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No company ever cost-cut its way to greatness

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Good times don’t last forever. As we have witnessed in recent months, the record eventually stops, and CEOs and the companies they lead have to reckon with the harsh realities of a downward economy — most of which is completely out of their control. The current laundry list includes everything from COVID-19 and supply chain issues to inflation and more.

Faced with these challenges, every CEO has a fiduciary responsibility to strategically position their company for sustained success. The good news is that it’s not all doom and gloom. Despite all the things out of their control, there is a lot that is. Best-in-class companies focus on what they can control not simply to survive, but thrive. In fact, Harvard Business Review found that approximately 9% of companies emerge from downturns stronger than before.

Surviving a downturn: How to be part of the 9%

Being part of the 9% isn’t the result of dumb luck. It’s achieved through exceptional leadership and optimizing everything in your control. It begins by understanding what a complete strategy looks like.

In reality, many companies only have a half strategy to navigate the downturn. During difficult times, many companies over-focus on cost-cutting to stay afloat until they reach calmer waters. You see that play out now with what seems like daily announcements of mass layoffs, especially in the technology sector.

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But here’s the thing: No company ever cost-cut its way to greatness. Companies expect cost-cutting measures to make an immediate impact. But the reality is that it takes time to realize the savings, and these measures alone are not enough to thrive. A full strategy requires mastering cost and revenue together. Because in tough economic times, every drop of revenue matters. You must focus on making revenue predictable, which many CEOs find challenging, even in good economic times.

Every quarter, the top question on a CEO’s mind is: “Are we going to meet, beat or miss on revenue?” 

It’s the most important question in business, yet most CEOs have a tough time answering it, and there’s a good chance it will soon be tougher to answer. The reality is that things are likely to get worse before they get better. Leading indicators suggest difficult times ahead, with Deutsche Bank predicting “a major recession” and Wells Fargo calling recession “hard to avoid.” 

CEOs can’t control macroeconomic forces, but they can maximize their company’s revenue engine to reach its potential. The most important KPI in business is revenue, and optimizing for full control of revenue enables fact-based, strategic decisions.

Leaks sink ships

The first step to achieving full control of revenue is understanding that revenue is not just an outcome; it’s a process.

Up to 50% of employees are revenue-critical, meaning that they in some way contribute to a company’s revenue-generating process. But the systems they use to run revenue are decades old. What’s more, they’re not purpose-built to optimize and control revenue.

The result is a revenue leak, which is the loss of revenue due to breakdowns in the end-to-end revenue process — and it’s everywhere. Revenue leak is pervasive across the end-to-end revenue process, including demand generation, closing new business, and even deal expansion.

Our latest study found that companies lose 14.9% of revenue on average as a result of revenue leak. Collectively, revenue leak causes more than $2 trillion of lost economic value each year, according to Boston Consulting Group. 

Revenue leak is the biggest problem in business, and it is hiding in plain sight, causing a material drag on sales, growth, earnings and company value. It’s also avoidable. Solving revenue leak is the smartest way to bolster your company and come out of the downturn stronger.

Downturn strategy: From revenue leak to revenue precision

What if we could have a breakthrough in revenue? What if there was a new way to run revenue to root out leak points and maximize full revenue capture?

Meet revenue precision, the operating standard that results in the full capture of revenue — predictably and repeatedly. 

Revenue precision is achieved when the people, processes and systems that run revenue work seamlessly together. Gone are the days of broken handoffs between teams, inefficient processes and siloed systems conspiring to sap a company’s revenue potential. CEOs gain full visibility into the revenue process, controlling key processes and executing with constant collaboration from the C-suite and boardroom down to frontline managers and account reps. 

Enter revenue collaboration and governance

To go from revenue leak to revenue precision, you need a strategy. You need a strategy for collaboration and governance of the end-to-end revenue process. Revenue collaboration enables all revenue-critical employees to easily and effectively work together to run revenue. Revenue governance is the ability to control the end-to-end revenue process. 

When brought together, you have Revenue Collaboration and Governance (RevCG), a new framework to run revenue that unifies the entire end-to-end revenue process by connecting the systems and revenue-critical employees in the business that work on capturing and generating revenue. 

RevCG delivers complete transparency and total control over your revenue process. It is the best way to stop revenue leak and achieve revenue precision, and to protect revenue in the downturn and emerge stronger. Thriving. 

Andy Byrne is the cofounder and CEO of Clari.

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