The previous chapters describe a marketing environment of unprecedented change and complexity. The result is a need to reorganize brand portfolios, rethink spending approaches, generate more fine-grained customer insights, overhaul pricing and segment management, and restructure sales, service, and channel strategies. Each change is a challenge in its own right, and some companies are tackling more than one: GE, for example, has been trying simultaneously to improve the way it approaches innovation, brand management, and customer care. This level of change represents a commercial transformation—that is, a transformation of the company's broad-based marketing and sales elements.

It's difficult to carry off change of this magnitude at a brisk pace: deeply ingrained habits keep employees from embracing new techniques, skill-building efforts break down, and leaders lose focus. To counteract these problems, companies have developed a variety of change-management approaches, particularly in operations, where techniques such as Six Sigma and Total Quality Management (TQM) have flourished. Making change stick typically requires both planning and action—centering change on a powerful aspiration, establishing systems and processes that reinforce the goals of change, modifying mind-sets by creating a sense of shared purpose among employees, conducting targeted skill-building efforts, and creating role models for employees.¹ While such change-management practices are useful, they are difficult to apply to marketing and sales. One reason is that these organizations—encompassing brand managers, market researchers, and segment and channel managers, to name just a few—are more diverse and complex than the shop floors where many improvement programs take place. Figuring out how to keep disparate parts of the organization working together is a key challenge of change. Second, the rationale for transforming a marketing organization is often to jump-start growth. That requires creativity, not just strong execution, so the change effort is more difficult and the related decision making more complex. Finally, the responses of competitors and customers to marketing changes are difficult to predict, so it is hard to eliminate variability (a goal of many operations change efforts); maintaining flexibility is essential; and the establishment of goals and metrics is complicated.

In our experience, five critical ingredients of transformation are key to overcoming these issues (Exhibit 1):

1. Leadership, aspirations, conviction, and clarity of purpose: committed leadership that can bring together disparate parts of an organization to achieve an ambitious and clearly articulated aspiration
2. New ways of working: a combination of improved processes and tools that help make sense of complex information, redefined pivotal roles, and performance management that drives the transformation forward; together, these serve as the foundation of a commercial operating system that, when fully developed, improves consistency, coordination, insight, and decision making
3. Capability building: on-the-job apprenticeship and high-caliber coaching designed to upgrade critical skills while delivering results
4. Changes in mind-sets and behavior: necessary steps such as removing cultural barriers to change and developing a tailored set of interventions to shape behavior
5. Transformation design: an approach that delineates the scope of the journey of change and the support needed to meet its objectives

Focusing on all five priorities at once is a challenge, but in our experience companies that undertake a transformation in a piecemeal fashion risk seeing the effort run off the rails. Executives who pay attention to the marketing- and sales-specific subtleties around each of these levers dramatically increase the odds of successfully overhauling any aspect of the marketing mix, including brand management, channel strategy, pricing, and the way the sales force interacts with customers.

Leadership and aspirations

Achieving this degree of change in marketing and sales presents unique leadership challenges. For starters, performance goals such as boosting revenue can be achieved in many ways: improving customer service, developing new products, raising prices, and more. Further, with so many competitive and customer variables at work, results often take time to appear. Under such conditions maintaining focus is difficult, particularly as opportunities arise. Adding to the complexity of efforts to lead commercial transformations is the great number of interdependencies among, say, brand, key-account, pricing, and service management.

In our experience, most senior executives are surprised to see how much time and energy they have to invest in dealing with these issues in order to clarify the direction of change, maintain leadership focus, and communicate conviction. Consider, for example, a North American retailer that sought to transform itself from a company that served everybody into one that distinctively served its most profitable customer segment. Along the way, management encountered temptations to play in other attractive segments, but succumbing would have undermined the focus of the company's change effort—a broad endeavor that extended to merchandising, store layouts, and backroom operations. Thanks to the CEO's passion and unrelenting focus over a period of years, the company succeeded and overtook many of its competitors. At the other extreme, companies in industries as diverse as chemicals and high tech have mounted sales and marketing change efforts that suffered from the absence of a passionate and visible leader, reliance on a single corporate champion rather than a committed team, or the lack of a well-defined purpose.

