Jun 24, 2022 | Customers, Leadership, Management, Marketing, Sales
In the past, for the orderly management and convenience of organisations, Sales and Marketing have been kept by management in separate functional silos.
In a time of flattened organisation structures and the ease of communication and data sharing, this no longer makes any sense at all.
The evolution of the silos to one functional area of responsibility will remove substantial opportunity for the transaction costs incurred by turf wars, miscommunication, and unaligned objectives, to be eliminated.
From a customer’s perspective, how you are organised internally is irrelevant, they are looking for the products and services that solve their problems or address their opportunities in the most cost-effective way.
The vast majority of interactions a customer will have with a supplier will be cross functional. Over the course of a transaction, they will interact with sales, technical service, after sales service, and logistics, probably sequentially.
The power in the sales relationship has moved from the seller, who had control of the information necessary for a customer to make a purchase decision, to the buyer. In past days, the sellers only delivered the information that benefitted them, but those days are almost gone. This process has been gathering speed since the mid-nineties, and now dominates every transaction beyond small scale consumer purchases like groceries, and even there, the need to be clear about the ingredients, their sources and provenance is pervasive.
Both sales and marketing silos have the same ultimate objective: to generate a sale, and preferably a relationship that leads to a continuing flow of orders. The combination of the silos into one, Revenue Generation, makes logical organisational sense in this new environment, as well as better reflecting the way customers interact.
Sources of revenue.
Isolating the sources of revenue is a crucial component in effectively managing the revenue generation function. Luckily, the sources can be summarised into three areas.
- Customers. Which customers buy what products, in what volumes, how often?,
- Markets. There are many ways you can dissect a market. Geographically, customer type, customer purchase model, product type, depth of competitive activity, lifecycle stage, and others.
- Product. Product type, mix, price points, lifecycle stage, margin, potential, and others.
Together these three axes form a three dimensional matrix from which your revenue is derived. The task of the RevGen personnel is to maximise the revenue today, and into the future, while minimising or at least optimising the cost of generating that revenue.
Type of Revenue.
Considering not only the source of the revenue, but also the type is a crucial part of the equation that will lead to long term profitability. Again, there are three broad categories into which all revenue can fall.
- Transactional. One off sales that require little else at the point of the transaction beyond a mechanism to execute the exchange of goods for money.
- Packaged. This category is by far the biggest, as it contains all sales that come with a ‘ticket’ of some sort. That ticket may be a guarantee of service, warranty period, assurance of quality via a brand, bundled pricing, promotional support, and many others.
- Subscription. With the emergence of the internet, subscription sales are growing rapidly at the expense of the packaged sales. This exchanges the upfront revenue of a sale for an ongoing revenue stream based on use, time, or both product and service. The emergence of the ‘cloud’ has spawned a host of new business models that use subscription as their base, but it is not new. Xerox used subscription for decades by leasing their equipment, then charging for usage on top. Similarly, Goodyear moved their sales of tyres to the airline industry from a sale to a usage model in the 80’s to sidestep the simple fact that their tyres were more expensive, but lasted longer. This encapsulated the price sensitive nature of airline purchases, with the savings over time because their tyres lasted for more landings than did the opposition.
Thought about these variations all have resulted in an exploding range of business models over the last 20 years, making the task of managing the generation of revenue way more complex, and therefore also opening opportunities for those who can think creatively about the task.
When you need some creative outside experience in this complex menagerie, give me a call.
Jun 8, 2022 | Leadership, Management, Strategy
Much of the volume of paper dedicated to pontificating about strategy these days seems to focus on ‘Purpose’. Sadly, we do not have a workable and agreed definition. What we do have is confusion about the meaning, particularly when you consider the other strategic pontification generators ‘Mission’ ‘Vision’ and ‘Values’
What are the differences, and how do they improve enterprise performance?
In my view, spending time worrying about the differences, and similarities is time wasted. All are words that should lead to four outcomes that will improve performance.
Strategy.
They all provide a framework against which strategic decision can be measured. ‘Does this decision enhance our performance in a way that assists to deliver whichever of the labels you choose to use.
Differentiation.
A well articulated statement of strategic intent, called by whatever labels you choose, supported by overt action can, and does offer the opportunity for a differentiated product offering that will be hard for competitors to copy. This generates incremental revenue, at enhanced margins when done well.
Human resources.
Most people would prefer to work for a company that makes a positive contribution to their community as well as offering competitive pay and opportunity. I have an acquaintance who used to recruit for a tobacco company. His experience was that they had to pay well over the odds, and accept a modest performer in order to keep bums in the seats to get the job done. BTW, I dislike the term ‘human resources’ but have yet to come up with a better one that does not sound confected.
Culture.
This often misused word gives a sense of direction, focus, behavioural norms, common ideals and risk management that enables the building of momentum. ‘Culture’ is the essential glue that holds enterprises together.
You do not need a strong purpose, or either of the other two to have a successful enterprise. Most have survived and prospered to date without one, but there is no doubt in my mind that it helps enormously, however you define it.
Header cartoon credit: Courtesy Scott Adams and Dilbert.
May 30, 2022 | Governance, Leadership
There is no situation that requires a decision that cannot be enhanced by asking two simple questions:
Is the information right?
