreneur and a woman, this is a topic very close to my heart and therefore also happens to be the topic of my thesis. I am working on collecting data about how many technology companies with female founders or CEO/CTO/COOs were funded in the last 4 years, and how that number compares to the number of companies which were founded by male entrepreneurs.
I am also speaking with a number of VCs who have been pitched by both men and women and taking notes about their observations. Some of what I heard took me by surprise. For instance, some women who pitch a VC do not get funded because they come across as being over-confident and not genuine! I was under the impression that many women suffered from the opposite - not as assertive or outspoken, and erring on the side of caution! I am not sure if this is a function of the fact that women who do found tech. start-ups have a different mindset and self-select into entrepreneurship, or if there's an observer bias, or if there is a stereotype bias here! What do you think?
I expect to finish my thesis in May 2010, and will write a follow-up post describing my findings. Stay tuned!
While I do agree that one explanation for the phenomenon is that it's a supply issue, I am not convinced that it's the sole explanation. As an engineer, an entrepreneur and a woman, this is a topic very close to my heart and therefore also happens to be the topic of my thesis. I am working on collecting data about how many technology companies with female founders or CEO/CTO/COOs were funded in the last 4 years, and how that number compares to the number of companies which were founded by male entrepreneurs.
I am also speaking with a number of VCs who have been pitched by both men and women and taking notes about their observations. Some of what I heard took me by surprise. For instance, some women who pitch a VC do not get funded because they come across as being over-confident and not genuine! I was under the impression that many women suffered from the opposite - not as assertive or outspoken, and erring on the side of caution! I am not sure if this is a function of the fact that women who do found tech. start-ups have a different mindset and self-select into entrepreneurship, or if there's an observer bias, or if there is a stereotype bias here! What do you think?
I expect to finish my thesis in May 2010, and will write a follow-up post describing my findings. Stay tuned!
Wednesday, January 20, 2010
Knowing when to quit...
I came across an excellent post today that analyzes the “how do you know when to quit” question from the lean perspective.
I found myself nodding in complete agreement to this especially:
"If your acquisition efforts are failing, there need to be signs from other places in the model (conversion, upsell, retention) that the business is on the right path. If you’ve been at it for a long time and acquisition is poor and everything else is muddling along, then it’s time to quit. However, if you have found that you can either convert, upsell or retain customers well, then keep plugging away. The feedback from users is that your startup is on the right path…. now it’s time for incremental improvements in the other areas of the model to allow the business to reach the next level.
The original post is here.
I found myself nodding in complete agreement to this especially:
"If your acquisition efforts are failing, there need to be signs from other places in the model (conversion, upsell, retention) that the business is on the right path. If you’ve been at it for a long time and acquisition is poor and everything else is muddling along, then it’s time to quit. However, if you have found that you can either convert, upsell or retain customers well, then keep plugging away. The feedback from users is that your startup is on the right path…. now it’s time for incremental improvements in the other areas of the model to allow the business to reach the next level.
The original post is here.
Tuesday, January 12, 2010
Dr. Jack Gill at MIT - Day 2: Start-up dynamics
I have the privilege of being a TA for Dr. Jack Gill's short course at MIT titled "High Tech start-ups". Today, the topic was "Start-up Dynamics" and the guest speaker was Luca Erceg, founder and CEO of Simbol Mining. They spoke to a packed house with standing room only about 30 minutes into the talk.
Simbol won the 2008 Cleantech Group's Most Promising Technology Award. They are commercializing zero waste, zero carbon footprint production processes for lithium, EMD, and zinc battery chemicals sourced from geothermal brines.
Dr. Gill first characterized the elements of high-tech start-ups as follows:
- 1 to 3 driven founders
- Proprietary product technology
- Sizeable market
- Satisfies an unmet need
- A R&D team to create the product
- A mission, vision and milestones for the company
- Sufficient capital to execute
- Tenacity and,
- Lots of luck.
