Does Strategy Impact Revenue Growth?

The answer is  “maybe”. When strategy doesn’t deliver growth, the issue appears to be more on alignment than anything else. And yet, companies spend ample time on crafting go-to-market strategies without first investigating possible roadblocks to execution. In our experience, the number one roadblock to execution tends to be lack of commitment by senior management, typically due to inconsistencies between what the company is all about and how it presents itself in the marketplace. Here is why.

What is Strategy?

Strategy is defined as the thought process of focusing limited resources on a few well-chosen activities that are most likely to produce the best results. It is the process of deciding what to do and what NOT to do.

It turns out, however, that strategy is not a single process, but actually consists  of two components that must work well together. In addition,there is arguably a right and wrong sequence to strategy formulation, and getting that sequence wrong is typically what leads to poor execution.

Business Strategy

The first component is Business Strategy, which involves the internal DNA of the business. It addresses the following questions:  What are we really good at? Are we a product company, an operationally excellent company, or a highly customized service company that provide unique services to a very select clientele?

These three types of companies require  very different strategies. A company cannot excel at all three—nor will it need to. Mac buyers are not in the same market as Dell Inspiron buyers, for example. They buy different things and are willing to pay different prices for what they want. Neither are BMW and Toyota buyers in the same market, or DHL and UPS customers. Each company has a different value proposition based on its DNA.

Market Strategy

The second component is Market Strategy, which deals with the questions:  Where do we want to compete? Who cares most about the issues that we are the best at addressing?  It is about finding the right customer for whom the company’s value proposition is a painkiller (must have) rather than a vitamin (nice to have).

Go-to-market strategy deals with the selection of a market segment with a specific compelling need that the company can address. That means specifically targeted competitors, partners, and distribution strategy. It also entails a carefully selected pricing model that works for that market segment, as well as a positioning that guides all communication. Though all of these factors may be carefully assembled, they may still not be aligned with the core business strategy of the company, which can result in  friction and hurdles.

Getting these two equally critical, very different and yet complementary facets of strategy right is not trivial. Executing flawlessly on both is extremely challenging. The companies that figure out a highly viable strategy (for both business and market) and execute well on this strategy will have the best chance of becoming market leaders.

The Challenge of Strategy Execution

Strategy seems to work best when it starts internally (business strategy) and works outward (market strategy).

Most likely, the biggest reason why execution fails is due to lack of commitment—financial and emotional. This lack of commitment arises when senior management is not in agreement on how to proceed. Sales and Marketing managers? are typically externally focused and want to execute on go-to-market strategies that may not be in alignment with the core identity of the company. Because product companies are quite different from service or operations companies, their go-to-market strategies need to be different.

Misalignment occurs most often when a highly accomplished senior executive is hired and asserts his or her will to shape the company after an image this executive understands very well—the go-to-market strategy that he or she has previously executed with great success. The question here is: Is the go-to-market strategy the right one for this company’s DNA?

For example, in the 90’s, manufacturing companies tried to hire ex-Toyota managers in hopes of achieving zero quality defects and operational efficiency. However, in a number of instances, this tactic didn’t work well and was frustrating to both the hiring company and the ex-Toyota manager. How a product company achieves zero quality defects may radically differ from how an operations company achieves it–and strategy is always about answering the “how” with the resources available to the company.

Executing strategy requires discipline, which involves a commitment to do certain things and not others. Operationally excellent companies make different choices from product excellence companies. The entire management team needs to be in strong agreement on what those choices are, which is what business strategy is all about. With that in place, the work of finding the right market in which the company’s competencies allow it to dominate becomes more intuitive.

Market Strategy Flow

However, things can break down at this step as well. Market strategy has a certain flow to it. It starts with identifying a compelling need that a company has the best chance of solving more effectively than alternatives. Again, the idea is to find a market space where the company’s capabilities provide a painkiller (must have) rather than a vitamin (nice to have).

It then examines market segments with that compelling need and determines which one is the most accessible in terms of its decision makers and decision making process. Understanding the value chain of how goods and services flow from the company to the end user helps the company see how many stakeholders must be convinced to make a sale. The level and type of competition has significant impact. There are always competing alternatives. The question is how entrenched these are and how hard it will be to dislodge them.

With that knowledge, the company can position itself attractively against both a direct and market alternative. Whatever distribution channel is selected must meet the aforementioned requirements . It must be able to access the decision makers and know how to support the entire product that the customer wants to receive. Moreover,  it must be able to do this at a cost that leaves a healthy margin for the company while simultaneously showing strong ROI for the customer.

What we have described above is how to arrive at the right strategy for your business— one that is practical and executable. While this process is not easy, it aims to avoid major hurdles that can turn out to be showstoppers.

The SOMAmetrics Approach

At SOMAmetrics, we help our clients define a coherent strategy that is built on who they are and focuses on target markets with compelling needs that our clients can fulfill better than their competitors. Furthermore, we supplement our client’s resources with additional ones—from building marketing content to lead generation and qualification, and then delivering these sales qualified leads to our clients’ sales teams.

Our approach of aligning strategy with best practices makes execution smoother by shortening sales cycles and improving closing ratios, which leads to accelerated revenue growth.

Contact us today for a short conversation to see how we may be able to help.