Lofty aspirations not only help with focus but also get disparate parts of an organization working together. A case in point is GE's publicly stated goal of achieving organic growth of 8 percent a year—three percentage points higher than the company's historic, acquisition-fueled rates. Accord-ing to GE, achieving this goal required big ideas that could generate at least $50 million in incremental revenue. Often the only way to develop such ideas is for product developers, brand managers, market researchers, salespeople, and others to pull together across organizational boundaries and business units. As these people come together, the company is identifying growth opportunities while, at the same time, embedding greater consistency in its marketing approaches (such as brand and key-account management) and innovation techniques across regions and businesses.

New ways of working

No multiyear transformation is possible without changing the way people work—the tools they employ, the definition of their roles, and the way their work is measured. Making changes such as these is particularly challenging for marketing and sales organizations. In particular as proliferation boosts the number and complexity of the opportunities that marketers must assess, the sheer variety of the available analytic approaches makes it difficult to choose the core tools and frameworks that professionals should use to improve decision making. Often, companies must redefine roles to get employees out of the traditional functional boxes and to facilitate the integration of insights about customers, intelligence about competitors, and interdependent activities, such as setting prices, developing products, and creating messages. Finally, the development of metrics for tracking progress is challenging because common marketing measures (such as margins, share growth, and sales costs) are sometimes at odds with one another and often require a different emphasis across business units.

Yet the effort associated with putting in place new tools and frameworks yields important benefits. Consider the experience of a packaged-goods company that built a company-wide tool kit to guide key-account planning. The tool kit included five supporting analytical methodologies to help key-account teams review the economics of accounts, assess the needs of customers, determine the next-best alternatives of each, calculate the share of wallet the company captured from different segments in key accounts, and map the decision makers it had to influence to penetrate these accounts more deeply. When every region adopted these standardized tools and templates, the entire organization had a common language to describe how it planned accounts. This achievement facilitated more fact-based decision making about the company's product mix, promotions, trade spending, and service approaches; a clearer view of the trade-offs the company was making; and better comparisons across accounts, brands, and regions.

Even with the right tools in place, marketers must often redefine some roles substantially to ensure that key professionals focus on the right priorities. Two technology companies that changed the way they managed key accounts learned the benefits of properly scoping pivotal roles and the dangers of failing to do so. The first company broadened the roles of the managers in charge of several hundred of its largest accounts to include assembling cross-functional teams of sales support and technical-service people, setting product-specific sales and margin targets, holding business units responsible for sales and product delivery requirements, and seeking profitable opportunities to meet its customers' need for new applications. The second company, in contrast, didn't empower its managers to develop customer-specific plans, make trade-offs within or across product lines, or influence the design and development of product-specific applications across business units. As a result, this company's key-account management devolved into a glorified administrative position, while the first company enjoyed faster sales growth.

No one should underestimate the effort required to reinforce new approaches with new metrics and performance management. Before one high-tech company could boost its returns on marketing investments, it had to rationalize hundreds of different metrics (often derived from inconsistent sources) that various product groups tracked. After agreeing on a dozen key performance indicators that would inform planning and performance management across the marketing organization, the company developed four marketing scorecards—one each at the global, regional, business unit, and product level. Each scorecard emphasized the KPIs that were most relevant to managers at that level. The regional scorecard, for example, used customer metrics (such as the penetration of retailers), while the product scorecard focused more on consumer preferences (such as satisfaction with products). A consistent set of inputs made it possible to aggregate and compare the results achieved by every product, region, and business group.

