Twentieth-Century Tools Are Obsolete
Each of these forces has disrupted the status quo in marketing, sales, and service. Collectively, they have made traditional notions of how to manage growth obsolete. Managers try to manage revenue teams and activities that require a far more advanced and digital selling model than the systems and tools developed in the twentieth century can provide.
Using an obsolete commercial model to manage a modern selling infrastructure has significant business consequences. Managing marketing, sales, and service resources as discreet functions is an obstacle to teamwork. The idea of a linear and orderly customer journey – with advertising in the front, selling in the middle, and service and support at the end – just doesn't work because customers don't buy that way. The historic reliance on traditional print advertising and in-person human selling as pillars of investment for marketing and sales sharply declines as the number of customers who prefer to buy online increases.
The financial consequences of relying on a commercial model developed in the last century to manage a twenty-first-century selling system are large. For example, the uncoordinated management of the revenue cycle leads to revenue and margin leaking through “air gaps” and handoffs in the customer journey. Organizations can leak 10 percentage points of EBITDA by failing to follow up on opportunities, enforce pricing discipline, respond to buying signals, or recognize when their biggest customers are about to take their business elsewhere. The disconnected management of the valuable technology, customer data, and digital infrastructure assets that support revenue growth can create even bigger financial problems. If you don't have a coherent system for curating and connecting these growth assets into selling outcomes that create value, the result will be lower than acceptable financial returns on investment and higher selling costs. Managing these valuable growth assets in many different functional silos is the equivalent of racing an expensive car that is not firing on all cylinders and needs a wheel alignment and a tune-up.
Management models have always evolved with economic and market change. The corporation, conglomerate, and business unit structures pioneered by Rockefeller (Standard Oil), Reginald Jones (GE), and Alfred Sloan (GM) respectively were all structural innovations that served their purpose in their time.
The world has changed. Dramatically. The “stovepipe” organization consisting of separate marketing, sales, and service functions is a vestige of another era when media had greater reach, digital channels were just emerging, and customers followed an orderly and linear buying process. The CMO role emerged when business could get by with a big media budget to drive demand. The VP of sales when managing “sellers” was the key to closing deals. Roles like sales operations, customer insights, and digital marketing did not even exist 25 years ago because digital technology and customer data were not key components of the selling formula.
The Role of Leadership
The leadership model for managing growth resources is similarly outdated. For example, the Chief Marketing Officer (CMO) is a job function built on big brands and TV budgets that has only existed for a few short decades. But those big media budgets have been in decline for years. This has left many CMOs struggling to find a seat at the table as their core budgets have eroded and fighting from being pigeonholed at the very front of the revenue cycle. Large field sales organizations like the famous IBM “Blue Suits” have been around a long time, but the selling function has evolved by adding multiple tele, social, web, and even contactless channels that don't necessarily need a field sales force to serve customers. Service has become far more elevated and strategic as product adoption and experience have become central to customer relationship building, revenue expansion, and customer lifetime value.
Today, the functional distinctions between marketing, sales, and service exist more because of cultural and operational inertia rather than market reality. The silos that manage these roles have become a political and operational necessity to keep the machine running and cash flowing in the short term. These silos have also led to dysfunction and waste. Strategically, the hard functional structures represent a boat anchor that holds back revenue growth in the twenty-first century by impeding horizontal information flow across the revenue cycle and by making it difficult to deploy technology as a force multiplier at scale.
The twentieth century commercial structure is collapsing under the twin pressures of changing customer behavior and shifting business models. “Organizations are going to need to rewire their commercial engines to better reflect the new buying reality where customers are channel agnostic and buyer behavior is non-linear,” reports Brent Adamson, distinguished Vice President in Gartner's Sales practice.129 “It's a big job. It's going to involve reworking the legacy commercial infrastructure, and creating new roles, processes and metrics.”
Thus, it's no surprise that the vast majority of the senior growth leaders we spoke to in writing this book were taking steps to better align sales, marketing, and service teams to sustain and accelerate growth in light of the forces and dynamics we have outlined here. Over 90% were actively redefining the way they “architect” their selling channels and consolidating the operations that support selling and oversee customer data and technology assets. Eighty-five percent of CXOs were actively reconfiguring the roles and assignments on their revenue teams to improve the customer experience and grow the value of their accounts. And over 9,000 businesses have introduced “CXO” roles with a broader span of control over sales and marketing and a CEO mandate to lead commercial operations, systems, and processes across the entire business. Most significantly, almost all of them – regardless of company size or the industry they serve – believe fixing the commercial model in light of these market trends requires leadership from the CEO to succeed and a common purpose across every employee that touches the customer.
The CXOs we spoke with are also working to find ways to generate greater returns from the systems and technologies that support selling. Most feel their investments in CRM, digital selling infrastructure, sales enablement technology, and data assets are underperforming. They feel like they are working increasingly harder at the care and feeding of these tools, rather than the tools working harder for them. They feel their sales and marketing technology stacks have become too complicated. The majority tell us they are trying to rationalize, simplify, and better connect the many solutions in their sales technology stack. They are doing this to simplify the seller workflow, better leverage customer insights in day-to-day selling, and turn technology into a “force multiplier” to help them sell more for less.
This shift in focus is happening across businesses large and small, in every industry. Executives we spoke with agree on the importance of Revenue Operations, even if – until now – there has been little clarity on an exact definition or description of this still-maturing discipline. This book intends to change that.
CHAPTER 2 Create Value and Impact from Revenue Operations
We interviewed and surveyed hundreds of business leaders as part of our primary research. These included CEOs and leaders of growth-oriented businesses, large and small. In parallel we worked with the leading academics across the disciplines of marketing, sales, and service, as well as experts in areas like customer analytics, sales enablement, and marketing technology. Our research team evaluated thousands of technologies that are shaping and enabling the modern commercial model.
Most of the executives we interviewed described Revenue Operations as a system (or commercial model) for generating more sustainable and scalable business growth. The majority told us that Revenue Operations is an important if not existential business issue. They also felt that it was not fully developed as a business discipline, but it must become one because everyone will need to understand better if they expect to do their jobs, get promoted, and succeed in the marketplace.
Given
