Optimized for Growth: Scaling a Sales Organization

A highly successful company in the healthcare industry is planning for dramatic and rapid growth. They already have a leading market share in their existing market. However, they estimate that the overall market penetration of their industry as a whole (including both the company and its competitors) could be as low as 25%. Their feeling is that there is the potential for the industry to triple or quadruple in size. Further, the company's parent has an extensive product line that in the future could be channeled through the company.

How do we get paid for our knowledge?

Traditional thinking about sales is that a company sells a discrete product or a tightly packaged service. But with knowledge at the center of today's economy, the distinction between a "product" and a "service" is not that informative. It ignores the knowledge embedded in the overall creation of value for the customer (which is the basis of revenue generation). Knowledge is, therefore, embedded in both products and services, as well as conveyed informally in the marketing and selling processes, resulting in a process that is rarely linear.

This company is an especially clear example of this dynamic as most of the "sales" staff does not actually sell anything, rather they generate referrals by using data to show their institutional and referral partners the benefits to patients and institutions of adopting their services. The referral partners make recommendations to patients and/or their families as they leave a hospital or nursing facility. The patients go home and may or may not choose to contact the company. This figure illustrates this complex sales process:

What are the resources that support this value creation process?

Creating this inventory of intangible resources was critical in this project because it highlighted the differing ways that each category can be scaled:

• Human Capital is scaled by adding headcount. This organization was willing to add headcount, yet make sure its people were working as effectively as possible.

• Relationship Capital is scaled by increasing the revenue from existing customers and adding new customers. This organization already had program relationships in place across the country. Growth would come through better penetration of these programs.

• Structural Capital scales in a different way than people and relationships - once structural capital is developed, it can be used over and over again by any number of people. This organization had good structural capital in terms of training, tools, and marketing materials. But there were clear gaps where there was room for improvement.

The management team came to the realization that there would be a big pay-off from any improvement to its structural capital. It would make existing employees more effective and speed the learning curve for the new employees they would need to hire to meet their growth goals. So it made sense to examine the sales group"s structural capital - and identify potential gaps and areas for improvement.

At first, this felt a daunting task. How could one undertake a review of all the systems, processes, databases, training materials, and knowledge assets of this large organization? A detailed examination of each one of these elements would take quite a lot of time at a considerable cost to the company, probably resulting in a long report that might just get filed away and not lead to any improvements. Instead, the project took a page from the IC and VNA lesson books: it was structured as a bottom-up exercise to actively engage people in the change process. 

What is the work we do to support value creation?

Mapping the work of a group seems like an unnecessary step. Surely an organization knows what it does every day? Actually, the shift to a knowledge economy has complicated this simple question. In the industrial economy, it was easy to see work processes - you could go out onto the factory floor and visually follow the conversion of raw materials into a finished product. While physical processes are still important in some organizations, the real story is in the computers and systems that control the "production" processes of the organization. These systems contain human knowledge and decision criteria that have been converted into structural capital and make up the organization's "knowledge factory." And that's the issue: every business (whether it sells a product or a service) today has a knowledge factory, an invisible production facility where knowledge is put to work.

This figure adds an overlay to the Sales Ecosystem shown above. It identifies four core tasks of the Sales Group:

1. Developing relationships with program partners
2. Developing relationships with healthcare organizations
3. Motivating referrals from referral sources
4. Closing the sale with the ultimate subscriber

How well does our organization support these tasks with structural capital?

This question was answered using a refinement of the Value Network Analysis methodology in that it was specifically focused on structural capital impact. The assumption underlying this approach is that virtually every transaction has (or should have) structural capital associated with it. Tangible exchanges are supported with clear structural capital elements such as documentation, process steps, and/or systems. Intangible exchanges, on the other hand, should be supported with training and knowledge sources.

The VNA exercises were organized as follows:

Initial mapping: A group was gathered of roughly 20 employees, including representatives of all the key functions within the four core tasks. During a day-long session, they created four sets of maps of how work is done in each of the four core tasks. All roles and transactions related to that task were mapped.

Detailed mapping and structural capital analysis: Smaller groups of eight to ten employees each were gathered to review and refine each of the maps in more detail. The analysis was focused on what worked well, what was missing, and how the network could be improved. At the end of each session, the group prioritized the gaps between current performance and what they considered ideal. This was the foundation of the recommendations from the exercise.

Synthesis: The findings were reviewed with the participants as well as with the management team of the Sales Group and corporate management. This laid the groundwork for consensus on key initiatives.

It was important that the analysis was undertaken with a diverse group of people from both inside and outside the Sales Group including representatives of the Marketing, Finance, and Information Technology Groups. This brought a broad view to the analysis. It also actually led to an immediate resolution of some of the issues surfaced during the discussions. In one case, the Marketing Group said, "We have a program we developed last year to address this gap and never launched; we'll get it back on the calendar."

In another example, the IT department suggested a quick fix to enable field service people to receive information via email to their telephones that they previously received via fax (and only saw at the end of the day when they returned to their offices). Participants were empowered - and would offer comments such as, "We have the answer to that. We'll make sure it gets fixed right away."

This is a sample of one of the VNA Maps developed by the teams: 

The large number of transactions dominating the top center of the map is between the Evaluator and the Seller. The Evaluator role represents either the subscriber or a family member who is taking responsibility for the purchase. All of the transactions in this exchange occur in a single phone call. This high number of steps was itself something of a revelation for many in the project. But the mapping also brought out a number of critical weaknesses in the way that this call is managed and supported. Concrete recommendations arose from this related to the way that data is loaded into the call-support system, options that are offered through the system during the call, and the training provided to the telephone sales staff.

This map and the three others developed for the other key tasks made it clear that there were indeed significant opportunities for creation and/or improvement of structural capital in the Sales Group.

Where to next?

The project led to a number of fundamental findings and changes that included:

• Approving a 15% increase in headcount as a first step to scaling the most undermanned territories
• Adding a focus on healthcare organizations that were not program partners of the group
• Dividing the Territory Manager role into Program Management and Referral Marketing roles.
• Improving the telephone sales closing process (as described above)
• Developing and disseminating competitive information via training and online resources. As the market leader, this company had never gathered this information but the field personnel emphasized their need to sell against the competition.
• Creating business cases and data to support the organization's strategic business-to-business sale process
• Constructing a knowledge-sharing platform for all sales personnel to share best practices. The company already had this kind of system for sharing among its program partners and employees saw the value of having an internal sharing platform as well.

The project also laid the groundwork for two significant longer-term initiatives:

• Building the capability to map the company's market from the bottom up to support organic growth in each territory. This will involve changes to several of the company's core information platforms as well as the acquisition of some new data.
• Rationalizing the company's many channels and approaches to the market. This will involve creating new HCO partnership models, simplifying the company's existing program partnerships, and communicating with all partners for greater transparency and clarity.

Adapted from "Optimized for Growth: Case Study of a Sales Organization," Mary Adams and Verna Allee, Paper presented in Hong Kong November 12, 2010, at the International Conference on Intellectual Capital and Knowledge Management.

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