1CMO

Growth strategy | Advisory | Force multiplier

Growth

Knowing When to Pivot, Persevere, or Stop

by

You’ve got to know when to hold ’em

Know when to fold ’em

Know when to walk away

And know when to run…

– Kenny Rogers, chorus from The Gambler

The concept of “making a pivot” has become popular to use when talking about business growth strategy, but I have found it is commonly misunderstood. Moreover, there is often confusion about when to consider it, and how to evaluate the alternatives.

This article will explore the meaning and purpose of making a pivot, and the two common alternatives of persevering, or stopping.

Defining Business Pivot

In some respects, business is like the game of poker. It is full of uncertainty, some things are in our control and others are not, we learn from experience, and there are multiple players all trying to win. Your strategy is how you choose to handle all of those elements in order to create a winning hand. Over time, expert players learn when to double-down, hold, fold and when to walk away to realize the greatest odds of success.

Poker is a great metaphor for the concept of “pivot or persevere,” which comes from Eric Ries classic book, The Lean Startup. His definition of a pivot is a change in strategy without a change in vision. In the book, he goes on to explain, a pivot is a “structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth.”

It is important to note that while a pivot is a change in strategy, it does not necessarily need to be a complete change in direction. In fact, pivoting is often about looking at what has worked, and seeing how you can make refinements or refocus your efforts using those insights. As Ries notes, “keep one foot rooted in what we’ve learned so far, while making a fundamental change in strategy in order to seek even greater validated learning.”

Where Pivot Fits in Growth Strategy

The search for Product/Market Fit is a structured process where a growth leader gains validated learnings by sharing a minimum viable product with prospects and listening to the feedback.

How does this work in practice?

Growth leaders and company founders always have a vision. To achieve their vision they need to define a strategy and objectives to get there. Classic strategic planning theory dictates that the chosen strategy can change over time (or with new learnings from the market) but the vision should remain the same. When deciding to make a pivot, the target market or the value proposition (features and benefits) of the product or service might change, but the vision for the problem to solve does not. Each pivot creates a new set of assumptions and features to validate, and the process repeats.

The objective for each cycle of this process is for growth leaders and their teams to make a decision by asking a simple question: Should we pivot, persevere, or stop?

  • Pivot: If all the feedback is negative (or even worse, indifferent) and the data does not support the leap of faith assumptions, then it may be time to pivot. As the definition states, this means to try a different strategy in pursuit of the original vision.
  • Persevere: If each experimentation cycle seems to be more productive than the last, meaning there are lessons gained and the data supports the leap of faith assumptions, then the obvious next step is to persevere for another round of refinement.
  • Stop: In extreme cases, typically driven by complete failure to validate any of the leap of faith assumptions, or running out of cash to continue funding the search for Product/Market Fit, growth leaders or company founders may conclude there are no other pivots to make and it is time to stop. The decision to walk away is never easy, but sometimes is the only rational decision left.

The 10 Most Common Business Pivots

Just as every business and solution offering is different, so are the potential business pivots. However, there are some common themes. Here are the ten most common business pivots as highlighted in The Lean Startup book:

1. Zoom-in pivot

In this pivot, a single feature of your product becomes the whole product. This might be because one specific feature gets significantly more traction than the rest of your product. In these cases, channeling your resources into that feature alone can allow you to get your product onto the market much more quickly.

2. Zoom-out pivot

This pivot is the exact opposite of the first example: Your current product becomes a single feature of a bigger product. In this case, it means you have established that there is an interest in your product, but there is reason to believe that it needs to be a part of a larger, more developed product in order to be successful.

3. Customer segment pivot

Based on your field research, you conclude that your product should be targeting a different type of customer. This comes from discovering that your product interests a different audience to the one you were originally pushing it to. You might not need to change your product much at all – only your customer persona.

4. Customer need pivot

Your solution is refined based on a greater understanding, or new revelations, about your customer’s needs. Sometimes this pivot is driven by the discovery that the problem you’re solving is not important enough to your customers, or they are unwilling to pay for it.

5. Platform pivot

This pivot refers to a change from an application to a platform, or vice versa. Most often, startups that aspire to create a new platform begin their journey by creating a single application as the foundation.

6. Business architecture pivot

This pivot was inspired by concept that a business can either be high-margin/low-volume (complex systems model, common in B2B solutions with complex sales cycles), or low-margin/high-volume (volume operations model, common in B2C solutions). Some organizations choose to pivot by switching architectures.

7. Value capture pivot

This pivot reflects a change in the way you make money from your product. An example of this pivot would be changing how you charge by switching to a subscription business model from a sale-by-sale e-commerce model.

8. Engine of growth pivot

In this pivot, you make a change in your growth strategy in order to achieve faster or more profitable growth. Most startups use one of three primary growth engines: (1) Viral growth, when current users recommend other users. (2) Paid growth, when you spend marketing budget on acquiring new customers. (3) And sticky growth, which is focused on customer retention and maintaining a low churn rate. In this pivot, you decide to change from one of these growth engines to another.

