China Syndrome - The Slipped Deal Meltdown
WMMM #015 - A lesson for closing the gap when a forecasted deal slips.
Cardinal Initiatives Newsletter May 6 2023 9 min read
China syndrome (noun): a hypothetical sequence of events following the meltdown of a nuclear reactor, in which the core melts through its containment structure and deep into the earth; so named for the fanciful idea that there would be nothing to stop the meltdown from tunneling its way to the other side of the world (“China”).
China Syndrome - The Slipped Deal Meltdown
Melodramatic? Maybe.
It happens all of the time in enterprise sales. You reach the midpoint of a quarter, and a forecasted opportunity goes sideways. The sequence of events that ensue is so extreme that it beckons to be called a “meltdown” and so far-reaching that “China syndrome” does not seem an exaggeration if you find yourself in the middle.
This scenario could easily be a specific sales story, but I’ve chosen to leave it general, more of a lesson than a story. I have also decided to provide you with my view from three different perspectives:
Victim - the salesperson owning the slipped deal,
Management - that salesperson’s management team, and
Collateral Damage - other salespeople reporting to the same management, peers of our slipped deal owner.
In each perspective, I aim to describe how we reached this moment and why, what typically happens next and why, how I have handled this in the past, and what can be done going forward. My caveat to you is to acknowledge that each situation varies. Transactions and accounts aren’t all the same. There is not a single approach that cures all scenarios. Please use my experiences as examples to help you navigate your way.
Management
(This segment relates the perspective of the management team attempting to save their Forecast.)
We entered this quarter with barely enough deals to cover our quota.
We have to have every deal close at the forecasted amount or a few close higher to compensate for any shortfalls that transpire through negotiation.
We have no margin for error.
Our leadership is employing Stretch Management to drive growth.
The nature of selling complex solutions to large enterprises forces us to have opportunities with risk in the Forecast.
An example of “risk” is not having a verbal from a budget owner or decision maker to complete a transaction in our fiscal quarter.
Enterprises have buying processes notorious for withholding any commitment until the legal terms are agreed to, the negotiation is completed, and their buying process ends.
If we waited for a verbal from every opportunity before placing it into our Forecast, we would routinely forecast ZERO.
Victim has informed us that their deal is going to slip.
After visiting with the account and exhausting every option we could think of, we now see a significant impairment in this quarter’s Forecast.
We have communicated this news to our leadership, who has asked us about our plan to overcome this gap.
They want to know what we are doing to correct it.
Whatever experience we have in complex enterprise software sales has been muted by our time in middle management.
We want to be “making” the news, but our roles have unfortunately turned us into more “reporting” of the news.
We often have regrets, but our employer clearly values “reporting,” as that consumes much of the time in this role, and we were promoted to do it.
As a result, we are not deep into “the selling” of each opportunity, and certainly not with the nuances of how they were constructed.
It is, unfortunately, a numbers game at our level, and time is of the essence.
We choose a course of action that we can apply quickly and efficiently to every opportunity in the Pipeline: offer concessions.
We grab our Pipeline and call every opportunity owner (Collateral Damage).
When we get them on the line, we share our Forecast predicament, hoping to enlist each individual’s “team player” emotion.
We ask about their opportunity.
Regardless of the response, we ask them to take a “new offer” to their account.
The offer needs to be presented as a “one-time proposition,” good only if executed this quarter.
We are counting on Collateral Damage to use their considerable sales and relationship skills to find a way to pull this off without suffering unintended consequences.
At this point, we can’t concern ourselves with the next quarter.
We only need one or two of the opportunities from Collateral Damage to bite on this offer to give us a shot at saving our Forecast.
This is our plan to close the gap and what we share with our leadership.
Collateral Damage
(This segment relates the collective perspective of the peers of Victim and how Victim’s slipped deal impacts them.)
You have been nurturing an opportunity.
They weren’t shopping.
There was no evaluation underway.
This isn’t a lead produced by marketing or the ISR team.
You found a PAIN.
You established TRUST.
You have established a VALUE in doing something.
You have access to POWER.
You have established a differentiated value for doing something with us.
You have used the principles of Scarcity, Anchoring, Confirmation Bias, and Availability Heuristics to Influence this enterprise to the brink of a decision.
Neither price, terms, quantity, nor value is an obstacle to closing this opportunity.
There is no compelling business reason to do something now.
You are creating the URGENCY to do something - not there yet.
This opportunity is not in the Current Quarter Forecast.
You need to hear from POWER that they will work to get a transaction done in a specific time frame before you move this into a Quarterly Forecast.
You received an urgent request from Management.
They explain the new gap in the Forecast.
You provide them with a summary of the opportunity you are working on for next quarter.
Allowing your account the time needed to work their way through their internal politics and processes to get a deal done for you isn’t good enough for Management.
Management doesn’t know that making a new offer right now might jeopardize getting any deal at any time.
Why?
The complex factors that got the transaction this far are washed away if you mess with a single component: TRUST.
Your account had to TRUST you to be “Influenced” to take action.
Lobbing this “new offer” over the wall could jeopardize their TRUST in anything (any of the dozens of conversations you have had with various individuals) you have shared with them so far.
If they begin to doubt a single message from you, they may naturally ask themselves: “What else isn’t what it appears to be?”
If this happens, you are dangerously close to this entire transaction unraveling.
Victim
(This segment relates the perspective of the salesperson owning the slipped deal.)
