It seems like only yesterday that we were throwing around ideas for what would become the CEO Challenge. It’s been a year now, and we’re so pleased with the feedback we’ve received from clients, colleagues and collaborators. Seems we’ve struck a few chords, and that’s great to hear, especially because our messages aren’t always pleasant. “Your business model is Best of the Worst! Your organization is in chaos! You need to think like a Chief Revenue Officer!”
This month, Jane and I decided to revisit the twelve posts we’ve published to date. For those of you who have been reading a while … how many of these Challenges have you accepted? Have you implemented the action plans?
Most importantly, have you made any lasting changes?
Our goal has been to help you think more like a Chief Revenue Officer. We’ve reminded you that consistent, profitable revenue growth doesn’t come from thin air. It isn’t magic or hocus pocus. And it isn’t something that your sales team just delivers. Voila! Rain!
No. It doesn’t happen that way. Consistent, profitable revenue is a reward for delivering value to very specific customers. Period, end of story. And if your company isn’t meeting your revenue goals, look inside. Your business model might be completely off. Your strategy could be weak, or maybe it’s your company’s execution. Perhaps your organization isn’t aligned around the same revenue goals.
In our experience, very few organizations approach revenue generation as a science. It’s shocking. After all, without consistent, profitable revenue, there is no business.
But enough about that. Let’s get to the solution. Below you’ll find a description, links and downloadable PDFs for our first year’s worth of CEO Challenges, or you can download all 13 files in this single ZIP folder (you’ll need to uncompress the files).
BUSINESS MODEL & STRATEGIES
In boom times, BOTW companies are enormously confident in and proud of their performance. But then the environment changes. The market sours, the economy tanks, new competitors show up, legislation kicks in, or some other external variable shifts. Sales and profits plummet.
What do BOTW companies do? They blame these uncontrollable external variables for their woes. Then they just try to survive until the boom times return. They aren’t really market leaders; they’re just fulfilling accelerating demand. When that huge demand takes a nosedive, they point fingers because they don’t recognize this painful truth: Their problem is internal.
In this article, we discuss how to evolve a Best of the Worst (“BOTW”) business model to Best of the Best (“BOTB”). In particular, we focus on fixing three key issues:
1. Marketing strategies that care most about the quantity of prospects rather than the quality
2. Inflexible cost structures based on random external demand, not the specific needs of a specific, strategic target market
3. The dangerous attitude that customers buy from because the seller and the product is “good.”
No brand? You’re no different. In an age where your customers can choose from a huge swell of service providers from around the globe, choosing anonymity is a dangerous decision indeed. If you don’t answer the question of “why me,” a competitor surely will.
Very simply, branding gives customers a reason to buy from you without you having to plead, prod, and cajole a sale because you’re very clear about who you are and what specific customer segment you best serve. Thus, done correctly, branding is discomforting for a small to mid-size company because it requires a courageous and counter-intuitive choice to limit your market. After all, when you’re very specific about your target customers, you leave out other customers that don’t perfectly fit your target. For a small company fighting for survival, decisions don’t get much tougher than that.
Thought leadership is often bandied about as if it’s a marketing campaign. But thought leadership is a long-term business strategy that drives everything the organization does each day and at all levels. A thought leader is an innovator in a very specific niche, and customers in that niche recognize, value, and – most importantly – are willing to pay for that innovation, that leadership position.
True thought leaders can demand substantial price premiums for their solutions because they can clearly articulate a compelling value proposition for a very specific market niche. They also enjoy shorter sales cycles, greater repeat business, and strategic opportunities that their competitors miss.
That’s why thought leadership is typically so difficult.
REVENUE GENERATION AS A SCIENCE
You have a sales team and a marketing director, but they’re in constant combat. Your revenue growth is flat. Margins are shrinking. And whether you realize it or not, you’re drastically overpaying for results. It’s a common problem, but the companies who solve it can remove 10-15 points of cost while driving their top line to generate predictable results.
How can you solve this issue? By becoming a Chief Revenue Officer, or CRO. No, you don’t necessarily need to hire a CRO – you just need to add “CRO Thinking” to your own job description and “act like a CRO.”
When it comes to sleep deprivation, CEOs have plenty of issues to blame. In our experience, the top culprit is typically revenue-related. CEOs are tossing and turning over questions like “Is my sales manager doing a good job?” “Is my star salesperson going to quit?” “Why does one salesperson excel while others struggle?”
This stress frequently stems from two faulty beliefs: First, that consistent revenue generation depends on the talents of a few select individuals, and second, that those individuals operate in a world lacking both structure and predictability.
