A Guide to Business Development 2.0
At least once each day I get a call from someone trying to sell me outsourced development services. It's difficult to not be frustrated with these calls and it is increasingly hard to be polite, because
they come so frequently. Yet, more than frustrated, I am just puzzled. Does this tactic still work? Who in this day and age would give business based on a cold call? These companies could definitely use a dose of business development 2.0.
Because of these calls, for a while I have been thinking about the impact of the modern age on business development. In the good old days, it all boiled down to the salesmen with the big rolodexes who could close the deal. But clearly, the rules have changed. How does business development work this days? What makes sense and what does not? In this post we take a look.
Cold Calling is Dead
The reason we all hate cold calls so much is because they are very intrusive.
A stranger interrupts our flow, and takes precious seconds away from our lives. But maybe even as recently as 10 years ago we
did not feel it so acutely. Why? A few reasons. First, the pace of our lives was not as fast, the minutes did not feel as precious.
But more importantly, today we have a much less intrusive form of solicitation - email. True we all hate spam, but an unwanted email
doesn't feel like as sharp an interruption as an unsolicited phone call.
Besides being annoying, cold calling is no longer effective. People are smarter these days, and have learned to ignore upsells. A targeted email which avoids the spam box has a higher chance of getting a response than a call. With a call, the default allergic reaction is now "no." But with a brief and sincere email it could be, "hmmm, this might be interesting..." However, even cold emails do not work. To have a chance at making a sale, you need to get a warm introduction. It used to be that the business web was hidden inside of people's heads and rolodexes. Today, however, a lot of it is out there in the open - inside a digital business network called LinkedIn.
Warm Calling via LinkedIn
LinkedIn is a business network that has emerged as a substitute to the rolodex. Because it is
online and self-managed, LinkedIn offers a much more robust way of maintaining your business connections
and seeing what they are up to. But beyond that, LinkedIn has become an indispensable tool for business introductions.
Say you're interested in talking to Acme Co. about your new product. You log into LinkedIn and search for people who work for Acme. Then you see how you might be connected to them. Ideally connection is just one degree away, or in other words, you know someone who knows the person you are looking to connect with directly. And then you ask for an introduction.
An introduction received via LinkedIn is much warmer than a cold call, because it comes with a bit of trust. You are no longer a stranger trying to upsell things that no one needs, instead you come with a recommendation, however light, from a person that the receiver is connected to. And even if you can't find a path to connect to someone, sending a direct message via LinkedIn is better than sending a cold email. The reason is that LinkedIn implies business context, and so the person you're trying to reach likely is not going to be as surprised or angry about the unsolicited ping.
Creative Calling via Social Media
Beyond connecting on LinkedIn there are other modern means of connecting with people. Facebook message, Twitter @response, a comment on a photo or blog post, etc. These are ways of getting someone's attention that are creative, but you need to be careful when employing them because they can
be unwelcome. People do not use Twitter to get unsolicited business pings, nor do they post pictures for strangers to
comment on. Facebook is probably somewhat acceptable because a lot of people are mixing business contacts with friends there.
But the most solid way of connecting with someone outside of LinkedIn is via their blog.
People who blog generally want to have a conversation. If you engage with someone around their blog and participate in a conversation on a topic that they are interested in, you will naturally connect with them. Particularly if your business engagement is relevant to the topic they are discussing, blog comments are likely the best way to engage. However, if you try to push the conversation off topic, the person will perceive you as disingenuous and there will be no business.
Transaction 2.0
Let's suppose you've found the right way to connect and you've got your meeting. Now you're
looking at the whole sales cycle. Particularly, if you are small startup aiming to sell your product to a big company,
has anything changed? Not really. You still have two fundamental hurdles - the time and the risk.
Between startups and big companies expectations
of how quickly the deal can get done are completely misaligned. Big companies are scared of the startup speed.
Startups are frustrated with big companies' turtle pace.
