Why hard to sell PLM ROI?

May 24, 2014

plm-ROI

In business, ROI is one of the most fundamentals principles that can help companies to make decisions. To buy a software is an investment and therefore to be able to show ROI is an important part of sales and marketing activities. Manufacturing company will be trying to evaluate and compare ROI before the decision to buy and implement PLM system will be taken. Here is the problem. Historically, PLM systems and vendors have poor record to show PLM ROI. The simplest way to show ROI is to present it in the same method of measurement – money.

PLM-ROI-CIMdata

I read Why PLM Has CFOs Seeing Dollar $igns article by Arena Solution. In a nutshell, it speaks about how PLM can show measurable ROI. It brings lot of comparison between ERP and PLM. I can see premises of the comparison – PLM is taking much broader scope of business influence – from early design and customer requirements to service and maintenance. The following passage from the article arguing about the fact PLM financial and business value of PLM is greater than ERP.

For years, a Product Lifecycle Management solution has been seen as a solution that makes the lives of engineering and operations teams easier. But more strategically minded CFOs now see PLM as a solution to maximize business results. In fact, many C-level executives are finding greater financial and business value in their PLM solution than even in their ERP systems.

Well, as I said, it is hard to judge without numbers. Article leads to white paper – Why CFO are Banking on Cloud PLM? (You need to leave your contact information to get access to the article, which is fine). White paper speaks about 3 sources of ROI from PLM implementation – manufacturing and internal operations, optimizing the supply chain, customer satisfactions.

Unfortunately, article brings many data points about %% of saving and less examples of how to convert it to $$ signs. I found two places where examples of specific $$ saving where presented – (1) $500M savings over 3 years on direct materials in supply chain in computer industry. (2) $640M in materials acquisition savings potential in supply chain in industrial products.

The comparison between PLM and ERP made me think why PLM ROI is much less visible. Why is it so hard to convince CIO/CFO and other top executives to invest in PLM programs? Here are couple of thoughts.

You need to be able to measure saving. IT efficiency, operation metrics and strategic competitiveness – these are important things. However, can you show me how companies are measuring these parameters and what systems are helping to do so? Historically, finance and accounting systems were focus on external reporting. The needs for such system arose from the need of owners (and management) for cost information upon which to base production decision. Originally (many decades ago), the objective of financial system was to provide external financial reporting (IRS, Wall Street, etc.). Even for the last 2-3 decades the focus shifted from external reporting and profit to total process efficiency, it is still not reaching much to the level of operational metrics mentioned in all PLM ROI documents. ERP is a system that mostly satisfying the needs of financial reporting. PLM is not there yet.

I found the following passage from the white paper provided by Arena a good confirmation to my assumptions above – PLM is not measured on balance sheet.

Of course, CFOs naturally see clear ROI when it comes to financial systems, such as enterprise resource planning (ERP), but PLM – at its core – is an intellectual property management system with huge value not normally measured in a balance sheet. Simply put: CFOs see how inventory translates to dollars in an ERP system but have not considered how product quality and time to market translates to tremendous cost savings

What is my conclusion? If you want to improve something, you must be able to measure it first. In my view, this is a main problem with PLM ROI. The focus of PLM system and vendors should be on providing systems and tools that can measure activities. Companies should do the same. It is a lot of changes, but without that, PLM will remain the system with huge potential. Which gives hard time to sales and marketing to "show me the money" of saving and ROI with PLM. Just my thoughts…

Best, Oleg

Picture credit to CIMdata.


Why hard to sell PLM over the phone

February 27, 2014

plm-telesales

Life is transforming around us. Technology and communication are coming to our personal and business life. So, it comes to enterprise sales and PLM. The debates between new sales models and enterprise sales old schoolers are heating up. I posted about it last year and enjoyed many lovely conversations with sales people. My conclusion after that was – sales requires good organization and belief. Few weeks ago, I came with the idea of PLM sales cheat sheet outlining some important principles of how successful sell PLM to organizations.

Do you think you can successfully sell PLM over the phone? Personally, I haven’t heard about such examples. However, maybe new type of communication can help us. I was looking for some good examples of enterprise telesales to identify the pattern for success.

