This blog shares thoughts and insights on seeing your business from the outside in, through customers, markets, and real commercial signals. It focuses on clearer priorities, better decisions, and sustainable growth.
Offering Penetration (Adoption) Defined
September 4, 2023
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Offering Penetration or -adoption gives a view of the depth of customer collaboration.
We work with mid-cap and large companies that often have divisions/subsidiaries/business groups and measure penetration at this higher level as well as offering level.
Higher offering penetration has multitude of benefits:
Higher ARPA (average revenue per account/year) – read more about ARPA in our blog here
Higher LTV (Life time value over the entire customer relationship which could last years and decades)
Stronger Retention or loyalty
Offering is another thing to define also, which we approach with “Jobs-to-be-done” ideology.
Our customers may have a multitude of services or products meeting the same customer needs, which means that in order to simplify and make the data readable and understandable, an offering is a collection of SKUs of billing lines serving the same need. This approach allows us to discover what needs customers have and whether the company is already addressing them or if they remain in the potential side. Once we have mapped hundreds or thousands billing lines in to “offerings”, we have a view to customers and what needs we are currently serving for them and which we are not (see “Potential).
WHY IS IT IMPORTANT TO UNDERSTAND AND ANALYSE PENETRATION LEVEL?
In this example, there is a regular view to what penetration level looks like.
The majority of customers (1,021 pcs) only use one single offering, and they contribute 2,43M€ in revenue (rolling 12 months). The average revenue per account (ARPA) is 2380€.
However, the majority of turnover comes from a much smaller number of customers using 11 or more offerings. The companies that have a stronger penetration, naturally have higher ARPA, stronger customer relationships and less risk of defect. Penetration is a measure of how deeply are we serving our customers and how strong a retention do we have with them.
This example graph is very a usual organic outcome in majority of businesses. The companies are well-known for some areas they operate in and those areas dominate the market penetration = most customers are using those offerings. Some customers, however, have discovered that the company’s other offerings provide synergies and higher value for them and they are using a much wider portfolio.
Most companies have not mapped these synergies and solution spaces against customers’ jobs-to-be-done. By doing this analysis carefully, you are likely to discover hard-to-copy competitive advantages that you already have, and scale. The fastest route to profitable growth is available by making most of what you already have. In this time of uncertainty, when productivity is an imperative, these discoveries are priceless. This is about Outcome Driven Innovation (ODI) on steroids.
INSIGHTS FROM PENETRATION ANALYSIS
When you analyze penetration, there will be very valuable insights available for you to find. Here’s an example of such.
Some offerings have “Halo-effect”, which means that they promote a stronger penetration and make it easier for customers to buy and use wider offering base. These offering should be introduced to new customers as early as possible, because they will make the value experience, adoption and ARPA growth faster.
Penetration has strong variation by offering or customer segments. Some business sectors have adopted behaviors that include stronger penetration levels, while others use 1-2 offerings.
This analysis gives you tools to ask completely new questions, plan and design:
Recognize, analyse and research customers that have high penetration and how their relationships have developed over time. These customers represent current success stories that can be communicated with clarity and value for the masses. Understanding how things have evolved, why and what value customers gain from this behavior is a source of bottom-up insights and innovation.
Offering analysis on which offerings represent accelerators and which represent islands. From offering management point of view, the insights are very concrete and valuable.
Which offerings appear most frequently together? Even if the company has not built solutions by combining multiple offerings together, smart customers have already adopted those behaviors and benefit from them. In most cases we can recognize wider customer needs and jobs-to-be-done that can be met by combining multiple offerings into solutions. These solutions often represent competitive advantage and differentiation in the market place. They can be very strategic and valuable insights.
DESIGNING RELATIONSHIPS AND COMPETITIVE ADVANTAGE
When companies are designing individual offerings, they carefully research and analyse the customers’ needs and how to fulfil them. However, at the overall enterprise level this is rather rare. Looking at all strategic segments and full capacity of variety of offerings, it is actually quite rare that the company would have a solid plan on how they could maximally deliver value and competitive advantage for their customers.
Penetration level is both indicator and analysis tool as well as strategic KPI. Driving penetration deeper is both growth strategy and Risk mitigation.
The Service Design thinking has moved on to Business Design and we are now entering the “Customer Relationship Design” era, that is founded on strategic segmentation and striving to drive deeper, longer and more profitable customer relationships and competitive advantage founded on companies’ full portfolio wide capacity to solve customers’ challenges.
Here’s how Penetration is present in the KPI dashboard in our 180ops tool.
Clarity in the age of uncertainty
September 4, 2023
Remember how it felt like plateaus were moving when the 9/11 attack took place, or when Lehman Brothers collapsed and the financial crisis started? At that point in time, these events were like earthquakes in the economic operating environment. Well, it was only the beginning of an era of uncertainty at an unseen level.
