Author: Joel Reed

Seeking out growth strategies? Uncover a ‘Whole Product’ approach.

March 18, 2021

Joel Reed

Can you recall a couple of years ago when Google was hyping its Google Glass? This thing looked straight out of the future: a wearable computer with a head-mounted display—a “hands-free smartphone.” Your pair are surely next to your keyboard. Oh wait, you in fact did not buy a pair? Me either. Actually, hardly anyone bought the pricey new gadget before it was pulled from the market and deemed a failure. While a unique product, this is not an unusual product management growth (or lack thereof) story.

According to Harvard Business School professor Clayton Christensen, each year more than 30,000 new consumer products are launched — and 80% fail. Nielsen has found consumer product flops at more than 85%.

If growth by introducing a new product is incredibly risky (and it is), what better options are available to your B2B organization product management team then?

Focus on market — not product — for more-sustainable growth.

A more strategic approach to organizational growth comes from markets, not products — by growing share of existing markets or entering new ones altogether. As a base of growth, most companies want to retain existing revenue — securing their base buyers as a foundation for growth and building upon that by tapping into additional wallet share from the aforementioned buyers. A natural progression companies follow is to target and win new accounts and expand certain products into new regions, where they have a smaller market penetration.

These strategies can be approached in one of three ways:

Organically create solutions.
Acquire the solutions or technology.
Partner with others to build and/or sell the solutions

Understand your solution strategies — and where your current offerings and capabilities allow you to explore and expand.

Another way to think about these options is in a simple quadrant called the Ansoff Matrix. This common approach has been used since 1957 to organize and define product and market growth strategies into four fundamental sectors:

1. MARKET PENETRATION GROWTH STRATEGY

What: The process of entering an existing market in which there are current or similar products and taking market share from the other competing companies.
Pros: This is the most common growth strategy and usually the lowest risk of the four options because the need is validated already.
Cons: The greatest challenge is mindshare and differentiation to get your fair share, and it puts a premium on out-executing the competition.

2. MARKET DEVELOPMENT GROWTH STRATEGY

What: The process of identifying and developing new opportunities to sell existing products in previously unexplored markets (e.g., new industries or new geographies).
Pros: Assuming your company is happy with your current products/services, this is the logical and lower risk strategy for expanding your customer base and increasing revenue.
Cons: Companies often underestimate the level of effort for success. For example, entering a new geography may require product changes, expansion of service and support capabilities, branding initiatives, partnership development, and initial promotional expenditures.

3. PRODUCT DEVELOPMENT GROWTH STRATEGY

What: The process of identifying and developing new products to sell to markets where you already have experience and success.
Pros: Assuming your existing customers have a positive view of your solutions and experience, they are much more likely to engage in both input on solution development and entertain your prospecting initiatives.
Cons: New product development always carries a risk and is highly dependent on your understanding of the customers/market need, your ability to execute, and your overall speed to market.

4. DIVERSIFICATION GROWTH STRATEGY

What: The process of adding new products in new markets.
Pros: This strategy can help extend reach, offset risk or seasonality, boost brand image, or possibly differentiate and improve competitiveness.
Cons: This is the highest risk area not only because of the inherent risks associated with developing new products but also because of lack of experience working within the new market. When a company chooses to diversify, they knowingly put themselves in a position of great uncertainty. For these reasons, it is recommended that a company should only pursue a diversification strategy when the current product or current market no longer offers opportunities for further growth.

As a leading practice, companies should look at their solution strategy and investments and map them across a matrix like this. They should take a moment to evaluate the results asking questions such as: Are all the investments in one quadrant? If so, is the company at risk by not diversifying? Does the growth risk approach align with the company’s risk profile?

Embrace the ‘Whole Product’ approach.

Most importantly, your company needs to perform due diligence when considering methods for engaging in promising solution growth strategies. Many businesses fail by only considering growth via research and development investment — while not taking into account a Whole Product approach.

