Valuable CPQ Advice From Industry Expert Frank Sohn
To thrive, companies must manage two precious commodities very carefully: time and budget.
It’s not surprising, therefore, that technology companies are looking for ways to streamline internal process so that staff have more time to spend on value-added tasks rather than administrivia. One area that is ripe for automation is the process of creating quotes. At many technology companies, creating quotes is a long, arduous process that is done mostly done using antiquated spreadsheets that are prone to errors.
Automating complex quoting process, however, is not an easy task. Frank Sohn, President and CEO of Novus CPQ Consulting, has helped startups and Fortune 50 companies automate their quoting process over the last 20 years. He has seen it all.
We recently had the chance to sit down with Sohn and ask him questions about CPQ implementation – why some succeed and why others fail. Here is a summary of our conversation.
What does a successful CPQ implementation look like?
While all global projects have similarities, one needs to account for local nuances. Things that are local to the region like specific interests, culture can significantly impact the success or failure of a project.
Similarly, a successful CPQ implementation requires one to do their due diligence. Three things come to mind:
- Don’t feel rushed to make a decision – take your time and study your environment and foresee and prepare for any consequences.
- Never underestimate the power of learning – getting involved in the implementation process yourself will help you a lot in the long run
- There’s no magic bullet. As with most enterprise projects, there must be cooperation back and forth between the vendor and implementation team to ensure success.
While the expertise of consultants is invaluable, that isn’t always an option. By practicing the aforementioned key points, you will increase the success of your project.
At what point should a company start to consider CPQ technology?
The essence of CPQ lies in the automation of manual processes. It is only a matter of time until companies realize that there is another, much more feasible way to do certain things; Case in point, the implementation of CPQ essentially translates to time, and most importantly, cost saved on producing quotes, approval workflow, and generating and releasing comprehensive reports to the concerned parties. That said, the best time to incorporate CPQ technology is really whenever your current approach to managing business has run its course. When you can’t seem to turn around quotes as fast as, if not faster than, your competitors, when you awaken to all the capabilities you can further enhance if you could free up time that’s currently being consumed by the quoting process, and are really ready to take the leap of faith, it’s time.
Is there such a thing as a wrong time to implement CPQ technology?
Certainly. CPQ impacts many different areas of the implementing company. For instance, a relatively small, 50 person company, cannot afford to slam in a tool, and automate a few steps. A lot of strategizing (business and sales alike) should be in place for the CPQ implementation to be an effective one. Questions like “How do you want to sell” and “Who do you want to sell to?” need to be answered before embarking upon this surge of a revolution.
That said, if you already have a lot of other changes occurring, CPQ can wait. CPQ requires buy-in and active involvement from top-level executives. If there are other company-wide initiatives on the go that are occupying their time, then you may want to wait until to start your CPQ project.
Other factors like budget play a significant role in this situation too; you want the implementation to be done tomorrow, but do you have the right people, enough budget and the commitment that it demands? A maturity assessment will go a long way in supporting this venture.
What would be on your list of must-haves before a company starts implementing CPQ? Is it essential to have things like a defined sales process, stable configurations, proposal escalation process outlined before starting…or does it matter at all?
For the implementation to be successful, analyzing use cases from all kinds of different stakeholders is a great way of gaining perspective on what you want to achieve. These use cases can be your North Star if you will. I recommend you communicate internally with your company’s sales, sales operations, finance, legal, and IT teams, alongside the product management or product engineers, and note down what the challenges are, where the loopholes are today and how your new, advanced system will help make the way out of it.
If you get a list of say 1500 requirements, you must prioritize them, and/or look at hierarchy. – that is,
- Business Requirements. Shortlist 3-5 goals that you really want to achieve, use these as guidance and, most importantly, expand them to use cases as you expand on that.
- Business processes. If yours is a large global organization, every region and each department will have their specific processes. Keeping that in view, you will need to align across processes. Bear in mind that even the preparation process will take considerable time & money; nonetheless, it is suggested you document that process to make sure your resources are being utilized and managed efficiently. In case of mid-size companies (10 people) the process is fairly easy. It is important to note that detail is everything, regardless – new products, regional vs global processes, everything should ideally be mapped out so that all team members have a clear view of what’s happening; and you needn’t use expensive tools for this “awareness” session – free tools like paper can even serve the purpose.
- Key Performance Indicators (KPIs). In order for KPIs to serve the intended, two-fold purpose, which is to help achieve the company’s objectives and effectively communicate within the organization, they must be specific, measurable, attainable, realistic and time-bound. Are your KPIs really reflecting the objectives your company aspires to achieve and are you communicating with your teammates aptly?