9. Channel pivot

In the Channel pivot, you change how and where you sell your products and/or services (for example, in stores, online, through partners, in-app, etc.) This pivot is typically in response to the learning that the same solution can be delivered more effectively through a different channel. In many cases, this will drive changes in the price, features, and competitive landscape of a product.

10. Technology pivot

In this pivot, you decided to change the technology that your project is built upon. This is often a result of learning you can achieve the same outcome with a different lower cost and/or better performing technology.

As you can see from these ten examples, business pivots can take many forms. Which pivot you choose will ultimately be driven by what you have learned from your market experiments.

The bigger challenge for growth leaders is determining when to pivot.

To Pivot, or Not to Pivot?

Deciding whether to pivot, persevere, or walk away is one of the classic entrepreneurial dilemmas. It is one of the most difficult decisions any growth leader, or company founder, will ever have to make.

Asking the honest question of “should we make a pivot?” is sometimes painful, but always important.

Making the pivot decision can be very stressful and difficult for teams to evaluate. To avoid the trauma, many growth leaders and company founders wait too long to consider a pivot, sometimes with dire consequences.

One easy way to avoid this “fire drill” is to schedule regular Pivot/Persevere decision-making meetings in advance. A best practice suggestion is to do this no more frequently than once a month, but not any less frequently than once a quarter.

The agenda for this meeting is simple: Ask yourself, and your team, what evidence do you have that your current strategy is getting you closer to achieving your vision? Are you making sufficient progress to believe that your original strategic hypothesis is correct, or do you need to make a major change?

If your product experiments are helping you make progress towards validating leap of faith assumptions, and the feedback you are receiving is resulting in material improvements to the product offering, then it makes sense to continue.

If there is no evidence of making progress, or it is insufficient, then a pivot may very well be the best course of action. In the words of Eric Ries, “If we’re not moving the drivers of our business model, we’re not making progress. That becomes a sure sign that it’s time to pivot.”

Sometimes all you need is more patience, additional capital, or a larger audience. Other times, you might need to make a strategy change. In these scenarios, you might have the right product but you are targeting the wrong customers, it’s too expensive, lacks essential features, or doesn’t solve the right problem. This is when you pivot, or if you cannot see any viable path forward, you choose to stop and walk away.

Danger Zone for Growth Leaders

There may be no bigger destroyer of creative potential or financial capital than the misguided decision to persevere in the face of negative or neutral market feedback.

Instead of pivoting, or walking away, some growth leaders are tempted to stay on course and try to power through the obstacles. By refusing to make a decision, or embrace market feedback, they run the risk running in neutral. This is a dire situation where they are neither growing enough nor dying – just consuming scarce human and financial capital, but not making progress.

Growth leaders and their teams should take comfort in the realization that failure is a prerequisite for learning. In this context, making successful pivots will put them on the path towards a commercially viable solution offering.

This is the reason that many successful entrepreneurs and corporate growth leaders who have decided to make a pivot will tell you that their only regret was not making the decision earlier and quicker!

Conclusion

If growth leaders take only one lesson from the economic turmoil of the last 24 months, it is that we are living in complex VUCA business environment. The best path forward is to develop a growth strategy, and then move quickly to execute it. This market-facing activity will sometimes result in the need to re-evaluate the plan.

The decision of whether to pivot, persevere, or stop challenges every growth leader and business founder at some point. Making a good decision regarding whether or not to pivot your business strategy can be the critical difference between success and failure.

-Onward

About the author: Kimball Norup is the founder of 1CMO Consulting, a business strategy and growth advisory firm based in Sonoma, California. To read prior articles, or sign up to receive future ones by email, click here.

Validate Your Leap of Faith Assumptions

by

Leap of faith assumptions are the real power of entrepreneurs because the entire venture depends on it. If they are true, then great opportunity awaits. If they are false, the start-up/business risks total failure. 

– Eric Ries (author of The Lean Startup)

Many organizations choose to invest their scarce time and resources developing new products and/or services without having first validated that there is a market.

One frequent cause for this is the solution looking for a problem syndrome, where startups or more established companies neglect to fully understand or verify the problem first.

Without realizing it, the growth leaders of these organizations have made what is often called a “leap of faith assumption” that is, they have assumed there are ready and willing buyers for their offering.

Logic and common sense tell us that it would be very smart to verify this assumption before investing in building a solution.

Unfortunately, common sense is not always common practice!

There are several related common leap of faith assumptions made by company growth leaders. In this article, I will share what these strategic traps are and offer some guidance on how to avoid them.

Let’s get started…

Defining Leap of Faith Assumption

Every good strategic plan begins with a set of assumptions. After defining these assumptions, growth leaders next develop a strategy that uses those assumptions as a foundational starting point and build a plan around them that will achieve the organization’s objectives.

