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SPECIAL DOUBLE ISSUE: SALES

The Sales Learning
Because new-product launches often take
longer and cost more than expected, many
promising offerings are prematurely
aborted. Smart companies give
themselves time and money enough to
climb the sales learning curve before
ramping up the sales force.

c rve by Mark Leslie
and Charles A. Holloway

W hen a company launches a new

YEL MAG CYAN BLACK
product, the temptation is to imme-
diately ramp up sales force capacity to ac-
quire customers as quickly as possible. Yet
in our 25 years of experience with start-ups
and new-product introductions, we’ve found
that hiring a full sales force too fast just
leads the company to burn through cash
and fail to meet revenue expectations. Be-
fore it can sell the product efficiently, the
GARY SAWYER

entire organization needs to learn how cus-
tomers will acquire and use it, a process we
call the sales learning curve.

july–august 2006 115

and independent of. involving all customer-facing fully satisfy customers. Managers believed: “If we can through the give-and-take between the company and its build it. Instead of following conventional sales will they come?” wisdom. The improvements in model. the customers. (See the ex. and the competition. sales yield that result from this organizational learning and the design of effective sales incentives. He is based in Portola Valley.edu) is the Kleiner Perkins Caufield & Byers Professor of Management. manufacturing. Over time. the inevitable design mod- from. So the biggest risk for most companies has shifted hibit “Learning Processes for Manufacturing and Sales. As customers adopt and use the product. time required to educate customers about the offering The sales learning curve we are describing is separate and learn how they will use it. the ment cycle is more predictable. let’s consider for work groups and had never been upgraded to effi- some of the unexpected problems start-ups and established ciently support large organizations.stanford. The company’s founders recognized that tion more accurately. avoid the underlying infrastructure of market-leading e-mail sys- disastrous cash shortfalls. company (or in launching a brand new product ucts follow a sales learning curve that’s analogous to the from an established company) was the feasibility manufacturing learning curve but one that unfolds of the technology.SPECIAL DOUBLE ISSUE: SALES The concept of a learning curve is well understood in companies run into when they launch a new product – manufacturing. the development of a repeatable sales port. the entire process be- comes more effective: The more times a process is repeated. planning. Emeritus at Stanford Graduate School of Business in California.” Today. climb the curve. and CEO of Veritas Software. and operations departments. problems that could be anticipated if the sales function rience back and forth between a production line and the were viewed as a learning process. and the retired founder. But first. and product development. they will come. both new in point. the identification and resolution parts of the organization: marketing. plan resource alloca. wenty-five years ago.org . the individual learning curve ifications needed to deliver a robust product that will and more comprehensive. and experienced. engineering. sales model right. the major risk in creating a Start-ups and existing companies launching new prod. chairman. and reduce both the time and tems such as Microsoft Exchange was originally designed money required to achieve a profit. Holloway (holloway_chuck @gsb. thanks to the greater organization modifies both the offering and the pro. California. a lecturer at Stanford Graduate School of Business and Stanford’s Graduate School of Engineering. Most companies expect sales reps to go from new sidebar “How Big a Sales Force?”) That’s because the con- employees to fully productive salespeople during their ventional wisdom fails to address a number of challenges first months on the job. Scalix. of service issues. The New-Product Sales Challenge T the more efficient it becomes and the lower its cost. the market. tools. set appropriate expectations. the selection of appropriate market positioning. Midcourse correction at a start-up. availability of subcomponents and robust development cesses associated with making and selling it. product sup. a software In this article. purchasing. product. Charles A. (For an example of how that works. A large sales staff hinders more than it helps a company Entrepreneurs increasingly must ask: “When we build it. we will look at the sales learning curve company that develops e-mail and calendaring programs as a framework for helping managers and investors de. Here’s a case process affect all of the sales representatives. new-product launches and add sales capacity too quickly. hosted on Linux. the product develop- customers. They believed that Mark Leslie (mleslie@leslieventures.com) is the managing director of the private investment company Leslie Ventures. It’s important not to confuse the organization’s sales the result is often disappointing revenue growth and a learning curve with a salesperson’s individual learning cash shortfall. 116 harvard business review | hbr. see the curve. as they learn more about the involved in creating markets for unfamiliar products: the Hiring a full sales force too fast just leads the company to burn through cash and fail to meet revenue expectations. Employees transfer knowledge and expe. sales.”) from getting the product to work to getting it to market. the firm should focus first on organizing itself But if start-ups apply conventional sales wisdom to so it can learn from customers and respond to them. is one start-up that struggled to get its velop thoughtful launch strategies.

