Why Intentional Processes Drive More Revenue

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When many people think of process, they think of something mandatory. Usually something unpleasant. The idea of the “process police” comes up, a mysterious group who stifles any innovation in employees. We take a different view. We look at processes – intentional processes, those with purpose – as a potential competitive differentiator and revenue driver. In this case the meaning of “intentional” stresses the awareness and desire for an end to be achieved. You can intend something without necessarily being intentional!

We recently met with a senior executive from a notable FinTech company. Our discussion turned towards the need for process improvement, without also being “process for process sake.” We talked about the flow-on effects caused by poor processes. It’s a subject near and dear to my heart, having designed and implemented various processes  for technology companies for over 20 years.

The Sales Process

The most obvious process that’s tied to revenue is the sales process. How to turn an interest into a prospect and into a deal. There are many sales methodologies and processes out there, and we’ve used several of them.

Where things often fall down are in other areas. Renewal business. Product development. Implementation services. Support and customer success. Each one may in itself seem complete, but they frequently don’t connect with others. They are developed at the departmental level in silos. Intentional processes go beyond silos.

So why would a great, intentional process lead to more revenue? This diagram explains the logic:

intentional process

Processes without Intent

This all makes sense, but to illustrate the problem further let’s assume processes are “not intentional” in a number of areas:
– Sales processes are unclear or convoluted, leading customers to go elsewhere
– Renewal processes are vague, and customers are contacted too late, often risking the deal (or requiring a larger discount)
– Product road maps are inconsistent, confusing salespeople as well as customers
– Product commitments are difficult to keep
– Product development is late, buggy and/or canceled, frustrating customers and creating doubt in the company’s commitment to them
– Services processes are ambiguous leading to unclear deliverables and less value provided
– Support processes reward ticket closure rather than problem resolution
– Finance and Legal processes are onerous, delaying and risking product and services deals

The end result is wasted time and frustrated customers. Too much time is spent getting things done that could be better spent driving more business. Deals, renewals and additional business are at risk. And getting a recommendation from frustrated customers is also at risk.

Every Company Can Improve

Consider these three points:
1. Every company needs to improve in one or more areas.
2. If you’re only as good as everyone else you’re not better. You need to be better.
3. If you don’t have intentional processes you are leaving money on the table.

Process and Pragmatism

We take a pragmatic approach when working with clients. If they’re a smaller 50-person firm, a process might be simpler and carried out by a few people (or a single person) with minimum hassle. You don’t need many steps in the process, yet at the same time some level of definition and clarity is desired.

By creating an intentional process you are able to track the results of the process quantitatively as well as qualitatively and will get a consistent result. Without a process you’re dependent on “tribal knowledge” and the experience of the person performing the task.

If the customer is larger, there may be more required stakeholders and also more complexity. In a large public company, a product approval process is more than one person saying “yes”. It may involve multiple approval levels and signoffs as well as other inputs and outputs. At the same time, you don’t want to make it too complex.

There is a temptation to overengineer processes, especially by people who are too close to the problem but not close enough to the solution. I’ve found that’s where engaging a third party can be helpful to look objectively and unemotionally at the issue at hand.

Disruptive by Design

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Why is Dr. Clayton Christensen’s Disruptive Innovation Theory Important for Your Business?

Disruption Innovation Theory is about growth and creation of shareholder value. It generates viral growth, often 20 times typical growth index averages. It causes a dramatic change in the market’s competitive playing field. Disruptive innovation challenges incumbents with inferior products, competes against non-consumption, and thereby creates a new dimension of value to the consumer. Disruptive innovation is not just about technology, but more importantly about the successful execution of the Business Model.

Disruption Innovation opportunities are predictable and have distinct signals or “disruption fingerprints”:

  • Often an Inferior product/service to the incumbent alternatives
  • Addresses an unserved or under-served market,
  • Competes against consumer non-consumption
  • Often targets small niche markets
  • Customers are often unattractive to current market incumbents
  • Designed for moderate to low growth markets
  • Often disintermediates with traditional distribution channels
  • Enjoys a sustainable cost of production advantage
  • Product focuses on consumer advantages such as: ease of use, flexibility, simplicity and convenience

Disruption can be for low-end or high-end products. Low-end disruption targets micro market segments where consumers have opted out (non-consumers) with existing market products. Disruption is possible because in many mature markets, incumbent products exceed the true performance needs of customers. New market disruption focuses on the notion of inferiority based on the customers “job to be done”. New market disruption is superior to incumbent alternatives because it is based on a different set of customer values. It enables customers where previously impracticable before.

Key takeaways for your business:

  • One of the best ways to find disruption is to focus on non-consumption.
  • Disruption is predictable and should be integral part of your product planning and strategy development.
  • You can engineer disruption; “market disruption by design” is your best strategy.
  • Incumbents routinely dismiss disruptive upstarts as not good enough, until they are
  • Signs of future coming market disruption are present and obvious for years.
  • Alternative value chains are crucial for disruption
  • The customers who will not buy your product, understand why they do not!

Disruptive innovation creates abundance out of scarcity and is one of the most powerful engines of growth for your business.  If you would like to review how to make your business model disruptive, contact TechCXO.

Ken Goins is a Finance & Operations partner in TechCXO’s Atlanta office. Ken uses his c-suite leadership skills to develop and execute strategies to maximize revenue growth and operational efficiencies through innovation and process improvements in domestic and international business settings. See his full bio here.

Scale Up – Optimizing for Growth

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Founders flounder, as the saying goes, and scaling up is much harder than starting up.

At TechCXO, we’ve worked with hundreds of startups and see ample evidence to support these truisms, but must the cratering of a startup be the rule?

While startups can draw on pure entrepreneurial energy, creativity, tenacity and downright heroism to start a business, it’s also true that the initial force of will to get started eventually dissipates and new momentum must be created and properly applied to grow a business and refine a viable business model.

In his seminal Harvard Business Review article, “Why Entrepreneurs Don’t Scale,” John Hamm, wondered if there is there an “entrepreneurial personality” and an “executive personality” that are naturally at odds.

He didn’t see that there was, and neither do we. The problem to meeting the scaling challenge are tendencies entrepreneurs frequently display. Hamm sees them as excessive loyalty to early teams; task orientation; single-mindedness/tunnel vision; and working in isolation.

