Looking For Ways To Drive Your Commercial Strategy?
Commercial Capability building: Are You Looking To Your Teams To Capture Commercial Strategy - Not Consultants?
Having an optimised commercial system to build and embed commercial capability across the business is the best way to drive and capture commercial strategy.
- An internal commercial system to build sustainable value capture
- Avoid costly training courses and workshops that deliver zero margin
- Enable teams to learn the right skills at the right time
- Ensure all teams move toward the strategic commercial destination
- Generate at least 2-4 per cent additional margin within the first 3 to 6 months
Download your Executive leadership guide to Commercial Capability Building
THE NUMBER 1 MISTAKE
The biggest mistake CEOs can make right now is to rely on training courses and workshops to achieve the necessary level of pricing and commercial capability building across the business.
Indeed, training does not teach the appropriate pricing skills necessary for a new pricing project or embed price rise strategy or process, for example.
Research shows that within only 6 days, teams forget what they have learned from training courses because much of the workshop content, timing and sequence of training is flawed.
Having a commercial system of building capability and embedding learning within the business will bypass the 'forgetting curve' and enable teams to apply the right skills, at the right time and the right place to achieve the right outcomes.
Across the business, departmental leaders and their teams are operating in the toughest market environments of their careers:
- Finance, sales and pricing teams are implementing some of the biggest price rises ever to offset inflation and cover costs
- Purchasing teams are making further material and supplier cost reductions across purchasing spend
- Commercial teams are updating rise and fall clauses driven by changes in input costs and demand
- HR teams are bringing the workforce back to the office en masse while dealing with growing demands for better talent, pay, flexibility, incentives
Due to the urgency of many of these challenges, many often see building commercial capability as a luxury. Still, what if you could feed the right amount of learning and information into everyone’s day without overloading them? Only enough to ensure vital project workstreams as well as BAU activities were all completed proficiently?
IMMEDIATE RISK TO PROFIT
A recent report from the World Economic Forum finds that investment in closing the skills gap in businesses can boost GDP by $6.5 trillion by 2030. However, last year it cost businesses approximately $340 billion dollars to train their teams. Moreover, large businesses spending on average is $22 million (c.17% of their budget) with very little to show for it.
Whatever way you look at it, building capability using traditional training models is expensive and often fruitless. Nevertheless, the opportunity cost of inaction (not developing your teams) is even greater.
Over this year and last year alone, the market value of many great Australian B2B and manufacturing businesses plummeted as share prices drop. In fact, we know of one business whose share price dropped by 80 per cent in < 1 year due to sitting on these very kind of people and culture decisions.
When businesses leave it to individuals to manage their own development, they often don’t know where to start and end up doing their own thing anyway.
Once a business skimps on developing its people, skill gaps grow. What's more, the ability of teams to develop and implement commercial strategy diminishes. This often leaves executives with no choice but to seek external consultancy support.
When businesses rely on pricing training, often the timing, content and structure of the training course is flawed and teams forget it or stop using it.
If pricing tasks are shared across teams without a structured development plan or integrated processes, critical actions and great ideas are lost and implementation stagnates.
When teams firefight issues daily, they stop embedding better ways of working and go back to doing their own thing.
If pricing is outside a teams’ area of expertise, they can make repeated and costly mistakes and undertake lengthy workarounds to compensate.
THE COSTLY ROAD TO RECOVERY
Since 2010, Taylor Wells Advisory has worked through 23 pricing transformations. With many leaders and teams in a variety of B2B and B2C segments and industries. We have seen a lot, from:
- Sales teams giving away procurement savings because they set the wrong prices.
- Pricing teams issuing price rise notifications to customers without updating customer prices and contracts.
- Product teams overriding prices without authorisation or guidance.
- Executives explaining to the board why over a million dollars of revenue was not invoiced due to a combination of systems issues and price complexity.
- Commercial teams miscalculating price changes in the system and the business missing its margin target before end of year.
