High Growth Strategy

High Growth Strategy Overview

In a previous article entitled “The CEO’s Decision Gap“, we showed that there is a significant gap between what CEOs thinks is going on, and what may really be going on. We showed how this created a phenomenon we call the CEO’s Decision Gap—the gap of missing and misleading information preventing CEOs from creating a high growth strategy that lead to sustainable and profitable growth.

In this article we will attempt to provide a blue print for how CEO’s can grow their companies by 100% in 24 months, and sustain high growth rates afterwards.

Step 1: Conduct a GAP Audit

This is the first step. CEOs must first understand the gap that lies between ‘A’ where they are today, and ‘B’ where they want to be in the next 3-5 years.

Without understanding both what the gaps are and the magnitude of the various areas gaps, CEO’s cannot begin to define and prioritize the roadmap (‘C’) to bridge the gaps and arrive at their destination (‘B’). For more information and analysis of what we mean, please refer to The CEO’s Decision GAP.

A SOMAmetrics GAP (Growth Accountability and Performance) Audit typically takes less than a week to complete and provides a thorough and detailed analysis of the challenges the company faces as it tries to move to the CEO’s vision for the future of the company.

Step 2: Define the Roadmap ‘C’

Many a time, CEO’s define the high growth strategy for the company and inform the senior management team, who in turn informs the rest of the company what the strategy will be.  In most cases, results fall short of what expectations are.

We believe the reason for shortcomings is that the strategy is difficult to execute because it didn’t follow a top-down bottom up approach because it didn’t take into account where the company is today (‘A’) and work with the best people in the company to define the roadmap ‘C’ of how the company will get to ‘B’, the future.

Research and experience shows that the best way is for the CEO to assemble a strategy formulation team consisting of the best minds in the company, take the team away from day to day responsibilities, and charge them with identifying the optimal market segment for growth, and define a go-to-market strategy that will enable the company to own 25-40% market share within 24 months.

This step is discussed in great detail in “Go-to-Market Strategy Formulation” article.

Step 3: Shared Responsibility for the Five Fundamentals

As we work with our clients, we see that a key reason why companies fail to achieve their growth objectives is lack of understanding of how the five fundamental metrics—revenues, market share, customer satisfaction, profitability, and innovation–work together towards sustainable high growth.

Our GAP audits consistently show that companies work under two critical misconceptions:

• Misconception #1: Many companies believe that meeting revenue objectives is the primary focus and that if they focus on that, the company will grow sustainably in the future.
• Misconception #2: An executive is responsible for only one of these metrics. For example, the VP of Sales assumes revenue is his/her only real concern. The CFO thinks profitability is his/her only real concern, and so on.

Our research and experiences show that both of the above are false and are exactly why companies find it hard to consistently meet their growth objectives.

First, the CEO and the Executive Team have to accept that all Five Fundamentals–revenues, market share, profitability, customer satisfaction, and innovation–have to become top priority, continually monitored, and managed for growth—and not just one or the other.

Secondly, every member of the Executive Team is responsible for ALL Five Fundamentals, not just one or the other. In other words, the VP of Sales is responsible for revenue, market share, profitability, customer satisfaction, and innovation. So are the VP’s of Marketing, Finance, HR, Engineering, and Customer Service. Each is responsible for all five.

Taking it one step further, CEO’s should continually drive the clear message that EVERYONE in the company is responsible for revenue, market share, profitability, customer satisfaction, and innovation.

Step 4: Define a High Growth Strategy Implementation Plan

With the Executive team and key members of each department now on the same page as to the roadmap  (Step 2) of how the company is going to grow 100% over the next 24 months, the next task is to get detailed implementation plans from each department.

Each executive will work with his or her best people to determine:

1. How that department will deliver the expected growth in the five fundamentals
2. How they will track and measure growth in the five fundamentals
3. What the evaluation and compensation plan will look like for both under and over achievement

This plan will be submitted to the CEO within 2-3 weeks of returning from the Retreat (completion of Step 2).  The CEO will review the plan and accept or reject the plan with specific comments on what needs to be improved.

Once the CEO has accepted all the plans, the CEO will have these specific plans integrated into one business plan for the company and will be distributed to all executives.

This plan will be the basis for all monthly management meetings going forward.

Step 5: Make 100% Personal commitment to Achieve Targeted Results

We often hear from many that their company has announced strategic plans, initiatives, and other big words and nothing much has changed. Employees become cynical. They come to meetings, hear announcements, and go back to their work and their lives.

