Improving a company’s bottom line can improve ratios and financial statements, but it often doesn’t fundamentally change the company’s long-term prospects. Resilience and robust financial health require strong top-line growth as well.
Although many agree with this idea, the implications are not fully understood. To ensure strong top-line growth, a CEO’s strategic role requires that they: set goals for revenue and profitability, predicate those goals on strategic objectives rather than adjustments to last year’s plan, and actively manage revenue growth.
Isn’t the CEO’s job to delegate?
“But the active management is a delegated responsibility,” you say. “Simple execution for which a CEO needs to hold their VP of Sales accountable.”
And until recently you would have been correct. But market changes, evolving buyer behaviors, and the impact of technology demand an enterprise approach which transcends the traditional silos. The CEO must personally and conspicuously lead the revenue growth initiative for four reasons:
- Strong revenue growth will be a key factor in the valuation of companies selling into the impending tide of boomer business sales.
- Shifting a company’s revenue growth mindset from “selling” to “helping prospects buy” is required. And, that’s a company-wide change which only the CEO can champion and drive.
- Adapting a revenue growth model to buyer behaviors requires resource allocation and staffing changes.
- The technology which provides the platform for this shift almost inevitably straddles traditional silo boundaries. Conflicts which require CEO/presidential intervention result.
The CEO needs to manage growth not for lifestyle income, for pride or even to keep the bank off their back. CEOs need to manage revenue growth, as it is the largest factor in valuation which they can control.
It’s estimated that 9 of 15 million business owners in the US are “baby boomers.” Many of them are beginning to prepare for transactions – whether a straight sale or otherwise. As much as $11 trillion will soon be transferred.
Consistent, predictable, replicable revenue growth will be a highly valued and distinguishing characteristic as a “sellers’ market” becomes a “buyers’ market.” As valuations succumb to oversupply pressures, it will be an owner’s opportunity to buck the trend. And it’s not a factor that’s going to animate your VP of Sales.
A company’s approach to marketing, sales, and customer service permeates the cultural DNA. It’s something which is core to how the company sees the world, operates and interacts with stakeholders.
This is powerful – it’s why a culture is so important. The implications for positive or negative performance are significant. And the existing culture of sales creates enormous inertia to overcome and increases the likelihood of reversion to outdated habits.
Therefore, shifting from a mindset of selling, to one of helping buyers buy is not only necessary in a world where buyers are 70% through their buying process before they’ll speak to a rep and where 93% of B2B purchases start with an internet search; but it’s more than just a tactical tweak. This shift is a change management challenge. The cultural change will only occur if the most senior leadership advocates and consistently models and reinforces the new behaviors and mindset. The CEO must lead this change.
Organizational chart disruption
Most companies have a sales team several times the size of the marketing team. And during annual planning, resources are allocated based on historical norms, with incremental adjustments from year to year.
That allocation was natural and appropriate when the role of marketing was limited to communications, PR, graphic design, competitive research, and pricing. It’s inappropriate in today’s world where buyers research solutions to their problems and formulate their buying criteria in the shadows of the internet – relying on digital anonymity to avoid unwelcome interactions with sales reps.
Today the function of what was typically called “marketing” includes much of the lead generation, project creation and virtual sales – through 70% of the buying journey, and often up to the point of negotiation.
Neither the traditional bifurcation of marketing and sales nor the traditional allocation of resources and headcount remain valid. A “revenue growth” function is required, with skills to create approaches mapped to buyer expectations. A recent McKinsey Insights article suggested that the reallocation of sales and marketing resources is one of three key priorities for B2B companies seeking vibrant growth.
But no VP of Sales will volunteer to slash her staff just as very few Directors of Marketing have the skill set and perspective to manage the entire revenue growth continuum. Once again, only the CEO can successfully drive this change.
Information Technology (IT)
IT stands astride key intersections of business functions…and disrupts critical flows of information. That’s been tolerated with grumbling.
Too often, IT’s hammer has been some sort of homegrown solution or an amalgamation of poorly integrated shrink-wrapped tools. And not surprisingly, therefore, every problem has been a nail for which there wasn’t an easy solution. Layers have been built upon layers of expedient fixes and now business is beholden to IT. And almost invariably when a requirement is articulated, the IT response is “Sure, I can see why that would help. But….”
No more “buts.” It’s time for the CEO to push back. Revenue growth success requires agility, closed loop reporting and detailed real-time metrics to identify the revenue impact of discrete activities and to personalize interactions with prospects at a very granular level.
It’s the CEO’s responsibility to staff the IT department with a combination of technical skills (many of which can be outsourced) and broad, interdepartmental perspective. And in a process of continuous improvement, each barrier needs to be fixed rather than tolerated and worked around. If not, the power of fully integrated data will never be realized and buyers, with nearly unlimited options, will drift to competitors whose management developed an IT infrastructure that served as a viable business support tool.
The CEO can’t allow the IT tail to wag the revenue growth dog.
Pan-organization leadership and management
Successful revenue growth is critical to company strategy and resilience. It will impact valuation, and is therefore intensely important to owners. Adapting to today’s market realities requires a pan silo reach and perspective; it requires strategic vision rather than operational tweaks; and it likely means fundamentally changing traditional organizational staffing and resource allocation models.
So sales growth is no longer a responsibility which the CEO can delegate and supervise. Instead success in the near future will require that the most senior manager embraces, models and expects substantially different approaches.
Today, revenue growth is the CEO’s responsibility.