The Mereo Whole Product approach supports product managers in considering a core product and augments it with everything a buyer needs to have a compelling reason to buy. It considers that research and development is only one of many investment options to drive growth.

The core product is the benefit received by the solution and is complimented by the tangible product and augmented product that create the entire buyer experience.

So if we now look back to the Ansoff Matrix, we see that we can spread our research and development bets by utilizing marketing promotions and campaigns, partnerships, packaging and pricing — to name but a few approaches.

Achieve sustainable revenue performance.

In a highly competitive and uncertain market environment, diversification is critical — and broadening one’s approach to diversification can enable a company to stretch over-taxed research and development.

Mereo works with B2B organizations to create new “muscle memory” with simple and lightweight approaches to challenge harmful solution management status quo.

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Your Solution Strategy Is Desperate for Validation

January 28, 2021

Joel Reed

While B2B product management teams around the globe are convening to refresh their solution strategy for the next two to five years, most will never actually succeed. In fact, according to Harvard Business Review, each year more than 30,000 new products are launched — and a whopping 95% of them fail (2019).

Why? A major lack of validation. Most companies fail to ensure they can realistically achieve what they set out to do.

In today’s competitive environment, simply having a solution strategy is no longer enough. Before you engage resources and release funds, your teams must take some simple but vital steps toward validating your strategy.

How do you avoid putting your business’ fortunes into a strategy that the organization lacks the capability to execute successfully?
How can you check the alignment of your solution strategy against the financial, business and go-to-market strategies also in the works?
How can you take into consideration both customer- and market-driven inputs for a balanced approach?
How do you avoid a failure like the Airbus 380, where the strategy for a jumbo airliner may have been sound if the organization could have overcome its unaligned, disjointed organizational dynamics and executed key parts of the plan effectively?

Imagine in our current market context: Companies have suddenly needed to interact virtually — and many selling organizations may face the requirement to deliver solutions differently. With that comes a number of questions to validate a new solution delivery system: Does your technological infrastructure and skillset support these initiatives? Does the customer base understand the solutions and have a desire to adopt their new delivery? Is there a system to track usage and billing? Will sales and support teams be prepared?

Solution strategy validation may seem like common sense, but it is not common practice. Additionally, there are key validation factors that matter more than others. Read on for proven, expert validation strategies.

Validation as Investment Confidence

Your team has a handful of options for a formal solution strategy validation plan.

OPTION 1: QUICK CAPABILITY + ALIGNMENT CHECK POINTS

A simple high-level checklist can be configured to match the needs of your business. This checklist would vary business to business, but a typical checklist might include:

Financial Benefit in 202x: The potential revenue and margin contribution of the capability are significant enough to justify this level of investment by the company.
Ability to Deliver: Adjacent products that are part of the solution are technologically proven and well-integrated, and the company and/or partners have the resources/qualified staff to deliver on the customer promise.
Strategic Importance to the Customer: The solution addresses the strategic business imperative or initiative of the customer.
Short-term Financial Benefits to the Customer: Your customer has budget and can achieve financial benefits in a relatively short time frame (1-3 years).
Ability of Sales and Channel Partners to Sell the Solution: The value messaging and domain knowledge is straightforward and clear enough for the sales team to effectively sell the offering with proper training and tools.
Market Impact: The offering has the potential to reposition the company in the marketplace and/or change the competitive landscape. Plus, it can be supported by a compelling integrated marketing campaign.

OPTION 2: ORGANIZATIONAL CAPABILITIES TO EXECUTE PER OPPORTUNITY RATING CHART

Another approach to solution strategy validation is to simply rate the organizational capabilities to execute the solution strategy relative to the various strategic opportunities.

With this chart, your leadership team will be able to better visualize and pinpoint your organization’s current strengths and potential weaknesses in the context of key aspects of each solution strategy opportunity. Once your team assesses these, they can more strategically focus on prioritizing the most promising opportunities — and work on resolving issues with secondary opportunities for the future.

