NEW METRICS FOR BUSINESS DEVELOPMENT
The road to (faster) results
By Professor Jean-Pierre Jeannet - December 2008
|Excerpt from webcast: Marketing Series - New Metrics for Business Development - Part 2 (3:52)|
Many companies today are striving for more innovation, more new products and faster top-line growth. All of this depends on effective business development. In some companies, business development is viewed as a strategy and applies more to acquisitions or targeting of major investments. In any event, business development is an important sub-discipline of marketing and needs to be pushing the launch of new products and services, and obtaining a foothold in new territories or segments. What are some of the challenges companies face when getting out there?
When you launch, you spend. In a world where time is money, the pressure is on to move out of the early phase into business-as-usual as fast as possible. You should enter the "crisis of opportunity" when certain key questions come to the fore. Into how many different segments or markets should the product (or technology) be launched and which applications should one be considering? How deep does one go? How long will it take to come back out? When can one expect the payoff?
The point of business development as a professional approach is that correctly applied, it should provide discipline that leads to faster, more economic results. Certain measures need to be taken into consideration from a business development point of view for any organization and particularly for startups with a cash crunch.
Consideration number one is how far down is down. In other words, what is the sum total of the losses that will be accumulated before pay back time comes? This is driven by two things – effort and time required to the first deal.
Cash strapped entrepreneurial companies have come up with several very specific time metrics to take into consideration:
While it is critical to have a sense for all of these pathways, obviously any time that can be taken off each one reduces the need for a very large cash reserve upfront.
Cash strapped entrepreneurs are notoriously good at discipline and focus and without the luxury of cash or years to make a success of whatever venture is in question, discipline and focus are paramount to success. The time measurements above are part of this and are easily transferrable to a larger, flabbier organization.
Pros and cons
Time is one thing – but cost is another. What will it cost to educate the first customer? What will it cost to get the first order? To do the first delivery? Or to collect the first cash? And while educating customers is important, educating stakeholders should also not be forgotten.
In any business development mode, there are always several roads that lead to Rome. The fastest route to success may also be the most costly, and time and cost need to be weighed up to find the best combination.
Would it make sense to trade going deeper into the deepest point of loss, but returning more quickly to the profit zone, versus going more shallow but putting out the time? This is precisely the type of combination of things that need to be worked with – hence “the crisis of opportunity”.
As one probes for the best way to go, these trade-offs will have to be made and there may be other ways of shortening the process. Engaging in a strategic partnership will also help reduce both cost and time, as will leveraging existing corporate relationships or customers.
I have a pain, doctor
Both time and cost metrics are impacted by the value proposition of the new business or service. A strong value proposition will take less time to get to market but the success of anything depends on what it is going to do for potential customers. The difference this will make to the timeline and cost line is substantial – and it may be a question of making people aware of their “pain”. Is it a felt “pain” – i.e. I know I have a problem? Or is it a “perceived pain” – I think I have a problem but it isn’t all that bad? Or is it an “unrealized pain” – I am completely unaware that I even have a pain? Whatever it is, the important thing is how long it will take you to convince everybody out there that you have the solution in a world where people have invariably found their own solutions - effective or not - to get around their problems.
Will a business development approach with these new metrics ensure that one gets to market quicker, at less cost and have a better result? Absolutely. Every day that you are earlier in the market, or every day that you are more successful, is critical. And as an added bonus, a possibly unintended knock-on effect of such an approach is better synergy and fusion between departments in an organization which perhaps traditionally don't always see eye to eye.
This material is a result of a collaboration between Professor Jeannet and Professor Les Cham of Babson College.