Do you have know-how that’s needed now? Do you have know-how that’s needed now?

Authors
Miriam Connaughton

EY West Region People Advisory Services Technology, Media, and Telecom sector leader

Passionate about elevating the employee experience and investing in people to build future-ready skills to adapt to what’s next.

Swati Goenka

EY Global Technology Analyst

Technology enthusiast. Avid market trend scanner. Passionate about identifying opportunities of technology implementation to derive growth.

Tom Wroblewski

EY Americas People Advisory Services Sales Workforce Effectiveness Leader

Works with clients on sales workforce effectiveness. Enjoys spending time with family. Amateur runner and golfer.

6 minute read 23 Sep 2020
Related topics Tech sector

As tech companies shift to consumption-based business models, they must transform their sales and marketing teams. Our checklist shows how.

Technology companies are increasingly looking for differentiation and growth by aligning their business models more closely with the actual consumption of their services. As business pressures increase and as we rebound from unforeseen business challenges, adjustments in the sales motion, including pricing strategies, will be required. Clearly, it is a necessity to protect and engage our people and customers as the first response to global uncertainties. But at some point, what comes next and beyond will require us to focus on how we recover and grow. Many in the tech sector were already bundling products and services in new, more complex ways and most are implementing new subscription-based revenue streams. The need for such changes will likely accelerate as business conditions improve.

Consumption can mean different things depending on the model. For B2B “everything-as-a-service” or platform-based models, businesses must track and monetize usage at the user and feature level. In B2C models, software applications no longer come pre-installed in hardware, but are selected by the user (e.g., Office 365) and paid for through subscriptions. Even with seemingly “free” services, those large scale ad-funded platforms, the key metric is user engagement or “consumption,” which fuels the user-level data capture that is monetize indirectly. The switch to consumption-based business models has impact across the value chain, from product and customer experience development to pricing, revenue recognition and even tax strategies, with business implications across the enterprise.

This article explores the implications of consumption-based business models including the ever-important organizational and employee experience design considerations that savvy companies are prioritizing to complete this journey.

As companies respond to these shifts, one of the most fundamental questions remains, “Are their marketing and sales teams ready?” EY research indicates that the answer in many cases is “no” – meaning companies could be heading for severe trouble as they strive to make the switch. The vast majority of surveyed respondents (90%) said their companies are planning on shifting to subscription based models, yet only 55% of the respondents to our study are saying they’re fully prepared for the move to a subscription based sales force. There’s still a lot to do to ensure success.

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Chapter 1

Tackling the talent imperative

Tech companies must transform, motivate, and reskill their sales and marketing teams.

Why talent matters

Tech companies recognize the quality of sales talent/training in their organization as the biggest barrier to achieving growth objectives. Yet only 52.5% agree they have the right skills enablement in place to help sales teams understand the modern buyer.

Trickle down change pie chart

Key factors impeding the ability to achieve your organization's growth objectives

Trickle down change pie chart

My organization has the right sales skill enablement programs in place to educate any sales teams on the mindset of the modern buyer

If the workforce is to be fully prepared, a laser-focus on talent will be key – a focus ensuring sales teams become productive with new ways of working, actually helping them adopt new technologies and solution sales motions, and truly focusing on helping teams develop these new skills. All these factors will be key determinants of the winners and losers in the race to customer acceptance. EY data shows companies recognize the critical importance of selling skills in a solution-based subscription business, ranking sales talent and training as the biggest barrier to growth. Yet many are not yet addressing this issue.

Almost half – 47.5% – either think their organization doesn’t have the right sales enablement programs in place, or are uncertain whether the programs are adequate. And almost a third say their sales teams struggle with digital selling (31%), solution selling (33%), and understanding new or different pricing models (30%).

Challenges to the switch to subscriptions

Communicating the new value proposition is the biggest hurdle – and many are unconvinced that the change will permeate all areas of the business.

Trickle down change pie chart

What do you see as the greatest challenge(s) with activating a product to services or subscription-based shift within your organization?

Trickle down change pie chart

The change will be 'trickled down to all impacted functional areas'

The consumption-based selling approach requires a sales team that is skilled differently. Solution and business value oriented selling skills need to develop very quickly as customers expect to be sold to by experienced sellers who can clearly communicate how their solution will drive better business outcomes or either faster time to value for their clients. New modern learning approaches can provide the platform for this change and provide efficient options for companies that need to invest to upskill their salesforce and channel partners. Digital thinking is required here:

  • Digital learning platforms available anytime on any device, replacing classroom training and other traditional approaches 
  • Microburst learning which is quick and relevant to the solution and stage of the selling cycle
  • Gamification leveraged to engage the sellers and motivate them to learn new skills
  • Adaptive learning that personalizes the experience to the needs and learning path of the individual
  • Analytics fit for the digital age to monitor completion and, more importantly, applied understanding and future learning needs.

