Four Fundamentals of Revenue Growth
With recovery from the recession still moving at a snail’s pace, how worried should you be about your company’s future revenue growth? In a word: very. “But wait,” you might say. “Corporate profits are at their highest levels in 60 years, with profitability as a percentage of GDP at an all-time high of 10.3 percent. Companies are holding trillions in cash reserves, and are looking stronger than ever after squeezing every dollar of cost they could find out of their operations over the past four years.” This is correct, but it fails to tell the whole story.
May 2 2013 by Laurie Brunner
Aligning products with markets in a systematic way enables businesses to reach more customers and to choose the right mix of channels to profitably grow those customer relationships. Critical to this process is a comprehensive evaluation of the buying behavior and the demographics within the customer portfolio. High-performing companies that have realized sustained growth are adept at understanding inflections in customer demand. They recognize the importance of systematically conducting market scans to identify emerging buying preferences and potential new product applications. They understand not only what and how their customers buy, but more importantly, why. These high-growth companies are then able to more rapidly capture previously undefined product needs to hold and expand share. This process in itself minimizes market uncertainties by broadening the footprint of a product’s reach or extending its life by capturing new use.
High-performing organizations also mitigate the risk of growth setbacks by organizing the structure and process of the business around the end customer. Product strategies, pricing approaches, market plans, and the talents of the organization must all be aligned in lock-step with your customer. By focusing on the right customer segments, the right product or service mix, and the right tactical priorities, you can stay on track more effectively. That means new products or services must be conceived, and market-leading innovations must occur, well in advance of stated customer demand — and changes in customer needs must be swiftly acted upon.
All aspects of the organization — from product development to manufacturing to sales — must center on the customer. For example, manufacturing operations can create competitive advantage when aligned directly to customer needs and the markets they serve. By collaborating with customers and suppliers, the supply chain and manufacturing output can be linked directly to the customer’s operational business model. Making the customer “due north” on the compass creates greater value, customer loyalty, and a hard-to-dislodge competitive advantage.
Take Tim Cook, who leveraged Apple’s supply chain to create raving fans for the Macintosh. Whittling down Apple’s suppliers from 100 to 24, Cook was able to negotiate more favorable terms, including relocating those suppliers nearer to Apple plants. As a result, inventory levels were reduced from two months to six days. Manufacturing cycle times were cut in half. Apple not only reduced production and inventory costs, but created a loyal following for the latest in PC technology — readily available at an accessible price.
A similar assessment must be completed of the sales organization to ensure that skill sets are in alignment and can adapt with changing customer requirements. No matter how great a product may be, if it is misaligned to the market and the skill sets of the sales force to sell it, its full potential will never be achieved. Organizing the business around the customer is a foundational step toward achieving sustained growth by ensuring that customers are served by the right people selling the right products.
In a flat economy, of course, sales are harder to come by. Profitable growth cannot be achieved by simply adding more sales talent or by slashing costs. Sales force effectiveness, therefore, is all the more important. The challenge is recruiting, coaching and maintaining a sales force that is fully capable of supporting and fulfilling the needs of the business. Toward that end, sales force competencies must be aligned to corporate objectives, key performance indicators, and customer buying preferences.