Business Leaders Need To Agree On The Financial Impact Of Commercial Transformation
Managing a modern business is inherently complex, with lots of moving parts and dots to connect. Complexity is a fact of life – whether you are managing a supply chain, a factory, or a product design teams must manage hundreds of thousands of variables (parts, decisions, project steps, investments) to do their job.
Most businesses have created functional disciplines and models for dealing with this complexity. For example, asset allocation models and portfolio theory help Finance leaders manage thousands of investment choices and combinations to optimize return, cash flow and fiduciary goals. The leaders of industry have used tools like the Impact and Effort matrix to manage the hundreds of thousands of options, parts and initiatives involved in building cars, planes and rockets for decades. Scenario planning models allow corporate strategy teams to “war game” millions of different paths and investment strategies to grow a business profitably, sustainably and scalable.
To some degree, Sales and Marketing and Customer Success teams have been perceived to be different or less complex than these core C level functions. Sales is about relationships. Marketing is art. Service is responsiveness.
The reality is that growing a business is also a complex and interdisciplinary problem. “The real-world problem of growing a business is interdisciplinary in nature”, says David Reibstein, Professor of Marketing at The Wharton School of Business in the book Revenue Operations. “We need to do a better job of creating skills, structures, and leaders who can manage, coordinate, and align all these disciplines coherently around the customer,” Reibstein continues. “Being the captain that coordinates and leads all those functions in a business is a very big job. But an essential one.“
The modern commercial model has become far more complex and connected in the last twenty years growing a business has evolved into a digital, capital intensive, and data-driven team sport. Today, most B2B organizations are undertaking complex commercial transformations. More than half of B2B organizations are moving to a SaaS or recurring revenue model. A third (32%) of the businesses we spoke with are moving to data-driven selling. Still others are taking on digital transformation as their customers move online.
Finding ways to better manage this complexity to unlock growth in the business is what the emerging discipline of Revenue Operations is really all about. Revenue Operations – the alignment of revenue teams, systems, data and processes around the customer – represents a huge opportunity to create business value. Every business has dots they can connect – and financial opportunity to unlock the latent growth potential in their business by improving sales performance, monetizing customer data, and getting better returns from their customer, markets, data, channel and brand assets. Revenue Operations has become the fastest growing job in America as over 90% of B2B organizations are actively changing the way they lead and align revenue teams and the operations, systems, and processes that support them – according to the book Revenue Operations. “Revenue Operations is an integrated operating system that powers a connected go-to-market motion across the buyer’s journey and drives scaled revenue growth,” says Sid Kumar, the SVP of Revenue Operations at HubSpot.
My interviews with over fifty Revenue Operations leaders over the last six months found that most organizations are struggling to manage the complexity of the modern commercial model. Sixty two percent of Revenue Operations leaders believe the change management challenges of Revenue Operations are severely understated and gate the organizations’ ability to implement, adopt and act. This is because most Revenue Operations initiatives are the result of a top-down commercial transformation involving moving to a recurring revenue model, becoming more data-driven, or a digital transformation. Managing technology and data across many silos, systems, channels and stages in the customer journey was another driver of complexity. Fifty three percent cited rising technology complexity as an obstacle to realizing the potential of Revenue Operations in their organization. A third (32%) cited the complexity of aggregating, harmonizing and monetizing their customer data as a top barrier to success. In all the leaders who participated in the research identified a range of obstacles that held back their efforts to unlock more revenue growth from their teams, systems, data and digital selling channel assets.
The leaders we spoke with report they are unable to use traditional tools for managing the complexity of connecting the dots across the processes, teams, technology, and data to manage this change. They cite two obstacles unique to Revenue Operations that make it difficult to use proven management tools to effectively manage the complexities of growth.
The first is the general lack of consensus across the leadership team about the financial impact of commercial transformation. Seventy two percent of Revenue Operations leaders said the lack of consensus among their C-suite leaders about the financial contribution of commercial transformation to the business is holding back their efforts. This included the CEO and the leaders of Marketing, Sales, Success, Finance and HR.
This lack of a financially valid scorecard and vocabulary make it impossible for managers to set priorities across a vast set of opportunities to unlock growth, justify investments in growth technology, and motivate change within the revenue team. The lack of agreed upon financial impacts makes it difficult to establish incentives that foster teamwork across Product, Finance, Marketing, Sales, Service and Success silos towards the common goal of growing recurring revenues, profits and total account value.
The second is the lack of organizational maturity to connect the dots across the commercial system to make Revenue Operations a reality. Three quarters of Revenue Operations leaders feel educating these C-suite leaders is the number one key to realizing the potential of Revenue Operations in their organization. This renders proven management tools like the Impact and Effort matrix inadequate for managing an array of RevOps initiatives because the ‘effort’ axis is determined by intangibles beyond hard costs – such as willingness to change, ability to get different organizations to work as a team, the lack of architecture or blueprints for managing complexity of the people, process and technology of modern selling.
