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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Crush siloes by connecting teams, data, and technologies with a new systems-based approach to growth. Growing a business in the 21st Century has become a capital intensive and data-driven team sport. In Revenue Operations: A New Way to Align Sales and Marketing, Monetize Data, and Ignite Growth, an accomplished team of practitioners, academics, and experts provide a proven system for aligning revenue teams and unlocking growth. The book shows everyone how to connect the dots across an increasingly complex technology ecosystem to simplify selling and accelerate revenue expansion. With Revenue Operations, you'll understand what it takes to successfully transition to the new system of growth without killing your existing business. This practical and executable approach can be used by virtually any business - large or small, regardless of history or industry - that wants to generate more growth and value. By reading this book you will find: * Real-world case studies and personal experiences from executives across an array of high technology, commercial, industrial, services, consumer, and cloud-based businesses. * The six core elements of a system for managing your commercial operations, digital selling infrastructure, and customer data assets. * Nine building-blocks that connect the dots across your sales and marketing technology ecosystem to generate more consistent growth and a better customer experience at lower costs. * The skills and tools that next generation growth leaders will need to chart the roadmap for a successful career in any growth discipline for the next 25 years. An indispensable resource for anyone who wants to get more from their business - board members, CEOs, business unit leaders, strategists, thought leaders, analysts, operations professionals, partners, and front-line doers in sales, marketing, and service - Revenue Operations is based on over one thousand surveys of and interviews with business professionals conducted during 2020 and 2021. It also includes a comprehensive analysis of the sales and marketing technology landscape. As a perfectly balanced combination of academic insight and data-driven application, this book belongs on the bookshelves of anyone responsible for driving revenue and growth.
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Veröffentlichungsjahr: 2022
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Table of Contents
Cover
Title Page
Copyright
Acknowledgments
Introduction
Marketing: Increasing Ambiguity
Sales: Rising Complexity
Service: Progressive Emergence
About Our Research
The Bottom Line
PART I: Revenue Operations, A System for Growth
CHAPTER 1: Take Control of the Revenue Cycle
Introducing Revenue Operations, a New Way to Create Sustainable, Scalable Growth
The Financial Link Between Firm Value and Growth
The Challenges of Growth in the Twenty-First Century: Customers, Disruptions, and Fragmentation
CHAPTER 2: Create Value and Impact from Revenue Operations
How Revenue Operations Creates Value
The Change Management Hurdle
PART II: The Management System to Align Your Revenue Teams
CHAPTER 3: Understand Six Pillars of the Management System
Commercial Leadership That Unifies Marketing, Sales, and Service
Commercial Operations That Support All Growth-Related Functions
Commercial Architecture That Maximizes the Return on Selling Assets
Commercial Insights Built on Customer Engagement and Seller Activity Data
Commercial Enablement Capabilities That Turn Your Technology into a “Force Multiplier”
Commercial Practices That Maximize Return from Customer Data, Technology, Content, and Intellectual Property Assets
CHAPTER 4: Lead a Modern Business That Aligns Marketing, Sales, and Service
Growth Levers Across Executive Functions
A New Generation of Growth Leader Emerges
CHAPTER 5: Use One of Three Leadership Models: The Tsar, the Federation, and the Chief of Staff
The Tsar: Putting a “CXO” in Charge of Revenue Teams
The Federation: An Alliance Among Leadership Functions
The Chief of Staff: A Revenue Operations “Rock Star”
Case Study: Enhancing Value Across the Company at GHX
PART III: An Operating System for Conecting Technology, Data, Processes, and Teams
CHAPTER 6: Assemble the Nine Building Blocks of Revenue Operations
What Does an Operating System for Business Look Like?
The Building Blocks of the Revenue Operating System
The Team That Connects the Most Dots Wins
CHAPTER 7: Connect Your Data, Technology, and Channel Assets to Acquire More Customers
The Importance of Strategically Managing the Return on Commercial Assets
Building Block #1: Revenue Enablement – CRM, Content, and Learning Technologies That Support Selling
Building Block #2: Channel Optimization – Selling Channels That Maximize Effective and Efficient Interactions
Building Block #3: Customer-Facing Technology – The Owned Digital Selling Infrastructure That Manages Customer Touchpoints
CHAPTER 8: Blend Data into Insights That Inform Selling Actions, Conversations, and Decisions in Real Time
Unlocking the Potential of Analytics to Ignite Growth
Building Block #4: Revenue Intelligence – Manage and Measure Financial Value
Building Block #5: Engagement Data Hub – Leverage Advanced Analytics to Connect Growth Assets to Value
Building Block #6: Customer Intelligence – Use Customer Data to Inform Decisions, Actions, and Conversations
CHAPTER 9: Extract More Revenue and Margins from Your Teams and Resources
Building Block #7: Talent Development - Attract, Develop, and Retain Commercial Talent
Building Block #8: Revenue Optimization – Allocate People, Time, and Effort Against Opportunities
Building Block #9: Revenue Enhancement – Increase Revenue Yield with Better Packaging, Pricing, and Personalizing Offers
CHAPTER 10: Tune the Revenue Operating System to Get Maximum Performance
Digitize Planning Processes to Improve Agility in Deploying Your Resources
Use Analytics to Make Better Predictions, Forecasts, and Investment Decisions
Adopt Advanced Modeling Techniques to Evaluate More Scenarios and Build Consensus
The Power of Simulations to “War Game” Scenarios, Pressure Test Plans, and Building a Common Purpose
The Power of Models to Algorithmically Balance and Tune Your Revenue Engine
PART IV: How to Get Started and Drive Impact
CHAPTER 11: Deliver Growth with Six Smart Actions
Deliver Growth with Smart Actions
Six Proven Smart Actions That Work
Get Better Visibility into the Revenue Cycle
Simplify the Selling Workflow
Share Marketing Insights with Frontline Sellers
Develop and Retain High-Performing Selling Talent
Make Selling Channels More Effective
Streamline and Personalize the Selling Content Supply Chain
CHAPTER 12: Tailor Revenue Operations to Work for Your Business, Big or Small
How Revenue Operations Can Grow Revenues, Profits, and Value in
Your
Business
Transforming the Large Enterprise
Actions Enterprise Leaders Should Be Prioritizing
Achieving Hyper-Growth for Small Companies
Actions Hyper-Growth Leaders Should Be Prioritizing
CHAPTER 13: Make the Business Case for Your Growth System, from Activity to Impact
Prioritize Actions That Will Generate Short- and Long-Term Value
A Financially Valid Framework for Connecting Smart Actions to Firm Value: The Revenue Value Chain
How to Apply the Financial Framework to Create Budget, Buy-In, and Action
CHAPTER 14: Practical Tools to Take Control of Your Revenue Cycle
Glossary
References
Index
End User License Agreement
List of Illustrations
Chapter 1
FIGURE 1.1 The Revenue Cycle
FIGURE 1.2 Sources of Shareholder Return.
