Revenue Operations. Stephen Diorio
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taking steps toward unifying sales, marketing, and service.
This is not surprising because describing Revenue Operations is similar to describing great art, writing, or music. Most people agree it's a good thing, and everybody seems to know it when they see it, but few people can describe it. This ambiguity has allowed at least a dozen inconsistent definitions of Revenue Operations to flourish in written research, analyst reports, and software marketing and ads. These definitions range from a methodology to a strategy to a job function, software platform, and organization design.
This wide variety of inconsistent descriptions creates a practical challenge. If nobody agrees or understands what Revenue Operations is, how can analysts empirically prove that companies that deploy Revenue Operations are growing sales and creating value? If you cannot quantify the value of Revenue Operations, how can you size and sequence the effort involved in achieving it?
This book will lay out a clear execution blueprint for the individuals who must make Revenue Operations a reality – from the CEO to operations professionals to sellers engaging customers on the front line.
How Revenue Operations Creates Value
An analysis of the third-party research published by analysts, consultants, and solutions providers strongly supports the shift to Revenue Operations as a way to improve rep productivity and firm financial performance. Aligning the revenue-centric teams in marketing, sales, and service around a common workflow will also produce value in a variety of meaningful ways, including:
Productivity: Rep productivity gains ranging from 10 to 60%.26,47
Growth: Revenue growth improvements ranging from 19 to 31%.45,17,26
Ramp: The speed of ramping new sales reps of up to 60%.23
Churn: Reducing rep churn by 75% or more.23
Quota attainment: Improvements in quota attainment.
Value: Increases in firm value range of up to 71%.21
Although these are generalized business impact estimates, their collective bias suggests a significant and tangible opportunity. Until now, the current body of research has not yet answered the questions being asked by the senior executives our team interviewed. So far, research has failed to clearly define what a Revenue Operations model is, how those gains are being realized, and who specifically is achieving them. Broadly forecasting the financial benefits of moving to a Revenue Operations model in the absence of a concise definition of Revenue Operations or a few years of operating data is tricky.
This book tries to fill that gap by providing CEOs, CXOs, and their teams greater clarity on the financial contribution the Revenue Operations model makes to the business. We lay this contribution out in terms of the ability to meet or exceed top-line revenues targets while improving profits and growing firm value.
By working with hundreds of growth leaders and leading academics in the “science of growth,” we and the rest of the faculty of the Revenue Enablement Institute were able to isolate the specific financial, operational, and management levers that CXOs need to pull to realize measurable benefits and put in place key leading and lagging indicators on what is going to be a multiyear transformation. According to the CXOs we interviewed, it is possible to achieve immediate financial gains and demonstrable signs of progress from taking specific and measured actions:
1 Eliminate revenue leakage across the revenue cycle by eliminating the handoffs and “air gaps” in the prospect-to-cash cycle to revenue and margin leakage with a single point of management of the customer journey across the enterprise. This revenue, margin, and price leakage can cost your company up to 5% of realized profits (EBITDA) on business you should already have, but fail to realize because of missed handoffs, lack of follow-up, and improper pricing. If you are a $100 million company, that translates to losses from $1 million to $5 million annually. Add in the opportunity cost of missing signals from new buyers, alerts from angry customers, and opportunities to expand accounts, and the impact is far bigger.
2 Enable scalable technologies that multiply your efforts by redeploying operations and analytics resources to create scalable and consistent growth including one-to-one personalization at scale, real-time training at scale, dynamic pricing, data-driven sales resource allocation, and account-based marketing. For example, using algorithms to enforce pricing discipline and dynamically match price to market demand can add 10 points of profit to your bottom line with no incremental resources or investment. A 1% increase in effective price with no commensurate volume loss will add 10% to your bottom-line profits, according to Professors Jagmohan Ragu and John Zhang at the Wharton School of Business.102
3 Foster teamwork by doubling the engagement, speed, and productivity of revenue teams by adjusting the way they architect and systematize their selling systems, so they can grow faster while reducing the associated cost of sales. “Organizations that have automated workflow processes are seeing efficiency gains of two to three times when compared to counterparts using manual or spreadsheet-driven processes,” according to Michael Smith, a Managing Director of Blue Ridge Partners, who has helped over 300 B2B organizations unlock more growth from existing selling assets in the last decade.
4 Improve the return on technology assets by rationalizing the technology stack to reduce waste and sunset stranded or nonperforming assets. This will improve seller experience and adoption. Redeploying operations resources will streamline the administration of data, technology, and content. As we've discussed, these growth assets are expensive, valuable, and generate a significant portion of the financial value of your firm. In most firms they are underutilized and poorly managed. Putting these assets to work in ways that directly support scalable growth – such as better allocating resources and informing selling actions that yield higher prices, bigger deals, and better conversion rates – creates significant financial impact. For example, business-to-business selling organizations can get 50% higher engagement, speed of response and productivity from their sales reps at lower costs by incorporating virtual selling channels into their commercial model,” according to Michael Smith.
5 Use data to optimize selling and resource allocation by generating more and better insights from customer engagement and seller activity assets. Any business can better focus their selling time, resources, priorities, and the way they treat customers to make more money. The emergence of digital channels and advanced analytics offer tremendous potential to improve the performance of selling teams and channels. Businesses can realize these efficiencies by sharpening segmentation, focusing account priorities, shifting engagement to digital channels, and fine-tuning the emphasis and priorities of their sellers. We call the optimization of all these selling system design variables “the commercial architecture.” A properly designed and optimized commercial architecture that aligns selling roles, effort, and engagement with the right customers can contribute 5–10 points of profit contribution to the bottom line in the short term.
6 Reallocate sales overhead from real estate and travel to more scalable investments in training and enablement. The average organization spends over $10,000 a year on “selling overhead” on a per rep basis. Up until the mass adoption of work-at-home and work-from-anywhere policies, most of this overhead was associated with real estate, travel, and market development funds to take clients out to dinner. Very little – less than a third – was spent on scalable investments in training and technology to enable sellers. Replacing some or all of this overhead with technologies and training offers the potential to double visibility, speed, productivity, and engagement while still yielding a net reduction in cost of sell. Eighty-one percent of growth leaders surveyed by Wharton are actively optimizing that mix by increasing investment in digital technologies to improve market coverage and client engagement, while cutting travel and selling overhead budget to generate much higher sales at much lower costs.5
7 Improve the economics of field selling by improving the speed of ramping sales reps, raising the overall level of readiness and skill across the entire revenue team, and reducing churn to retain top talent that performs at a high level. A 5% increase in sales rep attrition