Beyond the length of the sales cycle the issue that kills most transactions between startups and large firms is risk. Will this 5 person company be around tomorrow? That's a question that large companies are likely to answer with a "no" and that becomes a big problem. For this reason it doesn't make sense to buy from startups - it is too risky. However the mitigating factor is often cost - startup products are often cheaper or even free. Yet even if the technology is free and easy to remove if things don't work out, big companies are wary. They do not understand free, it scares them and perhaps rightly so.
The worst part about having a startup that sells to big firms is actually scale. The famous crossing of the chasm necessary to get big is really complicated. In the enterprise world, it means signing up many clients, keeping the pipes open, and sending out more and more products. This model is so costly and risky that venture capitalists are reluctant to shell out the money to fund it. Because of the complexity of building the enterprise business that knocks on doors a new model is emerging - web services and APIs.
Door Knocking 2.0: Web Services and APIs
How can a small start up that has no capacity to knock on doors sell to big companies? A possible
answer can be via a web service or an API. The model is applicable to a whole range of services - from data plays
like del.icio.us to messaging systems like Twitter to infrastructure like Amazon Web Services and semantic web services
like Open Calais from Reuters. The basic model is to have a web service which is accessible via API (application programming interface).
Clients sign up to use the service and have to agree to the terms in order to obtain a key. Using those keys, clients can use the
service programmatically to send and get data from it.
Some examples: the del.icio.us API, allows clients to access information about specific users (if the user permits that). The Twitter API allows sending and receiving messages without using the Twitter web site. The Calais API is an example of a web service which encapsulates an algorithm. In this particular case, the algorithm takes a document and extracts semantic information from it. Unlike del.icio.us, which offers an interface to consumer data, Calais is a one shot deal algorithm. And perhaps the most important example of a web service play comes from Amazon. Taken collectively, the offered Amazon services is powerful infrastructure for building web-scale applications.
What is common between all these web services is the simple monetization strategy - pay per API call. For each call into the web service, the callee has to pay based on the amount of the resources consumed by the call. For example, Amazon has been charging for bandwidth, storage, and CPU time. The exact model does not matter as long as a fraction of a cent is charged for each call. Remarkably, this is a business that has a huge potential to scale. Each individual client is paying an affordable price, because each call into the web service is very cheap. However, collectively clients might amount to big revenue for the service provider.
What is the most attractive about this business model is that it is completely forecastable. By estimating the cost of scaling the business (mostly hardware, support and maintenance) and setting the price per web service call and the number of clients, you can determine if the business will work or not. Of course to be fair, we need to mention that just like in traditional sales, there is number of clients hidden in every equation. Two fundamental risks exist in this model - clients will not want to use the service and clients might not be able to figure out how to use it.
Still, the risks and costs of a web services based business are much less than the traditional enterprise approach. There is no need for an expensive sales force and an army of consultants to implement the solution. We are yet to see this model succeed in a major way, but because of their simplicity and straight revenue model the API based businesses are looking attractive.
Conclusion
Nothing stays constant in this world. The technology, the web and the society always evolve. Business development evolves along with everything else and lead generation has been changing along with methods of communication. Business networks like LinkedIn have replaced old rolodexes and email have made cold calling look ridiculous. Yet, there are no fundamental changes in the sales cycles and risks for startups that choose to go the traditional route of knocking on the doors of large companies.
The markets are iterating to come up with a new form of business development called web services. This new form is both cheaper and simpler - no enterprise sales force is needed to scale the business. However the question, "If we build it, will they come?" still remains unanswered. If any company can make this model work really well it is likely to be replicated and become widespread. Will web services succeed? Time will tell.
For now, please share your favorite examples and stories of business development 2.0 in the comments.
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Alex, great post! As a biz dev guy who had to do it in the past I can assure you nobody will mourn the passing of cold calling, least of all the sales guy! The pay per API call model is fascinating. I think you may have missed a really obvious one - search engine marketing. In the right hands - a team/process that can monetize clicks - and a great proposition at the right price (about $100 is ideal) it is as close as you can get to a revenue tap today. Not easy to do right, but great if you can.Bernard
This is a very timely blog as our team faces this hurdle everyday. For better or for worse, our company is facing massive growth as we scale across client segments, territories and into new sectors!!!