Validation as a Roadmap

Taking a moment to honestly answer these questions and to assess strategic options in the context of these validation points can help improve your confidence in your investment decisions — putting your organization on the path to wisely using its time, resources and money to serve some real value to its customers, and to realize sustainable revenue performance in the long run.

In the case of Trillium Software, the leadership engaged Mereo’s expertise to help develop and validate their solution strategy. With Mereo’s comprehensive tools, the team was able to define a strategy and align a time-phased roadmap for the next few years by identifying opportunities they could successfully deliver here and now. Beyond that, the team also identified opportunities for future investment of resources and skill development that were supported by market demand and significant customer impact.

Validation as Expert Third-Party Advisors

While the solution validation checklist and opportunity chart will put your teams on the right path toward realistic and high-potential solution successes, the true game-changer in validation comes from outside sources.

If you do not believe me, I will direct you to the Airbus 380 case study once more. A third-party expert can help you avoid office politics, individual biases and oversights. And a third-party partner like Mereo takes validation a step further with our Decision Maker Network™. This network represents a vast, diverse group of hundreds of business leaders across industries that can be engaged for your specific questions and concerns.

Is your solution strategy for the next few years in the works? Let’s make it unstoppable.

Validate Your Strategy + Investments

The State of Revenue Performance 2020: Opportunities for B2B Sellers Navigating the Pandemic

October 29, 2020

Joel Reed

The performance of the top companies around the globe is indicative of our current economic environment — and also offers direction forward for where sellers can best Seek to Serve™ for sustainable revenue performance.

In Mereo’s sixth annual revenue performance report of Fortune 500, Global 500 and Russell 2000 companies, we have identified a continuing trend of slow revenue growth and a new issue of poor profit performance. A variety of issues have influenced this negative performance trend, and uncovering these faults will help us explore strategies to move forward successfully — and may help your organization avoid these revenue pitfalls altogether.

NOTE! This article was written in collaboration with Austin Greene, Mereo’s 2020 summer intern and rising Baylor University senior majoring in Professional Selling, Entrepreneurship and International Business.

Performance Evaluation Highlights

In the past fiscal year, 47% of Fortune 500 companies experienced a profit reduction compared to the previous year — meaning that profitability has become a major issue for these companies.
In the year before COVID, we see a doubling of Fortune 500 companies with a loss to 31% and another 16% with profits below 5%, meaning nearly 50% experienced this poor profit behavior.
On the revenue side, the number of companies with declining revenue was steady at 16% from one year to the next.
Those with a meager revenue growth rate (below 5%) were also steady at 40%.
This means in total, 56% of companies in the Fortune 500 grew slower than 5% or had a revenue decline.

This slow-paced growth or decline in revenue is a departure from last year’s State of Revenue Performance Report findings — where overall revenue growth was increasing, with loss on a downward trend. With the issue surrounding growth and profitability identified, let us dive deeper into what influences are causing this — and how to combat declines moving ahead.

The Revenue Performance Opportunity for B2B Sellers Moving Forward

Revenue and Profitability Pitfall 1: Customer-Driven Only Perspectives

One explanation for top companies’ issues with growth and profitability may stem from their internal structures. A number of these suffering companies have pushed to be more customer-driven only in the past years — rather than upholding a dual customer- and market-oriented perspective.

This customer-driven approach leads to companies solving the problems of today (being responsive) but missing the problems of tomorrow (being innovative). While customer experience scores – measured by Net Promoter Score (NPS), for example – may increase in the near term, allowing a customer (or set of customers) to have such a heavy hand in guiding the product strategy or commanding a significant investment of the company resources to satisfy their needs can be a double-edge sword.

For example, the pandemic took almost every industry by storm, and while there was not much time to prepare, businesses that could adapt to a virtual platform faster than others tended to perform better. Market-driven companies tend to identify and invest in new opportunities and technologies earlier and are therefore prepared to take advantage of changes ahead of those focused only on satisfying today’s client needs.

