Has No Clothes
An Intro to Declaring War on Inefficiency
It’s a given that the sales and marketing engine is full of waste and inefficiency. Despite the best intentions of very smart people, something is still not quite right. How do we know? The Commercial Ratio tells us that most companies get $0.15 of growth for every $1 they spend on sales and marketing.
In this episode of the Inside: Sales Enablement podcast, Scott Santucci and Brian Lambert are joined by Kunal Mehta from the private equity firm TCV. Kunal shares a behind-the-scenes view of rolling out the Commercial Ratio to all TCV portfolio companies. What were those discussions? What was the focus? What happened?
Then, find out why the Commercial Ratio is a great starting point for addressing sales and marketing challenges and how you can use the metric to engage strategically with your executive team.
Conversation has been edited for clarity.
I love using stories, and I know you do too, to introduce a brand new idea.
Let’s start with a centering story. Many of us are familiar with the children’s tale from the 1800s by Hans Christian Andersen called The Emperor’s New Clothes. Some swindlers go into this village and they say, “We've got this amazing new fabric and it's the most amazing, comfortable, glorious fabric. But what makes it super amazing is only smart people can see it. Dumb people can't see how valuable this fabric is.”
And the emperor is like, “Wow, I want that fabric.” So these guys set up their loom and get to work making the emperor’s new clothes. All the emperor's aides would look at the progress that these guys were making and none of them wanted to admit that they didn't see anything. Keep in mind, these guys are scam artists. But no one wanted to admit that they couldn't see the fabric because by admitting that they couldn't see it they were saying that I'm stupid.
So, one aide would say, “Wow, that's fabulous.” And then the other aide, “Oh, you're right. I see how fabulous it is, too. It's so nice looking.” “That's looking great.” So everybody sort of kicks the can down the road. Finally, the time comes for the emperor to put on his new clothes. The charlatans mime out putting it on his clothes. Now the emperor doesn't want to admit that he can't see them. So he goes along with everyone else pretending he can see the fabris and parades out. Of course, no one wants to say anything to the emperor, until a little kid says, “Hey, he's got no clothes on!”
So the moral of that story is we should have the courage to speak up and say what’s true, even if it means going against popular opinion, because in the long run it could change people’s minds.
"The whole idea of the Commercial Ratio is a simple view to say are the sum of the parts greater than the whole? It's a simple idea, but unfortunately, a lot of us don't want to bring it up."
So, what does that have to do with sales enablement?
The premise of that fable is that sometimes the simplest things are not available to us. What we're talking about is what’s happening with the Commercial Ratio, more or less, the kid's saying, “Hey, there's no clothes here!”
In sales and marketing, we spend tons and tons and tons and tons of money and tons and tons of energy and throw tons of headcount at trying to drive more sales. But is it productive? The whole idea of the Commercial Ratio is a simple view to say are the sum of the parts greater than the whole? It's a simple idea, but unfortunately, a lot of us don't want to bring it up. We want to be the aides because we don't want to upset the emperor.
So with that as a frame of reference, I'm delighted to introduce Kunal Mehta who’s been advocating and developing this Commercial Ratio concept. We're going to learn about some of the experience he's had as his company TCV, a private equity firm, has rolled out the Commercial Ratio to their portfolio company. So Kunal, please introduce yourself and sort of set the tone a little bit.
What is Commercial Ratio and why is TCV so interested in it? How are you guys rolling out some of your portfolio members?
Thanks, Scott and Brian. My name’s Kunal Mehta. I head up the center of excellence for sales and marketing at TCV. The Commercial Ratio is really a center of gravity for us internally. How we talk at TCV about driving efficiency, across sales and marketing. And it comes naturally inside TCV. But there's certainly more work to do when we introduce it inside of the portfolio company.
I love the story you tell, Scott. I was watching a YouTube video this morning. I have no idea how their algorithm works for serving up videos to me but there was one that came up on hang gliding. I've never clicked on anything hang gliding related or have any interest whatsoever in hang gliding but I clicked on this one. And this guy, Chris Gurksy, had signed up for this class in Switzerland and the instructor forgot to strap him in and he took off.
The video was about this guy holding on for dear life, for about 2 minutes and 14 seconds. And that's all he could think about. And I feel like when we roll this out into a portfolio company, if they just trust the system and hold on for a brief moment, I think they'll see the value in the Commercial Ratio really quickly.
I think the point here is that Commercial Ratio is like flying and it's something different.
If you’ve never gone hang gliding before, the first step is stepping off that cliff and just hanging on for dear life. That fear factor that lasts for a few minutes before you go, “Hey, I'm flying.” You’ve got to be willing to take that first step off the cliff in the first place.
We want to keep this conversation going. Where are things working? If you have an idea of what Scott and Brian can cover in a future podcast, or have a story to share, please email email@example.com. You can also connect with them online.
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