Why World War II Aircraft Design Should Influence Your Sales Metrics
Guest Blog by Remen Okoruwa
Remen Okoruwa is the founder of StatusQuota (statusquota.co), which creates tools that help salespeople win more deals using predictive analytics and prospect insights. You can find him on Twitter @remen_ok
Tell me if you’ve heard this one before — a VP of sales with a great resume is hired to take the sales team to next level. Over the next year, the processes he attempts to implement don’t take hold, and growth stalls. And just as quickly as he entered, he is relieved of duty as the owner looks for another candidate to clean up the mess left behind. Rinse and repeat.
Sound familiar? Research indicates that the average VP sales only lasts for 18 months!!! There are a ton of reasons why sales executives succeed (or fail). But one of the biggest challenges they face is making data driven decisions. Let’s face it — with CRM, marketing automation, lead enrichment, and other tools serving up a smorgasbord of information.
In fact, the problem with making decisions at this level is not the absence of data. Rather, it’s hard to separate the signal from the noise. Sometimes even the most obvious data yields a counter-intuitive insight.
Story time! Back in World War II, the Allied powers were looking for any advantage they could find to beat back the Axis. To that end, America’s Center for Naval Analyses studied aircraft that had returned from missions and recommended reinforcing the armor on the areas with bullet holes. Makes sense, right? WRONG. Dead wrong, in fact.
Enter mathematician Abraham Wald, a Jew from present day Romania who escaped the Nazis in by immigrating to the US. Abraham took the same data and flipped it on its head. For you see, if the planes had made it back from the mission, then the areas with bullet holes required no reinforcement. They were evidence of the spots that could be hit without compromising the plane.
Instead, it was the parts of the plane that NEVER had bullet holes which required reinforcement. Because those were the spots that, when hit, were not survivable. The initial mistake was a literal case of survivorship bias.
What does this mean for you as a sales executive? In short — be very very wary of “obvious” conclusions from your data. Be prepared to peel a few layers of the onion to reach conclusions that may seem counter-intuitive. Data in the aggregate can tell a story that’s quite different than the individual cases once you take a closer look. As Mark Twain said in his autobiography, “There are three kinds of lies: lies, damned lies, and statistics.”
To that end, let’s talk about one common sales challenge where the first impression might be quite wrong:
Your sales team close rate is declining
This is the stuff of nightmares. You come in and sales rep performance begins to decline. Despite working the same (or even more) leads, the close rate has gone down. And it’s your mandate to fix it!
There are so many reasons for a declining close rate. It’s a topic that has been covered pretty extensively elsewhere:
So let’s flip this question on the head — can a declining close rate be a good thing? The answer is a resounding yes (in some cases).
Take for instance the case of an early stage startup. No sales people have yet been hired. So the founders are going out and making every single sale. They’re pestering every contact in the address book to find someone, ANYONE, who will buy. As such, the first customers that purchase are friends of friends, referrals from an advisor, the like. So after selling to 10–20 of these very warm leads, the founders determine that they need to hire a salesperson (or two, if you want to do it right) to start cold emailing & cold calling to really pour gas on the fire.
If those salespeople were hired with the expectation of cold prospecting, you better believe the close rate is going to drop. Without the benefit of warm introductions, you need to account for a drop-off in close rate. This is the critical phase where you’re actually going to begin systematizing your sales processes based on what you learn from these reps and the additional ones you hire. That is to say, you’re only now starting to get real signal. The founder sales is too noisy to be a reliable indicator.
The same principle applies to companies with companies with hundreds of clients and millions in revenue. While it is possible to scale a business with purely inbound leads or free-to-paid product upgrades, the next level of growth for a company is typically an outbound calling effort. And that outbound effort will likely yield at a lower rate than well qualified inbound “fish in a barrel” leads your team has worked up until this point.
That’s why Jason Lemkin, founder of EchoSign, recommends that sales & marketing teams focus on lead velocity rate as the key metric for driving consistent sales growth for your business. As he explains in his article:
“But there’s a better metric, your Key Metric, you should track and score yourself to, and hold your VP Marketing and marketing team to — Qualified Lead Velocity Rate (LVR), your growth in qualified leads, measure month-over-month, every month. It’s real time, not lagging, and it clearly predicts your future revenues and growth. And it’s more important strategically than your revenue growth this month or this quarter.”
Ultimately, your sales close rate is a lagging indicator that can help to diagnose an issue. As a sales leader, it is also important to have leading indicators that can position your team growth and success.