Is Your Corporate Culture Choking Your Revenue Potential?
Several years ago, OpenView Venture Partners made an investment in a high-growth technology company with a pretty unique product offering. When we began our partnership, the organization was focused on its long-term vision, planning years in advance for future market takeovers and potential product enhancements.
The problem with that strategy was simple. Amid all of the aspirations the company had for what it could become in five years, it almost overlooked an enormous high-growth revenue opportunity right in front of it at the time. The good news was that by acting quickly the business could still become the vendor of choice in a nine-figure market.
So that’s what it did.
The company’s sales, marketing, and product teams tucked their long-term roadmaps into their back pockets and began focusing on activities that would drive immediate revenue growth instead. They executed sales and marketing initiatives that fed the pipeline with actionable opportunities, and they built products that would quickly attract new, paying customers by satisfying an underserved market need.
Eight months later, the company had grown into a Goliath. It owned half of a 5,000-customer market, and — 10 months after that — it was acquired at seven times its initial valuation by a much larger competitor. What led to this acquisition? It was the fact that the CEO of the portfolio company recognized near-term opportunity and temporarily abandoned his long-term vision to attack it.
“That’s great,” you say. “But why should I care?”
It’s simple, really. As a growing business, it’s critical to understand where you fit in your market. And it’s even more important to make sure that the corporate culture you establish supports the short and long-term strategies necessary to survive in it.
If you’re a startup in an evangelistic market, for example, you may have the luxury of time, negating the need to chase revenue in the short term. If you’re an up-and-coming solution in a market full of big, branded players with well-established reputations and far greater resources, on the other hand, that strategy isn’t going to cut it.
In fact, like the company I mentioned above, you better be prepared to drive revenue growth when opportunities present themselves. That often means acting immediately on addressable market opportunities and making sure that everyone in your organization is prepared to turn their focus toward — and be accountable for — driving revenue, which is always the case.
More often than not, doing so is only possible when you have the right corporate culture in place. During my career, I’ve noticed three main types of corporate cultures, each of which serves a unique purpose depending on a business’s growth stage and market:
- Power Cultures: In this environment, the executive team is highly controlling and there’s no room for idea sharing or change management. Generally, the founder controls all aspects of company operations and is unwilling to view the business through any other lens, leading to very little innovation.
- Supportive Cultures: This culture is the total opposite of the previous one. It’s warm and fuzzy, and CEOs simply ask their employees to do their best. Goals may exist, but there’s generally a lack of consequence, urgency, and creativity.
- Performance Cultures: In this scenario, every employee is equipped with transparent goals and is empowered to challenge each other to achieve them. More importantly, there’s a high degree of accountability between teams and departments to quickly achieve short-term targets.
Take a guess which one is best suited to drive revenue?
Power and supportive cultures tend to be more product-driven, asking employees to do their jobs, stay the course, and focus on role-specific, long-term goals. A performance culture can do each of those things as well, but it also encourages every employee to focus on activities that drive revenue right now, not next year, making it better suited to drive revenue.
Now, before you suggest that your company’s marketing, product, and engineering teams can’t possibly be bound to revenue generation, let me stop you. If you’re sitting on a ticking time bomb and have to drive revenue as quickly as possible to survive, you can’t afford to employ anyone who isn’t comfortable being tied to revenue targets.
For developers, that means being judged on ready state products to fulfill sales orders. For marketers, it means being judged on the number of actionable, quality leads delivered to sales that can be converted to revenue. For salespeople, it means meeting or exceeding quota.
Yes, the whole process can feel like a dirty numbers game at times. But it’s effective. The idea is that if everyone is somehow compensated on a revenue target number, everyone will be motivated to do things that drive revenue. That’s critical, largely because growing companies in crowded markets must be able to squeeze through the windows that open for them.
Of course, a lot of CEOs and management teams strive to create a performance culture, but fail because internal teams silo themselves into their own subcultures. You can avoid that pitfall by making sure every employee clearly understands the business’s short- and long-term goals and has at least one measurable goal that’s tied to the performance of the company as a whole.
Ultimately, that approach will foster an environment that points everyone toward specific revenue targets and, like our portfolio company, allow your business’s many moving parts to quickly pivot and collectively step on the gas.
Editor’s Note: For more advice on managing your corporate culture as well as your revenue growth strategy, sign up for the OpenView newsletter.