By Rick McPartlin
Execution without a business plan is a hobby. Without a science-based revenue strategy, it’s a wish, and without aligned execution, it is expensive chaos.
Execution: The Discipline of Getting Things Done by Larry Bossidy and Ram Charan is a great book. After reading the book, you might think that the good companies execute, and the bad companies don’t. But that’s not necessarily so: Maybe the bad companies execute, but they just execute on the wrong stuff. Maybe the good companies execute but don’t know why it’s working. Maybe great execution is not enough.
Execution is very expensive. It includes most of your organizational investment such as your leadership team, your processes, your infrastructure, your outside partnerships, etc. A science-based revenue strategy has very little cost but is seldom a standard part of leadership activities. The cost for the strategy is some outside consulting and your team’s time in developing the strategy, aligning that strategy with your execution plan, and then measuring the execution and refining the strategy. The total cost of your revenue strategy is less than the total compensation for one member of the leadership team versus execution, which approaches the combined budget of your whole company.
Boomers lived through times where one strategy might work for 40 years — execution was king! Once a company stumbled into a successful strategy, their success was the result of disciplined execution. They don’t even think about the risk from the excessive cost from investing in great execution for a losing strategy.
In the 21st century, having a winning customer-focused revenue strategy is as important as being able to execute. Both must exist and work as one. There are an infinite number of losing strategies, and no matter how well you execute those losing strategies, you are spending and executing your way out of business.
Nobody sets out to have a bad revenue strategy, but more than 95 percent of all companies “win or lose” without ever even having an intentional revenue strategy.
Almost all companies have a target revenue number. Normally that number was the CEO’s best guess at what should be accomplished over the next 12 months. In some cases, the number is not a guess; it’s last year’s number with the expected market growth added on top, and an extra pinch for good measure. More sophisticated companies hire a market research firm to project the market, and then the CEO guesses what the number should be. In all cases, the CEO counts on execution carrying the day.
Producing profitable revenue does require great execution. But if you don’t execute well, your competition will. The better aligned the execution, the lower the operating costs. So if your competitors execute better, they have a cost advantage and will dominate.
Certainly, great execution is important. But when it comes to generating revenue, it may not be the most important element. In today’s world of TQM and Six Sigma and ISO, great execution comes at great cost. You only want to invest in execution for the things the market wants, is willing to pay for, and that deliver you a profit.
Most industries are under attack from the bottom. Tiny or small companies figure out what the market wants, what the market is willing to pay for, and then they deliver products and services that are “good enough.” In these cases, execution is doing less with less, and getting paid less but making more money. This is happening with the automotive industry, food service, hotels and travel, electronics, software, etc.
Science-based revenue strategy is developed with a specific process just like writing great software or designing an award-winning building. Those few companies that really developed a winning revenue strategy have both a go-to-market and a cost advantage based on the fact everyone knows where they are going, what they are doing and WHY they are doing it. Not only can they execute, but they can improvise when things change, and in the 21st century, change is everywhere and every day.
Does your team have revenue strategy, and do they know WHY they do what they do? If your team knows why they do what they do, they will change the execution to fit the current state of the market, while also preparing for the future. They will know when it is time to stop and challenge the strategy because the assumptions that created the strategy no longer hold. Those who just keep getting better at execution without an aligned revenue strategy will go out of business at the point of near perfect execution.
Execution will save you — or sink you. The difference is if your execution is focused on an intentional, science-based revenue strategy. If it is, it will seldom be bad — just like it will seldom be perfect. Since revenue science is assumption-based and measurable, your focused execution works like “zeroing in target alignment” with artillery — it gets you closer and closer until you hit the target almost every time.
No science-based revenue strategy? Then no amount of execution will save you. No focused execution? Then no revenue strategy will save you.
Business has one purpose: to continually grow profitable revenue. When based on the right combination of a science-based revenue strategy, strong execution and leverage from aligned structure, the growth is predictable. Winning requires all three: revenue strategy, structure to provide leverage, and a focus on execution, all in the right mix.
Rick McPartlin is the CEO of The Revenue Game and is a revenue generation consultant and Vistage speaker. McPartlin was a Vistage member development chair from 2002 to 2009.
Originally published: Oct 30, 2011