We define the common barriers a little differently and place them in these buckets:

PEOPLE — This materializes as putting the wrong people in the wrong seat or dysfunction due to lack of role clarity and accountability.

PROFIT —In the form of cash crunch/cash management issues, margin squeeze, and inappropriate responses to shifting markets.

CONTROL — Time wasted in issue discussion and inertia, misalignment and siloed behavior.

TRACTION— It’s been said, “implementation without vision is hallucination” and endless, tactical focus on putting out fires verses discipline, repeatable, effective process is a scaling killer.

Growth, then, is the only option. Where to start?

We have found that the initial focus on internal processes actually allow the company to grow faster externally. By taking some time to step back and focus ON the business rather than being buried IN the business, the leadership team can break through to new levels. We’ve operationalized this with an adaptation of the Entrepreneur Operating System. By focusing on 5 key elements and putting them in the context of their business, they can improve execution:

5 Key Elements to Scaling

  1. SIMPLIFY—If one can simplify process, procedure, level 10 meetings, and reporting, new checklists become part of the DNA focused on results.
  2. DELEGATE—Building enough trust to speak openly and establishing a learning culture will allow leaders to “delegate and elevate” embedding growth for succession
  3. PREDICT— Breaking down goals and information into manageable quarterly pulse helps to frame trends and targets for 1 year, 3 year 10 year blocks.
  4. SYSTEMATIZE—By identifying and documenting the core process you will then be able to integrate them to leverage your unique way of doing business.
  5. STRUCTURE—Creating accountability and reducing complexity can be done by clearly defining critical roles and the assigning a number that represents or drives their output can improve the coordinated contribution of everyone. We’ve seen this come to fruiting with legendary coach Bill Belichick’s frequent admonition: “Do your job.”

Often leaders and their teams are pushing ahead in completely different directions. When growth stalls, they may have lost momentum unwillingly by not having the adequate systems, process, or org structure to even know where to start to ‘optimize for growth’.

Just imagine the energy if all of the arrows are pointed in the same direction. To accomplish this, we help companies implement a TechCXO Operating System using the tools of EOS. With over 5,000 companies worldwide using EOS, it is now clear to the TechCXO consultants that those companies that have moved from just running fast to cohesive management teams now have the competitive advantage to win. In The Advantage Patrick Lencioni confirms “Organizational health will one day surpass all other disciplines in business as the greatest opportunity for improvement and competitive advantage—it is the single greatest factor in determining an organization’s success.”

Those who are able to break through the ceiling have built a cohesive leadership team, agreed on core issues solved problems, and been open enough to get the right people in the right seats. The ability to shift from stopping to scaling up is both a mindset and a discipline.

To work on the six key ingredients of business– vision, people, data, process, issues, traction—the CEO or president should be at the table with his or her leadership team. A TechCXO experienced leaders serves as an implementer who provides education, facilitation and coaching. A third party voice can help with course correction and progress.

It takes commitment, but those who want to can catapult their organization to greater profits, productivity and traction.

Disruption Response – Short and Mid-Term

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TechCXO Disruption Response Resources

Management teams don’t need to “lock up”, no matter the severity of business disruption or the ensuing uncertainty. You can focus your teams around short-, mid- and long-term goals and objectives. Here is some actionable advice and the experts who can assist you.

Short-Term: People

Start with people.

Leadership, with the assistance of Human Resources, must appreciate how disruptive events like coronavirus can be. Cancelling all travel and scheduled events is startling. An even bigger cultural shock is quickly transitioning employees to remote work. A number of tech companies have moved completely to remote working in just a matter of days.  There’s a lot to communicate and adjust to. Where do you begin?

Business Continuity Planning

Elena-Carroll

Business Continuity Planning Resource: Elena Carroll

No matter what stage your business is in – startup, growth stage, mature – or what size your business is, a business continuity program is something that all businesses should have. The most common scenario facing most companies given the coronavirus outbreak is that office facilities become inaccessible due to travel bans or quarantines, or that less people will come into the office due to illness or fear of illness.

These impacts could last for months, and many companies may not be able to provide an alternative location so quickly. Since a pandemic has been declared, multiple sites can be impacted. At minimum, all companies should have team activation procedures with a call tree that gets kicked off by a designated leader when something occurs so that all employees are accounted for and can be reached to continue ongoing business operations.

It is important to assess the different operational areas of your company, and rate them in terms of how critical it is to recover that business function. Financial, operational, legal, and reputational risks should be considered as part of the business impact analysis. Based on these impacts, a recovery time objective needs to be established for each business area, from hours to days depending on the impact assessment. The most critical functions will require more in-depth plans and be addressed as a priority to recover versus other less mission-critical areas.

Back-up procedures and processes will need to be defined for critical and other business applications should they become inaccessible. A communications plan that notifies employees and customers of the situation, what to expect and what needs to be done should be available and ready. An important goal is
to minimize any disruption of service to customers.

Remote Work

Maria Goldsholl TechCXO

HR, People, Remote Work Resource Maria Goldsholl

Everyone works differently, particularly when working remotely. One of the key things leadership must do is set expectations and establish accountability standards. Ideally, the below tips will help managers replicate the in -office experience at home as closely as possible and as a result keep the team connected and productive and minimize disruption.

Communication and Accountability

    1. Set boundaries – Make it clear that work from home is still working at full force. To prevent business interruption employees should set boundaries on their standard work time.
    2. Overcommunicate – Managers should over communicate in the form of 1:1 meetings where goal setting, updates and feedback are given regularly (ideally 2 times per week). Slack is an excellent tool for constant real time updates (similar to an office drop in)
    3. Results – Employees should clearly show work output, deadlines, goals and objectives
    4. Virtual Shadowing – For some key tasks, using screen share options in video conferencing helps facilitate understanding
    5. Time Block – For some, working from home is distracting. It is helpful for employees to work in prescribed time blocks such as those outlined in efficiency tools such as the pomodoro technique.
    6. Meetings & Preparation – Meetings should run the same as in office with an agenda and video turned on for visual interaction. The chat function can be used so as not to talk over the person presenting.
    7. Leverage video conferencing – Use of platforms like Google Hangouts and Zoom can closely replicate face-to-face interactions ideally with the camera on.
    8. Virtual Watercooler – Create a channel in slack called #watercooler or #WFHdays and have people post the types of things they would normally talk about in casual conversation in the office (what’s for lunch, pictures of the weekend, pictures of the dog) this creates a connectivity and a levity that allows the work from home employee to feel connected to their team and is a great stress relief.
    9. Regular check in- If you are a manager, consider having a virtual coffee with your entire team once a week to check in on how work from home is going and what tools/help you can provide to continue to help the team be productive.