…while adapting to sell new propositions

The challenges are compounded by the scope of potential and required changes. The biggest barrier to activating a shift to services or subscription-based selling, is communicating a compelling value proposition, followed by defining solutions and adaptive pricing. This is definitely a skills-based selling motion – which is why experienced sales talent is in such high demand. Subscription-based solution selling is the cornerstone of this new consumption-based sales model.

Add the required technology changes, and the degree of difficulty rises still further. Significant IT investment is expected in the coming year, including in customer relationship management (CRM), configure price quotes (CPQ), contract lifecycle management (CLM), content management systems (CMS) and analytics/BI tools. The pain usually experienced when implementing new technologies will be multiplied because technology is just one element of the changes needed for success. Significantly, 40% are skeptical that the changes required to support a new subscriptions business will trickle down to all functional areas. This represents a real opportunity to ensure the entire business is aligned.

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Chapter 2

Realigning incentives is key

Communicating the new value proposition is the biggest hurdle and many are unconvinced the change will permeate all areas of the business.

Communicating a stronger value proposition is actually a fairly easy first step however, it will also be critical to realign incentives both for sales teams and channel partners to drive accountability and growth. Full value will only be realized from new skills if they’re underpinned by modern compensation models that incentivize the right behaviors. Yet our respondents rate rethinking sales compensation as the least important of the internal sales and marketing process changes. We think this is an important miss, as the example of a technology company illustrates.. They only fully realized the necessity of redesigning their direct sales motion by:

  • Decreasing seller inefficiency by eliminating overlapping job roles which caused sub optimization in their sales coverage model resulting in overpayment for similar activities
  • Increasing emphasis on billing over just booking where there needs ideally to be a balance of emphasis in a subscription business 
  • Eliminating distracting factors like MBO’s (Management By Objectives) that don’t drive pay for financial performance.

We see many companies focusing initially on balancing their operation model with their go-to-market coverage. One of the critical steps of this process is to integrate job roles and sales incentive plans so the sales teams are aligned with the business strategy and objectives. Deprioritizing a rethink of sales compensation is a potential crucial blind spot. And one-third of them do not even plan to evaluate their current incentive compensation management tools. Compensation is considered least threatening factor for restricting channel partners for selling for their organization, while 22% believe that there is a scope of improvement in their incentive plans for channel partners. We are seeing technology companies orient incentives to ACV (Annual Contract Value) versus just TCV (Total Contract Value) at contract signature.

Partner and channel arrangement need to be improved

Over three-quarters of respondents believe their current approach to managing partners and channels doesn’t fully support their growth – and 22% say partner incentives could be better.

Trickle down change pie chart

Does your organization have a partner and channel ecosystem that enables you to achieve your growth objectives?

Trickle down change pie chart

Which of the following statements best reflect your current incentive plans for channel partners?

… alongside evolving the organizational culture

Our findings also underline the need to address the difficult “soft” issue of culture. In terms of customer-centric focus, around a third (32%) of respondents believe that only part of their organizations has a culture that addresses changing customer buying behaviors. Culture will evolve whether it’s being guided or not – so actively leading the way to a new culture is key to success.

EY’s eight-point checklist for your sales and marketing organization and talent agenda

Given these research insights, how can companies reshape their organization and talent for success in a subscription-selling world? Here’s our checklist for success.

1. Understand your organization’s readiness

EY research shows 44% of firms are either neutral or don’t feel sufficiently prepared to adopt a subscription model. So how ready is your organization? Don’t just guess – collect and assess data to analyze. Check how prepared you are with a change readiness assessment.

2. Figure out how you need to reorganize for success

Almost 70% of organizations believe their marketing function doesn’t align effectively with their sales teams. Do you know how to optimize your sales and marketing organization design for the new subscription model? Start with assessing your capabilities and design for the future.

3. Gain a clear picture of your skillset needs for the future

Companies have major skills gaps. In sales, these are primarily in account management, solution selling and digital selling. In marketing, they’re in analytics application, digital marketing, value proposition messaging and alignment with sales teams. Do you know what skills you’ll need, how many, where, and what mix? Get to the answers with future-focused workforce planning.

