One of the business impacts clearly demonstrated during the COVID-19 crisis is that, due to a combination of the pandemic’s economic impact as well as the accelerated rate of commercial digitalization, Commercial excellence 1.0 is dead. Long live commercial excellence 2.0. This new version is fast, furious, focused on impact, grounded in pricing science, and leveraging technology for efficiency, as the author explains. Stephan M. Liozu, Ph.D. (sliozu@gmail.com), is the Founder of Value Innoruption Advisors, a consulting boutique specialized in value-based pricing, industrial pricing, digital and subscription-based pricing. He is also an Adjunct Professor & Research Fellow at the Case Western Research University Weatherhead School of Management. He is a Certified Pricing Professional (CPP), a Prosci^® certified Change Manager, a certified Price-to- Win instructor, and a Strategyzer Business Model Innovation Coach. He has authored seven books: The Industrial Subscription Economy (2022), Pricing: The New CEO Imperative (2021), B2G Pricing (2020), Monetizing Data (2018), Value Mindset (2017), Dollarizing Differentiation Value (2016), The Pricing Journey (2015), and Pricing and Human Capital (2015). Stephan sits on the Advisory Board of the Professional Pricing Society. He is a Strategic Advisor at DecisionLink and Monetize360 and a Senior Advisor at BCG.

The Journal of Professional Pricing, September 2020

The experts have spoken. It will take 18 to 36 months to renew the demand levels and growth rates we experienced in 2019. There is a long road ahead. Many of these same experts anticipate that business as usual is gone forever and that firms will be on high alert to make the changes that are needed. There are two massive forces that impact pricing and commercial functions at the same time. One is obviously the COVID-19 crisis and its dramatic effect on the economy. The second is the accelerated rate of the digitalization of the commercial process. The addition and combination of these two forces act like a powerful earthquake that is forcing many companies around the world to rethink their go-to-market strategies and how they organize their commercial and pricing functions. Let us look at both forces one-by-one.

The Impact of the COVID-19 Crisis on Commercial Processes

Some industries are already anticipating impacts for five years or more. Armies of sales and pricing professionals have been let go because companies cannot currently sustain the associated cost levels. For most sectors, it is a massive shakeup. As a result, the sales and commercial functions are going to go through a transformation. Commercial intelligence and excellence as we knew them will morph into something else. I see seven areas that are going to change in commercial excellence in the next 1 to 3 years.

1. Support of all current bids and contract negotiations: no doubt the focus is on validating, securing, and closing current deals in the pipeline and on making sure they do not evaporate. That might require a few more concessions, short-term changes in proposed business models, and pricing engineering. But it is essential to give top management a reality check about what is real or not in the current forecasts and order pipeline. That is priority number one.
2. Focus on controlled and profitable growth: this is one of the biggest changes. We have to say goodbye to explosive growth. We must anticipate that businesses will scale back and might focus on profitable growth, sales opportunities close to the core business, or sales from adjacent innovations. For the last decade, the focus was on “growth at all cost” because the stock market expected that. Profitable growth is the new name of the game. That also means that your latest long-range plan and aggressive growth rates are useless. It is back to slow and profitable growth.
3. Attention to existing customer retention: we all know that the core business is the profit fuel of any business. It makes customer retention and focusing on core customers the biggest commercial priorities of the next two years. I anticipate that sales leaders will allocate their best talent and most of their resources to gaining these customers back at the expense of non-essential segments. Do not forget that your core and profitable customers will be under attack by your competitors, so it is all hands-on deck. Top management and top sales leadership need to pay attention to these accounts and visit them more often than before. It is all about relationship mapping and intense engagement.
4. Focus on return on assets: sales strategies will be impacted by severe reductions in CAPEX budgets, greater focus on cash flow, and higher ROI expectations for technology investments. We might witness a rationalization of investments in commercial excellence and sales enablement technologies. However, at the same time, the best platforms with superior and documented ROI should thrive. The sales enablement software space experienced explosive growth from nearly nothing to $5billion in annual sales in just 5 years. I am not sure they can sustain that level of growth over the next five years.
5. Zero in on sales efficiency: we should also expect a rationalization of headcount allocation and distribution between all relevant commercial functions: sales, sales ops, strategic account management, customer service, sales engineering, etc. Sales leaders must demonstrate the payback of each additional sales resource and the impact to short-term commercial goals. We might move away from a long-term orientation for a few years. In fact, whether short term or long term, every headcount and every investment in new resources will have to be clearly justified. This is just the new reality.
6. The emergence of customer success and value consulting: companies that will win over this delicate period are those who can demonstrated concrete and justified customer value. There is no more room for impact fuzziness or vague contribution to customers’ bottom line. Both customer success and value consulting roles will become key players at the commercial excellence table. The winners here are software companies who support value-based strategies and allow sales teams to demonstrate realized economic value. The value management software space is well positioned to succeed.
7. More proficiency in pricing and analytics: in the future, sales reps need to be able to access and interpret sales and pricing analytics. Because of the previous 6 points, the level of expected sophistication is going to rise. What was an option before because of robust growth is now a requirement to make the right decision on what customers to service, at what price, and with what level of cost-to-serve. I believe we are entering an era of data-centric commercial decision-making.

