Revenue Operations

A New Way to Align Sales & Marketing, Monetize Data, and Ignite Growth

Stephen G. Diorio,Chris K. Hummel

• Publisher: Wiley
• Year: 2022
• ISBN:
  9781119871125
• Edition: 1
• Topic: Business
• Subtopic: Management
• Index: Business

Crush siloes by connecting teams, data, and technologies with a new systems-based approach to growth.

Growing a business in the 21st Century has become a capital intensive and data-driven team sport. In Revenue Operations: A New Way to Align Sales and Marketing, Monetize Data, and Ignite Growth, an accomplished team of practitioners, academics, and experts provide a proven system for aligning revenue teams and unlocking growth. The book shows everyone how to connect the dots across an increasingly complex technology ecosystem to simplify selling and accelerate revenue expansion. With Revenue Operations, you'll understand what it takes to successfully transition to the new system of growth without killing your existing business. This practical and executable approach can be used by virtually any business - large or small, regardless of history or industry - that wants to generate more growth and value. By reading this book you will find:

• Real-world case studies and personal experiences from executives across an array of high technology, commercial, industrial, services, consumer, and cloud-based businesses.
• The six core elements of a system for managing your commercial operations, digital selling infrastructure, and customer data assets.
• Nine building-blocks that connect the dots across your sales and marketing technology ecosystem to generate more consistent growth and a better customer experience at lower costs.
• The skills and tools that next generation growth leaders will need to chart the roadmap for a successful career in any growth discipline for the next 25 years.

An indispensable resource for anyone who wants to get more from their business – board members, CEOs, business unit leaders, strategists, thought leaders, analysts, operations professionals, partners, and front-line doers in sales, marketing, and service - Revenue Operations is based on over one thousand surveys of and interviews with business professionals conducted during 2020 and 2021. It also includes a comprehensive analysis of the sales and marketing technology landscape. As a perfectly balanced combination of academic insight and data-driven application, this book belongs on the bookshelves of anyone responsible for driving revenue and growth.

PART I
Revenue Operations, A System for Growth

CHAPTER 1
Take Control of the Revenue Cycle

Introducing Revenue Operations, a New Way to Create Sustainable, Scalable Growth

Revenue growth – the increase in a company's sales over time – is the primary basis for creating business value. The more sustainable and scalable that growth is, the more valuable your business becomes. Despite this importance, the “science of growth” is not well understood. Most businesses approach growth as a disjointed, episodic activity.

Why? The core reason is that many business owners, CEOs, and leaders lack a practical and proven system for growing their business. Every other primary function in a business – from the procurement, manufacturing, and shipping of products to the management of financial and human resources – has an established system. Purchasing, manufacturing, HR, and finance leaders have spent decades standardizing and automating those systems. Despite that, few of the executives we spoke with could clearly describe any kind of connected approach, system, or model they use to generate the revenue and profit growth they forecast to their investors.

They gave us some pragmatic reasons for this. First, go-to-market processes have proven hard to manage, measure, and systematize because they are more “art” than science. Second, customers and markets change too often and too quickly to create stable, repeatable processes. Third, they lack the customer feedback data needed to anticipate customer needs, measure performance, and manage the channels, investments, and actions aimed at meeting those needs.

These arguments had some validity in the twentieth century. Not so today. A revolution in data analytics and the emergence of digital selling technology has given managers unprecedented visibility into and control over the full revenue cycle. Analytics improve measurement of customer engagement and account health. They also help to manage selling teams and predict sales pipeline performance.

Our conversations uncovered a more fundamental reason. Namely, growing a business is an interdisciplinary endeavor with many moving parts that don't reinforce one another:

• It's challenging to create a “go-to-market” approach that has dozens of functions to manage and many more disciplines to master – particularly when 80% of CEOs lack direct operating experience in most of these disciplines.
• It's hard to align customer-facing employees who work in segregated marketing, sales, and service organizations.
• It's difficult to connect technologies that are deployed in silos of automation.

In other words, it's impossible to deliver a superior customer experience when your revenue cycle consists of disconnected processes, policies, procedures, and machines.

No established commercial model exists to get these different pieces of the growth equation working together. Business leaders lack a management framework for coordinating their growth teams, functions, and disciplines. They lack an operating system for managing their growth assets, technologies, data, and processes.

Until these fundamental issues are addressed, efforts to accelerate or sustain profitable growth will be defeated.

The solution to this problem is clear. A new system for growth is urgently needed. One that aligns revenue teams with the infrastructure, operations, and processes that support them across the entire revenue cycle. One that generates more growth from the expensive data, technology, and channel assets that are the foundation of modern selling.

Our goal in writing this book is to better define that system for growth. We call it Revenue Operations.

