Wednesday Dec 04, 2019
EP13: Mr. Miyagi and the Theory of Market Dominance.
Rocky. The Karate Kid. The Average Joes. Rudy. Underdogs. We love them. They are the people who use their grit combined with their well-coached and newly acquired skills to make waves, cause the odds-makers fits, and run up the score.
When you get funded by a VC and finally have the green light to release the Kraken and launch your vaunted sales machine, there is a temptation to run up the bill on the countless tools available in the sales and marketing stack and forget the meager stack from whence you came.
“Stand back…I have capital and I’m not afraid to use it!”...you’ll think.
- Magic beans to make my phone ring?...I’ll take it!
- A love potion to make my prospects swoon into a demo?...Yes, please!
- A virtual dancing Elvis to get folks to download my white paper?...sure, why not?
You can spend the GDP of a small Caribbean country playing this game and feeling like you also have the perfect Millennial-friendly office, the best cold brew, and the ideal dress code and PTO policy.
But the most sophisticated and successful stack and culture in the world can be had right now if you simply have a tight message that works combined with a mechanism to talk to hundreds of thousands of people a year…AND doing it with a small team of sincere and empathetic salespeople.
But is it realistic?
In this episode I ask Chris if something like this only exists in the lab…or can it be really be seen in the wild.
Welcome to the Market Dominance Guys and this week’s episode: “Mr. Miyagi and the Theory of Market Dominance.”
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The complete transcript of this episode is below:
Chris Beall (02:48):
This what's so weird. This is huge leap. This is why I think it's so interesting. Okay. I have a strategy. My strategy consists of making a list. That's my strategy, right? I make a list. I claim that hypothetically, that that list is self-referencing. If one of them buys, the others are more likely to buy. I don't have evidence of that yet. It's a claim I'm making to myself. It's like any other scientific experiment, I make a claim. I got to set up the experiment. So I set up the experiment by making the list of companies. And I set up my sub experiment by saying, oh yes, and I'm going to try to talk to these people in these companies. I hypothesized that they're important to this process. And then I can start with them.
Now, what? Right, it's really interesting. Now what? I can advertise to them, but that doesn't give me any feedback other than that some of them can advertise another way. What if they're searching? I can buy some ad words and I can do that. And some of them will come to me. I can email them and some of them will come to me. But what I'm trying to do is to drive discovery conversation with which I find out from that individual whether they will take the risk of advancing the discussion to the next step.
So now I get to call the sheep from the goats, the sheep of the socializers who will always take a discussion to the next step because that's what they do. And the goats are the ones who are going to go, "I ain't going there unless I see personal advantage." And the personal advantage must first include the risk. So the risk comes from you lying to me because you know, more than me.
So therefore the thing that must happen is a discovery conversation in which by and large, as the potential buyer exits that conversation, they've now placed significant trust in that particular seller, whether or not they're going to buy now. So you're conditioning the market through sincerity applied at discovering. Your mathematical problem however, isn't discovery because you can't get them into discovery. We're busy and they don't spend their time doing this. So now you have to go, oh, here's my bottleneck. My bottleneck is right above discovery, which is right above the top of my funnel.
So now I have a new trust problem, which is how do I get somebody to take me to a discovery meeting? Oh, well the answer to that turns out to be in the oddest place that nobody ever thought to look, which is the first seven seconds of a cold call. So that's what's so interesting about all of this is you take what is going on in the big world, right?
So what happened to capitalism? It's really interesting. What happened to capitalism is all the machines became free and you can rent them. So the role of capital in society is completely changed. Capital is no longer an interesting question with regard to expansion of your business. It used to be core to buy the second cotton gin, I had to spend the same as I did on the first cotton gin. I've got to know that there's enough demand out there. So that's probably pretty easy, but mainly I have to have the capital. Without the capital, I can't do it. My gross profit flow from my sales is what's going to create the capital because at some point accumulated capital drains off. So to make a sustainable business, the capitalist formula was get a machine, make a thing, whatever the thing is that the people need or companies need or whatever, have a sales force out there, channel and we call it and have the gross profit flow come back and make sure the inventory is disposed of or else my prices will collapse, right?