This crisis has created a new sense of urgency to deploy new commercial solutions, new data analytics processes, and more robust prioritization processes. I call that commercial excellence 2.0. If you are in sales today, be ready for a new way of working and a new level of pressure for short-term impact. Managing profitable growth and cash flow at the same time creates tension between multiple functions. This is going to be the new normal. Expect more rigorous budgeting and forecasting processes. Expect to have to learn new technologies and to be much more agile. Disruption offers both challenges and opportunities. Your company needs you to step up your game today.

The Impact of Digitalization on the Commercial Function

Digitalization of the commercial function requires a significant investment in commercial intelligence. So let us start with the definition of what commercial intelligence is:

Digitalization and all the systems that go with it will bring no benefits without the proper information going through it. Remember that a fool with a tool is still a fool. A CRM system without complete and systematic customer data is useless. A pricing optimization solution with incomplete and uncleaned data will not make proper pricing recommendations. Finally, dynamic value-based pricing on an e-commerce platform needs real-time competitive information feeding the system. You get my point. Systems, tools, and models form the engine of digitalization. Data is the fuel of the engine. And because of that, the role of all commercial functions has changed with the need for more complete, deep, and relevant information. Here, we also include the need for qualitative information which can bring lots of value when combined with quantitative sources.

The Transformed Role of the Commercial Function

The need for commercial intelligence is real across all go-to-market functions in order to be able to deploy value-based strategies. At every stage of the go-to-market process, commercial functions play a critical role in gathering information and conducting specific value-based activities.

We are far away from the traditional sales role, which used to be focused on order taking. Because of digitalization, order taking has been automated in procurement software and e-commerce platforms. The sales function is transitioning into a more commercial function, i.e. wider in scope and much more connected to marketing and pricing. Finally, other functions besides sales are also very relevant to commercial intelligence: sales ops, demand generation, customer service, customer success, and strategic account management.

What is asked of traditional sales forces in terms of levels of sophistication is amazing. I list a few dimensions of the new role of sales below. The future is sales is moving towards a combination of commercial excellence and commercial intelligence. Could we call is “commercial excelligence”?

As you can imagine, the role of pricing in this new era of commercial excelligence is that of a turbo booster! Pricing enables sales with the right information and recommendations at the right time, for the right customer and the right product. In that context, commercial organizations need to be transforming to include these five considerations:

Both Forrester and Gartner predict a revolution in the way traditional commercial organizations are structured. That includes the inclusion of the pricing functions under the sales operations functions to work in full alignment. Imagine the power of the combination of technology, sales and pricing working together under one roof without organizational silos and constraints. We also see the emergence of unique commercial team designs with the separation of transactional and transactional activities. Therefore the account management function is booming right now. So digitalization is forcing us to have a discussion around this potential functional redesign.

Implications for Commercial Skills

The impact of digitalization on pricing skills is real. These skills were mostly soft skills to complement improving pricing science and technology. For commercial functions, I posit that the reverse is true. Sellers and developers do not lack soft skills. They need to develop more hard skills to be able to manage technology and to understand data and its science. I list some of the hard skills in the figure below.

Of course it is not about turning our sales force into data geeks, but they need to understand and embrace the rationale of pricing and commercial decisions and what models do in the background to derive intelligent decisions. The development of these hard skills are essential in building confidence and adoption in the commercial teams of the digital tools.

Conclusions

All major consulting companies have written about the renewed roles of pricing and commercial teams necessary to recover from this crisis. We made the case in this paper that both the current crisis and the accelerating rate of digitalization will change this two functions forever. So, here are three concluding points in this context:

1. ROI, ROI, and ROI: In the end, success breeds investments and more success. This crisis is a wake-up call for short term impact and long-term ROI. You cannot make your transformational roadmap too theoretical or too fuzzy. You now need to apply a strong discipline of calculating and promoting ROI for all your transformation initiatives. That is the only way to get attention from the C-Suite and to secure the next wave of investments for pricing and commercial programs. Every dollar is going to be counted. Be ready for a fist fight!
2. Digitalization is just accelerating the need to transformation sales and pricing: Speed is the new currency of business. Huge investments in digital tools and systems provide a boost to business cycles and accelerate the need to go faster in pricing and commercial transformations. That includes speed in design, speed in execution, speed in technological deployment, and speed in mindset disruption. What used to take 10 years needs to be done in 1 to 3 years.
3. You cannot transformation pricing without sales and vice versa: The interdependencies between sales and pricing are increased because of systems such as CRM, CPQ, sales automation, and business intelligence platforms. If you do a pricing transformation, you will for sure modify your commercial policies and processes. If you transform your commercial approach to inject a boost in productivity, you will most likely use CRM or CPQ and therefore will have to get pricing taken care of as well. Both are joined at the hip, especially now when companies are focusing on synergistic actions.

Commercial excellence 1.0 is dead. Long live commercial excellence 2.0. This new version is fast, furious, focused on impact, grounded in pricing science, and leveraging technology for efficiency. Are you ready to get on the departing high-speed train?