Sunday, May 30, 2021

Companies Take a More Holistic Path to Managing Revenue Growth

Changes in the business environment have led many B2B companies to adopt new approaches for managing their revenue generating activities. While the specific approaches vary, they all arise from the recognition that consistent organic revenue growth results from a combination of related activities. Therefore, it's important to treat such activities as components of a larger revenue generation process that must be managed holistically.

The need for a better approach to managing revenue generation and growth has been driven by the convergence of several factors, including:

  • The growing power and independence of business buyers enabled by an abundance of easily-accessible information
  • The need to provide outstanding experiences at every touchpoint across the entire customer lifecycle
  • The growing use of "as-a service" and other types of subscription-based (or subscription-like) business models
Meanwhile, the leaders of most B2B companies are under persistent pressures to provide organic revenue growth that is consistent, predictable and sustainable. To meet this challenge, many B2B companies have changed how they manage the business activities and processes that impact revenue generation.
The Rise of the Chief Revenue Officer
Some companies have responded to the growth management challenge by creating a C-level position that is usually called the chief revenue officer. The specific duties of the chief revenue officer - and the scope of his or her authority - vary across companies, but the CRO is usually tasked with managing most or all of the company's revenue generating functions. This will often include marketing, inside sales/business development, direct outside sales, channel sales and customer success/customer service.
Most of the early adopters of the CRO role were startup or early-stage SaaS companies. I have not seen any reliable estimates of how many or what kinds of companies now have a CRO. However, a LinkedIn search yesterday using the term "chief revenue officer" identified over 250,000 LinkedIn members with that job title.
The Emerging Revenue Operations Function
Some companies have sought to address the growth and revenue management challenge by creating a revenue operations (a/k/a RevOps) function in their organization. The RevOps concept is relatively new, and it's still evolving. So, as we'll see, companies have implemented RevOps in a variety of ways.
In a 2019 study report, SiriusDecisions (now part of Forrester) defined revenue operations as, ". . . a combination of sales operations, marketing operations and customer success operations teams that work together according to a set of defined operating principles to maximize revenue and performance." (Source:  Align to Win:  The Rise of Revenue Operations)
Research has shown that the use of RevOps functions is growing. In a 2019 survey of 2,462 B2B sales and marketing professionals by LeanData and Sales Hacker, 31% of the respondents said their company had a revenue operations group, up from 20% in the 2018 edition of the survey. Moreover, 27% of the respondents in the 2019 survey said they were actively building a RevOps function. That was up from 15% in the 2018 survey.
Both the LeanData/Sales Hacker study and the SiriusDecisions study identified three major models of revenue operations.
  • Virtual Alignment - Companies using this model do not have a formal RevOps structure or a dedicated RevOps team. In this model, individuals from each operations team (marketing, sales, customer success) agree to work with each other on a cooperative basis. SiriusDecisions called this model a "coalition of the willing."
  • Hybrid - This is a "somewhat centralized" model of RevOps. Companies using this model have at least two operations functions that report to a RevOps leader, while their other operations functions still report to their departmental leader.
  • Centralized - This is the most formal structure for a RevOps function. Companies using this model have s designated revenue operations leader in place, and some also have a dedicated RevOps team.
The following table shows the percentages of participants in the LeadData/Sales Hacker and SiriusDecisions studies using each model of revenue operations.

As the table shows, the most popular RevOps model in 2019 was virtual alignment, which reflects the relative newness of the RevOps concept. This also suggests that company leaders want to prove the value of RevOps before they make major changes in their organizational structure. As companies gain experience with RevOps, it seems likely that the use of a more formal and centralized RevOps model will grow.
Is More Needed?
Companies are hiring chief revenue officers and implementing revenue operations processes because they need to take a more holistic approach to managing revenue growth. These are steps in the right direction, but company leaders may need to do more to achieve their customer experience and revenue growth goals. I'll discuss what else may be needed in a future post.

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