Every viable company has a unique growth thesis with seemingly endless paths to create value. The challenge that many companies face, however, is how to choose the right initiatives to focus time and efforts towards.
Our recent report, How Companies are Achieving and Sustaining Commercial Momentum in 2023, shows that the current market environment is only a partial indicator of how much growth a company can achieve. The bigger indicator? All-in commitment to a well-defined plan of action based on the company’s commercial growth strategy.
As many companies enter the annual planning season, the first critical step is to determine how the company is creating value currently. SBI’s Value Creation Compass provides a clear path to determining where value is being created using four directional quadrants:
- Accelerating growth without increased expense
Companies in this quadrant have commercial spend levels that meet peer benchmarks, but the business is not growing at the expected rate given those investments, requiring productivity gains.
- Accelerating growth with increased expense
This is an ‘art of the possible’ thesis for high-growth companies focused on extracting breakout growth with increased investments in commercial functions.
- Maintaining growth with increased expense
Often also referred to as ‘converting to a more valuable revenue stream and operating model’, these companies focus on making a step-change in their revenue model to drive future growth and enterprise value creation.
- Maintaining growth rate without increased expense
Often seen in public take-private scenarios or large legacy businesses, this quadrant describes businesses that are commercially overspending, yet achieving substandard growth rates.
Each quadrant suggests different go-to-market initiatives be considered, from sales talent to operational process to organizational structure to marketing communications and more. For example, companies in Quadrant 1 of the Value Creation Compass should look at initiatives to optimize their GTM model, increase client retention, and exercise pricing and packaging leverage. Whereas, companies who find themselves in Quandrant 2, should develop new products and explore market expansion opportunities to drive growth.
Whatever the mix, two questions need to be answered that require quantifiable data and an honest assessment of the business: ‘What are the growth expectations?’ and ‘What is the level of investment?’ Seemingly basic questions, yes. But they will provide the foundation for a process that aligns commercial initiatives with strategic growth priorities.
If you're unsure of where you sit within the Value Creation Compass, we recommend completing the first step in the Annual Revenue Planning Methodology - establish a fact base. Growth leaders are guided through a series of questions to evaluate leading and lagging indicators to help them understand if they are experiencing stage-appropriate growth.
Growth is possible for companies committed to taking definitive action, remaining focused, and measuring progress. To learn more, visit the SBI Annual Planning Resource Center for more tools and insights.