- A business that spent hundreds of thousands of dollars launching a new sales incentives scheme but worked against the new way of pricing proposed by the Executive General Manager and a published commercial strategy document.
Training alone does not solve these problems. In fact, relying on training alone to build and embed commercial capability across your teams means immediate and significant margin loss. The average $ loss ranges from between -3- 5 percentage points each year. On top of this, factor in well over 36 months+ of a long and painful change process.
Download your Executive leadership guide to Commercial Capability Building
HOW TO ACCELERATE COMMERCIAL STRATEGY
Commercial capability building goes well beyond traditional training of employees: It’s about fundamentally changing how sales, pricing and marketing work gets done.
In fact, our research shows that you get the most impact from commercial capability building programmes when workflows and working days get stripped down to their most basic components.
However, what is equally important is the rebuild process. As it is only though rebuilding the entire pricing process that teams can embed new skills, knowledge, practices, processes and habits around new and existing workstreams.
Our optimised commercial optimisation system covers the basics. Just like a fitness programme. Then, it builds up from there as teams master new skills, kick key milestones, reach personal and team goals, and achieve shared outcomes.
The lessons can be basic. For example, how to take a price rise and how to write the most effective price rise communications to customers and staff. Or more sophisticated. For example, how to prioritise your responsibilities to integrate anticipated project tasks into BAU and optimised multiple team workflows.
They can also be technical or functional to get key workstreams and tasks completed on time and generating $ value improvement. For example, how to create a strategic price structure with optimal price levels to generate an additional 6 per cent margin within 3 to 6 months.
The system is applied to all departments and functions - not just pricing or sales or product teams. HR as well. Nothing goes missing, everything is captured.
- They are not learning the right things at the right time
- There’s no system to guide, remind, and regulate the flow of work, monitor learning outcomes. As well as lack of a system to update capability-build programmes according to the business' needs.
Connect with our commercial capability building service
Our Commercial System is spread out at different levels of the organisation. Starting with:
- Initiating Diagnostics
- Setting up Teams
- Phasing in Targeted Learning
- Tracking Progress
- Optimising As Required
Learn more here.
HOW AN ASX INDUSTRIAL BUSINESS GENERATED AN ADDITIONAL 9.5 PER CENT MARGIN IN UNDER 6 MONTHS WITH NEW TARGET PRICING
Taylor Wells was engaged to assist a leading ASX business to improve its pricing capability as it transitioned to a new customer-focused commercial strategy.
This ASX-listed business was experiencing a significant earnings decline with EBIT margins of less than 5%. There was no standard cost measurement to estimate operational expenses. There was no consideration of market pricing, willingness to pay or margin potential.
Legacy pricing habits were also deeply engrained in the culture of the business – ‘set and forget’ and ‘discounting to win business’ was the modus operandi.
Teams were tired and frustrated of working within broken systems. The general sentiment was there was no way out of the chaos. There was also significant talent churn and performance issues. Company culture was a liability to profitability and organisational health.
Taylor Wells started the commercial optimisation process from the top, focusing initially on drafting and planning.
To begin, we supported the executive team to identify key objectives and agreed scope for the roadmap.
We then devised an execution roadmap, including an organisational-wide communications plan to share with the whole business; and set up optimal team and committee structures – including taskforces, governance and steering committees – to oversee and drive multiple projects, deliverables and outcomes.
We devised a system and structure of reviews, checkpoints, meetings, stand-ups, 1-2-1 sessions and feedback loops to ensure all information was captured and actioned and problems addressed.
All meetings had structured agendas with time to debate concepts and discuss project risks, challenges or changes. There were also regular team catch-ups and stand-ups to overcome daily obstacles.
The value of structuring projects like this was that it provided absolute clarity and agreement on direction, purpose and vision from the top down. It gave leaders and their management teams a starting point; a place to forge ahead and forums to steer and guide the projects.
It also gave teams the structure they required to avoid working at cross purposes. Everyone knew what they were doing, and why and when. It cut out the red tape. It gave teams a fluid and open system of communicating, capturing learning from multiple tests and trials across numerous workstreams.