Good news: Revenue generation is a science similar to other disciplines inside your organization. It can be predictable, profitable, and far less stressful than you ever imagined.
“We need a sales leader who can build our team, lead us into the market and close business,” CEOs will tell me. ”I’ve spent a million dollars hiring, firing, and starting over. How can I stop the churn and hire someone who will deliver?”
Here’s the problem: A great sales VP won’t accept a job where there is no revenue generation strategy, infrastructure or organizational alignment. Top people know that this chaos impedes their success, and they can spot issues a mile away.
Even if they do join a chaotic company, great sales leaders eventually find themselves in lose-lose situations at exactly the time you need their expertise most. They take the blame for organizational problems and leave you to start the vicious cycle again.
We hear this problem all the time, and it’s a function of what we call “the desperate pipeline.” You know the desperate pipeline – you’re probably caught in several of them right now. Somewhere, somehow you crossed a seller’s path, and now you receive endless calls and emails trying to sell you something that you will never buy. But you’re still a prospect because you have a name, an email address, a phone number and a pulse.
Don’t be one of those desperate companies. A fat sales funnel has dramatic hidden costs and creates a barrier for consistent, profitable revenue growth. Marketing programs that focus on attracting as many leads as possible are no different from aggressive salespeople who pitch every breathing soul at every trade show, networking meeting and playground.
The solution? Shrink your pipeline!
This isn’t a good time to raise capital for your company, but according to this New York Times article, it may be a good time to sell. Even if an exit isn’t in the cards right now, you should consider bringing in outside counsel to evaluate the company from an investor’s perspective. Why? Because outside advice could help you improve your strategy and profitability, leading to a higher valuation if you later decide to take the next step.
But is your business ready for due diligence? Be careful with your answer — I’ve seen many CEOs and small business owners assume that since the company is profitable now, it will continue to be profitable in the future.
Unfortunately, yet buyers and investors aren’t making that assumption at all. In fact, they’re doing just the opposite — they’re looking for evidence that the company CAN’T maintain and grow profitability. Your mission is to convincingly demonstrate that your revenue and profits are repeatable and sustainable. And by “convincingly,” I mean that you need a clearly-defined long-term revenue strategy along with the process and structure to create that reality.
PROCESS, STRUCTURE & EXECUTION
A recent AP article proclaimed that “Americans’ job satisfaction lowest in 22 years … if the job satisfaction trend is not reversed, economists say, it could stifle innovation and hurt America’s competitiveness and productivity. It also could make unhappy older workers less inclined to take the time to share their knowledge and skills with younger workers.”
This decline has somber implications for businesses, and executive teams need to address this issue in their organizations. And guess what? It affects your revenue generation and profitability as well. In this issue of the CEO Challenge, we discuss three common examples of organizational misalignment that cause frustration, anger, confusion and, eventually, disengagement. We call this misalignment “The Cost of Chaos.”
Assumption testing has always been important in organizations. Right now, however, it’s more critical than ever. Markets are evolving so fast that the wrong assumptions can be fatal. Worse yet, an organization’s inability to routinely identify and test assumptions is a cultural defect that can be very difficult to correct.
It’s understandable that colleagues sometimes fail to challenge each other. We live in a multi-disciplined world in which we need to trust the expertise of our colleagues. When those from other disciplines speak, we may not have the direct knowledge to evaluate the intricacies of what they said, let alone establish whether it’s right. As a result, assumptions go unchecked. This problem escalates when power is added to the equation.
It’s naïve and dangerous for any executive to believe that employees will automatically voice anything, especially when that “anything” is negative or challenging. The way to truly create an organization that identifies and checks critical assumptions is to build it into the cultural expectations. Only if it becomes the behavioral expectation in the organization will it become real.
Recently you included a wide range of employees to assist in developing a critical new strategy. Employees felt involved and engaged; they had a sense of enthusiasm and ownership. But suddenly it’s been six months and you’re sitting in a meeting struggling with familiar issues … the great strategy you developed is long forgotten or ignored. What happened? Daily tasks, emergencies, and problems diverted your team from its strategic initiatives.
Today, this inability to execute efficiently and reliably is deadly. It may not be sexy or exciting, but well-crafted strategies are useless unless you drive the successful, timely execution of those strategies. You’re responsible for results, and your entire executive team must, must, must focus on execution. And there are two core competencies involved: clarity and consistent discipline.
Do you have any burning questions that we can address in a future issue of the CEO Challenge? Please contact us here. And if you know a CEO (or aspiring CEO) who could benefit from the CEO Challenge, please forward it liberally!
We also love your comments, questions, and debate, so please share your thoughts with us here, and thank you for taking this journey with us.