,

“We expect all our businesses to have a positive impact on our top and bottom lines. Profitability is very important to us or we wouldn’t be in this business.”

JEFF BEZOS, FOUNDER OF AMAZON

The next building block of a successful business is revenues; specifically, how best to establish a robust business model that generates profitable income. Understanding why revenue is critical to success is not hard: quite simply, without it, everything else is for nothing. Generating and maintaining revenue and looking for new sources while being alert to threats to current revenue streams should be at the heart of what leaders do. Revenue leads to growth, helps drive profitability and ensures sustained longevity and success, and, as highlighted earlier, revenue depends on creating value that is both tangible and intangible.

KNOWING HOW TO GROW REVENUES REMAINS AT THE CORE OF STRATEGY AND IS OFTEN A MORE ELUSIVE TASK FOR LEADERS.

Any business or organization is a significant, long-term investment. Shaping and managing it requires the right strategy and the right structure. Keeping it fresh and vital requires a mix of entrepreneurial and innovative input. And each part of the business, including the tactics employed and the ‘business model,’ must support the organization’s mission, underlying values, and, of course, its growth.

From the realm of revenue also comes the issue of generating, managing and maximizing resources. Does the organization fall into the category of B2B or B2C – business-to-business or business-to-consumer? Or is it a non-profit entity? No matter which, it needs resources to operate. Investors have their role but resources need to be generated in ways that are permanent, self-sustaining and profitable.

Those profitable returns can take various forms: tangible or intangible; financial or non-financial. Each offers the same thing at a fundamental level, whether it produces the ka-ching of a cash register or is qualitative or socially oriented in character. We saw in Chapter 2 how value creation is central to an organization’s growth and sustainability. Since it wields such an influence, it is measurable, which leads us into the world of KPIs or Key Performance Indicators. These include well-known residents such as ROI – Return on Investment and ROE – Return on Equity as well as more recent arrivals such as ROB – Return on Brand and STV – Stakeholder Value. Whether financial or non-financial, these measures gauge the amount of value the entity delivers, which for our purpose we group under the heading of Revenue.

Increasing business revenue is a constant challenge – one that’s made even tougher by competitive pressures, cash-flow challenges, other constraints (such as time) and a world of constant turbulence, unpredictability and change. Revenues matter because they allow you to invest in products, resources and processes that enable you to sell more. Crucially, the scarcity of one resource – such as customers for generating revenue, or capital for investing in enhanced sales systems – makes selling, and increasing revenue, difficult. One other question to consider is this: in your business, how might selling differ from increasing revenue? Let’s say that selling means getting new customers or selling more to existing ones, whereas increasing revenues might mean increasing prices for items that are already ‘sold,’ perhaps by offering a new feature with your product or service. Selling and increasing revenue are, of course, very similar and frequently, but not always, they are the same.

CHANGE IS NOT JUST CHANGING,
IT’S RACING

This chapter focuses on several essential elements of revenue generation, including the need for revenue-generation and change management to connect and relate to each other. Today, any discussion about value, revenue and profitability needs to address the issue of change. The connection between revenue and change is both obvious and obscure at the same time. It is obvious that things change: nothing new in that. Those changes will affect revenue generation. But as we highlighted in Chapter 1, what is significant is how the world is changing – and wreaking havoc on the unprepared. We just don’t connect the two issues – change and revenue – often enough. Change is more comprehensive, extensive and rapid than it has ever been, and we all have to accept that business-as-usual is no longer an option.

The effects of this tidal wave of change can be seen everywhere, making a strategy that includes a policy towardup change essential. To fully appreciate the enormity of this, we shall look more closely at how such change impacts on an organization’s ability to produce revenue both now and into the future.

Jerry Leamon at Deloitte sums up how overwhelming the changes that companies face are, and how important it is for them to put change at the heart of strategy development. “When we look far out on the business horizon, we see of vast portfolio of change brewing. Our Global Innovation Network (GIN) seeks to capture it before it hits and to turn it to Deloitte’s advantage. This initiative, as the name denotes, drives and accelerates innovation. That creates value and potential streams of new revenue. We define our way forward. Then we work backward to align our plan to the strategic actions we need to take today.”

So, how should leaders manage the connections between revenue and change? Several techniques and mindsets are useful.

Watching for the signs

Look around to detect any signs of change. As well as identifying smaller developments, ask yourself:

•   What are the emerging megatrends, the seismic shifts shaping the strategic environment?

•   Which have the highest probability and impact?

