Archive for February, 2011
The New Economic Reality of Virtual Services
In the days when I used to sell computer solutions to Fortune 500 companies, a 50 percent profit margin was the norm. That kind of mark-up is hard to achieve today, and in fact, for almost everything delivered online – software, media, and services such as sales training – profit margins have been slashed from a high of 50 percent or more down to 20 percent or less. (In this world, even Google’s margin of 30 percent is considered extraordinary.)
In the case of sales training, clients aren’t willing to pay as much if it’s delivered virtually rather than face-to-face. That’s because people tend to think virtual training won’t be as good. They also think it costs less to produce something online than in a physical location. In fact, both preconceptions are false.
At 3g Selling, for example, participants in our virtual sales training program consistently achieve far higher retention of the material compared with those taking similar programs offered in a physical classroom. Our program is conducted live in bite-size chunks over a period of several weeks to ensure retention and ongoing work application. When the same content is delivered in a physical classroom over a period of days, most of the knowledge is lost within a period of weeks.
The other misconception about virtual programs is cost. At 3g Selling, our sales training is conducted online in five 75-minute modules. Each program is live and led by a trained delivery team, which includes a host, subject expert, and producer, who runs the backend of the session and engages participants through chat. The costs for producing each module are significant, yet to stay competitive, our price remains lower than similar training programs, whether physical or virtual. (On top of the low price for virtual training, our clients save as much as 45 percent because there’s no travel or lost work time.)
As a long-time entrepreneur, I’m learning the new realities of revenue generation on the Internet. The days of earning high profits for services are rapidly diminishing. In the training business, we are getting ahead of the curve by offering a better product at a cheaper price. That means we will exist on lower margins. It also shifts the emphasis from IP to operational excellence. To make a profit in this new world we have to focus on logistics – using technology and process in innovative ways.
Not Only for Convenience But Also for Love (of Learning)
Ubiquity of communication marks one of civilization’s most significant advances. Imagine if Leonardo da Vinci had been able to conduct a live virtual classroom among like-minded artists in other city states throughout Europe and the Middle East. The secret geometries of the Mona Lisa might have been replicated in hundreds of portraits, and the world — as well as our museums — would have been far richer for it.
That’s the potential we have today with live virtual training. Whether we use a so-called mobile device, such as a smart phone or portable computer, or any other Internet-enabled computing device, we have the ability to be connected wherever we are, whenever we want. Although not everyone will be a Leonardo or an Einstein, the potential for training and developing innate human talent on a grand scale is truly within our reach.
Live virtual training techniques and strategies are still being developed, but as a society, we are at a turning point. We have the technologies to transform centuries of traditional classroom education and training into a virtual experience. Just as the physical classroom offers immersion, collaboration, and live access to SMEs, the virtual classroom now offers the same, and even better.
Results from a white paper recently issued by 3g Selling and Citrix Online The Virtual Learning Advantage(have shown that live virtual training trumps classroom training when it comes to retention of the material, and actively engaging participants with the instructor and with their peers. In addition, live virtual training eliminates the travel costs and hassles, time away from work, and the loss of retention associated with information overload.
On-line job support is another benefit live virtual training and mobility. For example, the maintenance engineer in the field might need immediate support for repairing a non-standard valve seal on a device. It takes no imagination to see the value in saved downtime and other costs when the engineer can receive immediate access to training. Similarly, a sales force that is equipped with the right knowledge at the right time – while in the field or at home preparing for a customer meeting – benefits from live virtual training married with mobility. One could almost consider the two a match made in heaven – or at least in the cloud.
Following speaking engagements at two back-to-back events–ASTD TechKnowledge and Training 2011–in the past couple of weeks, I’m left with a fair amount to contemplate regarding the direction our industry is headed. Technology is clearly central to the future of training, but the exact shape (or shapes) technology-enabled learning will take remain to be seen.
On the heels of TechKnowledge, Dave Stein of ES Research and I had some lively conversations about these central questions and my impressions of the event. Dave recently posted snippets of those conversations to his blog so I thought I’d repost that here for our readers.
