Growth Drivers for 2013

10 Proven Growth Drivers that Get Results!

At Evergreen, we help companies grow more, predictably. To enable greater and more predictable growth, our work with senior leaders, sales mangers, and sales reps focuses on:

  •  Making informed strategic choices about which growth opportunities to pursue,
  • Organizing resources effectively, and
  • Equipping sales managers and teams with the right processes and tools to sustain success

Over the last six weeks we have focused on 10 growth drivers we believe senior leaders, sales managers, and sales reps should focus on to drive growth in 2013. We have selected these 10 issues because they are actionable at all levels – the rep, team, and the organization. Moreover, they are proven, based on our experience with over 60 clients, to accelerate growth in a wide variety of industries.

Please follow us via email or RSS feed . And, if you have recently deployed, or plan to deploy, one of our 10 Drivers, please add a comment on the blog or Twitter at @EvergreenGrowth.

Our Top 10 Growth Drivers for 2013 Include:

  1. Growth Driver #1 – Confirm Your Revenue Model
  2. Growth Driver #2 – Increase Your Value
  3. Growth Driver #3 – Sell the Way Customers Buy
  4. Growth Driver #4 – Pursue a Mix of Revenue Gains and Drains
  5. Growth Driver #5 – Identify Growth Themes
  6. Growth Driver #6 – Create a Road Map to Success
  7. Growth Driver #7 – Tighten Your Focus on Sales Management
  8. Growth Driver #8 – Assess Your Turnover Risk
  9. Growth Driver #9 – Focus on Opportunity Creation
  10. Growth Driver #10 – Define Decisions at Customer Touchpoints Before Investing in BI Tools

-TGK


Growth Driver #5 – Identify Growth Themes

Granular analysis of growth  yields valuable insights into growth themes and informs Sales Model adjustments.

In today’s low growth and volatile economy, it is difficult to identify persistent growth themes and realign the Sales Model to achieve more persistent growth. What’s needed is a more granular pattern of analysis to identify where growth is occurring. To get granular, we recommend Win, Grow, and Own Analysis (WGO).  At its highest level, WGO analysis identifies the provenance of revenue growth  from three sources:  (1) recurring business with existing customers that you retain or “Own” year-over-year; (2) new business with existing customers that represent “Growth” within existing accounts; and (3) new business with new customers that represent incremental customer “Wins” for your company.

Then WGO drives deeper  to identify growth themes within each source. To do this, iterative analysis is performed  at finer levels of detail, within each source, such as by:

  • Customer segment
  • Sub-segments
  • Geography
  • Region
  • Sales channel or team type
  • Sales territory
  • Product/Service

Let’s take a look at the example  of how iterative analysis can enable the identification of growth themes and adjustment of one’s sales model.  In this example previous year’s sales were $10 million and  this year’s sales were $10.72 million.  How did this growth come about and, equally importantly, could it have been greater?

The first thing that stands out is the $2.35 million of customer “churn” experienced.  Some of this non-recurring business may be natural; i.e., there always has been and always will be a certain number of one-time buyers. But, in this case, churn is clearly the first area of investigation. If churn can be  minimized with effective customer retention strategies, then the company stands a much greater chance of efficiently achieving year-over-year sales growth.  “Owned”  revenue forms the foundation upon which revenue growth and  sales efficiency are built.  And, in this situation, the company has proven itself very capable of generating $2.45 million (24.5% growth) in revenue growth from further penetration of existing accounts. Lastly, while “Win” revenue represents a much lower component of overall revenue, closer inspection shows that 6.2% growth through new customers is a an extremely competitive rate of growth, compared to the competition. This makes the acquisition of new customers, that are not “one-timers” but are sticky and more likely to buy more, a top priority along with more effective account retention.

Let’s take a look at how the WGO analysis can be applied, with more granularity, to sales reps.  The table below further breaks-down the revenue analysis we initiated earlier by analyzing the revenue and profit contribution of individual sales reps. This level of analysis offers terrific insights on which reps are leading performers and which reps are lagging performers.  Sales leaders can build upon these insights, particularly with the addition of sub-segment and product level analysis, to identify best practices that can be used to refine strategy and tactics.  This knowledge also empowers sales leaders to define credible performance benchmarks that are supported by fact versus being simple “wet finger in the wind” aspirations.  The implications for coaching, training and personnel decisions are apparent.

