Real-World Problems Cross Organizational Boundaries
Growing a business is an interdisciplinary endeavor. A team sport. Any “go-to-market” strategy has dozens of functions to manage and many more disciplines to master. These functions include traditional growth disciplines like marketing, sales, and customer service. They also include brand management, product development, and the “4Ps” of pricing, promotion, product packaging, and placement. New disciplines like sales enablement, customer analytics, earned media management, and content management have emerged as these budgets have grown to command 15% or more of business-to-business (B2B) growth budgets.
There are job descriptions for all of these individual disciplines. There are millions of experienced managers and experts in these functional disciplines. Universities offer master's degrees and PhDs in most of these disciplines. Individually.
Organic growth requires all these disciplines to work together in unison toward a common end – consistent, profitable, and scalable growth. There is no curriculum for that. Few CEOs have direct experience in these disciplines. Less than 20% of CEOs have direct experience in sales. Few marketers become CEOs.
This is the underlying reason why few managers have been able to master the science of growth. “The root cause of this problem is that historically academic and business institutions have taught and managed the science of growth as a set of individual disciplines – branding, product management, marketing and analytics,” says Professor David Reibstein of the Wharton School of Business. “But the real-world problem of growing a business is interdisciplinary in nature. We as teachers need to do a better job of creating skills, structures, and leaders who can manage, coordinate, and align all these disciplines coherently around the customer. Being the captain that coordinates and leads all those functions in a business is a very big job. But an essential one.”
Academic and commercial research overwhelmingly supports the concepts that growth is a “team sport” and that there is a causal relationship between organizational competence in analytics, marketing, information sharing, agility, and cross-functional collaboration with enterprise value. This research shows that a 10% increase in organizational competence will drive on average a 5.5% increase in stock price.7 An analysis of 380 CMOs by Forbes found that organizations investing in data-driven measurement processes, competencies and systems were achieving significantly higher levels of marketing effectiveness and business outcomes – achieving 5% better returns on marketing investments and more than 7% higher levels of growth performance.105 The analysis revealed that these high-performing marketers – who were exceeding growth goals by over 25% – were significantly more data-driven in their approach to measuring, optimizing, and reallocating their offline and online sales and marketing investments.
The Role of Insight in Value Creation
Investments in customer insights and organizational agility do create firm value. How fast and effectively an organization analyzes, leverages, and shares information and customer data can increase tactical marketing returns but also generate long-term enterprise value.63 Academic research has proven there is a significant relationship between how fast your organization shares data and customer insights across revenue teams and share price.8 A comprehensive analysis of 114 academic research studies by the Marketing Science Institute (MSI) has demonstrated that the ability of an organization to generate, disseminate, and respond to market intelligence – called Organizational Knowledge Sharing – has a quantifiable positive effect on firm value and financial performance in terms of profits, sales, and market share.6
Managers need to recognize and prioritize the importance of sharing knowledge across the business. Modern selling systems produce customer data that allows revenue teams to identify trigger events that signal buying intent, flag inquiries from important influencers within accounts, and make decisions about next best actions based on past customer behavior. The window of time an organization has to act on that data is small, however – and is gated by customer time, attention, and expectations for response. This makes hastening data and decisions about an opportunity from the source (e.g. a website, an algorithm in marketing) to a customer-facing employee who can act on it (e.g. a relationship manager or customer service rep) a critical value driver.
Similarly, customer relationships, go-to-market effectiveness, organizational information sharing, customer experience, and the quality of products, people, and innovations have all been empirically proven to drive increases in firm value by academics.6
In particular, the push to focus the organization on customer lifetime value as the primary objective of the revenue team has a financial basis. Customer equity is a significant driver of share price. According to academic research, the value elasticity of customer equity is 0.72.8 This means a 10% increase in the value of customer assets will drive a 7.2% increase in stock price because higher levels of customer satisfaction, trust, and online service innovations enhance long-term margins, sales growth, and enterprise value. Hence, lifetime value is being redefined as an economic model in a digitally driven economy. This is evidenced by the ability of businesses like Airbnb ($125B in firm value with no profits at the time of printing) and the GHX Global Healthcare Exchange to convert digitally enabled consumer and business networks into valuable assets.108,60
For example, Rockbridge pushes its portfolio companies to deploy advanced analytics and direct marketing competencies pioneered by another Rockbridge company, Quicken Loans, to accelerate revenues, profits, and firm value. One Rockbridge portfolio business that provides online postgraduate education, North Central University, was able to borrow demand generation practices developed by Quicken Loans to grow their enrolled student population from 5,000 to 9,000 over their six years of ownership. This led to rapid growth in revenues (from $31M to $114M) and EBITDA (from $6M to $29M) and a highly successful exit.103
Intangible Assets as the Foundation for Growth
Any business can also unlock more growth and value by improving the return on their revenue-generating commercial assets – by which we mean your customer data, digital technology, digital channel infrastructure, and customer relationship equity. These assets make up most of the growth investment mix in B2B organizations, according to an analysis by the Marketing Accountability Standards Board.1 (See Figure 1.4) They also make up a significant portion of your firm's balance sheet. Most CEOs could generate more revenue and profits from these commercial growth assets if they only treated them like financial assets. Which is what they are.
The problem is these business assets that support growth as inherently “intangible” whereas factories, inventory materials, and trucks are tangible. This makes growth assets difficult to value, hard to manage, and difficult to build.
That's a problem managers must solve if they want to grow a business in the twenty-first century. Fast. The capital stock of the economy has changed, and managers need to change with it. Although the economy might have been built upon railroad tracks, canals, and factories in the past – today it is driven by intellectual property, software code, learning data sets, digital customer experiences, design, branding, and process know-how. Investment in “intangibles” exceeds investments in hard assets. They also explain over 80% of changes in firm value today. Far more (three times more) than they did in 1950, according to Jonathan Haskel and Stian Westlake in their book Capitalism Without Capital.135