In 1992, whereas Hewlett Packard (HP) realized a huge success with its RISC-based products, Manuel Diaz, head of HP's Computer Systems Organization (CSO), implemented a new sales approach to capitalise on the company's new market position. In 1994, the strategy turned out to be very profitable as HP's business grew by 40% when the industry-wide growth was just 5%.
In 1996, Diaz notices that its strategy to reach large enterprises could be refined. Indeed, HP remains stuck on the downstream and middle stream businesses of this market segment. At the same time, content value providers and solution-providers position themselves on the highly profitable upstream business. In parallel, Diaz looks for new ways of developing the business and reducing sales and support costs.
Consequently, Diaz undertakes an audit to identify CSO's possible opportunities. The audit reveals the reasons why HP's present sales approach keeps the company away from these lucrative opportunities. Among others, it recommends CSO to change drastically its customer relationship management with its large enterprise customers. Before going on for a new reorganisation, Diaz wants to weigh the costs of implementation of a strategy that would go along with his thoughts of migrating:
*From managing accounts to managing a portfolios of sales opportunities
*From viewing the sales process from the inside out to viewing it from the customer in
*From trying to grow sales by adding sales activities to accelerating sales growth by improving the efficiency and effectiveness of the sales process.
The case has stressed two main problems for CSO:
1.Sales processes and sales support system are lagging present sales strategy.
2.Sales department organisational structure is not designed to look for opportunities.
A.Sales Processes Lag Sales Strategy
The reason of this problem is mainly due to an order processes management issue. As salesmen are considered by clients as a unique point of entry to HP, the order processes are inappropriately managed under sales reps supervision, which divert them from their main sales tasks. Consequently to this issue appear a time management problem and a treadmill feeling in sales work force.
B.Sales Structure Not Designed to Look for Opportunities
The reasons of this problem are:
1.Mismatch between sales organisation and upstream business
Traditionally, HP salesmen are more order takers than business developers. In addition, the compensation plan promotes short-term projects. Repurchase, replacement and expansion projects last between 2 weeks and 1 year. Completing an opportunistic project takes between 2 and 3 years.
2.DMU approach issue
From a customer perspective, the purchasing and IT community wants to keep HP as a hardware vendor. The first ones want to control hardware vendor pricing and the second ones want to keep control of relationships.
3.Perceived image issue
Customers' senior executives do not consider HP brand as value-added supplier.
4.Poor knowledge transfer issue
The customer is frustrated at having to educate different HP application specialists about each new innovation project opportunity.
5.No identification from sales representatives for opportunistic projects
Sales representatives do not screen sales opportunities. Additionally, the "sales opportunity conversion rate", high in repurchase and expansion and low for conversion reflect sales reps difficulties to stimulate sales for undefined needs.
III. HP's CSO Business
A.What Business is CSO In?
Computer Systems Organization (CSO) is a division of HP that designs and manufactures computers, peripherals, system/application software, and networking products. To satisfy customer needs CSO entered into partnerships and acquisition strategies when internal offerings were non existent or too lengthy to develop. CSO further evolved to capitalize on the development...
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