Organizations need to constantly watch for indicators and discuss what they could lead to, as this leads to a shared understanding, which then points the way to a likely scenario and desired endpoint. This approach is critical to success, as Deloitte has found. In 2010, their Global Innovation Network identified twenty megatrends:

1.  Bio-mimicry (or learning from nature)

2.  Cultural diversity

3.  Digital lifestyle

4.  Globalization 2.0

5.  Individualization

6.  Knowledge-based economy

7.  Technology convergence

8.  Ubiquitous intelligence

9.  Increasing urbanization

10.  Women on the rise

11.  Business ecosystems

12.  Energy and alternative resources

13.  Climate change and sustainability

14.  New patterns of mobility

15.  Demographic change

16.  Changes in work practices

17.  Health

18.  New consumption patterns

19.  New political world order

20.  Growing threats to international security

What does this mean for companies?

We need to capture an extended view of what’s happening and to identify all the observable trends, because pinpointing and understanding them are important foundations for strategic business planning. By analyzing these further, we can unlock a series of impacts and, ultimately, a treasure chest of opportunities.

By identifying trends, companies can prepare to take advantage of opportunities and to create new ones, further building value, strength and profitability. Putting this all together is consultant Jerry Leamon from Deloitte: “The future is a matter of choice, not chance.”

“THE FUTURE IS A MATTER OF CHOICE, NOT CHANCE.”

Global Innovation Network, Deloitte

The K factor

Taking control and making the future more about choice, and less about chance, is pivotal. To achieve this, we need a strategy that assesses and reflects the changes taking place and even ones that are yet to occur. This results-oriented strategy capitalizes on the changes occurring in the world at large. The starting point for this is observing and gathering information. This information can then be used to fine-tune the path the organization is on. Much more than that, it will mobilize the whole company. By catching changes early, determining the impacts and integrating the findings into an actionable forward-looking business model, companies will build a stronger future.

To achieve this, you need to make connections between your existing knowledge and experience and the trends and changes taking place (both actual and potential) – what Tom Malnight and Tracey Keys from Global Trends calls the K Factor. He puts it very simply when he says that the key to navigating change is bridging the gap between what you knew, and what is new.

In particular, Tom Malnight and Tracey Keys explain that we should focus on three main areas of change:

•   Resources

•   Organizations and communities

•   Shapers and influencers

Through detailed analysis, insight and application of the findings, we can gain competitive advantage and create value. The natural endpoint of this approach is that companies start to lead change rather than simply react to it.

A MINDSET THAT LOOKS FOR NEW SOURCES OF REVENUE STREAMS WHILE BEING ALERT TO THREATS TO CURRENT ONES IS BEST. THIS WILL HELP TO INFORM AND DIRECT STRATEGY.

Thoughtfully applying this framework on both an industry and company basis will chart a course for the future. This exercise reveals the challenges the organization is likely to face. At the same time, it points to potential opportunities it can seize. By putting each trend through a series of lenses, more definitive options, choices and final decisions can be clearly defined and refined. The goal is to create, in Tom Malnight’s words, an “early warning system to stay ahead of change.”

IN PURSUIT OF OPPORTUNITIES, NEW MARKETS AND NEW MARKET SPACE

The techniques that worked in the past to set a company on a path to brisk and prolonged revenue growth, no longer hold true. This makes it essential to constantly revisit your strategic direction by recognizing and understanding the changes taking place, determining the consequences for your organization, and realizing the opportunities they present. Once all this information is gathered, it is imperative that you act on it.

As the title of this section suggests, we need to pursue opportunities, new markets and new market space. This was highlighted by W. Chan Kim and Renée Mauborgne in Blue Ocean Strategy (published by Harvard Business School, 2005). The book suggested that there are two kinds of market space: red oceans and blue oceans.

•  Red oceans represent all of the industries existing today – the known market space. Here, industry boundaries are defined and accepted, and the competitive rules of the game are well understood. Companies try to outperform their rivals in order to garner a greater share of demand. As the space gets more crowded, prospects for profits and growth wane. Eventually, products become commodities, and the increasing competition turns the water bloody.

  

•  Blue oceans, on the other hand, denote industries that do not yet exist – this is an unknown market space, devoid of competition. Here, demand is created rather than challenged. There is ample opportunity for growth that is both profitable and rapid. There are two ways to create blue oceans. In a few cases, companies conceive completely new industries, as eBay did with online auctions. More frequently, though, a blue ocean forms within a red ocean when a company alters the boundaries of an existing industry.

