Executive leader demonstrates how to think through and communicate to the organization which types of revenue growth are the most valuable.

 

SBI recently spoke with Dennis Hummel, the President of a $1.2 billion dollar privately held enterprise company with 5,000 employees. Today’s article is focused on demonstrating how to think through and communicate which types of revenue growth dollars are most valuable. It’s difficult to grow revenue faster than your industry’s growth rate and faster than your competitors. The Revenue Growth Diagnostic interactive tool will help you determine if you are likely or unlikely to make your number.

 

Different types of revenue growth earn different returns on capital, so not all growth is equally value creating. Today’s topic is focused Dennis is uniquely qualified to speak on this topic of developing corporate objectives. Maritz Holdings has several companies operating in an array of industries including the travel, industry, and motivation industries. Dennis is responsible for setting the strategic direction for each company. Today, Dennis is going to share how he provides clarity of objectives to his leadership teams.

 

This show is a must watch for executives seeking to bring clarity to the leadership team on how to achieve high growth goals. Read the full transcript of my interview with Dennis.  If you prefer to watch the full interview on high definition video, click here.

 

Why this topic today? Organizations that have too many objectives and priorities really don’t have any at all, they risk accomplishing nothing of significance. A corporate strategy often does not get executed because the sales, marketing, and product leaders are in their silos pursuing what they feel is important. This causes strategic misalignment, and often results in sub-par revenue growth.

 

I understand you’re a private company, so my first set of questions might be difficult to answer. If that’s the case, then maybe speak in generalities. I was going to ask you about the historic growth rate, the current growth rate, the organic growth rate of the company right now and its sustainability. 

 

We’ve stayed in business for over 123 years so sustainability, when I saw that question, I kind of smiled. However, nothing is guaranteed. The challenges we face to remain sustainable are just as challenging as they were 50 years ago or 100 years ago. The world about us is changing, the competitive set is evolving, and we have to evolve with it. We have different companies in different industries. We’re in the travel industry. We’re in the research industry. We’re in the motivation industry. 

 

We find that the growth curves on those industries ebb and flow based on, for example, I’ll give you an example. During the recession, we were right in the cross hairs of the travel stand down, and that put a lot of pressure on our travel business. At the same time, people were looking for ways to engage employees in different manners and that helped us in our motivation platform. There’s a lot of energy right now on the issue of customer experience, so we do a fair amount of customer experience research, data analytics and playing that back both to the tower or to the corporate office as well as to the point of intersection with the customer. That business is seeing some energy and some growth. 

 

A very successful company, lots of growth. However, constantly reinventing itself and staying abreast of the market, which is fantastic. Let’s different the types of growth earn different returns on capital. So not all growth is equally value creating. This is kind of a theme of today’s show. When you think about a revenue dollar, a revenue growth dollar, how do you think through that and how do you communicate to the organization on which growth is the most valuable types of growth? 

 

There’s a couple of different things you have to think through. One, what’s your fixed cost base because you should have the revenue to cover off fixed cost. If you begin to cut back on revenues that you can’t cap fixed cost out of, you’re going to end up with a negative return on your statement. We have some unique situations. We have points here, so we do a lot of work with points as a currency. If you have a loyalty card, you amass points based on your transaction activities, your transaction behaviors, or if you’re getting rewarded or acknowledged for your performance through a recognition program that includes points. 

 

We have two different vehicles. One is a bill on issuance point, which means we get to cash up front and we get to hold that cash for longer periods of time, until the point earner redeems. We also have points on redemption, and so the points on redemption we don’t get to cash until the point earner actually burns the point. You can imagine the model, the cashing model on those two is diametrically different. 

 

We’re constantly thinking about mix here, because there are certain things that we do. We have travel programs. We tend to get the capital or the cash upfront for the down payments with the hotels or the airlines when we’re booking rooms or seats, so that we maintain a cash-flow position that’s positive as opposed to fronting the cash on our nickel, and then waiting till the event actually takes place. 

 

It’s really important that not only the business leadership and the business employees understand how we make money and how cash-flow or how that affects cash-flow, but anybody calling on us I think needs to understand that dynamic, because it can mean a lot to us in terms of our ability to earn or make money. 

 

It’s a great example of the importance of mix, and if you’re calling on customers, you must understand their income statement, how they make money, the different types of revenue growth.  The impact on cash-flow that mix may have, et cetera. This is what we were trying to get to here with Dennis. 

 

I’m going to walk you through a little bit of a framework here. This is a multi-part question and we’re going to take this step by step. I’d like to get your perspective on these things. 

