From our client’s perspective, you should expect that business value would derive from several metrics – one of which is maximizing profitability. Profitability, simply calculated, is revenue less costs. I like to use a “lever” metaphor to depict this calculation and achieve the objective of maximizing profitability – which will come from increasing revenue (lever one) and reducing costs (lever two). For client investments in solution implementations, the goals and objectives for doing these projects need to align to these levers.
The graphic depicted here further leverages this metaphor at a deeper level.
This is one of my favorite graphics as it depicts this metaphor extremely well and can be used for virtually every client engagement. Both levers – increasing revenue and decreasing costs – have two types of impact areas, direct and indirect. Companies can increase revenues through direct and indirect impact levers, and can decrease costs through direct and indirect impact levers. Further, as we consider this, bear in mind that both direct and indirect impacts with have quantitative and qualitative aspects.
Let’s focus first on increase revenue impact areas. Direct revenue impacts are arguably the easiest to grasp as these will tie to marketing and sales activities. Direct revenue levers can include:
- Retention of and increased revenues from existing customers;
- Attracting and growing new customers; and
- Cross-selling and up-selling new products and services.
- Increasing customer satisfaction and loyalty;
- Increasing employee satisfaction and loyalty; and
- Increasing brand awareness.
From a CRM perspective, sales and marketing have traditional influence on these levers. The service function has a tremendous role in this too – especially toward contributing to cross/up-selling activities and increasing customer satisfaction. Revenue increases can also come from non-CRM functions – specifically human capital management, talent management and enterprise resource planning – all traditionally considered the “back office” but having equal opportunity to contribute to increasing revenues.
Turning our attention to reducing costs, direct cost reduction levers can include:
- Reducing operational and functional costs;
- Improving operational productivity and functional efficiency; and
- Eliminating unprofitable customers (yes, it is oftentimes needed).
- Decreasing time-to-market for products and services;
- Reducing customer support dependency; and
- Reducing employee turnover.
Note that I was purposely “generic” in the above depictions of the levers. To define these levers for client engagements, we need to drill into functions and operations specific to that customer’s organization, industry and strategy. Following “The Appirio Way”, we should be conducting an analysis for this on all projects – whether as part of a single release or a strategic blueprint. The Define and Design stage of the Appirio Way should prioritize scope and requirements against these. The Measure function should present how these will be tracked and analyzes, and how the client will adjust to ensure these levers are being pulled as planned.
Appirio 101 teaches and reinforces skills needed to excel across the ABCs - Agility, Business Value, Customers & Culture. We learn Appirio’s methodology, tools and solution delivery model toward increasing agility, focusing on customers and building our culture. Pertaining to delivering Business Value - our solution implementations are doing this, and leveraging the above model helps our customers (and our teams) understand how and where this will happen.