  

Red ocean or blue ocean? Finding the best route to long-lasting profitability

It is not hard to see the huge downside of red oceans. If you want to reap high rewards, an overcrowded sea of competitors is a very difficult place to be. The natural extension of this line of reasoning is that of a blue ocean, with its huge untapped potential, offering an abundance of opportunity for those able to see it and positioned to take advantage of it. With few competitors, these blue oceans of uncontested market space offer incredibly rich fishing. This potentially lucrative situation applies to the now and into the foreseeable future. And it holds true regardless of economic ups or downs.

This argument may seem self-evident: of course demand for something coupled with a lack of competitors would lead to an almost monopolistic advantage. But, if we look more deeply at the reason why this happens, it will also reveal something else that is significant. We have to ask ourselves: what is it about an uncontested marketplace that is really making the difference? The answer isn’t simply about monopoly or first mover advantage, it is about value creation. Customers don’t come to you because you are the only game in town; they come to you because your company has created something that they value – perhaps, something they never even knew they wanted.

The strategy your company takes will therefore depend on whether you are in an existing marketplace or moving into a new, relatively new or completely uncontested market. Each requires a different approach. Clearly, in an existing market, you will most likely be focusing on beating strong competition and constantly weighing costs against the value they generate, which keeps your company pursuing low costs and in blinkered service of existing demand. In an uncontested marketplace, the focus is significantly different: not only will the rules change; you will devise your own rules. Your strategy will assume you can eliminate the competition from the start by creating new and uncharted territories. You will generate demand that never existed and be positioned at the ready to exploit it. With such a privileged position, you will no longer be rigidly constrained by the need to balance costs against the value they generate. Eventually, the natural emphasis of strategy development becomes: how can we create even more uncontested, lucrative opportunities.

CUSTOMERS DON’T COME TO YOU BECAUSE YOU ARE THE ONLY GAME IN TOWN; THEY COME TO YOU BECAUSE YOUR COMPANY HAS CREATED SOMETHING THAT THEY VALUE … THE STRATEGY YOUR COMPANY TAKES WILL THEREFORE DEPEND ON WHETHER YOU ARE IN AN EXISTING MARKETPLACE OR MOVING INTO A NEW, RELATIVELY OR COMPLETELY UNCONTESTED MARKET.

The importance of adjacencies and repeatables

In the December 2003 Harvard Business Review case study Growth Outside the Core, Chris Zook and James Allen explored the potential revenue-boosting strategy of expanding into new markets. Their research, involving 1,850 companies, revealed that there was only a 25 percent success rate. Significantly, their research also revealed a pattern. Success usually followed for companies that exploited ‘adjacencies’ and ‘repeatables’:

  

1.  Adjacencies – when companies expand, success is often found in business activities that could be considered ‘adjacent’ to their usual activities. In fact, exceptional or sustained growth may come from moving in to adjacencies, and the best adjacency strategies leverage the core business. The drivers of successful adjacency moves include:

  

•   Building on strong, not weak platforms

•   Valuing closeness to the core

•   Seeking repeatable models

•   Following the customer

  

Finally, success is often found when companies repeat their success formula each time they expand into new areas.

  

2.  Repeatables – by using tactics that have already been used successfully, companies are able to create and enter market spaces rapidly – long before competitors emerge or by taking new but existing companies by surprise. This ‘repeatables’ strategy can accelerate the flow of revenue, as it is swift. All the accrued skill and expertise is ready to deploy to take advantage of every opportunity. This approach has been termed ‘the new math of profitable growth’ for very good reason: the discipline, rigor, analysis and attention to detail are great and the potential rewards are even greater.

  

In fact, actions in six areas are crucial to expanding into new markets:

  

1.  Vision and Goals – establish clear and highly motivating higher-level goals and principles.

  

2.  Where to Win – focus on well-defined boundaries of target markets and segments. Also, choose the right method to prioritize (based on attractiveness and ability to succeed).

  

3.  How to Win – this stage has three parts: building a clear, measurable, competitive and differentiated offer; developing the potential to achieve leadership in core activities, and using repeatable models to replicate and adapt successes.

  

4.  Required Capabilities – this involves pre-emptive building of capacity and new world class skills.

  

5.  Strategic Imperatives and Initiatives – understanding the right methods to receive feedback from customer and market with closed loops to decisions, and being able to implement with required speed and certainty.

  

6.  Aligned and Mobilized Organization – translating strategy into clear goals, objectives and behaviors that are ‘non-negotiable,’ right down to the front line.