He shared with the group a template that Vanguard Ventures uses to analyze and investment when they are pitched by entrepreneurs. It was a lot of what an entrepreneur expects to be assessed on, no surprises there. Since most of the audience was comprised of engineers and scientists, he went into the nuts and bolts of how to access venture capital and what to expect. He pointed to www.NVCA.org and the Western Association of Venture Capitalists as resources. I didn't know about WAVC, it was good to learn. He then went on to speak about common stock and preferred stock, the differences, pricing differential between the two and also touched upon convertibles and warrants. It was a terrific preview to the entrepreneurial finance class I am signed up for this coming semester!
One of the most useful pieces of advice I took away from his talk was the importance of being able to learn very quickly and adjust the game plan on the fly. When pitching an investor, if the pitch doesn't go so well, use that as a learning opportunity. Understand why the investor declined to invest, and when you leave the meeting, go to the closest coffee shop with your team and do a post-mortem analysis of what worked and what did not, and what needs to be refined for the next pitch. Sounds very similar to customer development for start-ups, perhaps this should be called "investor development for start-ups"!
He then went on talk about what a typical term sheet looks like and explained some of the jargon - what's pre-money valuation, option pools, vesting, and board size and composition.
Another topic I found very interesting that he touched upon is frequent start-up problems. He listed:
- Competence of CEO
- Inadequate capitalization
- IP issues
- Poor cash management
- Lack of focus
- Over optimistic forecasts
- Underestimating competition and,
- Mediocre drive and commitment
Having been a victim to IP issues with my first start-up, it was particularly interesting to me to hear about other traps I might fall into if I don't watch out.
I was intrigued to notice the similarities between what Dr. Gill and Dr. Bob Langer (who visited Founder's Journey last semester) said about creating a real company versus a product line. A real company is built on a technology platform, not on a single product.
Luca was a great speaker who responded to the questions addressed to him with very frank answers. As a first time CEO and founder, his observations were particularly relevant and timely. I enjoyed hearing about the importance of the CEO actively managing his relationship with his board of directors, and how an ideal relationship with will result in a two-way flow of information and will get the CEO the feedback and advice he needs to effectively run the company.
I also enjoyed his description of how he was approached by VCs after winning the Cleantech most promising technology award, and how he chose to raise an angel round first to have results before approaching VCs. He offered sage advice on the importance of selling oneself effectively to investors - the importance of having a really crisp elevator pitch, and revealing enough information to be intriguing and land a follow-up meeting with investors, but not too much information that will allow for snap judgements and no room for clarification or rebuttals.
In all, an excellent morning spent hearing start-up wisdom.
Simbol won the 2008 Cleantech Group's Most Promising Technology Award. They are commercializing zero waste, zero carbon footprint production processes for lithium, EMD, and zinc battery chemicals sourced from geothermal brines.
Dr. Gill first characterized the elements of high-tech start-ups as follows:
- 1 to 3 driven founders
- Proprietary product technology
- Sizeable market
- Satisfies an unmet need
- A R&D team to create the product
- A mission, vision and milestones for the company
- Sufficient capital to execute
- Tenacity and,
- Lots of luck.
He shared with the group a template that Vanguard Ventures uses to analyze and investment when they are pitched by entrepreneurs. It was a lot of what an entrepreneur expects to be assessed on, no surprises there. Since most of the audience was comprised of engineers and scientists, he went into the nuts and bolts of how to access venture capital and what to expect. He pointed to www.NVCA.org and the Western Association of Venture Capitalists as resources. I didn't know about WAVC, it was good to learn. He then went on to speak about common stock and preferred stock, the differences, pricing differential between the two and also touched upon convertibles and warrants. It was a terrific preview to the entrepreneurial finance class I am signed up for this coming semester!
One of the most useful pieces of advice I took away from his talk was the importance of being able to learn very quickly and adjust the game plan on the fly. When pitching an investor, if the pitch doesn't go so well, use that as a learning opportunity. Understand why the investor declined to invest, and when you leave the meeting, go to the closest coffee shop with your team and do a post-mortem analysis of what worked and what did not, and what needs to be refined for the next pitch. Sounds very similar to customer development for start-ups, perhaps this should be called "investor development for start-ups"!
He then went on talk about what a typical term sheet looks like and explained some of the jargon - what's pre-money valuation, option pools, vesting, and board size and composition.