For instance, Jowan Petrovic in the above example is clearly a standout at retaining revenue and penetrating existing accounts. However, new business generation is not his strong suite. With this insight, his manager should dig deeper and further profile his revenue. In this instance, further profiling revealed that the products Jowan sells into existing accounts are different that those he attempts to sell into new accounts, highlighting either a need for potential training or the segmentation of Jowan’s role, to exclude selling new accounts. In contrast to Jowan, there is Joe Bong, who is great at winning accounts, but terrible at owning accounts. In Joe’s case, there’s clearly a need to dig in and analyze the types of accounts he is acquiring, as well as his account management skills and approach.

If you have not granularly decomposed where and how growth is occurring in your company, it’s time to get busy and apply WGO analysis, it will help you quickly identify growth themes, provide a fact base for high value conversations between Sales Managers and Reps, and it will enable you to make adjustments to your sales model to achieve higher levels of efficiency and effectiveness.

We are half way through our 10 Growth Drivers for 2013. Catch up on the first four tips here:

  1. Growth Driver #1 – Confirm Your Revenue Model
  2. Growth Driver #2 – Increase Your Value
  3. Growth Driver #3 – Sell the Way Customers Buy
  4. Growth Driver #4 – Pursue a Mix of Revenue Gains and Drains

-TGK


Growth Driver #4 – Pursue a Mix of Revenue Gains and Drains

CSOs should pursue revenue gains and drains; closing revenue drains creates immediate and enduring profit improvement which may exceed gains themselves.

As the economic recovery remains slow, CSOs  face increasing pressure to drive revenue growth. However, many have fallen into the trap of pursuing revenue gains without first closing their company’s revenue drains. As a result, returns from gains are marginalized or fail to materialize at all, sparking questions about the legitimacy of growth initiatives, and diminishing sales rep’s and the board’s confidence in growth strategies.

The graphic below, while not an exhaustive list highlights the gains and drains companies face most frequently.  

Although the optimal way to avoid this trap surely is to ensure that all revenue drains are closed before pursuing revenue gains, managers may not have this luxury. The need to pursue revenue gains, for strategic reasons, may trump blocking all drains. Thus, managers must prioritize revenue improvement opportunities based on three factors: strategic value, financial value, and ease of implementation. To do this, we recommend:

  1. Assessing the economic and strategic value of eliminating drains.
  2. Using a 2*2 matrix to rank your gains and drains with strategic value on one axis and economic value on the second axis.
  3. Overlaying the ease of implementation onto your options and build a sequence that allows you and your team to maximize strategic, then economic value as quickly as possible, beginning with a few quick wins to energize the organization.

While results from this process vary by business, it is not uncommon to swiftly generate 10-15% incremental revenue by blocking drains alone, making annual drains vs. gains analysis a mandatory exercise.

If you have recently shut off revenue drains, or are contemplating a hybrid approach to revenue improvement, please comment below. Or Tweet at @evergreengrowth.

-TGK


Growth Driver #2 – Increase Your Value

Increasing your value to customers depends on your ability to Identify, Demonstrate, and Deliver value.

Providing value is important at every stage of the life cycle, but it is especially critical in the growth stage. Early in the growth stage, you must motivate early adopters to buy your product, and later in the stage you must compel new customers to switch to your product. In both cases, you must communicate a compelling reason to buy. To increase your value to your customers, follow these steps.

1. Identify Value

The first step in identifying value is to assess each customer segment’s – if not each customer’s – value chain and identify opportunities to create value. To do this, we like to create a customer value tree that describes how customers grow revenue and make a profit. With this picture in hand, it becomes far easier to begin to identify sources of value from the customer’s perspective, and this step has the added benefit of educating everyone who touches the customer. The second step to identifying value is to sort value creating opportunities into: critical pain points, areas of insecurity or risk, and opportunities for future gain. This sorting exercise typically yields a prioritized road map for value creation, beginning with big pain points, then areas of risk, and concluding with longer term opportunities. To double check this road map, we recommend testing it with customers to determine if your prioritization is accurate and if your performance claims are differentiated versus your competitors. This step will allow you to re-prioritize value creating opportunities and highlight those that require additional investment to improve their performance.

2. Demonstrate Value

Armed with a prioritized road map, you are in a much better position to start demonstrating your value. But you’re not ready to dive int just yet. Before you begin demonstrating your value you must do three things:

  1. Identify which stakeholders in the customer organization care most about each of your value propositions.
  2. Determine when in the sales process to communicate your value propositions.
  3. Select the right person/medium, based on the customer’s expectations, to deliver your value propositions.

