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title: Product to Service Presentation

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# Product to Service Presentation

## Intro:
Maybe you can remember when Salespeople visited you once every three years and tried to sell or renew their software. This tried-and true sales model had helped companies like Microsoft one of the world’s most valuable companies. Basically, the amount of money Microsoft charged organizations was based primarily on head count.
When Satya Nadella became CEO of Microsoft in 2014, he changed the sales model drastically form its traditional Windows first to a cloud first strategy. The gist of the new model is to convert its products into a software as a service also called SaaS.
This new SaaS model bases fees on consumption, similar to how you have to pay for your water and electricity, the more you use it the more you pay.
This change not only requires the change of the strategy but an entirely new mindset about the sales function.

## Three Steps
The author of the article Doug J. Chung teaches in his classes that the most sales strategy and management decisions revolve around three issues: **how to sell what to whom**. While this sentence is still valid, the how, what, and whom must be defined anew. Redefinition ranges from selling services instead of products, the types of customers and how the salespeople must engage with customers before and after the sale. Many things can go wrong on redefining your company, so the author defined three steps which enable companies to transform most effectively to support such a new strategy:

## Rethink Customer Segmentation
In the old days large B2B companies assigned the customers with the highest head count top priority and sent their best salespeople. A shift to a SaaS model can change this, for example Netflix only has 8,600 employees, only a fraction of large enterprises. I am sure you can't imagine handling Netflix as a second-class citizen. During the first half of 2019 Netflix accounted for 12.6% of all internet traffic and now Imagine selling cloud services. The conclusion is obvious. 
Stories like this make it clear that the metrics that identify a potential enterprise client have to be reworked.
This off course comes with some new complexities: while in the old model you "just" had to take the head count, in the new model it is more complex. An example could be to look at the number of cloud engineers employed by a client, or cloud usage.

## Resctructure the Sales Organization
While the first step deals with the whom the second step deals with the how. The traditional sales process looked like this: generate leads, qualify prospects, demonstrate the product, and close the sale. Changing to a SaaS model means to generate substantial revenue the customer must use your product, a lot. This is called customer success. Only if the customer is happy and has success using your software service, will he use it often. To drive this success salespeople, must stay engaged after the contract is signed and must become quasi consultants, to help the customer grow adept at using the product. This leads to closer and continuous relationships with the customers, which in turn gives insights into customers pain points and product features that might add value.
All these new tasks are not easily accomplished by traditional salespeople, they need to drastically change their behaviour and knowledge. This brings us to the last step.

## Use Sales Force Management Instruments to Drive the Right Behavior
To accomplish all these changes and new customer interactions sales manager must use a set of tools which the author calls sales force management instruments.
These include Hiring the right people, training, and managing their performance and compensating them in a way that aligns their incentives with company strategy. Let’s look at the Hiring:

#### Hiring
The new technically complexity that customer success brings with it, calls for applicants who have both technical skills and the emotional intelligence to succeed in a customer facing role. While companies typically worry about whether their technical employees are adaptable enough to make the shift, the problem seems to lie more with salespeople who often struggle to master their increasingly technical job requirements. A Microsoft executive calls for a drastic way to accomplish this: "It is necessary and inevitable to terminate people who cannot or are unwilling to transition to the new sales model."
A way to make change more enticing could be the compensation.

#### Compensation
According to the author companies spend about $200 billion annually on sales compensation for a simple reason: A well-constructed comp plan significantly improves salespeople's behaviour. So, while in traditional sales the incentive pay was given in proportion to the closed deals, in the SaaS model the incentive should be closely linked to consumption of the customer, like cloud consumption.

#### Training and performance management
The next topic to look at is the training and performance management. In this new SaaS world salespeople need to have the skills to identify cloud usage potential and show customers how to add value by using the service. Since this is often new for salespeople, sales manager should coach and offer feedback while this change is ongoing to increase the success rate.
Another important aspect is the company culture.

#### Culture
You can have the best new strategy if you cannot change the mindset and with that the culture of the employees only disaster awaits you. For this purpose, Microsoft for example changed its mindset from a "know it all" to a dynamic learning environment of "learn it all". The focus shifted from the product itself to helping people use it.

#### Conclusion
Developing a new offering, first the potential customers pain point must be identified. Only if the customers pain is sufficient can it make the companies value proposition viable. Important is also that the firm must also find the right sales strategy to engage customers with its innovation. 
So, to increase their odds of success, they must be ready to rethink their sales management and strategy the same way they reengineer their products.