Mark Benioff is coming with some examples of CRM telesales in his book – Behind the cloud. The book is an easy read and fun – I recommend it to everybody if you have some free time. Play #41 from this book – telesales works (even though everyone thinks it doesn’t) was repeat in the following salesforce.com blog post. Mark brings top 5 points for a winning conversation in a successful sales call: Leverage the experience the prospect has had with other solutions; Introduce the value your product offers; Provide success stories from customers; Verify success stories by offering customer testimony; Provide a customer for the prospect to contact.

These points seems logical and simple. I was trying to apply it to my experience and compare to my notes from conversations with sales people to see and analyze how it can be applied in PLM sales. Why PLM sales conversation over the phone is hard? I put some of my thoughts below:

1. Leverage the experience the prospect has had with other solutions.

PLM competition (as well as previous customer experience) can be separated into two large groups – existing PDM/PLM solutions and homegrown systems. The first group is usually a result of heavy investment company made for the last 5-10 years. Second group is a solution developed by internal people (often with heavy inclusion of Microsoft Excel, Microsoft Office and other non-PLM specific tools). From my experience, it is very hard for customer to summarize main pain points. Companies are looking for more functions and lower TCO. Very often customer is not transparent about the existing PLM system situation, especially when it comes to the need to retire existing system (PLM vendor shifts to another solution/version) and existing solution is draining into problem. In a generic way, experience can be summarized as high cost, complexity and absence of specific functions. If you succeed to come to the last points, it will be clearly the success in your call, since you will be able to build your sales strategy based on these missing functions.

2. Introduce the value your product offers.

As I speak in my blog about PLM differentiation, many of them are very complicated to explain. Marketing story looks great – low cost, easy implementation, streamline your company processes, etc. However, devil is in details and the story about them is long and complicated to be told to a single phone call.

3. Provide success stories from customers.

PLM companies have large set of successful implementation stories. The problem with these stories – they all look the same on the high level – "we (company) had a problem in engineering and manufacturing process, complexity of competition, bad collaboration. With XYZ PLM solution we succeeded to solve these problems and our life is good". It is very rare (but possible) to see PLM specific examples of what process and how company improved their work environment with PLM, rather than say it is good now.

4. Verify success stories by offering customer testimony.

PLM implementation testimonial are too generic and raising too many questions from too many people in the company. It goes way beyond what is possible to answered via phone and/or WebEx session.

5. Provide a customer for the prospect to contact.

In my professional life, I never had a problem to provide reference customer to call. However, I’ve heard that on a broad scope engineering and manufacturing organizations tendency is less speak about how their working processes are organized. The diversity of manufacturing organizations plays another role and making "apples to apples" comparison very hard.

What is my conclusion? The uniqueness of existing PLM solutions and sales is high level of engineering and technical complexity. So, to maintain a successful PLM sales conversation you probably need to bring in some specific technical / functional use cases and pain points the solution you are selling can solve in a unique way. It will help you to win over the customer mind and build a foundation to continue sales process. Just my thoughts…

Best, Oleg


PLM Sales Cheat Sheet

January 20, 2014

plm-sales-cheat-sheet

I have to admit – I don’t have formal sales education. My childhood was mostly influenced by math and tech. Technology has a smell of precision and knowledge. At the same time, sales appears to be manipulative. I can try to blame Soviet Union regime, but it doesn’t matter now. I was wrong.

The understanding of how I was wrong came later in my life. I learned to sell my software projects, application and services. I still cannot say I’m good in sales. I must thank few people in my carrier that helped me a lot to understand the nature of sales. I’m still learning.

None of recommendations I put below came from formal books. Actually, I never had a chance to read formal sales books. Probably I should. List below comes from my experience and involvement in PLM projects in variety of roles – technical, implementation, advisory, strategy, competitive analysis and more. Following these rules helped me to achieve goals.

1- Make "enterprise executives" friends and friends across other divisions in a company you are selling to. Don’t be engineering/tech buddy only. The championship in engineering system department is important, but you need to get the whole picture of product problems and profit in a company.

2- Learn to say "No" to engineers and R&D managers. Very often, PLM has engineering roots in the organization. You can easy get spoiled by engineering ideas. With all respect to engineers, these ideas are not always on the top priority list for CIO and can be far from business goals.