That's the old formula. That's the formula I was taught in school, in high school. I remember taking a class on whatever they call it, economics. Right? And they showed me the supply demand curves and how capital works. And in 1972, when I took that class, I remember raising my hand saying, "Mr. Kittredge, that model is obsolete. "And he said, "How could this model be obsolete? This is how our society works." And I said, "That model is obsolete." And I told them this in '72. I said because the math says that the cost of making new products is going to go down. The cost of making the machines that make products is going to go down. And the driver for that is the thing I just learned how to do over the last four years, which is to build software.
When the experts say software is eating the world, everybody gets this wrong and they go, "Oh, software's eating the world. That means we're going to use more software products." It's not true at all. Software is essential to the making of all things that we use, including software. It's irrelevant that we use software, that we sell software to consumers use it is irrelevant. That doesn't make any difference. It makes making things cheaper and cheaper because it's software that ultimately robotized as the economy. It robotizes first certain jobs like writing something down on a piece of paper, sending it to somebody, sending the memo. Remember we used to have typing pools? The typing pools all went away. These are huge, huge, huge numbers of employees who did things that are now done by software.
Software drives costs, incremental costs of making new products, new products. The copy of a product is so cheap. Now we don't even think about it, right? Back in the day, the copy of the product counted. The classic P and L meant something. Cost of goods was the cost of my inputs, and the cost of the labor to make the thing. Cost of the labor has gone down because of software. The cost of the goods has gone down because of somebody else's software.
It ripples through the economy. So now we're left with the only thing that counts as markets. The only thing that counts as markets and the biggest changes you can't buy them anymore. You used to be able to buy markets and now you can't buy them because you're competing with money, and money is more liquid than your damn corporation. This is why the first seven seconds of a cold call are the essence of executing corporate strategy. And the message that goes in the next 27 seconds is the most likely point where you're going to fail and they process or the machine that's in scarce supply is the sincere sales person. And that's the new economy.
That's why I want to write this book. That's what this book is about. It's not about salespeople getting better. The reason that we're doing this company is we've stumbled upon the mechanism for tearing the lid off the top of the funnel. We actually don't think that solves the problem. We think that's today's problem. Today's problem is getting a flow of discovery meetings. Tomorrow's problem is holding great discovery meetings. That condition the market in your favor for dominance
Corey Frank (09:51):
Is the natural progression of ConnectAndSell, right? From a one dimensional product company that performs a service that's advantageous to the market. You've repositioned the messaging, the big idea to what ConnectAndSel really is. That it seems like this natural offshoot is that there is going to be a shortage of sincere sales people than that is going to beget another industry of all types of sales training, or maybe even instead of a typing pool, I have a sincere salesperson pools. Right? And it's kind of the natural trend line for great, okay, I love it. I agree with you. I want to dominate my market. I don't have the right recruiters. I don't have the right people to hire these people. You're given me the screenplays to say, but I don't have the Stella Adler's to coach and put me on stage and slap me around to get me there. How do you get me there?
Chris Beall (11:01):
Exactly. Exactly. How do you hire the right people who have the right characteristics inside of ... So how people are raised becomes really important. What kinds of places can you go that have filtered for sincerity? So we have a company in Northern California we work with called Five 11 Enterprises. And what they do is they hire graduates out of Simpson College and Bethel University or College, whatever it's called. So their strategy, their purpose was to provide jobs for people that were like themselves. That is people whose spiritual inclinations were such that they went to a school whose purpose was to allow them to conduct a spiritual life professionally, somehow, right? So that's a sincerity filter because those schools don't attract insincere people by and large, and they filtered them out along the way through their program. That's not their primary intention. It's a side effect of how they're run, right?