In today’s rapidly evolving and increasingly populated selling environment, it is critical to ensure that your value propositions are delivered at the right point in the sales process (frequently, earlier), to the right stakeholders, and by the right member of your team (increasingly not just the sales rep). Doing all three well ensure you have maximum opportunity to differentiate your products and services and share of mind with each stakeholder.

3. Deliver Value

The last step and, frequently, the linchpin of short and long-term success is delivering value. Delivery of value requires confirmation, planning, education, and reporting. Before you are ready to deliver value, you must:

  1. Reconfirm the value stakeholders are expecting you to create and how it will be measured.
  2. Develop a plan to deliver with your team, including, sales, operations, and customer service.
  3. Educate the project team (your team and the client’s) on your implementation plan to deliver value.
  4. Report value as it’s created for your customer.

Don’t make the mistake so many sales people make and assume that value is delivered at closing.

If you have recently worked to increase your value or enhance your value propositions, please comment below, or shoot us a note.

-TGK


10 Growth Drivers to Pursue in 2013

At Evergreen, we help companies grow more, predictably. To enable greater and more predictable growth, our work with senior leaders, sales mangers, and sales reps focuses on:

  •  Making informed strategic choices about which growth opportunities to pursue,
  • Organizing resources effectively, and
  • Equipping sales managers and teams with the right processes and tools to sustain success

Over the next six weeks – commencing November 1st – we will focus on our top the top 10 growth drivers we believe senior leaders, sales managers, and sales reps should focus on to drive growth in 2013. We have selected these 10 issues because they are actionable at all levels – the rep, team, and the organization. Moreover, they are proven, based on our experience with over 60 clients, to accelerate growth in a wide variety of industries.

Please follow us via email or RSS feed over the next six weeks. And, if you have recently deployed, or plan to deploy, one of our 10 Drivers, please add a comment on the blog or Twitter at @EvergreenGrowth.

Update: Links to the 10 drivers we posted are listed below:

  1. Growth Driver #1 – Confirm Your Revenue Model
  2. Growth Driver #2 – Increase Your Value
  3. Growth Driver #3 – Sell the Way Customers Buy
  4. Growth Driver #4 – Pursue a Mix of Revenue Gains and Drains
  5. Growth Driver #5 – Identify Growth Themes
  6. Growth Driver #6 – Create a Road Map to Success
  7. Growth Driver #7 – Tighten Your Focus on Sales Management
  8. Growth Driver #8 – Assess Your Turnover Risk
  9. Growth Driver #9 – Focus on Opportunity Creation
  10. Growth Driver #10 – Define Decisions at Customer Touchpoints Before Investing in BI Tools

-TGK


Implications of Market Maturity and Decline for Sales Models

Your markets are maturing, even declining. Do you know how to evolve your Sales Model?

Lately, the topics of market maturity and decline have been coming up a lot in our discussions with CEO and business owners. There’s a growing sense, as the anemic economic recovery rocks along, that growth for many markets has peaked or is in a steeping decline.

You know the warning signs of maturity and decline:

  1. Profits are being harvested and paid to investors and management vs. re-invested in product innovation or market expansion.
  2. Consolidation of competitors is occurring at an increasing rate, and new entrants are innovating from the bottom.
  3. Price pressure is increasing significantly.
  4. Customer’s control over the buying process has increased markedly, it’s harder than ever to gain early access to stakeholders.
  5. Competitors are competing on brand, ancillary services that complement products, and process improvements instead of the products themselves.

Examples of industries in maturity or decline are abundant. One of the most prominent is the plumbing industry which is very mature in the developed world. And, immature in the developing world; it’s products are not well suited because the lack of public infrastructure, water, and energy. A short list of competitors: Sloan Valve, Kohler, Zurn, Toto, and American Standard have dominant market share and market share has been relatively static for long periods of time. Competition is somewhat oriented to products that conserve water, but is substantially oriented around price, and distribution channel control. So what must the plumbing industry, or others facing similar circumstances do to adapt their sales models?

Implications for Sales Models

Maturing and declining markets pose a number of implications of one’s sales model. In maturity, sales efficiency, or the cost of customer acquisition becomes critically important. Where as in decline, one’s ability to capture specific pools of profit becomes paramount. Here are strategies you should pursue:

In Maturity:

Sales Process, Sales Process, Sales Process. The first and most underutilized driver of sales efficiency is a sales process that is designed based on the customer’s buying process. Once you have a sales process that fits the customer’s buying process, it is critical to enable this process with a CRM system to measure and track sales cycle times and customer interactions, as well as tools to support quality conversations and information sharing with each customer stakeholder in the sales process.

