The number one mistake we see leadership teams make when doing their annual plan, besides the concept of an annual plan, is that they put their revenue future ONLY in the hands of their chief revenue officer (CRO). Here’s how it might go down (with embellishments, of course).
The leadership team turns to the sales department with a single question: "How much can you get me next year?" The sales team responds with the same number as the current year, anticipating the pushback. The CFO dismisses this answer, claiming that it won't suffice, accusing the sales team of sandbagging their numbers. Sales then provides an "official" arbitrary number based on the deals they currently have in their pipeline. The CFO remains unconvinced but has no other alternative. It's time to turn to someone else, and that someone is the CMO. Together, they agree on a growth number, any number, without much thought. This decision leads to the CRO giving the sales teams an unattainable goal of the "agreed" number +10%, just to guarantee they hit the baseline number. The CFO is satisfied with this arrangement because, if the number is hit, he doesn't have to pay out any commission, and he knows the team will work hard. They believe they are aligned and in agreement, but they are fundamentally flawed.
This is called "Riding the Demand Curve." Riding the demand curve is a perilous strategy that relies on hope and delusion. To steer clear of this flawed approach, the CEO must align the team to drive growth revenues based on insightful market dynamics, securing more than your fair share of the pie. If your growth rate is 10% and the market is expanding at 15%, you are losing your market share. Therefore, to achieve genuine 10% growth, your organization must plan to grow by at least 25%. This could involve rethinking your value proposition, go-to-market strategy, technology, and talent deployment, and not just relying on sales.
To truly succeed, your organization must understand how to shift the demand curve and claim more than its fair share of the market. This requires a systematic approach that incorporates market-driven insights and micro-adjustments to your go-to-market execution. By embedding these concepts into your organizational market approach, you can create a sustainable strategy for growth, even in the most challenging markets.
At the heart of this approach is a market-driven strategy, and we believe that this should be the responsibility of the marketing function. We specialize in helping organizations build the necessary skills to create a market-driven strategy that delivers results.
Building and Effective Plan
Planning for growth is an essential task for any organization, and it's crucial to build a plan that's not just based on hope and arbitrary numbers. The number one mistake that leadership teams make when doing their annual plan is putting their revenue future solely in the hands of their chief revenue officer (CRO). This approach is flawed because it ignores the market dynamics, insights, and opportunities that other departments, such as marketing, can bring to the table. To drive growth revenues and get more than your company's fair share of the market, you need to build a plan based on insights and market dynamics, not just hope.
To create a growth plan that works, start by gaining insights into your market, your competition, and your customers. Use data analytics and market research to understand what drives customer behavior, what your competition is doing, and where the opportunities lie. Once you have a clear picture of the market dynamics, you can start to develop a strategy that leverages your strengths and addresses your weaknesses.
Your growth strategy should encompass more than just sales. It may require rethinking your value proposition, your go-to-market strategy, your technology, and the way you deploy your talent. For example, you might need to invest in new technology to improve your customer experience, or you might need to hire new talent to support your new go-to-market strategy. Whatever changes you make, make sure they're aligned with your overall growth plan.
Building your firm's market-driven strategy should reside within the marketing function. The marketing department is uniquely positioned to understand the market dynamics, the customer needs, and the competitive landscape. With their insights, they can help drive growth by creating a compelling value proposition, identifying the right channels to reach your target audience, and developing a messaging strategy that resonates with your customers.
Here are some additional resources to help you build a growth plan that works:
"The Lean Startup" by Eric Ries: This book provides a framework for building a successful startup by creating a culture of innovation, experimentation, and learning.
"The Innovator's Dilemma" by Clayton Christensen: This book explains why successful companies often fail when faced with disruptive technologies and how to avoid this fate.
"Blue Ocean Strategy" by W. Chan Kim and Renée Mauborgne: This book provides a framework for creating uncontested market space and making the competition irrelevant.
"The 7 Habits of Highly Effective People" by Stephen Covey: This book provides a framework for personal and professional effectiveness, including principles for goal setting, time management, and decision making.
"Business Model Generation" by Alexander Osterwalder and Yves Pigneur: This book provides a framework for creating and testing new business models that can help drive growth and innovation.
In conclusion, to build a growth plan that works, you need to move away from a strategy of hope and build a plan based on insights and market dynamics. This requires more than just sales; it requires a comprehensive approach that leverages your strengths and addresses your weaknesses. By working closely with your marketing department and using the resources available to you, you can create a growth plan that drives real results.
Discover how Mahdlo team of Executive Advisors can help you expand your business and take the risk out of growth plans. Contact us today to learn more and read our blog for valuable insights on business growth strategies.