… or how I learned to glide the chaos of inventing SaaS Revenue Operations

Prologue

For the past 20 years, I’ve been intimately involved in the delivery of product configuration, price calculation, and sales quoting solutions for SaaS companies. From publicly traded, industry-defining companies with tens-of-thousands of workers to companies who have fewer than 100 employees, I’ve been there to help the team achieve their next milestone and reach the next horizon. Here are some lessons I’ve learned…

Summary

Leaders considering a change to their current configure, price, quote (CPQ) solution should be mindful of the matrix of stakeholders and intersecting interests surrounding that nexus. 

Stakeholders of a business’s CPQ landscape are manyfold, diverse, and may be unexpected. The common personas involved from Product, Marketing, Sales, Service, and General & Administrative functions (aka The Five Families) may be misaligned in their awareness, interests, and abilities. 

Disruptive changes related to a CPQ evolution will challenge expectations. Identifying and addressing these common conflicts prior to engaging with system, integration, and data delivery partners will do wonders for the objective outcomes, stakeholder experience, and the time-to-value ratio. 

Fifteen years ago, a senior colleague at a scaling SaaS company described the quote-to-cash space as, “the circle of death” among all of the company’s functions.

Today, there are modern practices, blueprints, and packaged solutions that form a solid foundation with adaptable extensions to highlight how a company differentiates itself. Use standard/commodity components. Save customization for when you’ve got lightning in a bottle. Get just enough expert contingent/consulting help. 

When it comes to it, custom development may be a worthy pursuit to deliver distinct value for stakeholders. Really explore the total cost of ownership for the life of custom solutions after the implementation. The prompts in this guide will help outline the scope of work to build, evolve, sustain, and sunset custom CPQ components. The prompts and questions herein intend to stimulate discussions among accountable stakeholders. These considerations and points of view will calibrate, align, and steady The Five Families for what comes next. 

Is CPQ right for me?

For as many organizations that are propelled by the capabilities a CPQ solution enables, plenty of others become trapped in a gordian knot of policy, data, legacy, growth, and reactivity. Consider affirming the responses to these prompts with the heads of the five families to memorialize directional alignment for the planning horizons (6 to 60 months). 

What are we selling?

While not intended as a trick question, some responses may make it seem like a ‘gotcha’ inquiry. It is a challenge to convey what a product is in language simple enough for a fifth grader to understand. The value of that output multiplies productivity for each of the five families. There may only be a handful of products, which wouldn’t seem like a rousing call for an investment in CPQ however, pricing is evolving.

And yet, selling 12,000 combinations of shape, size, material, and colors for construction bricks at the same price may call for a snazzy catalog filter for resellers but not necessarily a CPQ. Good-better-best, physical goods, variable fees, usage/consumption, recurring services, one-time delivery, hard bundled, non-coterminous, et cetera. Some common classification & taxonomy helps. 

Who is selling it?

Direct, indirect, inbound, outbound, web-commerce, product commerce, referral considerations, source attribution, eligibility and registration. Getting clear on the full cast of actors and stakeholders for any commercial activity is crucial for gauging the scope (schedule, budget, and spending) of a CPQ initiative.

Truly, even products that are bought, rather than sold, may benefit from CPQ enabled capabilities in the right circumstances. Multi-channel transactions could be multi-dimensionally complicated with an over-built CPQ. 

When does it end?

Whether the products are recurring subscriptions or shipping containers, there is a life cycle for any product. Awareness of the lifecycle between a product and a customer is a pillar of CRM value. Documenting expectations for a contract renewal or modification, a return or trade-in, or a retirement for each customers’ product lifecycle stages helps a trusted advisor like Kumonami guide a company to a solution fit for purpose. 

Where is this documented?