Source: Data from E. Olsen, F. Pla
...
FIGURE 1.3 Revenue Growth and Firm Value.
Source: Blue Ridge Partners, Pitch
...
FIGURE 1.4 The Commercial Processes That Create Firm Value.
Source: 1) Brand
...
FIGURE 1.5 The Megatrends That Changed the Growth Formula
Chapter 3
FIGURE 3.1 The Six Pillars of a Management System for Revenue Operations
Chapter 4
FIGURE 4.1 Distribution of Growth Levers Across Executive Functions
Chapter 6
FIGURE 6.1 The Revenue Operating System: Introduction
FIGURE 6.2 The Revenue Operating System: Building Blocks
FIGURE 6.3 The Modern Growth Investment Mix.
Source: The Marketing Accountab
...
FIGURE 6.4 The Revenue Operating System
Chapter 7
FIGURE 7.1 The Effectiveness of Technology Infrastructure Supporting the Sal...
FIGURE 7.2 Aligning the Technology Stack with the Most Common Points of Fail...
FIGURE 7.3 Three Ways Technology Can Enhance Selling Channels
FIGURE 7.4 Connecting the Dots Between Sales Engagement Data and Business Va...
Chapter 8
FIGURE 8.1 The Top Opportunities to Better Manage Sales Teams.
Source: Reven
...
Chapter 9
FIGURE 9.1 The Top Ways Customer Behavior Is Impacting Remote Selling Produc...
Chapter 10
FIGURE 10.1 The Interrelated Decision Factors That Inform Growth System Perf...
Chapter 11
FIGURE 11.1 Revenue Cycle Insights
FIGURE 11.2 The Digital Selling Platform
FIGURE 11.3 Account-Based Marketing
FIGURE 11.4 The Integrated Learning and Development Process
FIGURE 11.5 Real-Time Data-Driven Selling
FIGURE 11.6 Intelligent Response Management
Chapter 12
FIGURE 12.1 The Relative Performance and Valuation of Different Commercial M...
FIGURE 12.2 The Relative Performance and Valuation of Different Commercial M...
Chapter 13
FIGURE 13.1 The Revenue Value Chain
FIGURE 13.2 The Revenue Value Chain (Example)
Guide
Cover Page
Title Page
Copyright
Acknowledgments
Introduction
Table of Contents
Begin Reading
Glossary
References
Index
WILEY END USER LICENSE AGREEMENT
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“Companies need the right technology, process, and strategy to accelerate revenue streams and efficiency.”
— Meredith Schmidt, EVP, Revenue Cloud & Solutions, Salesforce
STEPHEN G. DIORIO
CHRIS K. HUMMEL
REVENUE OPERATIONS
A NEW WAY TO ALIGN SALES & MARKETING, MONETIZE DATA, AND IGNITE GROWTH
Copyright © 2022 by Stephen Diorio and Christopher Hummel. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:
Names: Diorio, Stephen G., author. | Hummel, Chris K., author.
Title: Revenue operations : a new way to align sales & marketing, monetize data, and ignite growth / Stephen G. Diorio, Chris K. Hummel.
Description: Hoboken, New Jersey : Wiley, [2022] | Includes bibliographical references and index.
Identifiers: LCCN 2021062097 (print) | LCCN 2021062098 (ebook) | ISBN 9781119871118 (cloth) | ISBN 9781119871132 (adobe pdf) | ISBN 9781119871125 (epub)
Subjects: LCSH: Revenue. | Selling.
Classification: LCC HJ2305 .D56 2022 (print) | LCC HJ2305 (ebook) | DDC 336.02—dc23/eng/20220118
LC record available at https://lccn.loc.gov/2021062097
LC ebook record available at https://lccn.loc.gov/2021062098
Cover Images: Courtesy of Chris K. Hummel; © koosen/Shutterstock; © Ollustrator/Getty Images
Cover Design: Wiley
Acknowledgments
We are grateful to the many people who took the time to share their thoughts and experiences with us. So many people helped us along the way who have our heartfelt thanks, and that list inevitably goes far beyond the people listed here. The leading minds in the science of growth from business, academia, consulting, technology, and association worlds participated in and supported this work.
That starts with all the executives and CXOs who graciously provided such detailed insight, anecdotes, and stories. Your real-world experience is the backbone of Revenue Operations. This includes the ongoing advice and real-world perspective from our network of executives who have led Fortune 500 sales and marketing organizations, including: Toni-Clayton Hine (EY), David Edelman (Aetna), Peter Horst (Hershey), Denise Karkos (Sirius XM), Shannon LaPierre (Stanley), David Master (Janus Henderson), Mike Marcellin (Juniper Networks), Jaime Punishill (Lionbridge), Steve Shannon (Kia Motors), and Connie Weaver (The Equitable). A big “thank you” to the hundreds of other executives we spoke with who are out there fighting to add science to the art of growth. This book is anchored by research, lessons, and insights from leaders of Analytics@Wharton at the Wharton School of Business, including Professors Eric Bradlow, Kartik Hosanagar, Raghu Iyengar, Leonard Lodish, David Reibstein, and Abraham Wyner.