3- Prepare to come at least 7 times to meet your prospect customer. Sometimes you will feel repeating yourself, but in PLM implementation, it is often part of learning and convincing themselves about their decision. Also, be ready to answer on the question "what is PLM and why is it needed if company already spent million dollars to implement ERP". You need to have a good answer…

4- You need to become a source of knowledge about other PLM implementations, best practices, failures and successes etc. Make yourself a bit "techie" – it will help you to build your credit. Very often your prospect customer doesn’t know what to do and would love to learn from what you did for other companies.

5- Learn how to shutdown implementations if things are going wrong. This one is tough. Sh’t happens. You need to learn how to fire customer, even if you made a sale. Not everything depends on you. PLM touches different departments and often requires a company to change the way they do business. People are trying to manipulate and it resulted in politics influence, conflicts between management groups, implementation strategies, competitors, etc. If you see that you cannot make a visible success in 3-4 months, push the stop button and ask to "rethink what needs to be done".

6- Learn few key typical PLM implementations failures – team disagreement about product development process and data ownership, CAD integration failure, PLM/ERP integration failure. In my view, these three are responsible for more than 50% of PLM implementation failures. You need to learn how to smell it and go to option #5 with request to rebuild the process.

7- Deliver one feature from engineers dream list. Take one that will help engineers to be proud of what PLM does. Something that not on the top priority list. You will become "engineering hero".

8- You biggest win will come 3 years later from a customer you failed to sale to. Enterprise sales is a lengthy process. Companies need time to understand how they do work and how they need to manage a change. Management changes. Corporate conflicts get resolved. Remember #4 and be consistent in PLM vision you sale. Prospects will come back.

What is my conclusion? Enterprise sales is a special discipline. These days is probably one of the most interesting things in the overall process of technological disruption. Major disruption happened because of internet, cloud, mobile and other technologies. The wave seems to be going to enterprise continent. However, enterprise is first about people and second about technologies. Technologies make sense only after people can understand and use them. Just my thoughts and good luck!

Best, Oleg


Why you still cannot sell PLM without exec support?

August 6, 2013

There are variety definitions of what is PLM. Not much agreement about that among PLM vendors, PLM analysts and manufacturing companies. However, if you want to introduce PLM in manufacturing company, you can find majority of people to agree that implementing PLM takes time and includes some strategy planning, implementation and patience. My PLM industry colleague and blogging buddy Jos Voskuil calls it PLM journey. One of the things that often comes during PLM journeys is to have C-level support during PLM sales and implementation.

Aras Corp. recently featured the issue of C-level management support for PLM in their blog – Executive Support for PLM and Why You Need It. I captured few interesting quotes from that post:

Executive support is a crucial part of the PLM selection, implementation and acceptance processes that often gets overlooked. Having executives back a PLM initiative not only shows that the software is here to stay, it also ensures resources, and brings executive insight into the business model and processes to the project.

PLM is not a one-year solution; it’s a long term decision and the results have to be measured over time. For example, are your product development cycles still improving 3 years later? ROI has no expiration date. Including the long term impact of PLM in your business case could be the key to getting much-needed executive support.

In my view, these messages are capturing very well the essence of what called "PLM business transformation" process. You cannot sell and implement PLM without having PLM implementation champion in a company as well as execs giving their buy-ins to the project. It represents what I called enterprise sales old schoolers in one of my previous blog post. However, I’d like to put some controversy in this PLM journey nirvana. It would be great for business to have time to choose their PLM journey road with enough time for discussing, planning and implementing. It should be also good to have unlimited resources to spend in PLM journey. However, this is probably not going to happen these days and for visible future for most of companies I know. Businesses are very dynamic these days and driven by lots of unpredictable business factors, cost constraints, competition and regulation. It applies a new perspective on how companies will treat PLM in the future. And, it will drive even more attention from executives in the companies.

What is my conclusion? Regardless on what PLM implementation strategy you choose these days, to have exec support for your PLM project is a good thing. When it comes to redefining how is you company develop and manufacturing products, you want to have some C-level support people to backup your PLM strategy. In the modern dynamic business environment to have execs on board of your PLM implementation is even more important. Nowadays, you don’t have 5 years to manage your PLM journey project. Your PLM journey becomes PLM sprints with execs serves as supporters and judges at the same time. Just my thoughts…

Best, Oleg


How to ditch old PLM marketing and friend engineers?