Another topic I found very interesting that he touched upon is frequent start-up problems. He listed:
- Competence of CEO
- Inadequate capitalization
- IP issues
- Poor cash management
- Lack of focus
- Over optimistic forecasts
- Underestimating competition and,
- Mediocre drive and commitment
Having been a victim to IP issues with my first start-up, it was particularly interesting to me to hear about other traps I might fall into if I don't watch out.
I was intrigued to notice the similarities between what Dr. Gill and Dr. Bob Langer (who visited Founder's Journey last semester) said about creating a real company versus a product line. A real company is built on a technology platform, not on a single product.
Luca was a great speaker who responded to the questions addressed to him with very frank answers. As a first time CEO and founder, his observations were particularly relevant and timely. I enjoyed hearing about the importance of the CEO actively managing his relationship with his board of directors, and how an ideal relationship with will result in a two-way flow of information and will get the CEO the feedback and advice he needs to effectively run the company.
I also enjoyed his description of how he was approached by VCs after winning the Cleantech most promising technology award, and how he chose to raise an angel round first to have results before approaching VCs. He offered sage advice on the importance of selling oneself effectively to investors - the importance of having a really crisp elevator pitch, and revealing enough information to be intriguing and land a follow-up meeting with investors, but not too much information that will allow for snap judgements and no room for clarification or rebuttals.
In all, an excellent morning spent hearing start-up wisdom.
Wednesday, December 30, 2009
Most innovative product of the decade - woohoo!
Techcrunch's Crunch Gear voted USB thumbdrives I co-invented the most innovative product of the decade! Glad the recognition beat the patent awards - the first 5 patents I filed back in 1999 came through this decade. The stuff filed 2000 and after will probably only come through next decade... never mind the patents are barely worth the paper they're printed on given all the corporate cross-licensing agreements!
Tuesday, December 8, 2009
The art and craft of sales - an interview with Scott Chandler
Last week, I had the pleasure of meeting a very impressive sales executive, a true sales rock star. Scott Chandler is the Vice president of strategic sales at Infinera, and served as VP Worldwide Sales for Infinera before that. It's not often that one encounters true excellence along with sincere humility. In the past 4 months, I have had the pleasure and privilege of meeting two such people: Scott and Desh Deshpande. This is a blog post about Scott, another one about Desh is soon to follow!
Here are excerpts from my interview of Scott:
Me: What are the characteristics of a good sales person in your opinion?
Scott: A good sales person is one who has an excellent work ethic, is paranoid and is someone who is creative. An excellent work ethic is a common denominator for most successful people.
Paranoia is very important because a sales person must constantly think and be aware of what his competition is doing, and be prepared at all times to be one step ahead.
Creativity is super important in this business because a good sales person must always create reasons for future meetings with the client, until the sale is closed.
Sales are made based on relationships at the end of the day. It’s important to be very tuned in to the customer and interpret fine nuances in tone and language appropriately in order to be extraordinarily successful in sales.
Me: What characteristics make someone a good sales manager?
Scott: A good sales manager is an excellent team player in addition to possessing all the skills that a good salesperson possesses. He must have the respect and trust of the people who report to him, and must have built up a reputation for fair play. The team must know that their manager has their back at all times.
As one progresses upward in a sales organization, it’s extremely important to understand what motivates each constituency (s)he is dealing with, and respond in a way that addresses that constituency’s concerns. A CEO is seeking a different answer than the VP of technology or the head of manufacturing, and it’s very important for a head of sales to be able to turn on a dime and give different people the responses they are looking for from their perspective. It’s almost like having ADD – there are a number of people who need to be kept happy at the same time, and it’s a very delicate balancing act to pull off. That’s one reason why burn-out is so high among sales managers and not that many people make it to the top sales jobs.
Also, good sales managers in top jobs must have the ability to make quick decisions that will eventually affect practically every part of the company. This requires someone who keeps their finger on the pulse of the customer round the clock, is able to synthesize the information quickly, and can take the heat.
Good sales managers are smart about how they use their time. Common perception is that sales people routinely wine and dine their customers and go on golf outings with their clients on weekends. Personally, I haven’t played golf at all in past year because I don’t have the time.