“Revenues Operations is much more of a strategic transformational issue than a tactical issue,” says Chris Fitch, who has led commercial transformation and growth initiatives at IBM for the last decade. “The scale and complexity of change involved is comparable to the ERP and digitization business transformations of the past few decades. What is different with Revenue Operations is that leaders struggle to agree on the value, financial return and effort involved in commercial transformation. While management tools such as Impact/Effort Prioritization, Experience Models and Portfolio Management inform the process, without consensus on Revenue Operations contribution to firm value and financial performance, it is difficult to mitigate the risk and complexity of these transformative programs.”
So what can business leaders do to overcome this complexity of commercial transformation and unlock more of the latent growth potential in their businesses? Our research uncovered four best practices that can help unlock more consistent and scalable growth today.
1. Educating senior leadership about the keys to executing Revenue Operations. Seventy five percent of Revenue Operations leaders told us that getting C-suite executives and senior management educated, bought in, and aligned about what is involved in successfully deploying Revenue Operations was critical to success. The reason was that while most operations leaders are fully capable of executing within their remit, only senior leaders have the span of control and remit to effect the change, investment, incentives, and risks needed for the transformation to happen. One of the biggest things holding back Revenue Operations efforts is horizontal communication and education between senior leadership and their operations teams, and vertical communication across the functions that support the revenue cycle. “For a technology implementation to succeed, it has to deliver value at all three levels of the organization and extend to the customer,” adds Sugato Deb, who leads Customer Success at Ansys. “The C-level executives who direct growth strategy, the customer facing employees that execute it, and the operations team that activates them.” For this to happen, C-suite leaders must understand and agree on the “smart actions” that balance time to value and capability building and connect the dots across the existing commercial systems, data sets and processes to create scalable and consistent growth. “The opportunity for growth leaders and their operations teams is identifying the actions that deliver and realize value for the client,” says Mary Beth Donovan, Global Senior Vice President, Customer Success at EDB.
2. Establishing consensus on the financial impact of commercial transformation. Seventy two percent of leaders agree it is crucial to establish a financially valid scorecard and consensus on the contribution of revenue operations actions, investments and initiatives to firm value and financial performance to prioritize actions, resource allocation and investments and incentivize change. Senior leadership need a shared understanding of the financial impact commercial transformation can deliver so they can align on priorities and effectively activate the required culture, compensation and resource allocation changes,” says Ashmi Pancholi, VP Revenue Operations and Analytics at Affirm. Without a clear mandate or common vocabulary to help leadership quantify value, communicate, budget, measure and prioritize actions, decisions and investments – commercial transformation agendas will be sidelined in favor of better understood but less impactful initiatives.
To do this, they need to be able to document the ‘math of growth” in their business and agree on the core growth levers in their business, according to Steven Busby, of the Revenue Enablement Institute. “Many executives running companies don’t fully understand the where the core growth leverage is in their business – which is oftentimes in cultural or process areas so they are not capitalizing on where the big and low hanging fruit opportunities are,” says Busby.
3. A baseline capability and operational maturity assessment. The overall maturity in commercial operations makes it difficult to generate returns from rapid advances in commercial technology, monetize a growing customer data set, and connect teams and processes to growth Net Recurring Revenues (NRR) and Total Account Value. Fifty three percent of leaders felt it is important to first establish a baseline of the maturity of the core people, process, analytics and technology capabilities and maturity required to implement and execute the revenue operations strategy. Several of the leaders in our Revenue Operations Community Offsite emphasized that the lack of maturity of their commercial operations, processes, analytical capabilities, and technology stack gated their ability to implement and change. “Revenue Operations is a team sport, and you can’t expect six grade soccer players to orchestrate and run complex plays and combinations as well as a world cup team,” adds Chris Hummel, Co-Author of Revenue Operations. “Assessing the reality of where your organizations capability to execute lie – from a people, process, and leadership perspective– provides a realistic handicap to your ability to execute complex “plays” and take ‘smart actions.”
4. A blueprint for connecting the dots. Establish a holistic top-down framework for connecting the dots across your existing commercial systems, data sets, teams and processes that balance time to value and with the core capability building required generate create scalable and consistent growth. For example, 43% of the leaders we spoke with reported their leadership teams cannot agree on the balance between building the core capabilities needed to execute Revenue Operations and “quick hit” financial impact to set goals and justify the effort. “There are so many different tools – the landscape has exploded,” according to Mary Lee, the Global Head of Revenue Operations at Lionbridge Technologies. “They are all in silos because of how bought them, who uses them, and the function that owns them. The big questions are who is the leader who brings all these pieces together and what type of holistic framework can we use that lets us see how these different things come together to create value?”
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