While a small group of people trained on aimed to cut total cost of ownership by 50% to 60%. OpenMail system. scalable. Production Line 1 Customer 1 Pu ting rch rke asi Ma nt geme ng ct Mana Production Produ R Man TIE ufac CU Line 2 turin g PRODUCT arketing Customer 2 STO CTI O N FRON Product M Product Engineerin MER FRONT g Product Engineering gineering Produ Manufacturing En ct Sup port Production Sal ODU s ation es E Line 3 Oper ngi Customer 3 IE R Sal nee PR ng es ring nni Pla Production Line 4 Customer 4 Manufacturing Learning Sales Learning the disruptive nature of the Linux operating system cre. and the factory floor. career detour. it became evident that the have to iterate on with customers. Linux existed in most organizations in Scalix’s sales Scalix launched its product. The same is true for the sales strategy that will bring that product to market. Scalix learned its product was leader with enterprise experience and sell directly to CIOs not quite ready for prime time. These department managers large enterprises that after a few sales to small public sec- didn’t want the headache of moving their Windows-based tor accounts. It emerges from the give-and- take between all the departments involved in its creation – purchasing. based on Hewlett-Packard’s pipeline. In early interviews. It. The second problem was closely related to the first. too. but there’s another 10% you of unexpected problems. reliable. the operations team one lots and trials with customers and learned the full extent level down – the people who would be responsible for of customers’ requirements for enterprise-class e-mail. Scalix faced such an uphill battle selling directly to jected Scalix’s solution. ated a rare opportunity for a new supplier to enter the Scalix discovered that many large companies needed to mature e-mail market with a solution that was more se. operations. it overhauled its go-to-market strategy to hit the administrators themselves viewed moving to Scalix as a Linux evangelist and early adopter community first. facing applications on Linux. and you think you have a market- However. And the Exchange 2004. the company corrected its course.” keeping the system up and running on a daily basis – re. In many cases. Then you discover that you really don’t. engineering. one that involves all the departments that face customers. Specifically. they were not working on e-mail. Early adopters. CEO Glenn Winokur ex- at large companies. large corporations. The third problem was of an entirely different order Its initial strategy was simple: Recruit a high-powered sales and perhaps the thorniest. were running only customer- YEL MAG CYAN BLACK responded enthusiastically to the promised cost savings. the company encountered a number You’re 90% of the way there. manufacturing. as Scalix moved deeper into the sales cycle at ready product. CIOs such as Amazon and eBay. and cost effective. First. in July 2003. they e-mail on it. with a particular emphasis on smaller targets in the july–august 2006 117 . get more comfortable with Linux before they would run cure. In mid- Exchange administrators over to Linux. From the time we came CIO was not the primary decision maker for purchasing out and through all of 2003. we iteratively worked on pi- e-mail systems. so the company decided to expand its sales capacity quickly. plained: “You come out. planning. is an iterative process. Th e S a l e s Le a r n i n g C u r ve Learning Processes for Manufacturing and Sales An innovative product does not arise fully formed from a flawless development process.

