How a Leader Masters Change
Bill McDermott, CEO of SAP Americas, shows you how to create a sales team of winners By Kim Wright Wiley



In 2002, SAP America was going nowhere. The U.S. and Canadian subsidiary of the German software giant had gone through five CEOs in six years and revenue was growing at less than half the rate of the company’s European division. The market buzz was all about dot-coms out of California, and SAP, whose software focused largely on mainstream functions such as accounting and manufacturing, seemed like a big yawn. But that was before Leo Apotheker, president of customer solutions and operations, and the Executive Board of SAP AG brought in Bill McDermott as CEO of SAP America. McDermott, then 41 years old, joined SAP America in September 2002 and immediately set about creating a sales machine that was second to none. During the next four years, the stock price of SAP would rise from $9.75 to $54. The market cap would increase 400 percent to $55 billion. Employee turnover (after an initial bloodletting) would drop from 40 percent to 10 percent. Now the dot-coms are foundering and SAP has become the leading business brand in the field, racking up record profits year after year.It's a stunning reversal of fortunes. But how did McDermott and his team do it? What makes the SAP Americas' team one of the most successful teams in the region - and how can you get what it's got? Change is only possible when it’s tied to a very specific vision,” says McDermott. His vision was to create a marketing plan that would let his sales team tell the SAP story from the customer’s point of view. “We intended to make every customer become a best-run business,” he says, a goal reflected in SAP’s global advertising slogan, ‘The best-run businesses run SAP.’” In other words, the customer comes first – even in the slogan. Reps don’t talk to their prospects about how great SAP is; instead they talk about how great the prospect’s company can be once they begin running SAP. “Customers don’t like tech talk,” says McDermott. “They don’t care about all the capabilities of your new system, they just want to get something done better, faster, and cheaper. Our marketing focuses on what the customer is trying to accomplish.” The vision is actually even more long-range than that: SAP cares about the customer’s customer. “You have to take the time to understand the customer’s markets and their competition,” says McDermott. “It enables you to not only see what the customer wants now but to also see what the customer is likely to want in the future.” Managing the volume of information necessary to make this vision a reality is a daunting task, but it’s largely what has enabled SAP to quadruple its market value while other software companies have stood still. McDermott is the original turnaround kid. During high school, he worked in a deli and when the owner put it up for sale, McDermott, although still a teenager, offered him a deal. McDermott would borrow the $7,000 purchase price from the owner and if he couldn’t pay the loan off within a year, the owner would get the store back. It was his first exercise in understanding customer needs. Under McDermott’s management, the deli began offering everything that the competitive 7-11 down the street did not – delivery service for senior citizens, weekly credit for blue-collar workers, video games for neighborhood teens. He not only paid off the loan, but used the proceeds from the deli to put himself through college and buy his family a beach house. After successful stints at Xerox, Gartner Group, and Siebel Systems, McDermott was called in to resuscitate SAP’s North American business and he had one question: Why isn’t this thing working? “I spent the first three months figuring that out,” he says. “It’s easy to automatically blame the sales people for not selling, but I looked at the leadership team.” There were 13 direct reports and by the end of his first 100 days, McDermott had replaced 12 of them. “They weren’t bad people,” he says, “but our vision had outgrown their ability to get us there. They were used to selling in terms of the product, but we were in the process of changing from a product culture into a value-to- customer culture. Now it was all about telling the story from the customer’s point of view and if someone wasn’t comfort- able with that shift, they weren’t the right person for the job.” This customer-first vision became like a knife that separated the wheat from the chaff. “At that time, our vision was non-operational,” recalls McDermott. “If people didn’t have the skills or the knowledge to make it real, a lot of them needed to go. I honestly believe that if people don’t get it within a certain length of time, they’re not likely to ever get it.” The surviving employees, along with new people brought in to augment the team, were then put through an aggressive cross-training program. SAP was a tech company full of people uncomfortable with tech, and McDermott was not amused by the irony of employees who were selling software but reluctant to use it themselves. “We needed to make radical changes if we were going to get closer to our customers,” McDermott says, “and all our executives now use our own CRM technology to manage their business in real time.” McDermott established a sales intelligence center where reps could tap into a database and get up to speed on their customers fast. Thus they don’t have to waste the customer’s time – or their own – asking endless questions just to get the background info they need to make a sales pitch. Use of this system isn’t just a nice idea; it’s mandatory. “Our sales professionals go in armed with completely up-to-date intelligence,” McDermott says. “With this technology, there’s no excuse for not knowing your customer’s business and we have no patience with anyone who appears in front of a customer without the facts.” It wasn’t just about getting employees to embrace their own technology; some of them had to embrace a U-Haul as well. McDermott restructured the SAP Americas sales team to match the firm’s 25+ target industries. This required some radical moves of personnel. But if someone had experience with high-tech clients, McDermott was willing to relocate them to California where their expertise would be the most valuable. In order to implement so many changes in such a short time, McDermott had to convince his sales force that these changes were crucial to its success. “Make no mistake,” he says. “Change is tough and people instinctively fight against it. It’s unrealistic to think everybody is going to get on board immediately, and I certainly wasn’t naïve enough to expect people to follow me from day one, especially in a company that had been through so many changes in leadership. The best way to get around the doubters is to get a few faithful disciples in the boat with you and begin rowing. Don’t wait for everyone to agree, just proceed with the work. Once you’ve had a few successes, you start to gain momentum and eventually the doubters will begin to follow you too.” So how do you communicate your own vision and motivate your team? McDermott suggests the following steps. 