While dining, golfing with your customers is perceived to be an effective way to create the all-important-relationship necessary for selling, in my opinion, there are other more effective and efficient ways to do this. Remember that the people you’re selling to may not necessarily be looking for new friends and they each have their own families they may like to spend time with!
One of my biggest customers told me “Scott, I am giving you this business because of the relationship you maintained with me even when things were down. The other guys never spoke to me then.” What I did was I reached out to this person periodically every couple of months even when I knew the person did not have a budget, kept him in the loop and let him know what new products my employer was coming up with that would be useful to them when they did have a budget. Being communicative, responsive, and honest is a much more effective way of building these relationships.
A great sales manager is one who is capable of punching someone in the nose and then 5 seconds later, the person who got punched is thanking you for it. That’s an art - it can be honed, but fundamentally, some people just have it and others don’t. Ask my sales guys – they will tell you that I am absolutely capable of bringing you to the ground and stepping on you, and 5 minutes later you will be thanking me. It’s the X factor.
Me: When/How do you decide to promote a sales person to become a sales manager?
Scott: I promote people who have earned their stripes, and I know I can trust them and respect their judgment. I have known all of my top people here at Infinera for more than a decade, and some people have moved 3 jobs with me, so they can work for me. A good manager must inspire that kind of loyalty in his people.
Me: How are incentives structured for the sales manager?
Scott: The incentives for a manager or similar to that of a sales person but on a more macro scale. The quota for a sales person might be $5M, for a sales manager, it will be $50Million. The sales people are incented based on what’s important to the company – sometimes it’s a margin bonus . Other times it’s a new product bonus, or a new customer bonus. The incentive varies depending on what the company needs at that stage.
Me: If you are in charge of worldwide sales, how do you think of and manage territory?
Scott: Territory allocation in an early stage start-up is very easy honestly, it actually starts to get harder as you get bigger. When you are a start-up, it’s you and a couple of other people, and you have the whole planet to sell to. The CEO, marketing and sales teams brainstorm an year before the product is even built – who do we know out there, who are our top customers, who our best customers are, and which customers represent our best chances. We then line up all the potential customers, put them on a list, everyone agrees and pokes holes about why a particular customer is not a good one to be on the list or why isn’t another customer on the list etc., create a top 20 list and then you start calling them.
You know most people if you have been in the industry long enough. You say “Hey, I am now with company XYZ. I know you don’t know anything about this company, but you know me and I think you will find this product interesting…”. Then you look at the list for companies you don’t know people at, and start to hire your first 3 or 4 sales people. I look in my Rolodex and see who I know has a deep relationship with the target customer and go hire them. These people will typically have a relationship with the target customers even deeper than me. When I say “deep”, I don’t mean someone whose the customer’s golf buddy. I am thinking of someone who attended the guy’s wedding, who is a godfather to his child, not merely a superficial business relationship.
Then, when it’s time to grow and expand, there are basically only 5 regions in worldwide sales: Eastern and Western US, EMEA (Europe, Middle East, Asia), Asia Pacific and CALA (Central and Latin America). I then look in my network to see who the best guy I know is for the job in a given market. Once I hire these people, I work with them to bring in their top guys from their personal network based upon what the company needs in its next level of leadership. This works really well when one has been focused on a specific industry for a long time as I have, and pretty much know all the other top players in this industry.
Me: What information systems do you use?
Scott: I will tell you if you promise not to laugh at me, given you’re from MIT. I have a notebook bound in green leather held together by duct tape that I thumb through every morning. I go through every single contact in the book, and check off a mental list – is everything going well with this account? When was the last time I spoke with him? When did this person check-in last, and what was it about? If it’s been a while since I touched base, I pick up the phone and call the person. I do this every single day, first thing in the morning.
Me: Ever hired a salesman who seemed to be the right guy for the job and turned out he was not? What went wrong?
Scott: Oh absolutely! Sometimes, people talk a good game, meet all the criteria on paper but don’t walk the walk. As a manager, it’s very important to be study human psychology and be an astute observer. Some people are terrible new account managers but very good with customer relationships. In such cases, you try to find a home for them. You team up the good hunters with the good farmers because people maybe better at one than the other.