used to selling mature products. a number of They hire experienced sales talent far enough in advance problems arose shortly after the launch.SPECIAL DOUBLE ISSUE: SALES higher education and public sectors. a set of software applica- work and in the process learn how to better meet their tions preconfigured to run on servers from vendors like customers’ needs. Both sales teams received mistakes in launching a new product that start-ups do. This frustrated the regular sales team. So Veritas decided to teract with real customers deploying a product to do real launch a new class of products. ing successive releases of its existing products. and IBM. and sales staff need to resolve a host of issues: PRODUCT DEVELOPMENT MARKETING SALES Completeness Positioning Distribution Channels > Features and functions > Competitive analysis > Number and type > Interface to existing ecosystem > Market segmentation > Channel support and training > Ease of installation > Marketing messages Sales Force > Proof of value proposition (ROI) > Sales model Correctness > Value to customers > Packaging > Sales pitch > Reliability > Training and development Promotion > Ease of servicing > Collateral materials > Lead generation > Advertising. It was very good at sell- sales cycle. commissions on the new product. The company’s initial go-to-market strategy was to cre- Breaking new ground at an established company. but it was not yet either fully reliable or fully func- and wait for the sales team members to deliver their ex. Scalix was named one of Red Although its signature file and disk management software Herring’s 100 top private companies of North America in was competitive in its features. But Scalix could have saved scarce re. now part of Symantec. beginning. the new model offered much better econom. which was pected quotas. a bundled hardware and software solution like those from Such adjustments aren’t unusual when companies in. Dell. In late 2001. EMC and Network Appliance. and then they sit back to go. tional. Scalix was a large software company that sold three major soft- hired two in-house telesales representatives to drum up ware products through an international sales force of leads. shows. The revised sales company’s track record in new categories was spottier. This bundled solution would sources and learned important lessons far more quickly offer the cost advantages of buying commodity PC server had it delayed hiring a traditional sales force and focused hardware from existing vendors together with a complete all customer-facing departments on learning from the plug-and-play software package from Veritas. but the ics than the original field sales approach. strategy is working well.000 field employees. With lower-priced salespeople and a compressed more than 2. Veritas had ex- of the launch to allow them to come up to speed (based pected the product to be completely developed and ready on conventional sales wisdom). and PR > Technical support Fit > Ease of use > Customer testimonials Sales Stage > Suitability for environment > Learning Pricing > Across market segments > Development > Across channels > Expansion 118 harvard business review | hbr. where Linux accep. tance was strongest. marketers.org . However. HP. Product developers. many customers preferred 2004 and 2005. To execute this new strategy. Veritas Software. ate an overlap sales force that would work closely with Established companies often make many of the same the regular software sales force. Reps were compen- What Goes into a Comprehensive New-Product Strategy Launching a completely new product into a new market is not just a matter of hiring an army of salespeople and letting them loose once the product is created. Compaq.

marketing. the company learns Strategy. themselves only after some preceding issue has been dis- hibit “What Goes into a Comprehensive New-Product covered and addressed. What the Organization Needs to Learn E very business goes through a unique learning process. it could have anticipated and made provisions for these problems. making them less likely to cooperate with Veritas at the field sales level. doesn’t happen all cated questions. and each industry. ment. The broad people in an effort to gather more feedback more quickly: range of issues that all three departments must resolve Many problems are discovered sequentially. Gaining that knowledge. reliable. the prod- uct will probably not have ex- actly the right features or work exactly the way it should at the YEL MAG CYAN BLACK outset. Un- derstandably. of course. They need to segment its market. enough to reach a level of steady sales.” When you look at the length of the list. It develops grad- need to correctly determine which features would make ually: The company makes initial assumptions. The modified offering reaches even more cus- need to correctly analyze the product’s position relative tomers. Veritas abandoned the initiative a little over a year after its introduction because the revenue remained substantially below expectations. the to its competition. which the product valuable to customers. Marketers customers. and efficient to service. The sales and marketing processes may not be focused initially on the right cus. This process termine the number and type of distribution channels. july–august 2006 119 . far more than ramping up a large sales force. the new bun- dled offering was seen as a po- tential threat to the company’s traditional hardware partners like Sun Microsystems. cannot be short-circuited by sending out an army of sales- develop a sales model. and product has a different set of drivers. pany’s progress along the learning curve. Th e S a l e s Le a r n i n g C u r ve sated for sales of the new product but not enough to make up for the extra time and effort re- quired. work up a sales pitch. In addition. and the sales efforts – accelerating the com- need to develop packaging. Had Veritas better understood what was involved in the sales learning curve for this new ven- ture. savvy regular sales- people never enthusiastically sup- ported the new product. They message. The product developers. revealing to launch a successful product is summarized in the ex. and sales must resolve a host of compli. They need to make it are modified iteratively as feedback comes in from early easy to use. To traverse the learning curve. comes easy to see that launching a new product involves tomers. product develop. for instance. Nor does it happen in a vacuum. it be. The sales team needs to de. As the Scalix and Veritas examples show. whose further feedback hones the product. company. at once. Eventually.