Revenue Performance Solution 1: Balanced Customer- and Market-Oriented Perspectives

Companies need to balance being responsive to customers’ short-term needs with being innovative to embrace market-driven demands bringing improved value to the client in turn. This equilibrium creates true value for customers while producing clear differentiation to improve pricing and avoid product and service commoditization. Companies that have not differentiated themselves in both message and product are likely to be the ones that perform the worst as we continue to get the results from the pandemic’s impact on the economy.

Revenue and Profitability Pitfall 2: Failing to Adjust Content Strategy to Virtual Platforms

The traditional business world continues to shift to a virtual environment. According to a recent Salesforce report, “State of Sales,” 60% of sellers report an increase in virtual meetings since 2015, while sellers have increased their time connecting virtually with customers at a rate three times greater than connecting in person.

In the coming months, one of the greatest challenges that will be faced by executives is developing compelling content with marketing teams to virtually cater to coaching the sales teams. Research has found that only 1/3 of buyers believed most their vendors were well-prepared and had already enabled digital channels (PROS Global Survey). Yet, looking forward, B2B companies see digital interactions as two to three times more important to their customers than traditional sales interactions (McKinsey).

While continuing to place an emphasis on aligning sales and marketing efforts to perform and adapt to various situations is vital to driving revenue, it is simply not enough to focus solely on past content standards and expect continued growth. Many organizations are struggling to identify and enable their teams with vital tools in today’s market.

Revenue Performance Solution 2: Adaptation to a Virtual Environment

By understanding what you can do to drive positive performance, you can set your organization above and apart during these turbulent times and enable your teams to adapt. This links to companies arming their sales and marketing teams with better tools that enable them to continue to differentiate their portfolios of products while not falling behind due to a lack of technical capabilities. Already almost 90% of sales have moved to videoconferencing, phone or web sales models, and while some skepticism remains, more than half believe this is equally or more effective than sales models used before COVID-19 (McKinsey).

By evaluating the effects of the pandemic on sales teams, Mereo has established a model on how to capture a prospect’s attention through this new virtual environment in Lead in Virtual Selling with RICH™ Content. RICH™ content stands for Relevance, Innovation, Complexities, and Hard data and proof. Incorporating these four areas into content development, meeting preparation and other interactions is critical to ensuring an effective sales force as we move into the new virtual age of business.

At Mereo, we thrive on enabling teams to identify issues and move forward to provide value industry and serve their clients. For guidance on how to have these conversations, contact us.

{Top Sales Magazine} Lead in Virtual Selling With RICH™ Content

September 10, 2020

Joel Reed

Learn how to lead in virtual selling with RICH content in the latest Top Sales Magazine article!

In late 2019, the International Air Transport Association (IATA) published the “Economic Performance of the Airline Industry” report. It predicted a 4.1% growth in global air traffic demand in 2020. Then the global pandemic undermined this forecast as borders closed, social distancing ensued, and sales executives slashed travel budgets for their teams through the rest of this year and into next.

No one could have foretold our current sales environment. Yet as sales leaders and business executives, it is vital to adjust and adapt to this current situation — rather than deny or fight it.

In the short-term, from this disruption, a decline in revenue performance is manageable. However, businesses must proactively make moves now to sell as effectively as possible and ensure long-term revenue performance sustainability. The current situation is difficult, but it is not dire. Alternative approaches are available. Equip your sales teams with the technology, skills and resources to win an unfair share™ in a virtual selling environment — and look to the Mereo RICH™ virtual selling formula to guide you.

Find the entire article on pages 18-19 of the Top Sales Magazine September Issue and dive into the elements of RICH™ content.

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The Future of Your Organization Is Virtual — at Least Partially

July 16, 2020

Joel Reed

The economy has been reopening — and with that comes the expectation of offices leaving behind their virtual organization and reopening their doors too. There are many reasons to be eager to “get back to normal” and to restart business face-to-face. Organizations rely on alignment to attain sustainable revenue performance, and what better way to achieve that than physical proximity and regular meetings? In-person business and selling is paramount in effectiveness and engagement.