In general, you can categorize assumptions into two buckets:

  • Technical – assumptions you make about topics like usability, construction, efficiency, and reliability of your product or service.
  • Commercial – assumptions you make about topics like what prospects want, how you will market, sales channels, and customer success.

The goal for growth leaders is to test their assumptions as quickly as possible. For most assumptions, this is not that difficult. In fact, some assumptions can be validated from past experience or simple deduction based on accepted facts. For example, people need to eat food to live, or companies need to sell their services to grow.

Other assumptions, often related to functional details of the proposed product or service, require field-testing with prospects. This will be a topic for a future article.

In the world of startup and growth strategy there is a special subset of assumptions that are more challenging. These assumptions are so fundamental, that the success of the entire business rests on them. If they are true, tremendous opportunity awaits the company. If they are false, the company risks failure. Because they are unknown and highly risky, they are often called “leap of faith” assumptions.

Eric Ries popularized the leap of faith assumption concept in his book, The Lean Startup.

Note: Don’t be misled by the title of the book – the principles apply to any size or maturity of organization. In fact, his definition of a “startup” is: A human institution designed to create a new product or service under conditions of extreme uncertainty. This definition purposely does not include anything about company size, industry, or sector of the economy. It applies to any organization.

Growth leaders need to recognize that leap of faith assumptions are the riskiest elements of their strategic growth plans. They are also more difficult to validate, therefore there is a temptation to take them for granted, or simply gamble that they are right and not wrong.

Many startups and more mature companies have failed because they did not prioritize and properly validate their leap of faith assumptions first.

Critical Leap of Faith Assumptions

Growth leaders must try to validate as many of their assumptions as possible before they invest in developing a new solution to a problem. However, the critical assumptions, the ones we call leap of faith assumptions, should be the priority.

Leap of faith assumptions most often focus on the demand side of the equation. Why is this the case? Because if there is no demand, then there is no sale, and if there is no sale, then there is no business opportunity.

In my experience, here are the three most critical leap of faith assumptions that startup founders and established company growth leaders make:

  • The ultimate “leap of faith” assumption – is that prospects actually want the proposed solution. Making sure there is market demand is critical. If you solve a problem that people want to fix that is great news.
  • The next is – prospects recognize they have the problem. Or, are they living in ignorant bliss? This is not necessarily a showstopper, but if prospects don’t know they have the problem it means your marketing and sales process will be more complicated because you will have to educate on the problem and then the solution.
  • The third is – prospects are willing to pay for a solution. If people recognize they have a problem and want your solution, will they pay for it? This should be obvious – it is extremely hard to build a business model around a solution that nobody will pay for!

Validating Your Leap of Faith Assumptions

The Lean Startup Methodology pioneered by Steve Blank and optimized by Eric Ries was designed to help growth leaders quickly identify their critical leap of faith assumptions so that they can test them out on potential customers. Then they can decide whether to stay the course (continue validating and begin developing the solution) or change directions (pivot). A future article will cover this process in greater detail.

Discovery can only happen when growth leaders get out of the building and talk to real live prospects in the marketplace. Only then can you learn if potential future customers have a significant problem worth solving.

How do you do this? – By asking and getting answers to deeper questions like:

  • Do people really have the problem you think they have?
  • How do they describe the problem?
  • How do they address the problem today?
  • Is your concept a better alternative for them?
  • What is solving the problem worth?
  • What is the cost of inaction?
  • Where would they search for a solution?
  • How would they like to buy?
  • Where would you find more customer like them?

One proven strategy for growth leaders is to identify and prioritize their most risky assumptions to tackle first. Why? Those assumptions that are scary or make us uncomfortable are also the easiest to push aside. It is human nature to embrace what is familiar and safe, just as it is to avoid risk and the unfamiliar. Focus first on the leap of faith assumptions that have a high level of importance for project success along with a short duration of time to test.

Conclusion

Just because you “can” create a new solution is not a good enough reason. The real question is “should you?” – This can only be answered by determining that it is a solution to a problem that people want to solve and will pay for.

Before starting to create a new product and/or service, growth leaders must ensure they can positively answer critical leap of faith assumptions around demand for their proposed new product or service. A positive response will provide greater clarity and confidence to proceed.

-Onward

About the author: Kimball Norup is the founder of 1CMO Consulting, a business strategy and growth advisory firm based in Sonoma, California. To read prior articles, or sign up to receive future ones by email, click here.

How to Avoid Being a Solution Looking for a Problem

by

“If the only tool you have is a hammer, you tend to see every problem as a nail.”

– Abraham Maslow

The single biggest reason for startup failure is “no market need” – I like to call this the “solution looking for a problem” syndrome.

Unfortunately, this scenario is extremely common in startups. It is also common to find it in more established organizations.