July 22, 2013

There is a chasm between old and new schoolers these days in many places and industries. I wonder if PLM will be different and will keep old school formation in everything – business models, marketing, technical solutions, etc. Few months ago I posted – PLM, Viral Sales and Enterprise Old Schoolers article that generated few very open and honest conversations with some of my friends – sales professionals.

Jos Voskuil made me think about new generation of people in PLM industry after reading his article about Product Innovation Apparel conference. Navigate to this link to read Jos’ post. Here is my favorite quote:

There is so much to learn from experiences in the apparel industry. The PLM market for apparel might be immature, the people implementing are not. They have picked up the modern way of PLM thinking in the context of business, instead of a focus on IT. Combined with the fact that it is less a male-only business, it opened my eyes, and other PLM consultants should do the same.

What do you think will be the right place to start PLM transformation? Here is the idea. Let’s ditch old school PLM marketing. The one that focus on big goals of PLM to control all development processes and systems in the company. You might be shocked. The fundamentals of PLM for many years was focused on how PLM implementation can focus on setting up processes in organization and controlling product information. On the grand scale of possible transformation you can think about that as a right approach of value added sales. However, it brings so much change and disturbance in organization. Old PLM folks, you are right by showing a potential problems in organization. However, people hate you for this. And if change is hard, they will not make it happen without stick of CxO sponsoring and big organizational committees.

So, what is the alternative? Here is an idea. Let make PLM “to friend” engineers. In fact, none of them likes PDM or PLM. Most of them won’t be even able to explain what PLM suppose to do for their company. However, I’m sure engineers have problems. And one of the most complicated problem they have is communicate with rest of the company. This communication is not easy. The traditional waterfall product development approach keeps engineers behind the firewall. This firewall is making communication complex in two directions. It is hard to share information from engineering. However, it is extremely hard to get information from outside world and make it available and usable inside of PLM organization. So, new generation of PLM systems will make communication of engineers, sharing data and work on engineering BOM much easier than before and turn engineers to best friends.

What is my conclusion? Old schools value promotions are still here. However, in my view, it is very hard to make it work efficiently and drive future success in implementing PLM systems. Next gen of PLM will remove “PLM marketing” tag and come to people to help share data and communicate across organization more efficiently without barriers and complexity. Just my thoughts…

Best, Oleg

Image courtesy HBR blog.


Why PLM needs to shift focus from buyers to users?

June 3, 2013

Enterprise systems for long time are well-known as a place where IT plays the role of the king on the road. ERP, CRM and many other enterprise systems and implementations proved that. If you want to sell to enterprise organization, you need to focus on key IT people, preferable on CIO, Chief of Engineering, Manufacturing etc. Earlier this year, I had a healthy debate about this topic following my blog post – PLM, Viral Sales and Enterprise Old Schoolers.

The disruption in Enterprise IT is one that I see as one of the most interesting trends these days in enterprise space. The following presentation caught my attention yesterday – The challenges and opportunities of business in the disruptive tech era. I recommend you to take a look on this even the presentation is 56 slides. However, the following slide stands out and resonate with the point I wanted to make about IT.

Let’s get back to PLM domain. In the existing ecosystems, there are two major ways to sell and implement PDM/PLM projects. One can be made indirectly mostly via CAD vendors channels. The complexity of these implementations is limited and these implementations (with some small number of exclusions) are limited to catch the level of enterprise IT. Another one is a direct channel developed by PLM and ERP vendors selling PLM implementations to top level management in IT organizations. The higher level of IT people is better.

I can see multiple reasons why existing IT is not getting excited about technological disruption in PLM and other enterprise organization. The disruption means changes and changes are usually come with the lost of control and existing status. For example, cloud means no servers need to installed, implementations can be done remotely and product development has a better chances to focus on user experience and business needs rather than on how to implement and run enterprise deployments.

What is my conclusion? The future of PLM implementation will shift focus from PLM buyers to PLM users. At the end of the days, people need to get job done. PLM needs to focus on user needs, user experience and the ability of systems to help people in everyday business life. Just my thoughts…

Best, Oleg


How PLM can adopt Sales 2.0?

