By Garrett Sheridan
A question on the minds of most organizations today—and an item that continues to be high on their agendas—is deceptively simple: “How do you drive profitable, organic growth?” Why is it that some companies tend to excel at driving growth while others struggle? What are they doing differently?
To start with, organizations successful at driving and sustaining organic growth do several key things fundamentally better than their competitors.
They use data to determine the addressable market.
Understanding which products are going to be drivers of growth is critical. But effective organizations also take a very data-driven approach to growth, investing in building a detailed understanding of sales potential for every customer and customer segment, including their existing customer base and prospects.
If an organization fails to accurately assess the addressable market, any number of issues can arise that will sidetrack its plans for growth, including a sales force that is too large or, worse still, too small.
They build sales teams aligned with growth targets.
Organizations with impressive track records when it comes to growth know that it is critical to design the sales organization appropriately to deliver on growth strategy and are adept at thinking through the technology and processes (e.g., CRM, or account planning) required to effectively manage the sales process.
They excel at determining what “footprint” is required to build the right sales organization to execute the strategy by answering the following questions:
How many “hunters” are needed to go after new customers?
How many “farmers” are needed to manage existing accounts?
What number, type and quality of people do we need and where can we get them if they don’t exist in the organization today?
How do we get the right metrics in place and the right compensation to drive the behaviors and results that lead to profitable growth?
They avoid the innovation “trap.”
Another thing high-growth companies do better is innovate. A recent Harvard Business Review article explored the four different types of innovation and how they can be successfully deployed to address specific organizational needs, concluding there was no single true route to innovation, and the chosen route must fit the problem or issue being solved.
The trap that many companies understandably fall into is assuming that innovation must be of the disruptive or breakthrough type—product overhauls, new operating models, major strategy shifts or a nebulous, “out of the box” solution to shake up the status quo. After all, innovation must be new, bold, groundbreaking and an about-face from everything we have ever done or known, right?
Not so fast—you don’t need to change the world just yet. Companies that drive incremental or “sustaining” innovation year over year have figured out that it can be very profitable, especially when it’s customer-driven and grounded in the ability to translate customer needs into products and services that deliver significant value. To do this, you will need two things: an innovation engine and a disciplined process (as well as a disposition to take a few risks).
So how does this incremental innovation actually work? Take the example of a large medical supplier with over $100 billion in annual revenues and a services line broad enough to incorporate everything from toothbrushes to large diagnostic equipment used in healthcare. Their innovation charter? To better understand how their customers were using their products and increase user efficiencies.
To do this, they spent considerable time in hospital operating rooms where they quickly sized up how typical surgeries were using their products. To their surprise, it turned out that an average surgical procedure needed upwards of sixty instruments, and nurse practitioners were selecting each one individually, essentially rebuilding the wheel each time they prepared for surgery.
How did they innovate? They bundled the instruments into procedure-appropriate packages, creating a far more efficient process for the nurse practitioner. While this may seem like an obvious solution, it created a more on-demand, as-needed inventory aligned with customer needs, reducing preparation time for surgery.
They understand which business capabilities are priorities.
One frequently seen dynamic in high-growth companies is that while leaders are adept at focusing on the revenue side of the equation, they also spend time thinking through the capabilities required to support growth. As a company grows, not all areas experience growth the same way. Highly effective companies think through the organizational-level capabilities that differentiate them and are truly critical to execution.
Consider a company like Apple. One could argue that the most valuable capabilities at Apple are product design and marketing. Consequently, organizations like Apple continue to invest in those capabilities ahead of, and then in support of, growth.
Also, to the earlier point about understanding the needs of customers and innovating around them, Apple managed the neat trick of not only understanding the current needs of customers but anticipating their future needs and, like only a handful of companies, shaping those future customer needs by creating products that addressed needs customers didn’t know they had—opening up a whole new addressable market for the business.
They get rid of walls.
All organizations—without exception—that achieve effective and sustained results have removed formerly existing barriers or silos which were preventing growth.
What happens if you don’t? Take, for example, Sony, a massive global behemoth that many agreed, during the 2001 launch of Apple’s game-changing iPod, had the requisite capabilities to come up with the next revolutionary music player.
So, why didn’t they? Because those capabilities remained locked, stuck within individual business units across the company and unable to synergize into an innovative, competitive product.
Lesson learned. Sixteen years later, many companies that have similar issues have now implemented growth and innovation “councils” to promote collaboration and help foster cultures that are better able to integrate capabilities and harness technologies across functions and business units.
It’s within reach.
Profitable growth is within reach for organizations that effectively integrate their customer needs, market dynamics and capabilities. Easier said than done, right? Yet by doing many of the same things you may currently be executing, but doing them in a more focused, integrated and customer-centric manner, you too can drive and sustain a growth engine just like your competitors.
Now you can answer the question of how to drive profitable growth—but will you?