1. Communicate the reason you need to change. Over-communicate it. “To get people to follow your lead, you have to get them to change their minds,” says McDermott. “They need to see that this change isn’t just some random request you dreamed up, it’s developed around a cause worth fighting for.” 2. Stretch the team. Once McDermott had cut the dead weight, he knew that the people who remained all had the right stuff and were capable of responding to the challenge. “Good leaders constantly stretch people,” he says. “I asked a lot of these people, but they delivered.” 3. Empower each individual. “It’s important to speed up decision making,” says McDermott. “Many companies centralize all power in the corner office and if management has to okay even the most minor decision, it slows down the sales process. Our people are told, ‘If it’s right for the customer, just do it.’” 4. Reward high performers. McDermott’s grandfather was a professional basketball player and his father was a coach. Collectively they taught him that you get better results when you focus on what people are doing right instead of constantly berating them for their weaknesses. “I’m not afraid of paying out compensation,” says McDermott. “Perhaps we even disproportionately reward high performers … but you must create an intensity to win.” The final component to SAP Americas’ winning strategy may be the most unusual: McDermott believes in a team approach to sales. In fact, McDermott believes in it so strongly that even in his position as CEO of SAP Americas, he estimates that he still spends about 70 percent of his time with SAP customers. McDermott is well aware that not every company has such a musketeer-like approach. In many companies, there’s almost antipathy between the different officers. But McDermott believes that a key ingredient for sales success is a respectful relationship between the CEO, CIO, and CSO. “The CEO should realize that the sales leader has a really tough job,” he says. “It’s easy to turn your sales leaders into whipping posts but it takes a smart CEO to realize how smart his CSO must be. Respect builds integrity into the relationship.” The CIO is equally important. “The CEO is all about growth,” says McDermott. “but you can’t grow unless you have the technology to support it.” McDermott believes that “in the most successful companies, marketing and sales work as one. I think of marketing as the air cover while the sales people are the ground troops. Neither can do it without the other, so the effort must be collaborative, with constant communication.” Ideally, there’s also collaboration among members of the sales team. “It’s unrealistic to think a sales professional, no matter how well trained, can handle all the conversations necessary to close all sales,” McDermott says. “Each account that’s worth going after needs a relationship plan, one strategic format that involves the whole team. The sales professional might be the quarterback, but he needs other people to run plays.” McDermott uses the analogy of an elevator and says that you have to know what floor your prospect is on so that you can send a representative from your team who is on the same level. “Each interaction is different. If you need to engage a company CEO to get a sale, then that elevator has to go to the top floor and you need to send your own CEO to meet with him. Figure out who needs to be talking to whom, because it just makes no sense to assume that any one sales professional is capable of having all the conversations necessary to close a large sale. It’s naïve of management to assume he can do this or to blame him if he can’t.” Besides, McDermott loves being in the field. “It’s my chance to find out what people want. If one customer needs something, I know that eventually a dozen more will need it too.” By now you may be thinking, “Sounds great, but my CEO is nothing like McDermott. In fact, I think I may be reporting to one of those guys he fired back in 2002.” The good news is, no matter what your actual title, McDermott believes you’re already your own CEO. He believes that every salesperson is actually running his or her own business within the larger business of their corporation. “Most sales organizations,” McDermott says, “are driven by a single question: ‘Did you make the number?’ But that’s the wrong question. These short-term, narrow kinds of focus are why we see so much fluctuation – a sales team will have a good quarter, then a bad quarter. It makes more sense to use a four-quarter rolling measurement because then you’re looking at the whole pipeline. Your thinking becomes broader and more long-term. When I talk to a sales professional, I look at his business plan for the next 12 months and ask, ‘Jim, do you have everything you need in the pipeline to achieve this goal?’” “If you want to go from a VP of sales to a CEO, just practice in the job you have now,” says McDermott. “Think strategically: What does this customer need? What is he or she likely to need in the future and how can I develop it? Where within the company will I find the necessary support? How can I reach goals not just for this quarter, but for the whole year? In other words, what do I need to be putting into the pipeline now to assure my success six months from now … nine months from now … five years from now? Thinking like a CEO is the first step in ultimately becoming a CEO.” •

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