Why Revenue Growth Strategies Fail — and how not to

Highlights

  • Several studies show that nearly half of revenue growth strategies fail to achieve their goal.
  • Risk management improves the likelihood of achieving the company growth strategy.
  • Risk management is the process of identifying, measuring, and prioritizing risks; implementing strategies to manage them; and creating plans to prevent, mitigate or respond to high likelihood or high impact risks which threaten the company strategy.
Johnny Grow Revenue Growth Consulting

A revenue growth strategy defines a calculated approach to achieve a financial objective. Most often that means a defined path to grow revenue or market share at the least cost and in the shortest time.

The best revenue growth strategies capitalize on core competencies, design competitive advantages that create differentiation, demonstrate how the company will win customers, position the brand relative to competitors and make the investment needed to achieve the financial goal.

However, designing and implementing a successful growth strategy is easier said than done. PwC's Strategy group did some research and found that more than half of 4,400 participants said they didn't have the right company strategy. Another survey of more than 500 senior executives found that nine out of 10 participants knew their company growth strategy was missing major market opportunities.

With so many business strategies falling short something is needed to do better.

Over three decades of experience have taught us that proactive risk management is that something that reduces revenue growth strategy failures. Risk management is the process of identifying, measuring, and prioritizing risks. It then implements strategies to manage identified risks and creates plans to prevent, mitigate or respond to high likelihood or high impact risks that threaten the strategic objective.

Risk management and analysis preempts or avoids the causes of failed revenue growth strategies.

Risk Management Process

Revenue Growth Strategy Risks

A revenue strategy can surface many avenues to company growth. For example, you can expand your customer base, penetrate new markets or launch an innovate product. But for every growth opportunity there are a multitude of impediments any one of which can torpedo the goal.

While anybody can dissect a failure in retrospect the best business leaders do this before and during their journey. A risk management process aids this introspection. It identifies the causes of failure in advance and creates mitigation plans for those causes with a high likelihood or impact.

Below are the top causes of failed business growth strategies.

More of the same

Many companies seek significant growth but achieve incremental results. The problem is their goals and actions do not align. If business as usual is working for you then keep doing it. However, if it's not then you need change. Change starts by doing things differently.

The easiest revenue growth strategy is to do pretty much the same thing as last year but do it better. But that's not a growth strategy. That's wishful thinking. A business as usual strategy will yield more of the same. If you didn't achieve your growth goals last year, you probably won't this year.

Breaking the status quo can be the most difficult for companies with a history of success. If revenue growth continues unabated keep doing what you are doing. However, if you are incurring more empowered customers, product commoditization, price pressure, changing market conditions or new competitors, a change in the revenue strategy is needed. For companies with a history of success, the biggest risk to growth is doing the things you did before in a market that is different.

Strategies that are not strategic

Is your company growth strategy really strategic? Many are not.

Revenue strategies must thoroughly answer essential questions such as where does growth come from? How will we win customers? And how will we achieve our financial goal?

No CEO would drive to a destination they've never been without a map. Yet pursuing a new and presumably never before achieved revenue target without a growth strategy is like driving to a destination without having the address.

Growth plans are also not strategic when they substitute tactics for strategies. The strategy sets the revenue target and commits the necessary resources. It eliminates alternatives and prescribes a specific direction. Strategies are created from analysis, have longer durations, are difficult to implement and hard to reverse.

Tactics move the company toward the goal. They are created from actions and achieved in shorter timeframes. They are relatively straightforward to implement and can be more easily changed.

Strategy and Tactics

Strategy is all about planning and positioning. Tactics are all about relentless execution. The revenue strategy defines WHAT to do. Tactics defines HOW to do it.

Strategy is a precursor to everything that comes after. Great execution won't get you very far if your strategy is wrong. Without a clear and definitive strategy, it’s likely your execution will be poorly directed. That means even good execution may not move the company in the right direction.

Forgot the customer

Pretty much all companies say they are customer centric. Who wants to admit otherwise? However, for many that is more of a self-platitude than reality. Revenue strategies that do not include customer objectives are a clear signal that the company is not customer centric.

When companies are not customer centric, they define their revenue strategy from an inside-out perspective. That is solely or mostly from the company's perspective. They then pursue objectives that serve only the company's interests.

Customer-centric companies instead take an outside-in perspective. They make the effort to understand customer problems, what's most important to customers, and what it takes to win customers. They then craft a revenue strategy that includes these objectives.

I can't overemphasize the need to really understand the customers top goals (by customer segment) and avoid the freshman mistake of repositioning the company goals as though they are benefits to customers.

Product led strategy

Build it and they will come. Sometimes, but usually not.

Revenue strategies fail when they naively believe that the company can just build a better product and the world will come.

Sure, good products are essential to success. But the best product, in and of itself, rarely wins.

History shows a littered trail of great product companies that were surpassed by competitors with better positioning, messaging, stories, customer intimacy or other factors that contributed to an overarching business strategy.

The company needs people to build good products, but it also needs people that build business outcomes. The two may be related but they are distinctly different and almost always created by different people.

A budget disguised as a strategy

Many small and midsize businesses treat business strategy design as an annual budgeting exercise.

They craft a financial plan and budget at the beginning of the year. They later highlight variance analysis in the monthly financial statements.

Budgets are essential to support strategic priorities, maintain internal controls and reduce non-essential spending. However, by themselves they are insufficient. They are only numbers and don't show how to differentiate, how to stand out and how to win customers.

A secondary problem is financial planning built on unsupported estimates and assumptions. Inaccurate data creates inaccurate forecasts. A lack of data creates poor revenue plans that are too high-level and overly broad.

A better approach is to create financial plans and budgets based on company performance history, market research and industry benchmarks. Only with market research will you uncover revenue opportunities that otherwise go unnoticed. Only with industry benchmarks will you recognize where you are competitively strong and weak.

Poor focus

Time and resources are top constraints to company growth. Disciplined allocation of budget, people and time are essential to accomplish goals in the shortest time or at all. The risk of success skyrockets when finite resources are casually allocated or not directly linked to the most important objectives.

The manta here is to not just identify what you are going to focus on, but clearly decide what you are not going to do. Business strategy involves a set of choices and decisions of what the company will and will not do. For many companies, deciding what not to do is much more difficult.

Business focus

Inactive governance

Governance is the difference between shepherding actions toward a prescribed goal or waiting to be surprised when performance falls short.

Governance brings clarity to roles, cadence, communications and responsibilities. It makes sure everyone knows their responsibilities and expectations are clear. Governance reporting is built on the most essential metrics, is frequently measured and includes feedback loops.

Governance Hierarchy

Good governance brings clear eyed rationalization when confronted with competing priorities. It helps us separate the urgent from the important and not confuse activity with progress.

It gives stakeholders the information they need to do their job. They want truth and they want it early so they can inject corrective actions at the earliest opportunity. Most of all, they want to avoid surprises.

Revenue growth strategies incur disproportionately higher failure rates without active governance.

See the risk management framework to preempt and avoid the top causes of revenue growth strategy failure.

Click to Tweet