 

By our way of thinking, our firm’s kind of point of view, there’s really three growth strategies that a company can deploy. The first is market expansion, which is kind of high water raises all ships. You’re in the right market, at the right time, at the right offering, and you’re going to grow because that sector is doing well. The next is market exposure, which says I’m in this market today. There’s an adjacent growth market over here, and I’m going to go into that market, expose myself to that market, and as a result, grow. Then the third type is market share, which is I’m in this market. It might not be growing super quick. For me to grow, I’ve got to take business from the bad guys, so to speak. 

 

Three very different types of growth strategies. Of course, if you think about how that might cascade down to somebody’s marketing strategy or somebody’s sales execution plan, you have a very different approach depending on which of those revenue growth strategies you took. From your perspective and in your company, which is a multi-business company, how do you think through these three types of revenue growth and how does that inform your strategy? 

 

That’s a great question because I can cite examples where we have done all three. 

 

I’m going to pick a couple just to give you a sense of how we thought through something. In our travel business, large event travel, user conferences, business meetings, sales incentive programs, even in the world of association meetings and trade shows, quite often it’s a very sticky business. Once you have one of those contracts, it’s very difficult to unseat an incumbent. You learn a lot about the participants. You learn about the leadership team. They trust you. There’s a lot of trust involved in running one of those things. 

 

It’s a big, very complex program to run, so they don’t switch vendors or suppliers very quickly. That meant that rather than trying to expand our growth solely by new client acquisition, we began to look for the outer ring. That outer ring in our particular case, we were doing just events and incentive programs. We went out and bought a company about five years ago that does trade show and association based travel. That expand almost doubled our business in a very quick way. Obviously, it’s an expensive way because you’re spending capital or cash to acquire the business and there’s goodwill involved. 

 

But if you can get a return and if you can make the return work, which we did, that’s an immediate way to expand the business. Because it’s expensive, you also then look for what you referred to early as our organic growth. How do I go out and maybe steal a share or get a share in a marketplace where I am stronger? One of the areas that comes to mind for us is we were a pretty good provider in the research space, customer satisfaction research. The term now is customer experience. 

 

So we went and partnered and actually merged our company with a big data analytics and that algorithm company that helps us to deliver not only the insights we gathered from gaining information or getting research information from validated research, but we also knew that there was a lot of information that’s being put forth in the social media, unstructured data that we needed to marry with that, and we needed to be able to put that information out to the end user or the end user was connecting with customer more quickly. 

 

That merger of two different capabilities or the enhancement of capabilities allows us an opportunity to begin to steal share or to gather up share. As you pointed out in your three scenarios, it’s certainly a very hot space. Everybody is trying to understand the customer experience. Employee engagement and customer experience are probably two of the hottest spaces in our world right now in anything we do. 

 

Very good. For the audience just to summarize there, if you’re trying to grow and you’ve got aggressive revenue growth goals, think about these things, can I expand in my current business? Can I expose myself to a new business? What Dennis called the outer ring. If I’m going to be in a share battle, I better know my accounts because sometimes if you’re competing against a sticky competitor, where the end customer doesn’t change the vendor very often, that’s a tough battle to win. You’ve got to be careful and selective as to how you go after things. It’s a very interesting way to think about growth as market expansion, market exposure, and market share performance. 

 

I have one thing to add to that conversation. One of the other ways, when you do have a sticky customer, we don’t allow ourselves the luxury of just saying, “Well, we’ve won the business. That’s all we’re going to get.” We begin to look to add a few interesting little capabilities that we can expand that program with, so we can expand inside the program which allows us to grow. We’re growing with a customer who already knows us, who already has confidence in us. That’s an easier conversation to have for a sales professional. It’s important that the company continues to look for adjunct capabilities that it can put into that existing relationship, and that’s another way to grow. We certainly do that here. 

 

That makes you more and more sticky, right? So, it’s both a growth play and a defense play, right? That’s a great add. 

 

Right. 

 

Dennis, what strategic trade-off decisions have been made to prioritize long-term value creation? 

 

That’s an ever and ongoing discussion as you might imagine. We think about the capabilities or maybe refreshing the program or an offering of a product, or refreshing a set of services. Because we’re a service based company, so the offerings we have are in large part are both technology and people. When you start to talk about recasting a service you provide in the market, obviously there’s an investment. At the same time, with the world we have today, you’re always looking over your shoulder and wondering when or who is coming up behind you with a better mousetrap that can be leveraged and utilized by your customers and potentially unseat you.

 

It is a balancing act between what do I invest and what is my rate of turn. Typically, when we do investments, we have a rate of return we expect. We’re definitely looking at the feasibility, how easy will it be for us to get it done, what disruption will it create for our existing business, and do we have the talent to pull it off? Those answers are all needed. If you don’t do that, if you’re not constantly looking, if you’re not disrupting, you’ll get disrupted.

