Thought Leadership: A Model for Breaking Down Barriers Between Marketing, Sales, and Finance Albert Kleynhans Accrete Solutions

Transcription

2 In This Session We ll Look At The bigger picture lead-to-cash (L2C) revenue process stream: s From identifying and qualifying leads, to pursuing opportunities, generating quotes and orders, through booking revenue Challenges companies often face in lead-to-cash processes, and ways a combination of process and technology can help improve results and break down barriers Specific ways SAP CRM 7.0 can be used to address some of the typical challenges many companies face Some practical guidelines on how your organization can identify and improve lead-to-cash process improvements 2

3 What We ll Cover Terminology and definitions Exploring the lead-to-cash trends Understanding lead-to-cash macro process, organizations involved, and stakeholders Delving into the challenges and opportunities for L2C Kick-starting your organization s L2C assessment Wrap-up 3

4 Lead-to-Cash Terms and Definitions L2C s Lead-to-cash is the macro process covering all aspects from lead generation through winning business, booking orders, and revenue, including the deferral and recognition of revenue Lead and Opportunity Qualification s Qualification is the process of validating a lead or opportunity against predetermined criteria and assigning a qualification level to it based on its maturity within the sales process Sales Methodology s The sales approach or recipe that a sales organization uses to provide a consistent way for its sales representatives to pursue, track, and report on the progress of a potential sale 4

5 Lead-to-Cash Terms and Definitions (cont.) Perfect Order s Processed on time, complete, with all products in good quality and no multiple touches during the processing Deferred Revenue s Deferred revenue is sold business that could not be fully accounted for immediately as revenue, and that needs to be accrued until a service is complete or a milestone is reached Revenue Recognition s Revenue recognition is the process of monitoring when revenue can be posted from accrued to actual revenue, and is dependent on the actions and triggers from the field often service events (i.e., installation done or training performed) 5

7 Lead-to-Cash Trends Several trends, some new, some making a comeback due to the economic climate, are emerging again for the L2C space s Focus on simplification and automation s Focus on the lead-to-cash cycle time s Growing role of social networking s Mobility for increased productivity s Revenue recognition automation 7

8 Focus on Simplification and Automation As many companies are turning the corner after the challenging last few years, a renewed focus is emerging on simplifying business rules and reducing complexity in their sales processes Companies look for process improvements and reducing inefficiencies by focusing more on standardized offerings to their customers, sacrificing some flexibility for more efficiencies Some companies have looked at more basic, Web-based and/or SAAS tools as lower-cost alternatives to provide L2C capabilities s However, the lack of functionality, standard integration, and automation are significant negative factors for these solutions 8

9 Focus on the Lead-to-Cash Cycle Time Focus on the lead-to-cash cycle time and not just the cycles within each core process and business function s Organizations often focus on the performance within each department or business function, and not on the entire process s More and more organizations are starting to track and manage the entire cycle time from lead qualified to cash collected s Focus shifts from business rules and functions that optimize individual components of the L2C process, to improvements and business rules that improve the overall process 9

10 The Growing Role of Social Networking Social networking has played a growing role in marketing for a number of years already, and is now making its way into sales and customer support functions Sales execs have been somewhat skeptical about the overall net benefit of social networking on sales performance s However, tools like LinkedIn are turning the tide on the perception Social networking in sales has intangible potential benefits, including building relationships with customers, team selling, and sales team cooperation 10

11 Matured Mobility for Increased Productivity Mobility has matured and is opening new avenues for field users and management on the road to stay productive s Tablet PCs, such as Apple s ipad, are gaining significant momentum in providing access to sales teams, sales executives and supply chain executives Allows for access to vital information in a timely and user friendly fashion s The popularity of the ipad as part work, part play is making it an attractive incentive for sales representatives to use SFA tools s Management and executives use tablet-based dashboards with drill-down capabilities to access information without having to learn how to use a complex application 11

12 Revenue Recognition Automation In a drive to stay compliant with FEC regularity requirements, companies spent significant resources (often through manual effort) to manage the revenue booking process Leading companies are identifying complex and manual revenue recognition processes as a significant area for reducing complexity and improving automation Standardizing and automating revenue management reduces risks (e.g., audits, dependence on one key resource), improves closing cycle times around month-, quarter-, and year-end, and often results in direct cost savings 12