Yet, the recent social distancing mandates have sent people home for half of 2020. The work-from-home environment has required organizations to invest in technology, to develop procedures and to shift practices. As such, the short-term requirement to work from home has accelerated a trend toward greater infrastructure and acceptance of virtual business environments.

While some organizations may eventually return to a more-traditional workplace environment, and in-person selling will resume in the future, business practices will forever be changed. Here is what you can expect:

Technologic Foundations Built in the Pandemic Have Set the Stage for Future Business Norms

Many organizations did not have the technological or procedural foundations to support a remote workforce prior to the coronavirus pandemic. Early 2020 saw large investments in computers, software, telecommunications equipment and tools, security protocols and procedures. All this will stick with leaders in a sunk cost type of mindset. They cannot feasibly and responsibly abandon the infrastructure they have created.

With these investments in mind, leadership will need to consider the best path forward with restrictions lifting. Most offices cannot meet safe social distancing without pricy office space updates. At a minimum, leadership may decide to shift to regional operations in lieu of central offices. They may decide to move their teams to remote capacity.

Though it was unplanned and unexpected, the pandemic provided a trial run of virtual organization practices. Leadership can take this time to review the efficacy of the last months:

Were there any surprising benefits?
Were there major roadblocks to operations?
Are there solutions moving forward to overcome those?
Are the travel and expense savings substantial and sustainable?
Are there compromises between “operations as usual” and “full virtual organization practices”?

Not only will internal impacts ensue. Your buyers will also be navigating virtual organization practices. Leadership will need to keep an eye on the external industry and buyer environment. Are your buyers comfortable taking face-to-face visits yet? Are business practices in your industry shifting to a more sterile, virtual environment as the preferred? Are there new lasting pains and focuses for your buyers? For example, for industries like IT, secure cloud-based solutions will continue to increase in importance. Data replication and security will be on the minds of IT and finance professionals. Are there opportunities for your organization to Seek to Serve™?

A Future Compromise of In-Person and Virtual Organizations

The pandemic turned age-old business practices on its head. There are drawbacks to virtual selling and business practices. Many of these things people and digital solution providers are working hastily to overcome. But, additionally, many leaders surely were surprised to uncover some benefits too. The key point is for leadership to analyze opportunities moving forward for using virtual tools to support agile, transparent and robust selling.

A shift to longer-term virtual selling organizations will require formal but lightweight processes. Without a physical presence in the office, there will need to be new methods of accountability. Professionals can expect more checkpoints that track and manage their activities, deal progression and functional performance. Remote coaching will become even more important in the development of personnel and in the obtainment of sales goals. Project planning and tracking will increase in importance, as well as easy-to-use — and secure — collaboration tools. Access to and transparency with data will be critical for successfully moving forward. Heavy oversight will fail; lightweight but formal team engagement is the key to success.

Productive cross-functional engagement, already an issue for many organizations, will become even more critical in remote environments. There will be an even greater need for formal reviews and alignment of financial, go-to-market, product and sales strategies. Cross-functional participation will also need to overcome limits of remote work, including for launch programs, product strategy definition and roadmap definition.

For support navigating virtual business best practices into the future, contact us. As you are looking toward the future, read more Principal Predictions to support the future of your business.

Principal Predictions

Business Leaders Face Difficult Supply Chain Decisions Ahead

June 16, 2020

Joel Reed

In early May 2020, Mereo principals shared seven predictions of COVID-19’s lasting impacts on go-to-market organizations. One of these predictions detailed the massive disruption to the global supply chain and the hefty changes to come. While COVID-19 has been a catalyst for supply chain disruption and discussions — there are additional geo-political forces at play that deepen supply chain impacts and future actions. Business leaders must make vital supply chain decisions in this “new normal.”