The only way the CEO can overcome such cynicism, and the accompanying resistance to change, is by obtaining personal 100% unqualified commitment from each of the executives.

Each executive must make a personal pledge to do whatever he or she can do, with integrity, to deliver on the targeted outcomes of the plan. Sure, plans need to be adjusted during execution based on feedback and data. However, the goal of growing 100% within 24 months is non-negotiable. There will be no excuses for missing that target.

Each executive in turn will go back to his or her top lieutenants and obtain a similar unqualified 100% commitment to do whatever it takes, with integrity, to deliver what their department has promised to deliver.

It is only with this personal pledge that change will begin, and also that change will take hold.

Step 6: Pilot the Changes

The CEO will make a formal announcement of the launch of the plan. Each department will launch its 90 –day plan launching the new Strategic Initiative of growing 100% in 24 months. As this is likely to be a departure from the way the company used to do things, each department head will ask for volunteers to work on this initiative and complete it within 90 days.

The core of the team charged with executing the 90 day pilot will need to be composed of those that attended the two-day retreat detailed in Step 3 of defining the Roadmap. These individuals have already given their absolute commitment to seeing that the company grows 100% in 24 months. It is their talents and commitment that will be essential for kicking off the company’s high growth strategy.

Step 7: Make Necessary Adjustments

During these 90 days, each of the executives and the top lieutenants will continually monitor the unexpected challenges and successes, discuss these, and build back into their departmental plan.

A powerful tool for making necessary adjustments is the monthly Senior Management meetings.

While many companies have such a meeting, not all use this meeting for what it should be used for—identifying the most important challenges and opportunities that ALL senior managers must work on together.

During this meeting, each executive will take 3-5 minutes to share three important pieces of information to the rest of the executive team.

• The unexpected successes or positive results seen during the prior month
• The unexpected challenges or hurdles seen the prior month
• What the team intends to achieve the coming month

After each executive has reported on their key items, the CEO will then open the meeting to addressing the top challenge faced by each department. Every executive there will offer advice and help on how to address this challenge

After the round of challenges, the CEO will then open the discussion to the top unexpected success or achievement in each department and see whether these can be replicated in other areas, and what opportunity they present for further growth

These executive meetings should not last more than 2 hours and the key is to make sure that executives only report and focus on their key pieces of information they want to share with the team. The rest should be distributed and read before the meeting.

If used as recommended above, the Senior Management Meeting is a powerful feedback mechanism for achieving organization-wide changes quickly and effectively.

Step 8: Scale Out

Now that the team has the first initiative under their belt over the past ninety days, it is now time to start phasing out old systems and processes that are no longer relevant and replacing them with the new best practices, systems, and processes that have been agreed to.

Each department will then set quarterly goals for doing, measuring, adjusting, and doing more towards the stated goals of 100% growth in 24 months.

Step 9: Make Continual Improvements a Part of Your High Growth Strategy

The key to sustained high growth is making continual improvements which has the following key elements:

1. Defining the targets to be achieved
2. Determining the Key Performance Indicators (KPI) that enables the organization to see if it has achieved the targets
3. Periodically evaluating the targets to see if they are still relevant and inspiring for the organization, and therefore, periodically evaluating the KPI to make sure that they are in synch with the targets
4. Never taking anything for given or granted, but always questioning underlying assumptions to see if they are still relevant and meaningful
5. Always looking for the unexpected successes and failures to understand why and make the necessary adjustments
6. Find ways to increase organization-wide learning so as to disseminate new information and skills as quickly and as widely as possible
7. Rewarding success, but rewarding innovativeness and risk-taking even more

How SOMAmetrics Can Help with Your High Growth Strategy

SOMAmetrics works with clients in every step of creating and managing the above blueprint: from GAP audits that illuminate the gaps that need to be bridged for a company to transition from today ‘A ‘to the vision of the future ‘B’; to defining the Roadmap ‘C’; to working with each department and senior management team to work out an implementation plan; and to providing any missing skills and resources for bringing about that transformation.

We have the necessary skills, experiences, and tools to help companies efficiently create a compelling future, define an effective go-to-market strategy for this vision, and the resources to execute a high growth strategy.

Please contact us today to see how we can help you grow 100% in the next 24 months.

We often work with CEOs of companies that are experiencing significant challenges in meeting their revenue target. When we ask them why they think they are missing their revenue objectives, many say they are not sure. Others guess.