Improved tools, processes, definitions of roles, and performance management are key components of a commercial operating system. In effect, it is a blueprint for consistent, leading-edge sales and marketing in the two or three functional areas—such as pricing, brand, segment, channel, or key-account management—most closely linked to a company's strategic priorities. Such an operating system is valuable both for initiating change and for institutionalizing it. (For more details on this topic, see "The power of a commercial operating system.")

Building capabilities

The complex and conceptual nature of marketing and sales requires companies to help their frontline professionals develop a range of tacit skills, such as making trade-offs and solving problems, rather than simply transferring "hard" knowledge. But many companies have learned through experience that formal training is woefully ineffective at building such skills. More successful approaches rely rather on apprenticeship, buttressed by basic training and part-time support, to establish new ways of working (Exhibit 2). By apprenticeship, we don't just mean training tailored to real tasks; we mean learning by doing something important for a business.

If people learn best by doing, someone needs to help them do. Much as Toyota Motor sends dozens of engineers to its partner-suppliers for as long as two years to help the suppliers learn the Toyota production system, marketing organizations need a pool of specialized, expert change agents to build skills among frontline employees and to help them engage with new systems. We call these experts navigators, and the way they introduce new capabilities in parallel with new systems and processes mini-transformations—which frequently occur first in a specific business unit, geography, or segment. Although developing a pool of navigators is resource intensive, failing to do so, we find, often leads to disappointing results.

A pharmaceutical company identified direct sales to doctors as a core skill in need of upgrading. The company chose a group of its best salespeople, who took part in a pilot program intended for rollout to the whole sales force, to serve as navigators. During the pilot, the navigators helped to shape new key-account-management processes, selling tools, and tactics checklists. After it ended, they committed more than 50 percent of their time to coaching and mentoring hundreds of salespeople in new geographies and product areas. Their status as high-performing salespeople gave them instant credibility, and their involvement in the pilot made them true believers and ideal teachers.

In contrast, a medical-device company couldn't roll out a successful pilot to other regions and business units because it failed to give its sales staff personal, on-the-job coaching or mentoring. Instead, it provided several days of training and thick binders filled with tools and processes, which went largely unused because the salespeople hadn't absorbed these systems through practical effort and didn't have coaches to help them through the tough spots. Eventually, even salespeople in the pilot business unit who changed their jobs fell back on old habits.

Mind-sets and behavior

No company should underestimate the corrosive potential of deep-seated beliefs such as "I can't lose this customer," "volume trumps margin," "if I take that risk I'll be shot down," or "the company doesn't really care about. . . ." Executives launching any change program must counteract such mind-sets and the resulting behavior. To do so, they should diagnose the underlying cultural barriers and apply a combination of hard interventions (such as changes to the incentive structure) and soft ones (like role-modeling).

But underlying assumptions are difficult to change, particularly for sales and marketing executives, who, compared with their counterparts in operations, typically have little experience with major change programs. Marketing executives may be surprised by how much effort is required to diagnose potentially counterproductive mind-sets, to begin dislodging them, and to follow up with supporting systems—from technology to compensation plans—that can convince employees of management's resolve.

The experience of a European insurance company illustrates just how many reinforcing initiatives may be needed to change mind-sets (Exhibit 3). The company sought to boost its performance by building longer-term, trust-based relationships with customers. Before launching an effort to build the relationship skills of its salespeople, it spent time interviewing and holding focus groups with them, as well as conducting more quantitative surveys. These diagnostic efforts revealed that since many employees placed great value on the immediate gratification they received from closing deals, they emphasized transactional relationships and limited their follow-up with problem customers. The company also uncovered an infrequently stated but widely held belief among the salespeople that the insurance they peddled wasn't worth its price, so that their job, in essence, was to "rip people off."