Price books, spreadsheets, presentations, napkins, and any medium for commercial transaction structures will inform answers to these questions. The relative maturity of the documentation is an indicator of the success spectrum a company considering a CPQ change can expect to capture. If knowing is half the battle then the other half is dispersed among many factors like an organizational readiness for change. The five families representing all their stakeholders must agree to amend their existing policies, products, processes, platforms and data to win the war. The disruption level is high for CPQ change initiatives. Keeping designs, decisions, and details documented unlocks productive collaboration and partnerships that scale up and down.

How do prospects/customers experience this?

Voice call with a person? IVR? A video call? In the product? A web page? A portal? A kiosk? Printed catalog? Connect the desired experience for your market personas with a business architecture to deliver that priority. 

Why, for all of it?

For all these prompts, going the extra step to highlight the values and objectives for each response reinforces the context and creates a stage for empowered staff and stakeholders to act in accordance with those intentions. 

Configuring

Have it your way, but don’t go crazy

Complex bundles with interdependent elements and components can optimize value for businesses and customers. This capability is so powerful, it was the essence of a massive marketing campaign when it went wide at the dawn of this century (“dude, you’re getting a Dell”). The ability to configure modular solution components into a package that works for a prospect or customer’s particular needs can be a material market differentiator for a company. 

However, subscribing/licensing a configuration platform may also powerfully bind an organization into untenable expectations and limit responsive agility for evolving marketplaces. 

Any of The Five Families or external stakeholders could become overwhelmed with the impact of product configuration structures. Balance the interests of Accounting to quickly close each period with accuracy and automated audit abilities for each transactional element with the interests of Sales to deliver on a portfolio of metrics and quotas. 

It’s critical to have awareness and alignment on the policies that govern What We Are Selling across the five families. 

Planning and managing these factors across stakeholders is a set of skills and experiences that may be strong in the day-to-day contributors to these strategic and cross-functional initiatives, typically at the Director level. Ideally, a product program manager is able to lead the families to define the business rules for new features or products. It’s unusual for anything other than a product change or M&A to have such a broad company impact. This makes a product program manager likely to have the relationships and skills for conducting the squad through this chapter. 

Mapping each feature or part to the products, offerings, bundles, and promotions in which they may be contained is paramount for tracing the value stream from ideation through accounting to replacement for each intersection of customer and feature, no matter how it was packaged, priced, or presented. There may be good reasons to create items for non-saleable elements or features to facilitate delivery or connected services for the offering, bundle, or promotion. 

In the XaaS world, it’s likely there is some flow of metrics from the commercial product platform to the CPQ and CRM. There may be ways to assemble the views of information and activity for business operators without creating an item/product record for the CPQ to convey to downstream subscriber systems & stakeholders. 

Knowing each deliverable or billable element of a product offering clearly across the five families provides a strata of trusted operation at the deepest level across company functions. This becomes the bedrock for focused design discussions for implementing this foundation in the chosen CPQ solution. It can be tedious work and like so much that is worth doing, defining & aligning these details without any immediate benefit is a challenge. The immediate benefits of this work are the resulting documents and definitions as a reference for any delivery contributors to rapidly onboard. The guiding business outcomes materialize much later. 

Pricing

The slipperiest slope

The science/art of determining pricing frameworks, conditions, and calculations is a powerful force which impacts nearly every aspect of a company. Each of The Five Families have direct interests in aligning tightly on pricing granularity, schedules, and qualifiers. Their operational productivity depends on the organizational trust that the factors affecting financial values for any transaction are considered and referenceable. 

The stakeholder group for this pricing principle is astonishingly broad, especially for companies moving “up market”. Any company seeking growth will make changes to pricing and packaging. As challenging as it is to consider and align this diverse array of stakeholder interests for any incremental change to the catalog, it is still valuable to prescribe a structure for the retirement of any change as part of its introduction scope. 

What happens when we want to increase the unit price for a component of this offering? 
When this offering is bundled with another, what attributes are important to maintain for which stakeholders? 
Who is responsible for communicating about component or feature changes and sunsetting?
How are the impacted stakeholders identified? 