No bad thing of course, but this does impose hurdles/complexities that need to be addressed swiftly/effectively...
I think one of the biggest challenges we face as a start-up is brand recognition/trust/product knowledge.
Because we sell an online intelligence platform into Senior Strategy / M&A teams at major media companies (Nokia, Liberty Media, Microsoft etc,...)to support their strategic + investment initiatives, our clients want to build relationships and feel that we are connected into their network and operating at their level.
The first two issues above are self-explanatory (recognition/trust), but the third - educating your client base on the business benefits / security of exceptional new technology is the long race. Clients have to drink tea and biscuits before they will get into bed with you. They also have to learn how to adapt new technologies/platforms into their daily operations. They don't want to come across as inept yet expect to be served in their own timeline...
...and time is money -
In some cases, this can take up to 12 months of interaction / lead time with key buyers/decision makers to prove that our service is tech-tight while increasing service quality.
In other cases, it can take as little as 3 weeks...some factors to contend with: organisational structures, company cultures, embedded competitors, price perception (all web tools should be free!!!????)and distance selling (some clients expect you to live on their doorstep)and customisation.
I would argue that the ability for web companies to customise their offering for business clients will place them within a pinnacle zone. no easy task...
All in all, our clients are great and we enjoy the twists and turns it might take to deliver a great solution into heavy-hitter teams.
Would love to hear more comments/tales in this domain!!!
Rory Kenny
VP Business Development
MBA Judge Business School, Cambridge UK
www.strategyeye.com
Digital Media + Clean Tech
I agree with what you are saying for the most part. The biggest hurdle for most is the "Door Knocking" section. These services are wonderful in theory, but are so technical and hard to do "right". Only the bravest and smartest are really able to use these services appropriately. Google's App Engine is trying to be Amazon Web Services for dummies, but Python is going to hold it back for a bit.
One of the biggest challenges with the API model, however, is that of the CFO on the customer side. While fractions of a penny sounds good in theory, big company CFO's don't like the unlimited cost that this potentially represents.
They view it like a call option - unlimited downside if they are extremely successful. While most API models present the customer with potential advertising opportunities, and hence instant ROI, the typical CFO doesn't view it this way as they know there is only one constant in the equation - cost. In other words, if the advertising market goes south or if the customer business model changes, the API costs is still present.
Of course, the easy work-around is to place a pricing cap on the business model - if the customer exceeds XX API calls/month then the price is capped. The challenge with this is that, as Alex points out, the beauty of the API model is that it scales nicely so pricing caps can limit the potential of the company and, hence, the value from the investor/VC point-of-view.
Unfortunatley, I don't have a good work-around for this objection. It would be great to learn from others' experience.
eh hum. knowing who your customer is, and what the "trigger point" is for them to be in a position to actually need your product or service is also a really good starting point. 2.0 in this case, might involve getting people to declare some data points, so that these triggers could be implied (far fetched?). Maybe. I have just never ever found an introduction that led to business through linked in. Maybe some sort of guide is needed !
Unfortunately the premise that cold calling is dead and does not work today is so far from true I don't know where to start. We use it everyday to sell services for our clients. We also use web, direct mail, and other advertising to drive inbound calls, but constantly close outbound B2B deals with small and medium sized businesses everyday. Your ideas are great, but the reality is very far away, especially in the small business space even when selling to IT professionals much less small business owners.
Cold calling is here to stay for awhile. The acceptance of the tech is just not there yet.
These are some very good suggestions, and it's amazing that there aren't more posts written about BizDev for startups. I'm hoping this is the first of many posts in this series.
As per usual these kind of tips are a "it depends" situation. For tech-savvy companies an API is a great way to get a relationship going. However if you're dealing with companies that are less technically inclined there's no way they'll go out of their way to investigate your API.
Making the product dead-simple to use is a powerful form of BizDev. Just look at AdSense, it's a small piece of javascript, and everybody uses it. If their system was a backend API framework, it would have had a much tougher time to reach the same level of success.
