Reaching for 100% of configurations done with CPQ
If you ask a design engineer working for an elevator company how many stops the elevators they sell can have the most, he might answer 100. Maybe 95% of the sales of elevators have fewer than 10 stops, and all elevators above 20 floors require some engineer-to-order? So, does it make sense to allow for 100 stops in the configurator?
We recommend aiming at 80-95% of the configurations done automatically by the CPQ software, and allowing for some manual work for the rest. The reason is that there is typically an 80-20 rule in regards to implementation, where the last 20% of the configuration complexity will take 80% of the implementation time of the tool.
It is much better to focus on 80% of the sales initially in the project, and to make sure there is a ready process for the other 20% of the sales. If the project is a success, why not aim higher in the next phase of the project?
The configurator does not have backing from senior management
The CPQ process is spread all over the enterprise and touches many groups including sales, IT, engineering, marketing and order management. The planning and development of a CPQ solution must involve all of these organizations and must address the requirements of each group.
A sales configurator is a knowledge-based tool, and hence it is never better than the actual knowledge and data inserted into the tool. Typically the product expert or senior sales representative who is busy working with deals, and cannot be spared for a configuration project, is the person needed for this type of project.
Backing from senior management is essential, to allow for prioritization of the implementation of the configurator over the day-to-day business tasks for all these organizations, including the busy product expert.
Bad data quality
A good sales configurator will use your product data existing in current systems. But how good is the quality of that data today? Do you have an organization in which all knowledge is stored in people’s heads and documentation is missing? As stated above, the output from the configurator will never be better than the input, which means you need to make an inventory of your product data and documentation.
You might need to structure and systemize your product data before selecting or implementing sales configuration software. If you don’t, the implementation will probably take much longer than expected, and changes of the tool will be done multiple times back and forth before being able to release.
Too few or too many integrations
Implementing integrations take time, independently of what the vendor will tell you. Even a standard integration may require quite some adaptation because the software you are already using and want to integrate to is probably customized. Adding integrations to all your surrounding tools will add up to a hefty budget, and with some delays added your project might get pulled before it is released.
Hence it is important to prioritize integrations, and to allow for manual integration in the early phases of the project. Do your prices reside in ERP? Are they only changed every 6 months? Can you export them to Excel initially, to get the project going? If you can get a manual integration to work, try to push the implementation work to the future.
However, from a similar perspective pushing integrations to the future which require a large amount of manual work is also a bad idea. The manual work will cost money and may cause update errors.
In summary, when selecting a vendor make sure they have standard integrations to the essential systems you need to integrate to, and focus only on those integrations in the early phases to allow for a quick return on investment. Add the additional integrations in later phases, and do separate ROI calculations for the specific integrations.
The configurator cannot solve the configuration problem
Configuration is a complex subject. To put things into perspective; the number of atoms in the universe is estimated to be 10^80. A configurable product with 100 choices, and 10 alternatives for each choice has 10^100 combinations.
It is important to select a configurator that is able to solve complex configuration problems, an incorrect selection of sales configurator may lead to being force to simplify the configuration problem too much and hence giving incorrect configurations or prices to the sales person.
Too much focus on tangible products
A typical product does not only consist of hardware, but also other intangible products. It’s not uncommon for companies to have higher margins on services, spares and extended warranties. These products should not be forgotten when implementing the configurator – because without these the configurator is not complete. And if the configurator is not complete, the deals will either be missing these high margin products, or the sales will simply not use the configurator due to the missing products.
The configurator isn’t easy to use
If the solution is difficult to use, cryptic in concept or just slow – it will fail because no one will use it.
Your solution should simplify a complex process, not replace one complex process with another. There are often tradeoffs in functionality when simplicity is the primary goal. Make sure your configurator is achieving a good balance between these two elements.
The configurator doesn’t focus on the key users
Configuration projects tend to be initiated by all other departments at companies except sales, because sales are too busy working on quotes for customers. Hence the key tasks of the tool often misunderstood and not implemented properly.
The most important task of a sales configurator is to help the sales person create a correct, competitive and valid quote quickly – and what that means exactly is different for different companies.
Makes sure key people from the sales department are involved in the selection and development process to insure that their requirements are covered.
Not realizing that configuration maintenance is important
In most configurable products, the master data changes continuously. New options are added and old ones disappear, new suppliers emerge, prices change, etc. Often, these changes are made on a daily or weekly basis. Typically, these changes are managed in ERP, CRM or PLM systems by people not involved in the configurator maintenance.
It is therefore vital that master data maintenance requires minimal amount of changes in the configuration software. It is also equally important that an organization is set up to be responsible for the maintenance of the software, because with even a minimal amount of maintenance it still needs to be tested and validated.
Selecting a tool that requires IT involvement for maintenance
No matter which company, IT staff is a valuable but scarce resource. When it comes to a CPQ implementation, IT must be consulted, and a certain amount of IT service will be required to set up the solution.
But what is IT’s involvement after the initial implementation? IT recognizes that it has the potential to be a chokepoint for the enterprise, and that’s not what IT wants to be. At the same time, marketing and sales don’t want a restraint or a dependency on IT.
The point of a CPQ is to present speed and flexibility with the power of the sales configurator and pricing rules to deliver a great user experience. If marketing has to wait a few days for IT to make a change, the configurator will constantly be out of date and won’t allow for any promotional opportunities.
In addition, if you don’t get your business involved in the maintenance of your CPQ, you’ll pay for expensive and never-ending consulting services from your CPQ vendor.
Make sure you involve IT in the selection and implementation, but also make sure the business can and will be maintaining the solution over time.