Short-Term: Financial Management

Financial and Cash Management Resource: Paul Sansone

The finance and accounting team can proactively take measures to optimize its cash management systems, work with lenders and even work with sales professionals in terms of the current sales pipeline and the impact pricing and discounts might have in the next upcoming months.

Cash Management

Your CFO can take a number of steps to optimize the proper management of cash.

Reconciling all bank accounts regularly

  • Prompt reconciliation of bank accounts will give clues on how to avoid delays in collection.

Creating a realistic revised cash flow forecast and sticking to it

  • Forecasting is the first step in attaining a workable cash flow. Moreover, regular reviews of the cash flow statement will highlight a possible shortfall. The statement will show if cash inflow was from an account receivable or other sources such as a credit line and if cash was released to pay for account payables, investments, and operations.

Tracking both current and projected revenues

  • Knowing the current and future revenue situation on a frequent basis will help understand the effect on cash flow and whether cash management needs tightening or there is enough cash to invest. Likewise, keeping sight of projected revenues will be the basis for potential resource allocation revisions.

Monitoring and prioritizing cash disbursements and other related business expenses

  • An analysis of the cash flow will help prioritize cash disbursements and unnecessary business expenses.

Implementing a timely collection of account receivables

  • Three kinds of float cause cash delays.  Mail float is a delay in receiving checks through the mail.  Processing float is a delay in the company’s internal processing of cash and checks.  Bank float is a delay due to the normal clearing process. Delays can also be due to customers deliberately not paying on time.  This may become an increasingly large issue due to business disruptions.

Mid-Term: Operations

brendan-cooper

Operations Resource: Brendan Cooper

During a disruption, operations tend to suffer serious effects due to an overnight drop in demand. The best time to deal with potential disruptions is yesterday; the second-best time is now. The characteristics of a disruption include a sudden drop in demand, excess supply and inventory, idle equipment and other assets, underutilized labor, unabsorbed fixed costs and sharply higher variable costs of operation. This all leads to declining profitability and crisis operations management.

The conditions brought about by industry disruption include excess inventory and falling prices as competitors with underutilized assets chase too few orders with ever lower prices. The battle to maintain share of a shrinking market, while production unit costs are rising, is punishing. Industries tend to be slow to react and over-produce in an uncertain environment which exacerbates excess inventory levels.

Four Key Steps to Improve Operations During Crisis

Four key steps can be followed to improve operations when such a crisis hits:

1. Gather

Recognizing that a business disruption requires a firm break with “business as normal” practice is essential. The faster this happens, the better. The first step is to gather critical resources, both internal and external to the company. Internal resources must include people who can, and will, affect change. External resources could include business partners with relevant experience or a vested interest in the success of the business. A crisis team of no more than six people is optimal.

In order to focus minds and hearts throughout the business, all non-essential activities should be (at least) temporarily suspended. A quick decision on which activities and projects are “mission-critical” must be made. Typically, items such as non-sales travel, projects with payback more than one year, and activities consuming significant resources are delayed or cancelled.

2. Diagnose

Using the crisis team’s collective knowledge, ideas which drive improved sales and lower costs are quickly collected. For manufacturers the biggest potential cost improvements are in raw materials and manufacturing overhead. These items typically make up most of the cost of goods sold for a manufacturer. Lean manufacturing practices can reduce the production cycle times and inventories needed to support sales.

Key areas to examine include:
• trim fixed costs
• reduce product lines
• lower production complexity
• shorten production cycle times
• reduce finished goods – hold inventory in semi-finished form
• lower raw materials inventories
• mothball / consolidate production
• reduce cost of raw materials
• reduce inventory
• lower raw material costs
• rationalize operations

3. Prioritize

Next the business must determine priorities and focus scarce resources on critical activities. The team can create simple Pareto diagrams and prioritize customers, raw materials, vendors, profitability, revenue, cash, transaction time, etc. As the business faces resource constraints, it can focus efforts on the 20% of the activities that generate 80% of the cash, profit, order completion, lead time, etc. Project work, for example, will likely be a much lower priority than order completion or activities that generate cash.

An easy exercise is to attach best estimates of effort, costs and benefits to each proposed activity and plot them on a Benefit-Effort 2-axis chart. In such an exercise the project priority list becomes easily visually apparent.

4. Execute

A “B” plan with an “A” execution is sufficient to pull most companies through a crisis. Lean techniques and principles can be used at an accelerated pace to achieve the needed results in a shortened time period. Iterative cycles of Plan-Do-Check-Act or Define-Measure-Analyze-Improve-Control bring the business closer to goals through logical steps.

Constant, clear and continuous communication is essential to an “A” execution. Having daily huddles and being clear on daily and weekly priorities are critical to making steady progress in operations improvement. Improving businesses must be prepared to change priorities, drop activities which have low yield, and support those which are providing a timely return. Simply being clear each day and week as things change will help everyone focus on the right things.

Mid-Term: Supply Chain

During a business disruption the protection, maintenance and improvement of the supply chain is critical for survival. For your manufacturing, supply chain or business processes, there are 8 key steps you can take to prepare:

Step 1: Identify Designates for all key functional areas

Many business processes, especially in your business software, are very similar. Screens and entries in one process often look very much like those in another. Also, connected processes might transfer familiar information. Each key person in your operations must have a designate. One person can be a designate for several others but you have to leverage organizational slack and move people to the areas to keep the business running.

Step 2: Document your critical business processes

All too often, businesses rely on the knowledge and expertise of individual contributors who know what to do but have never written it down. Using process experts (helped by your IT resource to speed creation), create screenshots with instructions or “how to” videos showing how to do key business transactions, allowing someone with more limited knowledge to step in as needed. Using pictures or videos will allow the instructions to be more intuitive and allow much faster completion than writing everything. Remember that transactions may likely take longer to process and you may have to do more monitoring for mistakes.