Why does it happen? Entrepreneurial solution creators get so excited and passionate about their new product and/or service innovation that they gloss over a fundamental requirement for business success: To be viable your offering must address a real problem in the market that buyers actually want to solve.

The key takeaway for business growth leaders is to avoid falling in love with your offering until you have validated there is a market for it. To build and grow a successful business, you have to make something that people actually want to buy.

Growth leaders that ignore this wisdom will end up spending a lot of time and money trying to sell something that nobody will pay for. This can have fatal ramifications for a career, and an organization.

While the solution is simple, it is not always easy to do.

Start here…

First Identify Potential Problems to Solve

“It isn’t that they cannot find the solution. It is that they cannot see the problem.”

– G.K Chesterton

Begin your solution discovery journey by putting a customer hat on. Think deeply about significant problems that need solving.

This research exercise should be heavily influenced by your personal and professional life experiences. Your background and history can be a powerful lens through which to view the world.

For B2B problems, it is often much easier to focus in on a specific industry vertical or functional area. Ideally, one that you know intimately. For B2C problems, think about a specific demographic or consumer profile to get started.

When you identify a potential problem to solve, a pain to eliminate, or some meaningful metric that your future market would like to improve then you are ready to begin thinking about solutions.

But first, it is absolutely vital that you get feedback on the problem you have identified and confirmation from actual prospects that they care about a potential solution.

Here’s how…

Validate the Problem with Real Live Prospects

“You can increase your problem-solving skills by honing your question-asking ability.”

– Michael J. Gelb

At this stage, armed with a hypothesis of a problem, many startup founders start building their new product and/or service. This is a big mistake. Why? You simply do not know enough yet. Before doing any development work you need to get out of the building and talk to real live prospects in the market.

The smartest way to validate your problem-to-solve is to talk to at least 20 (preferably more) potential customers. You need to validate your hypothesis of the problem that you think they are experiencing.

Your goal is to get a better understanding of how they articulate the problem. What are their pain points? What is their desired outcome? What must the solution include? What is a solution worth to them personally? To their organizations?

These interviews must be done with real potential buyers who are experiencing the problem you want to solve. Even more importantly, these must be prospects who can make a purchase decision. For example interviewing a sales rep about a potential productivity tool might yield a positive response, but they are not your buyer…you need to validate with their sales manager, the one who has a budget and the ability to actually buy a sales productivity tool.

Why should you push for a least 20 interviews? Because you will learn and refine your problem hypothesis as you go.

  • The first three interviews (numbers 1-to-3) will help you understand and refine the problem statement. You will learn how to articulate it in the buyer’s language. You will also learn what questions to ask. While you might think you understand it, you are biased to the seller’s point of view, not the buyer’s. These first interviews will give you a much richer understanding of the problem from the buyer’s perspective.
  • The next seven interviews (numbers 4-to-10) will confirm the patterns and observations you made in the first round. You learn how to define the problem from the first three interviews and confirm your learnings in the second set of seven.
  • The next ten interviews (numbers 11-to-20) will provide you with a much deeper viewpoint on the problem, and help you to narrow in on the most impactful parts. This is where you will begin to nail your pitch, and where you will start to form a strong thesis around the eventual solution. For style points you can interview people from different sizes of organization, or tangential industries to your target, to gain a broader perspective on the problem.

One important caveat with your interviews: make sure these are conducted with actual potential customers. While it might be easier to interview your friends or people you know, they won’t give you the unvarnished truth that you need.

Talk to prospects who you don’t know, and who don’t know you.

And pay attention to what you hear…

Listen Carefully to Identify the Right Problem

“Solving problems means listening.”

– Richard Branson

While this buyer interviewing process is an exceptional learning opportunity, it can also be painful. You might not get positive feedback, or you might receive conflicting signals about the actual problem. Worst case, you get indifference…which means there is not a lot of energy around the problem or a solution.

Indifference is the kiss of death. What you are seeking is loud confirmation, or strong resistance.

Regardless of whether the feedback is positive, negative, or mediocre – the most important thing is to pay attention. Listen to what the potential buyers are telling you. It is much easier to make changes to your assumptions and plans at this early stage than it is later down the road after you have invested a lot of time and money to create a solution for a problem nobody cares about.

Based on your interviews you should now be able to answer some important questions:

  • Do people really have the problem you think they have?
  • How do they describe it?
  • How do they approach the problem today?
  • Is your concept a better alternative for them?
  • What is solving the problem worth?

“We fail more often because we solve the wrong problem than because we get the wrong solution to the right problem.”

– Russell L. Ackoff

At this point, assuming the feedback was mostly positive and you have validated the problem, you in a great position to begin to think about potential solutions.

Solutioning Mode

“We cannot solve our problems with the same thinking we used when we created them.”

