The smartest growth strategy in the world will fail if the people who are central to its execution don’t have the motivation, skills, and resources to get it done. Having consulted with dozens of companies on their growth strategies over the years, the most important factor I’ve seen in developing that execution capability is the widespread involvement of internal stakeholders in the development of the strategy itself — everyone from senior leaders to frontline team members.
Unfortunately, too often, firms embark on growth strategies by having a consulting firm or an internal strategy team collect data, analyze markets and competitors, and then work with senior leaders on a growth plan, after which people are simply given their marching orders. With this approach, managers and teams that were not involved in the creation of the strategy often don’t fully understand it, may not agree with it, or may not have the skills to do what’s needed.
A Failure of Execution
I saw this play out several years ago in a company that provided software for the telecommunications industry. With support from an outside expert, an internal strategy team developed a plan for growing sales revenue by over 30%. A part of the plan called for dozens of sales reps across the US to focus on selling new, higher-end integrated enterprise software packages while a newly formed inside group sold and supported the company’s lower-end legacy products. This required the first group to develop relationships at client organizations beyond those they already had with procurement and IT, focusing instead on higher-level managers. The integrated nature of the offering required that they begin to share information about customer contacts, coordinate sales approaches with the services and product teams, and be more disciplined in tracking progress. To support these shifts, the company provided training on the new software, and also gave each sales rep a new laptop that was loaded with a well-known sales management and tracking system.
On the surface, this approach made sense, and if executed properly, it would have significantly increased revenues. However, for the sales reps, this was a seismic change that they didn’t support or understand and were ill-prepared to carry out. It required them not only to understand the new products, collateral material, and more-complex pricing, but also to learn a whole new approach to selling and tracking their activities. On top of all that, there was a new commission system that paid out over a longer period of time, based on customers’ utilization of the software. About the only thing that the sales reps liked were the new laptops; the rest of the changes were simply overwhelming. Predictably, after six months, revenues actually went down rather than improved, and the company was forced to rethink its strategy for growth.
A Better Approach
As a business leader, a more effective approach is to engage broad segments of your organization in the development of your growth strategy from the beginning. There are four keys to doing this well:
Trust your team that they can develop ideas that will make a difference. Sure, it’s tempting to find outside experts with established credibility who can give you fresh insights and plans. But without the engagement of internal people, those plans may be difficult to carry out. That doesn’t mean you can’t engage outside voices at all — just that they should not drive the strategy-making process.
Incorporate a strong educational component in the strategy-making process so that the people who are involved in the effort have a common understanding of the financial and operational benefits and challenges, as well as how they fit into the bigger picture of the company as a whole.
Give the strategy-development process enough time to allow people to learn, contribute, debate, and become committed to the outcome — and still do their day jobs. It’s natural to be impatient, and you indeed should want the growth strategy to be crystallized as quickly as possible. But bringing people together takes time. Data has to be collected and shared, homework has to be done in between sessions, and ideas need to be tossed around and then discarded or sharpened.
Don’t wait for the process to finish before you move into action. As my colleagues and I and others have written previously, strategy doesn’t develop in a straight line. It requires constant iteration, testing, experimentation, and learning — all of which you should encourage along the way. Experiments will also give you a window into what skills, resources, and capabilities will be needed to scale up.
To show you how this works, let’s look at Payoneer, a global fintech company with over 2,000 employees, and how they have done this over the last two years. Payoneer provides a platform for millions of small businesses and independent professionals around the world to send and receive cross-border, multi-currency payments from customers, suppliers, contractors, and marketplaces such as Amazon, Etsy, and others, and thus participate in the global economy. They have hired me in the past to advise them on their growth strategy.
When CEO John Caplan joined Payoneer in mid-2022, there wasn’t broad consensus across the organization on how the company should accelerate growth, and he wanted to take a fresh look: Should they add new products or capabilities (either organically or through acquisitions)? And if so, which ones? Or should they do more cross-selling and up-selling of their current products? When Caplan brought his senior leadership team together that summer, the data that was brought forth to support different pathways was inconclusive.
To cut through the ambiguity, Caplan realized that he would need three things: better data; views of people from across the company, including those who were closest to the customers; and an objective, external perspective on the addressable market. He also felt strongly that these three elements would need to be integrated, not by him alone, but by people from across Payoneer who would be responsible for acting on whatever strategy emerged.
To make this happen, Caplan launched a multi-month process of discovery and learning that directly engaged more than 200 people across the company. It started with a three-day workshop for executives and some of their direct reports in which they all looked at external market data (provided by a strategy firm that worked side-by-side with the team), internal analytics about customer profitability, customer feedback, and other data, then identified possible growth opportunities and further questions that needed research. After some more homework, a few weeks later, an even larger group of 50 or so people met for several more days to go into greater depth on some of the key opportunities and identify new ways of working that could drive growth. Some of these were put into play with experiments in regions or countries, or with certain types of customers.
For example, one of the strategy ideas was to provide hyper-local customer care by using in-country vendors who understand local business and cultural contexts to support customers in their own language and time zone. Early on, the team picked one country in which to try this approach so that they would learn how it worked — and how best to manage the vendors — before expanding to other countries.
This process of further analysis, workshops, and experimentation continued for several months, with Caplan keeping a close eye on the timeline with his chief transformation officer. Caplan then pulled together the full team to turn what had been learned into a more formal growth strategy that was the basis for the company’s budget and resource allocation. The strategy was also shared and discussed at a number of town hall meetings. Each regional manager also presented and discussed the outcomes locally to ensure that everyone was on board.
Although it’s still early, data shared at the company’s inaugural investor day in September 2023, which showed data as of the end of June, indicated that this growth strategy was already bearing fruit. For example, one element of the strategy was to identify the “ideal customer profile”: entrepreneurs and businesses who used the Payoneer platform above a certain threshold consistently. The number of these ideal customers at the high end grew double digits year-over-year. One-year revenue retention for the June 2022 cohort of ideal customers was 120%, and operationally, the company showed customer acquisition cost payback of less than 12 months for this cohort. In addition, there was significant growth in new business units.
Engaging a large number of team members in the growth strategy–making process will be messy and require patience. But in the end, the capability and buy-in that you develop will greatly increase your chances of success, both in the short-term and beyond.
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Copyright for syndicated content belongs to the linked Source : Harvard Business – https://hbr.org/2024/02/internal-buy-in-will-make-or-break-your-growth-strategy
