Picture this – your organisation has just delivered a strong EBITDA growth, and there are high fives all around. But, as a business head, you reflect on your customer interactions and commercial reviews, and feel that there probably was more growth to be captured.
So how do you know if your gut is right and more importantly, how do you convince your top team to stretch even further against the backdrop of a solid growth already delivered?
Over the years I have had the privilege of working with the business heads of several Fortune 250 and Private Equity owned companies and they all have faced this question at some point. While each situation was unique, in summary, a business head could probe three themes as a first step to uncover organic growth potential.
ARE WE GROWING IN EACH OF OUR MICRO-MARKETS?
Organisations typically have a fair understanding of their market size, share and growth at an aggregate level. But the information quality rapidly deteriorates as you drill down to your specific solutions / applications at a country or sub-region level i.e. a micro-market. The task is even more difficult if your market is niche and not covered exhaustively by analysts.
The best organisations have a great insight into each of their key micro-markets. It is a capability that they have systematically developed over time – sometimes building insight for one micro-market at a time as done by a global OEM and a professional services company.
You should explicitly task your commercial organisation to get on this micro-market journey too. Until then, use the data you have to build the best possible history of growth and share for your products / offers at a sub-region level i.e. in each micro-market.
If you spot key micro-markets where you have a poor growth or share evolution, then you already have your first potential areas to investigate further growth.
IS THERE A BIG VARIATION IN SALES/FTE ACROSS OUR TEAMS?
Organisations can spend lot of time and $ to get an industry Sales/FTE benchmark. However, it cannot reliably provide the precision needed to assess performance or allocate territories. If your sales organisation is big enough, always build an internal Sales/FTE benchmark
A global hi-tech company used statistical clustering to identify product-country units that would require similar level of sales effort. By doing so it discovered that Australia was similar to the UK and France, while Portugal was similar to Turkey. It then used cluster level Sales/FTE to set performance targets and size teams.
Building internal benchmark does not always require sophisticated analytics. A global speciality chemicals company calculated Sales/FTE for each product group-region, then took the best value and adjusted it regionally for relevant market dynamics and operating model. The sales improvement potential in some product group-regions became too obvious to miss.
Like-for-like sales units with biggest gap to internal Sales/FTE benchmark give you the second area to investigate further growth potential.
IS OUR COMMERCIAL APPROACH DIFFERENTIATED AND RIGOROUS?
Assessing and redesigning the commercial operating model requires time, but three questions can quickly highlight whether more growth could be unlocked by improving quality of your GTM approach and its execution
Do our GTM segments enable us to identify and target high potential customers differently vs. others?
Many organisations use $ sales as a primary axis to segment customers, and end up with three segments – key accounts that receive a lot of focus, small accounts managed by distributors, and then a long list of mid-size accounts that receive varying levels of sales attention and a fairly undifferentiated selling approach. Best practice GTM segmentation takes into account customer’s characteristics (e.g., needs, wallet size), and your strategic objectives in addition to the sales value of the customers to construct distinct segments. Each segment receives fit for purpose sales, marketing and technical focus. A global bio-technology company used this approach to uncover and systematically target customers where it could grow the most – not just those where it was already selling the most.
How alive is our Account Planning?
Account planning is often seen as an administrative burden by the frontline, and outside of the non-key accounts, its quality is poor. On the other hand, account plans of best performing organisations are live documents that help the commercial teams to make strategic decisions as well as to plan tactical actions.
Pull up the account plan for your high potential customers. Does it offer enough insight into customer’s needs and wallet size? Specify who needs to be influenced? Have milestones? … If you are underwhelmed with what you see, there is clearly an opportunity to capture growth by making the account plan the basis for tactical and strategic account management.
Is our pipeline well managed?
A weak pipeline that has gone unnoticed is the first sign of poor pipeline management. A poor opportunity mix in terms of volume by stage / segment / size is another sign of poor pipeline management. The pipeline of an OEM added up to the budget, but a closer analysis revealed that a significant proportion of opportunities had an unrealistic close date and were very unlikely to materialise in the budget year. Does your pipeline add up to the budget? What % of it has an unrealistic ‘expected close date’? What is the pipeline mix?
While assessing quality of pipeline management requires rigorous investigation of people, process and systems, the above questions can be a litmus test to highlight growth potential.
Exploring the themes of Micro-markets, Sales/FTE and commercial approach as described above can help you to objectively confirm the potential for organic growth at a granular level. This can create a strong to case to rally your organisation to improve commercial effectiveness – even though strong growth was already delivered.