Clever observation of predictable human behaviour paid off towards winning the market

Years ago, I worked for a company that had just "crossed the chasm" selling within the early majority market segment.  The competition was fierce, and there was one company that had the technological edge against us.  They were a smaller company but had Apple's"cool" aura, making them very appealing.  Their software had all the cool bells and whistles whereas ours had all the core features that were very good, but little of the cool factor our competitor had. As you can guess, we were losing many deals to them quite frequently.

To compete, our management team devised a short-term strategy.  Both companies were public companies and faced quarterly revenue growth scrutiny from the financial community.  My company decided to pursue a tactic for 90 days. We would do two things:  commit to immediately developing any feature a customer needed that this competitor had that we did not, and secondly, if we couldn't win the sale, we would do anything to stall a deal until the end of the quarter; whether that was a considerable discount, commit to new features or schedule a senior management call with their executives (to buy time). These actions were taken in the hope that our competitor's management team would turn on their sales staff. It worked!

What transpired was brilliant.  Our competitor had a bad quarter.  When reporting it to Wall Street, their stock dropped dramatically; the analysts demanded action to correct the revenue drop. The board put pressure on the CEO to correct the situation quickly.  

There is a desire to attribute blame to bad things that happen.  Sometimes bad things happen, and there is no one to blame. In this case, they didn't realize that my company had purposely stalled all the deals. Instead, they took the bait and did exactly what we had hoped for: they turned on their people, assigning blame and pressure.

The CEO promptly called the Sales VP and read him the "riot act" which prompted him to call his managers and do the same.  Predictably this flowed down to the field sales force, who were already discouraged about a down quarter. Enormous pressure was put on the sales team to "perform or else!".  Threats never go down very well, especially with a group of employees who are highly mobile within their industry.

This kind of blame attribution was very predictable and had the desired effect we were hoping for.  To demonstrate "action," sales managers began firing underperforming reps which only increased the discouragement amongst the field sales individuals. In fear that they might be next, many remaining reps stopped selling and began looking for other jobs. The net result was a significant exodus of salespeople and a further drop in the next quarter's sales. Wall Street was not impressed and further pressure ensued within the organization. Things kept repeating sending the company into a death spiral. The salespeople were not at fault. Rather than rallying behind their staff, the management team turned on them. Management assigned blame, and issued threats.

Our sales were down, but our management team took the heat that quarter and supported the sales team.  Ironically, we could only afford to do this for one quarter.  Had they stuck it out, they would have been back again, beating us in a large portion of the competitive deals.  Sustaining this type of market pressure for any longer would have sunk our company.  They might have come out of this even stronger than before. Instead, they pursued self-destructive tactics of blame, pressure, and threats.

After the exodus of their sales people and due to the time it takes to hire and make a new person productive, sales floundered, and the company began to falter. Suddenly, we began to win more deals competing against them and grab additional market share, which further exacerbated their situation.  Of course, we advertised their drop in sales to all new potential customers further casting doubt of their viability.

Our competitor went into a ditch of stupidity and soon was gone from the marketplace.  If they had supported their people and stuck by them, the strategy would not have worked, and we would have been the worse for it.

Our management team guessed right.  They accurately predicted that our competitor would succumb to the pressure to assign blame, criticize, and fire sales staff when revenue stalled. The outcome was incredibly predictable. By failing to stand behind their people, the management team destroyed their company.

I'm sure there are many pearls of wisdom to glean from this story, but what always stood out for me was how the urge to assign blame tipped the scale and sent this company to an untimely demise. I remember so vividly how sharp they were as a competitor and how much better their technology was than ours. Because of the desire to assign blame and punish the perceived "under-performers", they destroyed their culture, chased a lot of good people away, and, as a result, put themselves into a death spiral.

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