Emerging markets are rapidly gaining ground on developed economies. Emerging markets constituted just below half of world GDP in 2012, when converted to US$ at purchasing power parities, up from about one third in 2000. In the next decade this shift will continue at a much slower speed. By 2025, emerging markets will capture just over half of world GDP.
By 2050, emerging and growth markets will move from one third of the world’s GDP to two thirds – essentially “flipping” global economic output. This new economic capacity is already creating hosts of new global competitors – further diminishing competitive advantage and driving price competition.
In business literature, commoditization is defined as the process by which goods that have economic value and are distinguishable in terms of attributes (uniqueness or brand) end up becoming simple commodities in the eyes of the market or consumers. It is the movement of a market from differentiated to undifferentiated price competition and from monopolistic to “perfect competition.” (Wikipedia)
If you are successful, you will be imitated. As a result, the ability to create and sustain defensible differentiation becomes progressively more difficult in virtually all markets, which often leads to a commodity perception – accompanied by declining revenue growth and margin erosion. In the book The Solution-Centric Organization (McGraw-Hill 2006) we called this decline the “path to commoditization,” as illustrated in the figure below.
Global economic developments in the last two decades including the lowering of trade and investment barriers, the rise of telecommunication and transportation technologies, and other technological advances have accelerated the commoditization process for almost all forms of products and services – resulting in price wars and declining margins.
So the question is, what is your sales organization doing to adapt its thinking and approach to the pressures of commoditization? We won’t completely address that question here, but there are several major aspects of the “sales machine” to consider.
SALES PROCESS / METHODOLOGY
According to research from Sirius Decisions, the number one reason for not meeting sales quotas was inability of sales people to effectively communicate value messages. In the Solution-Centric Organization (McGraw-Hill), we emphasized not only the critical need to focus on issue-driven messages, but the integration of those messages into sales methodology and usable sales tools. Sales playbooks need to provide essential “how to’s” for integrating value messaging and differentiation early in the customer dialogue.
SALES TALENT / COMPETENCIES
Competency frameworks need to consider the increased need for sales professionals to differentiate through the selling approach. Skills and capabilities related to business acumen, ability to diagnose and explore customer challenges, and consultative dialogue will be foundational requirements to compete.
SALES TECHNOLOGY / ENABLEMENT
According to IDC, on average 90% of corporations surveyed require quantifiable proof of bottom-line benefits on most projects. That means your sales team better be equipped with effective, rational ROI tools – that allow customer collaboration and input. But just quantifying a return isn’t sufficient. Sales enablement tools need to provide guides for differentiated value and competitive “knock outs.”
We are nearing the 7th and last disrupting force in this series. Stay tuned in the coming days as we examine the challenges of ‘The Emergence of Big Data’ and then tie our series together with an integrated approach to create a change resilient sales organization.