@stephen - your objection is a very reasonable one in a lot of cases, but not all. Just as with everything on the web, there are a handful of business models that can apply, and one should choose the appropriate one based on the situation. Some api's are monetized indirectly through the referral of web traffic and lead generation for a company's core business, such as Compete's. Others, like eBay's, are monetized by making it easier and more efficient to use the core business (in eBay's case, the placement and management of online auctions). And so on.
At Mashery, we've launched dozens of APIs for customers, and each of them sees a strategic or monetary value in doing so. Dave McClure, who used to run Paypal's developer network and API program and who advises startups (including Mashery) on these issues, says "bake your business model into your API. Your API business model IS your business model." We give the same advice to our customers.
Bear in mind, also, that Alex's post above is about business development, lead generation, etc. A well-managed open API with access limits gives prospective partners a way to develop an app that uses your service, test it, and even begin to scale demand, and most successful APIs (like Calais, which is powered by Mashery), take this approach. Thousands of developers can come and test, and only those who launch a successful application need to have the "exchange of value conversation". You end up with a self-managed biz dev funnel, and out the bottom of the funnel come the world's most qualified leads - those who have built a successful app on your API. At that point, figuring out a mutually satisfactory - and economical - business model based on the actual app and its usage is pretty easy.
Oren Michels
CEO, Mashery
Interesting...Business Development 2.0.
Why not college entrepreneurship 2.0? There are so many college students building companies these days. Just from the top 50 entrepreneurial colleges, there are over 10,000 new startups each year from undergraduates, graduates, and recent graduates.
http://www.collegemogul.com
Note to manufacturers, and sellers of things:
Stop selling junk and over market values.
Sell good stuff, people will flock to you, you will become "victims of your own success"
@ 5. I have used LinkedIn with great success. The mechanics are simple but it really is no more than a simple tool that is an extension of your network and how you nurture relationships. So it is not a quick fix. But if you do have a good network LinkedIn saves tons of time and unearths many opportunities you would not have thought about.
It's always good to hear/read an educated opinion, so thanks for your thoughts. Even more helpful would be some stats on different methods of introduction, but they may be hard to come by. In answer to your two questions: 1) Yes, cold calling still works; 2) In my opinion, people have never awarded business based on a cold call. It takes work to land business. The cold call, or any method of introduction, is just one way to break the ice. Most people hate making cold calls as much or more as they hate receiving them. But when a salesperson learns to have fun with cold calls and to respect the time of their prospects, it can work.
It's a lot like advertising--a successful approach to business development needs to include a variety of methods, with time/budget applied according to ROI. So I focus most of my time on referrals and social networking, but I still make time for cold calls. It's excellent practice for any salesperson. And I promise that when I do call, I'll immediately give you the opportunity to hang up so I don't waste your time.
Best regards,
Rob Russell
Business Development Manager
www.quangoinc.com
503-968-0825 ext. 207
How about you look at "Radical team-based synergy 3.5", "Digital integrated culture 4.0" or "Lifetime enterprise mindset 2.1.3" for solving some of these problems?
(jargon courtesy of http://www.mwls.co.uk/jargon.htm)
Seriously, why do you have to add the ridiculous "2.0" moniker to so much of this article? Even the relatively accepted term, "Web 2.0", creates a false hyper-inflated value of technology and its impact on culture. Let's communicate like intelligent people and say what we mean rather than resorting to catchy new-media jargon.
The handshake picture makes an appearance.
I hope those guys are getting royalties.
Nice article. It's specially interesting when you point out services with algorithms, like Calais.
I have recently wrote an article about how to embed algorithms into a web design:
http://www.designvsart.com/blog/2008/04/10/should-a-website-design-show-its-precious-algorithm/
Alex
This is a very interesting topic. My position is unusual, because I own two companies of relevance here: one is a business focused social networking driven referral site (http://www.wecando.biz), the other is a technology sales organisation (http://www.entelegen.com).
