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Revenue Performance Management As A Business Growth Strategy

TEBR sept_oct2012-zinio

By Phil Fernandez

For more than a decade, I have had a mantra that has guided my personal approach to leadership. It goes like this: Think Big. Start Small. Move Quickly.

I can’t think of a better place to apply this mantra than to the Revenue Performance Management (RPM) journey. RPM is a strategy that optimizes interactions with buyers across the revenue cycle to accelerate predictable revenue growth. It’s a transformative process that aligns and unites marketing and sales, instead of allowing silos and dysfunction to get in the way of bottom line growth. In order to achieve this kind of transformation, companies must address organization, compensation and incentives, job roles, and work practices as well as their technology infrastructure.

This may seem overwhelming initially, but implementing RPM can pay for itself very quickly, because there is so much waste and inefficiency in most marketing and sales groups. There’s plenty of low hanging fruit in most companies to go after in the early days, and having quick successes is valuable because it reinforces organizational commitment and confidence. But, implementing a RPM strategy is a journey. It is a long-term commitment to systematic business transformation—one that touches processes, organization structures, information technologies, and metrics. It is also a journey of continuous improvement, in which ongoing monitoring and measurement is fed back into increasingly efficient revenue generation and growth.

“RPM is a strategy that optimizes interactions with buyers across the revenue cycle to accelerate predictable revenue growth. It’s a transformative process that aligns and unites marketing and sales, instead of allowing silos and dysfunction to get in the way of bottom line growth.”

There’s a familiar adage that goes, “The hardest part of any journey is taking the first step,” and it certainly applies here. Because RPM directly affects so many deeply entrenched elements of a company’s organization and culture, including changes in people’s job descriptions, the journey’s beginning can seem scary and may often encounter resistance.

There are numerous aspects of a successful RPM launch, all of which are intertwined, including leadership, organizational alignment, technology, and initial project scope. Since nothing happens without leadership, that’s a good place to start.

RPM As A CEO Imperative
Consider this: Even though many publicly traded companies have been reporting strong earnings, and parts of the economy have recovered from the depths of the recession that began in 2008, their performance hasn’t always translated into higher stock values. Because these strong earnings often came by way of staff cuts and other cost reductions, real growth has been scarce. As a result, Wall Street has increasingly turned its attention toward the top line, demanding to see more progress on revenue performance.

That’s not news to CEOs or other senior business leaders. For the past three years, revenue growth has been their main objective, according to Frost & Sullivan’s annual CEO Survey. But what’s interesting is to observe how CEOs think about accomplishing it: The largest proportion cites increasing sales as their number one strategy for achieving their growth goals.

This survey result caught my attention because while increasing sales is a hugely important goal, it is not a strategy in and of itself. It’s a little bit like saying that one’s strategy for losing twenty pounds is to drop a few pounds every week. It says nothing about how you’re actually planning to accomplish it. So the real question for these CEOs is this: What is your strategy for increasing sales? And how do you plan to actually accomplish that growth goal?

The responding CEOs in the Frost & Sullivan survey identified myriad textbook strategies to achieve their growth goals, including strategic partnerships, customer strategies, new product development, and expansion into new markets. But something critical was missing: a focus on improving the company’s sales and marketing effectiveness as a way to increase revenue performance. Perhaps that’s why this same group of CEOs also indicated that they have less than full confidence in their organizations’ ability to conduct core growth strategies; it’s as though more of the same simply didn’t inspire much confidence.

Of course, I think that Revenue Performance Management answers the question of how to achieve fundamental growth. And because it’s clear that any growth agenda starts in the CEO’s office, RPM is a strategy that must originate there as well. I have a vision, and it goes like this: Pretty soon, every CEO will turn to his or her team, and ask, “What are we doing about RPM?”

A transition to RPM has significant implications for a company’s internal operations over time. As marketing generates more good leads, and therefore increases sales efficiency, investments in the marketing department will also tend to increase. Those will be offset by savings captured from the increased sales efficiency. As marketing leaders and staff become more directly accountable for revenue, their compensation structures will tend to become more leveraged and look more like traditional sales comp plans. As a maturing, end-to-end revenue cycle model yields new metrics and increases long-range revenue forecast accuracy, corporate dashboards will evolve, and managers will need to interpret this new data as a guide to future actions.

