Why Promised Benefits No Longer Satisfy Buyers & What Sellers Can Do About It

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1 Retail Price: $4.99 The New Focus Of 'Promise-Weary' Buyers: Benefits Realization Why Promised Benefits No Longer Satisfy Buyers & What Sellers Can Do About It Buyers have a new obsession. It is called 'benefits realization', or alternatively 'benefits delivery'. They have lost faith that promises made before the sale will actually materialize and are determined to intervene to ensure that they do. But if buyers are focused on benefits realization, then sellers must be too. In this article we will show you how you can use this important concept to boost your sales success.

2 Buyers Reach A New Level Of Benefits-Obsession Unfortunately managing a project is not the same as managing its benefits. All too often projects are delivered on time and within budget, but without all the benefits being realized. In planning and managing benefits realization it is important to integrate the two however. That means setting out how key benefits will integrate with the project plan, including its key dependencies, critical dates, review points and so on. It makes no sense for organizations to spend many months in planning the right strategies, finding the optimum solutions and choosing the best suppliers, simply to leave the most important element to chance that is the realization of benefits. Managers have learned that benefits just like anything else - must be planned, tracked and managed. They are increasingly seeing benefits management as essential to the management of success. Managing a project is not the same as managing its benefits. Buyers Focus On The Full Costs-Benefits Equation Cutting costs has long been a key driver for procurement. But, what happens when costs cannot be cut much further? Well, the focus turns to the other side of the costs-benefits equation and ensuring that benefits are fully realized. Managers have logically turned their attention to benefits and performance. Traditionally most attention was focused on cutting costs in respect of suppliers and projects, with considerably less on maximising benefits. However, that is very much a one dimensional view of the bottom line. After all the price-value (or benefits) equation isn't just about price negotiation, but performance management and most of all benefits realization. Benefits realization is at the core of 'getting more for less'. P a g e 2

3 For purchases and projects that entail fixed costs or dedicated resources (take for example in the public sector where there is less room to manoeuvre) driving benefits has by necessity taken equal priority to cutting costs. For sellers this may be good news as benefits, rather than price, is where they would much prefer to compete. Why Benefits Realization Is So Important 'Show me the money' is a popular movie-inspired catch-phrase that has been discovered by buyers and reworded into 'show me the benefits'. 1 It is a new mantra for internal project management and programme delivery. Moreover it is a taunt for suppliers who are being increasingly measured upon the fulfilment of their promises. The objectives of benefits realization are as follows: 1. The objective is not only to ensure that benefits are realized, but that they are also verified. All too often cold water is thrown on benefit claims of project sponsors, or suppliers. What is required is an objective standard (to which all stakeholders ascribe) by which the realization of benefits can be independently verified. That means there is no confusion about what is and is not achieved and who can and cannot take credit for it. Given that 3 rd parties are often involved in validating, or scrutinising projects/purchases, clear evidence of benefits realization is essential and this is something that the seller should facilitate. If it is a monetized benefit then finance had better give its approval to the methodology of calculation. 2. Benefits realization is aimed at ensuring that all benefits are maximized. That means, in the words of one buyer, squeezing out every last benefit. That includes the last 20% which can easily go unexploited, but it does not stop there. It also includes going above and beyond what was originally anticipated. In this context the 1 'Show Me The Money' was popularized by the 1996 movie 'Jerry Maguire'. P a g e 3

4 supplier who suggests ways in which additional benefits can be derived will certainly gain points from the buyer. 3. Benefits may read well on paper, but when it comes to the practical realization there can be a host of factors upon which they depend. They can include external variables such as internal, or market place changes. Things change in the company and its marketplace that will impact on the project and its planned benefits. That means a dynamic and proactive approach is required, on the part of both buyer and seller. It is essential to measure, communicate and reinforce benefits Benefits realization is ongoing; it does not stop at least not for the lifetime of the project in question. It is aimed at ensuring that benefits are achieved and sustained in a repeatable manner. For the seller this means it is essential to measure, communicate and reinforce benefits on an ongoing basis. It also means that account reviews and client reports should focus on benefits delivered and underway. 5. Managers' reputations are on the line. Increasingly they are being called to account for the performance of their departments, as well as their major projects and purchases. In the past the temptation has been to overpromise and under-deliver. However, the focus on benefits realization closes the loop as regards managers delivering on their plans. Sellers therefore need to expect to be in the spotlight well beyond the point of the sale. P a g e 4