Revenue Operations represents a bold new commercial model for the twenty-first century. Its goal is to create sustainable and scalable business growth. As we define it, Revenue Operations comprises two components. First, the management system – our EQ – aligns the people in your revenue teams. Second, the operating system – our IQ – combines technology, processes, and data assets to generate more sustainable and scalable growth. Revenue Operations weaves these two together to grow revenues, profits, and firm value.

Throughout this book we strive to articulate what Revenue Operations is and to show you examples of how to make it work. This book will help every person who cares about growth – from the business owner to customer-facing employees on the front line – to take steps that can generate more consistent and scalable growth. Because everyone has a role in the growth equation.

The book will specifically help business owners, CEOs, and leaders of the marketing, sales, and service functions to better allocate growth resources, make more profitable growth investments, take intelligent risks, and create a common purpose across revenue teams. It provides operations leaders and performance improvement professionals a blueprint for knitting together the systems, processes, and operations that support revenue growth in ways that generate scalable and consistent growth. This work will also help customer-facing employees on the front line to better leverage the systems, information, and tools available to them and work together as one revenue team.

In addition, this book provides a career road map for any professional who seeks to advance their career and ultimately lead a business. It provides essential knowledge to any student who seeks a career in any growth discipline – marketing, sales, service, operations, or analytics.

Furthermore, the lessons and insights inside will help any business, from large enterprises to small companies, looking to accelerate growth.

---

How Is Revenue Operations a System for Growth?

At the simplest level, a system is a combination of things that work together as a united whole to achieve a common purpose.

Exactly what those “things” are, how they “work together,” the nature of the “united whole,” and the “common purpose” all define how any given system works. Systems can do many things: run a computer; educate people; manufacture and distribute products; and even manage money.

The “things” within a system can include a wide variety of ingredients – ranging from people and organizations to technology, devices, or software code to principles and procedures. The way they combine to “work together” can take the form of a machine (a computer), operation (manufacturing), a network (railroad), or a biologic process (digestion).

Businesses have established systems for most of their operations including: manufacturing, distribution, supply chain management, and finance. These systems are generally well organized, automated, managed, and measured in a mature organization.

The conversation changes when you start to talk about a system for growth. In most businesses, fragmented groups of customer-facing employees, silos of automation, and a lot of disconnected processes, policies, and technologies don't work well together. Nor do they work with a common purpose toward a common goal. There is no system to generate consistent, scalable, and profitable growth.

Revenue Operations changes that. It introduces new elements and shows how they work together. It offers a systems-based approach to growth across the entire revenue cycle: awareness, demand, purchase, and consumption (see Figure 1.1). Companies of all sizes and profiles can use it without having to rip the current business apart.

FIGURE 1.1 The Revenue Cycle

---

The Financial Link Between Firm Value and Growth

An organization's ability to grow revenues has become more and more tied to firm value than at any time in our business lives.

This relationship can be seen in the high valuations awarded to businesses that can deliver predictable, scalable, and profitable growth. For example, the marketplace values firms with hyper growth (e.g. annual growth over 40%) and predictable revenues (e.g. Net Annual Recurring Revenues of over 100%) disproportionately. That is why a hyper-growth business like HubSpot commands price/earnings ratios in the hundreds while not yet showing a profit. It also explains why a SaaS business like Salesforce.com with double-digit growth rates and recurring revenue streams will have a valuation in excess of 60 times its earnings – more than triple the S&P 500 average.⁶⁰

An analysis of total shareholder return of the S&P 500 over a 20-year span found that 58% of value creation is attributed to organic growth (see Figure 1.2). That means the ability to grow revenues organically has created more firm value than all efforts to reduce costs, expand earnings multiples, and improve free cash flow combined.¹⁰¹

The capital markets value growth. Generating more consistent growth is a formula every business can use to create value. Private investors need growth to justify the historically high prices they are paying for businesses. Growth attracts talented employees, and buyers view it as a sign of innovation, quality, and validation.

FIGURE 1.2 Sources of Shareholder Return. Source: Data from E. Olsen, F. Plaschke, D. Stelter, “Threading the Needle: Value Creation in a Low Growth Economy”

FIGURE 1.3 Revenue Growth and Firm Value. Source: Blue Ridge Partners, Pitchbook, Blossom Street Ventures, Dow Jones, Refinitive 2021, Inc 500, NASDAQ

Today the average business in the S&P 500 is growing top-line revenues at 4% annually and is valued at 18 times earnings (see Figure 1.3).⁵² A firm that grows at double that pace is worth almost twice as much. Businesses that master scalable growth – by creating systems for growing revenues faster than the resources needed to generate those revenues – are even more valuable. For example, businesses that grow fast and have recurring revenue models are worth over forty times their profits. Companies like Google, Salesforce.com, or Citrix that have mastered the ability to sca...