The business did not have a strategic pricing function and required detailed guidelines on how to set up and integrate a pricing function in the business.
Our first step in the integration process was designing and building optimal team structure and team roles.
Next, we utilised our pricing recruitment service to help the business appoint a high calibre pricing manager.
As the commercial requirements of the business needed a pricing manager with a special mix of skills, capability and potential, we utilised our unique pricing manager assessment framework, datasets and talent pools.
Our Pricing Manager Assessment framework was the basis upon which executives in this business made their selection decision for this appointment.
Within 1 month we found a high-performing pricing manager with the capabilities we needed. The pricing manager has since been promoted in the business and the pricing function is a highly regarded and growing function.
From week 1 of the pricing manager joining the business, we began a structured onboarding process.
The onboarding had two main objectives: To align pricing to commercial strategy according to the Pricing Roadmap. To deliver $1.5M in EBIT by the end of the year with incremental margin growth present from at least month 3 of the roadmap.
With these objectives and targets in mind, we designed an onboarding programme and workflows to deliver results in the first 3 months, 6, 9 and 12 months.
We developed customised pricing plans to support the pricing manager build a strategic price architecture.
We co-created and developed strategies and analytics using a range of methods – value-based pricing, competitive pricing, attribute-based pricing to optimise revenues and prices.
We developed pricing communication plans, stakeholder engagement initiatives and then technical ERP price structure designs for a new ERP system.
To accelerate the implementation of these plans, we designed a system of structured coaching and communication.
All plans were actioned, implemented and delivered the required EBIT results.
When we were sure our pricing plans were capturing value; we initiated plans for the sales and category management teams to bolster the results we were getting from the pricing project.
We built customised plans and workflows and aligned plans and workflows to the new pricing roadmap, strategy and mission.
All team interdependencies were mapped out. All tasks were identified, prioritised and categorised within workstreams and all workstreams and projects were given project owners and sponsors.
There were regular steering committee meetings that we helped to facilitate. There were also frequent stakeholder and project meetings set up to ensure delivery from the line managers’ teams.
All of these meetings were all project managed and aligned to the roadmap and tracked using dashboards. All ideas and actions were captured and given to owners.
Once team plans were designed and issued, we allocated a series of structured tests and trials to project stakeholders in sales, HR, category, marketing, IT, executive team, procurement, and finance.
Structured learning in this requirement was underpinned by testing, scientific investigation and subject matter expertise. If there were gaps in knowledge, they were filled in a timely manner with targeted coaching to ensure delivery and decision-making were effective and speedy.
Taking the pricing manager function as an example. We worked with the new pricing manager to test if target pricing could be applied to uncontracted revenue. We then set up a trial, combing through 21,ooo lines of data and established via testing new target pricing for over 6,000 individual line items.
Within 4 months, the business was generating an additional 9.5 per cent margin on the newly priced items. Within 6 months, new and proven pricing processes were documented and embedded in the business. All tasks, decisions and workflows were set up.
Many of the tests and trials set up during this time were ideas from the team as well as us.
This new way of capturing ideas and then turning them into real $ value brought about a cross-functional way of optimising sales, product innovation and pricing that was not dependent on us or any one person in the business.
What’s more, the new system highlighted all the great work the teams were doing. Teams were finally recognised for their positive contributions to margin generation, as the business finally had visibility of all the workflows, ideas and value capture being achieved on a daily basis.
Commercial optimisation is a continuous process. It involves all departments, not just pricing. Take HR, for example:
Do HR recruit and train people that are really in line with the business or its pricing strategy?
Are commercial teams incentivised, rewarded and recognised in a way that truly motivates people with unique pricing skills to deliver more complex business outcomes?
Are the pricing and sales teams set up properly to implement the commercial strategy – tool kits, training, resourcing?
If the answer is no across the board, unsuitable people are being employed. Training is less than effective. Salary, reward and talent management structures are driving talent away. Great sales teams are missing out on sales through no fault of their own.