Revenue Traction in a Startup World

Internationally known technology and business analyst, Jesse Berst, publishes Smart Grid News reporting on the latest insights on the Smart Grid sector. This sector is one of the few growth sectors in today’s economy.  Altus partner, Dave Chase, wrote a guest piece entitled Sales Learning Curve: Why Smart Grid vendors must go slow to grow fast. Jesse moderated the Voyager Capital-hosted session that had Mark Leslie speak about the Sales Learning Curve which is where Dave Jones, Doug Schulze and Dave Chase originally met Mark Leslie.

Mark was instrumental in helping Altus form a practice around Leslie’s Sales Learning Curve framework. Altus Alliance remains the first and only consultancy to develop a practice around this now well-regarded framework that was subsequently published in the Harvard Business Review.

Chase opens the Smart Grid News piece with the question:

“Why does it always take longer and cost more to build a technology company than anyone expects?”

And then expands on that common refrain.

That lament is true for all high-tech firms, but nowhere so true as in the energy technology sector, which has all the usual challenges plus a target market (utilities) that is one of the most conservative on earth. Yet a simple fact defines every successful company — it figures out how to bring in more money than it spends. The Sales Learning Curve may be the best way to solve this fundamental equation. What’s more, it is not a “soft” technique with vague parameters. Rather, it is a concept that can be measured and monitored with the same rigor as the Manufacturing Learning Curve (MLC), which determines how long it takes to reduce manufacturing costs.

He draws the parallel with the MLC and highlights the curve in a sales context.

The Manufacturing Learning Curve shows how cost declines as volume increases. The Sales Learning Curve shows how the Sales Yield increases as learning increases. As illustrated nearby, the Sales Yield is simply the average production per full-time salesperson. Until salespeople sell more than they cost, they are a drain on cash flow and hiring more only makes that worse. Yet, according to Leslie, salespeople can’t sell more until the entire company has undergone some “organizational learning.”

The exact shape of the curve is different for every company and sector but the central tenet remains constant — during the “go-to-market” phase companies should “Go Slow to Grow Fast.” Just as athletes and musicians practice very slowly until they master a movement, companies must spend and hire slowly until they truly know what customers want and need.

Key message:

You can’t speed up the process by hiring more people or throwing more money at the problem. Organizational learning takes time. Customers must spend time with the beta product; reps must spend time with customers, and then spend time with the company’s engineers and marketers to translate customer preferences into better products and better marketing. The gating factor is not the ability to add new features or pump out new marketing brochures. The limitation is the time for the entire organization to truly understand and internalize customer needs.

We have worked successfully in the Energy Efficiency sector and seen that the organization that “measures twice and cuts once” can both reduce the sales cycle and increase the quantity and quality of their sales pipeline. For example, one company saw their pipeline go from a low-quality $3MM pipeline to a well-qualified $22MM pipeline.