Some observations on virtual learning for sales people
Martyn Lewis, CEO of 3g Selling and Market Partners, attended ASTD’s recent TechKnowledge event in San Jose. 3g Selling is a leading provider of virtual sales learning solutions, so we view Martyn as an expert in this area. (Note: 3g Selling subscribes to ESR’s research.) With Martyn’s permission, here are a few of his observations from that event: First, Martyn tells us that the focus and interest was on the technology tools that enable training, such as LMS, development tools, and delivery tools. He goes on to write,
- “The buzz word was definitely ‘mobility’ and all that means.”
- “The ‘must be seen with it or you don’t get it device’ was the iPad.”
- “Put the above two observations together and you immediately realize that the future of all training will be delivering content, in a just in time fashion, to anyone, anywhere, by way of an Apple product.”
- “Measurement of training effectiveness still has a place on the agenda, but not as big as I have seen at other conferences in 2010.”
Martyn goes on, “Sales training was definitely a focus at the show, and for obvious reasons, is a target for mobility.” In an email exchange between Martyn and me, I commented that virtual sales training lags behind that of other departments within many corporations. Martyn responded: “I would agree with your comment about being further behind. One further observation then is that most of the examples I saw were of a very interesting nature as they all had a very tangible payback. For example, the maintenance engineer in the field that is faced with a different valve seal on a device they are repairing. For that person to gain immediate access to training and information takes no imagination to see that this saved downtime, additional costs etc. One of many examples I heard of the use of mobile and more modular training. It is now interesting to reflect on the payback of having our sales force equipped with the right knowledge at the right time. You and I know the very significant payback that this represents, but it is not so tangible as the valve seal example above. Therefore it may be harder to justify and gain funding for such an investment.”
Sales training continues to move toward virtual. In fact, among 39 sales training companies ESR is covering, 42 percent of all the providers’ clients are using the providers’ virtual learning solutions. Because there is no practical limit (unlike a classroom) many hundreds of thousands of salespeople were trained last year.
The IDC predicts that by 2013, at least 75 percent of the U.S. workforce will be made up of mobile workers.
This week, President Obama announced the launch of Startup America, a national campaign to celebrate, inspire, and accelerate high-growth entrepreneurship. A partnership between private companies, such as IBM and Intel, and public organizations, such as the Small Business Administration, the campaign promises to provide both an economic and a social framework for economic growth and sustainable job creation.
What I hope Startup America supports is one of the fastest growing economic sectors in the world today: training knowledge workers. A major cost for companies is training: In 2009, more than $47 billion was spent in the U.S. for training services with outside vendors, and $126 billion was spent on training in total. Forty percent of these costs involved bringing participants to a physical classroom, where training takes place. Given the prediction by the IDC that by 2013, at least 75 percent of the U.S. workforce will be made up of mobile workers, it makes more sense to leverage technology for virtual training and save the expense of travel and time off work.
The next step for Startup America would be to include a roster of virtual training programs as an integral part of its support for startups and their staff. Besides saving time and money, virtual training has the potential to deliver a superior learning experience than does a physical classroom. A recent white paper 3g Selling coauthored with Citrix demonstrates that a best-in-class, instructor-led and live virtual training program can engage learners, increase the rate of program adoption and behavioral changes, and improve performance results.
What startups need besides money and mentorship is the ability to provide training quickly and effectively to an ever-growing pool of knowledge workers. We would hope that Facebook—a partner in Startup America, which is hosting a dozen or more Startup Days around the country to provide entrepreneurs access to expertise, resources, and engineers to help accelerate their businesses—will include virtual training vendors in its offerings. And although the field of virtual training is crowded, there is enough variety among training offerings—such as 3g Selling’s use of a broadcast studio format combined with live, virtual training—to satisfy and support startups, as well as established businesses, everywhere.
Martyn Lewis is a principal at 3g Selling, which provides clients with transformational sales training experiences delivered live over the web. For more information, visit www.3gselling.com.