Business-to-business(B2B) success is measured by growth. Companies that sustain profitable growth over time know how to make sure all aspects of their organization create and/or enable customer value through customer-centricity. This includes every functional department within the organization from Human Resources/Talent Management to R&D, to Finance, to Production/Manufacturing, from Marketing, to Sales, to Implementation/Shipping, and Customer Service. And that all the associated processes such as product conception, product development, and service delivery, are firing on all cylinders to create customer value and drive growth.growth, customer centricity, growth engine, customer value, B2B, smart business, KPIs, alignment, collaboration, performance management, key performance indicators, measurement, measures, metrics

  1. What does it mean to fire on all cylinders in your company?
  2. How do you spot misfires?
  3. What can you do to keep your engine humming?

The answers to these questions are the focus of this episode of our What’s Your Edge? podcast.

When your growth engine is at maximum efficiency, it means that every department within the company is operating at peak performance, aligned around the organization’s business outcomes, and working together to achieve these.  Sounds relatively easy, right? But it takes only one weak link in the engine to result in an engine misfire.

Engine Misfires are Costly and Put Businesses in Growth Jeopardy

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Worn out plugs, dirt or carbon in the fuel injector, a failed ignition coil pack, vacuum leaks, or a faulty oxygen sensor are among the reasons for engine misfires.  When an engine, such as your car engine, isn’t operating on all cylinders, the result can be expensive and/or dangerous:

  • Decreased gas mileage which results in increased fuel costs.
  • Slow acceleration or noticeable loss of power can impact maneuvering in traffic or being able to avoid an accident.
  • Engine stalling potentially setting up a scenario for an accident.

While there may be a number of signs an organization isn’t firing on all cylinders, these three are among the most common.

  1. A noticeable loss of customers or market share. Success in any industry requires keeping your customer retention rates above the average. And for most organizations, that means close to, or above, an 80% retention rate.
  2. High customer acquisition costs, difficulty closing net new customers, or a poor win/loss ratio. In B2B companies the average rule of thumb for customer acquisition costs is 3:1, that is you spend approximately 33 percent of the average Lifetime Value on acquiring new customers. According to research by the Rain Group, the average win rate across industries is 47%.
  3. Low customer engagement across the customer journey resulting in low pipeline coverage ratio. According to Investopedia, analysts expect a pipeline coverage ratio of three or better.

It is easy to see that these types of engine misfires are costly and potentially put your business at risk. Let’s examine some of the major functions in an organization and how they provide the power necessary to grow your business and create customer value.

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How do Major Cylinders Improve Your Growth Mileage?

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An engine, specifically a car engine, converts your fuel (gas or electricity) into energy that causes your wheels to turn in order to move the car.  The same is true for the functions and processes that serve as the engine for your business.  Let’s briefly look under the hood at five important cylinders that comprise your business engine and enable your organization towards growth and customer value:

  • Product Development and R&D: Without a great product or service, it’s difficult to achieve growth. However, it’s not enough to simply have a great product. It’s also important to continuously innovate and improve upon it. This is where R&D comes in. Companies with superior R&D capabilities have higher revenue growth rates than those with inferior R&D capabilities. Companies that invest in R&D are able to stay ahead of the competition and continue to provide value to their customers.
  • Marketing: Once a great product or service (solution) has been developed, it’s important to let the world or at least your target market know about it. Marketing is the process of attracting and keeping customers to generate revenue. Marketing and the strategies they develop and execute are the keys to creating demand for your solution. When you have demand, you have a sales pipeline. We’re not talking about measuring the number of qualified leads, we’re talking about creating demand from new and existing customers. Ultimately this demand is captured in the sales pipeline. The sales pipeline is a great way to gauge a company’s health.growth, customer centricity, growth engine, customer value, KPIs, alignment, collaboration, performance management, key performance indicators, measurement, measures, metrics
  • Customer Support/Service: Once a product has been sold, it’s important to provide the necessary support to ensure customer satisfaction, retention, and referrals. This includes everything from training and implementation to ongoing maintenance and support. HubSpot research found that 93% of customers are likely to make repeat purchases with companies that are customer-centric and offer an excellent customer experience.
  • Sales: Sales is the department that is responsible for closing the deal and bringing in profitable revenue. Sales teams, whether direct or indirect, need to be knowledgeable about the product or service and be able to effectively communicate its value to potential customers. By calculating the profit ratio (net income divided by sales revenue) businesses can reveal how much of every dollar brought in by sales actually makes it to the bottom line.
  • Human Resources (HR)/Talent Management: HR improves the company’s bottom line with its knowledge of how human capital affects organizational success. Pay, performance management, training and development, recruitment, and onboarding, and reinforcing the values and culture of the business are all within the domain of HR. Effective human resource management enables companies to recruit and retain employees, improve and enhance the organization, and ensure the organization creates an environment conducive to a positive employee experience.  According to the recent Forbes Insights Research, “The Experience Equation: How Happy Employees and Customers Accelerate Growth”, companies that deliver great employee and customer experiences are growing almost twice as fast as companies that stumble in both areas. Of the executives surveyed, 70 percent agreed that a better employee experience leads directly to a better customer experience.

The Importance of KPIs to Drive Alignment and Collaboration

Each of these functions plays a critical role in achieving your organization’s business outcomes. However, it’s not enough for each function to operate independently. A study by Deloitte found that companies that prioritize collaboration are twice as likely to be profitable. This level of performance can only be achieved when each department is aligned with the company’s outcomes and is working collaboratively towards achieving those goals. Just like an engine needs all of its cylinders to fire as designed in order to operate at peak performance, your company needs all of its departments to work together. growth, customer centricity, growth engine, customer value, KPIs, alignment, collaboration, performance management, key performance indicators, measurement, measures, metrics

Planning and performance management are two parts that support alignment and collaboration.  The organization’s overall strategic and operational plans serve as the foundation for each department’s plan.  To achieve alignment its essential that the individual department’s plan ladder up to the umbrella plans.

Two critical aspects of a good plan are that it is customer-centric and measurable. How do you decide the overarching metrics for every department’s plan?  You ensure the measures in the plan will logically link to the organization’s key performance indicators (KPIs), that is the metrics your organization is willing to invest in to improve, create customer value, and accelerate growth.  In this way, KPIs serve as an excellent alignment and performance management tool.

Therefore, it is crucial to wisely select your KPIs.  Because we live in the age of the empowered customer, in addition to traditional KPIs around financial measures, we recommend three customer-centric KPIs that every department impacts:

  1. Customer Engagement: The degree of commitment a customer has to your company
    and its products and services. There can be NO growth without engagement.
  2. Customer Effort: The degree of effort (easy or hard) a customer must exert to interact with your company. Customer effort is your leading indicator of a competitive customer experience.
  3. Customer Lifetime Value: The value of a customer over the span of time this customer purchases AND uses your company’s solutions. This measure provides insight into how well your company is functioning.

Is Your Growth Engine in Sure-Fire or Misfire Mode?

Take a moment to check your engine and take quick action to address any warning lights:growth, growth engine, B2B, smart business, KPIs, alignment, collaboration, performance management, key performance indicators, measurement, measures, metrics

  • Do you spot any misfires?
  • Are all cylinders firing?
  • Do you have the alignment and performance management to keep your engine humming?
  • Are you following the regular maintenance schedule?

The growth of your company depends on your answers. If you have questions, we have answers.

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