getting strategy into the revenue gamestrategy+into+the+revenue+g… · getting strategy into the...

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Executive SummaryCompany life spans are getting shorter, cost-cutting initiatives have run their course,

competitive intensity is heightened and entire industries are being disrupted. In the modern

business environment, is strategy really in the "game"? Outside of the strategy organization

itself, there are often misconceptions that strategic planning is a “pie in the sky” function. Worst

yet, strategic planning can be perceived as a “out of touch” corporate function that is know

mostly for hosting annual strategic planning off-sites at fancy golf resorts.

tt Either way, often at the expense of planning for the future, the urgent need for companies

to deliver current and short-term returns can be a dominant force. Under these conditions,

strategic management disciplines in many companies can struggle to consistently

demonstrate value and command the respect that they once did.

tt Addressing critical questions about the future becomes an urgent priority for senior

business leaders and the strategy practitioners that support them. To that end, this note

introduces new, actionable strategic management practices that are designed for the

uncertainty, structural change and complexity of the modern business environment.

tt The core of these practices is about “getting strategy into the revenue game” - reframing

strategy as a portfolio of medium to long-term, horizon 2-3 opportunities that are linked

directly to future revenue and growth outcomes.

tt In our experience, this approach equips strategy executives and practitioners to speak

the value creating language that their companies need in the 21st Century, and that CEOs,

CFOs, Boards and Shareholders really understand and care about.

Getting Strategy Into The Revenue GameHelping growth champions create value in the 21st Century by speaking the

language that CEOs, CFOs, Boards and Shareholders really care about.

BY: WAYNE SIMMONS AND KEARY CRAWFORD

BEST PRACTICE NOTE

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Filing the void: the business case for strategyAchieving revenue and growth objectives is often the most pressing issue in companies large

and small. According to our research1, 90% of surveyed executives indicate that revenue and

growth will become even more of a challenge amidst macroeconomic uncertainty, structural

change and unprecedented competitive complexity that they are facing.

tt When thinking about future revenue and growth, marketing and sales typically come to

mind first. However, both marketing and sales are inherently tactical and focused on horizon

0-1, current to short-term revenue (0-12 months). Interestingly, these two disciplines are

becoming even more tactical as marketing and sales automation rapidly proliferate.

What often gets lost in the day-to-day leadership conversation is the fact that 70% of a

company’s enterprise value (i.e. stock price) relies on its future growth prospects. Future revenue

and growth is defined as horizon 2-3, over the medium to long-term (e.g. 12-60+ months) rather

than current or short-term performance.

tt When insufficient attention is paid to medium to long-term revenue and growth, companies

suffer from an affliction that we call "revenue blindness" - a lack of visibility into horizon

2-3 revenue that can quickly make companies vulnerable to the structural changes, market

complexity and hyper competition that define the new business environment.

tt Most senior business leaders are intrinsically aware of the essential role that horizon 2-3

revenue and growth play in enterprise value creation. However, the pressures to deliver

quarterly performance and earnings tend to dictate that horizon 0-1 revenue command the

lion’s share of leadership attention and consume the largest portion of corporate resources.

tt Conventional wisdom assumes that all types of revenue and growth are the responsibility of

Marketing and Sales organizations. We argue differently: horizon 2-3 revenue and growth

is about the future, and inherently falls within the purview of executives and practitioners in

strategy and strategy-related fields.

Strategy: Questions about relevance, impact, and valueCEOs, CFOs, Boards and senior business leaders are continuously searching for ways to create

new sources of value. To that end, rationalizing which strategic choices and capital investments

are most likely to generate future revenue and growth outcomes (and thus enterprise value) is

one of the principle conversations going on in the C-suite.

tt Unfortunately, equipped with decades-old, internally-focused competitive advantage,

strategic planning, operational efficiency and balanced scorecard frameworks, strategy and

strategy-related disciplines can often be forgotten in that critical C-suite conversation.

tt When faced with questions about the future, many companies outsource their idea

generation and strategy formulation to outside management consultants.

1 2013 Chief Strategy Officer Survey, The Growth Strategy Co. and Innovation Excellence Ltd.

GETTING STRATEGY INTO THE REVENUE GAME

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However, some are now realizing that these extremely expensive, episodic consulting

“transactions” struggle to deliver tangible results or sustained value to the organization.

tt As affirmation of the negative value perceptions associated with management consultants,

John Abele of Heidrick & Struggles states that, “Consultants were frequently hired to

develop growth plans, but too often these reports ended up collecting dust on the shelf”.

tt Further, as noted in Consulting on the Cusp of Disruption (Harvard Business Review, 2013),

“consulting is highly opaque…consultants rely on ‘social proof’ to substantiate their value”.

