"It is business that generates the jobs, income and taxes that keep a country going."
---Mark Skousen (American economist)
If you keep up with current events, I'm sure you're aware that the Republican-controlled Congress passed a sweeping tax reform bill last week. We’re not going to address the full minutia of the 2017 Tax Cuts and Jobs Act in this article. However, here are a few of the salient highlights for American businesses:
The substantial cut in U.S. corporate tax rates is undoubtedly the single greatest change in our federal tax laws in the last 30 years. It also seems to be the most controversial portion of the new legislation. Indeed, left-wing politicians and left-leaning media outlets have been quick to condemn the new Tax Act as a gift to the wealthy at the expense of the middle-class.
Before and after the House and Senate votes were taken last week, the pollical hyperbole was in full effect. According to Senate minority leader Chuck Schumer (D, NY), the tax bill seemed to “stuff even more money into the pockets of the wealthy and the biggest corporations while raising taxes on millions in the middle class.” House Minority leader Nancy Pelosi (D, CA) went even further stating, “This GOP tax scam is simply theft, monumental, brazen theft from the American middle class and from every person who aspires to reach it. The GOP tax scam is not a vote for an investment in growth or jobs.”
It’s interesting to note that the final votes in both the House and Senate fell squarely along partisan lines. While a handful of Republicans opposed the bill in the House, not one single Democrat representative voted in favor of the legislation. The same was true in the Senate where all but one Republican (Bob Corker (R, TN)) voted yea and the entire Democrat Senate voted nay.
The apocalyptic reactions to the bill's passing from Democrat leadership and the left-wing media are deeply disturbing, particularly when you take into account that most nonpartisan economic think tanks project sizable economic gains under the new tax plan. For example, the Tax Foundation (a non-partisan Washington D.C.-based think tank) conservatively estimated in their preliminary analysis that the new Tax Act will generate:
Keep in mind that the Tax Foundation used very conservative assumptions for their forecast model and did not take into account any real compounding effects. In contrast, several other noted economists are predicting far, far greater returns over the long run. For example, Forbes contributor Bill Conerly recently remarked, “The biggest impact will be the gradual improvement in economic growth year after year. A small increment added to our recent growth rates would be inconsequential in any one year, but the increments will cumulate and even compound. Twenty years from now, the difference will be significant.” In other words, it's very feasible that the new Tax Act will create economic boon conditions and actually increase tax revenues over the long run.
While the true long-term economic impact of the new tax legislation remains open for debate, a sizable number of high-profile American corporations are already beginning to return immediate dividends to their workers. Several companies (including Boeing Comcast, Fifth Third Bankcorp and Wells Fargo) announced new investments, minimum wage hikes and employee bonuses the day after the tax reform bill was passed by Congress. More major companies are expected to quickly follow suit, thereby negating much of the original hyperbole surrounding the bill.
advantage of many of the loopholes and special deductions that major corporations could. Additionally, the draconian 35% corporate tax structure discouraged venture capitalists from taking sizable risks on startups in the U.S. market for years.
Smaller businesses are the backbone of the American economy. In 2017, over 60% of American private sector jobs are with companies with less than 1000 workers. For a good number of these companies, the new Tax Act dramatically changes their scalability dynamics. Although not every small to medium size business owner wants to grow the size of their enterprise, a good number in fact do. It doesn’t take a rocket scientist to realize that the newly enacted tax legislation frees up financial capital for growth, research and expansion that was previously earmarked for the coffers of the federal government.
In parallel, it’s very likely that Venture Capitalists will begin to invest more and more in startup opportunities in relatively dormant American industries. Again, we're not going to get into Tax Act's minutia in this article (i.e. tax implications for VC investments). However, a basic understanding of economics leads to a realization that a sizable reduction in corporate tax rates makes American investments more attractive to VCs. Therefore, the likely influx of investment capital will undoubtedly lead to greater innovation. These investments will also increase demand for skilled American labor in a number of industrial sectors as competition increases. Consequently, real sustainable wage growth for American workers appears within reach for the first time in nearly two decades.
We'd be remiss if we didn't mention that an estimated 40-45% of all Americans pay no federal income taxes whatsoever today. There are many factors behind this astounding figure. However, an economic stimulus package of this magnitude will most certainly reduce welfare and unemployment figures in the years to come. In addition, the average American worker who pays taxes is expected to realize a sizable tax reduction under the new plan.