14 Lead-to-Cash Macro Level View 14

15 Organizations Involved in Lead-to-Cash Marketing s Lead generation, development, qualification and assignment Inside sales s Lead development and qualification s Quote and order support s Sales supporting functions including billing Field sales s Opportunity development s Sales quotations s Closing business and sales orders s Order entry (if applicable) 15

16 Organizations Involved in Lead-to-Cash (cont.) Customer service and field service s Service execution and service billing s Contract management Sales logistics s Inventory management s Order fulfillment Enterprise planning s Demand planning, supply planning Finance s Invoicing s Revenue management IT s Application support 16

17 L2C Typical Business Functions CRM ERP Finance HR Logistics Service Sales Marketing Analytics Analytics Marketing Marketing Planning Campaigns Promotions Loyalty Lead Generation Lead Management Sales Plan/Forecasting Customer Leads Pipeline Opportunity Quotations Orders Service Customer Service Field Service Service Contract Warranty / Claim Complaint / Return Depot Repair E-Service Analytics Master Data Pipeline Sales Service Marketing Logistics Financials Order Execution Logistics Supply Chain Inventory Management Reverse Logistics E-Commerce Channel Inventory Finance Credit Management Planning & Budgets Cost Tracking Revenue booking Revenue deferral Contracts Installed Base Billing Spare Part Activity Knowledge 17

19 Challenges and Opportunities for L2C Lead management Opportunity management Quotation and order management Finance integration 19

20 Lead Management Challenges and Opportunities Lead generation s Be able to answer, What sources are providing the best quality leads at the lowest cost per revenue dollar earned? Lead qualification s Who should be involved in the qualification process marketing or sales? s Is a two-step qualification right for my organization? s Lead volume vs. lead quality is an important trade-off and often less is more less leads of higher quality Lead distribution s Pushing unwanted leads to sales people is often counterproductive s Consider an opt-in approach for sales reps to receive leads 20

21 Lead Management Challenges and Opportunities (cont.) Downstream visibility of lead follow-up and results s Being able to track the life cycle of a lead is a critical part of analyzing the impact of your organization s marketing and business development capabilities s Identifying and tracking the right top three or top five metrics is very important in establishing a consistent and successful lead generation operation Identifying the right leads or opportunities to invest time and resources in, and avoiding the wrong deals, has a significant impact on an organization s overall success and margins 21

22 Target Improvement Areas Lead Management Topic Actions Enablers Lead Generation Lead Source Performance Capture Leads created in a period per source Cost associated with leads per source Revenue based on opportunities won or orders processed from leads from a source Determine Average cost per lead per source Average revenue per lead per source Lead-to-order conversion percentage per source Integrated lead management tool Lead analytical capabilities Performance dashboard 22

23 Target Improvement Areas Lead Management (cont.) Topic Actions Enablers Lead Qualification Consider Who should do primary lead qualification? Should my organization trial run an inside sales qualification process? Do we have a consistent, easy to use qualification guide? Can we easily adjust the qualification criteria based on work load and sales pipeline? Integrated lead management tool Lead qualification process Lead qualification survey Lead pipeline visibility A sample lead qualification matrix is provided 23

24 Sample Lead Qualification Matrix 24

25 Lead Qualification Using SAP CRM Define questionnaires s Layout, questions, answers, ratings Define questionnaire determination s By time period, transaction type, item category Assign qualification levels to questionnaires s Min. percentage based (e.g., cold 25%, warm 50%, hot 75%) 25

27 Opportunity Management Challenges and Opportunities Closing more deals: Are your sales tools helping or hurting? s Sales methodology Are your sales processes supported by a consistent sales methodology? Is this followed in your organization? Is your sales methodology adding value to your sales process? Can you measure the impact? s Sales automation To what extent are you using guided selling or automated sales assistant capabilities to guide new sales representatives through your process? How flexible is your sales automation tool to adjust to the experience level of your individual sales representatives? Too much guidance during the sales process can be a distracting factor for sales teams to use your SFA application 27