We loved learning from several leading academics in the science of growth over the last five years. We are grateful to receive insights, research, and education from Neil Bendle (Terry College of Business), Bobby Calder (Kellogg School of Business), Paul Farris (Darden School of Business), Dominique Hanssens (UCLA Anderson School of Business), Peter Howard (Questrom School of Business), Purush Papatla (Northwest Mutual Life Big Data Institute), Don Sexton (Columbia Business School), Dave Stewart (Loyola Marymount University), and Kimberly Whitler (Darden School of Business).
Our research would have been impossible without access to experts who have helped hundreds of businesses become more data driven, accountable, and productive, including Howard Brown, Cam Tipping, and Neil Hoyne. This also includes key friends like Ian Lowles, Bill Wohl, Rick Devine, Rob Halsey, and Anthony Johndrow and others who provided counsel on the ideas and models we built.
We drew heavily from the Marketing Accountability Standards Board (MASB), and in particular their leaders Frank Findley and Tony Pace, who are doing the hard work of proving the financial contribution of growth assets and investments.
We learned critical lessons on breaking silos, aligning revenue teams, and creating a common purpose across the organization from General Stanley McChrystal and Victor Bilgen of the McChrystal Group.
We also received generous perspective and advice from the leading analysts in the sales and marketing technology sphere, including Brent Adamson of the Gartner Group and Rich Eldh, the Founder of Sirius Decisions
This research leaned very heavily on the decades of experience from the leadership of Blue Ridge Partners, an elite go-to-market consultancy. We relied heavily on the experience, judgment, and research of Jim Corey, Carter Hinkley, Marten Leijon, Allen Merrill, Jim Quallen, Michael Smith, and Corey Torrence.
We received tremendous support and access to research and executives' perspectives from the leading associations and professional organizations in the field of growth, notably: Bob Liodice of the Association of National Advertisers, Bob Kelly of the Sales Management Association, and Earl Taylor of the Marketing Science Institute.
We are indebted to the team that sponsored and guided the production of this book, including Richard Narramore, our editor at John Wiley and Sons, and his crack editorial, production, and marketing team that kept us on task and on time, including Jessica Filippo, Deborah Schindlar, and Donna J. Weinson.
Researching a book takes a tremendous amount of analysis and digging. Heartfelt thanks to our research team that analyzed thousands of technology solutions, including Blake Brown, Robert Diorio, Jeff McKittrick, and Greg Munster.
We needed the painful and valuable contribution of our crack editing team, including Ingrid Wenzler, Adam Sirgony, and Matthew Schmitd, plus special contribution from my brilliant daughter Anna Diorio, who added elegance to our visuals and storytelling.
Of course, none of this could have happened without the personal support and encouragement of our families. They were strong enough to push us when challenges seemed insurmountable and were gracious enough to give us the space we needed when we hit our stride. We are blessed to have our spouses, Lyn and Tatiana, who provided the support, motivation, food, and “air cover” to make this book possible. Our children, Anna and Robert and Angelina, Dante, Chris Jr, and Arabella, should all take credit in this, too, for the inspiration they provide us every day.
Introduction
Growth is good. Really good.
Growth elevates short-term performance. Growth has a disproportionate effect on valuation. Growth – especially organic growth – generates intangible goodwill and positive momentum among customers, influencers, analysts, and employees.
Here's the challenge: organizations too often treat growth like a disconnected, functionally driven art form rather than the interdisciplinary, data-driven science it should be.
The core revenue-facing functions – Marketing, Sales, and Service – all operate in silos. Each function is trying to do its individual job and maximize the impact of its activities on customers and revenue. Managers optimize the parts – brand, demand generation, pipeline conversion, retention rates, etc. – while coordination between the three is episodic, temporary, and heavily influenced by the personalities involved. They allocate resources as a cascade along organizational lines using historical precedents as the primary guide.
Even when this approach works, managers generally celebrate only the fact that growth happened, since they usually cannot explain why. Teams assume that someone else will take responsibility for the whole. When cross-functional collaboration happens, it requires Herculean efforts to marshal the collective troops and achieve one-time, almost artisanal objectives.
Who is ultimately responsible for coordination of key growth assets and initiatives in the business? That often falls on one person: the CEO. Because no other c-level officer typically controls more than 40% of the identified 18 levers of growth, CEOs get dragged into the nitty-gritty of optimizing all variables that cross organizational boundaries. There are a lot of these. Organizations may be built around functions, but real-world opportunities and challenges ignore those artificial boundaries.
So, we have functional experts trying to manage an interdisciplinary, multifaceted problem. This gap between the importance of growth to firm value and the limited understanding of how to achieve it creates heated discussions in boardrooms, management meetings, and planning sessions everywhere. What are we all missing?
Today we lack a system for growth.
Such systems for the back office and supply chain have already been developed over decades. It's time that we brought similar discipline, rigor, and methodology to the process of expanding our revenues. The three teams involved work hard and do their best, but somehow things just aren't clicking. The front office needs standardization and repeatability, too.
To understand how a systems-based approach to growth might work, let's look at what's happening inside each of the revenue-centric functions. To start, here are some common problems all functions are faced with:
The financial criteria for allocating growth resources, OPEX, and CapEx across these disparate functions differs wildly.
Change is everywhere. Not only does change scare people, but it raises questions about whether the benefits of transformation are worth the pain.
Real-world problems are interdependent and interdisciplinary. Regardless of what its org chart looks like, any business needs to manage the entire revenue cycle as an integrated whole before, during, and after the transaction.
The digital selling infrastructure, including the customer experience and data it generates, has become one of the biggest growth assets, even if ownership is unclear.
Investors, owners, and boards need more predictable and forward-looking forecasts.
Consistency, repeatability, and automation could help ensure that good performance is sustainable over time and scalable.
Marketing: Increasing Ambiguity
Telling the company story, getting the offer in market, and orchestrating the customer experience. These are valuable activities that all contribute to demand generation and firm value. In a digital world where innovation, trust, and customer experience matter more, the perceived value of marketing activities has increased, yet budgets are shrinking, and the scope of the function is fluctuating.
A relatively recent invention of the twentieth century, the Chief Marketing Officer (CMO) role has changed dramatically over the course of its short span of existence by shifting from managing media and building brands and demand in the last century to curating the customer experience in digital channels and managing customer analytics in the modern era.
