Complex Enterprises

Complex enterprises are large matrixed organizations that can struggle to grow because of their size and structure. Functional silos, fragmented management of selling resources, overly complicated technology portfolios, and disconnected customer data sets can stifle adaptation to changing market realities. Complex enterprises must focus and align their revenue teams and resources on the highest opportunity accounts and find ways to leverage technology as a force multiplier. The leaders of these businesses prioritize specific aspects of the Revenue Operations model:

• From a commercial architecture perspective, they redesign their market segmentation, account priorities, and coverage model to realize more market opportunity and focus resources on customer value.
• Their analytics teams must make better use of predictive insights to significantly focus account priorities based on potential, propensity to buy, signals of intent, and coverage difficulty.
• Their operations teams evaluate the effectiveness and returns on their technology, data, channel infrastructure assets. To accomplish this, they assess their entire commercial technology portfolio to identify ways to save money by rationalizing the technology and eliminating waste, redundancy, or nonperforming assets. In parallel they ask those teams to better connect the dots across their revenue enablement technology portfolio by simplifying the selling workflow. They also try to streamline the way selling content is created, managed, personalized, and distributed to sellers and customers through all their channels.

Margin Maximizers

Margin maximizers are large but slower-growing enterprises that create value by maximizing margin and price while simultaneously controlling cost to sell. These organizations focus on optimizing the allocation of their growth resources and focusing their sellers on products and activities that generate the most profit contribution. They also invest in revenue enhancement systems that help their revenue teams sell value and migrate selling interactions to digital and virtual channels. These businesses must maximize earnings growth to justify purchase price valuations by PE investors that have grown to exceed 13 times EBITDA. The leaders of margin maximizing businesses are concentrating on these actions and priorities:

• From a leadership perspective, they demand better accountability for financial returns from every commercial investment and asset. To do this, they define financially valid criteria to prioritize, size, allocate, and measure the performance of every team, budget, operation, and enablement asset in the selling system.
• From an operations standpoint, leaders are exerting more control over cross-functional revenue cycle. To do this, they establish a single point of management across the entire revenue cycle from prospect awareness to customer expansion. The goal is to have a single person focused on eliminating the handoffs and “air gaps” in the prospect-to-cash cycle and on stopping revenue and margin leakage.
• Their sales enablement teams invest in revenue enhancement systems that help sellers capture more price and value. To do this, they invest in CQP and fulfillment tools to reduce revenue, price, and margin leakage in the lead-to-cash cycle.

Agile Enterprises

Agile enterprises are large organizations trying to pivot from their core markets to realize market opportunity in new, rapidly growing segments. These organizations invest in product innovations and shift their focus to maximizing the long-term customer relationship. This occurs by cross-selling the full breadth of their expanded product portfolio. Taking this approach places a premium on cross-selling, key account management, and aligning revenue teams on the highest potential accounts. These businesses maximize firm value by using team-based selling approaches to grow total contract value and customer lifetime value. They also pivot their go-to-market strategy to expand addressable markets and drive high levels of growth at scale. Executives leading agile enterprises build out these aspects of their system of growth:

• They adopt real-time data-driven selling. They have tasked their sales enablement and operations team to pilot and enable real-time prescriptive sales guidance and individualized coaching to all customer-facing marketing, sales, and service teams. This helps frontline sellers learn about new products faster and allows managers and specialists to coach them when new cross-sell opportunities emerge in real-time conversations.
• Executives here put in place leadership models that better align revenue teams around the customer with a broad transformation remit and authority. Some organizations like Cisco have adopted the “Tsar” approach by putting a CXO in charge of marketing, sales, and service. Others, like Juniper Networks, have taken a more federated approach to aligning sales and marketing.
• They reengineer the roles on their selling teams to elevate development roles (e.g. Sales Development Reps, Business Development Reps) that better pursue new markets and key account management teams that develop and cross-sell into different buying units in named accounts.
• They link and coordinate their commercial operations to better leverage customer insights and scalable technologies across the enterprise. To do this they create better integration across marketing operations, sales operations, sales enablement, and training and development with the goal of better supporting sellers across the revenue cycle.
• From a technology enablement perspective, they ask their marketing operations and sales enablement teams to collaboratively connect their digital marketing infrastructure with their CRM and sales technology systems in support of Account-Based Marketing. To do this, they connect digital marketing signals, digital marketing programs (e.g. advertising, web assets), and CRM to execute ABM programs. This helps sellers identify key stakeholders to target in accounts, optimize account coverage, and maximize the return on sales and marketing technology.