In this context, social proof means that the “educational pedigrees, eloquence, and

demeanor [of consulting firms] become substitutes for measurable results.”

tt So, if strategy and management consultants struggle to demonstrate value, how can the

strategy executives and practitioners that hire them show tangible value to their companies?

Case in Point: Global Industrial ManufacturerPursuing revenue and growth opportunities can be a challenge. For many companies, such

as a Fortune 50 global industrial manufacturer that we've worked with, a far too familiar cycle

has emerged: first, Shareholders and the Board expressed concerns about enterprise value

(i.e. stock price) of the company; the CEO and senior business leaders responded by setting

ambitious future revenue and growth targets; engineering and product teams reacted by hastily

developing new products and features that were then handed to marketing to generate new

demand and leads. However, when the sales organization finally tried to convert those leads

into revenue or growth, they find the going tough with slow sales and the original, overly

ambitious revenue targets virtually impossible to meet.

Diagnosis: Not enough focus on the things that really matterAs in the case study above, taking action to pursue revenue and growth can have multi billion-

dollar implications. With significant resources being applied to traditional strategic planning,

product development, marketing and sales, why is the situation in the case study so familiar?

tt From our research and fieldwork, we attribute a large part of this problem to a reactive,

short-term focus caused by the relative absence of specific horizon 2-3 revenue and growth

opportunities and associated risks in the traditional revenue cycle. While this may seem

surprising on the surface, deeper examination shows this pattern in a few key ways.

tt When CEOs, general managers and other senior business leaders set future revenue

and growth targets, they often don’t have a clear sense or specificity of where that future

revenue and growth will actually come from, nor do they factor-in the real world risks and

barriers that may inhibit their ability to capture that future revenue and growth.

tt The lack of focus on generating specific future revenue and growth opportunities, and

the actions needed to capture those opportunities, leads to future revenue and growth

forecasts that lack credibility - built on flawed or non-existent assumptions about such


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strategic issues as market size, market attractiveness, the willingness to pay of prospective

customers, the impact and probability of risks, and levels of competitive intensity.

tt As product, marketing and sales teams engage to meet those, often-baseless, revenue and

growth forecasts, any errors in strategic assumptions or risk identification can cascade down

through the revenue cycle at ever-higher costs and lower success rates.

tt While all of the actors in the traditional revenue cycle seem to be doing their part (albeit

independently), overall results can often miss the mark. With a sustained absence of horizon

2-3 revenue and growth opportunities within the revenue cycle, companies can quickly

find themselves out of sync with customers, markets and demand; falling behind the

competition and consistently missing their future revenue and growth forecasts.

Rethinking the blueprint for revenue and growthWith enterprise value creation (or value destruction) in the balance, what’s needed? Imagine

implementing a "start-up like" entrepreneurial philosophy and practices that are specifically

designed to generate and capture future, horizon 2-3 revenue and growth opportunities – the

essential ingredients for enterprise value creation in the 21st Century.

tt The idea of large corporations or mature companies thinking, acting and growing more like

entrepreneurial start-ups can seem like a fantasy. This is particularly true for companies that

are hard-wired to focus internally on operational efficiency and cost cutting, or those that

are successful in the status quo of the "known world" - trying to extract value from known

customers, in known markets, with known offerings against known competitors.

tt The known world is being replaced by the unknown world of uncertainty, structural change

and complexity. In this environment, the need to become "more entrepreneurial" is no

longer a novelty or luxury - it is an absolute necessity for companies large and small.

tt A more entrepreneurial strategic management approach is the opposite of linear annual

strategic planning or the "all or nothing, bet bet" capital investment approaches that are

common. This new approach recognizes that pursuing multiple pathways to the future is a

better way to capture opportunities and manage risks than a single "bet the farm" approach.

tt Leading global corporations, such as GE and American Express, are addressing the

entrepreneurial imperative by incorporating concepts such as lean startup and real options

valuation into strategic processes. These concepts are built on experimentation and

incremental learning, which provides companies with the agility and optionality typically

found in the start-up world and essential for the new business environment.

tt Absent this type of thinking, revenue blindness can take hold, making future revenue

and growth seem inaccessible and unachievable - hidden by 1) an inside-out perspective

that limits peripheral vision of markets, trends, customers, etc. 2) a focus on short-term

performance that limits over-the-horizon visibility; and 3) an aversion to risks that can

obscure underlying opportunities.