At its best, Marketing should be a commercial function that delivers significant, tangible impact on the business performance of a company, affecting both revenue and valuation. Whether you're the CMO, a brand manager, or a creative specialist, the role can be exhilarating, frustrating, intellectual, administrative, strategic, creative, scientific, powerless, and game-changing – usually all of these and often simultaneously. Transformation is happening, and many fronts are moving. Ambiguity is a marketer's constant companion. Why?
The skill sets in marketing are in flux.
Technology, data overload, market noise, and fluctuating channels combine with massive variation in budgets, metrics, decision rights, organizational structure and incentives to present existential challenges.
The marketing toolset has democratized.
Other departments and functions can now execute “marketing” activities on their own, blurring areas of collaboration.
The marketing mix has changed.
Digital marketing technology infrastructure and the people data analytics and content required to support them now command the bulk of marketing budgets. Also, the budget allocated on “owned marketing” – where the company controls the message 100% – now exceeds paid media.
Marketing doesn't fully control the digital channels needed to do their job.
Most customer engagement now happens in digital and contactless channels, but in most cases marketing does not own or manage the systems, data assets, and blueprint for these increasingly important systems.
We all lost control of the buyer's journey.
While the idea of a linear demand funnel is archaic, marketers can still influence the buyer's journey having an engagement model for wherever the customer wants to go.
Organizational “flashpoints” are increasing in breadth and depth.
The tussle over marketing's intersections with product, digital, sales, and service teams challenges management structures.
Every marketing organization has a customized, unique structure.
Collaboration with peers can suffer when the size, scope, activities, and mandate of every marketing organization fluctuate constantly. Culture evolves organizations that are as unique as a fingerprint.
Marketing leaders need to recognize that these ambiguities weigh on marketing personnel and their peers across the company. At its most impactful, marketing orchestrates – engaging with all other parts of the company, providing holistic views of the customer perspective, and amplifying the best of the organization to create a whole that is greater than the sum of the individual parts. Otherwise, like a decaying satellite, the marketing function will continue to appear quite sophisticated and even cool from the outside as it inexorably heads toward its own demise.
Sales: Rising Complexity
Sales teams are tasked with converting interested prospects into transacting customers, increasing revenue per account, and managing relationships to increase loyalty and trust. These activities exist at the center of any drive to expand revenues.
Sales is a powerful function. The skill sets of sales reps, account managers, and other sales personnel can vary widely, though, and often depend on the sales model, product sophistication, and buying cycle. Because sales manages the pipeline of business, it has unparalleled visibility of the upcoming revenue streams. It also represents the “last touch” before the transaction with the customer. Sales leaders leverage that control point to exercise authority in many areas beyond their official remit. The surety of that dominant position, however, is now starting to fade as sales confronts transformation in its own area.
Selling has become more capital intensive.
More buying happens within digital channels, and sales people rely on analytics and automation to engage customers with the speed and personalization they demand. Sales leaders now hold two responsibilities: managing both sellers (the people) and selling (the system).
Selling has become a complex team sport.
No single organization controls all of the revenue growth levers, so the ability to move information quickly between functions helps get marketing, sales, and service silos working as one revenue team with a single common purpose.
Selling teams are more distributed, digital, data driven, and dynamic.
The role of sales has evolved to rely more on digital channels and collaboration technologies and less on planes, trains, and automobiles over time. The recent pandemic has only accelerated the move to sell bigger and more complicated products through digital channels. It has also created a skill gap for sales leaders and people who did not grow up with the skills to be effective in this environment.
More business models create more revenue streams going through more channels.
New approaches like subscriptions open up alternative and derivative products that can be monetized more and more through owned digital infrastructure outside of and in parallel with any traditional sales channels.
We lost visibility of what the customer is doing.
The volume of data we now collect on customer interactions dwarfs what we've been using to analyze transactions, but the fragmentation of that engagement data actually creates gaps in visibility for the sales teams that frustrate their efforts for a 360-degree understanding of their customers.
The old-school “art of selling” is struggling against the new school analytics.
Like the battles in Major League Baseball between grizzled old scouts and the new crop of data-driven analysts, the utility of many historical traits once considered critical for performance in sales are now being questioned as the selling process becomes more engineered.
Selling now requires less human interaction to enhance relationships.
The increasing automation of customer engagement, when used effectively, should unburden sales people from many administrative or low-value activities. Sellers now need to balance the volume, content, and frequency of digital interactions with person-to-person outreach to find the optimal revenue yield.
Even where sales leaders recognize the value of other functions in driving more and/or bigger transactions, they struggle with a lack of access to full information on all the touchpoints with customers. Technology needs to be seen as more of an asset than a tool. At its peak value, sales can act as a true customer advocate, serving as the bridge between customer and company and using its performance-driven culture to push accountability across all functions to serve the customer's needs. If not, sales may find itself stranded as the king of an increasingly less relevant hill.
Service: Progressive Emergence
In the context we use for this book, service drives the customer's consumption of your product or service. This function covers activities like onboarding, activation, implementation, support, adoption, change orders, upgrades, maintenance, and many more. In most cases, these responsibilities are distributed across multiple organizations with many labels such as customer care or field service. Occasionally, the role is so important that a company will bundle many of these responsibilities into a branded, differentiated service offering like Apple's Genius Bar and BestBuy's Geek Squad.
“Service” isn't really one function but rather an amalgamation of roles from a variety of other organizations. This minimizes the institutional authority of service, even though the product consumption experience has become one of the most important factors in growing lifetime customer value. Cloud software companies do often have a function called “Customer Success” that handles much of the adoption process for complex offerings, and this function is starting to pop up in other industries that have complex implementation requirements.
The role of service has been elevated as it now commands a rising share of the customer interactions in the business, play a bigger role in revenue growth and relationship expansion, and have more direct control over the primary objectives of the business: namely, growing customer relations' lifetime value and net recurring revenue.
The “service” function doesn't exist as one entity.
The product consumption experience is rarely managed inside one internal organization but is rather fragmented across regional, product, sales, marketing, and other teams with little rhyme or reason.