More important to our nation's future, American industry will once again have competitive advantages in the global arena. The truth of the matter is that our nation benefits wholly when job creators have more capital available to create, execute and innovate. Unleash the financial handcuffs from the John Galts of American enterprise and the free market will flourish. The positive effects will certainly ripple though society much as Mr. Conerly stated in his recent Forbes column.
In closing, a sad truth was revealed in the final Tax Cuts and Jobs Act debates and voting tallies last week. The leadership of the Democrat Party, as a whole, has now moved as far to the left on the political spectrum as the self-proclaimed “Democratic Socialist” Bernie Sanders (I, VT). They seem to have completely abandoned the virtuous, free market principles that have guided our Constitutional Republic for the last 241 years. Their "progressive" label appears to be a thinly veiled euphemism for neo-Marxist ideology. If John F. Kennedy were alive today, I imagine that he'd be aghast at what's become of his Democrat party.
Author: Erik Gagnon - Managing Partner, Chi Rho Consulting
Note: This is the second of a five-part series of articles examining the discipline of Demand Generation. Follow this link to read the first article in the series: Why Nearly 60% of Enterprise Demand Generation Programs Underperform.
"Success doesn't necessarily come from breakthrough innovation but from flawless execution. A great strategy alone won't win a game or a battle; the win comes from basic blocking and tackling."
---Naveen Jain (Entrepreneur and Philanthropist)
In a game of American football, two competing teams vie for control of a ball, which can be kicked through a set of goalposts or run into the opponent's goal area to score points. If you're a fan of the sport, you probably know that the game has evolved dramatically over the years. In fact, nearly every aspect of football has changed to some degree since the game's inception over a century ago: the rules, the equipment, the venues and even the on field tactics. The game constantly evolves, innovates and modernizes.
Despite, the game's ongoing evolution, the end objectives of the contests have always remained consistent. Score more points than your opponent and you win the match. Win the most important matches and and you're crowned champion. Consistently win championships and you solidify your team as a dynasty.
I doubt that any dynastic football coach would dispute Naveen Jain's quote we cited above. Having played the game myself, I can tell you that the best teams on paper don't always win the contests on the field. The bottom line is that ongoing success on the gridiron typically requires consistent and near-flawless execution of basic fundamentals in every facet of the game.
Suffice it to say, the end objectives of nearly every business enterprise are parallel to the game of football: you play to win. In our first article of this series, we discussed why a high percentage of companies that have adopted Demand Generation practices and principles are ineffective. In this article, we'll address the four strategic pillars of successful enterprise Demand Generation programs and examine some of the fundamental tactics that distinguish the champions from the also ran's.
The First Pillar: Your Process
As we discussed in the first article, Demand Generation defines your organization’s personal relationship with your leads, prospects and customers. Needless to say, every customer touch-point offers an opportunity to strengthen your relationship with your customer. Consequently, your organization needs to be structured around your customer rather than your products or services to fully optimize your Demand Generation efforts.
Unlike traditional Lead Generation programs where interested (warm) prospects were turned over to a sales professional to close deals, Demand Generation programs nurture the relationship through the entirety of the Revenue Funnel. In other words, you're not just looking to close a deal. Instead, you're seeking to establish long-term relationships with your buyers; where satisfied customers become loyalists and loyalists become vocal brand advocates.
So why is having a dynamic, ongoing relationship with your buyers so important these days? First and foremost, the digital revolution has dramatically altered buying processes and decision making over the last few years. In effect, buyers are more knowledgeable and better informed than ever before. They're turning to friends, colleagues and other key influencers to research their purchases long before they ever engage with your sales team.
Recent studies by Forrester Research, DemandGen and CSO Insights all reveal some startling figures that support this claim. For instance:
These figures indicate that your customers' needs and buying patterns must be at the center of your Demand Generation strategy. The stats also suggest that you need to actively engage with customers at every point in the revenue funnel principally on their terms.
An effective demand generation process does just that. It more closely aligns your Marketing and Sales functions, and it creates a seamless buying process that eliminates the gap between Interest and Desire:
The Second Pillar: Your People
Traditional business models typically view Marketing as a cost silo and Sales as a revenue silo. Effective Demand Generation generally requires a blended model approach. In our experiences, we've found that a combined marketing/sales organizational model, built around the touch-points in the revenue funnel, typically works best.