Yet, in nearly all cases, the CEOs continue to try different things to achieve their revenue targets and growth, even when they don’t fully understand the underlying issues causing the shortfalls. They continue to expend significant resources to try and make things better, partly because they think they know enough to act, and partly because they feel they must act.

This is somewhat akin to a doctor prescribing treatment before a proper diagnosis. At best it will likely produce little or no results. The wrong treatment, however, can result in adverse health consequences or even death.

Similarly, when CEOs act without properly diagnosing the problem, at best this will likely produce less than the desired results. Worse, this squanders valuable resources that may be in short supply when they finally figure out the problem.

The real issue is that there is a significant gap between what the CEO thinks is going on, and what may really be going on.  We call this phenomenon the CEO’s Decision Gap—the gap of missing and misleading information preventing CEOs from making high-quality, effective decisions that lead to sustainable and profitable growth.

This article shall attempt to explain what this gap is, why it occurs, and how CEO’s can close this decision gap, allowing companies to hit their revenue targets.

The ABC Challenge

Every CEO has an ABC challenge:

• A – clearly knowing what and where the company is at today
• B – defining a clear and compelling future for the company (3,5, 10 years from now)
• C – formulating an effective plan for moving the company from ‘A’ to ‘B’ and executing on that plan

When CEO’s struggle to transition from the present to the future (make ‘C’ work), paradoxically it is because they have been successful at delegating most of ‘A’ to their executive team so they can focus their own time and energy on ‘B’. CEO’s build a team with the intention of sharing responsibilities—the executive team will focus on today’s business and run the company day to day. The CEO will focus on defining the growth path and revenue target for the future of the company.

However, the more successful CEO’s are at delegating today’s responsibilities to their executive team, the harder ‘C’ becomes to execute. Here is why.

Let’s say that the CEO spends 75% of her time working on the future and 25% of her time dealing with day-to-day matters. And let’s assume that the executive team does the reverse—roughly 75% of each executive’s time is spent on today’s issues (‘A’), and 25% is spent working on the future (‘B’).

In theory, this seems like a logical separation of duties and responsibilities.

In reality, it creates what we call the CEO’s Decision Gap—making the wrong decisions because of missing and misleading information.

• The CEO ends up having a very clearly defined ‘B’, but sketchy awareness of ‘A’ (this is typically true even when the CEO is a founder and once had hands-on knowledge of the business)
• Senior execs end up having intimate knowledge of ‘A’, but only sketchy awareness of ‘B’

The difference in their focus, gives them different perspectives.

An example of this difference leading to misleading information is that of missed revenues. The VP of Sales might think this is because she doesn’t have enough sales leads or enough sales people. The VP of marketing may say that there aren’t enough sales leads because of lack of budget to do marketing properly. Such “diagnosis” typically results in a request for more company resources being expended. Or Sales people say they can close business if engineering would give them the features they wanted, and so on.

The CEO, however, might see this as more of a ‘B’ problem. The company is not aiming at the right market, or doesn’t have the right strengths to become a significant or leading player in the right market. The CEO also wants to build the right products and alliances that give the company a significant competitive edge. In other words, the same limited resources can either go to what the executives are demanding be spent (that is on ‘A’) or spent on building the future (‘B’).

What we see happening most often is that CEO’s try to split the difference.

Since they can’t be sure that their executives are wrong, CEOs can’t discount the requests to spend more money doing what they are already doing that is NOT producing the desired results. At the same time, they know they have to make way for the future. They try to fund both.

Our experiences show that in the competition between ‘A’ and ‘B’, today almost always wins because today is far more well known to the company as a whole than ‘B’ –which is typically only clearly understood by the CEO.

However, missed revenue targets this quarter or this year, are typically the result of missed business objectives some years past. Revenue especially has a lag time of 2-3 years since products have to be developed and marketed before they translate into revenue.  Therefore, robbing the future to feed today only makes it harder and harder to feed today– future revenue targets will also be missed due to lack of building a solid future. CEO’s instinctively understand this and try to ensure that the future is well provisioned for.

Now, executives don’t do this to be contrary to the CEO. They are simply acting on what they believe is their mandate—on what they are measured and compensated. They are trying to do to the best of their abilities what they believe the CEO expects them to be doing.

However unintentional, the CEO and the management team are not exactly on the same page—neither about today nor tomorrow—resulting in the CEO’s Decision Gap.

The Real Challenge of ABC

Imagine a racing boat with a team of world-class rowers all rowing in perfect unison. The boat moves very quickly towards the target, apparently effortlessly.