Service rarely has a seat at the executive table.
Since service usually doesn't exist as a single organizational entity, it lacks institutional authority as a “constituency” and feels the absence of a c-level leader to advocate for and allocate resources to improving the customer ownership experience.
Driving product adoption has become more important to revenue expansion.
Customer loyalty is critical to revenue expansion. First, customers are more focused on time to value and want faster returns on their assets and investments, so they buy in smaller, bite-size, iterative chunks. Second, subscription models also simplify the customer's ability to cancel the service, so the selling of value never stops.
Subscription business models are becoming the norm.
Subscription models where the customer pays a scheduled usage fee per agreed-on period have become very popular. Such annuity revenue streams are very attractive and have penetrated many sectors as either rental- or performance-based fee models. How to transform one's portfolio into a subscription model is one of the core questions we hear from many companies.
The customer success function is moving beyond software as a service (SaaS) companies as people recognize its value add.
Cloud companies natively understand the value of the customer ownership experience and have been pioneers in setting up “customer success” teams that manage the onboarding, activation, and training of new customers. That concept of a customer success function has migrated into many other industrial and technology businesses as a best practice.
Service leaders come from many different backgrounds – often project management – and hold many different titles. Yet the access to customer intelligence in this “function” rivals and maybe even beats marketing's data sets. This is a new, emerging space on the org chart that is worth watching.
The three teams work hard and do their best, but somehow things just aren't clicking.
Stepping back into the CEO shoes, there are common observations from all the functions.
Change is everywhere: Not only does change scare people, but it raises questions about whether the benefits of transformation are worth the pain.
Real-world problems are interdependent and interdisciplinary: Regardless of what its org chart looks like, any business needs to manage the entire revenue cycle as an integrated whole before, during, and after the transaction.
A systems-based approach is required: Consistency, repeatability, and automation help ensure that good performance is sustainable over time and scalable.
About Our Research
This book combines primary and proprietary research, a deep analysis of existing academic and corporate material in the field, consultations with world-class experts and thought leaders, and finally our own decades of personal experience as practitioners and analysts in the business world. As only teaming up an authority on go-to-market transformation and an operational executive can do, we argued over big-picture and minute details. In the end, we both agreed on what the real issue is and what needed to be done.
The foundation of the book is our primary research. This includes thousands of surveys with executives, managers, and performance professionals who manage growth in large and small businesses across many industries. When we reference our surveys, we will cite the actual survey and source document in a citation.
We also conducted in-depth interviews with over 110 growth leaders. These generally included the most senior executive responsible for growth in the business. In many cases it was the President, CEO, or Chief Operating Officer because that was the only individual who managed all the growth functions – marketing, sales, and service. In other cases, we met with executives that had been given an expanded remit to align revenue teams and resources around the customer. These executives had titles like Chief Growth Officer and Chief Revenue Officer. In some other cases we interviewed the functional leaders of marketing, sales, and services. Sometimes these executives insisted on being interviewed together because they regarded themselves as a team, not a manager. We will reference these interviews in statistics and direct quotes and will use the material for case studies about their challenges, best practices, and accomplishments.
In addition to this primary research, we made an exhaustive analysis of academic research and commercial research on the subject, which are also cited in the text. Our team comprehensively analyzed the most meaningful and relevant academic and commercial research on the science of growth. Here we were lucky enough to have the support of the leaders of the Marketing Sciences Institute, The Marketing Accountability Standards Board, The Sales Management Association, Analytics@Wharton, the Association of National Advertisers (ANA), and many associations and partners. These studies and academic papers are cited directly with links to the complete research reports and publications provided in the citations at the end of the book.
Finally, this research initiative drew heavily on the experiences and expertise of the world-class practitioners, academics, and experts of the Revenue Enablement Institute. These world-class experts include sales and marketing executives like Jeff McKittrick, Michael Smith, Greg Munster, Bruce Rogers, and David Edelman. They also include leading academics like Professor David Reibstein and Raghu Iyengar from the Wharton School of Business. We also were able to tap into decades of experience from experts in the science of growth including Cam Tipping, Bob Kelly, Corey Torrence, Bruce Rogers, Michael Smith, Doug Laney, and Howard Brown. All of these experts are quoted directly in the body of the book.
Our analysis of the commercial technology ecosystem was based on a comprehensive analysis of over 4,000 technologies that support sales and marketing over the past 18 months. Using the Revenue Operating System that you'll learn about in the book as a filter, we arrived at an initial list of the top 100 that we believe are transforming the commercial model and enabling the emergence of Revenue Operations, a system for growth. While this list is dynamic and will evolve over time, these initial 100 innovators are mentioned in context in the body of the book, and a full list is available on a website and research report listed in the citations.
Finally, it's important to mention that we, the authors, have obviously colored this analysis with our own background and experience. Thankfully, that experience includes senior leadership and c-level roles at growth businesses and innovators like Oracle, SAP, Schneider Electric, United Rentals, Siemens, GE, and Citigroup. Ideally, this personal history helped us synthesize our research with a more practical perspective and amplified the solutions we outline with conviction of people who have been there. We've sat in the board rooms and management meetings trying to push growth agendas. We've made the hard decisions on where and how much capital to invest in different initiatives. And most importantly, we've lived with the consequences of those decisions.
The Bottom Line
Executives and managers today are using outdated twentieth-century tools to govern and manage twenty-first-century businesses. These archaic twentieth-century management tools were built around a functional structure that sought a balance between the responsiveness of a strong local presence and the efficiency of centralized, global-scale operations. Today's reality is different, and personalized offerings delivered with the efficiency of global scale are expected. We're fighting a different battle between fragmentation and alignment. To connect the dots and layer in the science of growth, data, insight, and knowledge must be shared throughout the organization to provide them the EQ, the IQ, and the bias for actions that deliver results.
That's what this book is all about: Revenue Operations, a bold system to steadily drive growth in the twenty-first century. We'll take you through three core sections. Part I defines Revenue Operations and its impact. Part II articulates the key pillars that make up the management system and helps you decide which leadership model works best for you. Part III lays out the building blocks of the operating system for your business. Here we focus on improving the return on your technology, data, process, and team investments and on giving you a good sense of the priority capital investments you need to make. In Part IV we bring it all together with the concept of Smart Actions and provide you tools to best implement Revenue Operations for your own company.
