The Trouble with Value

Posted on December 17, 2009 | Filed Under CredibilityLeverageRiskSellingSix Principles™Value | Leave a Comment

A recent Computerworld article covered a study done by the Harvard Medical School about the value of computerization in US hospitals.  The article led with the headline: “Computers don’t save hospitals money”.  This is not good news if you’re a seller of Information Technology solutions.

First tip: Be prepared1. You can expect to hear about this, certainly if you are selling in the health industry, but generally if you are selling the value of Information Technology to people who either have trouble believing in the value of IT, or for whom it is disadvantageous to admit it (for example, buyers in procurement roles).  The article will be used in attempts to undermine your value arguments, and thereby reduce your prices.

For those of you who regularly read our articles, or are familiar with our teaching, you know that we consistently find that sellers who focus on and deliver unique business value win more often, close their sales faster, and sell at higher prices. Sellers who do not have this focus and/or delivery are more often commoditized, have sales which drag on, and lose more to competition if they are not the low-cost seller.

Second tip: If you think you’ll hear about this from a client, consider reading the full article from The American Journal of Medicine®. It’s the only way you can really be ready to talk about this. One thing that stood out to me was that the article appeared to treat all costs in the same way – all costs were attributed to the attempts to save money through computerization.  If true, that’s clearly an overstatement.  In the United States, anyone who has gone to a doctor in the past several years knows that the 1996 Health Insurance Portability and Accountability Act (HIPAA) has significantly altered the recordkeeping landscape. Primarily a privacy and recordkeeping law, it was not driven by a need for efficiency or effectiveness in healthcare.  It would seem there are HIPAA implications in the computerization topic. Penalties for lack of compliance are strong motivators to action in cases like this. Significant HIPAA regulations implementation occurred during the study period. No matter what the case is, your personal knowledge of the Harvard publication will be important if this study is used against you.

Third tip: There is the concept in sales of a “loyalty gap”.  This gap occurs when business value is projected for a project at the beginning, but no one ever goes back to the clients who supported the decision with a report of the actual values that accrued.  In the absence of this feedback, the sponsor understandably doubts the result, and in doubting feels a “loyalty gap”. When your projects complete, whether the value is fully delivered or not, make sure that you let the sponsor know what happened.  If you do not, they assume the worst, and you get a “loyalty gap”.

Last tip: Why is our title “The Trouble with Value” if we are such strong believers (and we are) that IT projects provide value, and that emphasizing that value is the most persuasive way to sell?  It’s a catchy title. However, it isn’t the value that creates the trouble.  If you sell the value of your offering to your clients, you should reasonably expect them to question it, and you should be prepared to back it up with references, rational arguments, and joint work with your client to confirm the expectations.  Then, you should execute strongly, and follow-up to see if the value accrued or not.  Realistically, we know that most business value projects are just as strongly (if not more strongly) influenced by client performance as they are by seller performance.  But you cannot afford to just ignore the business output metrics, and move on to the next sale.  Selling is a persuasion business, and persuasion is a credibility business.  You need to have both to succeed.

The real trouble with value is the follow-up and execution by the seller – lacking that, you risk your value prediction becoming an empty promise that hurts your credibility going forward.  And that’s trouble.

1 One of the K&R Six Principles™ is: Get M.O.R.E. Preparation is Key to a Winning Negotiation

Negotiation Anosognosia

Posted on December 14, 2009 | Filed Under K&R WorkshopsPersuasionSellingValue | Leave a Comment

Wikipedia says, “Anosognosia is a condition in which a person who suffers disability seems unaware of or denies the existence of his or her disability. This may include unawareness of quite dramatic impairments, such as blindness or paralysis.”

The description could be applied to a negotiator who fails to recognize what everyone else can see – their product or service has value to the buyer.  In a recent account planning and negotiation review, a sales team came to us and basically said, “Our proposal for the customer provides $500,000,000 (yes, $500 million) worth of our product for $100,000.  They haven’t signed yet.  What should we do?”