– Albert Einstein

Perhaps the single most important piece of advice for entrepreneurs and growth leaders who want to avoid being a solution looking for a problem is this:

Fall in love with the problem first, not your proposed solution.

This mindset shift is so powerful because solutions may shift and morph over time, but problems are usually more enduring. There are many benefits to starting with a validated problem:

  • When you start with a validated problem, you have the flexibility to create multiple solutions.
  • When you start with a validated problem, you avoid falling in love with every one of your ideas, even the bad ones!
  • When you start with a validated problem, you will naturally gravitate to the solution that best solves the problem, and that buyers will pay you for.
  • When you start with a validated problem, you are not constrained by a pre-formed solution, you have the opportunity to truly innovate.

Be the Solution to a Significant Problem

“Giving up is the most painful way of solving a problem.”

-Anonymous

Validating a market problem is not always easy, but it is always worthwhile.

The investment you and your team make in developing a deep understanding of the customer challenge will pay off in spades. Not only will it result in a solution that customers will pay for, but you will also develop a much deeper understanding of how to sell to them, and how to service them once they do become your customer.

Instead of being a solution looking for a problem, search out significant problems, understand them inside and out, and then create a compelling solution to sell.

Pretty simple, right?!

-Onward

About the author: Kimball Norup is the founder of 1CMO Consulting, a business strategy and growth advisory firm based in Sonoma, California. To read prior articles, or sign up to receive future ones by email, click here.

Top 10 Reasons Why Startups Fail

by

“I have learned fifty thousand ways it cannot be done and therefore I am fifty thousand times nearer the final successful experiment.”

– Thomas Edison

When developing a growth strategy for an organization we often rely on benchmarks and best practices. Imitating what has successfully worked for other companies is a proven and widely used approach.

Less common, but equally as useful, is to examine business failures. By observing what has not worked for other organizations, growth leaders can not only avoid running into common landmines, but also identify warning signs of trouble before they become fatal.

Fortunately, growth leaders have many publicly available resources to learn from. One of the most comprehensive and useful reports is published by CB Insights, a business analytics firm focused on high growth private companies and investor activities. They keep a running list of failed startup post-mortems, which is now up to 368 and counting. And from that list they identified the top 20 reasons why startups fail.

In this article, I will share the top 10 reasons, and my insights for how growth leaders can avoid them. While there is not a perfect correlation to non-startups (i.e. established organizations that are already in a market with their product and/or service offering) I think most of the lessons apply equally as well.

Note: The percentages add up to more than 100% because many startups suffered from more than one reason for failure.

Here they are:

1 –  No market need (42%)

I like to call this the “solution looking for a problem” syndrome.

Unfortunately, this is extremely common among entrepreneurs. They get so excited and passionate about their new product and/or service innovation that they gloss over a fundamental requirement for business success: there has to be a problem in the market that buyers want to solve.

Strategy for growth leaders: Do not fall in love with your offering until you have validated there is a market for it. You have to make something that people want to buy.

2 – Ran out of cash (29%)

This one doesn’t really need much explanation. There are two old business truisms that apply here:

  • “Cash is king”
  • “It takes money to make money”

There are many costs involved with starting and scaling a business. Very rarely do you find a startup that is able to finance its growth entirely from operations.  Most startups need investment capital to get going, and established businesses also need liquidity to fund their growth.

Strategy for growth leaders: Create a realistic growth plan that accounts for all your costs, and build in a cushion for the unexpected. Recognize that money is a finite resource, which needs to be carefully allocated and managed.

3 – Not the right team (23%)

Almost all problems in business are ultimately people problems, and so are the solutions. To execute your growth strategy you need to build and manage a team of professionals who believe in your mission and are dedicated to your vision of the future for the organization. This team needs to include capability across a diverse set of skills (i.e. finance, product, marketing, sales, client success, etc.)

Strategy for growth leaders: Growth leaders have the primary responsibility of getting the right people on the bus, and then organizing them into the rights seats.

4 – Got outcompeted (19%)

This reason for failure has some subtlety to it. Many growth strategists preach that organizations should not pay any attention to competitors. This is a mistake. While you should not be consumed by what competitors are doing, you cannot afford to ignore them either.

The truth is that while many startups were outcompeted by other companies, they also failed to execute at differentiating their solution in a crowded space.

Strategy for growth leaders: You must position your offering(s) against any competitive or alternative solution. If you have a demonstrably different or superior value proposition then competitive worries disappear since nobody will ever be in your exact market with your exact product. Continuously improving your products and/or services is a proven strategy for success.

5 – Pricing /Cost issues (18%)

Pricing is one of those business topics that is as much art as it is science. Most startups, and more than a few established businesses, struggle with how to price their offerings.

The challenge is that no matter how scientifically a pricing strategy is created, it ultimately has to survive the final test of what the market will accept. Your pricing has to be high enough to cover costs and hopefully make a profit, yet low enough so that it does not become an insurmountable obstacle to making a sale.