I hired this guy once who had a terrific killer instinct – he was very good at breaking down barriers and landing the initial contract. However, he was pretty bad with following up, keeping in touch with people and doing relationship maintenance. I had the option of firing this guy. Instead, I chose to move him into a role where his skills of breaking down barriers and landing the first contract was important, and moved someone else who’s better at relationship management to do the follow-up.
It’s very important for a good manager to know the strengths and weaknesses of their employees, and position them appropriately to succeed even when the employee himself is not aware of his own strength or weakness.
Me: Suppose there’s a dispute where one sales person has been working on a lead for months and the order comes from a different department/location, how do you decide who gets credit?
Scott: This happens all the time. In fact, I just got off the phone with one of my sales people dealing with this exact thing. These issues are much easier to resolve if your people trust you and believe you’re playing fairly. Often, I end up compensating both people equally, even if it means I need to deal with the CFO later and justify my actions. It’s really important to not have petty bickering in the organization, because it can bring the morale down. Sometimes, I might ask the person to take one for the team secure in the knowledge that their work has been noted and will be acknowledged appropriately down the line.
And this in a nutshell folks, is how the winners think about sales!
Here are excerpts from my interview of Scott:
Me: What are the characteristics of a good sales person in your opinion?
Scott: A good sales person is one who has an excellent work ethic, is paranoid and is someone who is creative. An excellent work ethic is a common denominator for most successful people.
Paranoia is very important because a sales person must constantly think and be aware of what his competition is doing, and be prepared at all times to be one step ahead.
Creativity is super important in this business because a good sales person must always create reasons for future meetings with the client, until the sale is closed.
Sales are made based on relationships at the end of the day. It’s important to be very tuned in to the customer and interpret fine nuances in tone and language appropriately in order to be extraordinarily successful in sales.
Me: What characteristics make someone a good sales manager?
Scott: A good sales manager is an excellent team player in addition to possessing all the skills that a good salesperson possesses. He must have the respect and trust of the people who report to him, and must have built up a reputation for fair play. The team must know that their manager has their back at all times.
As one progresses upward in a sales organization, it’s extremely important to understand what motivates each constituency (s)he is dealing with, and respond in a way that addresses that constituency’s concerns. A CEO is seeking a different answer than the VP of technology or the head of manufacturing, and it’s very important for a head of sales to be able to turn on a dime and give different people the responses they are looking for from their perspective. It’s almost like having ADD – there are a number of people who need to be kept happy at the same time, and it’s a very delicate balancing act to pull off. That’s one reason why burn-out is so high among sales managers and not that many people make it to the top sales jobs.
Also, good sales managers in top jobs must have the ability to make quick decisions that will eventually affect practically every part of the company. This requires someone who keeps their finger on the pulse of the customer round the clock, is able to synthesize the information quickly, and can take the heat.
Good sales managers are smart about how they use their time. Common perception is that sales people routinely wine and dine their customers and go on golf outings with their clients on weekends. Personally, I haven’t played golf at all in past year because I don’t have the time.
While dining, golfing with your customers is perceived to be an effective way to create the all-important-relationship necessary for selling, in my opinion, there are other more effective and efficient ways to do this. Remember that the people you’re selling to may not necessarily be looking for new friends and they each have their own families they may like to spend time with!
One of my biggest customers told me “Scott, I am giving you this business because of the relationship you maintained with me even when things were down. The other guys never spoke to me then.” What I did was I reached out to this person periodically every couple of months even when I knew the person did not have a budget, kept him in the loop and let him know what new products my employer was coming up with that would be useful to them when they did have a budget. Being communicative, responsive, and honest is a much more effective way of building these relationships.
A great sales manager is one who is capable of punching someone in the nose and then 5 seconds later, the person who got punched is thanking you for it. That’s an art - it can be honed, but fundamentally, some people just have it and others don’t. Ask my sales guys – they will tell you that I am absolutely capable of bringing you to the ground and stepping on you, and 5 minutes later you will be thanking me. It’s the X factor.
Me: When/How do you decide to promote a sales person to become a sales manager?