A recent article in the Wall Street Journal, “Huawei and the U.S.-China Tech War,” reinforces our supply chain principal predictions, namely regarding the vital need for:

Enhanced supply security
Better supply chain agility
Strategy shift from sole-sourcing to multi-sourcing

The article details the heightened regulations the U.S. Commerce Department has placed on Huawei, the Chinese telecom giant which is seen as a threat due to its inability to be autonomous from the Chinese government. It also discusses the recently announced plans for building a factory in Arizona for Taiwan-based TSMC, the largest semiconductor maker in the world, which would remove the current supply gap of chip manufacturers in the U.S. Likely, moves like these may become recurring trends into the future and will continue to influence global businesses, B2B and otherwise.

For support in aligning your business strategy to the market realities surfacing now and into the future, contact us. For further insights into supply chain impacts — among leadership adaptation, online retail, marketing activities and more — look to the Mereo Principal Predictions.

Prepare for Change

Client advisory boards are a solution executive’s best friend

January 9, 2020

Joel Reed

Internal leadership may think their new or legacy solutions are the best thing since the invention of the wheel — but without external validation, there is little hard evidence to back up its investment and projected success.

External validation is necessary for due diligence of a solution strategy, its roadmap and the prioritization of execution initiatives. It will answer vital questions like:

- Does your market need it?
- Do they get and align with your strategy?
- Do they want it?
- How much will they pay for it?
- Is there something else they would need to incorporate before they can make use of your solution?
- Are they in denial of the issue this solution solves?
- What will it take to get them to see the benefits and possible rewards?

It may seem like an outlandish dream for any executive team as they are convening around a conference table, wondering about their solution’s viability in the market: “What if we could just ask our customers and prospects?”

Mereo’s client advisory board (CAB) approach and Mereo’s prospect decision maker advisory boards enable B2B selling organizations to do just that.

The Insight of the Client Advisory Board

With the Mereo CAB, your leadership team gains access to about a dozen or more hand-selected senior customers — typically the decision makers involved in setting business strategy or IT strategy — for direct face-to-face conversation, feedback and input.

Mereo helps selling organizations identify companies to invite as part of a CAB based on a number of high-value customer criteria, including:

- How the customer partnered through the buying process
- If the customer is utilizing your solution in a way that aligns to the strategy (e.g., not a one-off customer build)
- If the customer is leading edge in some area (e.g., scale, market thought leaders, technology leaders)

CAB meetings are typically a day and a half long in upscale settings that relay a high-level of gratitude and appreciation. The day and a half is highly structured with social time scheduled with senior company executives to optimize the value of everyone’s time.

Though CABs are not sales events and should never be prioritized as such, they present natural sales opportunities, because ultimately:

- These companies will be references
- These companies will emerge as early adopters
- These companies will become more attuned to solution breadth and often buy more as a result

CABs in Practice

When revenue growth had plateaued for Trillium Software, Mereo helped its leadership develop and implement a client advisory board initiative, from customer identification to invitations and meeting agenda and facilitations.

Trillium leadership met with their CABs in Chicago and London. In these two events, they not only learned that their messages and marketing were not communicating all the solutions and value Trillium has to offer but paved the way for direct and immediate action by the customer.

It turned out the majority of customers did not realize Trillium had been improving its software over the last few years, and once they heard what Trillium could now offer, the customers eagerly jumped on the solution and stopped seeking out other vendors. As a result, Trillium realized a massive bump in their fourth quarter and had a solid foundation for improved solution strategy into the future.

Learn more about how Mereo can help support your solution management strategy with greater insight, strategy and customer validation, and contact us to get started.

Winning Solution Management

Solution management strategy: common sense principles but not common practice

October 31, 2019

Joel Reed

Do not be afraid to challenge your engine and engage your customers.

Your solution management strategy is the main sustenance of your organization’s sustainability. Without a solution, you have nothing to offer, nothing to sell. And without a solid and strategically evolving solution strategy, your organization will not stay abreast of any market change for very long into the future.

A solution management strategy needs to take target buyers’ greatest needs — their greatest unsolved pains — as input and output to the world an innovative answer. This is all common sense.