Transformers

Transformers are businesses transitioning a significant portion of their revenues to a recurring revenue model. Their shift from selling individual hardware, software, and service transactions to recurring revenue streams occurs by repackaging their software or services offerings “as a service” or bundling them into a subscription pricing model. Net recurring revenues, the customer experience, and customer lifetime value become focal points for the revenue team. The average mature SaaS business grows at 19%, which supports double-digit earnings multiples and stable cash flow while covering large, fixed costs.⁵⁴ In order to address these unique challenges, the leaders of transformers prioritize these actions:

• From a commercial operations perspective, they are redefining their measurements and incentives. These management systems changes refocus marketing, sales, and service teams on customer lifetime value, retention, and annual recurring revenue as the primary goal.
• From a commercial architecture perspective, they are reengineering selling roles to better focus the revenue team. The goals become customer lifetime value growth, incentives for selling long-term deals, and total contract value growth. As part of this transition, the customer success manager role gets introduced or increases.
• From a commercial insights standpoint, they are developing fact-based measures of opportunity potential, seller performance, and account and pipeline health based on customer engagement and seller activity data.
• Commercial operations teams are also taking steps to shrink the lead-to-cash cycle to improve cash flow. They do this by streamlining the selling workflow and accelerating the sales cycle with enablement, engagement, and readiness solutions. The transition from a transaction to a subscription model delays revenue receipt by spreading it out over time, and this puts serious pressure on cash flow at the inflection point until the annuity streams build up.
• From an insight's perspective, new revenue intelligence dashboards give better visibility into the entire revenue cycle. By aggregating, analyzing, and transforming their customer data into revenue life cycle insights, you can create fact-based measures of account health and customer lifetime value. This helps focus on growing the volume and value of customer accounts.

Failure to Launch

Failure at launch describes businesses with high-growth expectations and funding that are unable to generate the high levels of organic growth their investors want to see. These businesses struggle to find the sweet spot in the market, sell their unique value to customers, and win consistently. These organizations are under pressure to achieve greater market share to justify the valuations and growth capital their owners have invested. They try to stem the losses incurred because of inconsistency and failure to leverage scalable technologies in their commercial models. The leaders of these types of businesses focus on these actions:

• They actively reengineer their commercial architecture to better align selling resources with actionable market opportunity to ignite growth. They do this by refocusing their teams on the territories, accounts, and market segments where they can effectively realize more market opportunity and win more consistently. They also refine the way they cover their target markets, engage with customers, and refocus sellers on the activities that convert business.
• They ask their analytics teams to find ways to “shrink the bullseye” with customer targeting insight by focusing their revenue teams on the highest potential accounts and eliminating “long tail” customers who are not likely to buy. To do this, they are finding ways to use advanced analytics and predictive insights to significantly focus account priorities based on potential, propensity to buy, and coverage difficulty.
• From a commercial support perspective, they ask their operations teams to link together the CRM, sales enablement, sales readiness, and digital asset management solutions in their revenue technology portfolio to eliminate the key points of failure, friction, and manual labor in the day-to-day seller workflow. These systems are largely managed in different functional silos in most business-to-business organizations.

