The CEO’s Formula for Applying the Science of “Revenue Generation” – Part 3

Variable 4 – Structure:

Every organization has applied structure intentionally or unintentionally.  Companies create process, brands, messages, literature, training, software tools, etc. to help the execution deliver more results.  The variable of structure needs to be measured for its impact on the ability for execution to deliver results.

The structure investment can come in the almost unlimited forms and always needs to be recognized and measured against the change in execution.  If the resulting change in execution creates a positive ROI – great!  If it is not positive decide if it can be modified to become positive and most importantly compare each structure investment to every other structure option (in every part of the organization) to determine the combination that gives the greatest overall return when plugged into the formula.

There is ONLY ONE PURPOSE for structure and that is to improve execution.  NEVER invest in structure without knowing the organization’s current assumptions about the benefits the new structure will provide for the improvement in the execution of “Revenue Generation.” After investing in the structure measure what really happens at the point of execution and compare that to the investment to determine if you can make changes to further improve execution to secure the best possible return on resources.

Alignment (Revenue Strategy + Execution) x (Leverage x Structure)

Variable 5  – Leverage:

We all want leverage and since the purpose of structure is to leverage an organizations ability to improve execution related to growth and profitability.  Leverage is either positive or negative.  The impact of the leverage shows up in the ultimate metric of more profitable revenue for the dollars invested short-term and long-term.

If there is a powerful brand that draws customers or if aligned execution creates repeat business and referrals then the leverage is positive.  Conversely if the whole organization goes to product training to learn how to pitch the product in detailed PowerPoint’s, how to deliver specification heavy demos and to create web videos that talk about company history the buyers will be convinced that the company’s goals aren’t about solving the buyers problems, but are about creating a transaction for the buyer, then the leverage is negative.

Strategy, Execution, Alignment and Structure individually and as a group control both the nature (positive or negative) and the amount of leverage, which changes the results from execution.

Summary:

Alignment (Revenue Strategy + Execution) x (Leverage x Structure)

Most organizations only focus on two things (execution and structure) and they both require budget.  Execution and structure are the two things a leader can buy with the expectation that things will get better, which may or may not be true.

In truth large amounts of money are misspent on these two parts of the formula.  CRM, training, advertising, trade shows, and websites are far too often large investments with little or no alignment and large negative leverage.  That means not only don’t they help get more profitable revenue but they actually increase the Cost of Chaos, while holding down topline growth.

As the Cost of Chaos increases any additional growth requires spending more and more money (on execution and structure) to get smaller and smaller returns (both topline and profit).

This is why an organization can be operationally excellent, win all kinds of awards for excellent structure (training programs, websites and super bowl ads) while their problems get bigger and bigger.

Everything a team does, every dollar spend is either aligned to the revenue strategy (assuming there is one with the 5 answers) or it isn’t.  Each action and every resource invested creates either positive or negative leverage and has a corresponding impact on growth and profits.

The choice is to apply this formula in an intentional way which requires the organization to apply the discipline of revenue science focusing on all five variables or let the world decide how to apply the formula to the organization.

Any organization that wants help applying this formula to win The Revenue Game should join those of us thinking like a CRO to implement the formula as part of the science of “Revenue Generation.”

 

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https://www.therevenuegame.com/ceochallenge/01/revenue-generation-part3#comments

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