Successful Solution Selling: Magic or Management?Published: August 10, 2005 in Knowledge@Emory
Although he calls himself a “rookie professor,” the endeavors of Dimitri Kapelianis to present real world business people to his classroom are the moves of a seasoned professional. An assistant professor of marketing at Emory University’s Goizueta Business School, Kapelianis teaches Sales and Business Development. His teaching is closely aligned with his research, which focuses on how salespeople seek information and use knowledge to win complex sales opportunities and drive sales performance.
In order to support his research program and to reinforce the relevance of what he teaches, Kapelianis brings in experts to speak with his students. Earlier this year, he hosted a panel discussion focused on sales and sales management. The panelists included Tom Moore, a senior sales consultant with the Zyman Group; Philip Seagraves, director of business development with Lathem Time Corporation; Rick Page, Chairman, CEO and founder of The Complex Sale, Inc.; and Ken Cornelius, President & CEO of Siemens One, the wholly-owned sales and marketing subsidiary of Siemens Corporation.
In a follow-up interview with Siemens One’s Ken Cornelius, Kapelianis explored in-depth the functions and organizational set up of Siemens, a global technology and infrastructure company. Few companies can match Siemens’ portfolio of technologies, systems and services. The company serves customers in 192 countries, and spends more than $6 billion annually on R&D including $800 million in the U.S. alone in the areas of medical, power, automation and control, transportation, information and communications, lighting, building technologies and water technologies. Cornelius explained that, before the development of Siemens One in 2001, the company wrestled with the issue of multiple sales teams calling on the same customer, and cross-selling opportunities for the 13 business units that were difficult to capture. Because of the breadth of technology Siemens brings to the market, customer relationships that had already been established by one sales group could be leveraged to help uncover opportunities for other units—and ultimately to provide the customer with better, more integrated solutions. The Siemens One organization focuses on key accounts in the United States and select vertical markets in private and public sectors.
In this interview, Cornelius, who develops strategies to help the Siemens One team identify the opportunities that involve multiple Siemens Operating Companies, provided unique insight into expertise bundling in the multi-unit sales force.
Kapelianis: What role does Siemens One play in Siemens?
Cornelius: Siemens One is the integration arm for the 13 different major operating companies that Siemens operates in the United States. In this country, each operating company is a separate legal entity and there are solutions that we can bring to customers that involve combining a variety of our technologies and products.
The best example, or deepest penetration into a market, is in healthcare, where we have the diagnostic equipment, imaging technology, software, workflow engines, building technologies, lighting and the power distribution technology to run a hospital. What we do is look at vertical markets or large customers and say, ‘is there a competitive advantage in putting the different Siemens offerings together.’ Then we can take a holistic approach. For instance, for vertical market bundling –healthcare, airports – we can also bundle security, communications, and power generation.
Kapelianis: Can you give us an example of a vertical application?
Cornelius: A good example is the digital hospital concept: you could call for an appointment for an ultrasound from your home and that information would get routed to the proper person for the test. When you drive into the hospital parking lot and slide a smart card in the system, it alerts everyone who needs to know that you are there. When you walk in, all your records are up and the ultrasound room is ready for you. In the last several years all of the Siemens business units [began employing] the same software platform, so integration is easy.
A solution like smart cards can go across vertical markets. We concentrate on areas where we have some process expertise—healthcare, airports, power generation and physical distribution centers are areas where we have high vertical bundling opportunity.
Kapelianis: How is the sales force structured?
Cornelius: In Siemens One, a single business developer coordinates multiple sales people from the different divisions for a specific project or account in a vertical market or in a particular region. They would also have a team of operating company field people [selected] to support the opportunity. From a sales standpoint, these teams don’t have a continuous life. Once the sale is made, Siemens still provides a single point-of-contact so the customer continues to benefit from our coordinated approach, but the sales team, itself, disperses.
This differs from account management in that the Siemens One team is very opportunity focused. Account management is the way to go to develop relationships, and it takes a long time. [Account Managers] focus on a customer. The Siemens One sales team focuses a variety of technologies or products on a specific opportunity.
Kapelianis: What was the impetus for Siemens to move toward solutions?
Cornelius: During the late 1990s, the Siemens AG CEO, Dr. Heinrich von Pierer, was being pushed by Wall Street analysts to sell off pieces of the company and focus solely on telecommunications. They said there was no value in the conglomerate structure and that Siemens should be a ‘pure play’ by selling the company’s Medical and Power Generation divisions. Fortunately, Dr. von Pierer said no, and embarked on a strategy to increase our stake in each area, strengthening two of the most successful business units for Siemens. Our portfolio of solutions has become a strength. Every acquisition and investment we make has to be meaningful to the organization and our customers—especially those we already do business with.
Back when we started Siemens One in 2001, we did an analysis and found that one third of our business came from our top 160 accounts. When we looked carefully at them, we found that 154 of those account [relationships] were held by single Siemens Operating Companies. Only six of them had any crossover.
We decided to concentrate on accounts where somebody in our company had a relationship and could bring in others; or [look at] vertical markets where we had the deep process knowledge or owned the key technology, such as the medical business.
Siemens is in a unique position; we are one of a handful of companies that can actually do this (bundle solutions across a broad range of technologies). We can deliver major savings [and a compelling] value proposition.