28 Opportunity Management Challenges and Opportunities (cont.) Sales pipeline visibility is a key component of managing your sales team and the results they achieve s Opportunity-specific sales forecasting Being able to track the probability of a sales deal closing, with increased accuracy, including the when, what, and how many aspects that impact your sales forecasts Leading organizations have the ability to easily roll up opportunity-based forecasts into their demand planning tool, and adjust the timing and probability of closing on mass or individual opportunity level with a few key strokes Improving your opportunity-based sales forecasts can be achieved in smaller, incremental projects that could have a big, positive impact on how you manage your business 28

29 Opportunity Management Challenges and Opportunities (cont.) Timely sales pipeline and opportunity analysis results in valuable information s Management information resulting from opportunity analysis Know when to intervene: Ability to track typical stage and cycle times for opportunities enables the ability to identify and escalate opportunities not moving along as they should Know when to pull the plug: Ability to recognize opportunities that are not tracking for success early and either take corrective steps or abandon to focus elsewhere Know where to focus: Knowing which clients and opportunities provide the best return allows for the best use of rainmakers and expensive executive time s The value of analytical information is directly related to how accessible, accurate, and timely the information is 29

30 Target Improvement Areas Opportunity Management Topic Actions Enablers Sales Automation Considerations for Sales Assistant Capabilities Review sales approach and identify three to five key steps in each stage Look at templates and checklists that live outside of core application to include Provide ability to scale level of guidance on automation into two or three levels, and assign your sales force accordingly Opportunity Management application Sales methodology Sales assistant capabilities Workflow and action automation capabilities Opportunity analysis application Avoid Pitfalls Avoid guiding too much and alienating your sales team Avoid over-automation Keep workflow simple and to the point 30

31 Target Improvement Areas Opportunity Management (cont.) Topic Actions Enablers Sales Forecasting from Opportunities Consider The very positive impact of a good opportunity-based forecast on demand planning, availability, cash flow, and customer satisfaction metrics The time your organization today spends on planning and forecasting vs. resolving issues caused by inaccurate or poor forecasting Evaluation steps Consider a health-check review on your current opportunity forecasting process and applications Compare your capabilities with the core capabilities of leading organizations Identify the targeted areas for improvement process, application, simplification, automation, etc. Opportunity Management application Opportunity forecasting tool Opportunity forecasting process and discipline Opportunity analysis application Opportunity metrics and KPIs 31

32 Target Improvement Areas Opportunity Reporting Topic Actions Enablers Opportunity Analytics Do you have the following basic information: Opportunity pipeline report per stage and probability of closing Top N Opportunity report per segment At risk and high priority opportunity Opportunity dashboard or fact sheet to get a one-page summary view Metric on information accuracy on opportunities Opportunity Management application Opportunity analysis application Opportunity metrics and KPIs Rating your information availability Accurate? Timely? Easy to compile reports? Easy to access reports? More and more companies are deploying mobility devices such as Apple s ipad to provide management information to 32

33 Improving Your Opportunity-Based Sales Forecasts Plan quotas and monitor pipeline against specified sales targets Four pipeline views s Target-to-Date s Closing Date s Sales Pipeline s Sales Pipeline Change Targets maintained by unit within the organization structure via quota planning SAP CRM analytics presented in parallel to opportunity data for overview and drill-down capabilities (no BI required) Data presented in real-time with ad hoc filtering and data views by organizational unit What-if analysis through opportunity data simulation 33

34 Opportunity Pipeline Report in SAP CRM 34

36 Quotations and Orders Challenges and Opportunities Closing the deal and executing the order; this is where you protect or lose your margin s Efficient quotation generation and tracking Inefficiencies in quotation process can lead to lost business, delayed orders, reduced margins, cash flow issues Quotations do change at times Having an efficient process to deal with it, proactively addresses many potential delays s Price management and optimization Biggest hit on margins comes during the quotation and final negotiation stage Often occurs because sales reps do not have required information to make right decisions regarding discounts and final pricing Price management and optimization tools provide the key information needed to help sales teams protect margins 36

37 Quotations and Orders Challenges and Opportunities (cont.) The secret to efficient order fulfillment: Measure, view, manage s Visibility into order execution and fulfillment As companies position themselves for recovery after the downturn, many focus on the standardization and simplification of their order management processes Significant process efficiencies are gained through the reduction of exceptions and manual interventions The ability to identify potential bottlenecks and address in advance depends almost entirely on the availability of information, including: Normal processing cycle times for each stage Monitoring of typical bottlenecks and trouble areas Escalation triggers supported by a reliable escalation process 37