Step 3: Eliminate bottlenecks (including bureaucratic ones)

A process is only as fast as it’s slowest step. You probably know what these steps are but have not had time to deal with them. With constrained resources, you have to reduce or eliminate or move staffing to these bottlenecks in order to speed the entire process. You know this intuitively at a fast food restaurant; you might have the fastest order taker in history, but if the cash register is broken, or the fries aren’t ready or your drink machine is broken, you are going to be waiting and wasting resources. The worst of these are things like “approvals” or “policies” or “extra quality checks” – step in and make it easy and encourage people to make decisions not wait for approvals.

Step 4: Have regular conversations with your customers

Customers sometimes seem unreasonable, but they are the ones providing the revenue and cash you need right now. They also have a unique view of your business that you often do not have because the information you received internally is “filtered”. As a customer yourself, you know that the sooner you are told about an issue, the better off you are so that you can respond. For example, if a key raw material or supply chain item goes on allocation – and your purchases are limited – you should do a similar allocation with your customers. Share everything you know from your vendor(s) with them real time. They will not like it initially, but in a few weeks as your competitors run out of material, you will be able to fill orders (at a slower rate of course). This will give your customers ample time to communicate with their customers and so on. Another example would be to discuss ways to take cost out of the entire supply chain together through the crisis rather than simply ask for price reductions or better payment terms in a vacuum. Everyone is in the same situation and working together will facilitate the best supply chain possible in a difficult situation.

Step 5: Initiate regular conversations with your suppliers and vendors

Do not wait on your vendors – bring them together via a conference call (or select the 20% of vendors that make up 80% of cost or units) and have a high level strategy discussion with them. Get ideas on best practices and share them with each other. Again, this will not only improve communication, but you can be honest with each other. Each of you will see parts of the supply chain that others cannot. I remember the first time I did this, we found hundreds of thousands of potential dollars in savings across multiple products and vendors through this type of idea sharing. Your vendors will view it as a positive experience and they have a vested interest in helping you be successful.

Step 6: Find substitutes when possible

The pressure to differentiate has often created hundreds of versions of virtually the same product. How many different types of laundry soap or paper plates to we really need? SKU proliferation is rampant in companies. With slow supply chains, having some product is better than no product. Work with your customers on substitutes – you might even provide the “better” product at the regular price simply to avoid stockouts and lost sales. This might be the perfect opportunity to sell that obsolete inventory collecting dust in your warehouse – it will also generate some badly needed cash!

Step 7: Have your IT team expand your teleconferencing capabilities

Many significant supply chain interactions occur face-to-face which may not be possible soon. Companies often have limited tools or rooms for teleconferencing. Work with your IT team to expand bandwidth, upgrade on-line services and train employees on exactly how to use them effectively. They may have used the tools in your office, but have they conferenced in 20 people from 9 countries before? Do they have anyone they can speak to in IT for a problem with a 3am vendor call? Will their phone be adequate to show a maintenance vendor a problem via a telecall so that you can trouble shoot it remotely? Does the phone have good enough resolution? Don’t get overwhelmed but step-by-step provide the right tools to the key employees and help them use them effectively. Be proactive because they might think you expect them to know how to do this despite having only done it a few times in the past.

Step 8: Communicate often and clearly. Lead by example.

Having daily huddles and being clear on daily and weekly priorities (which will be constantly changing) is critical to Operations and Supply Chain. In a famous Supply Chain simulation, called “The Beer Game”, players try to move things through the supply chain (and operations) with no or limited communication. The result is disastrous order patterns (called the bull whip effect) where larger and larger (unnecessary) orders oscillate through the system, mostly due to poor communication. Simply being clear each day and week as things change will help everyone focus on the right things.

Mid-Term: Revenue Growth and Retention

Rick Nichols

Revenue Growth Resource: Rick Nichols

The marketing, sales and customer success teams can proactively take measures to reduce risks associated with possible business disruption in the coming months. An immediate human reaction in business disruption is the tendency to stop all buying and horde cash. Having the flexibility to offer flexible pricing and terms may alleviate this fear. Proactive communication further assures both prospects and customers that you have a well-thought through plan, as well as further contingencies if the disruption proves to be a longer-term issue.

Creating Interest and Demand

A key to ensuring ongoing interest and demand creation is through outbound multi-channel marketing. Creation of a value story must answer two key questions: Why do anything and why now? Two key questions.

Pipeline Growth and Health

Creating a healthy pipeline necessary to drive continued sales and revenue depends directly on the team’s ability to create and communicate a value story that is linked to how your solution links to mitigation of key challenges and achieves primary business outcomes. Aligning with legal and product teams gives the sales team to prospect with confidence.

Forecast Management and Predictability

Having a clear and accurate sales forecast gives Finance and other downstream business functions insights regarding two key KPIs: cash flow, resource requirements and allocation and current and future revenue. Ensuring increased confidence in the forecast may be accomplished with buyer alignment though measuring verifiable outcomes during the selling process.

Customer Satisfaction and Retention

Maintaining a sense of calm and assurance that your team has the tools, processes and means of collaboration backed by stringently managed security and SLAs ensuring 100% uptime while working remotely gives customers a high level of confidence in the fact their business won’t be interrupted and cause damage to their customer and supplier relationships.

Next: A discussion of long-terms steps to take in response to business disruption. Operations, Product and Strategy Executive Elena Carroll will discuss strategic shifts and building data businesses within your current operations.

Customer Success and Intentional Revenue

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Customer Success and The Case for Intentional Revenue™

In my career, I’ve worked with and consulted many technology firms from small to large on customer renewal issues. Most have had at least a reasonable level of success, and many have gone on to do very well. Over the years I’ve collected a set of notes. I tried to understand why some have exceeded expectations and why some have fallen short. A lot has to do with consistent execution and growth, but then I looked at the numbers further – is it only about sales? About good products? Good after-sale support? It’s that and more. I’ve come up with a model that I call Intentional Revenue™ which has three elements.

Customer Desired Outcome

First, you build, sell, install and support a customer so they reach their desired outcome. You’re not selling a “product” or even a “solution”. A simple analogy – you’re looking for a new car and are considering a convertible. Reliability, power, space and value are important. But the end result is not a car. You’re buying into a lifestyle where you can put the top down and relax in the sunshine.
Your customers are the same. If a customer needs a new billing system, they’re not buying it from you because they like billing systems. They are buying because it solves a problem. They are buying relief from their current system. That’s the outcome they are looking for.