As several other people have stated, at Entelegen we use cold calling every day and win business for our clients that way. We don't make life any harder for ourselves than it need be, so we ensure we choose a market sector and job type where we can be sure they have a specific painpoint, which means when they pick up the call we can start speaking to them about why they may want to buy - not thrash around "trying to sell something [they] don't want". Do something properly and you get results. I recall one project we did for a client brought 19 pipeline entries (average sale value $20K each) from 40 days of calling. It works.
It would annoy me more than a well focused cold call to have someone try to sell to me on Facebook, when I am there to network only with friends. And contact a key decision maker through his/her blog or micro-blog? The people we sell to (C-level and above) have even less time to sit around sharing their intimate thoughts and actions than they do to take calls.
Business focused social networking offers lots of opportunities to be certain, but I cannot imagine how generally unproductive a salesperson would be if as an alternative to just picking up the phone they combed LinkedIn for tenuous introductions. We use LinkedIn ourselves if we don't have all the data we need on someone, but then after that we are on the phone. Nothing gets the job done faster.
But I do see Web 2.0 as a great way to quickly collect endorsements and then share those with prospective clients to help win confidence once the intriductions are over. This is what we have built with WeCanDo.BIZ. It doesn't stop us having to prospect, but it does help us to work through the sales cycle faster.
Ian Hendry
http://www.wecando.biz
Pay per call API idea is quite fascinating but I wonder where in Web 2.0 world it can be implemented? I mean what sort of businesses can pay for this type of service?
Great post and a very thoughtful discussion on where Sales 2.0 is going. I agree that cold calling is dead, and because selling is a highly sensitive social interaction you are right to point out that the future evolution of these tools is not clear.
Patrick@simplesales.ca
This post started off great. I think it's a stretch to think that APIs and social networks alone are going to be the "new biz dev", though.
However, it's certainly not a stretch to say that online lead generation via a business's website where SEO, ppc, a blog and social media marketing can ATTRACT prospects to a Company so that OUTBOUND marketing is replaced by INBOUND Marketing.
It gets even worse if you are on the internet and sign up for newsletters from some of the so-called gurus. Anytime a new product is launched, they all rush to get emails out telling you how great this is and why it is going to help you take your business to the next level.
Notice how many of the emails say exactly the same thing. Talk about buyer beware!
I read some Interesting Business Articles here...
http://www.ezedir.com/Article/Business/
Great post, but I have to disagree on the cold calling bit, it depends on the target audience. If you're after small businesses it sometimes helps to convert leads by cold calling.
All the other "biz dev 2.0" things you mentioned are exactly what helped us penetrate the music business and shape our product.
Maor
YouLicense.com
Great article - especially with the wide scope of opinions in the comments. Companies can not rely on one method of selling - whether it be cold calling, inbound marketing (PPC, SEO), web 2.0 or even APIs. Technologists have touted technology as the replacement for enterprise sales people since the advent of the telegraph and yet people still buy from people. For every technology advancement to help sell more there's an equal technology advancement to hinder selling. Look at phones vs caller-id or email vs spam filters. LinkedIn connections used to be open for all to see but now the best connected are turning that feature off or leaving the site. The pendulum continues to swing but what remains constant is that people still buy from people. And that brings us back to the old adage - "it's not who you are but who you know." The best salespeople have a strong network of customers, partners and vendors. They keep their relationship strong within the network by giving and getting referrals. Do they still cold call, send email and embrace inbound requests from marketing? Yes. Do they leverage the web to (Plaxo, LinkedIn, Facebook, Inquisix) to keep their network active. Yes. But it's still sales people!
You make some great points, but I think you need to specify your claims further. Cold calling certainly is not dead and works quite well as a first step in relationship sales. For purely transactional sales it may not be so effective these days.
Also, as other commenters have pointed out, different segments and industries have different reactions to these bizdev methods. You are not going to find many potential industrial clients on LinkedIn; but you can phone these guys all day long. Conversely, CTOs and software engineers almost never answer the phone, but do genuflect to the LinkedIn and Facebook gods.
