Commercial Awareness - Tips for Success

What is Commercial Awareness? Is it some dark art that is practised by shady bankers and finance demons in the bank vault of Scrooge McDuck?

No... not really and also diving in to a pool of gold coins from a great height sounds pretty painful (please enjoy the Ducktales theme tune, that I have no doubt has started playing in your head!). At its most basic level it's appreciating that goods and services have a cost to produce and in any transaction each party will have their own motives.

Let's make up an example to give us something to work with. You're a farmer and you grow potatoes (or tatties in Scotland) and your friend John grows turnips (neeps). You love spuds and John loves his neeps but it would be nice to enjoy both neeps and tatties (maybe with some gravy or peppercorn sauce and maybe haggis? I really shouldn't write when I'm hungry).

So you and John do a trade - 6 of your potatoes for 6 of his turnips. For both of you, you want to give away the fewest of your items for the most of theirs because maybe you can trade some of your other excess produce for something else (haggis?). That's the basic of trade and most folks have a basic understanding of that from being a kid in the playground trading marbles with their friends.

So what would make you "commercially aware"? Okay let's say before discussing business you took John out for a slap-up meal and plenty of libations. At the end of the evening you get John to agree to trade you his entire crop of tatties for a single spud. You have won the game of capitalism! You have basically given away nothing and gotten everything... No. You've taken advantage of a friend and in the process you have driven John to destitution so no he won't be able to produce any more turnips next year, you have lost a trading partner/ friend and if John gets back on his feet, he will either look to screw you over to get back at you or not trade with you at all.

So a short-term win, has lost you a pal and the ability to obtain turnips in future. That's not a great outcome.

While there is a little more to it, that is the basics of commercial awareness - understanding the motives of each party and understanding short term and long-term strategy.

From the Perspective of the Client

For this example, let's say that your key business system supplier has been incumbent for 10 years. It took a lot of money to install, configure, test, train and go live with and it would cost a lot to replace. There is always a cost/ benefit analysis that you should be running against switching to an alternative supplier. Let's call this system for this narrative Heuristically Programmed Algorithmic Computer 9000 or HAL for short. We will be Dave...

Over the last 10 years, HAL has had a few problems - bugs, defects and outages (and an unfortunate incident that required you to jump the vacuum of space into an airlock without your helmet). HAL broadly works but occasionally the supplier will fail to notice some log files filling up resulting in an unexpected outage or promised functionality takes way too long to be delivered and then takes way too long in the test-debug-resolve-retest cycle. Generally they are not a truly awful supplier but they could be better.

Now every time you review the contract or have a service meeting with the supplier you hammer on all their failures. There could even be threats of contract disputes and potential litigation because that piece of functionality you need for compliance is overdue by 3 years and it keeps getting kicked down the HAL development roadmap.

Okay so if you're doing everything you need to, in a timely manner and the supplier is just not demonstrating willing then you've got a fairly strong case against them offering something for their failures but let's make this scenario more complicated.

From the Perspective of the Supplier

Building on the scenario of HAL above let's look at it from the supplier side. You're a Small/ Medium Enterprise (SME), offering the specialised business solution that client's need. Sure there are shiner solutions out there but they come with a yearly price tag with 3 more 0's on the end. HAL gets the job done.

Money in the SME space is always tight and while you would love to offer a better service, ultimately the market will only pay up to a certain point for your target clients. You do what you can though.

Your client, while they have very good reasons for kicking you every 3 months at the service review meeting, they really don't help themselves or you.

So the client has had a couple of changes in senior leadership over the last 10 years, and every time this happens, you get a set of new requirements and while they agree the previous leaderships projects should be delivered, they are not keenly resourced. They keep stopping and starting.

They've now got 6 functionality projects open on the books and some of them should have been completed 5 years ago, plus the need to upgrade the infrastructure but this is complicated by the fact that some of the non-prod environments have different versions of your software in place from the functionality projects making regression testing pretty much impossible. They keep threatening to haul you over the coals but it's difficult to support them effectively when they won't finish one project before opening the next and the requirements keep changing over time. It's actually costing you money to just keep the older projects ticking over and having to stop and start them all the time.

So your costs are ever increasing and you can't increase your charges because the customer isn't willing to pay more for what they perceive as not good service and so now you need to do more with less resources than before.

Takeaway

So clearly it isn't reasonable for the supplier to charge the client more for a worsening service. Clearly it isn't reasonable for the client to beat the supplier for non-delivery when they are not holding up their end of the bargain. The relationship is steadily getting worse and there is very little light at the end of the tunnel. So how do we exit this loop?

Simple, talk. Use words. Get the right individuals in a room and share the problems you're facing. No not about your sick dog that you had to take to the vet this morning. The supplier needs the client to finish the existing projects, so figure out the dependencies and draw up a roadmap together. The client needs a better service so figure out what you can invest to give confidence that the lights can be kept on until you can get to the end of the roadmap. Be honest about budgets and that will be the basis of the money conversation.

To be clear, I'm not suggesting that failure be rewarded, I'm just suggesting that resetting the relationship might be the most productive way forwards for all parties.

Hot Tips

• Clear objectives: in any commercial conversation be clear with what you want and communicate these points effectively. Add supporting information but don't keep hammering the same point again and again.
• Understand both sides: If you understand everyone's motives then you might be able to come up with a plan that helps everyone achieve most of what they want. If motives are not clear, then ask questions.
• Be the adult: Sometimes to move a conversation forwards, you just need to reasonable. Don't descend in to ultimatums as this is rarely productive.
• Contracts: Yes understand what is and isn't included but if you have to keep referencing penalty clauses then the other side are going to look for their get out of jail free cards. If you talk, you might get more return.
• Derisk: If a piece of work needs to happen but until it starts there will be a lot of variables which could impact delivery then do smaller pieces of discovery work first. Package them and explain how they fit in to the overall objective. Price for risk in projects usually means someone loses.
• Focus on delivery: It might be great to beat one small supplier up and get lots of work done for basically nothing but it could take you 18 months to get the work started. You could delay much bigger pieces of work which might cost you more in the medium term.
• Don't get angry: anger is rarely useful in negotiation, so avoid. Patience will get you a lot more, if you make an offer or request then be prepared to walk away for a little while to show you're serious.

Summary

Have I covered everything here? No but I hope I've explained, through scenarios, the mindset you need. Don't forget to be human, we all work better when we are human to one another.

Now I'm off to sing, Daisy Bell while I'm being dissembled...