Yet these best practices are scarily too often not common practice in solution management strategy.

Too often senior leaders do not do what they know is intrinsically right or what appears to be attractive from a market opportunity standpoint. Instead they back down when the technical team pushes a different investment plan.

Who Is Right? Let the Customer Decide.

While certainly not the only source of input, letting the customers help define your solution strategy and the associated prioritization of resources is sound and proven to work. Engaging customers and prospects early — and often — in solution roadmap discussions leads to:

Greater confidence in resource investments
Easier garnering of early adopters
References
An accelerated market launch

Fight against what is easy or appealing. Fight for serving your buyers with the best, to make them their best. Listen to your buyers. Your next solution awaits at the intersection of the words of their woes and the strengths of your organization.

Strategic Solution Management in Action

One B2B organization Mereo had the pleasure to serve had never engaged customers in their strategy or prioritization partially out of habit (we know what is best) and partly because they did not believe they could get an audience.

With Mereo’s help they engaged North American and European customers in two day and a half sessions, attracting C-level interest from some of the world’s largest financial services firms.

The customers were thrilled to be engaged, the company gained critical insight into resource allocation and the organization were happily surprised to realize a 20% boost in sales as a result of improved executive alignment.

When you are in the position to launch a high-value solution, download the Mereo “Product Launch” eBook for further insights and a proven framework.

Download the Product Launch Guide

The State of Revenue Performance Presents an Opportunity for B2B sellers

September 19, 2019

Joel Reed

The performance of the top companies around the globe can be a telling sign of our current economic environment — and an insightful opportunity for where sellers can Seek to Serve™ their buyers.

In Mereo’s fifth annual revenue performance report of Fortune 500, Global 500 and Russell 2000 companies for the most recent fiscal years, we have uncovered results not seen since before the 2007 and 2008 recessionary period — signs of positive growth in top companies.

Albeit there was still a significant portion of companies that experienced declining revenue or sluggish growth, especially compared to their peers, many organizations’ fortunes have improved. And this improvement is likely due to the effects of tax legislation and the stronger GDP.

In comparison, the Mereo 2016/2017 Revenue Performance Report showed a trend of increasing profits yet decreasing revenue. But this year’s report tells us a new story.

In this past fiscal calendar year, just 21% of Fortune 500 companies experienced decreased revenue; a year ago that number was an unnerving 48%. While this marks significant improvement in the performance of revenue laggards, it is still somewhat shocking that one in five of these companies had declining revenue and another 9% grew at less than 2% year-over-year.

Mid-sized companies, as represented by the Russell 2000, for the first time in our review, performed worse than their larger counterparts with 27% showing declining revenue and only 46% growing at more than 5%.

On the other end of the spectrum, for the first time since the 2007 and 2008 recession, more than 50% of the Fortune 500 companies (50.7%) had revenue growth of more than 5% — which is over twice the number of companies when compared to last year.

This leaves us with a corporate landscape defined by “haves” and “have nots” — with the haves creating a significant performance gap between themselves and their poorly performing counterparts.

Companies’ Strategies in 2019 and Beyond

In our current economic environment, companies continue to focus on driving down costs and improving productivity. By doing so they will work toward improving profitability as confirmed by the most recent quarterly earnings reports that showed S&P 500 results averaging over 3.3% earnings growth.

On the positive side, in addition to having stronger growth overall, companies in Quarter 1 forecasted positive earnings revisions by over a 2-to-1 ratio (Seeking Alpha April 28 S&P Earnings Analysis Brian Gilmartin). This means companies are committing to their shareholders that they will see continued earnings growth by either improving revenue or lowering costs — or both.

The Opportunity for B2B Sellers

Sellers have an opportunity to assist the poor revenue performers with primary value statements encompassing a story of cost-reduction and productivity improvement. And if a seller can clearly show how their solution can play a role in enabling new revenue streams for their buyer, this may resonate even more with the buyer’s internal initiatives.