This all sounds simple. But in my experience, the value chain in technology solutions is often broken. Sales can oversell or over-commit. Products can be faulty or not deliver promised functionality. Implementation services seek sign-offs rather than delivering value. And support focuses on closing tickets not resolving the issue.

I’ve tackled and solved many problems in these areas. Often sales coaching will help along with deal reviews. Product reviews against consistent, communicated roadmaps also ensure alignment. Implementation services focused on success and not milestone achievements are critical. Support surveys that measure results, not closure rates, provide positive feedback and reinforcement.

The Intentional Revenue™ goal is to achieve 100% alignment between a sale and achieving the customer’s desired outcome. For every customer.

Renewals

The key to long-term success for startups or mature companies is customer renewals. Software or technology is usually sold in one of three ways:

– Perpetual License (fee paid for permanent ownership; annual support is usually extra)

– Term License (fee paid for license and support for a fixed term)

– SaaS (fee paid to host a solution, for support and licensing, usually for a fixed term).

In these cases there are revenue opportunities beyond the initial sale. Implementation services and education are almost always added to the license costs. There are fees from ongoing support. And there are fees for major upgrades and updates (if not covered by the license agreement).

Customer Lifecycle Management

Customer Lifecycle Management is a discipline in itself. If a customer doesn’t get their desired outcome, their likelihood to renew decreases. A customer will also renew for a short period and look for a replacement if they feel neglected or abused.

Additionally, with renewals, there are two aspects to consider: rate and yield. The renewal rate is the percentage of customers who renew after their first term. Or, those who renew maintenance if they have perpetual licenses. Cell phone and cable services have high churn (non-renewal) rates. B2C software also can have high rates of churn, often approaching 50%. Enterprise software and mission-critical technology have higher renewal rates. But they are rarely 100%.

Renewal yield refers to the capacity or dollar value of each renewal. Let’s say that you sold the customer 500 seats of software, or 500 units of hardware, but they only used 200 of them. They are unlikely to renew for 500. It is more likely the customer will agree to 250 which covers their current usage plus some growth. That would result in a renewal yield of only 50%! It’s also possible to exceed 100%, if you sell more capacity during a renewal cycle. That’s usually a great sign that the customer is getting value and their desired outcome.

It’s much easier to tackle high renewal yields and rates if you think about it up front. I once took over a large portfolio of products. The products had fast declining yield (<50%) and slipping renewal rates. I was able to get the renewal rate to 100% and the yield over 90%. It requires a lot of effort if you’re trying to do it right before a customer renewal.

The Intentional Revenue™ goal is to achieve a 100% renewal rate and 100%+ of renewal yield.

Recommendations

How likely is your customer to recommend you to others? Referrals are a huge source of leads and future business. Of course, negative recommendations are not desirable.

Again, if your customer doesn’t renew, they didn’t achieve their desired outcome. They are not going to give you a recommendation, either. There are times a customer will get their outcome, renew, but not recommend. What’s up? The customer’s treatment before, during or after the renewal cycle is the culprit. The perpetrator might be your CEO or a support technician.

There are ways to measure Likelihood to Recommend (LTR). One of the most popular measures is Net Promoter Score®. Regardless of the method you use, if you’re not getting recommended, you’re leaving money on the table.

The Intentional Revenue™ goal is to have 100% of customers likely to recommend you to others.

The Proof

You might argue that this works well for one type of product, or for one type of company. I’ve modeled out success for: (1) mature technology companies with term licenses; (2) mature companies that sell perpetual licenses; (3) startups, and (4) growth companies that sell SaaS or term licenses.

Some firms have strong sales teams but aren’t as strong in customer renewals. Others are great at renewal yield but not rate or vice versa. Some are “best in class” at the higher range for each. The model also includes all Intentional Revenue™ principles.

For the first few years of the model, the differences aren’t noticeable. But Intentional Revenue™ plays the long game. Here are the gains you could achieve over 10-years with the Intentional Revenue™ model:

[table id=8 /]

These are illustrations and your numbers may differ. But in all cases, there are tangible revenue improvements. The annual revenue run rate at the 10 year mark is close to double the typical case. This is even in a conservative scenario (mature perpetual). Small improvements in renewal rate, renewal yield and bookings growth deliver big results. If you aren’t already achieving the metrics laid out here, there is room for improvement.

Finally, this is not about selling. Nor about products. Nor about services or support. It is a holistic approach that requires all functions to work together.

How do you get started? Give me a call! My practice offers 3-day onsite assessment workshops to get you underway.

Mark Lukianchuk is a transformational global technology executive with a proven record of innovation and execution in the Software, Payments and FinTech spaces. He can be reached at (404) 777-4774 and mark.lukianchuk@techcxo.com

4 Ps Ripe for Fractional Engagments

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4 “Ps” Ripe for Fractional Engagements

TechCXO specializes in providing fractional executives for a variety of positions. Our on-demand executive model is typically 50-75% more cost and time-effective than a full-time, in-house function. But not every company needs a fractional or interim CEO, COO, CTO or CFO.

In addition to the C-Suite, there are 4 other areas that would benefit greatly from expert assistance but not necessarily require a full-time employee. I mentioned in my last blog about the need for intentional processes.

As it happens, these 4 areas also start with the letter “P”:

• Project
• Program
• Product
• Portfolio

Project Work

The logical first opportunity is with project work. According to the PMBOK® Guide from the Project Management Institute the definition of a project is “a temporary endeavor undertaken to create a unique project service or result.” Projects are temporary and close down on the completion of the work they were chartered to deliver.

When your company hires a project manager, you are banking on the fact that the role will be needed indefinitely. What if the project is short term? What if you don’t need to hire a full time PM? TechCXO provides qualified, experienced partners and project managers to scale your efforts up and down as needed. We can help you with all phases of a project, from definition through implementation.

Program Work

A program is more extensive than a project in that it is more concerned with benefits rather than tasks. Programs can span multiple business units or disciplines. They can be comprised of multiple projects. Even if you have project managers on staff, often they do not have the level of experience necessary to juggle a more complex program. Even if experienced they may not have the available bandwidth to dedicate. This risks program success. TechCXO provides partners and staff with the level of expertise needed to design, implement and manage more involved programs.

