Tuesday, October 4, 2016

Your Eyes Are Bigger Than Your Stomach

My friend, Mike, called me several months ago for some advice. He was working on a potential $200 million outsourcing deal with a large manufacturing company. (Yes, I know, the word “potential” is a spoiler!) The company wanted to reduce operational costs by outsourcing a critical business function to Mike’s company. This was a sole-source deal, which means there was no competition for the work. The deal was Mike’s for the taking!

The work Mike’s company was going to do involved gathering test data and reporting it to a regulatory agency. In the course of the discussions, Mike’s company realized that all companies in this industry had to gather this test data and report it to the same agency.

One of the senior executives in Mike’s company got what he thought was a great idea: let’s use this first client to create an “industry utility,” meaning a service open to other companies in the industry so they could drive down their costs. The conversations with the client quickly escalated to forming a joint venture.

Mike wanted some advice on how to structure the joint venture.

I said, “Mike, no two words will waste more of your time than ‘joint venture.’ In my career I have never seen a joint venture result in the benefits the parties sought, assuming they ever got it formed in the first place.”

Mike said, “No, no, we’re both aligned with this. It’s going to be a billion dollar business!”

“Mike,” I said, “The client asked your company to help them reduce costs. Here’s my advice: Don’t sell the client the deal you want. Sell the client the deal they need. Because even if you’re successful selling them the deal you want, the client will quickly try to find a way to scuttle the deal because they never wanted it in the first place!”

Mike insisted I didn’t understand and hung up.

Needless to say, the deal never came to fruition. The parties got into such a tussle about whose executives would run the joint venture and what the ownership percentages would be that they lost sight of the original deal. In the end, the client’s leadership found another path to cut costs and Mike lost a $200 million deal.

When I was a kid and complained my stomach hurt because I ate too much, my grandmother used to chastise me: “Your eyes are bigger than your stomach.” Sometimes in sales this is true as well. A client asks us for help and, before we know it, we are proposing a program we think will solve all their problems! Our eyes get bigger than what the client can stomach.

The moment we start proposing work that the client didn’t ask for, we have shifted from close advisor to self-interested sales person. And that tinge of self-interest destroys all the trust we worked so long to build. Focus on the deal that helps the client, not the one that helps you. That is how you will build lasting, trusted relationships.

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