This book will help owners, CEOs, and the heads of the marketing, sales, and service functions – the growth leaders that we will refer to as “CXOs.” This work will also help revenue-centric employees on the front line take a more systemic approach to growing their business. Furthermore, the lessons and insights inside will help large enterprises and small companies looking to accelerate growth.
We sincerely hope you enjoy Revenue Operations.
PART IRevenue Operations, A System for Growth
CHAPTER 1Take Control of the Revenue Cycle
Introducing Revenue Operations, a New Way to Create Sustainable, Scalable Growth
Revenue growth – the increase in a company's sales over time – is the primary basis for creating business value. The more sustainable and scalable that growth is, the more valuable your business becomes. Despite this importance, the “science of growth” is not well understood. Most businesses approach growth as a disjointed, episodic activity.
Why? The core reason is that many business owners, CEOs, and leaders lack a practical and proven system for growing their business. Every other primary function in a business – from the procurement, manufacturing, and shipping of products to the management of financial and human resources – has an established system. Purchasing, manufacturing, HR, and finance leaders have spent decades standardizing and automating those systems. Despite that, few of the executives we spoke with could clearly describe any kind of connected approach, system, or model they use to generate the revenue and profit growth they forecast to their investors.
They gave us some pragmatic reasons for this. First, go-to-market processes have proven hard to manage, measure, and systematize because they are more “art” than science. Second, customers and markets change too often and too quickly to create stable, repeatable processes. Third, they lack the customer feedback data needed to anticipate customer needs, measure performance, and manage the channels, investments, and actions aimed at meeting those needs.
These arguments had some validity in the twentieth century. Not so today. A revolution in data analytics and the emergence of digital selling technology has given managers unprecedented visibility into and control over the full revenue cycle. Analytics improve measurement of customer engagement and account health. They also help to manage selling teams and predict sales pipeline performance.
Our conversations uncovered a more fundamental reason. Namely, growing a business is an interdisciplinary endeavor with many moving parts that don't reinforce one another:
It's challenging to create a “go-to-market” approach that has dozens of functions to manage and many more disciplines to master – particularly when 80% of CEOs lack direct operating experience in most of these disciplines.
It's hard to align customer-facing employees who work in segregated marketing, sales, and service organizations.
It's difficult to connect technologies that are deployed in silos of automation.
In other words, it's impossible to deliver a superior customer experience when your revenue cycle consists of disconnected processes, policies, procedures, and machines.
No established commercial model exists to get these different pieces of the growth equation working together. Business leaders lack a management framework for coordinating their growth teams, functions, and disciplines. They lack an operating system for managing their growth assets, technologies, data, and processes.
Until these fundamental issues are addressed, efforts to accelerate or sustain profitable growth will be defeated.
The solution to this problem is clear. A new system for growth is urgently needed. One that aligns revenue teams with the infrastructure, operations, and processes that support them across the entire revenue cycle. One that generates more growth from the expensive data, technology, and channel assets that are the foundation of modern selling.
Our goal in writing this book is to better define that system for growth. We call it Revenue Operations.
Revenue Operations represents a bold new commercial model for the twenty-first century. Its goal is to create sustainable and scalable business growth. As we define it, Revenue Operations comprises two components. First, the management system – our EQ – aligns the people in your revenue teams. Second, the operating system – our IQ – combines technology, processes, and data assets to generate more sustainable and scalable growth. Revenue Operations weaves these two together to grow revenues, profits, and firm value.
Throughout this book we strive to articulate what Revenue Operations is and to show you examples of how to make it work. This book will help every person who cares about growth – from the business owner to customer-facing employees on the front line – to take steps that can generate more consistent and scalable growth. Because everyone has a role in the growth equation.
The book will specifically help business owners, CEOs, and leaders of the marketing, sales, and service functions to better allocate growth resources, make more profitable growth investments, take intelligent risks, and create a common purpose across revenue teams. It provides operations leaders and performance improvement professionals a blueprint for knitting together the systems, processes, and operations that support revenue growth in ways that generate scalable and consistent growth. This work will also help customer-facing employees on the front line to better leverage the systems, information, and tools available to them and work together as one revenue team.
In addition, this book provides a career road map for any professional who seeks to advance their career and ultimately lead a business. It provides essential knowledge to any student who seeks a career in any growth discipline – marketing, sales, service, operations, or analytics.
Furthermore, the lessons and insights inside will help any business, from large enterprises to small companies, looking to accelerate growth.
How Is Revenue Operations a System for Growth?
At the simplest level, a system is a combination of things that work together as a united whole to achieve a common purpose.
Exactly what those “things” are, how they “work together,” the nature of the “united whole,” and the “common purpose” all define how any given system works. Systems can do many things: run a computer; educate people; manufacture and distribute products; and even manage money.
The “things” within a system can include a wide variety of ingredients – ranging from people and organizations to technology, devices, or software code to principles and procedures. The way they combine to “work together” can take the form of a machine (a computer), operation (manufacturing), a network (railroad), or a biologic process (digestion).
Businesses have established systems for most of their operations including: manufacturing, distribution, supply chain management, and finance. These systems are generally well organized, automated, managed, and measured in a mature organization.
The conversation changes when you start to talk about a system for growth. In most businesses, fragmented groups of customer-facing employees, silos of automation, and a lot of disconnected processes, policies, and technologies don't work well together. Nor do they work with a common purpose toward a common goal. There is no system to generate consistent, scalable, and profitable growth.
Revenue Operations changes that. It introduces new elements and shows how they work together. It offers a systems-based approach to growth across the entire revenue cycle: awareness, demand, purchase, and consumption (see Figure 1.1). Companies of all sizes and profiles can use it without having to rip the current business apart.
FIGURE 1.1 The Revenue Cycle
The Financial Link Between Firm Value and Growth
An organization's ability to grow revenues has become more and more tied to firm value than at any time in our business lives.