Strategy for growth leaders: The best approach to pricing is to define all the variables and then create a plan to test them out. In addition to the “retail” price of your product and/or service, there is a long list of items to also consider, such as: segmentation, bundles, incentives, payment plans, terms and conditions, etc. Test until you find the combination that optimizes conversion and profitability.

6 – User un-friendly product (17%)

Regardless of whether it is B2C or B2B, every buyer has options – including sticking with the dreaded status quo! Ignoring the user experience is a risky move that many organizations make (sometimes unconsciously). Products or services that are difficult or confusing to use, ultimately will fall aside to solutions that are easier.

Strategy for growth leaders: In addition to having a formal client success function in the organization, growth leaders should relentlessly focus on the user experience for the customers. A great place to start is to define your typical “buyer’s journey” – the process a prospect goes through to become a customer of your organization – then evaluate every step along the way, looking for areas to improve the experience and results.

7 – Product without a business model (17%)

It is hard to argue that a business model is not important – in fact, it is foundational for a company! This reason for failure is a bit like pricing in that there is not always a “correct” or “perfect” answer, but merely an answer that is better than other alternatives. The way to get to a solution is to test, and to remain open to other options.

Strategy for growth leaders: The challenge for many startups, and even more established organizations, is that their growth leaders do not explore all their options. Sticking to a single sales channel or failing to find ways to monetize client relationships can stall growth. Your business model and growth strategy should be based on research, your experience, and the market feedback you receive…your sales revenue is a pretty good indicator of a successful business model!

8 – Poor marketing (14%)

Defining a target audience, knowing how to get their attention and then converting them to leads and ultimately customers is one of the most important skills of any successful business.

A surprising number of startups and more established companies are not good at promoting their products or services. Sometimes this is due to lack of expertise (easy to address by making a hire or outsourcing to an agency) but more often than not it is due to a lack of clarity around your ideal client profile or the value proposition you deliver.

Strategy for growth leaders: The place to start is to define the value proposition your products and/or services deliver to customers. Next, get clarity on who your ideal customers are and where to find them. Then you are in a position to work on your branding, marketing campaigns, and go-to-market tactics. If you don’t have a competent go-to-market leader on your management team (you should!) then either go hire one, or make the decision to outsource the marketing function to a proven third party.

9 – Ignore customers (14%)

Ignoring customers is why companies fall victim to reason #6 above: User un-friendly product. It sounds crazy, but many organizations are so focused on landing new business that they completely neglect those who have already purchased from them. Growth leaders and their teams need to get out of the building and interact with buyers.

Strategy for growth leaders: Invest in customer service and client success. Pay attention to any feedback, and constantly seek more insight on how customers are using your offerings, what features they like and dislike, and their suggestions for improvements or new solutions. Don’t just listen to this valuable input, take action to make improvements. If you ignore customers, they will ultimately go somewhere else.

10 – Product mistimed (13%)

Many entrepreneurs and established company product executives are perfectionists. This is not necessarily a bad trait, but it can become a problem if it prevents your organization from going to market with your products and/or services.

In this case, perfect is the mortal enemy of “good enough!”

Occasionally (particularly with startups in emerging markets) you see companies that developed a solution the market was not yet ready for. More often than not, however, the case is that companies miss their market opportunity by not having a saleable offering ready to sell.

Strategy for growth leaders: The old saying that “you don’t get a second chance to make a first impression” applies here. Growth leaders need to learn to recognize when their offerings are “good enough” versus perfect. Don’t waste your market opportunity.

Learning from failure

Experience tells us that there are as many reasons for business success as there are for failure.

The top 10 reasons for failure highlighted above present growth leaders with a useful list of risks to be aware of and ideally to avoid entirely.

As always, please share your feedback, and feel free to give me a call if you need help.

-Onward

About the author: Kimball Norup is the founder of 1CMO Consulting, a business strategy and growth advisory firm based in Sonoma, California. To read prior articles, or sign up to receive future ones by email, click here.

10 Surprising Strategies to Increase Your Sales

by

“Nothing happens until a sale is made.”

  – Thomas J. Watson

There is one fundamental truth in business growth, and it applies irrespective of the company or industry: In order to grow the organization you ultimately have to increase sales.

Not every organization is ready for growth, but those that are quickly discover there are many variables. It is often difficult to know which strategies and tactics to consider both individually and collectively.

In this article, I will share ten of my favorite strategies to accelerate your sales and drive growth. Some of these may be surprising, but they have proven to be successful in organizations I have been involved with, and I am confident they can work for you too.

But first, an important reminder…

Four Sales Growth Levers

Every go-to-market tactic (and there are many) has a common objective; namely to directly, or indirectly, improve sales results.