It's a core to their mission, but not core to their practice, the filter. So you get these folks who are coming out of these schools who love the area it turns out. So you have a reason to aggregate them. They like the Mount Shasta area. They like Redding. There is not a lot of jobs there for these kinds of people anyway. What are the jobs going to be? Right? It's kind of interesting. So they could go to work in the medical field perhaps, or something like that. There are always jobs there. But what if they could learn sales? And then what if we could amp them up by a factor of 10? So this phrase is a little bit funny and it sounds flip, but it's not. It's actually very sincere, which is we work with Five 11 Enterprise to provide packaged sincerity on steroids.
So they package the sincerity in the form of a salesperson training, and a place to sit, great support that is support that's appropriate to a sincere person. And then we amp them up by a factor of 10. We turn each one into 10 people, and then we manage them against the standard since. Drift, right? And drift is all about seeking comfort in place of performance. So the coaching is very simple, but it's still rigorous coaching. We have to listen carefully and they have to be held to a high standard. But interestingly, the high standard is the standard of sincerity and precision, not what you normally do with salespeople. Normally with a salesperson you say, "Give me somebody with some good sales DNA, a good track record, the Rolodex, and here's your territory," right? But that's the capitalist approach, which is no longer relevant. Not because there's anything wrong with capitalism. It's just burned out because you don't need the capital anymore.
Chris Beall (14:40):
So what you need is you need a pace of taking a market and you need the insurance policy of knowing you're going to dominate it. As soon as you know you're going to dominate one market, you have capital. Oddly enough, it frees up resources to now go after another market. And all this stuff comes together in this interesting way. That's what's going to be kind of hard about this book, but I think is exciting. So when I deliver this to people now in a simple form, right? But it's still a whole thing. Starting from here's the change that you were seeing out there. The change is it's hard to buy companies now to execute strategy. You can put a strategy down on a piece of paper, but there's a new sheriff in town called private equity. And he doesn't want you to have his company that he wants to buy and he's going to bid it up.
And by the way his job is simpler than yours. You've got to integrate, he doesn't have to integrate. So he's going to, oh, you're going to get an overpriced product and it's going to have higher risk. So, okay. How do I stay in business? Because dominating markets is not a matter of desire. It's a matter of necessity. If you don't dominate one, you will always go out of business. Mathematically you will always go out of business. Why?
Because someone else will come along and dominate all of the markets that you're playing. One will dominate one, one will dominate another. You're playing in five markets. You think and I get 16% share, 22% share, 5% share, 9% share and 18. I'm doing so good, right? And you're counting dollars with dollars are coming in. And you're looking at the gross profits. Gross profits are good. Right? You're looking at your growth rate. Oh, I'm doing okay in this one. I'm growing 20% in this one. I'm growing 6%. But mathematically what's going to happen is if you're in five markets, one, two, three, four, up to five companies are going to come in eventually and dominate that market through a simple program of talking to everybody.
Corey Frank (16:34):
Yeah. Right. And today they talk with everybody in lieu of ConnectAndSell or a tool like that, they're going to do it by using social media to dominate the conversation. Whoever has the greatest noise, which has to be done.
Chris Beall (16:50):
It can't be done because it's noise. It can't be done.
Corey Frank (16:52):
But this is a lot like Ockham's razor theory of markets, because you're going to the simplest half that not the most obvious path for so many folks is where does truly the consumer have this catalyst, this initial big bang or spark of being introduced to your company of potentially step one, verse one chapter, one of your company is in that first seven seconds. It's not way back in the origin story of the product. It's not in the R and D meetings. It's not in the marketing or the logo or anything like that. Right? It really is this Ockham about what's standing right in front of you.
And that's very disconcerting I would imagine for the traditional market understanding. It's very disconcerting for a marketing person, a product marketing person, an R and D person, hell it may even be disconcerting for the sales person here. Right, because wait, I thought my job was just to make my nuts and then maybe get a firm handshake. And now you're telling me that the company's survival, it's very survival, it's binary. It's either you dominate or you're dead. I don't like this binary world. I like this gray world instead. And that's what we're talking about here.