Is it the right information?
These are different questions that often become confused.
An accurate piece of data is of no value if it does not relate to the question being asked, or is related to a symptom of the problem rather than its core.
Often it seems that people use data to back a point of view, and just because they have data, the critical analysis of the assumptions and methodology behind the data is not seriously questioned.
It also pays to closely observe who is asking the question, and their attitude to an unexpected or uncomfortable answer.
Charlie Munger, Warren Buffett’s brilliant offsider is credited with the quote: “In God we trust, all others bring data”. I think this is absolutely right, as far as it goes. You just need to ensure it is the right data, and you do not mistake the data for the outcomes of crystal ball rubbing, self-interest, or optimism.
Header cartoon credit: Gapingvoid.com.
May 26, 2022 | Change, Innovation, Leadership
Opportunities abound, and are hard to ignore.
They emerge to consume resources, distract attention, divert investment, obscure the focus on strategy, and generally disrupt operations.
How do you ignore, or better still, systematically, and quickly assess them, learn, and then execute or walk away?
- Relentless focus on the long-term objective, and the framework that is the strategic plan and supporting operational plans that will deliver that objective.
- Consistency between the long-term objectives and the activities that are shorter term, tactical choices.
- Have a bias for action, coupled with the discipline that any action needs to move the enterprise towards that long term goal.
- Never underestimate the power of the status quo to water down and divert the bias for strategically oriented action.
- You need the right people, those that will measure every decision against the agreed strategic objectives. This is not to remove any opportunity to divert from the strategy, it just requires more short-term agility to take advantage of tactical situations as they occur.
- Make sure you have all the facts and are working from first principles.
Strategy is all about making choices, and making a choice for option A precludes also choosing option B. This cascading of choices becomes a Bayesian decision tree as the choices cascade through the organisation from the top to the points of tactical implementation.
May 19, 2022 | Governance, Leadership
Every adult on the face of the earth has a set of biases deeply rooted in their brains. This is nothing to be surprised, ashamed, or confused about, it is the way we evolved. Our biases serve the purpose of freeing up cognitive capacity for more important, potentially lifesaving things, like the Fight or Flight response to anything that resembles danger.
Confirmation bias is one such cognitive shortcut. When we see something that we are familiar with, that confirms what we already think, we just accept it without analysis. Because it confirms to what we already believe, we accept it to be true.
We no longer live on the savannah where the rustle in the grass might be a sabre-toothed tiger, but the cognitive shortcuts that evolved in response to the need for instant recognition of that situation remain.
We use a host of these biases all the time in all facets of our lives, usually without recognising them.
Those who understand these cognitive shortcuts can use them to their benefit, and potentially our detriment. If someone can use a bias to elicit the response they want to some sort of stimuli, as in a sales situation, they can benefit, and those on the receiving end do not realise they are being manipulated.
The addition of the network effects of the web over the top of biases we all have has the effect of supercharging them. The social platforms particularly Facebook use this as a core part of their business model. Give people what they want and expect to see, and they will be increasingly committed to the view and the sources of ‘information’ on their view.
Over the time of this election campaign, we have seen the major parties put confirmation bias on steroids. Selected messages in selected places to selected audiences, seeking to confirm a selected response in the minds of the audience.
What a farce.
It is a graphic example of confirmation bias at work when what we need is thoughtful policy development and analysis as part of a robust strategy for the country.
Instead, we get this blizzard of psychologically driven tactical messages aimed only at Saturday May 21st.
I watched the Liberal Party ‘policy launch’ last Sunday morning. My penance for being so acerbic over the last months. Thankfully, both the treasurer, and national’s ‘leader’ were brief, but Scomo took 55 minutes of my life with a passionate plea to a packed house of selected Liberal party members for their vote. Presumably, he already has theirs, but what was interesting is that the whole thing was a zealot’s exhortation of a whole range of half-truths and outright misinterpretation of facts. Raw Confirmation bias on steroids for the packed house.
I wonder if any other swinging voter watched it, and had to run for the dunney as I did?
Thank heavens it will be over in a couple of days, but the hangover is likely to last for a while.
Header cartoon credit Chainsawsuit.com
May 11, 2022 | Leadership, Management, Marketing
There is an enormous difference between knowing the name of something, and truly understanding it.
Most move through school, university, and life by skimming, remembering bits about which questions are asked, and judiciously using jargon to get away with it.
Few take the time, and make the effort to truly understand.
The test is to explain that complex idea to a 12-year-old in such a way that they understand it. When you cannot do that, it is not the 12-year old’s fault, it is yours. You do not understand it fully enough to be able in simple words, metaphors, and similes to communicate the essential nature of the thing.
This is what I see from most calling themselves marketers.
Many marketers, particularly the younger ones, come up against a problem, and before doing any reasonable analysis, jump straight to some sort of digital conclusion that is often grossly sub-optimal.
Marketing is part science, part art.
It is a difficult balance, made more difficult by the simple fact that the art part of the equation only comes with experience, built upon the foundation of the science.
‘Anyone can make a subject complicated, but only someone who truly understands it can make it simple’. Richard Feynman