Sellers engaging better-performing buyers should do so with a message of identifying revenue initiatives and accelerating or decreasing the risk of those initiatives. This strategy will show a seller’s commitment to helping their buyer continue along their current upwards trajectory and to meeting their public commitments (often easier said than done). To be considered as a trusted advisor rather than just a seller and to gain executive access, sellers will need to focus on the most complex aspects of those initiatives where the business risk is greatest and be prepared to have compelling and provocative points of view backed up by experience and proof points of success.

In this environment, references become an even stronger requirement.

Understanding the needs of buyers and seeking to serve those needs will set you apart in these interesting financial times. At Mereo, we thrive on equipping teams to provide value to their industry and to serve their buyers. For guidance on how to have these conversations, contact us.

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Ensure alignment before investing resources in a merger or acquisition

September 12, 2019

Joel Reed

Leadership typically assesses the value of a possible merger or acquisition based on business strategies such as:

Gaining entrance to new markets
Filling solution offering gaps and building solution synergies
Accelerating scale and improving cash flow

Yet, despite these well-intentioned strategies — and the due diligence of leadership in their assessment within these parameters — the failure rate for most mergers and acquisitions (M&A) remains greater than that of their successes.

Between 70% and 90% of mergers and acquisitions fail.

Lake Capital Partners and Harvard Business Review research

Despite the trend of failure, the rate and size of acquisitions has more than tripled since the late 1980s and early 1990s, with the total value of mergers and acquisition deals worldwide now estimated at $3.9 trillion (2018).

Even with substantial resources being invested in mergers and acquisitions by businesses around the world, many are failing. It is more important than ever to understand where this failure stems from and how to overcome it for all future deals.

Why Mergers and Acquisitions Are Failing

Research indicates that most mergers and acquisitions failure results from:

Inadequate due diligence and oversight of key issues
False sense of security around promised/expected solution synergies
Failure to recognize cultural synergies and differences

While the above points do hold merit and would affect the success of a merger or acquisition, in our experience at Mereo, failures or even sub-optimal successes generally occur for the same reasons businesses underperform: a lack of alignment across sales, marketing and product strategies.

The Key to Merger and Acquisition Success: Alignment

Due diligence should not be simply a financial exercise. It should extend to identifying synergies and differences in the sales, marketing and product functions between the two organizations in order to realistically determine if the differences can be overcome and the opportunities leveraged.

SALES

Can one of the joined entities help position new solutions to new markets (e.g. geographies, industries, size)? Will the execution model accelerate or hinder this opportunity?
How consistent or different are sales practices of the combined organizations? What impact will that have on quickly aligning the teams?
How similar are the compensation plans of the combined organizations? If one structure is based on revenue acceleration and growth (higher compensation based on increasing quota achievement) and the other is founded on revenue predictability (reward and compensation maximized for achieving quota with downside pressure for significant over- or under-achievement) then there is significant risk of frustration and turnover at minimum.

MARKETING

How aligned are the marketing strategies of the combined organizations? For example, is one focused on creating demand based on brand awareness while the other drives demand with active programs, campaigns and activities?
If there is a mismatch, ask yourself: What will the effects be on sales’ skills and tools?
A change in marketing spend mix or focus as compared with history may have a detrimental and unexpected effect on sales performance and result in turnover and tools/skills investments not forecasted.

PRODUCT

Is product strategy driven by customer and market input or is it driven by expertise internal to the company?
If the customer base is accustomed to being integral to the strategy and investment decisions, will the decrease in engagement cause dissatisfaction? What are the customer’s expectations and how will you continue to engage them or initiate engagement if you have not in the past?
What product strategy will best inform your newly joined organizations’ strategy and investment decisions?

An Advantage in Achieving Alignment

At Mereo, we help companies define sales, marketing and product strategies with tools and techniques that create a particular focus on the alignment of strategies across the entire organization and each function. Let’s connect to see how leading practices we have employed to successfully help leading B2B organizations align their teams for sustainable revenue performance might be relevant for your situation.

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