About Blind Spots and Why smart people do dumb things
September 4, 2023
Way back I read this book and it became a permanent reminder of one obvious fact for me. (The book is available in Amazon)
Revenue Projection Defined
September 4, 2023
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Revenue Projection is an expected billing level for existing customers by month for the next 12 months. The algorithm takes into account different seasons and trends related to customers’ behavior. Projection can be calculated from billing history and represent a light version of forecasting.
The actual forecasting is much more complex tool that takes into account the changes in business environment, changes in client companies (revenue or profit changes, etc.), sales pipeline and risks of defect. However, projection is already enabling data-driven decision making much better than intuition and experience.
VALUE & BENEFITS
OFFERING BUDGETING AND GOALS
From CFO and Offering Management point of view, projection gives an outlook on the next 12 months and the likely outcome of it. This supports budgeting well, because it gives an outlook on how things are developing if everything continues as they have been done so far.
If the outcome doesn’t look good enough, Readiness and Risk as well as Growth Planning (Ideal Customer Profile) will help define what and how should be changed in order to exceed the projected outcome. Projection is a living figure, which means that in case customers defect or new customers buy more, these impacts will be projected for the next 12 months. This allows CFO and Offering Management to stay constantly tuned with what their annual outcome looks like.
SALES MANAGEMENT, GOALS & INCENTIVES
Each business ID has it’s own billing projection for each month. Projection of all named accounts gives an outlook on total outcome of all accounts the sales person is responsible for. According to Salesforce’s State of Sales 2023 study, the most important reason why Salespeople resign their jobs is unrealistic expectations. Sales people know their accounts and what is possible to accomplish with them, in case the goals are set homogeneously for all salespeople, the outcomes might be wildly unfair.
Example:
Salesperson 1: Projection is a 20% growth with a 10% growth goal, which means that this salesperson will certainly meet and exceed his/her goals. Happy days 🙂
Salesperson 2: Projection is a 20% decline with a 10% growth goal, which actually means a 30% growth in order to meet the quota. This salesperson is likely to feel hopeless and to resign and change employer.
According to our customers CSOs especially the younger salesreps require answers: “What is this quota and goal based on?” “How can I meet these expectations?”. We have developed tools to answer these critical questions: What to sell to whom, when and why?
Projection is a constantly evolving figure, which means that in case the salesperson wins new accounts or services (up-sales, cross-sales, new customer acquisition & retention), the projection also updates and gives hope for success. The earlier in the year the positive changes take place, the stronger impact they have on annual success.
TAKEAWAY
Projection is a budgeting and goal setting tool and an inspiring monitoring tool for C-level overall view as well as offering and account management. Other tools like Growth Planning, Ideal Customer Profile, Ideal Offering Profile, Risk and Readiness provide insights for priority and change planning and a view to changes: “How are our changes impacting, what outcomes they drive?”. If the projection doesn’t meet the expectations, other tools will help you exceed the projected outcomes.
The 180ops value promise is to provide you with answers about what to sell, to whom, when and why. These answers bring clarity to the most burning question: “How can I meet my quota and goals?”
Revenue Projection Defined
September 4, 2023
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Revenue Projection is an expected billing level for existing customers by month for the next 12 months. The algorithm takes into account different seasons and trends related to customers’ behavior. Projection can be calculated from billing history and represent a light version of forecasting.
The actual forecasting is much more complex tool that takes into account the changes in business environment, changes in client companies (revenue or profit changes, etc.), sales pipeline and risks of defect. However, projection is already enabling data-driven decision making much better than intuition and experience.
VALUE & BENEFITS
OFFERING BUDGETING AND GOALS
From CFO and Offering Management point of view, projection gives an outlook on the next 12 months and the likely outcome of it. This supports budgeting well, because it gives an outlook on how things are developing if everything continues as they have been done so far.
If the outcome doesn’t look good enough, Readiness and Risk as well as Growth Planning (Ideal Customer Profile) will help define what and how should be changed in order to exceed the projected outcome. Projection is a living figure, which means that in case customers defect or new customers buy more, these impacts will be projected for the next 12 months. This allows CFO and Offering Management to stay constantly tuned with what their annual outcome looks like.
SALES MANAGEMENT, GOALS & INCENTIVES
Each business ID has it’s own billing projection for each month. Projection of all named accounts gives an outlook on total outcome of all accounts the sales person is responsible for. According to Salesforce’s State of Sales 2023 study, the most important reason why Salespeople resign their jobs is unrealistic expectations. Sales people know their accounts and what is possible to accomplish with them, in case the goals are set homogeneously for all salespeople, the outcomes might be wildly unfair.
Example:
Salesperson 1: Projection is a 20% growth with a 10% growth goal, which means that this salesperson will certainly meet and exceed his/her goals. Happy days 🙂
Salesperson 2: Projection is a 20% decline with a 10% growth goal, which actually means a 30% growth in order to meet the quota. This salesperson is likely to feel hopeless and to resign and change employer.
According to our customers CSOs especially the younger salesreps require answers: “What is this quota and goal based on?” “How can I meet these expectations?”. We have developed tools to answer these critical questions: What to sell to whom, when and why?