SPECIAL DOUBLE ISSUE: SALES The Sales Learning Curve C ompanies have long measured their progress along the manufacturing learning curve by tracking costs How Steep a Curve? per unit–the more they learn about the manufactur- ing process. Still. so that you can deploy your sales force. “Sales yield” is defined as the average annual much longer and flatter initially than one for sales revenue per full-time.” 120 harvard business review | hbr. and then flattens the learning curve.org . the curve for launching pany learns about its product. the sales yield never reaches expected levels. Standard its sales curve is shifted to the left and far steeper. applying the con- TIME cept of a sales learning curve allows you to understand New Product. the more efficient it becomes at selling. the more efficient it becomes. resem- SALES YIELD Quota bling the second curve in the exhibit. gap – that is. and its learning process was far quicker. sales yield for a new product into an established market. The sales learning process was long and complicated. faster. The gateways from one stage Follow-On Product. fully trained and effective sales introducing a variation of an existing product representative. New Market where in the learning process your launch is. mar- TIME keting. resulting in a sales yield curve that looked like the first curve in the exhibit “How Steep a Curve?” By contrast. it created a whole new product category. the competing Handspring. market. accelerates for a while. the transition phase. the longer starts out slowly. when the Palm Pilot was intro- and aborting too soon. and sales process. For example. Accordingly. Clearly. and represents a different stage in your production. the longer it takes for sales yield The steepness of the curve – a measure of how rapidly to reach targeted quota levels. and the higher the a totally new product into a new market is sales yield. That’s because the sales learning process unfolds in three distinct phases – the initiation phase. Tracking sales yield can be more challenging than measuring manufacturing production volumes and costs because revenue-generating activities tend to be less predictable than production. which we call the “traction point. resulting in cash shortfalls and premature death for promising products. duced. and sales strategies. can make the achieve targeted levels–varies substantially from product difference between pioneering a new market to product. and the Progress along the sales learning curve is lower the unit cost goes. Typically. engineer- ing support. product revenues reach the break-even point and then tations appropriately. or even the break-even point. the greater the revenue out as the product matures. Progress along the sales learning measured by tracking sales yield over time. therefore. and management time appropriately. was launched with a “better. Standard and reach the break-even point and profitability SALES YIELD Revenue Quota more quickly. a follow-on product in a now-established market. in a classic S-shape curve. marketing efforts. curve is measured in an analogous way: The more a com- As you might expect. Each phase requires a different size – and kind – of sales force. and the execution phase – as the ex- hibit “Ramping Up the Learning Curve” shows. is to track sales yield over time and Gap adjust your go-to-market strategy as you move along the curve. Setting expec. Existing Market to the next correspond to two markers of profitability level – the break-even point and some targeted level of steady sales. For many new-prod- Revenue Gap uct launches. Sales Force Planning for Launch T he way to shift the sales learning curve to the left. cheaper”strat- egy.

unfold in three parts. Typically. Once dent that the product has achieved traction and is enter- the sales yield equals the fully loaded expense per sales ing the execution phase. Still. Th e S a l e s Le a r n i n g C u r ve The initiation phase. a price book. and a talent for bringing cus. The original responsible for bridging the gap between custom- renaissance reps should continue to stay focused on learn. TIME tomers together with various functional teams within the company. Typically. A heavily commission-based pay plan is not only unlikely to achieve sales objectives but can inhibit learning. ers. that is. and marketing communications in perfecting both the offering itself and the go-to-market Initiation Transition Execution Phase Phase Phase strategy and programs. the company needs more tradi- What constitutes “traction” varies from company to tional salespeople–what’s known in the industry as “coin- company and product to product. are very different from those needed in the assign large sales quotas in the initiation phase. able. and bers of the sales team should be encouraged to focus in. and those that do will require signif. In this phase. phase. Toward the end of the initiation ical and communication skills of the renaissance reps. and sales are beginning to accelerate. three to four salespeople are enough to start the learning process and to make sure that the prob- lems encountered aren’t just the result of a bad hire. different again from those needed after most issues stead on learning as much as they can about how custom. a deep interest in the product technology. and adding sales capacity at a rate commen. Marketing leadership is surate with the rise in the slope of the curve. the company should have a pretty good idea of what to expect in terms of steady state sales yield for the product. Salespeople must be resourceful. a tolerance of ambiguity. when the product is being refined. a sales plan. Once sales management is confi- of customers. to bring in orders. companies generally have acquired a critical mass The execution phase. Every- ing. Break-even point clude a facility for communicating with many parts of the organization. and lasts until the break-even point – that is. second stage. when it has been beta tested. The staffing and financial re- icant incentives. A small sales force not only keeps costs down but SALES YIELD Traction point is more effective in supporting other parts of the com- pany. and the engineering organization. This second phase lasts until the sales yield reaches will allow. sition phase. few customers will be willing to consider The go-to-market strategy for a new product should buying the product. The types of skills needed during this phase differ from those needed to sell more mature products. The people hired at this stage – we call them “enlight. By this point. They in. during the initiation phase. and marketing materials the fully loaded cost per sales rep as the end of the tran. one on the marketing team has to be knowledgeable july–august 2006 121 . This phase begins when the prod- uct is ready to hit the market. when the formula for success has a point where company management can see that the been developed and all of the support requirements for product has achieved real traction in the market. have been resolved and sales have reached a sustain- ers will use the product so they can support engineering. before the product is It’s both unrealistic and potentially dysfunctional to profitable. predictable level. We think of this kind of person as the “renais. sales reps can be hired as rapidly YEL MAG CYAN BLACK rep. ened reps”– should be comfortable contributing to a still- sance rep. we’ve found that operated reps”– who require nothing more than a terri- a useful rule of thumb is to consider a sales yield of twice tory.” evolving sales model but do not need to have the analyt- The transition phase. Ramping Up when sales yield reaches a point where revenue per sales the Learning Curve rep equals the fully loaded cost per sales rep. It’s also inefficient to hire too many sales reps in this phase. sales reps are in place. product marketing. sales management should focus roduct marketing and marketing communications on developing a repeatable sales model. The Role of Marketing P In the transition phase. during this time. able to develop their own sales models and collateral materials as needed. refining market should ideally be the center of learning activities positioning. sales reps. The mem. sources needed in the first stage. it’s safe to assume you’ve moved into the transition as the company’s management and financial constraints phase.

