Rethinking Revenue Generation: Designing Metrics for New ModelsBy: Jameson Riley International, Revenue Growth Strategy
Discounted pipeline, revenue and percent to goal as the sole critical questions when measuring revenue generation? That’s old school. A complex buying world requires deriving value from new roles, shifting revenue models and defining success in new ways. Making sense of these needs is difficult; measuring them can be overwhelming. It’s time to rethink the very nature of revenue generation.
In this new reality, the temptation to include every possible definition for a digital acquisition, a renewal or an equipment installation can quickly become exhausting as all speak to critical new avenues of business or existing revenue streams. The question, then, must focus on selecting the appropriate metrics to enable quick decision-making and ensure appropriate periodic reviews. Which metrics should you choose? To complicate the issue further, multi-country regions such as Europe or APAC often have additional challenges with more planning layers and markets in different stages of development that require different revenue strategies.
Simply creating a list of potential metrics and choosing a few has a low chance of success. Instead, the following steps will help to guide you towards a few key metrics as a starting point:
1. Reassess Your Audience
Before beginning any discussion of dashboards, data feeds or cadences, highlight and understand the individual needs of each of your critical audiences. As commercial models change and evolve, the teams requiring data and their needs change dramatically. Even if you have a metrics program in place, does it measure the elements you need today or does it inform decisions from your commercial model of the past? For example, a new high octane inside sales team will need much different activity data than a manager running a strategic accounts team. Level and responsibility will also inform some of this. A COO needs different types of information than a local country-level P&L manager; in turn, that manager will also have different needs than a functionally oriented leader of a regional customer success team.
Balancing these disparate needs by audience without creating excessive iterations can become challenging. The task is to understand which metrics serve all audiences and which need specific tailoring. If the tailored metrics are critical, how can you (or your team) most efficiently deliver them?
One solution to this problem is to approach metric design and delivery as an evolving process. Begin with the data everyone requires to answer their critical issues and build from this core outwards. This has the added benefit of increasing buy-in to the new reporting by doing a few things well at the outset rather than a large raft of metrics that need constant revision.
2. Choose Metric Categories
Simple “types” of metrics that answer basic questions will have the most impact on driving decision-makers at all levels of your organization. What questions do you need to answer? How did we perform yesterday? How will we perform tomorrow? Understanding and including both headlight (e.g., pipeline, expansion opportunity amounts) and taillight (e.g., revenue, renewal rates) metrics begins to approach some of these questions.
You might also ask your teams whether they’ve done enough this quarter. Separating conversations about activities (e.g., marketing campaigns and sales calls) from financial results (e.g., gross profit or cost of sales) helps create clarity for analysis and interpretation of the data with your teams.
In short, too many metrics can have as low an impact as having no metrics at all. Define a very clear set of questions to answer and two to three metrics per question. Divide them into easily digestible types to clarify the data. For example, you might think about forward-looking metrics (headlights) versus historical metrics (taillights). You might also distinguish between inputs (activities) and outputs (results).
3. Inform a Local Story
Finally, metrics should always come with critical local or team-specific interpretation, particularly in the multi-market regions mentioned above. Metric selection and design at its best creates a series of conversations between local P&L owners, support functions and regional/central senior management. A good metrics program will help surface critical discussions, focus attention on areas of concern and support differential investment decisions in the ever-present reality of scarce resources. The goal should be to enable decision-making rather than to redefine the metrics program itself constantly.
One area of particular importance: sales strategy alignment. Any metrics chosen should help to support a discussion of market or segment sales strategy. Understanding the overarching approach for a particular market to meeting their revenue goals and supporting the analysis of this will help to drive adoption.
As an example, a market where your company has an established presence and a key account strategy, potentially Germany, will have somewhat different needs than an SMB-driven locality with a low-cost approach, Spain for example. Likewise, country managers in growth areas will likely find growth statistics and account acquisition results most compelling. Mature teams likely need more insight into expansion and renewal selling successes. Any metrics program should have some support for telling each of these stories, even if the suite of data varies only slightly.
The right metrics deliver mission-critical information and insight for decision-making on an ongoing basis. Selecting the correct pieces of data to meet your audience’s needs, providing context for the key questions and supporting interpretation will all help enable success for any new metrics program. As your commercial structure needs to adapt quickly while you rethink the nature of revenue generation, you will need to adjust your monitoring and measurement programs with increasing agility over time.
Is your EMEA organization struggling with designing metrics for your new models? Contact Alexander Group for help.