4. Analyze the skills base of your current workforce

Only about 50% of organizations think their sales team can have a value-based discussion with customers, and one-third of sales and marketing teams struggle with digital selling. How well do your workforce’s current skillsets align with ensuring a consistent and engaging customer experience? And where do you need reskilling. Find out through a workforce analytics-based skills assessment.

5. Ensure you have the right skills enablement programs

There are major skills gaps in both sales and marketing – and the number one issue impeding the ability to achieve growth objectives is quality of sales talent/training. But almost half (47.5%) of organizations think they don’t have adequate sales skill enablement programs in place to educate on the mindset of the modern buyer. Are your skills enablement programs up to the task? Ensure they are, by implementing updated, world-class sales training that takes advantage of omni-channel, e-learning technology.

About 33% of organizations believe there are skills gaps in their sales teams in solution selling, 25% in articulating value propositions, and 30% in understanding new pricing models. In marketing, 31% see gaps in effective messaging to articulate the value proposition.

6. Address the full span of the required culture change

In terms of solution-selling mindset, 25% of respondents believe only their sales team has the culture to address changing customer buying behaviors, and another 36% say only parts of the organization have such a culture. Looking organization-wide, the belief that the right talent for this culture is in place is low for sales, at 16%; the perception that there’s a sales-oriented culture is flat across sales and other parts of the organization, both at 26%. Where is culture change needed – and how far does it need it shift? Run a culture diagnostic as a foundational input to reinventing your employee and channel partner experience.

7. Realign sales compensation

Getting sales compensation right is a vital priority that companies ignore or delay at their peril. Some 22% of firms say their current incentive plans for channel partners could be better. And other findings highlighted above underline the widespread concern over effective communication of the value proposition by sales and marketing teams. So, do your sales incentives encourage the right behavior to support your strategy? To ensure they do, conduct a sales compensation and incentives design exercise.

8. Invest in strong change support

Over four-fifths (82%) of companies are seeking internal sales and marketing process changes. And the top challenge with activating a subscription-based shift is communicating a compelling value proposition. The broader change agenda is complex – technology, operating model, skills, incentives and more – and how you support change must be equally robust. Is your current change support capability strong enough? A modernized change experience program will help you identify and address any weaknesses.

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Chapter 3

Getting it right

Few businesses have already taken right steps to create the right workforce for a successful migration to consumption based model.

If you can check off these eight items, you’ll be well set to create the right workforce for a successful migration to consumption-based models, something several leading companies have already achieved.

One is Cisco, which is making its workforce more digital and transforming the way its employees work by building a connected workplace, developing collaboration technology, leveraging IoT and experience applications and optimizing workplace resources. In the past five years, Cisco’s workforce has increased by 20% but its real estate portfolio has decreased by 30%. Also, its employee engagement has increased by 17% and work-life balance by 15%.

Take another look at our checklist. If you can’t say “we’re there” on every item, what are you waiting for? The good news is that reimagining your sales workforce for the new consumption-based business models doesn’t have to be a drawn-out process.

EY wavespace™

Whether virtual or in-person, EY teams can move fast to deliver breakthrough thinking and holistic, practical solutions through our innovative wavespaceTM approach. Our leading experts with real-world experience can help you hit the ground running – and get your sales and marketing teams onto the winners’ podium.

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Summary

For tech companies to move successfully to new consumption-based business models, they must transform their sales & marketing operations and ensure their teams have the right skills and incentive plans. Achieving this requires a wide array of actions – from organizational and process redesign to reskilling and talent development, and from the implementation of advanced workforce analytics to cultural change reflecting the modern customer’s new buying behaviors. EY’s checklist and solutions will help companies tackle all these changes – creating an engaged and skilled workforce that can fuel growth in today’s consumption-based business models.

About this article

Authors
Miriam Connaughton

EY West Region People Advisory Services Technology, Media, and Telecom sector leader

Passionate about elevating the employee experience and investing in people to build future-ready skills to adapt to what’s next.

Swati Goenka

EY Global Technology Analyst

Technology enthusiast. Avid market trend scanner. Passionate about identifying opportunities of technology implementation to derive growth.

Tom Wroblewski

EY Americas People Advisory Services Sales Workforce Effectiveness Leader

Works with clients on sales workforce effectiveness. Enjoys spending time with family. Amateur runner and golfer.

Related topics Tech sector