Strategic alignment is an urgent need. It is fundamental to successful and predictable revenue growth. One way for organizations to assess themselves is by using the revenue growth maturity model. As companies mature and move up through the different levels of this model shown below, their customer acquisition cost, customer lifetime value, and growth attainment improve.
Back in 2012, a midmarket software company decided it needed help. The company had been recently acquired by a private equity firm. At the time of the transaction, the company had an estimated value of $1.5 billion. In terms of strategic alignment, the acquired company was plotted as Level 1 – Chaos on the revenue growth maturity model. A corporate strategy existed, but functional strategies did not. When asked, most of the functional leaders were not familiar with their corporate strategy. At Level 1, the organization was neither stable nor predictable. Its performance was erratic and functional leaders were unable to repeat successes consistently.
The key to value creation is maturity through strategic alignment. For this Level 1 software company, the first step was defining its corporate strategy. In addition to setting the direction for the company, the corporate strategy defines why the company exists in the first place, which markets it chooses to compete in, and what strategic advantages will be developed. Without a defined corporate strategy, functional strategies cannot be developed.
In the three years following acquisition, the company progressed from Level 1 through Level 2 to Level 3. Corporate and functional strategies were created yearly using a similar process and then implemented. Within each level, the individual functions understood their strategy and abided by it. Success was repeatable and execution consistent. Initiatives were deployed that aligned to and actualized the individual functional strategies. The impact was measurable. In 2015, the software company was valued at $3.5 billion. And it has recently embarked on another three-year journey to reach Level 5 on the revenue growth maturity model and $5 billion in valuation.