A Better Way to Manage A Capital Intensive, Digital and Data-Driven Selling System
Customers increasingly desire more compelling, self-directed, and friction free digital experiences. Today the customer journey happens almost entirely online. The broad adoption of digital, data-driven, distributed and dynamic (4D) selling networks has only accelerated this push to owned digital channels and data-driven selling.
These dynamics have fundamentally reshaped the allocation of growth resources, operating budgets, and capital investment in the three decades since the emergence of digital channels. The overwhelming customer preference for digital engagement – amplified by a revolution in AI and explosion in new digital touch points – has reallocated two thirds of growth budgets to “owned” digital selling channels. The shift to “4D” selling has transformed the go-to-market approach of 97% of organizations, according to research by the Wharton School of Business.
- Operating budgets are being reallocated to owned digital selling channels and the systems, data, and operations that support them. The average organization uses over 20 digitally enabled marketing, sales and service channels to engage prospects and customers over the revenue cycle. As a result, commercial technology and “owned” sales and marketing channels now represent 25% and 35% of operating spend respectively, displacing paid media and the overhead that supports field sales according to the Revenue Operating System report.
- Digital selling infrastructure and data have become assets on the balance sheet. The capital investment in the digital channel infrastructure, customer databases, and enabling technologies that support digital commerce and “4D” selling teams has created some of the biggest financial assets on the balance sheet. In some cases, the customer data within a business can be more valuable than the business itself.
- Investment in enabling front line sellers with technology is growing. The cost of arming a customer-facing employee with the information, automation, and digital channel capabilities they need to compete in 2022 has risen to thousands of dollars as selling becomes more digital, agile and data driven. Spending per employee is on a trajectory to exceed $10,000 in technology and related services and support as CFOs reallocate funds from sales travel, MDF funds, and real estate to more scalable investments in technology and training. This will bring sales and service reps more in line with other highly automated job functions like warehouse, production, and finance workers– who have more technology investment behind them to make them productive. “Sales is the least technology enabled job function out there,” says Stephen Messer, CEO of Collective[i] a platform that leverages AI to improve sales and marketing performance in so many ways, they almost defy description. “Every job function outside of the demand chain – from warehouse workers and truck drivers to finance, HR and procurement executives – have more technology investment behind them on a per capita basis. That’s a big reason why productivity gains in selling – which has remained fundamentally flat at only 30% selling time in front of the customer for the last several decades – have failed to take off.”
The confluence of these trends has also created unprecedented cost and complexity for the executives leading sales and marketing. This is redefining how businesses manage their commercial systems to create growth and value. “Over the last forty years, growing a business has evolved to become a capital intensive, digital, and data-driven team sport,” says Chris Hummel, author of the book Revenue Operations: A New Way to Align Sales and Marketing, Monetize Data, and Ignite Growth. “In that time the weight of sales and marketing investment has shifted from media and field sales to owned digital channels and data-driven selling. Today we’ve reached a tipping point where the cost, complexity and interdisciplinary nature of selling has rendered traditional models for managing the teams, operations, and systems that support the revenue cycle obsolete.”
The complexity of coordinating so many digital channels and harnessing the data they generate is breaking the back of traditional marketing, sales and service silos. It has also forced the consolidation and coordination of many operating teams (marketing operations, sales operations, sales enablement, training and development, customer analytics) that support them. As a direct consequence, the return on selling assets – people, data, technology, and content – still falls below managers’ expectations, and even further below their potential to create firm value by any financially valid measure. The current situation is unsustainable.
The core problem is there is no established system for getting the many different channels, teams, and technologies in the growth equation working together. Business leaders lack an operating system for managing their growth assets, systems, and processes.
Something has to change. Until these fundamental issues are addressed, the potential of technology and AI to unlock consistent, profitable, and scalable growth will not be realized.
The solution to this problem is clear. A new system for growth is urgently needed. One that aligns revenue teams and the systems, operations, and processes that support them across the entire revenue cycle. And generates more growth from the expensive data, technology and channel assets that are the foundation of modern selling.
The notion of “connecting the dots” across the commercial technology portfolio to create a system that improves selling performance and unlocks more growth is taking hold with sellers who have grown frustrated with an increasingly complex and siloed set of tools their teams are using. “The technology tools are useful, but they are really just ingredients to an operating system for growth. The real value…is in connecting the dots,” according to Marcus Jewell, the CRO of Juniper Networks. “Knitting together a highly profitable and productive portfolio of selling technologies can multiply the return on technology, adoption, and seller performance,” echoes Jeff McKittrick AVP of Go-to-Market Systems and Strategy of Pure Storage. “This has become mission critical as the cost and complexity of the sales and marketing tech stack continues to growth.” Understanding the ROI of our enablement investments has really helped us unlock more growth potential from our data and technology investments while optimizing our enablement philosophy,” says Christian Smith, the Chief Revenue Officer of Splunk.