Systems integrators and consulting partners may not lead their clients through the product lifecycle management capabilities and operations as part of their scopes of work. It’s assumed that the internal team working with a partner to change a pricing engine is retooling their own future operations and testing the new systems. Often though, foreseeable use cases and scenarios for piloting, introducing, renewing, revising, and retiring pricing references and rules are insufficient to optimize solution designs that scale institutional pricing agility. Reviewing and realigning product operations scope as part of any CPQ or pricing engine update is an often overlooked factor for a successful transformation. 

Be specific and explicit with each stakeholder about the fidelities for pricing throughout the value stream. 

How many decimals are used in *each* system for currency values? 
What are the rounding algorithms and are they consistent? 
Does that hold for any potential foreign currencies? 
What are the units of measure for time throughout the value stream? Are they aligned with the pricing units? 
When some proration is needed, how is that reflected? 

An approval workflow may be a way to control deal terms that still allows business development structures to be explored. Over time, approval becomes visibility then evolves into enforcement just as paths become roads to make progress more efficient. Balancing the stakeholders’ desires for control over pricing modifiers with the efficiency of platform enforcements is a journey as the product life cycles play out. 

The skill and experience for considering and arranging the approaches for resolving these and myriad other factors for pricing structures and solution designs is uncommonly present in any of the five family Directors for a given function. This is an excellent area for augmenting the team with focused expertise while it’s needed to prepare for a larger systems integrator engagement or to initiate the internal delivery team for a successful launch. 

Quoting

Party in the front, business in the back

The most visible and so often misunderstood element of the formula, quoting, has evolved to be oriented around the generation of proposal documents, order forms, and contracts. Where ‘quoting’ is commonly used to encapsulate all the CPQ capabilities, there is value in discerning the configuration of the deal documents from the configuration of the deal products. 

The distinct configurability of the proposal documents (‘quotes’) allows the five families to design and build the solution to meet their needs in a way that is abstracted from other stakeholders through a more palatable view. Simplifying multi-component bundle configurations with complex pricing into a single line item for presentation to a prospect can be all that’s needed to secure a clear, compliant, and complete agreement. 

The delivery, pricing allocation, and component schedules from the Configuration may be critical for the five families and select stakeholders. Quotes provide a layer to summarize the facts for easier acceptance as well as an option to expose the configuration, pricing, and packaging with all the detail and correlations required for ultimate transparency when appropriate. 

For companies with a product commerce capability, there’s a brave world of collaborative quoting to explore. Customers may explore offerings with pricing calculated as though an internal team member were configuring and pricing the quote for customers. Allowing customers to initiate configuration and pricing may be valuable intent indicators for sales or success staff to close if customers do not complete the transaction themselves (cha-ching). This is an advanced area available to the organizations who have put in the hard work to align the five families on the Configuration and Pricing subjects. 

Consulting

Choose partners

Creating an expanding product catalog leads to growing pains. Just as there are therapeutic activities to relieve the growing pains adolescents feel, the prompts here are therapy for an organization considering a CPQ evolution or revolution. As an effective therapist or trainer will introduce the exercises with guidance and personalization, a consulting partner aligns organizational objectives and values with platform capabilities through some common exploration and discovery work hands-on. 

Following through with the predictable internal operations process shifts, a CPQ update can enable a new range of motion in a value stream. Many businesses are branded by their ability to package the right value structures for the broad & diverse cast of CPQ stakeholders. Choosing the partners who will make your business *be* their business is a defining decision for the endeavor. 

Are the partners interests aligned with yours? How do you know? How would the partner know?
What is important for you to be custom built? Why? Does this partner have that experience?
Are they engaged to support their own customizations post-implementation? How does that factor into your operating budget?

Create a partner and platform engagement plan after The Five Families have aligned on fitness for CPQ and what's important for stakeholders in each segment. This clarifies the selection priorities for the best partners at each stage. The CPQ change should help to grow *your* business, not theirs.