 

We make those decisions all the time. 

 

I was going to ask you about investing in R&D and how you might measure the return on that, and how that might benefit sales and marketing professionals in the future. But as a services company, you don’t necessarily have R&D at least in the classical sense, so how do you think about that? I guess, what’s the equivalent of R&D in a services business? Is there one? 

 

Yeah, there definitely is. It’s a great question. We’re right in the throes. I was just out in Sonoma at a venture capital meeting. I was in the valley. We’re taking all our leaders over to New York to an incubator, where we looked for our innovation and it really is about the topic of innovation is through the various trends we’re watching in the marketplace, and then we start to look for early stage companies who potentially could either partner with us to increase our value or we could acquire to increase our value. Then of course we have our own skunk works here who are constantly testing and trying things. 

 

One of the hardest things I think a business has to do is to fail and fail fast if it’s not working. We tend to hang onto things too long, but if we’re not trying and failing every now and then, we’re not probably pushing the envelope far enough. For us, it’s really about innovation. It’s really the whole idea of innovating our server’s capabilities and to some degree, the rails we run on in technology. 

 

Innovation in your business as opposed to kind of classical R&D. That makes all the sense in the world. All right then, I guess my last question for you is, from your perspective of the senior executive, you have to make capital allocation decisions. You can invest in product or a new service. You can invest in marketing programs to increase your reach if you will, or you can invest in improving the productivity of the sales force. Probably you have to make investments in all three, but how do you think through like what comes first, what comes second, what comes third? If you only had to make one bet, how do you think through those types of things? 

 

It’s securities, right? Because if I have a great product but I have no reach or no ability to get the market or I have a great product and no visible means of selling it in the market, it will just become permanent potential. It won’t go anywhere. I think product, or at least the good enough product, is a price of entry to the dance. 

 

Where the real differentiation takes place in my mind today in particular is in the digital marketing and the ability to get your brand out there, and then very much, I mean of course you’d expect this from an old sales guy, it’s in the selling. It’s in the ability to intersect with the customer, to get the customer aware very quickly as to the value that you can create for them and what it means to them or returns basis, and obviously then execute on what you and the customer have agreed as the solution that will suit their needs. 

 

Dennis, that was a great demonstration on how to create clarity through the entire company by getting everyone laser-focused on the real drivers of revenue growth. On behalf of our audience, I know you’re a very busy senior executive, I want to thank you for contributing back to our body of knowledge and spending some time with us this morning. 

 

I want to thank you, Greg, and I encourage the audience, when I started selling, the great hero on the top of my head would tell you that I’ve been in it a little bit. The resources and the ability to understand the customer were almost solely dependent upon me and my interaction with the customer. Today there are so many sources of information about the customer and about what’s going on in the customer’s world that you should take stock of before you even intersect with the customer. 

 

We’re all busy, and it is hard to get our attention because we’re getting bombarded with emails and various attempts to get in. So, the more you know about us, the more laser beamed your response or your approach can be, and the less time we’ll have to take to get better solutions for our companies to make us more profitable and to allow us to grow faster than we could on our own. 

 

Summary

I hope you gained valuable insights for your business from my interview with Dennis.  If you would like to spend time with me on the topic of driving revenue per sales head up, come see me at The Studio in Dallas. The Studio is SBI’s multimillion dollar, one-of-a-kind, state-of-the-art executive briefing center. Sessions at The Studio are experiential and are designed around the principles of interactive exercises, hands-on innovation, and peer-to-peer collaboration. The Studio is a safe-haven for learning and after just a few days clients leave with confidence and clarity your revenue growth strategies and sales and marketing motions to make your number. 

 

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ABOUT THE AUTHOR

Greg Alexander

Leads the firm's focus on the CEO’s role in accelerating revenue growth by getting the product team, the marketing department, and the sales organization into strategic alignment.

Greg is the host of The SBI Podcast, the most listened to sales and marketing podcast on the internet.

 

He is the host of SBI TV, a monthly television program broadcast on the internet featuring top B2B sales and marketing leader sharing their strategies to grow revenues.

 

Greg is the Editor-in-Chief of The SBI Magazine, the leading B2B publication focused on sales and marketing effectiveness.

 

He is the author of two critically acclaimed books Topgrading for Sales and Making the Number.

 

Greg has authored over 100 articles on SBI’s award winning blog, The SBI Blog.

 

He graduated from The University of Massachusetts Amherst with a BA in English and received his MBA from Georgia Tech.

 

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