5 6. Managers are now required to adopt a 360 degree view of the purchase. That is a full lifecycle view that extends from validating the need to selecting a supplier and onwards past the purchase order to managing the project and achieving the results. This is a view that sellers must adopt both in terms of writing the proposal and delivering the solution. It is at the core of benefits realization. 7. Benefits realization is key to ensuring access to resources: In this era of cost cutting the very life of a project, or programme may depend on its sponsors being able to confidently lay claim to its benefits and to defend them against the claim of competing projects. The next time a manager, department or team goes looking for funding they had better be able to demonstrate a track record in realising benefits. 8. Benefits realization is key to managing stakeholders. In particular it means: Ensuring clarity on what all stakeholders require Getting buy-in around the benefits Managing expectations in terms of what is going to be delivered Being able to show stakeholders, including end customers what has been achieved. To demonstrate that the promises made to them have been met. P a g e 5

6 A Framework For Benefits Realization Ensuring the realization of benefits requires a plan. Such a benefits plan, ideally summarized in the form of a spreadsheet table listing all benefits, should include the following elements: A clear definition of the benefits A grading/prioritization of those benefits The KPIs or variables impacted upon How each benefit will be measured and tracked (ideally with a before-after comparison) When each benefit will be realized (including progress along the way) Who benefits from the benefit (impact on various stakeholders) Independencies between benefits and projects Who will validate the project achievements/benefits and how The risks that the planned benefits will not be achieved, including the dependencies and tradeoffs that may be required How progress towards the benefit will be tracked (including review points) and any problems or deviations managed Who is ultimately responsible for the achievement of the benefit and the process of tracking and managing it The costs associated with benefits realization. Benefits realization requires a plan. While the benefits plan is normally the buyer's concern, it is also a powerful tool for the seller. It is a new way for the seller to tell the buyer that 'we are obsessed with your benefits too'. Elements of the benefits plan can be used in terms of the needs analysis and solutions definition steps of the sales process, as well as in the proposal writing and project planning or implementation stages. P a g e 6

7 Your Sales Gauge: Benefits Realization There are 8 items in the best practice checklist below. Use these to gauge how effectively you are handling benefits realization and the impact this could have on your sales success. Tick the ones for which you can answer 'Yes' that is those that are presently being addressed, or covered by your sales approach. Pay particular attention to those that you cannot Tick they could be limiting your success. How Suppliers Can Realize The Benefits It is no longer enough to simply promise benefits. You have to go one step further and show how they will be realized. The introduction of the concept of benefits realization into proposals and pitches can truly distinguish a supplier. With this in mind here are some steps for sellers to follow: Find out how customers approach the issue of benefits realization and support them in this area by adapting your information reporting, key account plans, account review meetings, and so on to their needs. Provide the customer with the information and the framework required for benefits management and planning. That means applying some, or all of the principles of a benefits plan (as outlined above). Get better at defining, and as much as possible quantifying; benefits. Clarity around what will be delivered makes the management of benefits realization much easier. P a g e 7

8 Integrate your project and account management around benefits management. For example it should be possible to review progress in benefit realization against key project milestones. Agree a mechanism for tracking and measuring benefits and use it to continually communicate cumulative benefits. Communicate your track record in realising benefits through customer success stories and quotes. Let buyers know that you deliver. The challenge for the seller is to make benefits realization a key factor in supplier selection. That means broadening the focus from competing seller promises, or claims, but the ability to realize them. After all buyers would settle for the supplier who offers 90% of the benefits but guarantees 100% realization that is much better than the supplier offering 100% of the benefits, but reaching only 80% of the results. It is, in the words of one buyer-manager a classic case of 'a benefit in the hand is worth two in the bush'. So, sellers set to it! Put benefits realization at the core of your selling and see how it can boost your sales success. P a g e 8

9 What Should You Do Next? Use the checklist above to decide what you want to do next. In particular, see how many items were you able to tick 'Yes'. If you ticked most, or all of them then you have benefits realization under control. So, you might like to navigate to some other aspect of the Repeat Sales Stage, or elsewhere in the sales process. If not, this area could be limiting your sales success. You can start addressing it by tackling those items in the checklist that you could not tick. For each make a note of specific actions you can take you will find space to write earlier in this paper. The Science behind This Paper These insights and tools are based on extensive research under 3 headings: 1. Buyer Research our ground-breaking research into how modern buying decisions are made and the implications for sellers. 2. Best Practice Research Over 1 million pages of best practice sales case studies, books and research. 3. Common Practice Research Our peer comparison benchmark of 1,000s of your competitors and peers. The Sales Engine and SellerNav are trademarks of The ASG Group. The entire contents of this document are copyright of The ASG Group and cannot be reproduced in any format without written permission. Would you like help in tackling your sales challenges? Contact us at: enquiries@theasggroup.com P a g e 9