At times not losing is as important as winning

At times not losing is as important as winning.

Customer Validation
E.piphany was an 11-month-old startup with 31 people and on fire. We had closed four $100,000 deals for our customer relationship management software.

Joe Dinucci, our VP of Sales, was hot on the trail of our next big order. He had just demo’d our product to his friend, the CFO of Autodesk. After seeing the demo, the CFO walked Joe over to the office of Autodesk’s VP of sales, and said to her, “I think this product might solve your sales reporting problem.”

After a demo she agreed it would.

Joe came back to our company excited. If we won the Autodesk account it could be worth half a million dollars or more.

They Have A Problem and Know It
At the time Autodesk’s sales organization was frustrated with their IT department. It took weeks or months for Sales to get financial, sales results and customer reports from IT. Autodesk’s VP of Sales fit the profile of a earlyvangelist: she understood she had a pressing problem (couldn’t get timely data needed to forecast sales), she was searching for a solution (beating up the Autodesk CIO on a weekly basis to solve her problem), she had a timetable for a solution (now) and her company had committed budget dollars to solve this problem (they spend anything to stop missing forecasts.)

A Match Made in Heaven
For the next several weeks, the entire E.piphany engineering department worked with Autodesk’s sales operation team to build a prototype using real Autodesk data. Joe made a compelling ROI (Return On Investment) presentation to the VP of Sales and the CFO. E.piphany and Autodesk seemed like a match made in heaven and it looked like we had a $500,000 deal that could close in weeks.

Not quite.

The CIO
The CFO casually mentioned that as IT would install and maintain the system, they would have to recommend and sign off on an E.piphany purchase. As the CIO worked for the CFO, Joe paid what he thought was a courtesy call on Autodesk’s CIO.

The CIO didn’t say much in the presentation (warning, warning) and he passed Joe on to his manager of data warehouse development. What Joe didn’t know was that months ago, this IT group has been tasked to solve Sales’ reporting problems and was struggling with the complexity and difficulty of extracting data from SAP.

Joe was aware of the tense history between Autodesk sales and its IT department, but given how happy the VP of Sales was with E.piphany’s prototypes plus Joe’s personal relationship with the CFO, he didn’t see this as a serious obstacle. Joe believed the IT organization had nothing but technical piece parts to compete with E.piphany’s complete solution. Given E.piphany had a vastly superior solution, Joe believed there was no logical way they could recommend to the CIO to deploy anything else but E.piphany.

Wrong.

The IT Revolt
Unbeknownst to Joe a revolt was brewing in Autodesk’s IT organization. “Sales keeps asking for all these reports and now they are telling us what application to buy?  If we deploy E.piphany’s entire solution, we’ll all be out of jobs. But if we recommend software tools from another startup, we could say we’re solving the needs of the Sales VP and still keep our jobs.“

Late in the afternoon, Joe got a call from a friend in Autodesk’s IT department warning that they were give the order to another startup. And the CIO would approve the recommendation and pass this to his boss, the CFO, the next day.

We’re Going to Lose
Joe arrived in my office, his face making it clear he brought bad news. E.piphany was now about to lose a half million-dollar Autodesk sale. Joe looked at his shoes while he muttered his frustrations with internal Autodesk politics.

We had a long discussion about the consequences if we lost. It was one thing for a startup to lose to a large company like Oracle or IBM. But to lose the sale to another startup with an inferior product would have been psychologically devastating to our little startup. E.piphany’s product development team had spent weeks inside the account, and they believed the deal was all but won. The competitor would trumpet the sales win far and wide and use the momentum to get more sales.

We couldn’t afford to lose this sale. What could we do?

The Third Way
It struck me that there might be more than two outcomes.Sales had defined the problem as a win or lose situation. But what if we added a third choice?  What if we formally, publicly and noisily withdrew from the account? The worst case was that we could tell our engineering team that we should have won but the game was rigged. While we certainly wouldn’t win the business, withdrawing would solve the more emotionally explosive issue of losing. (And In the back of my mind, I believed this third way had a chance of giving us the winning hand.)

At first Joe hated the idea. Like every great sales guy, he was eternally optimistic about the outcome. However, I wasn’t in the mood to put the company’s future at risk on the testosterone levels of our sales guy. Withdrawing by claiming that Autodesk’s IT staff had already decided that it was “any solution but ours” was making the best of a deteriorating sales situation.

Joe called his friend the CFO, waiting until after 5pm, when he was sure he wasn’t in his office, and left him a message: “Thanks for introducing us to the VP of Sales and your technical staff. We really appreciate the opportunity to work with you. Unfortunately it looks like this deal isn’t going to happen. You have a bunch of smart guys working for you, but they are determined to make sure that the status quo won’t change. We have limited resources and can’t continue to give demos and hold meetings when the outcome is predetermined. My guess is we’ll be back in six to nine months when the VP of Sales is still unhappy. I’m going to call her and let her know that we can’t put in the system that she wanted, but I thought I’d check-in with you first. Thanks again for the opportunity.”