While we might expect this perspective to play a significant role in this lesson, it doesn’t.
This lesson is about the fallout that occurs when deals slip.
Victim had a deal in Forecast that slipped.
It happens.
I have much to say about what can be done to minimize this risk, but not in this lesson.
When selling to enterprises, we are unlikely to get a “verbal” from a decision maker far enough in advance to forecast your deal by the time the Forecast is due.
(It does no good to wait until it’s raining to forecast rain.)
Therefore, a forecast in the enterprise segment almost always contains risk.
Deals are going to slip, unfortunately.
How I have handled in the past
Collateral Damage
How would I accommodate the request made of me by my management team (Management) when I know it will not produce the outcome they desire and may have multiple unintended consequences?
I believe it is impossible to “concede” your way into closing a deal.
There are numerous reasons for this.
The most effective way to explain why is to state from experience that once you start “giving,” an enterprise account remembers there is no floor for how low you can go.
It’s software.
There is zero cost to reproduce.
Our pre-tax margins are the highest in any industry.
Price and value were not obstacles to closing this deal, and you have opened a door that cannot be closed.
Additionally, by making a new offer at the last minute (4-6 weeks left in your quarter) with better terms, you are training your account to withhold any “verbal” or positive feedback about every transaction they do with you.
You become the culprit for the very predicament you now find yourself in as it relates to a Forecast filled with risk because your accounts won’t give you “verbals” until the very last minute.
One way to handle this situation is to find an executive in the account that is not involved in the transaction details - not part of the negotiation or buying process.
This executive needs to be high enough to have a business mind.
Once you identify this person, let’s call them the Executive Sponsor, you need to map them to a peer role in your company.
The person in your company may or may not be in the sales organization.
They are unlikely to be Management but may be Management’s leadership.
Arrange a discussion between the two executives where your exec introduces the business on the table with the current timing 90 days out.
Your exec then explains that we’d like to explore if this transaction can be done in your current fiscal quarter in the next four weeks.
Continuing this line of communication, your exec acknowledges that our request is due to our timing, which doesn’t match theirs.
The key statement follows.
Your exec then asks their exec if it is possible to accelerate the timing and get it done for us in the next four weeks.
Executives in enterprise accounts are happy to “do a favor” for another executive because it gives them an IOU - Influence through the reciprocity principle.
If there isn’t anything insurmountable in the way of making this decision, they will want to accommodate the request because they now have someone to call when they need a favor.
You may be surprised to learn that they typically won’t ask for any significant concessions to grant this request. It appears to violate a little-known “executives’ etiquette.”
Remember, if you have gone high enough in your account to obtain the ideal Executive Sponsor, they have done for their sales team what your exec is doing for you right now.
And, the higher you go, the more decent the people are: they treat others how they’d like to be treated.
Prepare your exec to be asked to support their exec’s upcoming charity event.
If we received a request in return for pulling a deal forward, it is uncanny how often it was precisely this: supporting a charity event.
Find the Executive Sponsor’s charity and their annual event, which they frequently ask their business partners for support.
Have this ready for your exec.
Management
How would I handle the gap in our Forecast caused by the deal that just slipped?
The best way to handle this situation is to begin by inspecting the other deals we have in Forecast.
It is possible to use the negotiation process to expand the size of a deal. We have had success in this area. It is the simplest solution with the lowest risk to other parts of your business if it does not initiate another process (evaluation, legal, or other) that could delay the transaction.
Next, I would look at your Pipeline for the following quarter’s opportunities to pull forward.
Use the Executive Sponsor technique described earlier to have conversations with these accounts.
Finally, consider approaching those accounts where you have an IOU - you’ve done a favor for them in the past. Use the same open and transparent approach and ask them for their ideas about where they may need more of what you sell.
My recommendations for the future
Collateral Damage and Victim
Now that I have shared how I would handle the response to the request from Management, let’s discuss how to prepare every opportunity for the China Syndrome in advance.
Improve the communication of your opportunity strategy with Management.
Choose your Executive Sponsors early and involve Management in the process.
Schedule an introductory meeting between the Executive Sponsors so that the first time they interact is not during a Slipped Deal meltdown.
Share your timing with your Coach in the account and have the same conversations at your level: acknowledge it is our timing, not theirs, and ask if there is any way we can align their decision and buying processes with our fiscal quarter.
Management
Assume that we will still need to forecast deals without having the luxury of them telling us they are placing an order with us next quarter.
There will be risk in our Forecast and more than a possibility that we will experience slippage.
Go into every quarter with a plan for slippage.
Implement the Executive Sponsor concept across our sales org.
Brief these Executive Sponsors regularly, especially when there is business in play.
Consider stepping onto the playing field ourselves.
We likely already want to but have adapted to the “report-the-news” approach.
Let’s fight through that.
An example is to find a name for a role we can play in our accounts.
We should collaborate with our salespeople to develop this program.
Management Sponsor, Project Sponsor, Area Sponsor, and Industry Sponsor are examples.
Work with our salespeople to map ourselves to peer roles in each account.
I have found that when done right, team selling is the most effective approach with enterprise accounts.
Summary & Lessons Learned:
1) There will always be risk in your Forecast.
2) Expect slipped deals and have a plan.
3) You cannot concede your way to a win.
4) Team selling and Executive Sponsors are a best practice.
Thank you for reading,
Jeff
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