Five Steps to Unlock M&A Enterprise Value through Commercial Integration

Step 1: Begin with the End Customer In Mind

Identify the target end markets that the expanded solution offering addresses. Don’t fall into the trap of focusing only on existing customers―make sure you also include expanded total available market (TAM) opportunities. Segment these target end markets by grouping cohorts with similar buyer journeys and value drivers. Tap into your sales and marketing organization for initial insights and augment with external market research to get the full picture. The key is to develop both buyer and account level insights. Account insights are the foundation to develop an opportunity model to effectively segment CRM database accounts at scale. Buyer insights are the building blocks to create targeted messaging and sales plays for specific personas within a segment and an account. These customer segments define the first step in building the integrated commercial organization.

Step 2: Define the Integrated Commercial Coverage Strategy for Each Segment Across Marketing, Sales and Service

Armed with an account segmentation methodology, determine the right engagement model for each segment and the routes to market for each segment based on the buyer journey needs.  There may be multiple routes to market depending on the expanded solution offering. Many industrial manufacturers and distributors are exploring new routes to market especially as it pertains to software offerings.

Determine how the commercial organization will engage each of the stakeholders across the buyer journey. Define the roles and responsibilities within marketing, sales and service by each segment and stakeholder. Expanded portfolio offerings and value propositions provide an opportunity to introduce or refine a strategic account program. Set up account-based marketing (ABM) to actively engage new buying centers. Define the strategic account manager (SAM) role to target higher and wider audiences within the strategic accounts. Enable the service organization to listen for expansion opportunities. Designing the coverage strategy by customer segment ensures that the integrated commercial organization is setup to engage the customer for their needs vs. being built to accommodate the needs of the legacy businesses.

Step 3: Calculate the Integrated Headcount and Resource Investments

The coverage strategy defines the roles and processes for the integrated commercial organization which is then used to calculate the required headcount and resource investments. There are multiple approaches to calculating headcount and investments. Many organizations define a rep productivity quota as an input for their sales investment models. However, the sales productivity approach does not fully incorporate the workload needs of the customer accounts.  Take a more granular approach by defining workload expectations by account across activities in the customer engagement lifecycle. This will give a single account workload for each of the future state roles which can then be multiplied by the number of accounts in the segment to give a full view of account workload needs. Use the account workload as the numerator and the available sales rep time as the denominator to yield the required headcount for that role. The rep productivity quota expectation shifts from being an input to becoming an output of this methodology. Although this step is a quantitative approach, it also helps to further define the expectations of the roles in the future state model.

Step 4: Set Up Metrics and Compensation to Align Behaviors

The definition of success in the future state will not be defined by the same legacy metrics. Revenue and profit will always be important, but future success will be defined by the ability of the integrated commercial organization to sell the full solution offering. For example, recurring revenue pricing models for software and service offerings contribute a small impact to revenue in the short term that can easily be overshadowed by a legacy total revenue metric. However, the recurring revenue and growth contribution will have an outsized impact on enterprise value and should be a separately defined metric. Translate these new metrics into a redesign of variable compensation plans. Different roles will have different abilities to influence these new metrics. Set up new plans to ensure individuals at all levels are contributing to the new definition of success.

Step 5: Prepare a Plan and Rollout the Integrated Commercial Strategy

The integrated commercial strategy starts with the customer and ends with the ability to execute. Careful planning is required to translate the integrated commercial strategy into execution. The future state design has been people agnostic up until this point. Now it is time to slot incumbents into the future state roles. The size of the transformation will determine the approach taken. For large transformations, execute a talent assessment to support decisions on slotting individuals to future state roles that will make them and the organization successful. Determine the new territory and account assignments and the transition plan to provide customers with a seamless transition. Support account transitions with manager involvement. The more touchpoints your customers have, the less revenue is at risk of slipping through the cracks. All the process and role updates will require updates to the systems and technologies. Make sure those changes are evolving to meet the needs of the new model and drive the collaboration required. Prepare the internal and external rollout communications materials. Playbooks can be highly effective communications tools to introduce role changes, but they also serve as an on-going reference as individuals process the changes and what they mean to their day-to-day. A successful execution will be made possible only by preparing a thorough and thoughtful plan.