Since these beliefs ran headfirst into the goal of building trust-based relationships, changing such mind-sets was the centerpiece of the company's effort. To start, the CEO and other top executives made a series of public statements describing the attitudes they wanted salespeople to have about customer relationships. Then they began role-modeling those attitudes in meetings. Next, the company evaluated all of its salespeople according to their willingness and ability to work collaboratively with customers. The top 25 percent became change agents, and some of them helped senior managers to rewrite the call scripts that all sales reps would use. Once the company had taken these initial steps, it began rolling out the program more broadly through several other moves:

• a peer-mentoring program anchored in examples of best practice
• internal and external public commitments by senior executives to achieving the company's sales goals and to increasing the number of repeat customers and long-term relationships
• the internal publication of testimonials from customers about interactions with relationship-oriented salespeople
• new compensation schemes that rewarded the maintenance of longer-term relationships more generously than transactional business

Over time, the mind-sets of the company's salespeople across Europe truly did change. Operating in a mature, highly competitive industry, the company exceeded an aggressive set of targets for earnings and revenue growth.

Transformation design

Many companies, facing the complexity and freedom inherent in marketing and sales, adopt an à la carte approach to change. Rather than employing the programmatic rigor and pace of a Six Sigma or lean-operations transformation, these companies let their business units, country organizations, and districts choose from a broad menu of ideas and tools to meet their overall performance goals. In our experience, this approach is mistaken. Marketing and sales transformations require a change process with the same staging and discipline as analogous efforts in operations. Indeed, marketing's more fluid nature means that executives must devote unusually large amounts of time and effort to designing the transformation. The program must replicate across the company whatever should be consistent while giving frontline managers space where they need it. In addition, senior executives should review the program's overall progress and make trade-offs—such as how centralized or tailored to individual business units the effort should be—more frequently and in greater detail than they do for most operational-change programs.

To understand how these issues play out in practice, consider the experience of two chemical companies. The first, a single-business-unit provider of nutritional additives, suffered from vague processes and unclear accountability for most marketing and sales activities, which had historically been less important because of patent protection and cartelized competition. The second, a specialty-chemical maker that was the product of a series of mergers, comprised five divisions with 20 separate business units varying drastically in size and marketing skills.

The nutritional-chemical maker, given its simpler organizational structure, found it relatively straightforward to manage its effort centrally, to adopt top-down goals, and to use standardized approaches throughout the organization. Standardization was particularly valuable because it helped raise a broad set of marketing and sales skills from their weak starting points. To avoid having frontline professionals feel that the new approach was being imposed, the company involved many of these employees in the design of the effort to build new skills and identified a wide range of change leaders to promote them. In 12 months, it upgraded the skills of more than 500 people and, over two years, improved its return on sales (ROS) by nearly 4 percent.

For the specialty-chemical company, by contrast, a centralized change effort would have been disastrous. Because the company's divisions and business units were diverse, it needed to build its skills selectively, to develop new processes in a flexible way, and to set more targets from the bottom up. To avoid having the transformation veer out of control, the company created a small core team that moved from division to division, helping each to tailor pilot programs to its skills and needs. Over four years, this larger company rolled out new skills and approaches to more than 3,000 marketing and sales professionals, thus helping to boost its ROS by roughly 4 percent.

Although selective tailoring is usually crucial in change efforts that embrace a number of business units, many companies fail to fine-tune their approach. One diversified materials company, for example, had disappointing results when it tried to force onto Europe some new key-account-management and transaction-pricing systems that had been perfected in North America. Even when applied to products that were similar in the two regions, the new approaches were ineffective in Europe because of differences in competitors' reactions, the customers' expectations about discounting and payment terms, and the nature of relationships.

In contrast, another global materials company took extreme care in overhauling several of its skills, processes, and tools. By determining which of them could be used consistently (such as a system for calculating the SKU-to-delivery-point cost) and which would need to be modified by business unit or even by product within a given geography (such as brand-management and transaction-pricing approaches), the company laid the foundation for a successful transformation.

By tailoring classic change-management techniques to the specific needs of sales and marketing, executives can increase the odds of truly transforming their commercial organizations.