Plugging in this lower marginal contribution cost per rep. and proficient at communicating the product itself to high standards of completeness. the typical time required to planning model.000 curve. and increase these ence or the experience of other salespeople selling similar expectations gradually. That works fine for mature products.000 per year in T&E expenses plus $80. But let’s say that our company is a start-up. is that it curs $50. neering and G&A personnel. The software busi. subtract.8 million per rep. with renaissance reps. But closely tracking your sales yield. which fined. able to understand cus. and tion. people needed to reach the break-even cash flow point is to in an effort to be conservative about selling a totally new prod- divide the total fixed costs by the marginal contribution of uct in a new market. The basic formula for calculating the number of sales. he prudently reduces that figure by about 20% no magic formula for predicting when that point will arrive. 122 harvard business review | hbr. will prevent you from wasting critical funds in the ing the total cost per rep of $495. and a sales rep in. To figure out exactly how and promise executive management that they’d reach break- many reps to hire and when. in this revenues were coming in far more slowly than they ever case $165. doesn’t take into account the organization’s sales learning ministrative and operating expenses. to $2 million in average revenue per rep. early stages. they want to ramp up sales quickly. and engineering that their needs will be accurately effort. but that’s an expensive use of scarce cash resources. That totals $330. reps will not generate enough instance. annual revenue it’s reasonable to expect an average rep to So what’s the right way to approach capacity planning for produce once she’s come fully up to speed – the “standard a new-product launch? Start out with very low assumptions quota. and the sales VP.3 million per year. more than just an understanding of the languages of Once beta testing is complete. that our software company hires a star sales vice revenue to cover their total costs. There can be requires substantial credibility to convince customers. contribution per rep will therefore be negative in this phase.SPECIAL DOUBLE ISSUE: SALES How Big a Sales Force? A t the time of a successful beta test. and tying your planning ness has high incremental margins of around 90%. To that must be added indirect costs hired from the outset. train and deploy new sales reps. He’d get these reps on board as soon as possible sales reps as early as possible. most sales leaders rely on their past experi. pressure to start the campaign early to support the sales sales.000 from the expected yield. the go-to-market strategy had yet to be settled. In an effort to cover Our company’s fixed costs (engineering and G&A) are run- those costs and become cash positive as quickly as ning around $12 million per year. for during the initiation phase. vious experience. reduces his standard quota from $2. and typically adds as much as 50% of the direct cost per rep. consisting of engi. when the product was still being re- (such as sales support and management personnel). about expected revenue per salesperson. young companies the sales VP arrives at a marginal contribution for an average typically carry a large fixed cost. sending the company further into the red and disappointing The next. That drops the marginal contribution per minus total cost per rep). Based on his pre. and fit. Anticipate that products.5 mil- an average sales rep (revenue minus cost of goods sold lion to $1.000. Marketing must hold tomers and their needs. communicated to the other parties.000 in ad. there’s among reps. rep of around $1. The first step is to calculate total rep to $585. So. the company must de- these disparate groups and individuals in the company.5 million. per year.000 would for a mature product.” To do so.org . so the sales head concludes possible. and most challenging. Suppose. It cide when to launch a marketing campaign. That brings the total cost per rep to $495.5 million in revenue per year. though. even within six to 12 months. Say a software company pays its average sales rep The problem with applying the above methodology to $200. about the product technology. curve. Cash flow would be strained. Given that the marginal president from a Fortune 100 software firm.000. step is to figure out what investors. start-ups or new-category product launches. Only when you see the productivity of existing reps ap- so that’s the figure he starts with as the standard quota. proaching the point where they cover their total costs should Then to account for attrition and uneven performance you consider expanding the sales force. quarter by quarter. would lead him to conclude he needs more like 21 sales reps. Conventional that he needs about nine or ten salesº reps to reach the break- wisdom suggests that the only way to drive sales is by hiring even point. Our start-up would be swamped if all 21 reps were in direct costs per rep. he might expect a fully effective sales rep hiring more people will merely deteriorate your cash posi- (FESR) to produce about $2. Unfortunately. But success in this role requires correctness.000 per year (base plus commission). yielding assumptions to the different stages on the sales learning an expected contribution of $1. most sales leaders use a capacity.