April 22, 2013

The last decade was all about 2.0. To me, 2.0 trend was about how to re-think existing norms and behaviors, re-invent something well-known and to challenge existing axioms. Internet changed a lot in our life for the last decade. One of the places that remains very conservative is enterprise sales. If you are social web enthusiast, tech geek or iOS developer, try to speak to people selling to big enterprises. You can find yourself in the wrong territory after first 5 minutes of talk. However, I can see how changes are coming to this place too. In the beginning of this year, I tried to challenge my friend from enterprise sales department. If you missed my previous blog, navigate here – PLM, Viral Sales and Enterprise Old Schoolers. One of my conclusions after this post was that even enterprise sales has strong roots, the time is coming to challenge the current status.

I’ve been catching up on emails and social media during my long journey from Boston to Singapore this weekend. The following Gigaom article caught my attention – Enterprise 2.0: The science of inside sales. Take five minutes of your time and read the article. Freemium was a king of the road in consumer market for the last 3-5 years. It seems to me everybody read the “Free” bible by Chris Anderson. I remember my note back in 2009 – Is Free the future of PLM? What I found very interesting in Gigaom article is the idea of merging of two parallel models – freemium and direct sales.

At the end of the day, it is all about setting cost and price. If your cost of the sale is high, you have no chance to scale up and sale to mainstream market. I found the following passage important:

In contrast to traditional outside sales, which is done in-person and tends to involve extensive travel and time expenditures, inside sales is professional B2B sales done remotely via phone, email and chat. It is strategic selling that requires managing a deal through a multi-stage process, multiple touch points with the customer, establishing value and an ROI for the product and supporting complex purchasing methods, like procurement departments, but importantly without visiting the customer.

Another interesting snippet brings you cost vs. price model that can take you beyond the threshold of free online business and allows you to have sales people.

So how do you know if you’re ready to build an inside sales team? Truthfully, if the product is shipping it’s never too soon. A key test is the price at which you are converting free users to paid. There are a lot of apps that only charge 99 cents or $4.99 a month for the premium version. That won’t cut it – your margins won’t support a sales force. You’ll need a price point of at least $25 to $50 per user per month to validate the value of your product and make enterprise sales work. At that price or above, a workgroup of 10 to 20 users can be sold within a customer account for $5,000 to $10,000 per year. Over time, you’ll be able to increase the deal sizes through premium features like administrative functionality.

And finally, you can see an enterprise example, which probably can make sense for PLM sales too.

The typical inside rep will make $40,000 to $60,000 per year in base salary. Including bonus, their on-target earnings (OTE) will be between $100,000 and $120,000. Most Enterprise 2.0 startups are subscription businesses, so quotas should be tied to Annual Revenue Requirement (ARR) or Monthly Recurring Revenue (MRR) with accelerators for contract lengths greater than one year. A typical quota for your first rep is $500,000 of ARR. Over time, enterprise sales reps often settle around a $1 million quota.

The conversation about inside sales made me think about what PLM vendors potentially can do in order to step into the future of Sales 2.0. Here are 3 fundamental steps:

1. Delivery model. Your should be able to deliver your software without CD/DVD and people that need to come and install it. Call it cloud, online, distributed software – it doesn’t matter. You need to exclude a traditional delivery mechanism driven by traditional software development methods and long awaited releases.

2. Online configuration. After you learn to deliver software online, you need to switch an army of consultants, implementers and service providers to work online. Stop pay to airline tickets. All software configuration and tailoring must be done online.

3. Application and granularity. The nature of application is going to change. We should stop a monolithic nature of enterprise software. In the past, it was important to sell “all-in-one-box”. In order to support “inside sales” model, business software needs to have an ability to be deployed in a granular way. Some portions of applications can be provided for free, then configuration should allow to turn on licensing feature and Voilà – you converted your free customer into paying one.

What is my conclusion? The new technology is ready for enterprise. It proven by multiple startup companies and giants of consumer software business. However, enterprise companies are tricky and enterprise sales are even more tricky. Both sides – sellers and buyers are keeping an existing enterprise sales model. This is their life jacket to survive and keep an existing enterprise sales model afloat. The time is coming to disrupt it. Just my thoughts…

Best, Oleg


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