Contact Garrett Sheridan. Learn More
By Sean Williams
The recent Wells Fargo settlement—to the tune of $185 million—has given business leaders pause to examine the contributing dynamics. A combination of aggressive cross-selling strategy, insufficient employee monitoring, and incentives misaligned with the best interests of customers set the stage for a massive employee fraud in the creation of unauthorized accounts driven by the desire to earn bonus compensation. Learn More
Hardly unique, Wells Fargo is one of many companies placing aggressive goals on customer-facing employees, most in a direct position to inadvertently do harm, and they must carefully evaluate the strategic, legal, and reputational risks.
Clearly, substantial changes are often necessary to remain competitive as employees adjust to new ways of interacting with customers to deliver profitable growth. While post-Wells Fargo activities may include new value statements and requisite hours of training, actual employee behaviors are much more difficult to monitor, and frequently fraught with blind spots.
But how is a leader to know if employees are upholding and reinforcing company policies and standards rather than potentially destroying value by pursuing individual goals at the expense of customers?
One source of safeguarding against these risks is to employ something many companies already have: a voice of customer program.
How could a voice of customer program help a bank address its blind spots in employee behavior? Obviously, customers will not know—at least not immediately—if a bank employee opened an account for them without their permission. But a voice of customer program employing outreach to recently-opened account holders asking for customer feedback on the sales process—a common activity—can illuminate such a disconnect.
But such an approach is not foolproof in that this type of feedback is solicited only from the small number of customers who have opened accounts, and many will routinely decline the interview for reasons that have little to do with unethical bank behaviors (e.g., customers commonly believe there was a mistake). Beyond customer declinations however, it may be likely that either the email address or phone number designated to the new account is bogus.
However, if the question was asked of any customer conducting any transaction on an active account, it would provide a broad data sample that could easily be used to monitor and evaluate employee behavior, notably illuminating any discrepancies between the customer’s assertion that they have not opened an account and bank records indicating otherwise. More importantly, these disconnects will reveal potential problems in branch locations where new goals have been rolled out, strategies implemented, etc.
Such dynamics transcend the financial services industry, certainly, and an effective voice of customer program can be useful for managing risk from employee behaviors in any company. For example, many automobile manufacturers reimburse dealer service departments for the parts sold for repairs, but not for actual car repair. This creates a subtle mismatch between the ideal activities of the service personnel (repairing cars) and the service for which the manufacturer is paying (installation). Such a disconnect creates easy opportunities to “game the system,” which in turn creates clear risk for the manufacturer.
When a customer returns for the same service on the same vehicle, the manufacturer can safely assume that the repair was not correctly performed on the first attempt. But the manufacturer may be unaware if service personnel created duplicate entries for the same repair, if repairs sold were not required, or if the customer had repairs performed elsewhere.
These blind spots can be easily addressed by asking the right questions of customers. For example, inquiring with a customer as to when the last time a specific repair was performed may indicate if service personnel unnecessarily replaced parts not yet past their lifetime expectancy.
In the insurance sector, companies that are increasing pressure on claims can install new processes and due diligence, but the clear potential to harm claimants means that insurance companies should be auditing customers to ensure such processes are being followed. Manufacturers changing warranties and retailers modifying return policies could also better manage risks by more frequently surveying the customer experience.
Of course, collected customer data may never be perfect—and will be effective only insomuch as the customer remembers interactions. For example, in the earlier banking illustration, the customer could incorrectly remember opening an account, when such a transaction in fact occurred, or inaccurately recall the bank, if they do business with more than one.
But this random noise will not change significantly over time or vary much by location, which are exactly the indicators a bank should be seeking. And the voice of customer data can provide vital information exactly where there are few other options for examining employee behavior. To realize monitoring value of voice of client programs, the programs should be integrated into the strategy implementation and risk management processes. Consider the following five steps:
1) Examine the new strategy with the appropriate cross-functional team of leaders from strategy, sales, marketing or human resources. Identify where the new strategy unintentionally incentivizes employee misbehavior toward customers. Eliminate as many of these incentives as possible.
2) Explicitly list any remaining potential avenues for employee misbehavior. The more specific about the different ways this misbehavior could manifest, the better.
3) Work with the data and analytics function to map out which of these manifestations can be identified today, and which could be monitored through existing infrastructure with some additional work. Think through the analytics and reporting that would be necessary to ensure that what can be seen, will be seen. The remaining manifestations of employee misbehavior are the blind spots.
4) Work with the voice of customer program to shed light on the blind spots, by asking the right questions of the right customers at the right time. Make sure that the voice of customer program and the data and analytics functions work together to produce integrated reporting for the leadership on the manifestations of misbehavior, including rates, trends, and locations. Establish baseline values of customer responses before rolling out the new strategy, goals or incentives.
5) Make sure there are no remaining blind spots. If blind spots remain, or new blind spots are identified later, consider adding a customer survey or other data collection mechanism as necessary to address the new blind spots.
This approach helps ensure that problems are identified before they become widespread, which will help put both executives and regulators at ease while minimizing situations where employees may feel encouraged to act against the best interests of the customer, mapping and monitoring such behaviors to course correct when required.