  

What does this mean for value creation?

While opening new markets is one revenue-enhancing strategy, changing an organization’s structure and business model is another. This requires companies to address the issue of value creation from different angles. In Creating New Market Space (Harvard Business Review, January-February 1999, pp. 83-93), W. Chan Kim and Renée Mauborgne argue that a systematic approach to value innovation will enable companies to break free from their competitors. This is no small task for so many organizations, whose systems, operations and strategies are often defined and constrained by repetition, a focus on dealing with known competitors and by business-as-usual assumptions that all keep it rolling forward in the same way over and over.

REMEMBER THE PARADOx OF LEADERSHIP: THE STRONGER THE POSITION OF YOUR BUSINESS, THE MORE LIKELY IT IS OPERATING BELOW FULL POTENTIAL.

If there is one characteristic that typifies businesses trying to generate new value, it is that they seek to enhance revenue in ways that are unmet by prevailing market dynamics. Everything about these companies is different: they change their entire pattern of strategic thinking. Out goes the notion of competition based on incremental improvements in cost, quality or both. In comes extending the focus outside traditional boundaries to find (or create) unclaimed market space. When breakthroughs result, they will create value, and organizations will reap the rewards.

  

As Kim and Mauborgne identify, a systematic approach to value creation looks at six areas:

  

•   Substitute industries

•   Strategic groups within industries

•   Chain of buyers

•   Complementary product and service offerings

•   Functional or emotional appeal to buyers

•   Time

  

Each of these is summarized and compared to conventional competitive strategies in the table on “Shifting the Focus of Strategy.”

Value networks

In addition, Xiaobo Wu and Wei Zhang see value creation and enhancing revenue as a function of the value network to achieve sustainable advantage. As they say, the value network has replaced the value chain to become the main focus of value creation. (Business Model Innovations in China: From a Value Network Perspective, Indiana University, Indianapolis and Bloomington, Indiana, April 15-17, 2009). While the value chain is a linear model, with suppliers at the front end and customers at the back, the value network, as the term implies, adds other players, layers and linkages. This network connects all relevant internal and external people through a system of value flows that ultimately creates more value for the company. The number of ‘actors’ can be many and varied, making managing, predicting and directing them difficult. Although this presents many challenges, by redefining our business models to include a close examination of the value network, companies will sift out many opportunities.

It is useful to examine the value network from five aspects, as Wu and Zhang suggest. By focusing business model innovation in the following five areas, businesses will reveal opportunities and strengthen their long-term future.

  

1.  Actor change. Here, the actors include the main firm, affiliated companies, and all organizations and individuals that affect value creation activities. Applying the value network lens offers the potential to reel in additional customers and introduce them into the firm’s value network. How do you bring new customers into the fold? By offering innovations that emanate from new areas of the market, such as the emerging or low end areas.

  

2.  Relation change. Whereas actor change focuses on expanding the buying population, relation change offers new products and services to existing customers, providing further value. Examples of relation change include: mass-customization, total solution, and integrated innovation. These mechanisms provide more flexible and abundant products or service combinations through modularization and standardization.

  

3.  Network subdivision. Network subdivision denotes splitting the network into small and new parts to derive greater value. This creates new functions and activities. An example of this is e-business outsourcing.

  

4.  Network extension. The opposite of subdivision, network extension seeks to build up the network by locating opportunities within close reach of the main business. Essentially, by pushing out the existing borders, companies attract new actors into the value network.

  

5.  Network integration. Integration is twofold. It offers the potential to expand the value network and to form one or more new networks. Identifying and connecting ‘value islands’ is the means to bringing in new actors and creating additional networks.

  

THE IMPACT OF INNOVATION ON REVENUE

Revenue is one of the most critical six Rs. So how should organizations ensure they lift revenue? The key to this goal is monitoring, measuring and innovation.

This starts with a focus on the changes and trends that are occurring now and are shaping the future. Companies face competitive threats, innovations and price cuts and they have to cope with change that is so rapid and extensive that markets may never return to the long accepted business-as-usual model. Change is part of the economic landscape and companies need to gear up accordingly, if they are to protect their revenue.

When faced with such change, management theory often suggests that businesses should perform a swift, wide and decisive analysis, to decide how to launch a counterattack. However, this approach is not always effective in today’s world. Things are different: a shift is taking place … a big shift. What companies need is a way of measuring the extent and impact of change. Deloitte created a new tool to do just that: the Shift Index.