For startup companies, adopting a blended organizational model is usually a relatively easy task. Conversely, established businesses with traditional lead generation models seem to experience difficulties. To be successful, you will most likely need to change the skill-set of your personnel, the reward structure based on changes in goals and performance metrics and the organizational structure to align to the buyers' purchase path. This requires a shift away from the traditional way of thinking of both marketing and sales.
It's important to remember that organizational change Is difficult and that people sometimes resist the efforts. Your marketing personnel and your sales team need both support and leadership in order to make the strategic shift pay off. Consequently, clear communication of your overall mission, vision and objectives from the top on down are critical for transition.
As we mentioned earlier, effective Demand Generation processes bridge the gap between marketing and sales. Over the years, we've found organizations that appoint a C-Level leader to oversee the whole process are generally more successful than their peers who draw territorial lines between marketing and sales functions. Therefore, we strongly urge our clients to appoint a "Chief Demand Officer" (or a Chief Revenue Officer if you prefer), who owns the he entire Customer Life Cycle.
The CDO / CRO leads a team that is responsible for meeting the revenue objectives for your products or services, Their functional org chart generally looks something like this:
The CDO / CRO's functional teams exist to create awareness, nurture prospects, close sales, up sell, cross sell and strengthen relationships. Support staff (Marketing Ops) support the entire organization. Along with traditional sales and conversion metrics, two critical financial measurements tie the teams' activities together:
The Third Pillar: Your Content
Once you've fully committed to a customer-centric business model, it's time to turn your attention to your content strategy. Like every marketing program, success is a matter of being in the right place at the right time with the right solution. An ideal Demand Generation program establishes your organization as the expert in your particular line of business. Therefore, each and every interaction with your prospects and customers should affirm and strengthen the perception that you are the leading solution in your category.
First and foremost, you need to find and target the best touch points to engage customers. This isn't an exact science. Tactics vary by industry and product type. Additionally, every business has varying strengths and deficiencies. Therefore, we strongly suggest you begin with category best practices that seem to fit your model. Test them out for yourself and quickly adapt and expand the ones that seem most promising. Here are some basic tactics to consider through the various stages of the revenue funnel:
With this model in mind, here are our five fundamental recommendations for developing an effective content strategy:
The Fourth Pillar: Analytics
Although it doesn't directly appear on your balance sheet, your company's structured data is an extremely important and valuable business asset. To a large degree, your ability to access, analyze and interpret the data generated through all of your customer interactions drives the effectiveness of your Demand Generation campaigns. As a recent report by DemandMetric / Radius demonstrates:
We recommend that you take stock of your data as early as possible! Missing, inaccurate or poor quality data impedes effective Demand Generation as well as the successful application of predictive analytics. You may wish to consider a full audit of your CRM applications, gathering and storage systems, personnel, as well as the depth, accuracy and quality of your structured data. That way, you can quickly begin to harness your assets and pull together an action plan to address your deficiencies.
A real opportunity exists in most industries to develop a sizable competitive advantage through structured data. Believe it or not, the DemandMetric / Radius report suggests that only 44% of CMO’s understand predictive analytics well; and only 11% of those that do understand are actually implementing or using predictive analytics for Demand Generation activities. Even more surprising, only 55% of companies that employ predictive modeling are using their data to find new revenue opportunities!
We'll state once again: Demand Generation programs are an ideal pairing for predictive analytics. Even if you're a very lean organization, commercial solutions do exist to help integrate predictive analytics into the process. If your current Demand Generation campaigns are yielding less than desired results, chances are there's room for improvement if you unlock the full power stored within your enterprise data systems.
Effective Demand Generation is an enterprise-wide endeavor. It requires a firm foundation built upon each of the four strategic pillars we described above. Whether your company is new to the discipline or you're a seasoned player, you need to ensure that you're executing the fundamentals efficiently and effectively. Otherwise, you're likely to be steamrolled by your competition.
You may be wondering why we haven't listed technology (e.g. automation systems, adaptive control technology, CRM systems, etc.) as a fifth pillar. While the right technology certainly speeds delivery, improves effectiveness and can also lower costs, we'd argue that technology systems are complementary tools to each of the four pillars we've described above. In our next article in this series, 12 Things to Consider Before You Automate Your Demand Generation Processes, we'll discuss the benefits of several Demand Generation technologies as well as some serious technological pitfalls you'll want to avoid.
