Growth Strategies: Sell Mates
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XA Systems Corp.
Rest assured, Lacy Edwards is no composite. It just happens that the president and chief executive officer of XA Systems Corp. (#66) sounds like a man whose goals are so in tune with our Inc. 500 requirements, you'd think we invented him to justify our criteria. "Sales," says Edwards, 42, "is this company's dominant, driving force."
Which is, we'll grant you, rather unexpected given the nature of the business he is in. XA, based in Los Gatos, Calif., develops and markets applications software. Its products, starting at $40,000 apiece, aren't exactly the stuff of door-to-door sales and pink Cadillacs.
XA may be a technology company, but having the very best technology, Edwards reasons, is not always synonymous with having a fast-selling product. "We're not interested in developing stuff that is just neat," he says. "People have to want it." While most technology entrepreneurs grumble about their salespeople, Edwards is willing to put the sales department above even himself. "If a few of them aren't earning more than I am, we're in trouble."
Edwards came aboard -- from IBM -- in 1986, when sales were $1 million a year. He knew full well that any software company's most expensive investment is in its distribution channel. XA's cost of sales is sky-high, amounting to 25% of revenues, 50% if technical support and marketing are added in. The sales cycle, which usually runs at least 90 days, includes four stages: an initial appointment, a demonstration, a 30-day trial, and, if all goes well, a closing. Each stage involves at least one on-site visit, often by a sales rep and a member of the technical staff.
Everywhere you look, people are selling. Visit the marketing department, for instance, and you'll find nine people on the phones, setting up appointments for the 45 North American salespeople. "The marketing department does not make any strategic or positioning decisions," says Edwards. "It enhances the productivity of our salespeople by making sure they don't spend their time looking for people to sell to." All salespeople are required to make 40 on-site customer visits a month. Their goal, says Edwards, is to close a sale in 3 to 4 months, instead of the industry average of 6 to 12.
Edwards's strategic decisions reflect his rigid focus. In the past three years he has considered more than 100 potential new products and chosen only 6 -- all of which fit snugly into the company's distribution system. For instance, Edwards refuses to consider products that retail for less than $40,000. And XA rejects products that open up new markets, sticking strictly to software destined for large data-processing companies. Even the internal product-development staff focuses on enhancing existing ones because they already fit into the distribution system.
That may be well and good for now, while the company's current products are hot. But what happens when there are no new products with which to stoke the sales engine? Might Edwards be sacrificing long-term viability for short-term sales gains? Not so, he argues, claiming that as long as the company stays focused, he'll have no trouble finding products to slide down his distribution chute. "The world is full of great products," he says. "You can even be successful with a great distribution system and a mediocre product. We're not blind about opportunities, we're just disciplined about what we'll look at.
"It's true, we're not doing this like normal folks do. But we're growing much faster; so who's to say they're right?"* * *
Niche: High-end applications software
Strategy: Make sales, not technology, the driving force for the entire company
Headquarters: Los Gatos, Calif.
Scope: International -- Joshua Hyatt