Significant financial value can be generated by creating a system for scalable and consistent growth. As evidence of this, the market value of the top 100 technologies enabling the Revenue Operating System has grown to nearly $1 Trillion according to research by the Revenue Enablement Institute. Sixteen “Revenue Operations Unicorns” valued at over $1 Billion have emerged from this group. VC and Private Equity investors poured $4.7 Billion in new investment into these firms in 2021 to fuel product innovation and inorganic acquisitions to help them “connect the dots” across the commercial technology ecosystem.
Many of the executives leading the “unicorns” that are defining and enabling this commercial transformation view the sales and marketing tech stack as a highly interconnected system rather than a portfolio of point solutions. “What’s important is not the number of tools, but your ability to connect the dots across the sales and marketing technology ecosystem,” echoes Robert Wahbe, the Founder of the Sales Enablement Platform Highspot, in a recent interview. “The highest performing organizations are using advanced analytics and AI to connect the dots across traditional working silos to find ways to generate more revenues, improve operating efficiency and manage risks like sales rep churn,” according to Marc Altshuller, CEO of Varicent, a sales performance management platform in a recent interview
Experts in the science of growth are proposing a framework – the Revenue Operating System – as a better model for aligning the people, process and technology that underlie growth. Treating the commercial model as a “system” can help to align revenue teams and the systems, operations, and processes that support them across the entire revenue cycle. And just like the operating system in a computer, it can be optimized to help businesses generate more growth from the expensive data, technology and channel assets that are the foundation of modern selling.
“The Revenue Operating System is designed to unlock the potential of technology to make selling more consistent, scalable, and most importantly profitable,” says Chris Hummel. “This system can help business leaders to reimagine their technology stacks and go-to-market models around platforms that aggregate, orchestrate and deploy customer engagement data rather than a disconnected portfolio of “point solutions” purchased to solve functional problems.”
So what would a Revenue Operating System look like? According to Chris Hummel, the underlying principle behind the notion of a Revenue Operating System is to find ways to use AI and advanced analytics to connect your commercial data and technology assets in ways that drive growth and create firm value. An “Engagement Data Hub” that collects and converts customer, sales, product, and transaction data into commercial insights that inform actions and decisions to create value and growth sits at the center of the framework. Another important element of the system is to find ways to better utilize and leverage the commercial technology assets (like CRM, enablement, engagement, content management, and readiness systems) that support sellers. The most successful growth leaders are taking a “top down” approach to managing their sales and marketing technology portfolio by knitting together these technologies into ecosystems – or federations – that have the greatest potential to create value and higher returns on their technology, content and data assets. These include “connecting the dots” across their tech stacks to:
- Manage and measure the financial return on growth investments
- Better package, price, and personalize communications, campaigns and offerings
- Optimally allocate people, time, and selling effort to the best opportunities.
- Improve the engagement, productivity, cadence, and coverage of selling channels
- Leverage customer data to optimize campaigns, recommendations, answers and seller priorities
- Integrate learning and development to better ramp, develop and retain top talent
The technology community is following suite with this vision. “The Revenue Operating System paints a clear picture of the state of your selling system,” says Viral Bajaria, the Founder of 6Sense in a recent interview. “You need to orchestrate across the different siloes of technology. That’s how value gets created in modern selling.” Recent M&A activity reinforces the notion that the commercial technology ecosystem is converging around a more coherent system of growth. Thirteen mergers and acquisitions have occurred in this growing and dynamic community in the last 12 months, as narrowly defined point solutions and software categories converge around a more interconnected system for growth. The categories converging around this system include Sales Enablement, Sales Engagement, Sales Performance Management, Marketing Automation, ABM, RevOps, Customer Data Platforms, Revenue Intelligence, and Configure Price and Quote (CPQ) categories. For example, in the last year most of the major players in the sales enablement, engagement, and readiness space merged to create a more integrated offering that better supports the day-to-day selling workflow. The average platform listed in the Revenue Operating System analysis is tracked in over three software categories by the likes of Gartner, Forrester and G2. In frustration, over a dozen of the leading software firms have started to position themselves as “Revenue Operations Platforms and solutions” in an attempt to create a sort of “meta category” that describes their interconnectedness.
This notion of managing a business function like a system is not new. Every other primary function in a business – from the procurement, manufacturing, and shipping of products to the management of financial and human resources – has an established system. Sales and marketing have historically been one of the few business functions that has eschewed the notion that taking a systemic approach to creating value. Until now.