Size Matters, and So Does Ability
Most new strategies fail due to internal issues
When prioritizing growth initiatives, many companies focus too much on the size of a market opportunity and insufficiently on their ability to successfully pursue it. Their business plans analyze opportunity size, the rate of revenue growth, and market share potential. The revenue opportunity is quantified by customer segment, geography, and product. Risk assessments focus on external factors like competitors, regulators, and customers. Yet, most new strategies fail due to internal issues.
In selecting target markets, balance enthusiasm about the opportunity with a realistic assessment of your company’s ability to execute. Can you be uniquely relevant and create, communicate, and deliver differentiated value? Will the capabilities you develop be useful in the long term? Constantinos Markides, a professor of Strategic Leadership at the London Business School, comments that in evaluating diversification opportunities, “like good chess players, forward-thinking managers will be thinking two or three moves ahead.”7
“It’s all about execution, and there are not that many companies that have execution as a discipline,” commented Chris Cook, now president and COO at New Relic. Chris described how his previous company, Wily Technology, focused on execution as the central factor in planning growth. The management team translated each revenue objective into specific execution plans. Chris recalls, “We thought about the details of how we are going to deliver the number. Via which channel, and how much revenue do we need per sales rep? How do these numbers match history? Is it doable?”
That simple question—whether success in a new market is doable for your company—is as important as any market characteristic. New products and markets create challenges for sales execution. Before committing to a new strategy, anticipate the changes that will be required of the sales process. Longer sales cycles, increased partner involvement, or greater complexity of product mix are likely to cause big disruptions. Existing sales compensation and the momentum of existing products, practices, and habits will make such adjustments diffcult and possibly unwelcome. Consider your sales practices and compensation model carefully and plan for changes that will encourage behaviors appropriate to the new market.
Also consider the number of new skills reps will need in order to articulate relevance and value of new offerings or to engage new buyers. Existing channel partners and service and support personnel will also need new tools and capabilities. In many cases, you may need to recruit new reps or channel partners with different expertise or within new geographies, and in-region resources deployed to support them. Though entry into a new market does not necessarily involve new products, success will lead to demand for new or modified product features or processes for implementation and service delivery. Make sure product management, R&D, and services groups are prepared to add at least some of these changes to their road map. Get agreement and allocate dollars to these areas proactively. A realistic assessment and investment now will prevent unmet expectations, firefighting, and finger-pointing later.
Figure 2: Balancing Opportunity Size with Ability to Execute