Pipeline Management | Avoid the Matrjoschka Effect!

Timing in Sales is difficult to manage, especially when teams are heads down closing their deals today. It´s likely they miss to identify and qualify required opportunities to feed them tomorrow.

Personally, it reminds me of the response we get when calling into a teenager bedroom - good intend but no sense of urgency!

The formal concept to manage this challenge in business is called Sales Pipeline Management. It´s bridging today´s deal-by-deal business execution with the projected business attainment on an opportunity-by-opportunity basis. While, it is the shared formal concept for all stakeholders, it allows for different perspectives:​

• Sellers want to know if the business volume will ultimately make them hit their target.
• Management probes into deal health, velocity and win-rate to understand the solidity of the managed business.
• Leaders expect balanced individual- / team-contribution and want to see the pipeline develop towards profitability and along the strategic direction.

While there are plenty of publications on Pipeline Management, I would like to share some perspective, why Quality must beat Quantity!

Ideally, all your opportunities convert to business and contribute to the goal attainment. However, reality is very different. Deals are slipping into future quarters, they close smaller than expected or simply are lost.

Let me introduce some commonly used concepts to address the lack of control on the pipeline:

• The more the merrier: Trying to compensate the potential losses through incremental opportunity.
• Inspect what you expect: Working on the Information Inefficiency, believing that more information leads to more insight and more control.
• Coaching till it hurts: Coaching sellers and teams along the sales process to make better situational decisions and overall benefit deal sizes.

In essence, you can either further mobilize your demand generation engine to put more deals into the pipeline (increase Quantity) or lose less from it (increase WinRate) - either way, you will need to prepare for the unexpected. Important to keep in mind that both approaches are limited by available sales capacity of the organization.

As far as the laws of mathematics refer to reality, they are not certain; and as far as they are certain, they do not refer to reality.
Albert Einstein

The Spreadsheet Acrobats will tell you that the required future Pipeline Threshold to hit your future sales target ("pipeline coverage") will be the future target to go plus an % uplift. The amount of required % uplift is defined by the % amount of historically lost deals. In other words, we set the pipeline coverage goal high enough so, we -hopefully- cater for potential future losses.

The formula is simple and compelling, BUT, it is based on at least three critical assumptions:

1. History Repeating: The pipeline coverage formula uses historic facts to anticipate the need for the future. So, be aware that the rear mirror might give you a wrong impression on the direction of the road ahead - it is very unlikely that moving forward the circumstances for your business will be the same again.
2. Statistic Probability: The pipeline coverage formula uses statistical assumptions in a discrete business. Therefore, it will not work on small number of deals, significantly varying deal sizes or changing likelihood to succeed.
3. Sales Capacity: No matter how many deals you deem appropriate or how much effort you are willing to put into coaching, your cost of sales sets the practical limit.

Pipeline Coverage Expectations - The Matrjoschka Effect

The mathematical approach alone is not getting you on the safe side. You end up in an unhealthy race fighting lost opportunities with more demand generation. However, the more pipeline volume we expect, the more difficult it is to find sufficient deals and the harder it gets to reach a similar success rate again. Fighting the tendency of dropping WinRates through incremental volume requirements we can call the Matryoshka Effect in Pipeline Coverage Requirements - the Pipeline Coverage targets keep going up while WinRates are trending downwards.

In reality, many leaders still prefer to drive the hard fact based, quantitative approach over qualitative coaching. The reason is simple: It´s easier to scale pipeline generation within a sales organization (all hands on deck!"), than coaching sellers, partners and marketing for elevated deal quality.

The only way to escape Matryoshka’s appetite for more is by putting focus on the qualitative approach to deals, both on the Demand Generation and on the Deal Management side. Increasing the number of healthy deals (and the healthy meals for Matryoshka) will get your pipeline into a stable, healthy state.

​Give it a serious try, put focus on the organizational capability and you will be surprised, both by the qualitative and the quantitative effects it triggers.

The very practical approach of Coaching for Pipeline Success [Keith Rosen] works well for me but, Training alone doesn't develop champions. Leaders do!