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Continued...
Increasing revenues
through singles and doubles build a growth mind-set
throughout the business, so that when the opportunity
for a home run does come along, you'll be better
prepared to take advantage of it.
For example, Dell's
efforts, beginning in 1993, to improve inventory turns
to use less cash and reduce price and product
obsolescence began as a single. The company's initial
goal was to increase inventory turns, which were
averaging six a year, to ten. Over the last ten years,
Dell has continuously improved the totality of its
supply chain so that its inventory turns over one
hundred times a year, or once less than every four days.
The result is higher revenue growth and what has become
a lethal competitive weapon against all PC
manufacturers. In addition, this supply chain enables
Dell to accelerate revenue growth by entering into new
market opportunities like printers, servers, and
storage.
3. Seek good growth
and avoid bad growth. A framework for distinguishing
good from bad growth is a crucial element in generating
revenue growth. Good growth not only increases revenues
but improves profits, is sustainable over time, and does
not use unacceptable levels of capital. It is also
primarily organic (internally generated) and based on
differentiated products and services that fill new or
unmet needs, creating value for customers.
The ability to generate
internal growth separates leaders who build their
businesses on a solid foundation of long-term profitable
growth from those who, through acquisitions and
financial engineering, increase revenues like crazy but
who create that growth on shaky footings that ultimately
crumble. Many acquisitions provide a one-shot
improvement, as duplicative costs are removed from the
combined companies. But few, if any, demonstrate any
significant improvement in the rate of growth of
revenues.
4. Dispel the myths
that inhibit both people and organizations from growing.
An important part of any leader's role is to
realistically confront excuses such as: "We are in
a no-growth industry, and no one is growing";
"Customers are buying only on price"; or
"The distributors are the ones in direct contact
with retailers, and there's not much I can do."
Every leader needs a growth agenda and the ability to
communicate an urgency about the need to increase
revenues and build the business so that action-oriented
people within the organization find out what needs to be
done today.
5. Turn the idea of
productivity on its head by increasing revenue
productivity. The old saw says "we have to do
more with less." The problem, though, is that the
focus is usually on the "less" and the
"more" rarely happens. Revenue productivity is
a tool for getting that elusive "more" by
actively and creatively searching for ideas for revenue
growth without using a disproportionate amount of
resources. It shows how to invest your current level of
resources in a way that leads to increased sales by
analyzing everything a business does, from the seemingly
mundane to the vitally important.
6. Develop and
implement a growth budget. All companies have a
budget. It is, however, astonishing how little detail
about revenue and sources of revenue growth you can find
there. Almost all of the lines in the budget are
cost-related. Few, if any, identify resources explicitly
earmarked for growth. The growth budget provides a
foundation that will allow a company to increase
revenues instead of just talking about it. It includes
all critical actions over the short, medium, and long
terms that require resources to achieve revenue growth
goals. And there is follow-through that includes rewards
for success and penalties for poor performance.
7. Beef up upstream
marketing. One of the key missing links for
generating revenue growth at most companies is upstream
marketing. What most people visualize as marketing
involves advertising, promotion, brand-building, and
communicating with customers through public relations,
trade shows, and in store displays. Those activities are
obviously of great importance but primarily
"downstream" in nature -- that is, they
enhance the acceptance of a product or service that
already exists. Upstream marketing, on the other hand,
takes place at a much earlier stage by developing a
clear market segmentation map and then identifying and
precisely defining which customer segments to focus on.
It analyzes how the end-user uses the product or service
and what competitive advantage will be required to win
the customer and at what price points.
8. Understand how to
do effective cross-selling (or value/solutions selling).
Cross-selling can be a significant source of revenue
growth, but most companies approach it from exactly the
wrong perspective. They start by saying, "What else
can we sell to our existing customer base?"
However, instead of looking inside-out your
organization, you need to look outside-in. Successful
cross-selling starts by selecting a segment of customers
and then working backward to define precisely the mix of
products and services they need and creatively shaping a
value proposition unique to them. Effective
cross-selling ensures the proposition is presented to
the right decision makers in the language of the
customer and spells out the financial, physical, and
post-purchase benefits of the offering.
9. Create a social
engine to accelerate revenue growth. Every
organization is a social system, the center of which is
a way of thinking and acting that sets both day-to-day
actions and the long-term agenda. When an organization
has an explicit growth agenda understood by everyone,
growth becomes a central focus -- a social engine --
during formal meetings as well as informal discussions.
The social engine is then fueled by growth ideas as one
growth initiative builds on another. People at all
levels then see growth as everyone's job. The social
engine and its associated tools provide the mechanism
for making revenue growth a reality by developing a
laser-sharp focus, aligning individual silo priorities
and making the right tradeoffs.
10. Operationalize
innovation by converting ideas into revenue growth.
Innovation is not the private property of lone geniuses
working apart from the mainstream of the business. In
any company of reasonable size, innovation is a social
process that requires collaboration and communication
for idea generation, selecting those ideas for revenue
growth that are to be funded, and shaping those ideas
into product prototypes and launching them into the
marketplace.
The tools that have been
outlined are the foundation of your program for future
revenue growth. But remember what we said earlier
Revenue growth and productivity improvement are not
conflicting goals. To keep the revenue growth engine
running, you must have a disciplined day-in and day-out
program of cost productivity improvement. Not only is it
imperative for competitive advantage, it provides the
findings for future growth.
Ram Charan is
the coauthor of Execution: The Discipline of Getting
Things Done, the international bestseller that has
changed the way managers run their companies. He is a
highly sought-after advisor to CEOs and senior
executives in companies ranging from start-ups to the
Fortune 500. Dr. Charan earned his doctorate at Harvard
Business School and has been on the faculty of that
school as well as the Kellogg School of Management at
Northwestern University. His articles have been
published in Fortune magazine and Harvard
Business Review, and his other books include What
the CEO Wants You to Know, Boards At Work, and The
Leadership Pipeline.
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The
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