Product Work

The third area is product. You already have product managers on staff. Are they delivering according to best practices? Are your products late, buggy or worse, canceled? An experienced third party can help you look objectively at any product problems and recommend a solution. TechCXO provides both technical and business-level product assistance via its skilled partners.

Portfolio Work

Lastly, an often-overlooked area is portfolio. As program is to project, portfolio is to product. As your company grows and you build or acquire multiple products things get more complex. You need to balance spend, manage renewals and run the portfolio as a business. Are you growing your portfolio as you should? You need to be better than your competitors. TechCXO provides a seasoned and independent voice to help you turn on, turn up and turn around any portfolio issues.

The final benefit – TechCXO can do this all on a fractional or project basis. We can get started immediately, without the risk and complexity of hiring a full time employee or independent contractor. All at a considerable cost savings.

Ready to learn more? I’d love to talk with you about your potential needs. I can tailor a project to fit your project, program, product or portfolio requirements.

Generalists in a Specialized World

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Who provides competitive advantage to companies? Generalists? Specialists? Both? Neither?

I’m always on the hunt for a good new business book, and I’m currently reading “Range: Why Generalists Triumph in a Specialized World” by David Epstein. As somewhat of a generalist myself (albeit in technology) I can relate to much of what Epstein writes.

In the corporate world, there tends to be a higher value placed on specialization. Need a product manager? A services delivery manager? A sales manager? A requisition is opened for one with 20 detailed job requirements and an applicant must meet all of them to even be considered. In many cases this level of specialization is desirable, possibly even required.

But not always.

Trees or Leaves Problems?

It’s what I call the “forest, trees or leaves” problem.

The English writer and playwright John Heywood first documented the proverb “see the forest for the trees” in 1546. Nowadays it’s usually used in a negative context. “He can’t see the forest for the trees” implies that someone is too close to the problem to see the big picture.

When tackling a very specialized problem, this level of detail is needed. Sometimes it’s not even a “tree problem” but a closer look is needed – at the leaves themselves.

In my experience, when someone is new to an organization, they have the ability to see the forest. After a period of time (around 12 months) they become too engrained in how the company works and can no longer see the forest. They can only see trees and leaves.

The problem arises when trying to solve something strategic in nature. This might be a cross-functional issue that spans multiple teams. It might be something outside the experience base of the team members. Solving this problem means you need someone to look at the forest, and because the team members were hired to be specialists it’s tough to do.

Coming back to the book I mentioned earlier – there’s an interesting quote: “Specialization is obvious: keep going straight. Breadth is trickier to grow.”

Especially if you hire for specialization! You are prioritizing depth over breadth.

T-Shaped and I-Shaped People

Epstein also describes the difference between a “T-shaped person” and an “I-shaped person”. An I-shaped person is a traditional “narrow but deep” specialist. A T-shaped person is one who is wide but has access to depth via others already in the organization.

TechCXO is full of partners with T-shaped expertise, especially those with broad operating experience across multiple domains. I count myself in that list.

A T-shaped person will provide a competitive advantage to companies.

Day-to-day, companies can leverage specialists in the roles where they are strongest. They can bring in a TechCXO partner to assist with wider T-shaped problems that cross functions. They don’t need to have specialized domain expertise as that already exists.

The other advantage to a company: you can get access to a T-shaped executive as needed, on demand. You don’t need to change your hiring practices. You don’t need to sacrifice domain expertise and specialization.

Do you need help in seeing the forest? I and other partners at TechCXO are just a phone call away and can assist you in determining your requirements.

What Got Your Business Here Won’t Get You There – Part 2

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Last time we explored how companies at different stages have differing needs. As a reminder, here are some sample challenges across several functions:

[table id=10 /]

It’s relatively simple to know which trajectory your company is on by looking at its financials. What becomes more difficult is in knowing if you are ready to meet functional challenges. How do you know if something is missing?

One of the benefits of working with sharp people at TechCXO is the knowledge and information sharing that we do. A while back Mike Allred and I were discussing ideas on a call and a comment he made reminded me of something I had built years ago – a maturity model for enterprise software. I immediately thought of its applications towards Intentional Revenue™.

What is a maturity model? It’s a process or tool that helps companies assess how effective they are and also provides a guide as to what to do next.

If you don’t know where you are, how do you know where you’re going? And how do you get there?

In IT, one of the grandfathers of maturity models is Software CMM, dating back to the 1980’s and created by Carnegie Mellon University. It’s now called CMMI and is owned by ISACA. It’s extremely thorough and comprehensive.

But there’s a challenge in implementing maturity models. Often, it’s a laborious process and I’ve found that the effort to adhere to it often doesn’t fit smaller companies. Why should a startup waste valuable resources in this way?

The answer is by having a guide as to what to do next. A simple start is often “just enough” to set up a good framework to build on later. Without this framework companies may not know where they have gaps as they grow, which can lead to problems. It also helps smaller companies know what skills and experience they need to acquire as they add new team members.

Since that call I’ve created an Intentional Revenue™ Maturity Model, the basics of which I will share with you here.

Like many models, this one has five levels:

Technically, there is also a Level 0 which corresponds to “unknown”, so consider that for a moment. The initial step for any company – startup to mature – is to know where they stand by first getting assessed. Then you can determine what areas need to be addressed.

If you’re a startup, you’d probably want to ensure you have the basics down pat across the board.

If you’re heading into a growth stage, you probably want to scale up your maturity along with your revenue.

As you become mature, you want to optimize what you have. But these are general rules.

One difference between the Intentional Revenue™ Maturity Model and many others is that you can achieve a high maturity level at ANY stage of growth. The scoring questions use process and qualitative criteria as opposed to specific tasks to perform or quantitative targets.

As an example, defining sales success could start with “hit your target (pass/fail)” which indicates low maturity. A single booking or revenue number defines if a salesperson or territory is successful or not. Obviously, it’s better than not knowing anything at all, but it’s very basic.

This progresses through “consistent measurement aligned with customer success” which indicates a high level of maturity. There is no longer a single metric used but more detailed criteria, measurement, performance management and alignment with how successful a customer is.

The actual measurement process isn’t critical here. The fact that it is consistent and aligned is. So, for a startup, this task could be done in a spreadsheet by a single person. In a mature organization it might require a dedicated team with a more detailed process and reporting requirements.