Now, imagine some of the rowers falling out of synch with the others, even just a little bit. Suddenly, the boat moves in jerky motion, slowing down, and requiring more effort to keep it going. Worse still, if the rowers sit facing different directions, then no matter how hard each rows, the boat will not move much.

This is essentially what happens in many companies as they grow. Without meaning to, executives begin running their departments almost like separate companies. All of a sudden, invisible but real walls appear within the company. Even when CEOs realizes that this is happening, our experience has been that they totally underestimate the extent to which this is occurring– the degree to which the rowers are out of synch with each other.

While CEO’s want the company to be highly innovative and rapidly introduce new products and services, the various executives are trying to secure resources in order to meet their departmental mandates. While the CEO wants to build scalability into the business by revamping and sometimes overhauling it, the executives are resistant to changing anything that might mean they lose control.

In short, things take too long to build or change. Everyone is working on too many things at the same time, none of them going anywhere anytime fast.

This is the CEO’s ABC challenge—how to make the company move towards ‘B’ when ‘A’ is consuming all available attention, time, and resources.

The Power of GAP Audits in Reaching Revenue Targets

A GAP (Growth, Accountability, and Performance) audit shows a CEO to what extent the company is rowing in synch and whether the rowers are all facing in the direction that the CEO set (‘B’).

At the core, the GAP audit tries to answer the following key questions:

1. Do all senior members clearly understand what B is? Are they fully onboard?
2. Are all non-executive managers who implement company-wide and departmental policies knowledgeable regarding B? Are they on board?
3. Are the compensation and reward plans supportive of B, or are they highly biased towards A so as to make B undesirable and a nuisance?

A quick but intense GAP audit will answer these and more. Within a week, the CEO will have high quality information enabling him/her to make effective, informed decisions, thereby avoiding wasted time and money, and avoiding employee frustration and burnout.

Why GAP Audit’s Are Effective

Internal research for the purpose of planning are always in danger of infection from three fallacies—accepting assumptions for fact; accepting myopic (departmental) view for global; and settling for the obvious rather than the subtle.

• False Assumptions— A major contributor to the perspective gap is the proliferation of unsubstantiated assumptions. New people accept the way things are without challenging them. Veterans start believing human defined policies and procedures as inviolate as natural laws. Many a time, we hear “That won’t work” or “It can’t be done” because someone tried years back and was not successful.

An independent GAP audit assumes nothing and starts by asking a series of “what”, “why”, “who”, “where”, “how” and “when” to sort fact from assumption.

• Departmental myopia creating lack of objectivity – Executives not only have stakes in the status quo (‘A’), but also have very specific and narrowly defined departmental stakes. Eventually, these executives tend to assume that what is clearly a priority for them is also a priority for others. When each executive starts to think this way, then departmental priorities compete for the same limited company resources. They are now rowing out of sync and in different directions.

An independent GAP audit has no loyalty to and will not favor any one department. It will ask the same questions with the same objectivity with the single purpose of bringing out the truth.

• Expediency –looking for underlying and subtle issues requires concentrated and uninterrupted effort—a luxury that many executives believe they can’t afford. They can devote only small amounts of time to the issue and look for expedient outcomes.

The independent GAP audit occurs in one continuous stream for about a week, enabling key insights to emerge and for the dots to be more easily connected.

Conducting an independent GAP audit enables CEO’s to quickly close the perspective gap, enabling them to make high quality informed decisions that lead to an effective ‘C’, ultimately achieving their vision (‘B’)

Do you need an independent GAP Audit?

1. Are you missing your targeted objectives in any of the following areas—revenue, market share, profitability, customer satisfaction, and innovation?
2. Are you missing the above by more than 10%? Are you missing them more often than you care to admit?
3. Have you tried different things to solve this problem and nothing has seemed to really work?
4. Are managers constantly saying they need more people to achieve what you are asking of them, while you are starting to suspect the issue is more of productivity level (for example, revenue by employee is lower than it should be)?
5. Do you see inconsistencies between managers that do whatever it takes to make a customer happy, and yet don’t have the same sense of urgency regarding deadlines and targets? Do you find yourself perplexed as to why the inconsistency in dedication between these two phenomenon?

If you find that the answer to the above is far more “Yes” than “No” then you should seriously consider conducting an independent GAP Audit.

