Elon Musk’s first principle thinking for improving B2B sales
Elon Musk is the South-African born American entrepreneur. He is the founder, CEO & lead designer of SpaceX (revolutionised space travel) . He is co-founder, CEO & product architect of Tesla Inc (revolutionised sustainable transportation).
He also co-founded Paypal (revolutionising financial industry) which he sold to Ebay Inc. and used that money to start SpaceX and Tesla.
Musk works 100 hours a week and also do lunch meetings. He is at the forefront of multitasking which includes eating, texting, emails all at same time.
How can a person start so many successful companies and all in different domains?
The answer to this question is Elon Musk ability to use first principle thinking as a way of solving complex problems. This helps him apply his creative thinking on to complex issues and solve them ground up.
What is first principle thinking?
First principle thinking is the physics way of thinking. Its also referred as the true knowledge. When you apply first principle thinking to anything you basically try to identify the fundamental truth from the context.
The idea is to break down complex & large problems into basic elements and then rework on them from ground up.
The opposite to this is conventional thinking in which you think from what is being told is truth and is often not the truth or fundamental problem.
Main difference between First principle thinking and Conventional thinking is that you eliminate assumptions from First principle thinking and try to identify the real issues (fundamental truth).
Once the assumptions are eliminated then you can apply creative thought process and find the real issues (fundamental truths) and try to solve them from ground zero.
How Elon Musk uses first principle thinking?
Elon was working on battery packs that are used for TESLA cars. Historically, battery packs cost 600 USD. Everyone said that there is no way you can bring down cost of battery packs.
Elon used first principle approach and brought down cost to 80 USD.
- He asked first question :- What are the batteries made of or what are the materials used in making batteries? — So they found out batteries are made of Carbon, Nickel, Aluminium, Copper & some other materials.
- Second question he asked:- What is the market value of these materials on different stock markets around the world? — So if they buy these materials on London metal exchange what will be the cost versus buying these materials in US metal exchange.
They found out it just costs 70 USD for procuring these materials from different stock exchanges.
So they just need clever ways to combine these materials and form a battery pack, which they did later and cost to them was 80 USD.
“I think it’s important to reason from first principles rather than by analogy. The normal way we conduct our lives is we reason by analogy. [With analogy] we are doing this because it’s like something else that was done, or it is like what other people are doing. [With first principles] you boil things down to the most fundamental truths…and then reason up from there.” — Elon Musk
Just like Elon, the other brilliant minds who used first principle thinking are Thomas Edison, Nikola Tesla, Aristotle, Euclid & Feynman.
Now, lets try and apply the same principles on B2B sales and see if this helps.
What is B2B sales?
B2B or business to business is the process when one company/business sells products or services to other companies or businesses. Its a business to business transaction.
Whereas B2C is business to consumer where the end users are consumers like you and I.
The sales process for B2B business is different & have long sales cycles — time when a business/company contact a end user (other business or company) upto time when they pay for this product or service.
What is Ideal Customer Profile & B2B sales prospecting?
B2B sales prospecting is the process of finding the target business or companies who should ideally be contacted for selling products or services that a business has to sell.
Ideal Customer Profile: At first business identifies the key attributes that the other businesses or companies should have so that they qualify as their Ideal Customers.
- Which industry the business falls into? Automotive, Financial Services etc.
- How many employees the business should have? 1–10, 10–50, 50–200, or like more than 5,000.
- Where are the located? New York, London, India, China etc.
- Whether they can afford the price at which we are selling?
- Do they have money to pay for this service or not?
- Whether they have the problem that our product or services solves?
There can be multiple other attributes while defining the Ideal Customer Profile.
How first principle thinking can be applied for B2B sales?
Lets take an example of a digital marketing company that offer online marketing services to other businesses and apply first principle thinking for its B2B sales prospecting.
First principle thinking:- Using first principle thinking we should first identify the real issues and answer following key questions:-
- Why will any business or company consider doing digital marketing service?
Answer — because business wants to utilise the potential of social media to grow their business. Digital marketing is cost effective and has higher ROI compared to other traditional form of advertising like TV ads, outdoor media.
Great, now you have figured out that your Ideal customers are the ones that are not doing any digital marketing but would like to do it.
- What are the problems faced by companies if they do digital marketing by themselves versus having a agency doing it for them?
Answer — they will have to acquire digital marketing skills and experience by themselves and the learning curve is slow as it take times to experiment. The business core focus could be technology or operations or supply chain and if they shift focus and develop in- house digital marketing teams then they may not be using best of their time.
Now you know that the customers whose core focus or industry domain is different from marketing & advertising like Pharmaceuticals, Logistics etc, they will be more excited about your offering.
- What is the motivation for businesses to do digital marketing for their business? Is it growth, more clients, brand awareness or anything else?
Answer — primary goal is brand awareness because if the motivations is the acquire more customers then they will prefer to do this in- house.
Now you know that your Ideal Customer profile is the one who needs digital marketing, who is not doing it at the moment, is into Pharma or Logistics domain & has brand awareness as motivation.
- Whether businesses can afford to outsource digital marketing services or is it easy to do digital marketing in house?
Answer — whether they are hiring recently for digital marketing person but have poor digital presence? or whether they have recently raised funds then they have money to spend on these services.
This leads to a better understanding of your Ideal Customer Profile and helps you boil down to the fundamental issues your customers may have and how to find the right prospects.
In the end, we all want our business to grow and be more productive in our sales process. If you have thoughts on how you think first principles can help you solve B2B sales prospecting then please share in the comments below.