The outcome and the level of consistency is what determines maturity, not the work to do it.

This is important, and why many maturity models fail to gain traction in smaller companies. They are often too time-consuming and difficult.

No matter what you implement, you need to right-size it to the current stage of the company.

One final thing to consider: capabilities are assessed across multiple domains. In the case of Intentional Revenue™ this is across Sales & Marketing, Product Development, Implementation Services and Customer Support and Success.

A company can score well in several areas and lower in others, which yields a final maturity score that is the lowest common denominator. It’s perfectly fine to not achieve the highest level of maturity in all areas. Effort expended needs to align with expected returns.

Part of any report would also provide recommendations on next steps to proceed to the next level. A reassessment should be done in 12-18 months to show improvement.

I’ll finish off this blog series about the concept of maturity models and Intentional Revenue™ in the next blog entry. Stay tuned for Part 3 in the coming weeks. I can be reached at mark.lukianchuk@techcxo.com or at (404) 777-4774.

Mark Lukianchuk is a transformational global technology executive with a proven record of innovation and execution in the Software, Payments and FinTech spaces. He can be reached at (404) 777-4774 and mark.lukianchuk@techcxo.com

What Got Your Business Here Won’t Get You There – Part 1

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Recently I’ve had some very interesting conversations about business growth and transformation. In my own personal transformation as a business leader I leveraged the standard on the subject by Marshall Goldsmith, “What Got You Here Won’t Get You There.” Here’s my take on the business equivalent.

Startups have it tough. At the same time, they also have it easy. How can this be?

A CEO I worked for once said that the most important aspect of a startup was to have a differentiated product. That “two guys and a dog in a garage” could be extremely disruptive to mature technology firms. This is true.

But the startup has the luxury of being singularly focused on this new offering. To get revenue. To make their first customers successful and happy. This level of focus makes it easier to guide what they need to do.

In the vein of Intentional Revenue™, consider the challenges of a startup:

[table id=9 /]

Pretty straightforward, right?

When you’re 2 people and a dog in a garage, you wear multiple hats. You do whatever is required in order to ensure these challenges are met. I’m not sure exactly what role the dog has, but I’m sure it’s important.

Compare and contrast this with the challenges of growth and mature companies:

[table id=10 /]

You’ll note some key differences here. There’s a revenue curve which accelerates and then flattens. Mature companies have a much greater focus on “farming” or “harvesting” than “hunting”. What skills and talent that got you started may not work later.

Product Development starts with a great idea and an MVP. But the people who were there at the beginning might get bored when it’s time to optimize the portfolio. Great features aren’t the sole driver of product investment decisions anymore.

Implementation Services transform from “do whatever it takes” to get a customer up and running to “let’s make sure we don’t lose money”. The focus has changed.

Customer Success and Support is a bit more controversial. A startup wants to keep their anchor customer happy. This often means access to the CEO or whomever is necessary. Growth companies want to maintain that level of satisfaction. At mature companies, however, it becomes understood that you can’t make every customer happy. And that’s OK, but you want to keep the customers that matter most satisfied.

So, it’s clear that what got a startup off the ground and through its initial funding stage(s) won’t get you deep into the growth stage and into maturity. How do you meet the challenge? How do you know if something is missing?

I’ll discuss more about the concept of maturity models and Intentional Revenue™ in the next blog entry. Stay tuned for Part 2.

Acquisition Integration – Part 1

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Why Acquisitions Fail: It’s the Integration

Companies seek to accelerate revenue growth or enter new markets through mergers and acquisitions. They spend a lot of energy and resources identifying the right targets based on synergy and combined financial models.

But oftentimes, the real value of the acquisition is not realized. M&A typically fails during integration. All that effort and capital spent on acquiring the target is wasted.

Why? There can be several reasons:

1. Unless you are a large company that can afford their own in-house acquisition integration department, companies simply don’t have the internal resources to assign to an acquisition integration to do it right.
2. The existing management team fears creating a costly disruption in the acquired target.
3. The integration burden is placed on existing managers who already have a day job causing endless delay and lack of initiative.
4. The talent in the acquired firm is ignored and “stars” exit early, quickly causing a critical talent drain and loss of business know-how.

 

Every acquisition integration requires a dedicated, objective leader to achieve a timely and cost effective successful outcome. The leader must have the business acumen and soft skills to execute on the complex business objectives and strategy without negatively disrupting the combined organizations and their customers. It’s a careful balancing act that is learned from years of extensive experience.

TechCXO has on-demand executives that can lead your next acquisition integration.

The emphasis is on leader. An executive that can readily step-in, manage the various functions, communicate with the C-Suite, Board and management teams with confidence and execute.

The benefits of an interim executive to lead the integration are manifold:

1. The interim executive is not connected to either company’s political structure. He/she can speak freely, impartially and objectively about the problems. He/she will include and listen to the right functional leads on both sides. He/she will build needed relationships and trust on all sides to accelerate the integration.
2. The interim executive brings experience and best practices of completing acquisitions for other companies. For most clients, an acquisition happens every five years or longer and the internal talent lacks enough experience.
3. The interim executive has the experience to distinguish the real problems from the “noise.” Every acquisition or merger generates a tremendous amount of what I call “noise”: It’s all the supposed problems identified by employees in all functions at all levels of why the integration is going to fail. Most of it is rooted in cultural differences, feelings of resistance, lack of vision, fear of being excluded, organizational misalignment, geographic separation, to name a few. The experienced acquisition leader will collect all of the noise and identify the real problems in an atmosphere of inclusion and trust. Each acquisition is different and the real problems can exist anywhere inside the noise. The acquisition leader will engage and communicate with the organization to be effective in every situation.
4. The interim executive will also ensure that the customer experience is not negatively impacted. This is not easy, as you will have disparate sales, customer service, ERP systems, order management protocols and supply chains. Customers are always weary of mergers and acquisitions, but the consensus is that the customer experience never improves. You do not want to lose market share.
5. The interim acquisition leader will establish a timeline with hard milestones and report progress to a Steering Committee of carefully selected stakeholders (C-Suite, Board Members, Investors as appropriate). He/she will make sure that communication occurs at the right intervals and in real time. The acquisition executive will level-set the integration objectives up front: What do we want this integrated company to look like? An assimilation? A hybrid of best practices? A cost optimization play? The acquisition executive can advise the leadership on these decisions and develop the integration plan and timeline accordingly.
6. The interim executive has the ability to shape the integration around the complex acquisition objectives that drove the merger in the first place. Sometimes these objectives are highly sensitive in nature and should not be shared with internal managers (i.e divestiture, cost reduction, geographic consolidation, liquidation of assets)
7. The interim executive will lead the teams and reduce the “human toil” and accelerate the average acquisition experience. The leadership is accomplished through influence or cross-functional reporting structures as appropriate. Every company culture is different.