Scott: I promote people who have earned their stripes, and I know I can trust them and respect their judgment. I have known all of my top people here at Infinera for more than a decade, and some people have moved 3 jobs with me, so they can work for me. A good manager must inspire that kind of loyalty in his people.
Me: How are incentives structured for the sales manager?
Scott: The incentives for a manager or similar to that of a sales person but on a more macro scale. The quota for a sales person might be $5M, for a sales manager, it will be $50Million. The sales people are incented based on what’s important to the company – sometimes it’s a margin bonus . Other times it’s a new product bonus, or a new customer bonus. The incentive varies depending on what the company needs at that stage.
Me: If you are in charge of worldwide sales, how do you think of and manage territory?
Scott: Territory allocation in an early stage start-up is very easy honestly, it actually starts to get harder as you get bigger. When you are a start-up, it’s you and a couple of other people, and you have the whole planet to sell to. The CEO, marketing and sales teams brainstorm an year before the product is even built – who do we know out there, who are our top customers, who our best customers are, and which customers represent our best chances. We then line up all the potential customers, put them on a list, everyone agrees and pokes holes about why a particular customer is not a good one to be on the list or why isn’t another customer on the list etc., create a top 20 list and then you start calling them.
You know most people if you have been in the industry long enough. You say “Hey, I am now with company XYZ. I know you don’t know anything about this company, but you know me and I think you will find this product interesting…”. Then you look at the list for companies you don’t know people at, and start to hire your first 3 or 4 sales people. I look in my Rolodex and see who I know has a deep relationship with the target customer and go hire them. These people will typically have a relationship with the target customers even deeper than me. When I say “deep”, I don’t mean someone whose the customer’s golf buddy. I am thinking of someone who attended the guy’s wedding, who is a godfather to his child, not merely a superficial business relationship.
Then, when it’s time to grow and expand, there are basically only 5 regions in worldwide sales: Eastern and Western US, EMEA (Europe, Middle East, Asia), Asia Pacific and CALA (Central and Latin America). I then look in my network to see who the best guy I know is for the job in a given market. Once I hire these people, I work with them to bring in their top guys from their personal network based upon what the company needs in its next level of leadership. This works really well when one has been focused on a specific industry for a long time as I have, and pretty much know all the other top players in this industry.
Me: What information systems do you use?
Scott: I will tell you if you promise not to laugh at me, given you’re from MIT. I have a notebook bound in green leather held together by duct tape that I thumb through every morning. I go through every single contact in the book, and check off a mental list – is everything going well with this account? When was the last time I spoke with him? When did this person check-in last, and what was it about? If it’s been a while since I touched base, I pick up the phone and call the person. I do this every single day, first thing in the morning.
Me: Ever hired a salesman who seemed to be the right guy for the job and turned out he was not? What went wrong?
Scott: Oh absolutely! Sometimes, people talk a good game, meet all the criteria on paper but don’t walk the walk. As a manager, it’s very important to be study human psychology and be an astute observer. Some people are terrible new account managers but very good with customer relationships. In such cases, you try to find a home for them. You team up the good hunters with the good farmers because people maybe better at one than the other.
I hired this guy once who had a terrific killer instinct – he was very good at breaking down barriers and landing the initial contract. However, he was pretty bad with following up, keeping in touch with people and doing relationship maintenance. I had the option of firing this guy. Instead, I chose to move him into a role where his skills of breaking down barriers and landing the first contract was important, and moved someone else who’s better at relationship management to do the follow-up.
It’s very important for a good manager to know the strengths and weaknesses of their employees, and position them appropriately to succeed even when the employee himself is not aware of his own strength or weakness.
Me: Suppose there’s a dispute where one sales person has been working on a lead for months and the order comes from a different department/location, how do you decide who gets credit?
Scott: This happens all the time. In fact, I just got off the phone with one of my sales people dealing with this exact thing. These issues are much easier to resolve if your people trust you and believe you’re playing fairly. Often, I end up compensating both people equally, even if it means I need to deal with the CFO later and justify my actions. It’s really important to not have petty bickering in the organization, because it can bring the morale down. Sometimes, I might ask the person to take one for the team secure in the knowledge that their work has been noted and will be acknowledged appropriately down the line.
And this in a nutshell folks, is how the winners think about sales!
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