- Change Management. Change for any company can be thought of as rites of passage that lead to more optimized functioning. Being aware of where the change originates from and whether you’ll be getting support will enable you to plan ahead and manage change adequately.
From a vendor’s perspective, you wouldn’t want to rock the boat too much, or, in simpler words, you wouldn’t want to make the buyer too nervous. But then how do you get the customer to do the preparation required, without scaring them off from buying it? One of the solutions may be to conduct a 90-minute workshop – in any case; you are free to brainstorm and come forward with practical ways to encourage the customer to prepare themselves.
What is essential to look for when considering a CPQ technology platform?
Since CPQ sits between CRM and ERP/order management systems, which means that you will be sharing data with these platforms. You may start by looking at what ties into platforms ( examples include SAP, Oracle, Salesforce). When evaluating a CPQ platform, taking the following into consideration is good practice :
When integration with ERP & CRM systems is in question, there are many instances where dependencies can affect the process considerably. For example, quotes created in a CPQ tool are assigned to an opportunity in a CRM tool, while ERP systems can provide significant data about product availability, pricing of products/bundles etc. Therefore, the integration capabilities of the CPQ system must be taken into account.
Some companies that have been in business for a long time had rule-based engines, and when a rule-based engine in that when new products were added, rules changed. Today, we have shifted to more constraint-based systems. The two may sound similar but differ significantly.
Constraint-based systems, unlike their rule-based counterparts, allow for comprehensive configured solutions. You get to decide between the two based on your requirements; for instance, if you seek a more straightforward “If A is chosen then B is also selected” approach, traditional rule-based systems should suffice. On the other hand, when configuration guidance is required, constraint-based methods work best.
Price configuration and price optimization are also some essential elements to look for in a CPQ system. While many engines still offer more basic pricing than advanced, the idea remains the same. Different partners – pre-thought, execute logic in CPQ, so the order is same. Dynamic pricing – would give you data – what type of customer you are, location, vertical – i.e., customers like you paid 13.75 – 14.50 for similar products – for other identical window manufacturers as an example.
Determine, in conformity with your requirements, what type of system the CPQ system adopts. Is it an “Assemble to order” production strategy? Where products ordered by customers are produced quickly, using the already manufactured basic parts, and are somewhat configurable? Or is the CPQ system a “Build to order,” one where products are built only after a confirmed order is received.
Ascertain if the performance is up to par. What are some standards maintained by customers similar to you, who have implemented products identical to you as well?
Lastly and most importantly, confirm if the functionalities and features of the engine tool deliver what a customer would want.
What is essential to look for in a CPQ vendor?
There are a few characteristics to look for in a CPQ vendor:
- Consistency. The capability to solve business case today and continue to do so tomorrow. Throughout the life of your business, there will be many different business cases that will surface, a vendor who can solve one today and a different one that may present itself tomorrow are highly desirable.
- Longevity. Will they be around in 3 years from now? Many vendors vanish into thin air after selling – leaving you stranded and so, you should be wary of this when choosing a vendor. A vendor who offers continued support following a sale is the best kind.
- Enterprises. A CPQ vendor who can bring forth optimal solutions for a long time may very well have more than one. Do they address a particular use case, regarding performance, price does it support advanced use cases – instead of cross-selling/upsell logic manually – vs, logic to do that automatically ( whether by ML/AI or something real)…
- Question vendors. Don’t be afraid to question why vendors that are so eager to sell you a solution yet are not willing to listen to address solutions or understand the practical details of the customers’ business.
For Customers, they should be cautious when dealing with vendors who are too small, don’t have references in their vertical, or are going upstream when they haven’t had a similar experience previously. It is also important to acknowledge that significant enterprise deployments are more likely to provide 24/7 support whereas smaller companies will be available 8/5 – weighing the level and degree of support against your requirements can help you make an informed decision.
What does the future hold for CPQ?
Today, we are looking at flashy, more complex and sophisticated things like Artificial Intelligence and Machine Learning. However, this does not disregard the need for fundamental elements of a system that are used daily. Things like how easy or hard it is to do something, and how easy or hard things are to maintain. The reality is often not so simple. Become a specialist, take on a role. If you have a day job, you need to have maintenance closer to the people who know the product, and they need to be able to do that. That’s still often not the case.
What’s more, CPQ tools are now heavily used by sales and channel partners, but these needs are different than end users who seek self-service.
- Sales – are hands-on with the product, and they don’t need help.
- Channel – has some familiarity, and need a bit more hand-holding.
- Web/self-serve – are not well acquainted with the product but are also not using it. Make sure someone doesn’t leave your site in 5 seconds and make sure that they can get what they want. Visualization – good in theory, but can add complexity.