Author: Erik Gagnon - Managing Partner, Chi Rho Consulting
Note: This is the second of a five-part series of Jumpstart Strategies articles examining the discipline of Demand Generation. Here are links to the other live articles in the series:
“Leaders of the future will have to be visionary and be able to bring people in - real communicators… it's going to be incredibly valuable and incredibly in demand.”
--- Anita Borg (1999)
When American computer scientist Anita Borg spoke these words, the World Wide Web was still in its nascency. At the time, there were roughly 280 million internet users. Today, there are over 3.4 billion users. In parallel, the number of active websites has grown 10-fold since 1999. Today, there are over 311 MM active websites worldwide.
While the ascension of the Web has largely been a boon for marketers, it has also presented clear challenges in recent years. Specifically, how do you differentiate yourself from your competitors, stand out from the crowd and identify your business as a leader in a competitive marketplace? For a growing number of companies, particularly those with a long sales cycle, the answer to the puzzle has been Demand Generation.
What Is Demand Generation?
In theory, Demand Generation is “the focus of targeted marketing programs to drive awareness and interest in a company's products and/or services.” The scope of the discipline includes:
Demand Generation defines your organization’s personal relationship with your leads, prospects and customers. However, unlike traditional lead generation and customer acquisition programs, the objective of Demand Generation is to build and nurture key prospect and customer relationships for the long term.
An ideal Demand Generation platform establishes your organization as the expert in your line of business. Your customers turn (and return) to you for solutions to their most difficult challenges and purchase decisions. They also trumpet your products and services within their peer circles. From a P&L standpoint: the net effects of an effective Demand Generation program are two-fold: 1) it increases the lifetime value (LTV) of your customers AND 2) it decreases the cost to acquire new customers (CAC). In addition, an effective Demand Generation also increases market share over time.
Demand Generation programs. Consequently, many other companies (across a vast ray of industries) have jumped on the Demand Generation bandwagon in recent years.
Is Demand Generation Producing Positive Results?
The answer to this question really depends on whom you talk to. For example, a recent Annuitas benchmarking survey of 100 B2B enterprise marketers indicates that only 2.8% of the respondents believe that their Demand Generation programs are very effective. Conversely, a whopping 58.5% of the respondents said that their programs are largely ineffective:
In contrast, a recent survey by Demand Metric reveals another side to the story. While only 30% of study participants report having a B2B demand generation process that meets their objectives, respondents with advanced business analytics capabilities report significantly better results. Indeed, “when predictive analytics are applied, process performance soars, effectively meeting the objectives set for it over half of the time.”
To us, the Demand Metric survey results suggest that many marketers aren’t completely engaged in the full discipline of Demand Generation. While the Effectiveness Rate for companies that apply analytics is significantly better than their peers who don’t (55% vs 18%), even that figure seems disappointing. Obviously, for most of the marketers polled in both surveys, something seems to be lacking or missing in their Demand Generation formulas. In our experience, there seems to be two critical factors that many organizations overlook or completely ignore when they decide to adopt demand generation methods: organizational structure and process management.
The Essential Building Blocks For Effective Demand Generation
Industry analysts predict that Demand Generation budgets will continue their upward trend. According to the 2017 Demand Generation Benchmark Report, two-thirds (67%) of marketers expected to increase their budgets this year. Furthermore, one-third (33%) of marketers anticipated a rise of 20% or more. Similar budgetary increases are also expected for 2018. Consequently, it’s a near certainty that CEOs and CFOs will soon begin to demand better results from their Demand Generation investments. If marketers continue to under-perform, you can bet that heads will start to roll.
That said, blame for ineffective Demand Generation programs shouldn’t be solely directed at Marketing and Sales executives. We’d argue that many organizations have attached themselves to the DG buzzword without understanding the full nature of the discipline. Consequently, it seems that many companies focus on tactics while missing the big picture.
For example, when C-Level professionals are asked, "What exactly does Demand Generation entail?" Many of them will point to content creation or marketing automation (or a combination of the two). Better yet, scour job boards and you’ll find several Manager / Director level positions entailed with the responsibility of "Leading" Demand Generation efforts within companies large and medium and small alike.
