This is the second article in a blog series that discusses how businesses can leverage technology across the entire value chain. To read part one, click here.
Between October 2018 and October 2019, people who identified as a “director of revenue operations” on LinkedIn increased by 127%. Even more impressive was the pace of growth for this particular role: It exceeded all other revenue-engine titles, such as sales, marketing, and customer success, by 200–300% during the same time period.
Why the sudden increase in popularity and headcount? Revenue operations (rev ops) is an operating model that combines sales operations, marketing operations, and customer success operations into a single group or matrixed umbrella. Put simply, managing this operating model effectively is critical for greater forecast accuracy, better revenue performance, and overall growth.
In the first part of this blog series, we discussed a simple three-prong framework that can be implemented for value chain planning. In this installment, we’re going to take a deeper dive into the first strategic imperative—aligning the revenue engine—to explore the rise of rev ops, the role of technology, and how to better align this function across your own organization.
The remarkable rise of revenue operations
From an organizational standpoint, the director of rev ops is generally accountable to a chief revenue officer (CRO) or similar role. The responsibilities of this role include driving velocity and improving operational efficiency—from lead to opportunity, contract, order, cross-sell/up-sell, revenue recognition, and ultimately, renewal events.
Key areas for improvement are usually found throughout planning, process, technology, data, and measurement. This is primarily because sales, marketing, and customer success are often misaligned, which can cause awkward commercial hand-offs among the different groups. Leaders also tend to lack visibility into a cross-organizational view of performance.
One major catalyst for the rise of rev ops is a desire for companies to ensure that their buyers enjoy an exceptional customer experience across an increasingly individualized buyer journey. This desire has driven unprecedented investments in technologies that transcend antiquated firewalls and poor integrations between point solutions (ERP, marketing automation platform, CRM, CPQ, ICM) and customer-success applications.
Another catalyst is companies’ mass migration from perpetual to subscription revenue models. With subscription models, companies are able to measure, monitor, and respond to every customer interaction, as well as identify and solve problems in real time. The deployment of transcended technologies and processes are what many are calling “digital transformation”—and rev ops is leading it.
Finally, the greatest compelling driver for the rise of rev ops is the economic benefit that companies realize when they align the revenue engine’s three components. A recent SiriusDecisions study found that publicly traded companies aligning their revenue engine (with the presence of a CRO and rev ops leader) grow 2.7 times faster, with stock performances 1.7 times higher, than those that don’t.
Where to start when you want to align
If your company wants to better align finance, sales, marketing, and customer success, an excellent place to start is with an activity that traditionally takes place at the beginning of every fiscal year: planning.
More than anything, collaborative planning across these different functions continues to remain key. Shockingly, another SiriusDecisions study reveals that sales and marketing departments plan with one another only 46% of the time.
What are some of the ways your business can help rectify this problem? Here are five considerations to help tighten up collaboration across the revenue engine:
- CEO commitment. CEOs must create a collaborative culture in which leaders are expected to integrate organizational plans that directly support organizational goals and strategies.
- Market analysis and account segmentation. Finance, marketing, sales, and customer success must collaborate and source the same information to produce total addressable market (TAM) analyses. Use TAM to calculate service obtainable market (SOM), which can then be used to build a detailed list of accounts used to determine ideal target audiences, the final go-to-market strategy, account tiers, sales targets, revenue engine investments, and final quotas.
- When finance, sales, marketing, customer success, product, and supply chain teams work together in this completing this exercise, they all understand how goals were set and how to collaborate in achieving them.
- Go-to-market planning. Revenue engine leaders must coordinate on the collective deployment of resources and the type of go-to-market structure that will be most effective (i.e., vertical, account, product, geography, hybrid). Use a consistent nomenclature (i.e., theater, area, region and territory, AE, AM, BDR, SDR) because these terms are the basis for reporting and cross-organizational communication.
- Goal alignment. Revenue engine leaders should have a bottoms-up plan available for the coming fiscal year from the first day of the current one. When they are aligned, it’s easy to maintain. Calculate current end-of-year results by adding the most recent forecast to year-to-date actuals and then apply growth assumptions. This helps educate teams and prepare them for when they receive the top-down plan.
- Creating the final plan is a reconciliation exercise, with some negotiation, in which executives agree and understand each organization’s final headcount investment decisions, as well as how targets cascade down to individual accounts, territories, and salespeople. It can be surprising how many people outside of sales don’t know basic targets like booking, churn, and revenue. These same individuals should also know the current forecast and the actions they can take to help improve it.
- Operating rhythm. Reporting is a large part of a revenue engine operating rhythm. Determine who will need to see what information and when. Think of this as establishing reporting “audiences” that include the board of directors, CEO, CFO, revenue engine leaders, their next level of leadership, and salespeople. Make sure they are all seeing the single source of the truth. Nothing derails a meeting quicker than people arguing about the validity of numbers.
- For even more information, tune into our recent on-demand webinar, “Revenue operations: Aligning planning with execution to drive profitable growth.”
Creating cohesion among revenue engine groups is the ultimate goal. It’s incumbent upon the operations resources that support finance, sales, marketing, and customer success to work together to iron out inefficiencies, whether as a combined rev ops organization or as separate groups, with a renewed commitment to achieving operational excellence.
No matter where you may be in your journey, there’s always room to improve—fortunately, you don’t have tackle all of these considerations at once. Small steps can lead to big outcomes, so select one or two of these considerations as your starting point. If you can focus your efforts on getting these different teams planning together, you can make tremendous improvements in how they execute together.
Attending this year’s Dreamforce conference? Join MuleSoft, Akamai Technologies, and Anaplan on Wednesday, November 20, 2019 for our insightful session on best practices to maximize revenue and optimize demand. Click here to add this session to your Dreamforce agenda.