38 Quotations and Orders Challenges and Opportunities (cont.) What percentage of your organization s standard orders flow through your process without manual interventions or multiple touches s Striving for perfect orders Measure your current order management process and flow Identify exceptions and triggers for manual interviews Agree on the perfect order definition for your organization Pick the right spots to simplify and automate gradual improvements require low investments and can achieve significant results Make the perfect order percentage a measurable KPI that you can strive for across your sales, order operations, and financial departments Measure the impact and success will build on success 38

39 Target Improvement Areas Quotations and Orders Topic Actions Enablers Quote and Order Tracking Potential Quote and Order Improvements Gain understanding and manage the root causes for quotation changes Establish ability to handle quote revisions efficiently Troubled order process where an order outside the norm gets flagged or escalated for additional tracking through the process Customer perception: On time and at good quality is main focus for order fulfillment from a customer point of view. Improving communication and setting right expectations makes all the difference Integrated Quote Management application Integrated Order Management application Workflow and action automation capabilities Order Management reporting An ASUG/SAP study shows companies with integrated order entry, billing, and credit management have, on average, 25% fewer invoice errors 39

40 Target Improvement Areas Quotations and Orders (cont.) Topic Actions Enablers Margin threats: Managing availability and pricing Understand the threats to good margins Pricing errors Discounts Product availability Order errors and delays Expedited orders with many manual interventions Lack of information and communication Integrated Quote Management application Integrated Order Management application Price management and price optimization tools Forecasting and inventory management tools Quote and order processes Managing towards good margins Invest in forecasting and inventory visibility Price management tools Processes that support the reality of your business (i.e., quotes and orders change, supply chain issues occur, etc.) 40

42 Finance Integration Challenges and Opportunities Tracking credit status starts very early in the sales process and is an ongoing event s Credit management and credit status tracking Early credit status establishment for a new prospective customer Credit status checking at key milestone events and when identified triggers occur (i.e., above certain percentage order value increase) s Credit allocation An important process in larger corporations where multiple organizations may have substantial pending business at any point in time with the same customer 42

43 Finance Integration Challenges and Opportunities (cont.) Booking and managing revenue depends on information and triggers from the order and contract entry processes s Revenue often has to be split between organizations Have an automated and reliable process to address revenue allocation between sales and service, as well as allocations to warranty expense provisions Automating the allocation of revenue from the original sales order to the supporting service contract, including the creating of the contract from the sales order This addresses many typical duplicate effort situations s Revenue often has to be deferred Not all revenue gets recognized immediately and the deferral of revenue can often be a complex process full of manual interventions 43

44 Finance Integration Challenges and Opportunities (cont.) Revenue deferral and revenue recognition automation can provide significant and ongoing productivity gains for Contract Management and Finance s Potential gains Reducing manual effort during month-end and quarter-end processing Reduce risks due to inaccurate deferrals, and often overly conservative or overly aggressive recognition policies Reduce non-value adding communication between sales, service, and finance to often manually identify or validate the triggers for revenue booking 44

45 Target Improvement Areas Finance Integration Topic Actions Enablers Automated Credit Checks Identify Key points when credit validations are needed during the business development and sales process Level of credit checking needed at each of these points Flags and triggers required to initiate additional reviews and approvals Opportunities to automate basic approval routing through workflow Implement Automated credit checks based on the triggers identified above Automated escalations based on agreed criteria Approval workflow capabilities Integrated credit management application SAP CRM integration to credit management Workflow tool Supporting business process 45

46 Target Improvement Areas Finance Integration (cont.) Topic Actions Enablers Automating Revenue Recognition Identify Extent of revenue deferral and revenue recognition in your organization today Complexity of your revenue booking business rules Work effort associated with booking and adjusting revenue every month, quarter and year-end Cost associated with inter-organizational and management reviews Consider An initiative to automate the triggers and business rules Integrated lead management tool Lead analytical capabilities Performance dashboard SAP, between SAP CRM and SAP ERP, provides great vehicles to automate revenue booking and achieve productivity gains 46