We believe that tactically reliant Demand Generation recipes are almost certainly destined for failure. In our experience, we’ve found that tactical proficiency is only one factor in becoming an effective Demand Generation marketer. You must realize that Demand Generation is a complete business discipline. Ergo, for a company to be truly effective in the discipline it must embrace Demand Generation as an overall business strategy. For the strategy to succeed, your company must first become a customer-centric organization. As we've learned over the years, this often requires a measurable degree of organizational restructuring, realignment of departmental duties and a commitment to enterprise analytics.
It's our belief that many companies that experience failing or below expectation results from their Demand Generation efforts haven't fully embraced the DG concept as an over-arching business strategy. Like any key strategic initiative, your Demand Generation strategy requires a clear commitment from C-Level leaders and buy-in from every layer of subordinate management in order to truly be successful.
"Companies that grow for the sake of growth or that expand into areas outside their core business strategy often stumble. On the other hand, companies that build scale for the benefit of their customers and shareholders more often succeed over time."
---Jamie Dimon (Chairman, JPMorgan Chase)
If you Google "biggest problems facing entrepreneurs today," you'll find 100's of different answers on the subject. There are dozens of laundry lists to choose from and most offer some very good suggestions on the pitfalls you should avoid. That said, you'll find little commentary regarding the impact or importance of each problem in these articles. Therefore, I thought we would add our opinions on the matter into the discussion. We'll start with what we believe the top challenge every entrepreneur will face at one point in their journey is, if they hope to gain traction. As you'll soon learn, it's a challenge that entrepreneurs have faced in free market economies for eons.
If We Knew Then What We Know Now
There's a good chance that you're a foundling entrepreneur or that you work for a startup if you're reading this. If that's the case, I'm sure you have big dreams for your products or services. At least, that was the case with me when I founded my first business back in 2008. It was a real-time valuation service catering to antiques / collectibles merchants and avid hobbyists. My vision was that CollectCentric would quickly become an invaluable resource within the industry. I dreamed we'd one day be the 800 lb. gorilla within the category.
We built a working prototype and began searching for suitable investors so we could bring our concept to market. To make a long story short, CollectCentric was beaten out by another Atlanta-based startup: WorthPoint. Their business plan was more agile than ours and they also had deeper pockets. It turned out that they were also better negotiators too. They locked the principal data supplier (eBay) into a long-term, exclusive agreement. Needless to say, we were no longer able to compete in the category once the deal was announced.
The truth of the matter was that we were blind to factors that our team hadn't ever worked through before. In retrospect, we should have taken time during our development cycle to brief analysts and industry press. They could've been used as eyes and ears to let us know how the competitive landscape was shaping up. If we had done this, we might have altered our strategy and avoided the mistake of launching an also-ran product.
The Universal Challenge: How To Scale?
CollectCentic's tale mirrors similar stories dating back through the centuries (e.g. Nicola Tesla). Like Tesla and countless others, our principal challenge was scalability. A scalable company is one that can maintain or improve profit margins while sales volume increases. In other words, a startup cannot afford to lose revenue traction in order to produce more goods or services unless it has a well thought out strategy to secure a second round of funding (or your first round if you're bootstrapping).
Our revenue forecast was a different matter entirely. We didn't have deep supplier relationships, so we anticipated a rather lengthy ramp up time. This was a barrier for some potential investors and it put us in a difficult negotiating position with others. You have to understand that angel investors take a huge risk when they invest in a startup. Consequently, they generally seek a return of 10x or more on every investment they make. They also generally want to recoup their investment in a relatively short time period. To receive serious consideration from angel Investors your ROI should be 30-40% minimum. Additionally, the payback and dividend period should be no more than five to seven years out. As we found out, it's difficult to come to quick agreement on terms if your revenue streams don't meet these requirements.
What We Learned Along The Way
In hindsight, we made the mistake of underestimating the competition in an emerging market. WorthPoint had the more sustainable business strategy. They went after the suppliers aggressively while we concentrated on both branding and the development of our end user interface. We never saw Worthpoint's agreement with Terapeak (eBay's data aggregator) coming. Naturally, it was a hard pill for all of us to swallow when we learned of the agreement.
beaten into oblivion by experienced entrepreneurs and wiser businessmen just like we were. As an old adage goes, your only two choices as an entrepreneur are "get better or get beaten." In other words, you need to solve your company's scalability equation early or you'll probably be outflanked by your competition.
Author: Erik Gagnon - Managing Partner, Chi Rho Consulting