Lastly, is anyone else tired of reading all the different iterations of, "we have less time today than before."(?) Before when? Does anyone think Henry Ford sat around and twiddled his thumbs just because he didn't have the "burden" of an email inbox? I suppose John Rockefeller was at a loss for filling his day because he didn't have Twitter? Come on folks, let's get over ourselves and check the excuses (and egos) at the door.
This blog post is truly god sent! It couldn't have come at a better time! and as i move off to implement the suggestions, anybody for online collaboration...
Don't Hit me!!
Cold calling from India definetly doesn't work, but we have had great success cold calling marketing managers with major fortune 500 companies.
Cold calling still works if you are calling quilfeid prospects, you need to do reseach about your prospects first, and the internet provides that: google, websites, Linkedin.
Alex Iskold might be frustarted from the cold calling he gets because they r trying to sell something he is not interested in.
as for linkedin selling and geting leades i think it works:
1- i ve seen people posting questions about thier website/ asking for diggs and etc. and they get repsonse. also they are creating groups.
2- i added most of my business contacts that i made through cold calling, exhibit, events etc, to linkedin and most of them accepted, which lead for both of us to get to know our professional development much better. some i added to facebook and our relationship has become stronger.
in facebook on the other hand there are groups for companies, offline and online that are popular in the Jordan network, with beacon and flyer ads some has become even more popular.
But i agree with one commenter who said that "people do not like to be messaged in facebook for business deal, bc they r there to network with friends period", it would be like cold calling some one's home phone to get his company buy something ! and if you get many people reporting you, your account will be disabled by facebook.
The best way to build contacts and get leads is through events and meeting people in person, and use linkedin, email and calling to close a sale.
There are lots of things you can do instead of cold calling. You just don't realize it till you see it in action.
Great article.
http://www.coldcallfacts.com
Alex, this was extremely timely and helpful. Changes are happening so rapidly in the way we communicate for business. It is no longer simply the message that matters but the delivery method as well. I have come to rely on Twitter, LinkedIn and blogs to help me remain in the conversation. These tools are not the magic bullet but they certainly have helped me to develop relationships in my market and to stay in touch with thought leaders and industry insiders.
Great article! People don´t like to be sold to, they want to discover a good service or product themselves.I think cold calling is a pushy way to sell.
This article gives us much food for thought and a marketing roadmap for us to get on and develop. One of the most interesting and thought provoking reads I have had in a while. If only I had the time to read more !!
This article is total dog's doo dooo. people cold call because it works! It works he says? Sure 1000 calls equals Ca$h and just because you've annoyed several hundred nonces who don't and cannot get a girlfriend outside of cam chat, simply doesn't matter. Disguising upsell in better ways than this article with all its 'we get a back hander from all the companies we mention above' too, is key.
So telecanners PERSIST - business is WAR and WAR is no place for WAN**RS!
Well said.. Nothing stays constant in this world. The technology, the web and the society always evolve. Business development evolves along with everything else and lead generation has been changing along with methods of communication. All about web services and how people are fedup with cold callings more info about web services
Actually, Alex, one of my friends used me to introduce him to you :)...and I used your boss here for that :)...using Linkedin.
I guess you already talked to my friend (his name is Vladimir) and I hope some deals will come out from this talk.
Wonderful Article Alex. I think it goes to show what an impact technology has had on all of our lives.
The cold call might be dead but for those of us in sales we need to embrace the emerging technologies and never forget our ABC's (Always Be Closing)!
Wonderful Article Alex. I think it goes to show what an impact technology has had on all of our lives.
The cold call might be dead but for those of us in sales we need to embrace the emerging technologies and never forget our ABC's (Always Be Closing)!
Alex,
I think you are addressing two different biz dev topics here.
1. Finding the deal
2. What a deal might look like (especially when one partner is a startup and the other a more solid entity)
We find ourselves very much in this position at Movie Mouth - wanting to do deals with much larger companies. The only way that we can create a deal that works for both parties would be to use non-exclusive APIs. If there is a mutual benefit to sharing data, then opening up an API doesn't present a looming risk to the risk adverse Big Co.
I never had considered using the APIs to my benefit in the business world