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Idea in practice: Seeing through the fog of revenue blindnessHow can growth champions help their companies and senior business leaders avoid revenue

blindness in the real world? How can the risks of the new business environment be converted

into opportunities for revenue and growth?

tt We strongly advocate that companies implement a new strategic hierarchy that is purpose-

built for the modern business environment. This new framework combines growth

enterprise, lean startup and real options best practices with the action-orientation and

financial rigor needed by large corporations and mature companies.

tt With this new framework, strategy is reframed as a portfolio of specific revenue and

growth opportunities with associated initiatives, risks and risk mitigations, providing

companies with "options” that are predicated on making small initial investments in multiple

opportunities. By doing this, companies buy the "right", but not the "obligation", to make

subsequent investments if warranted by real world circumstances.

Linear ApproachDecoupled from revenue and growth

Agile ApproachLinked to revenue and growth

Corporate Targets

Opportunities ($)

Initiatives

Risks ($)

Mitigations

Strategies

Corporate Targets

Goals

Objectives

Strategies

IMPLIED Link Between Risks and Strategy EXPLICIT Link Between Risks and Strategy

Risks

Figure 1: Blending opportunities, risks, strategy formulation and execution to generate revenue and growth.

tt This hierarchy provides the visibility needed for senior business leaders to excercise options

to invest in the most promising strategic choices and opportunities, or to adjust course (e.g.

keep investing, stop investing, speed up, slow down, etc.) based on experiential learning,

changing circumstances, preliminary customer and market feedback.

tt Companies now have options to make course adjustments in initiatives and risk mitigations

based on changing circumstances. These options provide the agility needed for companies

to exploit opportunities and reduce risks - even in the face of the inevitability of real world

changes (e.g. emerging risks, or shifts in political, economic, social, technical, legal,

environmental factors, etc.).


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Implementation Example

A more strategic view of revenue performance requires companies to go far beyond the

compliance focus of traditional risk management software, and the static nature of conventional

strategic planning software and KPI dashbaords. As an example of these principles in practice,

GrowthCloud® - The enterprise platform for revenue and growth - provides a consistent way for

companies to transform the traditional revenue cycle by providing tools and insights purpose

built to bring visibility to specific horizon 2-3 revenue and growth opportunities and the actions

needed to capture those opportunities.

An enterprise view of strategies, opportunities and risks paints a clear picture of future revenue and growth to help strategists communicate in a way that CEOs, CFOs, Boards and Shareholders really understand and care about

With the enterprise view provided by the GrowthCloud® OPPORTUNITY PIPELINE, strategists

can 1) forecast and view the total strategic portfolio of revenue and growth opportunities, and 2)

view the impact (in financial terms) that risks have on revenue and growth across the portfolio.

The Growth Strategy Company LLC [US]

GrowthCloud® Dashboard


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Understanding the probability, impact and effects of risks on revenue opportunities

tt Risk factors for each opportunity are calculated as the product of the probability of the risk

occurring and the impact that each identified risk might have on the opportunity.

tt With the GrowthCloud® RISK RADAR, each underlying risk can be consistently categorized,

displayed and managed at the portfolio or individual opportunity level based on impact,

probability and size (in financial terms) of the impact.

Using opportunity modeling to evaluate scenarios and portfolio selection

tt As strategists identify and attribute individual risks to strategic opportunities, multiple

financial scenarios emerge to help decision-making, prioritization and capital

allocation decisions.

tt The GrowthCloud® OPPORTUNITY PIPELINE, growth champions have the insights

necessary to develop, model and prioritize the strategic initiatives and risk mitigation

activities needed to maximize the capture of revenue and growth opportunities.

The Growth Strategy Company LLC [US]

GrowthCloud® Dashboard

Powerful, easy to build models and scenarios lead to real options for senior business leaders and better strategic, prioritization and capital allocation decisions.

When individual assumptions and factors are aggregated for a specific opportunity, the

resultant “risk-adjusted” opportunity becomes the new financial basis for decision-making,

prioritization and capital allocation.


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tt Unique, assumptions-based FutureCast models within GrowthCloud® show the forecasted

effect of mitigation activities against defined execution-level stages or milestones.