Gas Guzzlers

Gas guzzlers are hyper-growth businesses on a growth trajectory to an IPO. Firms in this category are usually investing a significant percentage of their capital into generating hyper-growth, customer preference, and market share. Unfortunately, they struggle to achieve scalable and sustainable revenues. Gas guzzler revenues do not grow enough to justify rising selling costs, and inconsistent seller performance targets unfocused territories, accounts, and very low returns on commercial selling assets. These businesses focus on connecting the dots in these areas:

• A greater focus on accountability: leaders here ask for much higher degrees of accountability. They do this by defining financially valid criteria to prioritize, size, allocate, and measure the performance of all commercial teams, budgets, operations, and enablement assets.
• Operational ownership of the entire revenue cycle: map the cross-functional customer journey to eliminate the handoffs in the prospect-to-cash cycle and “air gaps” that drive revenue and margin leakage. They seek a single point of management of the customer journey across the enterprise.
• They push their commercial operations to better connect their sales enablement, CRM, conversational intelligence, and digital marketing systems. This makes selling channels more effective. To do this, they use advanced analytics and sales AI tools to help them turn customer engagement and seller activity data into commercial insights. These insights provide guidance and coaching to reps about the right response, content, action, or sales play to use in the “moments that matter” in the customer journey.

Leaky Buckets

Leaky buckets need to look at the combination of annualized recurring revenue plus account expansion revenues, minus revenue lost due to downgrades, cancellations, and churn. SaaS businesses that can acquire new customers at double-digit rates may be unable to sustain net recurring revenue ratios of over 100%. If your net recurring revenues fall below 100%, investors worry that you will lose too many customer relationships without sufficient offset of any revenue gains coming in.

Leakage tends to happen when revenue teams focus too much on acquiring new accounts or lack alignment on the customer experience. When teams lack alignment, significant revenue, opportunity, and margin are lost due to lack of personal accountability. To plug the holes, the executives running leaky bucket businesses emphasize these elements:

• From an operations perspective, they establish a common purpose across their marketing, sales, and service teams to get them working together toward more profitable growth. To do this, they redefine incentives to focus revenue teams on customer lifetime value, retention, and account health.
• They set up a leadership model that better aligns commercial teams around the customer. Due to limited scale and scope these organizations tend to favor a CXO leadership model. The Chief Revenue Officer role is especially popular in hyper-growth businesses.
• From a commercial insights perspective, they ask their analytics teams to give them better visibility into account health and selling activity across the entire revenue cycle. They use this data to measure and manage all the key factors leading to customer churn – satisfaction, loyalty, onboarding, success, and retention. As part of this initiative, they create metrics and fact-based incentives to get frontline sellers working with success teams on longer-term recurring revenues.

Cloud Climbers

“Cloud Climbers” are fast growing cloud-first businesses that see double-digit revenue growth rates by focusing on speed to market, optimizing the customer experience, and scaling selling technologies and channels. The average SaaS business IPO grew at over 50% with net recurring revenue ratios over 100% and firm valuation of over 15 times revenue.⁵³ To maintain this pace and meet extremely high investor expectations, they add sellers to expand their revenue teams at a rapid clip. Public investors put pressure on Cloud Climbers to provide visibility on future growth, especially annual recurring revenues and total contract value. The leaders of these businesses prioritize specific elements of their growth system.

• They unify their commercial operations to leverage customer insights and scalable technologies across the enterprise. To do this, they take advantage of engagement data from recorded conversations, content consumption by clients, CRM, and exchange data from email and calendars. They also pilot real-time guidance and coaching at scale with their frontline sellers. Using advanced analytics and sales AI tools, most cloud climbers can get an “80% good-enough” picture of buyer engagement and seller activity to provide real-time guidance and coaching to reps about the right response, content, action, or sales play to use in the “moments that matter” in the customer journey.
• From a commercial architecture perspective, they reconfigure roles on the revenue teams and segmentation of their markets. They see this as a way to capture a greater share of their large addressable market and keep their teams focused on sustaining net recurring revenues and growing customer lifetime value.
• From a commercial enablement perspective, they are asking sales enablement, operations, and training and development teams to knit together their sales enablement, training, learning, and development solutions. They aim to shrink the development and ramp-up time for new sellers to add capacity and combat attrition, which is higher in technology sectors. They are creating a closed-loop system for sales rep education, readiness, reinforcement, and measurement.

In the next chapter we will teach you financial tools to help prioritize the most profitable actions your organization can take to generate more sustainable and scalable growth. These tools will help you get the funding, consensus, and leadership support you need to take the required steps to improve.