Manufacturing & Distribution

The Bold Predictions and First Steps for Manufacturers in 2022

Authors

Manufacturers experienced an large number of disruptions in 2021.

Everyone had to be agile these past few years. In reality, no one really knows what curveball might be next. However, we do know that truly exceptional executives from leading firms thrive in uncertainty by demonstrating enduring leadership characteristics.

Enduring leaders look ahead and not behind. They survey their competition and those around them but they’re not beholden to the current state, nor do they benchmark themselves against the “as is.” Moreover, we know these leaders create a culture that looks well beyond the next quarter’s earnings report. They focus on the people and the programs that will take on whatever the “next” is.

Research from the Alexander Group indicates that enduring leaders, those who thrive in uncertainty, encounter six specific commercial issues. Here are strategies needed to tackle these six issues and to thrive in 2022 and beyond.

Prediction #1: Race for Talent Keeps Turnover at 15-20%+

Turnover within commercial (marketing, sales and service) teams will remain unsustainable at 15-20%, forcing an evolution of conventional recruiting and retention strategies.

COVID resulted in a complete 180 on the view of employment, in turn resulting in “The Great Resignation.” Manufacturing has been no exception as sellers and key support resources shuffle to different companies within the industry and, in many cases, exit for larger career and life changes. Data revealed that seller turnover has increased from 12% in 2017 to as high as 15% in 2019-2020 and threatens to maintain or increase. Leading organizations are overhauling talent management practices to incorporate Diversity, Equity and Inclusion (DEI) in all aspects of their career path, compensation and job responsibilities to attract and retain top talent from non-traditional sources.

First step: Manufacturers who will win the race for talent won’t simply throw more money at the problem. Rather, they will focus on multi-faceted employee engagement that aligns cultural purpose with individual destiny.

Prediction #2: Account Ownership Becomes a Team Sport

Account ownership will become a team sport. Manufacturers will see an overall reduction in their commercial teams’ headcount, but there will be a proliferation of roles across marketing, sales and service leading to higher productivity.

It’s the death of the superhero seller. As buyers demand more support throughout the purchasing process, organizations are deploying new roles across the commercial team. The data indicates investing in key support roles yields 34% higher productivity and 10% higher E/R efficiency. Leading manufacturers who recognize this and leverage roles such as Revenue Operations and Customer Success will capitalize on this advantage.

First step: Traditional “Sales Operations” will evolve into “Revenue Operations.” Sellers who take input from Revenue Operations on account planning and value messages will excel. Customer Service will evolve into Customer Success to ensure adoption of products and services, and soon receive upsell and cross-sell quotas.

Prediction #3: IoT Revolutionizes the Revenue Model

The Internet of Things (IoT) will begin a seismic shift from capex (selling things) to opex (selling outcomes or usage) models. Enduring leaders understand this dynamic impact to their income statements and valuations. They will focus on recurring revenue and promoting the technology behind their manufacturing.

Buyers are seeking to optimize their purchasing and usage of key products to further realize business outcomes. Manufacturers that sell connected or “smart” products are adding service to the value proposition. The data indicates that service brings in 11% of total revenue for the average manufacturer, while more IoT-enabled and service-led companies are bringing in 30%+. IoT offerings can be monetized in different ways, including:

Higher price relative to non-connected product
Additional subscription with dashboards and analytics
Services and maintenance contracts
Bundled PaaS (product as a service)

First step: IoT and recurring revenue sounds sexy, right? Well…most strategic leaders understand that the terrain in which they compete might not be ready for advanced opex concepts. A CEO of a large global industrial capital equipment manufacturer recently explained that he doesn’t have to monetize all the embedded “smart” products they’ve installed over the past decade; he merely needs to use the insights generated from their IoT products to tell a story of “predictable” revenue (i.e., where, when and how much their products will need replacement). To accomplish this feat, he is empowering sellers to deliver insights and outcomes, while upskilling services teams to harness those insights to improve customer engagement. Additionally, he is building consultative competencies into all customer-facing roles. These coverage adjustments allow him to accurately predict revenue two years, not two quarters out.

Prediction #4: Self-serve Comprises Over Half of Sales Volume

Half of manufacturing and distribution purchases will be made without face-to-face interaction. Certain high-volume accounts and most of the rest of market customers will use expanded self-serve models.

Data that comes through marketing/alternative channels and self-serve is richer, more insightful and actionable than ever before. Industrial sales forces with e-commerce achieve 15% higher productivity and 20% lower sales costs with similar margins. Successful organizations will find the right mix of product offerings and customer segments to assign to self-serve and reserve traditional coverage for opportunities that need it most. Despite the final transaction being self-serve, the work to get there and the value delivery that must follow remain the responsibility of an engaged commercial team.

First step: Manufacturers will further enhance electronic data interchange capabilities and selectively begin activating “click-to-buy” websites. A growing number of non-strategic accounts and select strategic accounts who prefer automation will no longer receive face-to-face field coverage.

Prediction #5: Commercial Functions Align Under the CRO

Manufacturers will add a new chair to the C-Suite: the Chief Revenue Officer (CRO).

As focus shifts from point-to-point problem-solving to holistic business outcome solutioning, enduring leaders know that buyers are looking for more support both upfront and on the back-end of the purchase process. Organizations must align pre-sales, sales and post-sales activities to create a seamless customer experience. In 2020, 23% of respondents across industries reported having a CRO, but <5% of manufacturers surveyed had a combined commercial leader. Only by having a coherent go-to-customer model across purchase stages will sales forces be able to win, maintain and grow incremental spend.

First step: Conventional silos between marketing, sales and service will not only fall—they will no longer be tolerated. Driven by evolved buyer journeys, executive leaders will force each commercial department to coordinate, collaborate and win as a team.

Prediction #6: Marketing and Service Get Revenue Quotas

Marketing and Service will have revenue quotas.

To reach buyers how and where they want to be met, leading manufacturers are creating cultures of continuous and seamless engagement models that span marketing, sales and service. Integration of the commercial team allows for collaboration across the buyer journey and provides long-term innovation selling. New tools and roles provide targeted messaging, making marketing revenue generation measurable. These sophisticated offerings require a robust post-sales strategy through service teams and imply a greater reliance on existing customers for expansion selling. All of which comes at a price that must be funded—hence the need for quota expansion.

First step: Marketers and commercial service organizations’ production will be measured, and compensation and incentives will be aligned to key sales objectives and revenue growth.

As the last two years have shown, nothing is a given. But enduring leaders (and those who want to allocate resources towards likely first steps) will most definitely continue to invest in their commercial teams to drive culture and differentiated growth.

For more information on Alexander Group’s manufacturing practice, please contact a manufacturing and distribution practice lead.

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