The four important areas that a seasoned acquisition integration leader manages are:

1. Customer experience (communication, order management)
2. Creation of a joint sales force
3. Proper cadence of system integration (email, ERP, portals, platforms)
4. Managing the temperament of the leadership (CEO, CFO, Board, Owners, Investors) on all sides for the benefit of a successful, timely integration. This is where executive soft skills are crucial. The soft skills, the executive’s ability to lead organizational change and influence, are equally important, if not more important, than the hard skills.

One more note: Timing is critical. A successful integration requires preparation and a strong “Day One” execution. The integration executive should be brought in at least two weeks before the closing to prepare the organization for a successful kick-off.

 

Matt Oess (full bio) are partners in TechCXO’s Atlanta office.

 

Before Mounting the Synergy Unicorn: New Skills for Merged Management Teams

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Companies seek to accelerate revenue growth or enter new markets through mergers and acquisitions. A great deal of excitement and justification surrounds the projected synergies and combined financial models.

Synergy: 1+1>2

Or is it?

However, as we all know, few companies realize the true value of the acquisition synergies. When M&A fails, it fails during integration. Much of the effort and capital spent on acquiring the target is sub-optimized or in many cases wasted.

In this piece, I’ll briefly cover what dynamics occur among the senior leadership team that erode synergistic value. And, I’ll discuss the two skill sets that the leaders of the combined entity must have to mitigate value leakage.

[The article was adapted from Matt Oess‘s original blog post]

However, as we all know, few companies realize the true value of the acquisition synergies. When M&A fails, it fails during integration. Much of the effort and capital spent on acquiring the target is sub-optimized or in many cases wasted.

In this piece, I’ll briefly cover what dynamics occur among the senior leadership team that erode synergistic value. And, I’ll discuss the two skill sets that the leaders of the combined entity must have to mitigate value leakage.

WHY M&A FAILS

A major failure mode of integration happens when the two leadership teams from the companies come together. The company’s executives create a detrimental amount of dysfunction when they unknowingly engage in the following:

  1. Jockey for position – Who’s going to sit in what seat when the final org chart has been created? Even the most objective leader can’t help but worry about what role they and their close peers will play in the future state of the company.  Even when the CEO of the merged entity tries to paint a clear picture of his or her future organization, the senior staff knows that “the changes are never over” and “I have to look out for myself or I’ll end up with the short end of the stick”. The human mind is amazingly good at painting worst-case imagery of “what if I don’t get the role I want?”. This drives behavior that destroys alignment among leaders and marginalizes the intended synergies.
  2. Protect my people – Executives can’t help but have a bias for and a comfort with those that have helped them to be successful in the past. As humans, we are also protectors of those we are closest to. And, we want what’s “best for our team”. This dynamic precludes objectivity when assembling the best possible team to lead the resulting company and limits optimal outcomes.
  3. Bias toward “what got us here” – No integration meeting would be complete without several incantations of “That’s not how wedid it in the past” or “We’ve tried that before, and it didn’t work”. Fear is an incredibly powerful force that creates enormous risk and dire outcomes in the minds of the two leadership teams. These barely-detectable fears paralyze good ideas that should be implemented, but don’t. As importantly, these behaviors almost always ensure that the teams can not fully align. And, that dynamic destroys synergy.

Here’s the thing. I truly believe that people show up to do their very best and do so with the very best intentions. And, the leaders who exhibit the above  behaviors do so, unknowingly. The brain’s protection mechanisms kick in to protect our own best interests. It’s perfectly natural for the brain to create the fear-based stories in our subconscious that drive undesirable behavior. And, this is where the change management aspects of the integration erode tremendous value.

So, imagine what the combined executive team looks like, as a unit, from the stakeholder’s purview. Each executive is trying their best and is well intentioned. But, the brain’s protection mechanisms drives the actions of the individuals that combine to create a team that typifies mis-alignment, dysfunctional communication, and poor collaboration.

Before putting in motion all the strategies, goals, org charts, and tactical action plans necessary to realize true potential of a merger, something more important must take place. The two management teams must know about the attitudes and behaviors they are about to engage in. And, they must develop the emotional intelligence skills and support each other to navigate these tough waters.

NOW WHAT?

The first step is to take the unconscious actions and behaviors of these executives…and make them conscious.  

To that end, the first skill set that we must impart to the executives is self-awareness of the mechanisms in our brains that create the behaviors that will destroy the very stakeholder value that they wish to enhance. Left undetected, the executives will navigate through their natural gut feel, which creates the appearance of false truths and leads to dysfunction.

Second, we help the executives build and leverage the necessary observation and communication skills required to create desirable outcomes and support each other. By creating intentionality and dramatically increasing the true situational awareness skills of the individual executives, we drastically increase the combined team’s emotional intelligence (as a collective leadership unit). And, we add a new dimension to their leadership skill set.

This isn’t a one-and-done training. We plan during the M&A due diligence phase. We launch on day zero. And, we support every senior executive until integration is complete and we achieve the synergies. Only through this intentionality and constant focus can newly-formed companies avoid the pitfalls mentioned above.

TAMING THE UNICORN

Merger and Acquisition teams, CEOs, CFOs, and Board Members that are considering buy/sell/merge activity have the power to mitigate the risks and deliver the allusive synergistic value. Strategy and actions are necessary, but not sufficient. Call it an insurance policy. Call it intentionality. It’s a simple formula…

Synergy:

1 + 1 + Team Emotional Intelligence > 2

Every M&A deal needs a program to mitigate these risks. The earlier these skills and competencies are enabled across the entire executive team, the faster the M&A teams mitigate the integration and change management risks. The broader and deeper these competencies are driven, the faster M&A teams create the alignment, collaboration, and communication required to deliver the synergies of the acquisition.