this phase of the business. and you think you have a market-ready product. The done (and sometimes even before). Indeed. The first is to introduce an or. and nizations encourage engineers to go on to the next chal. and they typically tie engineer. companies need instead to focus the time to profitability and the cost of breaking even. on the time creasing the success rate of start-ups and new-category it takes to reach the break-even and then sustainable product launches. Executives need to take K eeping the product development engineering responsibility for projecting the shape of the sales learn- team intact at least through the initiation phase is ing curve based on realistic inputs and for ensuring that essential to the success of a new-product launch. and to plan appropriately. in- engineering. This all learning opportunities are identified. about the ways customers use it in the first two stages.” correct is not the most glamorous phase of product develop. target ing with media and other resources so they can respond markets. CEOs and divi- must develop a nimble launch schedule that can adjust sion managers must direct the efforts of those who drive to the requirements of each stage by preparing collat. tives and engineering management: After beta testing is and hiring plans across the entire organization. see page 191. the learning and participate in all crucial product and or- eral materials that can be easily modified and by work. The most important “You come out. To move along the learning of the sales learning curve allows companies to reduce curve faster. they curve”– that is. the whole management team should be focused on the the positioning will evolve. Then. of the curve should drive the design of revenue. the reward systems in most R&D orga. longer the initiation stage. Applying the sales learning ing focused during launch. the sales learning curve vide the right incentives and foster the right culture to permits you to see all the aspects of a set of activities – in support the learning curve. New engineers have to be trained. the longer the learning pe- nization typically turns to the next product. Cleaning up riod and investment phase will be. will underwrite their efforts to gain enough experience to stretching out the time required to ramp up sales yield. it can distract the organization from its primary learning goal and set false expectations among The Role of General Management I the sales and engineering groups. role of all for senior executives is setting realistic expecta- ment. july–august 2006 123 . executives don’t get actively involved in sales been completed. the early manufacturing runs to stimulate volume that and it takes them longer to make design modifications. though. lenge. But when companies allow those most intimately High-tech companies routinely “price on the learning knowledgeable about a new product to move on. the engineering orga. the source of learning. a premature t is unlikely that incentives will be established to keep marketing campaign can set false expectations in the engineers involved with the product once it hits the marketplace that will be difficult to correct. To order. strategy until a revenue gap appears and cash becomes scarce. In addition. Th e S a l e s Le a r n i n g C u r ve What’s more. quickly once the final product and sales strategies have Too often. Marketing communications customer frontier. market without the direct and daily involvement of gen- As the company tweaks the product and learns more eral management. the go-to-market process – through a new lens ganizational measure that reflects the importance of stay. expense. ganizational decisions concerning functionality. they deliberately set selling prices low on YEL MAG CYAN BLACK slow down learning. the board. and the lower the and making sure that existing products are complete and revenue expectations should be set. Then you discover that you really don’t. Worse. as well as marketing and sales. curve as a strategic construct allows management and turing success in terms of how long it takes to achieve investors to share a common language in understanding scale production volumes. But it is during the early stages of the learning curve that top management can have maximum impact on the The Role of Engineering ultimate outcome of the venture. manufacturing learning curve. and marketing strategy. Companies measure manufac. And successful management ing to this metric as well. lower costs and ultimately reap higher profits. this case. during the first two phases. Like the Engineering management can take several steps to pro. the shape is a significant challenge for both company execu. HBR OnPoint 1003 to be rewarded by an assignment to another big project. tions – guided by the curve – for investors. engineers who stay involved throughout the entire learning process need Reprint R0607J. profitable levels of sales yield. employees. sales channels. What’s more.