There are ultimately only four sales growth levers, which enable any sales tactic to work. Despite the vast number of options and the many complexities of executing growth tactics, it is possible to map each one of them back to one of the following four principles:

  1. Increase the number of clients. Identifying and turning more prospects into new paying clients.
  2. Increase the average transaction. Getting each prospect or client to spend more at each purchase.
  3. Increase the frequency that the average client buys from you. Getting each client to buy from you more often.
  4. Improve the efficiency and effectiveness of each step in the marketing and sales process. Driving greater “funnel velocity” and conversion throughout the buyer’s journey.

In the sections that follow, I will share ten proven strategies that leverage one or more of these core principles to accelerate your sales.

1 – Appoint a (Competent) Growth Leader

I often talk to clients about getting the right team on the bus. The most important one is the bus driver!

In order to execute a strategic growth plan successfully, you will need a proven growth leader. This individual needs to “own” the development of growth strategy, and the subsequent execution of the plan.

A weak, or non-existent, growth leader will doom the growth plan from the start.

It might be the head of growth, or the VP of sales, or the Chief Marketing Officer. The title is ultimately less important than having a leader responsible for driving the growth agenda for the organization.

2 – Fire Your Worst Sales Rep (Immediately)

Sales teams tend to follow a bell curve of performance. A few high performers, the majority in the acceptable but not stellar middle, and then the bottom of the pile. There is almost always someone bringing up the rear.

Growth leaders should quickly get rid of those underperformers who are incompetent in their role or just coasting along. They are a drag on the entire organization.

Underperformers come with a huge cost. They always consume a disproportionate amount of management time. They usually cause resentment and friction in the team. If allowed to fester long enough, they become a cancer that can literally destroy a sales organization from the inside out.

Competent growth leaders clean house quickly and get the right team on the bus that they are driving.

A new growth leader should make a top-to-bottom review of the sales team a top priority. Provided they truly are much worse than the rest of the team, fire your worst sales rep as soon as possible.

Not only does this send a strong message to the rest of the team about establishing a performance culture, it also makes logical sense. Your organization is probably investing significant marketing resources generating leads. Don’t waste valuable leads on underperforming sales reps. Give them to those who have proven they can close deals.

Invest your newfound extra management time in making your best sales reps even better.

3 – Know Your Target (Deeply)

One of the most significant, and often overlooked, leverage points when developing go-to-market strategy is to define your sales target.

Many startups struggle with this, and it is very common for more established organizations too.

What do I mean by “know your target”?

The logic behind this recommendation is straightforward – every individual (for a B2C company) or every organization (for a B2B company) cannot be your target. You need focus in order to be successful. Without focus, your messaging will flounder in the marketplace, and your team will waste a lot of precious time and energy chasing bad deals.

If you are very clear on your target then you the luxury of just focusing your marketing and sales teams on those targets.

Based on analysis of existing customers, and researching the market, most organizations are able to create a definition of their best target with a little bit of effort.

In marketing circles, this is called an Ideal Client Profile (ICP). Knowing your ICP provides a great target for lead generation, it also helps to refine the value proposition and messaging into tailored language that will appeal specifically to that ICP.

4 – Understand (and Respect) the Buyer’s Journey

The vast majority of sales organizations get this topic completely wrong.

Most sales teams force prospects into their pre-defined sales process and pipeline stages. Why do they do this? Sometimes it is based on implementing a trendy sales methodology, or a model the head of sales brought with them from their prior company. More often than not, it is simply because it is the way they have always done things and nobody has bothered to ask one simple question…

“How do buyers want to buy?”

By asking this simple, yet profound question, a sales organization can begin to map their buyer’s journey. Once you know your buyer’s journey, you can then align this to your sales process instead of force fitting your sales process onto the buyer.

If you put your “buyer cap” on this makes sense, right?

Once you understand the buying process of your prospects, you can then help them move along that path. Providing potential buyers with the right amount of content and sales interactions, at the right time, will accelerate your sales.

This will also make it easier to buy from your organization. A great technique for growth leaders is to put yourself in the buyer’s seat. Attach yourself to the buyer’s journey from lead stage all the way to a closed-won client. At every step try to remove friction, strive to make it easier to buy from you. Some common areas of opportunity: your collateral, your website, your pricing, your contracting process, implementation and startup, etc.

5 – (Make Sure) Marketing Enables Sales

Unfortunately, it is all too common to discover a dysfunctional relationship between marketing and sales within organizations who desire growth.

This broken dynamic is often blamed on poor delivery, but I think the issue goes deeper. It is the direct result of poor alignment and bad communication between the two groups.

In any effective go-to-market organization, marketing enables sales.

How does a growth leader make sure this happens? By creating metrics and accountability that both marketing and sales agree upon.

If the sales team thinks all the leads they get from marketing are crap (a very common complaint) then have them create a definition of a lead which they will gladly accept. This becomes the new standard.

