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If Somali pirates can have a banner year, why not me?

January 20, 2010

While many firms had a rough year, the Somali pirates had a banner year in 2009, with 214 new prospects leading to 47 new customers, a significant rise over 2008’s 111 new prospects and that represented a 200% increase over 2007. Just the other day they closed a $7M deal with a Greek shipper. What are they doing right and can we look at our own organizations to see if we’re pirate material?

They respond quickly to shifts in their market

With all the various patrols in the gulf, the pirates have moved operations to the Southern and Eastern coasts of Somalia which remains largely not patrolled. Have we looked at our salesforces to see if they are calling where the competition is the heaviest and not looking for new, fertile ground not that far away?

They understand their market and employ technology to extend their reach
Time was, these pirates were low tech, using RPGs and other run of the mill sales techniques. Today, they use sophisticated electronics, heavy weapons and well as larger and faster ocean ready boats. Are we still using the same sales methods in this poor economy? Have we adapted to changing customer and competitor facts? For example, until recently, per Consumers Reports Magazine’s 2009 Customer Satisfaction Survey for cars, most consumers were very green conscious. Today, it’s quality, safety and value. Unless we adapt our messages, product portfolio and pricing, we’re selling 2007 in 2010.

Many of us are postponing technology decision until the very last minute, which in this economy makes eminent sense. Unfortunately, the world is not as binary as that. What we should be saying is “what parts of my technology is hurting my ability to either sell or deliver”? For example, you can probably live quite well with a somewhat dated and inefficient General Ledger system. Given today’s transaction volumes, you can probably get by for a while. However, what about your configuration and order entry systems, allowing you to price customer orders, or the link between the configuration/order entry system and Inventory tracking, so you really know how much you can build at any given time, optimizing raw material spend?

The pirates attack the ship, not the crew – ex, they know their true customer
Pirates know their customer is not the poor 3rd world sailor. Not to be course about it, but truth be told, I’m not sure if the President of a major shipping line stays awake at night wondering about crew status compared to wondering if his multi-million dollar 1,000 foot long supertanker is Ok. They fire at the bridge, intimidating the captain to stop the ship. Now that’s having a brand. If you can be in a 50 foot boat and intimidate a 1,000 foot ship to stop, you’ve achieved brand equity and you obviously know your customer very well. Who is our customer in this economy? Is it the big box store stocking our product or is it the end consumer who goes to that store? Given what little money we have to increase (or hold even) marketing, figuring out who actually makes the purchase and getting into their mind is crucial.
They also seem to target customers worthy of high profits, not just revenue. After all, which is harder to collect – $7M from a Greek shipping tycoon or $25,000 from a retiree on their 40 footer? IBM recently announced record operating results, mostly due to their very successful switch from commodity hardware to software and services, plus a very smart focus on account profitability and not just top line revenue.

Now the pirates are killing each other to get more than their fair share of a recent $7M sale

An article on Yahoo yesterday showed that even perfect capitalists are not always perfect. The pirates forgot to lay the rules for inter-departmental or cross territory revenue sharing and aligned compensation. Each pirate deal is paid out on a complex formula involving multiple sales representatives, delivery people, investors, officials, etc. That method worked Ok when the ship was relatively average sized (and so was the ransom), but when they closed this one deal of a $7M ransom, all civility went out the window and they began shooting each other. Our lesson is to think about how we divide territories and compensation to see if we can put in place some revenue sharing rules allowing and facilitating cooperation and joint activity. More to the point – are our reps out there selling 120% or are they also wondering if they can grab part of someone else’s revenue based on some technicality? Make sure all your rules for splits, selling/delivery credits are well codified and published so everyone keeps their eyes on the horizon and not on the rep in the next cubicle.

Rich Eichen is a Managing Principal of Return on Efficiency, LLC, who’s website is http://www.growroe.com and is one of their senior turnaround leaders/CROs, Program and Interim Executives with over 25 years experience reshaping companies, Operations and key initiatives. He can be reached at richard.eichen@growroe.com

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One Comment
  1. Richard Goeglein permalink

    Very interesting analogy — pirates are obviously quick studies, resilient, tenacious, flexible and don’t focus on ‘past practice’ as role model for success. Not many companies can say the same thing.

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