This is the second article in our series on revenue operations and its importance for fast growth tech companies. In Part 1, we defined revenue operations and what it does within a B2B organization.
Today, we’ll shift our focus to the reasons why revenue operations creates competitive advantage for high growth companies.
1. Revenue Operations Drives Continual Process Improvement
One of the primary roles of the revenue operations function is to make the business run more efficiently. To do this, they analyze data to create fact-based recommendations.
Having a dedicated team looking for opportunities to optimize the business isn’t just good for company performance. It also helps to establish the value of learning within the company culture.
Revenue operations helps to institutionalize a belief that “we can always do better”.
But the revenue operations team isn’t just limited to ideas. They also should take an active role in implementing changes. That involves everything from creating new processes, implementing software systems, and also training teams to institutionalize changes.
2. Avoid Plateaus with Revenue Ops
One challenge that athletes face all the time is hitting a performance plateau. The failure to make progress and improve despite working hard is extremely frustrating.
Athletes must be in top physical shape to perform in competition. That isn’t limited to just workouts. It also includes regulating sleep and eating the right diet.
The same is true for a business.
To deliver peak performance for a business, marketing, sales, product, and customer success activities must work in conjunction.
Imagine a situation where marketing was only concerned about generating a high volume of MQLs for sales, and sales was only concerned about getting the “easiest” revenue, rather than maximizing total revenue.
Things would get out of hand fairly quickly. Flooded by low quality MQLs, sales will focus on cherry-picking the best ones, leading marketing to claim sales isn’t working all the leads provided. Sales will instead claim marketing is providing crappy leads.
That’s a plateau.
To get past this plateau, sales and marketing could both focus on maximizing sales pipeline generated. This would shift incentives significantly.
For marketing, this would mean they would work harder to generate leads that are likely to convert to opportunities by sales. For sales, a pipeline target would make them work an assortment of leads, not just the very best ones.
Revenue operations is the perfect partner to help marketing identify qualities of high converting leads and helping sales prioritize leads based on historical conversion patterns.
3. Revenue operations align the entire team around the right metrics
For many companies, sales and marketing exist in two different worlds with two very different sets of metrics.
While marketing is focused on social media reach and engagement, email performance and lead generation, sales devotes attention to average deal size, length of sales cycle, and opportunity win rates.
These metrics have two main characteristics:
- They are only of interest to a single team or department
- They are generated directly from a system used by a team or department (e.g., Salesforce)
In an organization empowered by revenue operations, these types of metrics are table stakes. But they aren’t enough to drive differentiated growth.
More advanced organizations go a step further. Instead of managing each department with its own cottage metrics, each team is responsible for metrics that they can significantly influence, but may not completely control.
These types of metrics enable different departments to align on supporting each other to create value for the business.
For example, marketing teams have begun to focus on marketing attributed opportunities & marketing attributed pipeline dollars. These are figures driven by the interplay of sales converting marketing’s leads and marketing generating sufficient leads to be converted.
Additionally, the data needed to determine marketing’s performance against these metrics resides in the CRM, owned by sales.
But there’s another level to be achieved.
The “holy grail” performance metrics are those that directly correspond with the health and performance of the business.
For a SaaS company, think of stuff like customer lifetime value and customer acquisition cost. If the math doesn’t work for these metrics, your business will fail eventually.
These metrics don’t naturally belong to either sales or marketing. Nor are they being generated within the CRM, marketing tools, or even the accounting systems.
This is where revenue operations can really shine.
For example, the revenue operations team can conduct a lifetime value (LTV) analysis of all existing customers and use the results to group customers and prospects into LTV segments. Prospects could be rated based on similarity to customer LTV segments using company details like size, industry, and business need. Marketing leads and sales opportunities could then be mapped according to fit with one of these LTV segments within the marketing automation platform and CRM.
Using this system, marketing and sales could directly measure their success in converting and closing the right kinds of leads & opportunities – those most likely to be high value customers in the long term.
4. Give finance a seat at the table (finally)
The recurring revenue / subscription business model has transformed the role of finance in a big way.
Investors and executives don’t really care about rear-looking, historical metrics anymore. Those are just table stakes. Instead they are laser focused on understanding indicators of the future value & viability of the business.
In this new world of strategic finance, a deep understanding of metrics like churn, customer lifetime value, customer acquisition costs, and annual recurring revenue are the new bread and butter for business insights.
This shift moves finance even closer to the sales, marketing, and customer success teams. Great CFOs need to be able to partner with the other departments to drive growth in the business.
This shift also means finance and revenue operations make for natural allies in looking for strategic opportunities to drive growth across the business.
5. Revenue ops team is neutral “source of truth”
Incentives drive behavior.
When an operations team reports to a single business unit like sales or marketing, their success will be measured by their ability to support the goals of that team.
Unfortunately, what a single team wants (or needs) may be at odds with what is best for the organization as a whole.
And furthermore, separate operations teams assigned to different business units may duplicate efforts that are better centralized.
For example, sales and marketing having separate data warehouses to store data generated from across the business can waste resources and even hurt collaboration, as the company lacks a single source of truth when trying to figure out what is happening in the business and what to improve.
So where should revenue operations sit?
The right answer will vary for each company, but two emerging models make a lot of sense:
Option 1: staff role reporting directly to the CRO
For companies that already have a chief revenue officer directing the marketing & sales organizations, having the revenue operations team report directly to the CRO is a logical placement.
This setup provides RevOps executive visibility and a seat at the table for conversation with sales / marketing / customer success leadership.
Additionally, it insulates the function from getting mired in purely tactical / administrative tasks that often affects captive sales operation and marketing operation professionals.
Option 2: based in the finance organization
For organizations that lack a CRO role, another option is placing revenue operations within the finance team.
The finance organization serves as a neutral location to ensure that revenue operations stays focused on big picture business priorities.
One challenge with this setup is ensuring that the revenue operations team has a close relationship with the sales, marketing, and customer success organizations it is supporting. The impact of its work will be limited if the findings and recommendations are not implemented.
Next up in our series, we’ll dive into who are the right team members for a RevOps team.