If the marketing team thinks sales does not invest enough time in the good leads they receive (also a common criticism) then have them define the minimum threshold of activity for accepted leads, and build a process to nurture those leads that are not ready or those that are rejected.

Removing all the friction between marketing and sales can have a dramatic impact on sales performance.

A nice side benefit of this increased collaboration is better market feedback for the marketing team to use in developing content and refining messaging.

6 – Increase Your Prices (for New Customers)

Pricing is one of the most complicated, and often neglected, components of a growth strategy. Getting it right involves as much art as it does science.

Here is a radical suggestion: Increase your prices by 10-20% for new customers starting today.

Just like that. Boom!

You can always discount back down to yesterday’s list price, but at the very least, you have set the negotiation bar higher.

Raising prices on existing customers introduces significantly more risk, and should only be considered after careful deliberation. Smart organizations build pre-negotiated increases into their contracts, or at the very least have a well-rehearsed narrative that justifies the increase (greater costs, significantly more value, etc.)

Raising your prices is much easier if your product/service is good, and differentiated, and delivers real value to your customers…

7 – If You Don’t Know (Ask Your Customers)

When they attempt to charge more, some growth leaders discover their organization does not have much pricing power. They wake up to the realization that their product(s)/service(s) are in a commodity position with many alternative options for buyers.

These leaders need to revisit their differentiation and value proposition in order to make it more distinctive and valuable.

If you don’t know what else your customer wants, or even why they buy from you, get out of the building and ask them. You will be surprised at how honest customers will be if you ask them questions like this.

When you get back to the office, share these insights with your team and encourage them to bake them into what they do. This will help to improve your messaging, your sales, and ultimately your ability to charge more.

8 – Fire Your Worst Customer (Really)

When I am talking to CEO’s and growth leaders this next recommendation is always more controversial than firing your worst sales rep. Here it is:

Fire your worst customer.

I readily admit it is counter-intuitive to fire a paying customer in order to increase sales, but hear me out.

This highly symbolic move can have a long-lasting impact on your organization. Here’s why…

When you are out talking to customers, also pay attention to your support team and your financials. It really helps if you have profitability data at a customer level. What you will likely discover is your worst customer(s) come with a significantly higher service cost…often negating their contribution to the bottom line.

These customers cause stress, employee turnover, extra work-around processes, and many other bad support dynamics. Getting them off your books will send a message to your internal team that they are valued.

It will also send a message to your sales team…

I’m not saying this is true for your organization, but I have definitely seen sales reps (who are keen to make their numbers) chase after deals with customers they know are going to be a problem down the road. Firing a bad customer will reinforce to your sales team that there is a model for what a good and profitable customer should look like.

There is nothing more liberating (and symbolic to the team) than to cull a bad customer from the roster.

9 – Institute a Monthly Quota (Not Annual or Quarterly)

There is nothing like well thought out metrics to drive desired behavior in sales teams.

The metric most often discussed with sales teams is their sales quota. Unfortunately, this usually comes out of an annual budgeting process and is, by default, often expressed as an annual target number.

This is a mistake. Why? It is too far out in the distance to keep the attention of most sales reps. Smart growth leaders implement monthly sales quotas, not quarterly or annual ones.

Why is this important? Annual quotas are too far removed; they do not shine enough heat and light on immediate sales activity. Quarterly quotas take most of the pressure off sales reps for the first two months of the quarter.

I have heard pushback on this topic from sales teams who claim they have a longer sales cycle and/or high-ticket products/services, and therefore this does not work for them. The complaint is they have a low volume of transactions that cannot be measured monthly. That is fine. If this is the case for your organization, then consider measuring interim activity metrics that you have proven will ultimately result in sales quota achievement.

10 – Invest in Client Success (No Matter What Your Business)

This suggestion applies to any business, and is quite possibly the best idea of them all.

Here’s the logic: Depending on whose research you believe, and the industry you’re in, acquiring a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one. Furthermore, the consulting firm Bain found that increasing customer retention rates by 5% increases profits by 25% to 95%.

If you help your customers to optimize and better use what they have purchased from you, then they will return the favor in the form of loyalty. The payback in terms of renewals, referrals, upsells, and lifetime value can be huge.

The best part is you don’t need to invest more in marketing and sales, you just need to keep more of the business you have already sold.

Sales Is the Fuel for Your Growth

Growth leaders ultimately must increase sales in order to achieve their organizational growth objectives. What makes growth strategy interesting and exciting is that every organization and market is different, and the levers to increase sales are different for each unique situation.

The proven strategies and tactics in this article have worked for me, and the organizations I have been involved with during my career as a growth strategist. My expectation is that some, if not all, of them can also work in your organization.

As always, please share your feedback, and feel free to give me a call if I can help.

-Onward

About the author: Kimball Norup is the founder of 1CMO Consulting, a business strategy and growth advisory firm based in Sonoma, California. To read prior articles, or sign up to receive future ones by email, click here.