This relationship can be seen in the high valuations awarded to businesses that can deliver predictable, scalable, and profitable growth. For example, the marketplace values firms with hyper growth (e.g. annual growth over 40%) and predictable revenues (e.g. Net Annual Recurring Revenues of over 100%) disproportionately. That is why a hyper-growth business like HubSpot commands price/earnings ratios in the hundreds while not yet showing a profit. It also explains why a SaaS business like Salesforce.com with double-digit growth rates and recurring revenue streams will have a valuation in excess of 60 times its earnings – more than triple the S&P 500 average.60
An analysis of total shareholder return of the S&P 500 over a 20-year span found that 58% of value creation is attributed to organic growth (see Figure 1.2). That means the ability to grow revenues organically has created more firm value than all efforts to reduce costs, expand earnings multiples, and improve free cash flow combined.101
The capital markets value growth. Generating more consistent growth is a formula every business can use to create value. Private investors need growth to justify the historically high prices they are paying for businesses. Growth attracts talented employees, and buyers view it as a sign of innovation, quality, and validation.
FIGURE 1.2 Sources of Shareholder Return. Source: Data from E. Olsen, F. Plaschke, D. Stelter, “Threading the Needle: Value Creation in a Low Growth Economy”
FIGURE 1.3 Revenue Growth and Firm Value. Source: Blue Ridge Partners, Pitchbook, Blossom Street Ventures, Dow Jones, Refinitive 2021, Inc 500, NASDAQ
Today the average business in the S&P 500 is growing top-line revenues at 4% annually and is valued at 18 times earnings (see Figure 1.3).52 A firm that grows at double that pace is worth almost twice as much. Businesses that master scalable growth – by creating systems for growing revenues faster than the resources needed to generate those revenues – are even more valuable. For example, businesses that grow fast and have recurring revenue models are worth over forty times their profits. Companies like Google, Salesforce.com, or Citrix that have mastered the ability to scale revenues faster than costs are even more valuable. This is why so many private equity firms push their portfolio companies to move to a recurring revenue or cloud business model.
The growing importance of Revenue Operations as a practical way to create firm value is not lost on the owners and boards of high-growth businesses. Average purchase price multiples are at historic highs. PE investors are now paying in excess of 13 times EBITDA (which are earnings before interest, taxes, depreciation, and amortization) to acquire businesses. Most PE firms believe financial engineering will not be enough to justify such high prices and deliver their LPs the returns they expect.60 As evidence of this, over two-thirds (68.1%) of private equity firms are pushing their portfolio companies to grow at faster than 10% a year58 to justify the price premiums they have paid.59 Several private equity firms like Rockbridge Growth Equity, Morgan Stanley Private Equity, Tengram Partners, and Vista Equity Partners have created a growth culture, operating model, and infrastructure to support accelerated growth at scale across their portfolio. These growth-oriented investors have created centers of excellence in demand generation, call centers, and digital marketing channels. For example, Rockbridge is the private equity (PE) arm of the Quicken Loans group. They have been able to leverage their highly sophisticated marketing capability and focus on customer experiences that Quicken Loans used to become the #1 mortgage provider and launch Rocket Mortgage as a major brand across the other firms in the portfolio. Jim Howland, an Operating Partner at Morgan Stanley Private Equity, sees the role of the private equity investor evolving from pure financial engineering toward enabling faster revenue growth in the last few years. “What you do with an asset is as or more important as getting that asset at the right price,” reports Howland. “The reality is that if you want to attract good deals and make a return in today's PE world, you need to have a plan for how you will add value over the entire ownership period and build it into the price you pay for the asset. And a big part of that value plan is built around marketing and growth capabilities.”103
Investment banker Ben Howe, CEO of AGC Partners, reinforces reports that Private Equity owners are increasingly creating value using a “buy, grow, and build” model of governance and enablement. “The top tech buyout funds including Vista, Thoma Bravo, and Insight are relentless in their programmatic efforts to build organically and apply operational best practices to enhance organic growth via ongoing technology, go-to-market initiatives and product improvements across the organization” reports Howe. “Stories like Vista taking Marketo private for $1.8 billion with ample leverage, growing it at 66% and then selling it to Adobe for $4.8 billion generating a multi-billion dollar return in just 2 years tends to get LP's attention.”103
Unfortunately, many people still perceive growth as a form of “art” and fail to understand the science of growth. These people often see business functions through a very narrow lens: marketing is a creative discipline with little or no connection to financial outcomes; selling is about personal relationships, not method; and superstar sellers are treated as kings and queens – despite being hard to manage and even harder to replicate.
Also, executives cannot agree on the causal chain of events that leads to revenue growth and future cash flow, the keys that underlie firm value. This leaves executives without a financially valid way to make growth bets, weigh trade-offs, and optimally allocate resources across growth alternatives. It also makes it difficult to build a business case and management consensus on the capabilities that can create the greatest value to the firm. For example, most business leaders pay lip service to the notion of being data driven, digital, agile, and customer focused as a basis for competitive advantage. They understand these things are strategically important, but in most cases, they don't have a basis for evaluating these strategic value drivers and lack a tangible set of corporate initiatives to exploit them in the marketplace. Academic research proves, however, that these are the primary causal factors that determine the financial value of the enterprise.
Corporate executives struggle with the long-term growth formula. They can rarely agree on the big questions underlying their growth strategy such as the measurement, value, and importance of growth assets. “With all the focus on advanced analytics and data-driven marketing, not much progress has been made on understanding the fundamental math of growth in a business,” reports Professor Dominique Hanssens of the UCLA Anderson School of Management and author of the book The Long Term Impact of Marketing. “In my experience, executive teams that make the big growth bets often lack consensus and alignment on fundamentals like the true cost of customer acquisition, the right balance of customer acquisition relative to customer retention, and the financial contribution of the brand to the business.”104
Real-World Problems Cross Organizational Boundaries
Growing a business is an interdisciplinary endeavor. A team sport. Any “go-to-market” strategy has dozens of functions to manage and many more disciplines to master. These functions include traditional growth disciplines like marketing, sales, and customer service. They also include brand management, product development, and the “4Ps” of pricing, promotion, product packaging, and placement. New disciplines like sales enablement, customer analytics, earned media management, and content management have emerged as these budgets have grown to command 15% or more of business-to-business (B2B) growth budgets.