This team was Anosognosiastic (if such a word exists).  They failed to see what many others could, including the K&R reviewers.  At a 99.8% discount the only thing left to do was wait.  What they were unaware of or denied was that this situation was brought about by a complete failure to attribute any value to their product for the customer.  If it had any value to the buyer, the deal would have been closed long ago – probably for more than the $100,000 price.

Don’t fail to see the simplest of your persuasive arguments, which is that what you provide has value.  If you fail to see this, you may be suffering from Negotiation Anosognosia.  (td)

Principled Concession™ Poll – K&R’s Answers

Posted on December 7, 2009 | Filed Under Leverage | Leave a Comment

Our thanks to those of you who voted in our latest poll, “Which of the following is a Principled Concession™?”  For those who need some reading on the definition, see our article here or the full list of our articles about this topic here. Without further delay, our answers:

“Why don’t we split the difference?” As of the date of this posting, no one chose this answer. That’s good, because this is not principled. “Split the difference” can be characterized as a way to make both parties equally unhappy. Since neither has a good reason for the split, each is likely to go away thinking they could have (or should have) gotten more.  The technique often works because it appeals to our sense of fairness.

“You can have 5% off if you buy today.” 5% of our voters picked this one. This is most commonly heard in the technology business near the end of a quarter or year.  It is not principled.  In fact, instead of encouraging a sale today, it encourages waiting until the deadline (e.g. end-of-quarter), to see if the deal gets better.  If there is no compelling reason to buy now, savvy buyers will wait until the next quarter – for an even better deal!

“You can have 5% off if you buy today for delivery next week.” This one is closer, but  it is not a principled concession. It got 35% of the votes.  Why?  Most people recognize that there is a trade here – you pay less, but delivery is later. Presumably, if you wait until next week, you pay full price. Why isn’t it a Principled Concession™? Because it makes no direct connection to the buyer’s business value.  There is no stated loss of benefit that comes with waiting.  So in this case, a buyer who acts should accept both the discount and the delivery delay.  It would be Principled if it were in this form: “You can have 5% off if you buy today for delivery next week.  However, you will not be able to get the (benefit which is obtained through use) until next week, and that will mean (loss of benefit). Sample benefit/loss pairs might include such things as public visibility for an advertisement and the loss of sales, or use of your new car and the need to pay for public transportation in the meantime.  Note that benefit/loss pairs can also be put positively as benefit/gain pairs. For example, if you pay the full price today, your advertising will run now, and you can expect 12 additional sales before next week.

“You can have 5% off if you buy 10.” Only 2% of  our voters went for this one. There is no trade, and there is no explicit value to the buyer.  For the seller, it is nice to reduce the cost per sale, but that is value to the seller.  If we said, “You can have 5% off if you buy 10, which saves me marketing expense which I can use to reduce your price, and you get the benefit of 10 deployments instead of 1, which means that you will accrue (benefit)…”, it would be Principled.

“We give 5% off on days that end in “y” – like today!” Not Principled, and fortunately no one thinks that it is.

“None of them.” Well, 60% of our voters understood that none of the choices follow the Principled Concession™ format described in the article. We hope that they also recognize that unprincipled concessions not only accomplish nothing, but often delay decisions.  The real test is not how you voted, but what you will do in your negotiations.  Our hope is that you will only make Principled Concessions™.  (td)

Advance Fee Fraud – Again

Posted on December 1, 2009 | Filed Under Motivations, Objectives, RequirementsValue | Leave a Comment

In September of 2008, we wrote about the concept of “Advance Fee Fraud”, and how sellers fall victim to the tactic from buyers in various forms.  A couple of those include promises of future business “if you give me a good deal now”, or “if we do a successful proof of concept”.

Sometimes this practice is known as a “Nigerian 419 scam”, although that’s a bit unfair to Nigeria.  However, a recent article we saw on InternationalReporter.com brought it all back when it stated, “Nigeria dropped nine places to 130th position out of the 180 countries ranked on the global Corruption Perceptions Index (CPI) 2009 by Transparency International (TI), a global anti-corruption watchdog.”

Review our article – don’t let a buyer convince you (as a seller) to advance them a benefit in anticipation of a reward that may never come.   (td)

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