Chris Beall (18:17):
Yeah. That's what's so interesting. The shift happened really fast and so we have a front row seat at ConnectAndSell that no one else has. We get to watch companies actually doing it, and they won't talk about it, but we get to watch it. That was my dream with you guys at Stormwind. If we had done that step-by-step and stuck together and hadn't had that moment of doubt that Tom had then ended up in kind of going away and coming back. And if we had just said, let's reduce that top of funnel force by 70% and let's change their comp so that sincerity is going to be in play a hundred percent of the time. Let's do the whole thing, right? Would have simply eaten that market whole. Nobody would have a little to stand up. And it would have been simple step-by-step. It would have taken approximately three years to full domination.
And it would've taken approximately 18 months to certainty. And its certainty could have said, you know what? We could be worth four times as much if we demonstrate we can dominate a second bar. So let's do that because we know how to make products like that. Right? I mean, how hard was it to make a new product?
Corey Frank (19:28):
Chris Beall (19:30):
But dominating market? Very hard. Having shown you can dominate one, if we dominated one together, we would have been able to easily identify another. You already had like nine of them in your head. Just pick one, make a list, take the best, the best four people. And in four weeks we wouldn't just have knowledge, we would have had the beginning of dominance, and we'd take that dominant cycle down from three years and then maybe two years. But the time to certainty would have gone down to six months. And with a time to certainty on six months, that's the turns on your capital. That's what's changed. The financial equation has changed the turns on your capital. When do I get all my capital back? Right?
Corey Frank (20:11):
Chris Beall (20:12):
It depends on only your capital is now market domination is its markets. That's what my capital is, not money anymore. So what's the turn? Well, the turn starts at three years because that's the replacement cycle for products. For all products it starts at three years. Your time to certainty, when you look at the math, is you're at about 85, 90% certainty if you're following your dominance plan and the numbers are working. If that's all happening, then at 18 months, halfway through that cycle, you're sure that you're going to dominate that market. You're only at about 18 to 20% of market share, but doesn't make any difference because you've talked to everybody. You condition the market in your favor right? It's a mopping up action.
So you're foolish to spend management attention on a mopping up action. Management attention should go where net new value is being created and net new value is created in the next market. So I've got customers doing this and we can't put them in the book by name because they won't agree, but doing this right now [inaudible 00:21:18] market. And no one will ever be able to compete with them and no one knows what's happening. And they're very secretive. They hired a new guy. He comes in and he's at least got a great background and used to be at inside sales, all this stuff. And he says to his boss, "We got to go talk about this."
He says, "If you ever breathe one word of what we're doing with Connect and Sell, you will be fired." He goes, "Oh, oh." And then he comes to me and he says, "What should our stack be?" I said, "You have the most sophisticated stack in the world right now. You have a message that works. You have people who talk to 300,000 people a year, 11 of them. You've won. What you need to do is pick another market. Don't worry about your damn stack."
And so we fought over this for quite a while, for quite a while and you know, like three months, right? And he's going, "But I need this, I need this, I need this. I need this." Dude. And he says, "Yes, I get that it's working, but it could be working better." So it doesn't make any difference. It doesn't make any difference. If I'm going to win every fight. Does it make any difference if I win in the first round, the second round or the third round, if I win every single one? Who cares, right? I'm going to be undefeated.
Corey Frank (22:27):
So the competition's going to wake up one morning and realized that they can't catch.
Corey Frank (22:32):
Hopping over, game over. They've talked to everybody and they don't even sell to them. Their strategy is this, it's literally their strategy. Talk to everybody. That's their strategy. And they simply talk to everybody so they don't push it. They just talk to everybody. They kill their numbers. Everybody's talks about somebody's new business plans. How are they doing? These guys literally blow their plan out of the water every quarter. And yet they don't try to sell the product. They just talk to everybody.
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