External threats are accelerating the need for permanent change and disruption within businesses

Last week, we published a Legal Spotlight article which pointed out that there have been increased liquidations in the first half of this year. This is being driven by the accelerated change that is being brought about by digitalisation and the disruption of global economies. Within the south African context, these global changes, coupled with the fact that the Energy Crisis will be intensifying (with delays in the Koeberg Maintenance), mean that the signs of a challenging business environment are increasing.

It is not only South African companies that are experiencing disruptive change. I recently read an article which pointed out that Coca-Cola, Amazon and Netflix have all experienced significant challenges in the past two years. Disney has made a pivotal decision to move out of linear television as the public gravitates towards streaming channels.

The global companies mentioned above have one thing in common: they have undergone an extensive organisational restructuring programme. In the case of Coca-Cola, the CEO urged managers to look past their fears of failure to address specific issues. In the case of Disney, CEO Bob Iger embarked on a cost restructuring and retrenchment programme.

It is becoming clear that the role of Chief Restructuring Officers (CROs) is becoming more critical in every corporation.

Deep, relevant expertise

The McKinsey article points out that CROs need to have deep, relevant expertise to address existential threats. 

Substantial prior experience is essential. To make the most of this position’s possibilities, organizations need an executive with in-depth experience in sales, marketing, product, and even technology. Reports show that 72% of externally hired CROs bring more than 15 years of work experience to the role, 76% have worked previously at a start-up, and 96% have had experience at corporate incumbents. This experience will drive the meaningful change that is necessary to implement meaningful restructuring.

A CRO leads but does not replace marketing and sales executives. Although the CRO often has a background in sales, the role should not be confused with the vice president of sales. Instead, approximately 65% of unicorns with a CRO complement this position with a head of sales, marketing, or both. Rather than crowding the leadership ranks, we have found that the combination of both levels is essential for success. Heads of sales or marketing are primarily focused on more tactical short-term objectives within their functions, while the CRO stands above both and views sales and marketing as one component of the revenue-generating machine that ensures the long-term health of the company. The CRO delegates tactical execution to the heads of the departments and focuses on strategic thinking and visionary leadership.

CROs must get the mechanics to work, then manage the inputs

The article points out that from testing various demand generation techniques to measuring the success of sales and marketing campaigns, it is up to the CRO to make informed decisions on where and how to allocate resources for optimal growth.

Understanding funnel metrics is critical to the role of a CRO. When data are limited and sales cycles are long, focusing solely on converting opportunities into deals is not always effective. Instead, a pipeline should be built. CROs should set the target ambition, then cascade these targets—including the number of new customers and opportunities needed to achieve the targets—down to sales activity levels. This can be accomplished by using conversion rates and average revenue per deal to define the number of leads needed at each stage of the outbound-sales funnel. For example, if data show that to reach company targets one deal per month needs to be closed, it can be determined how many active, winnable opportunities and sales-qualified leads need to be generated to secure that deal. Combining this information with the activity of a sales agent also provides a CRO with information on the required size of their sales team. As more data and learnings are generated, CROs should not be afraid to update the targets accordingly.

The article adds that, to unleash the power of the pipeline, a CRO should ensure that all activities are focused on targets and that progress is monitored: tracking the number of daily qualified calls and emails, the number of marketing-qualified leads and sales-qualified leads generated each week, and the number of quotations received. With this data, the CRO can not only increase the motivation of sales representatives but also set clear expectations and help ensure that the company is on track to meet its objectives. A CRO focuses on outbound-activity metrics and eliminates misleading vanity metrics, such as counting partners as customers or placing undue emphasis on long-term potential that may not exist.

CROs must craft a strong revenue generation engine to unlock scale

The article points out that, to ensure that past experiences translate into valuable lessons, constant improvement, and repeatable actions, it is essential for CROs to craft a single revenue generation engine. A CRO oversees the collection, storage, analysis, and optimization of both marketing and sales data points and leads the implementation and integration of all three dimensions of the engine.

• Data: all marketing, outbound sales, and inbound activities generate data. It is the CRO’s responsibility to ensure that all the data are tracked accordingly, cumulated, and centrally stored in a data warehouse as input for the entire engine.
• Decision: from day one onward, the central CRM system is at the heart of the revenue generation engine. It is linked to state-of-the-art AI tools that run analyses and generate insights such as scoring and assessment of relevant leads. The CRO should ensure the implementation of a strong tool kit with increasing automation of marketing and sales processes to generate insights for decision making and activation of customers.
• Action: the CRO oversees the integration of the generated insights into go-to-market strategies and communicates these to the customer success, sales, and marketing teams. This includes using data to customize social-media messaging and websites and producing automated content to entice customers. The goal is to document and spur revenue to full capacity.

For example, when a leading German advanced-industries player launched a new business, it developed an AI-based revenue generation engine using more than ten million data points from its web analytics, sales channels, and external databases to generate and pursue insights. This enabled the newly founded business to scale rapidly, while at the same time keeping marketing and sales costs low.

Make bold moves when others are apprehensive

The article adds that successful CROs recognize trends before others do and benefit from early moves. Identifying new trends and their impact early allows first movers to enter developing spaces and build a strong position—which can result in higher margins and faster growth. For example, during the 2008 financial crisis, a leading online retailer invested heavily in paid advertising despite the economic downturn. By doing so, the company was able to negotiate unique deals with global media groups and achieve high channel penetration. This resulted in record brand awareness of more than 95%. Even after the crisis, the company benefited from the unique advertising conditions.

A regular role player

A town called Tombstone in Arizona experienced significant disruptive forces in the 1870s and 1880s. To address it, the mayor bought in a lawman called Wyatt Earp, who, along with his posse, implemented sweeping changes in the town to deal with the threat. 

You may think that this is a significantly different tangent that I am referring to. But hear me out. While not as severe as Earp and his posse, the role of the CRO can often be viewed in a similar light in that they are bought into a company to address change and deal with disruptive forces.  It is now required on a more frequent basis than before.

Restructuring used to be something that companies used to go through on an infrequent basis in response to an emerging threat. We are seeing now that this is rapidly becoming a regular business function. A separate McKinsey report pointed out that the job functions that will exist in the future world of work will significantly differ from what we see today. CROs were previously consultants that came into companies to implement sweeping changes. The need for this change has become more frequent, and the consequences of not adapting to these changes are far more damaging for companies. The role of CROs has therefore become more permanent and will only grow in the future.