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A dreamer to the core. A thinker. A writer. A marketer. A poet. A management guru in the making! A keen observer of business, organizations, leaders, society, economic environment, consumers, and innovation. A confirmed maverick who loves to turn conventional wisdom upside down!

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Thursday, March 09, 2006

Sales and Hopeless Optimism

Many sales personnel in many organizations seem to be unrealistic optimists. There is nothing wrong in being optimist. In fact, optimism is a virtue. But optimism works wonders only when it is grounded in reality. Blind optimism produces more problems than positive results. I call this phenomenon 'hopeless optimism'.

The root cause of 'hopeless optimism' is the fact that often sales personnel think of sales in isolation rather than it being a means to profits. Their perspective is functional and not holistic. They are perhaps unaware that 'hopeless optimism' adversely affects other aspects of operations as well as bottomline.

The worst victim of this 'hopeless optimism' is the supply chain with cascading effect on almost all areas of organization's performance. It is like a chain reaction.

'Hopeless optimism' starts with unrealistic sales forecast. Unrealistic sales forecast results in high production. Then comes the bolt from the blue when sales is fairly less than forecast. This results in unnecessary inventory. Unnecessary inventory results in fruitless investment as well as unproductive use of costly warehouse space. All these block a good chunk of working capital of the company. Slowly, with incremental increase of excess inventory every month, a good amount of inventory starts ageing rapidly resulting in reduction of market value of the goods. As the old inventory level rises, pressure builds and management starts to take action to liquidate it at discount. So discount contributes yet another cost. And this is not yet the end of the story. When old inventory enters market, chances are high that some of it might have deteriorated in quality. When customers use this lower quality material, chances are very high that brand equity and relationship a company has with its customers may take a beating! Now just calculate the present cost and future cost of the string of events originating from 'hopeless optimism' of many sales personnel. You might be shocked to see the numbers.

Moral of the story: Dream but with your feet firmly on ground. Never hallucinate!

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