Some Real Life GAP Audit Results

Here are some real life stories of how our GAP audits revealed issues that neither the CEO nor executive heading departments were aware of:

• An interview we held with three sales reps—the top, middle, and bottom producer in the sales organization—revealed that these three sales reps used completely different sales methodologies and tools to identify sales opportunities and close deals. This led to further investigation that revealed that the rest of the sales reps also used different tools and methodologies, whatever the sales rep brought from their previous company.  While the VP of sales gave each rep the same quota, some underperformed, others achieved over quota, and still others came around the quota. While the best performers almost always performed consistently, the rest did not, and as a result, the company had difficulty consistently meeting its revenue target. The VP of sales continuously requested hiring more sales reps. However, that would not have addressed the real issue of inconsistent performance.
• An interview of key executives showed that these executives had different opinion from the CEO, and from each other, regarding what the company strategy, core markets, and competitive advantage were. The CEO, saw the company as a product company wanted the company to be a technological leader in its chosen market. However, he was continually frustrated with the company’s inability to bring out new products and watching competitors beat them to it. The VP of operations, on the other hand, saw the company as a service company and continually pulled engineers to do custom jobs for clients, citing that these were very important customers and “our customers come first”.
• A company consistently missed a number of its targets including revenue targets, new product launches, and customer satisfaction ratings. While the various department heads consistently requested more budget to hire more so that they could meet their targets, our audits revealed that the real reason that the company missed its targets had to do with its culture rather than with shortage of resources
  • No one in the company was held accountable for completing anything by any deadline unless it was a work order specifically requested by customers. All other internal driven deadlines were therefore not only missed, but fully excused by management as soon as an employee said that he or she was working on a “customer request”.
  • Employees typically worked eight hours a day. When the eight hours were up, they turned of their computers and left, even when they had not completed what they had set out to do. As a result, deadlines came and went with no one really paying attention to them.

These are all system challenges that many companies face when they grow from a startup with a handful of employees to an established company with 50 or more employees. Once upon a time, the CEO knew everyone by name and knew exactly what they did and how good they were at it. Now, the CEO sees many strange faces and relies on his or her executive team to manage the productivity and direction of the various employees.

A GAP Audit is the only way for CEO’s to understand where the gaps are so they can begin to close these gaps and achieve their revenue targets.

The SOMAmetrics CEO GAP Audit™

The SOMAmetrics GAP Audit™ consists of three main phases:

• Information Gathering – during this phase the auditor gathers detailed information from a number of sources primarily: people, systems and tools, and company published material.
  • People—Surveys and interview with senor and middle management; top, middle, and bottom performers from various departments
  • Systems and Tools – what tools are used for what purposes. Are these designed for the past, the present, or the future?
  • Company published material – an inventory of Sales and Marketing tools and resources.
• GAP Analysis – during this phase, the information gathered from the above three sources is analyzed for consistency, clarity, and coherence. Perspective analysis is a key part of this phase.
• Recommendations – the last phase is an executive presentation outlining the findings of the GAP audit and recommendations for closing identified gaps, based on industry standards and our own experience working with over 100 companies

The GAP Audit typically is completed within 5-7 business days from start to finish, consisting of two site visits (one for interviews and the second for presentation of findings).

Please contact us today to find out more about this crucial first step to accelerating your company’s growth.

As we work with clients helping them achieve their revenue target, we are often surprised by how few companies actually think of their existing customers as the real revenue generator engine fueling growth.

Sales and Marketing are far more focused on potential customers than existing ones, leaving existing customers to Customer Service or Support. Even then, to many companies, customer service is just a necessary cost of doing business.

However, experience shows that existing customers are likely to be a much greater revenue generators than new customers for the following reasons:

1. Repeat or recurring purchase – although many companies do not view revenue from repeat purchase or recurring usage (as in SaaS models) as new revenue, it is ALWAYS new revenue since the customer can choose to buy from another vendor.  Taking recurring revenue for granted  will, sooner or later, lead to high customer attrition rates.
2. Selling new products and services to existing customers is significantly easier than to new brand new customers. In other words, growing the account costs less time and money than trying to get a completely new customer.
3. A referral from an existing customer has a higher closing ratio and shorter sales cycle than a lead from marketing efforts.

We are NOT saying that companies should not go after new customers. On the contrary, we believe that it becomes easier and less expensive to go after new customers if a company does very well with its existing ones.

What we are suggesting is that a company should place a very high premium on creating highly satisfied customers—what we call raving fans—so that it has a much better chance of revenue generation at a lower cost—which results in higher profitability. This is what we call Quadrant 1 and Quadrant 2 revenue generation efforts.

Let’s begin by postulating that losing a customer hurts a company’s financials far more than winning a new one can help it.

