Feb 24, 2012

Sales Don’t Grow Businesses, Innovation Does

There’s a prevailing attitude that “sales driven” companies are superior. I know I held that belief for the longest time. But it’s a fallacy. Being sales driven is fine, but without continuous innovation sales are not sustainable.

This idea rang home for me while reading the Steve Jobs biography by Walter Isaacson. Steve Jobs said,

“I have my own theory about why decline happens at companies like IBM or Microsoft. The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of the product becomes less important. The company starts valuing the great salesmen, because they’re the ones who move the needle on revenues, not the product engineers and designers. So the salespeople end up running the company. John Akers at IBM was a smart, eloquent, fantastic salesperson, but he didn’t know anything about product. The same thing happened at Xerox. When the sales guys run the company, the product guys don’t matter so much, and a lot of them just turn off.”

I concur, but the idea is completely contrary to my upbringing and training. I was brought up to admire companies like Xerox and IBM, and the way they developed their sales forces. I grew up listening to Tom Hopkins’ sales training tapes, and reading all the sales books I could get my hands on. I believed all great organizations were sales driven. But the unspoken truth is a great sales force cannot be great without great products and services.

Sales people are sales focused

One of the best examples of a company that was derailed by being too sales driven is Xerox. Xerox became a great company based on its innovations. They fundamentally changed the way we manage and share documents by making it possible to quickly and easily copy documents en masse.

In 1938 Xerox, then known as The Haloid Photographic Company, invented xerography – the first dry photocopying technique. In the 50’s they commercialized the technology, and in 1959 launched the Xerox 914. The 914 took off with business users, and Xerox became a serious player.

But in the late 70’s, Xerox lost sight of its innovation roots. It still had incredible R&D strength, but the company’s management didn’t value it. The leadership was focused on the cash cows, large photocopiers, and they didn’t value the incredible innovations coming out of their PARC research facility. Instead, Xerox’s leadership let the likes of Steve Jobs and Bill Gates take the innovations of the PARC team, and commercialize them into the Macintosh and Windows.

History repeats itself

Xerox is not alone. As Steve Jobs points out, losing sight of innovation can happen to any large, successful brand. As the company matures the sales force appears to have the most immediate impact on the company’s growth, and it’s easy to forget the present sales successes are based on products created 5, 10 or 15 years ago.

We can see the same story playing out at Research In Motion, a better sales force won’t cure RIM’s woes. The only way they’re going to recapture their glory is going back to their roots: innovate, design and launch game-changing products.

Steve Jobs said, “My passion has been to build an enduring company where people were motivated to make great products. Everything else was secondary.” The key line there is “make great products.” This is contrarian. Steve recognized great products build great businesses, not great sales forces.

What’s your take?

(Image Credit: FadderUri)

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