Opportunity-Risk Models

Visualize and forecast the impact that individual initiatives and risk mitigation action

can have on opportunity realization

tt Capturing the maximum upside potential of opportunities requires that specific actions

be taken. With Initiative-level Models within GrowthCloud®, strategists can build map

initiatives and risk mitigation actions for each opportunity.

tt This capability links specific execution-level activities, milestones and status points into

an integrated FutureCast model that is used to manage strategy execution and selecting

course correction options.

Initiative-Level Models


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Conclusion

The new business environment presents an interesting paradox. On the one hand, there are

elevated levels of uncertainty, structural change and complexity in virtually every industry.

On the other hand, the global marketplace offers significant opportunities to unlock new

sources of revenue and growth. Creating enterprise value in this new environment will

require companies to consistently maximize their capture of revenue and growth opportunities,

while minimizing their downside exposure to risks.

tt When companies focus revenue cycle activities exclusively on marketing and sales, they

limit themselves to immediate to short-term, horizon 0-1 revenue. Led by growth champions,

companies must expand the traditional revenue cycle to also include the medium to long-

term, horizon 2-3 revenue and growth that accounts for the vast majority of enterprise value.

tt Our experience and research concludes that taking a more entrepreneurial approach that

reframes strategy as a portfolio of specific revenue and growth opportunities is often the

missing link for companies to achieve and sustain revenue and growth.

tt Addressing the gap between current revenue forecasts and future revenue and growth

expectations becomes the clear mission and key value creating opportunity for executives

and practitioners in strategy and strategy-related fields.

tt When growth champions (with or without outside consultants) are able to consistently link

their work to future revenue and growth, they are better positioned to communicate in a

language that CEOs, CFOs, Boards and Shareholders actually understand and care about.


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Want to learn more?

Register for the upcoming webinar and see a LIVE DEMO of GrowthCloud® - the enterprise platform for revenue and growth - See how leading companies bring together opportunities and risks with strategy formulation and execution to drive horizon 2-3 revenue and growth.

RESERVE YOUR SPOT


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Self-Assessment: Getting Strategy Into the Revenue GameThe self-assessment is a diagnostic to help leadership teams quickly assess their organizations in key strategic management areas. The self-assessment is designed to help leadership teams: 1) spark candid leadership conversations about risks; 2) identify the state of practice within the organization; and 3) pinpoint and prioritize areas for leadership ideas and action.

How To Use The Self-Assessment:1. Read the Best Practice Note and then gather as a team to review and discuss.

2. Using the self-assessment form, each member of the team should then individually rate each element to determine the company’s perceived positioning, weaknesses (rating of 1) and strengths (rating of 5).

3. The group should discuss the results and generate the necessary leadership ideas and actions.

Self-Assessment

How well positioned are we to achieve and sustain our business growth goals?

WE

AK

NE

SS

STRE

NG

TH

What ideas do we have to take advantage of our strengths and mitigate our weaknesses?

We have clearly defined our strategy in terms of specific revenue and growth objectives.

1 2 3 4 5

We understand the gaps between immediate to short-term growth and our future revenue projections.

1 2 3 4 5

We consistently inform marketing and sales activities with insights from strategic activities.

1 2 3 4 5

We consistently present senior leadership with options as business circumstances change.

1 2 3 4 5

We have replaced questionable “suspects” in our pipeline with

specific revenue opportunities.1 2 3 4 5

We have factored-in risk adjustments to the revenue and growth opportunities that we have identified.

1 2 3 4 5

We consistently use strategy to inform strategic decisions, resource prioritization and capital allocation.

1 2 3 4 5

Our CEO, CFO and Board of Directors are informed about any variances in current revenue forecasts and future revenue and growth expectations.

1 2 3 4 5


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Disclaimers, Warranties, and PermissionsCopyright © 2014 GrowthCloud Holdings LLC

All Rights Reserved. All text, images, graphics and other materials in this printed material are subject to the copy-right and other

intellectual property rights of GrowthCloud Holdings LLC. These materials may not be reproduced, distributed or modified without

the express written permission of GrowthCloud Holdings LLC. The marks appearing in this material including, but not limited to

logos, emblems, slogans and names are trademarks of GrowthCloud Holdings LLC, its subsidiaries, affiliates and licensors. The

information contained in this publication has been obtained from sources believed to be reliable. GrowthCloud Holdings LLC

disclaims all warranties as to the accuracy, completeness or adequacy of such in-formation and shall have no liability for errors,

omissions or inadequacies in such information. This publication consists of the research and experiential opinions of GrowthCloud

Holdings LLC and should not be construed as statements of fact. The opinions expressed herein are subject to change without

notice.


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