contributed by Gary A. Williams, Founder & CEO, wRATINGS Corp., email@example.com
Whether you work on Wall Street, Main Street or Madison Avenue, everyone is talking about how companies must find ways to grow their revenue in 2010.
The "easy part" of cutting costs and right-sizing your business for the new level of demand is done -- or you probably didn't survive the Great Recession. For many, profit margins were painfully maintained and lowered earnings expectations were somehow met. So now that we sidestepped a financial catastrophe and global market meltdown, the focus turns back on the long-term health of your business and how to revitalize its growth.
So we just open up the old playbook and start executing again, right? Not so fast. Consumers are much better buyers now. Most leave their homes a lot less often, partly due to higher unemployment but mostly because they simply don't have to anymore. They often shop on the web before they get to the store, some to avoid sales tactics and others just to make sure they are getting the best price. When they do find a new product in-store, they can use their smart phones for on-the-spot price and availability comparisons.
Fortunately, business hasn't been sitting still either. We may have lost a decade worth of stock market value, but the innovators in marketing and technology didn't miss a single of those 3,650 or so days. We have many more ways to accelerate and improve how we do business with suppliers, employees and customers. Some of these include cloud computing, collaboration networks, price analysis software and social networks. Did you invest in any of these to help you cut costs? If you did, you're a few steps ahead of your rivals and may very well be ready to turn them into revenue growth weapons.
Even with all the change we've seen since 2000, the good news is that the way companies grow revenues and generate profit remains a much welcomed constant. And according to our research, it's been the same for centuries. Simply put, the key is to create a repeatable business framework that keeps customers vested in buying from you. Re-read that sentence and be sure to pull out the four most critical words: repeatable, framework, customers and vested. You may not have a business a few years from now without all four. If you can wrapper them around a common goal and execute on it, revenue growth is guaranteed.
Our extensive research shows that only nine ways exist to marry your business framework with customer vesting. But how you build competitive strength within each area though is virtually unlimited. We divide them into groups of three based on their business area:
So where do you start? Decades ago, the choice was easy: design dominance. Think of a great product or service, build it and you're instantly differentiated. The problem is that differentiation is no longer enough. Chrysler and GM were differentiated all right, but they didn't make money. And in 2010, the time to duplicate your product or service is shrinking considerably. Rivals are able to copy key features and elements quickly, especially in industries such as apparel, electronics and software.
Having the best product or service is no longer enough. To start growing revenue again, companies need to think about how they are going to compete in at least one other area beyond design dominance and brand perception. This is where past investments in technology, training and systems can be used to grow your top line rather than just help cut costs.
One example is to expand the traditional supply chain tools into non-traditional areas, and even into the delivery chain. How quickly can you move today's purchases into a centralized database to coordinate with future ordering requirements? This could create an Economies of Skill advantage, where you become the "FedEx" of your industry. How fast can you move product from design to shipment? This could create a Cost Containment advantage, where you become the "Dell" of your industry. How much customer behavior data can be merged with real purchasing data? This could create a Switching Lock-In advantage, where you become the "Apple" of your industry. If you collaborate with your suppliers, will this streamline your ability to deliver? This could create a Network Effect advantage, where you become the "eBay" of your industry.
None of these ideas are extraordinary on their own. Yet, all of these require that you pick one and become the best at it. Don't let anyone else be better, faster or smarter at it than your company. And then move onto the next area. The steps are simple take, but can be painfully difficult when making the decisions.
Here are the five steps to revenue growth:
1) Assess where your strengths are today. Which of the nine areas are you best, or could you be best in a relatively short time? Revenue growth is all about focus. Find the strength(s) or build one quickly.
2) Determine where your future strengths will be. To be successful, you need to own one or two of the nine areas. To be hyper-successful, you need to own four or five in your industry. Go where your rivals can't or won't go. Be creative. Be innovative. Have fun.
3) Match your spending initiatives to building out strengths. Ideally, the program or technology adds to more than one area of strength. If you don't have at least one initiative to build a strength, consider creating one to accelerate its growth.
4) Reduce, amend or eliminate any spending initiatives that don't contribute to your key strength(s). Be relentless.
5) Get marketing, technology and operations aligned on the right set of strengths.
This last step appears the simplest to understand, yet ends up being one of the most difficult to execute. One time a famous book author went on "Larry King Live," and at the end of the show, promised everyone that called his company's 800 number or went to its website would receive a free DVD that he just published. No doubt this would have been a great way to create pull-through demand for a product that was going to be sold on his website. The only issue was that marketing forgot to tell the web team and operations about the offer. So imagine the receptionist's joy of listening to 2,000+ voice mails the next morning! Worse yet, imagine the productivity drain and the increased time the customer had to wait simply because the marketing team didn't tell tech and operations about their plans in advance.
Alignment around the right set of competitive strengths within a company is critical, especially in today's world of transparency. When you consider which companies have been able to create a durable growth engine, you see that this alignment extends well past the employees into their customer's thinking and even their supplier's way of doing business. We may not always like paying the slight premium for FedEx, but the peace of mind knowing a package will arrive guaranteed makes the price worth it.
A few months ago, a video about "the fun theory" became a Youtube sensation, reaching more than 10 million views. A subway station in Stockholm wanted to find a way to get people to take the stairs rather than the escalator. So they turned the stairway into piano keys that played real musical notes. According to one source, 66 percent more people took the stairs. If you asked consumers which company is more likely to invent products like this, would more say Apple, Microsoft, Oracle or SAP?
The point isn't so much which company, but that most of us could definitively make that choice because we know "why" customers buy from them. The business framework is transparent and the customers are vested. Can we say the same for your company? If the answer is "yes," then your 2010 revenue growth imperative is well underway.
About Gary Williams
For more than 20 years, Gary Williams
has served as an advisor to investors, CEOs and senior executives around the world.
Through his patented research system, Gary and his team examine the competitive strength of market-leading companies on a daily basis. His data serves as a leading indicator to Wall Street on which companies will out-perform their rivals and if they will meet or miss their earnings expectations. Using insights from his extensive database of successful strategies, he also advises today's business leaders on how to build durable advantages over competitors.
In May 2002, Gary's groundbreaking research was published as the lead article in Harvard Business Review, and his first book, "The 5 Paths to Persuasion," (Warner Business Books 2004) has been translated into seven languages and was voted book of the month in Fast Company magazine.
Gary's work has been cited around the world in more than 800 publications, including the Wall Street Journal, Barron's, BusinessWeek, New York Times, Chief Executive, Investors Business Daily, CIO, CNBC, and the London Financial Times.