Kapelianis: How do you guard against customers demanding discounts for bundling an entire solution with Siemens?
Cornelius: Our customers understand that the value we bring is not through ‘discounts’ but through cost efficiencies derived from centralized project coordination and bundled technologies. For example, when we won the contract to put in all of the electronics at Reliant Stadium, we saved the customer $1 million in start-up costs.
Having said that, we understand that discounts are the first thing many customers consider. So we do spend time educating prospective customers about the financial benefits of working with Siemens and our own internal structure. For example, there is no margin stacking. We are a cost center for the company, so we pass back all profit and sales. Nothing is kept. We pass the market level margins back to our operating companies and we’re able to give market level prices, individual prices, to the customer without having to mark anything up.
For example, in healthcare, we can show how doing things a certain way in a hospital – so many beds, so many procedures, implementing certain technologies – will save them money. We are able to put the value propositions of each [business unit] together in one program and say, ‘If you [integrate] these areas, and buy everything from Siemens, you can gain $18 million of annual operational savings.’ That gets their attention.
Kapelianis: How do you manage the RFP process?
Cornelius: The key is to get in early in the opportunity cycle so we can influence the RFP. If it’s coming out, it’s often too late. For instance, one of our account managers recently heard about a switchgear opportunity for an automotive factory’s power distribution. We got in and were able to differentiate ourselves from the other guys who were offering [only] switchgear by doing a Siemens One presentation and showing all of our capabilities.
If you look at the whole company, we’re a pretty good partner to have. We’re not just a big company that makes a lot of stuff—we’re financially stable. We have the best global support structure of any company. And we spend more money on R&D so we can offer our customers the latest technology. If you want to build the same factory in the United States, India and Latin America, there’s only one company that can do that realistically. The financial stability means that we can see problems through.
The size of the opportunity is important. If it’s not critical enough to have executive level attention…if the operating savings potential is not substantial, it is often not a good [opportunity] for us.
Kapelianis: Can you explain how far you go with expertise bundling? For instance, do you include services and maintenance?
Cornelius: If it’s a critical process, like a power company building a new power plant, or a healthcare company building a new hospital, that’s an opportunity for us. We’ll take over for a steel mill or paper mill, where it’s our process and say we’ll run this process for you and share in the savings. Those are very specific processes that we have. We’ll outsource the IT functions and anything [that can be] consolidated into shared services.
One of our horizontal solutions is to go into a customer and say we’ll outsource maintenance of their technical machinery, and their IT and security. If you put any one of those individual opportunities on a piece of paper, it has its own value. But group them and it adds up to about 5 to 6 percent of their right column expenses. It gets real interesting to see. The first couple of meetings with C-level folks, it might be, ‘So-what? So if we do that, what good is it?’ You have to have somewhere in the $10 million savings range to make it a significant [value proposition] for a Fortune 500 company. I tell our people we need a customer who has a dictator with a vision. Our best customer is someone who can make a decision and run it through the system.
Kapelianis: For a sales person, solution selling takes much longer. How do you compensate the Siemens One and operating company sales people for one of these deals?
Cornelius: There are a couple of challenges: one is that they (the sales people) still have their normal job—so our people (Siemens One) take on the orchestration of the deal to make sure to get the follow-up. We also navigate Siemens for them. We have 70,000 people in the U.S. and we work to identify and bring the right resources into the deal. We take the administrative and project management off of their plate.
Both sales teams are compensated. There is a Siemens One incentive for our own people—they are very motivated. The operating company sales people [also gain] other benefits, namely, it is interesting and exciting to be involved in a large sale, as they often get to deal with a different [higher level] level within their account.
Kapelianis: Can you give an example of a major win? How did you organize, and what was the outcome?
Cornelius: After 9/11, Congress passed a law mandating that checked baggage moving through the 429 airports around the country and the territories would need to be inspected for explosives. The Transportation Security Administration (TSA) was under a tight deadline to implement the protective screening and put the bid out to all their normal major contractors—Lockheed, EDS, Northrop.
The Department of Transportation was familiar with Siemens from our projects building light rail systems in Portland, San Diego, Sacramento, etc. Because of our relationship there, they knew us as a big company that might be able to provide a solution, and our reps called Siemens One and asked if we could handle the job. The customer needed stability and financial viability, and we could give them both. This is exactly the type of opportunity that Siemens is able to use all of its strengths to deliver an end-to-end solution to the customer.
Because of the timing, we had to use the existing technology in many areas, but we looked at the specs and found that the explosive detection machines were roughly the same as our CT scanners. Many places needed the machines installed and at two to three tons each, they needed structural, electrical and logistics work that we could implement. Department of Transportation Secretary Norman Mineta thought it was a Herculean task, and even though we were the highest out of six bidders, we ended up getting it because they felt we were the only ones who could actually pull it off.
The machines had to be made and delivered in November, and up and working by December. Basically, overnight we were able to deploy another 1,000 people in the field to get them up and running. We teamed with Boeing because they were familiar with working with government contracts and had training centers in all the airports. They arranged to train 36,000 people. We were able to get all the airports protected. Recently the contract to continue service and maintain the equipment was extended for another five years.