All of this suggests that the entire senior leadership team in a company or operating division needs to be on the same page about RPM. The CFO must be ready and willing to implement the shifts and changes that RPM entails. Sales and marketing executives need to form a new alliance. And others, like manufacturing executives, need to take cues from new and important metrics.

In January of 1996, Jack Welch publicly announced the launch of a Six Sigma initiative at General Electric. He had developed a passion for the topic and committed his personal leadership to it. He built GE’s program to drive Six Sigma. He gave the initiative a name and identity. He set clear and measurable goals. He changed compensation and incentive structures. And he implemented new standards for promotion tied to Six Sigma. In short, he took all the steps needed to let everyone inside and outside GE know just how serious he was about this new initiative.

Executive leaders should look closely at how Welch catalyzed this transformation at GE, and they should consider applying similar strategies to weave RPM into their own corporate fabric.

Creating “Team Revenue” Within The Corporation
The top sales executive at a prominent technology company, who was himself an early adopter of RPM, recently described the marketing and sales relationship at many of the companies he had encountered. “It’s a lot like a dysfunctional marriage,” he said. “The husband and wife have forgotten why they got married in the first place, what made them such a great couple, a team. Those of us in marketing and sales must remember that we too are also members of the same team. And just like the couples in successful, long-lasting marriages, we need to approach business challenges and opportunities together, leveraging our collaborative strengths.”

The sales executive continued: “It doesn’t really matter if the fault lies with marketing or sales, or even both. There are two sides to every coin, and at least two versions of every problem. Pointing fingers and saying things like, ‘marketing couldn’t deliver quality leads,’ or ‘sales couldn’t close them,’ does no one any good. The only thing that matters is achieving revenue growth, and that requires us to come together as an integrated operation to solve problems and work the Revenue Cycle in a coordinated way. That’s what it takes to create a high output, revenue-centric organization. Ultimately, that’s what RPM is all about.”

The best marketing leaders see the world in much the same way. Susanne Lyons, the former CMO of Visa USA and Charles Schwab & Co., has been on the front lines of helping to catalyze these changes in the corporate revenue process. She recently told me how the sales culture has become less “individual-driven,” as it moves toward more of a revenue-centric ecosystem within the corporation.

“What’s really interesting is how companies are now using advanced data mining and sophisticated marketing automation tools to enable both the marketing and sales organizations to do continuous improvement, share best practices, and drive better results,” Susanne said. “Through these new technologies and processes, we are seeing sales and marketing collaborate on refining messaging and learning organically from each other. This would not have been possible without the new RPM tools and processes that more and more corporations throughout the United States and around the world are embracing.”

Susanne continued, “It’s no longer just the lone star sales guy, hiding all of his sales secrets. The best companies are figuring out what’s working and then finding efficient ways to quickly share those strategies and best practices across the entire organization. They then continue to refine and improve those practices, throwing out what isn’t working and constantly refining and improving what is. As part of a continuously improving cycle and loop, this process helps to drive greater productivity, increased sales, and more revenue. More than anything, this process improvement approach is a huge part of the power and promise of RPM.”

It’s a beautiful thing when an experienced sales executive, and an equally experienced marketing executive, can articulate with such clarity and consistency what it takes to build an integrated revenue leadership process spanning marketing and sales. One team, one integrated process, and one objective: revenue growth.

Of course, it may take a bit of nudging from the CEO and other senior leaders to get marketing and sales pointed in the same direction, particularly in organizations where this degree of clarity and consistency is not so evident. Obviously, when a CEO makes an organization’s priorities clear (as Jack Welch did with Six Sigma) other executives tend to line up and salute. But a few more management techniques can reinforce the message.

The senior revenue leader in the company, whether it’s the CEO, COO, President, or other senior general manager, needs to appoint a team explicitly charged with governing the RPM initiative. This will consist of senior sales and marketing executives themselves, or high-level designates on their teams with operational responsibility. Companies must organize this team as one consisting of peers, with neither marketing nor sales in charge of the initiative. And all members should be held responsible to speak in one voice about plans and measurements.