Focus on Sales Management Processes. Having a sales management process that enables frequent inspection of sales opportunities and coaching of sales personnel around the efficient and effective execution of the sales processes is a critical, and often under-leveraged driver of customer acquisition cost.

Re-align Compensation. In the wake of maturity, it is important to ensure that compensation spending is aligned with the right revenue, profit, and/or product and market outcomes while appropriately rewards levels of performance. Quota setting accuracy, allocation of compensation dollars by product/market, and the shape of payout curves become critical drivers of cost of sales.

In Decline:

Customer Selection. Once decline begins, the identification and selection of profitable customers becomes critical. To do this, sales leaders, with the help of finance, must develop a detailed understanding of individual and customer segment behavior  and the drivers of profitability within the customer’s business and their own. These insights form the foundation of where and how to manage decline while sustaining value at the bottom line.

Channel Selection. Within decline, channel selection and, ultimately, consolidation become critically important drivers of sustained profitability. Before demand shrinks precipitously, sales leaders must begin reducing the number of channel partners while improving their ability, through informed selection and strong partnering programs (invested in and created by the channel partner and manufacturer) , to maintain customer access and ensure quality customer experience.

Sales Coverage. Similar to channel selection, the number and types of sales people deployed across markets must be adjusted as markets decline. Not surprisingly, many sales leaders face maturity without having developed much skill at coverage re-design. This is due primarily to the perceived risk of altering customer relationships by changing account assignments and team configurations. However, this risk is mitigated by maintaining a clear understanding of how, and from whom, customers want to buy – which informs the type and number of sellers required – and creates a basis for making regular incremental adjustments.

It’s not only critical to spot the warning signs of maturity and decline, but also develop the ability to adjust one’s sales model dynamically across the market life cycle, ideally in advance of each stage!

Is your market maturing or declining? If it is, how are you adapting your sales model? Comment here or on Twitter. Or contact me at tknight@evergreengrwothadvisors.com.

-TGK


4 Sets of Questions to Check Your Business Model

If you are feeling like Eeyore, it could be time to reclaim control of your business model.

I recently attended a discussion, with business leaders, on business conditions and the economic outlook for the remainder of 2012 and next year. Interestingly, I came away from the discussion feeling utterly schizophrenic. During the discussion it became evident that we interact primarily with two types of managers. One is the Eeyore camp, who believe business conditions are largely out of their control and imploding, that the key to success is survival and risk management, largely through active cost management and customer retention. The other is made up of optimistic striving individuals who are fighting status quo, re-designing their businesses, and investing in experiments that they believe could transform their businesses.

As these disparate groups came into view, it struck me that the central difference between the Eeyores and the Strivers was a deep understanding of their business model and a desire to reshape it in the wake of market changes. As we dug a bit further, it became painfully clear that many of the Eeyores lacked a fundamental understanding of, or control over,  key elements of their business models. I started to wonder how many could answer the following sets of questions about their models:

  1. Sales:
    • Which customer segments are growing or likely to grow?
    • What do these segments want to buy and do we have the right products?
    • How do these segments want to buy, and are we selling that way?
    • What price does each segment expect?
    • What’s the cost of customer acquisition and the lifetime value?
    • How long is the sales cycle and the yield between each step?
    • Do we create enough opportunities at the top of the funnel to drive growth?
  2. Gross Profits:
    • What does it cost us to produce our products/services?
    • Are we driving enough volume on our high margin products or too much on our lower margin products?
    • Do we understand which customers are more and less profitable?
    • What are the biggest opportunities to reduce our costs of goods sold?
    • Should we rationalize, or innovate within, our product mix to increase margins?
    • If we reduce these costs, what are the implications for our sales and operating models?
    • Can margins be increased to the point where investments in growth are self-financed?
  3. Operating Model:
    • Are you spending the right amount on key functional operations outside of product creation and service delivery?
    • Where can we eliminate costs without impairing the customer experience?
  4. Cash Flow:
    • How quickly must we pay our liabilities, can we delay payment further?
    • How fast can we get customers to pay for goods and services?
    • Are there customers who will pay substantially in advance?
    • Can we reduce the amount of cash tied up in inventory or our supply chain?

How would you answer these questions about your business model? Do you and your team understand the interconnections between different elements, particularly their impact on cash flow? Where’s the highest value place to wrest control of your business model?

If you have recently addressed one or more of these questions, share your thoughts and experience by commenting here.

-TGK