The “Take Away” Gambit
This is known as the “take-away” gambit. I believed that by pulling the deal away, there was at least a 50% chance the CFO would do what I knew he didn’t want to – go to his CIO and help him make the “right” decision. I understood that a potential downside consequence of this maneuver was an uncooperative IT organization when we tried to install the product, but by then their check would be in the bank, and I had a plan to win them over.

Joe was concerned that we had just lost the account, but he made the call and left the message.

Two hours later Joe got a call back from the CFO who said,, “Wait, wait! Don’t pull out. Why don’t you come up and meet with me tomorrow morning. I’ve chatted with my staff and we’re now ready for a contract proposal.”

Autodesk became our third paying customer. Over the next year they paid us over $1million for our software.

After a full-court charm offensive, the IT person who wanted anyone but us became our biggest advocate. She keynoted our first user conference.

Lessons Learned

  • In complex B-to-B sales, multiple “Yes” votes are required to get an order.
  • A single “No” can kill the deal.
  • Understanding the saboteurs in a complex sale is as important as understanding the recommenders and influencers
  • We needed a selling strategy that took all of this into account.
  • In a startup not losing is sometimes more important than winning.

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24 Responses

  1. You can not rewind time and try another gambit and forward it to prove this.

  2. Thanks for the article Steve… Were you ever concerned that the Autodesk leadership would recognize the ‘take-away’ gambit?

    • No. It really wasn’t a gambit for them. I was serious and prepared to do this.
      A comment below said it best, “the best bluff is no bluff.”

  3. Brilliant post, Steve! Thank you for such a narrow, deep focused, first hand experience report – it just came down into my own OS as an archive, extracted itself while reading and installed itself flawlessly. Priceless.

    Best,

    Linas:)

  4. Great post Steve. B2B sales require a good understanding of the decision makers and cheerleaders at a company. Looking for your white knight is extremely important in winning the sale. Thanks for the insight and detail on this “case study.”

  5. Great story, gives insight into your strategic thinking in a dire situation. “Full court-charm” I could use some of this…I always seem to represent change to people and we all know how people like change.

    I wonder if you recall your alternate plan if the gambit failed? What was your instinct telling you when you came up with the Gambit, or while you had doubt of it working?

  6. Cool thinking Steve in a tense situation. It takes some altitude in a startup to be able to step back and come up with the third, and often best solution.

  7. How dare you make me enjoy reading a sales story!

  8. This is a great story, and it’s essentially accurate, and most important, the lessons learned are valid. I would take issue that the sale was riding on my testosterone level. Sales guys who run solely on testosterone wait until it’s too late to involve their managers; and they don’t listen to marketing guys’ advice.

    We got this deal because a set of really smart and tenacious people adapted and never surrendered. It was a memorable campaign. The take away gambit is brilliant. Thanks Steve!

  9. Hi Steve:
    There are some customers you do not want because they cost you too much. This rings a bell since once I was a CEO also of a small company and one of our groups was developing software for a major auto manufacturer. Like the rest of the industry in the US, they were notorious for setting harsh deadlines and then not being ready to accept delivery,etc. They were highy offended when we called them up finally and said they were costing us so much that we would no longer afford to work with them.

  10. Interesting story. No rewind needed.
    It was not a gambit. No one lost; all
    of the participants were better off at
    the end. Just ask the CFO and IT.

  11. Your only bluff is not to bluff. Great story.

  12. It’s not the customers you miss that sink you. Its the potential customers and customers that make you spend way too much resources that do.

  13. Steve,

    You again hit the nail on the head here. In selling to a big company account, it only takes one person to kill a deal. Because employees in big companies are not awarded for taking risks, NO votes can pop out all over the place.

    The overhang of risk-averse people is present in every one of these big company/small company interactions. Start-up companies are about taking risks (just like you did by turning the tables on Autodesk) and big companies are about not taking risks because no one wants to lose their job (like the CIO in your story). There is huge tension around this type of intersection. It can only be broken by bold moves and constant communication.

    Regards,

    Tom Baruch

    Partner

    formation | 8

    106 Lincoln Boulevard

    Pacific Union Bldg, Suite 212

    San Francisco, California 94129

  14. Great article. Would love to an see an article on how you won the I.T. department after that.

  15. Well done. As a startup. Can completely understand the type of moral loss could be had from losing a potential “sure thing” as we’ve had this happen before..l nice job on creating that urgency to get them reengaged.

  16. Love this story!

  17. [...] At times not losing is as important as winning « Steve Blank. Share this:StumbleUponDiggRedditLike this:LikeBe the first to like [...]

  18. I’d be interested what you specifically did to win over the IT person. You end with, “After a full-court charm offensive,…” an I’d love to know what that entailed. Hanks for the great story. Takes a ton of guts to walk from that big deal.

  19. [...] At times not losing is as important as winning Customer customer relationship management software Customer Validation Démo fire Joe Dinucci [...]

  20. [...] Blank on the challenges of closing a complex B2B sale with multiple decision influencers; Mark Suster of GRP Partners on the same [...]

  21. R$ 1MM sales for early adopters will always be a huge fight for startups. Thanks for the tips.

  22. Did you call the VP of Sales after the call to the CFO?

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