With few exceptions, no one ever taught revenue leaders about the ins and outs of RPM; it’s something they’ll need to invest the time to learn and the effort to understand.

“If marketing is able to deliver a steady stream of well qualified leads, sales efficiency and quota attainment will go up. That’s a fundamental equation of RPM, after all.”

Finally, all successful revenue leaders are motivated by incentives, and some incentives can help to get the ball rolling. The incentive for sales is pretty clear: If marketing is able to deliver a steady stream of well qualified leads, sales efficiency and quota attainment will go up. That’s a fundamental equation of RPM, after all. Because this increase in attainment comes from true efficiency gains, sales leaders need to hear a commitment from senior management that their quotas won’t just rise in line with sales growth, but that they will personally share— financially, that is—in the company’s improved revenue and efficiency.

The incentive should be only slightly less pecuniary for marketing. After all, the best marketing leaders have long yearned for a seat at the revenue table. They need a commitment to attend the revenue call and to have a voice in forecasting future revenue, and a compensation structure for themselves and their staff that shares the rewards of upside revenue performance with the team responsible for creating so many of those qualified sales leads.

Selecting An Initial Project Scope
Since every company is different, every RPM initiative will be unique. The key is to take that first hard step on the journey—to get yourself going.

In a small company with just a couple of sales reps, or a new company just beginning to sell, the scope of an initial RPM project can be quite simple. Everyone in marketing and sales participates, and management attention should immediately focus on the creation of great content, basic lead nurturing and scoring processes, and getting more well-qualified leads into the hands of sales.

However, it can be more daunting to get started in a larger, more mature company. Where do you begin?

First of all, many larger companies have multiple divisions, product lines, sales teams, and geographies in which sales take place. There are also multiple routes to market including channels, partners, and direct sales forces. So just pick one to start. You can base this decision on guidelines such as: Which marketing team has the ability to produce compelling content to feed the needs of inbound marketing and lead nurturing? What group has a marketing leader with proven skills in thinking about processes and metrics? Where is there a sales leader with a high degree of curiosity and receptivity to change?

Second, take inventory—literally. Most mature companies have existing databases of leads that they’ve gathered from various marketing programs that they’ve run in the past. And many mature companies have SFA or CRM systems that are groaning under the weight of dormant leads or sales opportunities. These lead pools can be great assets to get RPM moving. The entire RPM initiative can achieve a quick win if a lead nurturing process can activate a few dormant leads from a marketing database or CRM system. So start where there’s already a pool of leads to prime the pump.

Creating A New Narrative For Change
By making critical changes, across the entire revenue process, companies can balance their marketing and sales investments more effectively than ever. They can leverage large-scale changes in buyer behavior to find, nurture, qualify, and deliver more sales-ready leads to their front-line sales people, and they can align marketing and sales organizations into a single, revenue-focused team.

Together, these steps can unlock new revenue efficiencies and translate them into real top-line growth. Then lather, rinse, and repeat. Analyze early wins, and celebrate them to reinforce the organization’s commitment to RPM. Over the longer term, your Revenue Performance Management journey can completely transform the way your company creates—thereby changing the arc of your business completely.

This simple narrative needs to become the mantra of your senior leaders, RPM project sponsors, and the entire revenue team. Teach it. Repeat it. Create a shared vision. And reap the rewards.

*Adapted with permission of the publisher, John Wiley & Sons, Inc., www.wiley.com, from REVENUE DISRUPTION: Game-Changing Sales And Marketing Strategies To Accelerate Growth by Phil Fernandez (c) 2012 by Marketo, Inc.

About the Author
Phil Fernandez
is President and CEO of Marketo, a company that uniquely provides easy-to-use, powerful and complete marketing software that propels fast-growing small companies and global enterprises alike, recently named one of “America’s Most Promising Companies” by Forbes. He is also the author of REVENUE DISRUPTION: Game-Changing Sales And Marketing Strategies To Accelerate Growth.

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