Many CEO’s understand this instinctively. That is why companies provide Customer Service, so as to keep customers happy and prevent losing them. However, this is seen as more of a necessary evil, a cost, or a negative rather than a positive.

We are saying that working hard to make existing customers raving fans has a far greater impact on revenue generation, market share, and profitability than any marketing and sales activity that the company can invest in.

In this article, we will first outline three ways in which existing customers can dramatically help a company grow its revenue at a lower cost than going after new customers through marketing and sales campaigns. Then we will discuss what the company must do in order to enable these powerful revenue generators.

The Potential

Revenue Generator 1: Lifetime Value (LTV) of Customers

A powerful concept that every company should understand and utilize is the Lifetime Value (LTV) of a customer. LTV is defined as the net cash contribution that a customer pays for products and services, minus one-time acquisition costs (cost of sales and marketing in order to acquire the customer in the first place), minus the recurring costs of servicing the customer, calculated over the lifetime of that customer.

To illustrate this , let’s start by making the following assumptions regarding a “typical customer” of a fictional company ABC Technology.

Most companies do not take the trouble to analyze the average LTV of their customers. Instead, they mostly see the cost side of things, which lead them to think of Customer Service as, “Either we have to get our customers to pay for more customer support, or we have to reduce our cost of customer support”. This usually is a path that eventually leads to lost customers, market share, and profitability.

However, if a company takes the time to gather data, analyze, and build LTV charts similar to the above, it will see things that may not be apparent at first glance.

The net cash-flow is primarily determined by four factors:

• How long the customer purchased form the company
• How much it purchased each period
• How large the cost of acquisition was
• How large the cost of servicing this customer was

A substantial part of the cost of providing services to customers is of a fixed cost nature anyway, such as payroll and infrastructure costs. What this means is that trying to lower costs (perhaps by reducing services) has the opposite effect of displeasing customers and risking them leaving, thereby increasing cost of services as a percentage of revenue.

The goal is to make each customer so happy with your products and services that they do not want to leave unless they have to. As a result, each additional customer now becomes truly incremental, rather than replacing lost customers. This widens the base, frees up more cash for R&D, lowers the unit cost of services to each customer, and provides a whole host of other benefits.

Using LTV, we can illustrate how dramatic the results can be by making only two small changes:

• Increase average lifetime from 30 months to five years (or 60 months)
• Reduce the operating cost by 5% to 75% as a result of increased lifetime enabling increased number of customers

The new LTV chart looks like this:

The total net cash flow over the lifetime of the customer increased from $5000 to $23,000.

To really see the impact, for each scenario, lets’ divide the total net cash flow over the number of months

• Scenario one: $5,000/30 months = $167 of net cash flow per customer per month
• Scenario two: $23,000/60 months =  $383 of net cash flow per customer per month

We increased our net monthly cash flow per customer by 230% simply by providing better customer service and thereby increasing the average lifetime of a customer.

The added bonus is that your acquisition cost will likely be lower as well, increasing your net monthly cash-flow. Happy customers are more effective at promoting your products and services than most of your marketing and sales efforts. References from raving fans have a much higher closing ratio and close much faster than leads from marketing efforts—thereby lowering your acquisition costs.

So far, so good. The question that comes next is likely to be, “Wouldn’t our operating costs go up if we try to give better quality service?”

The answer appears to be NO.

We are not suggesting that companies increase the level of Customer Service they provide (which will significantly increase costs), but to change the way they provide it.

If we had a leaky boat, we can prevent the boat from sinking by bailing faster, or adding more people to bail. However, adding more people will increase the weight of the boat and make it more likely to sink than float. Bailing faster means that becomes our full time occupation rather than sailing the boat.

Or, we can do something different—fix the leak. Before we do that, however, we need to know a few things:

• Where the leaks are
• How big they are (naturally we would start by fixing the big leaks which will sink the boat faster than the small ones)
• What is causing the leak so we can prevent new leaks from occurring

Armed with this information, we can then put in place a plan to fix the leaks and prevent them from occurring in future. Now, we can focus on the real business of why we have the boat in the first place.

In many cases, we see our clients do with customer service is akin to bailing out water without fixing the leaks. The more customers sit in the boat, the more people are hired to bail water from the boat—this is not a winning strategy.

Raving fans are created by making intelligent, data-informed investments, resulting in products that are easier to learn and use.  And creating raving fans is the number one goal of our new Customer Service organization.