47 Sample Leading Practices for Revenue Recognition Ability to automatically defer revenue, cost of goods sold, and warranty cost as applicable upon invoicing s Based on the triggers identified in the sales order or contract (i.e., $100,000 invoice of which $25,000 is for postwarranty extended service) Ability to automatically trigger the start and end date and schedule from the initiating order or contract Ability to automatically recognize revenue based on the schedule from the initial order or contract, or based on the achievement of an event s On completion of an installation, delivery of training s On auto-calculated percent of completion of a project s On proof of delivery 47

49 Kick Start Your L2C Assessment Practical advice to launch and conduct your organization s leadto-cash assessment Major steps for the L2C assessment 1. Mobilize the assessment 2. Perform the assessment Gather stakeholder input Conduct process workshops Perform benchmark analysis 3. Capture and analyze the results 4. Determine next steps and action plans 49

50 1. Mobilize the Lead-to-Cash Assessment Build the case for the assessment s Stakeholders could include CFO, CIO and VPs of sales, service and marketing s Business case could include operational improvements, efficiency gains, addressing current pain points, cost savings, and cash flow improvements Determine the resource needs and budget s Will need an assessment lead and at least one representative from each organization participating s Could be done internally or with consulting support Agree on the method and timing to perform the assessment s Assessment can typically be completed in two to six weeks Get approval and kick-off initiative 50

51 2. Perform the Lead-to-Cash Assessment Surveys and stakeholder interviews s Informal surveys and questionnaires are a great way to capture internal feedback s Sample survey questions for leads and opportunities are included in the conference CD s Stakeholder interviews with key executives and business users provide great insight into the L2C macro process Process workshops s Conduct an end-to-end process workshop to look at the macro level process, identify obstacles, and target areas for improvement s Tip: Getting an experienced facilitator is an important factor to successful workshops 51

52 2. Perform the Lead-to-Cash Assessment (cont.) Baseline benchmarking s During the workshops, identify high impact target improvement areas on which you can perform a benchmark analysis s Potential benchmark areas include: Lead-to-opportunity conversions Percentage of deals where sales methodology is followed with win and loss results Average sales forecast accuracy Percentage of quotes revised multiple times Percentage of orders touched multiple times Time spent each month and/or quarter to book or adjust revenue Cash flow impact of each process 52

53 3. Capture and Analyze the Results Document potential process improvements and opportunities to remove process silos s Process flows are always a great tool to visually present the process opportunities for improvement s Highlight the major potential benefits and agree on the top two to three (e.g., cash flow benefits, cost savings, efficiency gains, customer retention and satisfaction) Summarize the key takeaways from the stakeholder analysis Look for and highlight common ground agreements on top priorities to address Consider 2x4 summaries and benefits/effort analysis charts to visually represent the best target areas for improvement s Sample templates included on the next two slides 53

54 3. Capture and Analyze the Results (cont.) Sample template to summarize results 54

55 3. Capture and Analyze the Results (cont.) More sample templates to summarize results 55

56 4. Determine Next Steps and Action Plans Build a roadmap of phased improvements Support with business cases where possible Present to management and executive teams to get approvals for formal implementation projects Some systems integrators offer quick-start assessment and mobilization services that could fast-track your efforts s However, there are many templates available for companies who prefer to drive the analysis themselves 56

58 7 Key Points to Take Home Business functions within an organization often try to compensate for integration problems with other business functions through the addition of many internally focused controls and business rules Looking at lead-to-cash as one large, fully integrated process allows organizations to identify silos and barriers that prevent optimization of the larger process Optimizing lead-to-cash could be a major effort, but identifying the larger opportunities and then dividing the work into incremental smaller projects can drive significant value without large investments An integrated application platform such as SAP CRM, SAP ERP, and business analytics solutions provide the enablers for companies to drive their L2C improvements 58

59 7 Key Points to Take Home (cont.) Improving lead-to-cash can have many benefits s Winning more business, increasing profitability, increasing productivity, cost savings, improved communication, cash flow improvements For lead-to-cash initiatives to be successful, the right level of executive support and participation from all stakeholder organizations are very important Companies can launch their own lead-to-cash assessment initiatives without much cost, and with little or no external help 59

60 Your Turn! How to contact me: Albert Kleynhans 60

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