There are job descriptions for all of these individual disciplines. There are millions of experienced managers and experts in these functional disciplines. Universities offer master's degrees and PhDs in most of these disciplines. Individually.
Organic growth requires all these disciplines to work together in unison toward a common end – consistent, profitable, and scalable growth. There is no curriculum for that. Few CEOs have direct experience in these disciplines. Less than 20% of CEOs have direct experience in sales. Few marketers become CEOs.
This is the underlying reason why few managers have been able to master the science of growth. “The root cause of this problem is that historically academic and business institutions have taught and managed the science of growth as a set of individual disciplines – branding, product management, marketing and analytics,” says Professor David Reibstein of the Wharton School of Business. “But the real-world problem of growing a business is interdisciplinary in nature. We as teachers 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. Being the captain that coordinates and leads all those functions in a business is a very big job. But an essential one.”
Academic and commercial research overwhelmingly supports the concepts that growth is a “team sport” and that there is a causal relationship between organizational competence in analytics, marketing, information sharing, agility, and cross-functional collaboration with enterprise value. This research shows that a 10% increase in organizational competence will drive on average a 5.5% increase in stock price.7 An analysis of 380 CMOs by Forbes found that organizations investing in data-driven measurement processes, competencies and systems were achieving significantly higher levels of marketing effectiveness and business outcomes – achieving 5% better returns on marketing investments and more than 7% higher levels of growth performance.105 The analysis revealed that these high-performing marketers – who were exceeding growth goals by over 25% – were significantly more data-driven in their approach to measuring, optimizing, and reallocating their offline and online sales and marketing investments.
The Role of Insight in Value Creation
Investments in customer insights and organizational agility do create firm value. How fast and effectively an organization analyzes, leverages, and shares information and customer data can increase tactical marketing returns but also generate long-term enterprise value.63 Academic research has proven there is a significant relationship between how fast your organization shares data and customer insights across revenue teams and share price.8 A comprehensive analysis of 114 academic research studies by the Marketing Science Institute (MSI) has demonstrated that the ability of an organization to generate, disseminate, and respond to market intelligence – called Organizational Knowledge Sharing – has a quantifiable positive effect on firm value and financial performance in terms of profits, sales, and market share.6
Managers need to recognize and prioritize the importance of sharing knowledge across the business. Modern selling systems produce customer data that allows revenue teams to identify trigger events that signal buying intent, flag inquiries from important influencers within accounts, and make decisions about next best actions based on past customer behavior. The window of time an organization has to act on that data is small, however – and is gated by customer time, attention, and expectations for response. This makes hastening data and decisions about an opportunity from the source (e.g. a website, an algorithm in marketing) to a customer-facing employee who can act on it (e.g. a relationship manager or customer service rep) a critical value driver.
Similarly, customer relationships, go-to-market effectiveness, organizational information sharing, customer experience, and the quality of products, people, and innovations have all been empirically proven to drive increases in firm value by academics.6
In particular, the push to focus the organization on customer lifetime value as the primary objective of the revenue team has a financial basis. Customer equity is a significant driver of share price. According to academic research, the value elasticity of customer equity is 0.72.8 This means a 10% increase in the value of customer assets will drive a 7.2% increase in stock price because higher levels of customer satisfaction, trust, and online service innovations enhance long-term margins, sales growth, and enterprise value. Hence, lifetime value is being redefined as an economic model in a digitally driven economy. This is evidenced by the ability of businesses like Airbnb ($125B in firm value with no profits at the time of printing) and the GHX Global Healthcare Exchange to convert digitally enabled consumer and business networks into valuable assets.108,60
For example, Rockbridge pushes its portfolio companies to deploy advanced analytics and direct marketing competencies pioneered by another Rockbridge company, Quicken Loans, to accelerate revenues, profits, and firm value. One Rockbridge portfolio business that provides online postgraduate education, North Central University, was able to borrow demand generation practices developed by Quicken Loans to grow their enrolled student population from 5,000 to 9,000 over their six years of ownership. This led to rapid growth in revenues (from $31M to $114M) and EBITDA (from $6M to $29M) and a highly successful exit.103
Intangible Assets as the Foundation for Growth
Any business can also unlock more growth and value by improving the return on their revenue-generating commercial assets – by which we mean your customer data, digital technology, digital channel infrastructure, and customer relationship equity. These assets make up most of the growth investment mix in B2B organizations, according to an analysis by the Marketing Accountability Standards Board.1 (See Figure 1.4) They also make up a significant portion of your firm's balance sheet. Most CEOs could generate more revenue and profits from these commercial growth assets if they only treated them like financial assets. Which is what they are.
The problem is these business assets that support growth as inherently “intangible” whereas factories, inventory materials, and trucks are tangible. This makes growth assets difficult to value, hard to manage, and difficult to build.
That's a problem managers must solve if they want to grow a business in the twenty-first century. Fast. The capital stock of the economy has changed, and managers need to change with it. Although the economy might have been built upon railroad tracks, canals, and factories in the past – today it is driven by intellectual property, software code, learning data sets, digital customer experiences, design, branding, and process know-how. Investment in “intangibles” exceeds investments in hard assets. They also explain over 80% of changes in firm value today. Far more (three times more) than they did in 1950, according to Jonathan Haskel and Stian Westlake in their book Capitalism Without Capital.135
FIGURE 1.4 The Commercial Processes That Create Firm Value. Source: 1) Brand Value as a Percentage of Marketing Capitalization. Applying the Brand Investment and Valuation Model. Analysis of Meier, Findley, Stewart. Marketing Accountability Standards Board. 2017; 2) Marketing’s Impact on Firm Value: Generalizations from a Meta Analysis, AMA, Alexander Edeling and Marc Fischer, Journal of Marketing Research 2016; 3) Empirical Generalizations About Marketing Impact, Hanssens, Marketing Science Institute; 4) the Marketing Accountability Standards Board CIR Initiative, 2018.