Revenue Generator 2:  Product Launch Pad

If we create raving fans that have no intention of leaving us, then we have a ready-made market for the new products and services we introduce. Since they love our company and our products it will not be hard, or costly, to get them to try these new products and services.

To make this work, we need to pay attention to two things:

• Our products and services work seamlessly with each other—having one product makes the other products that our customers already own even more valuable
• Our products and services work in the same or similar way—if our customers know how to use one product, then they know most of what they need to use our new product

If we can make the above two points happen, then there is a pretty high probability that any customer of one of our products will buy at least one other product from us.

Revenue Generator 3: Lead Generation Engine

The good news doesn’t stop there. If we have raving fans, they will rave about us. And if we ask them, they will have no qualms giving us the names of others that they believe will buy our products and services, becoming important revenue generators for our company.

Anyone who has ever sold for a living knows that it is significantly easier to sell to someone who came as a reference from a customer than to someone who came from a marketing campaign. The closing ratios are way higher, and the sale cycles are way shorter.

Therefore, taking the trouble to ensure that our customers are raving fans will pay big dividends.

• Each raving fan stays with us a long time, making them highly profitable
• They will be far more likely to buy other products and services from us, increasing their lifetime value
• And they will market and sell for us, lowering our acquisition cost.

So why don’t companies do everything they can to make each of their customers raving fans? We don’t think it’s for lack of wanting, or even trying.

We believe that the main reason that most of our clients cannot brag an 80% or more raving fan rate is because they don’t know how to achieve this.

The rest of this article discusses what transformations companies must undergo to achieve this goal and how they can make the necessary transformations.

Revenue Generation – The Transformation

Step 1: New Vision, New Mission

The New Vision: Total Customer Care

To enable the three powerful revenue-generating changes, companies have to move from “Customer Support” thinking to “Total Customer Care” thinking.

This is a major change in thinking—from supporting customers to taking total care of them. It includes not just addressing problems when they bring it to us, but eliminating the need for them to have any issues in the first place. It means creating products that are easy to learn, easy to use, and work as expected all the time.

Most importantly, this vision removes the view that Customer Care is the responsibility of the Customer Support/Service “department” and puts it squarely on the shoulders of the entire company—Product Design, Engineering/Development, Operations, Marketing, Sales—everyone is responsible for Total Customer Care.

The Mission Statement

The mission statement that derives from the vision of “Total Customer Care” is likely to be just as ambitious—“To create raving fans who are 100% reference-able”

Achieving this mission means that every one of your customers would be delighted to be a reference for you and become your revenue generator. In fact, they won’t wait till you ask, they are constantly raving about you all the time.

Is that possible? Yes. But it will take everyone in your company working together to achieve this mission—not just the Customer Service “department”.

Step 2: Know where you are Today

It is very hard to build a plan for improvement unless you know where you are, right now. Such an audit enables you to see where you are and where the gaps are vis-à-vis your end goal of “100% reference-able raving fans”.

Without taking an audit of where you are and identifying the gaps, very little will change for a simple reason. No one will know what to change or by how much to change it.

The audit here is essentially a survey that would be sent out to all of your customers asking them to rate your products and services along a number of critical issues.  By getting an overall score of ‘A’ means that the customer is a raving fan of your products and services. A score of ‘B’ means that the customer maybe loyal, but may not be fully comfortable recommending your product and services to others. Any score below a ‘B’ can be assumed to mean that customer will likely switch to another vendor given the opportunity.

What you would like to find out during the first audit is:

• What percentage of your customers gave you an overall (average) score of A, B, C, or D
• In what specific areas are your highest and lowest scores

It is our strongest recommendation that the questions be asked in such a way that they are not biased to solicit favorable responses. Finding out the truth, the whole truth, and nothing but the truth is the goal of this step.

Step 3: Set a Challenging Goal

Armed with actionable information from your survey, you can now begin setting your plan for fulfilling your mission of 100% reference-able raving fans.

Set as your goal that at least 90% of all your customers will be raving fans within two years. With this as goal, you can now set quarterly goals for the next eight quarters so you can end up at your final goal.

Step 4:  Know What to Measure

It is critical to measure the right things so that not only will you focus on addressing the right problems, but will arrive at the right fix for these problems.

To our thinking, companies tend to focus on measuring what they have heard others do to try to improve on these metrics. For example, we often hear clients tell us, “we have the best response rate in the industry”, or “87% of all issues are resolved on the first contact”. While these are good, they will not produce raving fans.

These are transactional metrics that do not measure the quality of the relationship at all.