Projection is a constantly evolving figure, which means that in case the salesperson wins new accounts or services (up-sales, cross-sales, new customer acquisition & retention), the projection also updates and gives hope for success. The earlier in the year the positive changes take place, the stronger impact they have on annual success.
TAKEAWAY
Projection is a budgeting and goal setting tool and an inspiring monitoring tool for C-level overall view as well as offering and account management. Other tools like Growth Planning, Ideal Customer Profile, Ideal Offering Profile, Risk and Readiness provide insights for priority and change planning and a view to changes: “How are our changes impacting, what outcomes they drive?”. If the projection doesn’t meet the expectations, other tools will help you exceed the projected outcomes.
The 180ops value promise is to provide you with answers about what to sell, to whom, when and why. These answers bring clarity to the most burning question: “How can I meet my quota and goals?”
ARPA (Average Revenue Per Account) Defined
September 4, 2023
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Average Revenue Per Account AKA ARPA is a measure of single accounts total annual billing/revenue.
Addressable, Obtainable and Active markets
January 4, 2023
The market activity has huge variation from one business sector to the next. In B2B some decisions are very long lasting, like investments to ERP, CRM, production facilities and real estate, production lines and machinery. They can also change the way a company operates: In case of outsourcing some functions the decision is done once and it is a big decision, but it continues as an ongoing retainer relationship. Customers in the active market represent only a fraction of obtainable or addressable markets.
Next Generation Intelligence - AI-augmented Double Diamond
January 4, 2023
In the past decade, the amount of data that companies have captured has exploded. The tools that companies are using are continuously generating more data. Data-related businesses delivering possibilities to leverage external data have also grown tremendously, and the new leap in making data actionable is about connecting internal and external data effectively and crafting intelligence from it with algorithms.
The approach easily described with the Double Diamond Framework (figure below). It was popularized by the design community in the mid-2000s (Design Council, 2022). The idea builds on the works of Guilford (1956), who is generally attributed with making the distinction between divergent and convergent thinking.
The innovation process consists of a sequence of steps where innovators first explore a wide range of problems and opportunities to then decide on adequate solutions (source).
This same process has been used for the purpose of making a creative strategy by many, including Ogilvy. In this case, we are using it to make a strategic discovery for strategy design and for the deployment and management of change:
There are five stages involved in applying this framework to AI.
Stage 1
This stage involves aggregating the company’s own data and relevant external data, which is about enablement of the analysis. The idea is to use unusually large bottom-up and outside-in dataset to lay the foundation, which will extend the double diamond AI-enabled insight and priority generation in the next stages.
Stage 2
This stage uses algorithms to make sense of tens of millions of rows of raw data. From this, we disxover where the money comes from, which offering and segment-related dynamics are involved, and the insights and priorities can we recognize. Furthermore, it allows for the discovery of readiness drivers to adopt new offerings (market segmenting by addressable, obtainable and active markets), how customers map in to current and potential value segments, etc.
In Stage 2, the primary goal is to discover what matters (the drivers of risks and opportunities) and where the money is. We need to get behind the KPIs to reveal dynamics and phenomena that drive change and results. Once recognized, we can measure and manage them.
Stage 3
The third stage is about defining direction, vision, brand and narrative. It gives the foundation for strategic development programs and deployment planning. Strategy is a domain of management consideration and decision making. The usual use cases would be eg. creation of strategic segmentation, making portfolio analysis, and creation of strategy and implementation planning.
Stage 4
This stage involves preparing for deployment, defining teams and team objectives, and deciding their key results. Each team has access to data that is relevant for their objectives. They have tools to make goals into key results, as well as the capability to analyze the underlying challenges and dynamics that they should concentrate on. The idea is that the objectives of the programs are firmly built on bottom-up data, which enable us to give tools and answers for planning. If we require strong growth, we need to give tools to meet them. 180ops has been built to give those answers.
Stage 5
Learning and doing. Transparency and shared learning is imperative for continuous improvement and the cumulative development of competitive advantage. The markets and customers change continuously. 180opos monitors those changes and gives feedback for that an more, such as changes in customers willingness to buy or relationship- or offering-related risks.
Adaptability to the changing environment is a must, and early signals about changes are imperative. That is why outside-in data has a vital role. Getting advice at the individual customer level supports sales very effectively. Creating unity between offering, marketing, sales and customer service bring the entire customer interface together. Offerings, customer segments and activities interconnect while transparency and feedback inspire, empower, and energize the organization. The goal is to drive cultural unity and purpose, winning as a team.
The new discoveries and magic are available from combinations:
Book introduction: Path to Growth and Profitability
October 10, 2022
BACKGROUND
Most business leaders can pinpoint problems causing inefficiencies that lead to underperforming or declining sales. Too often, however, they try to solve those problems on a bug-fix basis. But quick fixes create a false sense of accomplishment. The need to be busy and productive prevents us from taking a better look at the big picture and underlying challenges. The fundamental issues dragging performance down are not identified, and the correct core adjustments in strategy and perspective are not made.