By definition, raving fans are customers who absolutely love your product(s). That means your products are great, they work as expected all the time, and customers have no trouble using them– they rarely have any reason to contact you because of a problem. If there are any problems, they expect these to be resolved quickly. Therefore, your response rate is only material if it is too slow, not if it is quick.

In other words, fast response rate is not good customer service. It is like expecting a waiter to arrive at your table within a certain amount of time. Unless the waiter takes too long (in which case you likely wont go back), that will not be the reason why the restaurant may become your favorite.

Measuring the wrong things leads to the wrong conclusion, misleading you to spend more money on scaling your Customer Support organization, rather than creating great products that your customers will love. The more issues a company has the more people it hires to handle these calls/tweets/emails/chats, the more quickly it patches the problem for that customer, and the less the problem is truly addressed.

Don’t be concerned with how fast you respond to an issue or how many tickets you close relative to how many tickets are opened.

Instead, be concerned with how many tickets you have relative to how many users you have. If the number of tickets to users is small, then you are moving in the right direction. Otherwise, you may be responding to issues within seconds, and you may be closing tickets within 24 hours, but you don’t have happy customers because they are still calling about too many issues.

We believe that the right metrics are those that help you identify and resolve the issues at their root cause. We recommend that you look at issues that come in (via phone call, email, chat, twitter, etc.) and analyze them according to the following:

The key here is to use Customer Service/Support as the eyes and ears of the Design and Development team, not as a cheap substitute for them. The goal in the end is to create products that customers fall in love with—easy to learn, easy to use, and beautiful.

Step 5: Create a Learning Organization

Gathering the right kind of data is a great start, but learning from it and making necessary changes to improve customer satisfaction is the end goal.

A Learning Organization has at the very least the following characteristics

• It runs an audit of every system and business process it uses, At least twice a year, to see what is still relevant and what no longer is. Based on its analysis, it re-calibrates its systems and processes to meet today’s and tomorrow’s needs
• It surveys its customers, at least twice a year, to make sure it’s products and services are “must-haves” for them rather than nice to haves. Based on the surveys, it makes plans for necessary changes and executes them
• It continually communicates its finding with EVERY employee of the company—not just management. In fact, the best Learning Organizations involve their customers and their vendors in their findings.
• It demands that every employee actively participate in the drive towards making every customer a raving fan by inviting employees to:
  • Review the data shared and providing their analysis of what it means
  • Suggest ways of improving products and services to address any gaps they see
  • Provide a plan of action for how that employee will improve his/her capabilities to better help address the gaps they see
• It rewards initiative, smarts, creativity, and hard work in a number of ways:
  • Company-wide recognition
  • Cash bonus
  • Pay and responsibility increase
  • Paid time-off from work
  • Special perks such as being able to work from home certain times a week, being able to get their own hours, etc.
• It empowers every employee to step up and do whatever they believe is necessary to create a raving fan
• It is always dismantling departmental silos and encouraging cross-departmental information and knowledge sharing
  • It accepts and even rewards “smart” mistakes (mistakes made in the process of learning something new), but has little patience for “dumb” mistakes (mistakes made through carelessness, incompetency, and lack of doing proper homework)
  • It makes it clear that the role of management is to support those that do the work because those that do the work know more about the work than management.
• Its reward system is designed to foster company-wide teamwork.
  • It allows anyone who is approved to go ahead with a project to select anyone else they want from any department to be on their project team
  • It recognizes that the project team leader has a higher rank during a project’s life than the department head in terms of prioritizing the work of the team member
  • It has little tolerance for those that complain or blame others, but rather recognizes as leaders those who take full responsibility for the success of a project and spend their time and energy on the solutions to the problems

These are some important ways a company can become a Learning Organization so that it continually improves its products and services to its customers, thereby becoming a “must have” for them.

Conclusion

In this article, we have outlined three important ways how existing customers can dramatically increase a company’s revenue, market share, and profitability. We have also discussed how a company must first transform itself so as to create raving fans that will stay with it for a very long time, buy more and more from it, and tell everyone that listens to buy from this company – becoming the company’s key revenue generators.

In the second part, we have discussed five important steps a company should follow in order to transform itself into a Total Customer Care company that creates raving fans.

SOMAmetrics has helped many customers to bridge the gaps mentioned above, enabling our clients to convert their customers into raving fans.  Let us help you determine how you will convert every one of your customers into raving fans and thereby significantly increase your revenues, market share and profitability.

Contact us today for a quick call to see if we can help