The Shift Index

The Shift Index provides companies with a more-useful means of quantifying change. While so many business indicators are shortterm in their scope, the Shift Index is able to measure long-term trends – trends that will significantly impact markets, even entire economies. This provides companies with invaluable data. The Shift Index consists of three indices rolled into one: The Foundation Index, Flow Index and Impact Index. Through the use of 25 metrics, it provides a reading of where we are on a performance scale in relation to the longer-term shifts occurring, as well as suggesting actionable clues. The measurements range from the well-known to some that are less familiar – starting with ROE for Return on Equity, ROA for Return on Assets, and ROIC for Return on Invested Capital.

Other metrics in the Shift Index include new ways of looking at cyclical change. One is of particular interest to the six R framework and larger premise of this book: employee passion.

Figure 5.1: Deloitte’s Shift Index

Designed to make longer-term performance trends more relevant and actionable

Employee passion

By understanding what worker passion is and measuring its impact, we will see how it drives performance improvement. In John Hagel’s view, “Passionate workers seek challenges; in a world of change, they see opportunity in the unexpected. We refer to this as a ‘questing’ disposition. They also have a ‘connecting’ disposition, which is a strong desire to collaborate, participate and take on challenges. Passionate employees are more likely to participate in knowledge flows and generate value for their companies.”

“PASSIONATE EMPLOYEES ARE MORE LIKELY TO PARTICIPATE IN KNOWLEDGE FLOWS AND GENERATE VALUE FOR THEIR COMPANIES.”

John Hagel, Deloitte

According to the Shift Index, for the years 2009 and 2010, only 20-25 percent of US workers were passionate about their jobs. The implication: most employees are disengaged. This cannot be a satisfactory state, and the lost opportunities that this implies must be costing firms huge sums. To reverse this trend, it is essential that organizations be much more proactive and innovative toward employee engagement. As Eric Openshaw at Deloitte argues, “the key for businesses is to create an environment conducive to retaining [passionate employees]. Management should identify those who are adept participants in knowledge flows, provide them with platforms and tools to pursue their passions, equip them with the proper guidance and governance and then celebrate their successes to inspire others.”

  

Organizations seeking to achieve peak performance need to engage their employees. The results speak for themselves: companies with high engagement scores deliver better results than those with low scores, as the following statistics indicate:

•   Over 160 percent – the earnings per share for organizations in the top quartile of employee engagement versus those with below-average engagement (Gallup Management Journal, June 14, 2007).

  

•   Over 100 percent – the return on assets for organizations in the top quartile of employee engagement compared to those in the lowest quartile (JRA, November 2008).

  

•   Over 150 percent – the revenue growth for organizations in the top quartile of employee engagement versus those in the lowest quartile (Business Wire, August 14, 2009).

  

•   Over 40 percent – the profitability for Asian companies with high employee engagement scores compared to those with low scores (Hewitt Quarterly Asia Pacific, Vol. 5, Issue 2, July 2007).

  

•   Over 78 percent – the productivity for Asian companies with high employee engagement scores versus those with low scores (Hewitt Quarterly Asia Pacific, Vol. 5, Issue 2, July 2007).

  

These statistics bring up an important fact of life. Companies seeking to ride the crest of the wave, in the Revenue and other R categories, must always track and measure. Metrics are essential. Return on Investment, Return on Brand, Return on Anything and Everything, these all establish benchmarks that direct strategies toward success. This quantitative approach sets expectations, creates budgets and generates feedback. It enables organizations to tweak, change, add, subtract – do whatever – to strengthen their potential to achieve sustained growth and profitability.

BEING ENTREPRENEURIAL

Prediction, structure and process

To maximize revenue, we also have to determine how to reconcile the inherent conflict between a big business structure and being entrepreneurial. In his paper The Good, the Great and the Entrepreneurial, Stuart Read at IMD business school grappled with this conflict. So often, big business and entrepreneurship remain at odds with each other because of the way businesses are structured and run. Stuart Read divides these into: Prediction, Structure and Process.

•   Prediction – Companies often follow a policy of repeating activities that have been successful in the past. It is easy to see the flaw in this approach: it leaves other opportunities untapped.

  

•   Structure – When companies grow, the extra layers of management and the complexity of operations often make the decision-making process much more rigid and hierarchical. This can block the way to further value creation.

  

•   Process – Large organizations need to have specific procedures to cope with the many aspects of running a large operation and satisfying legal requirements. Unfortunately, these processes can also impede a firm’s ability to look for new opportunities and innovations.

  

This situation, however, is being challenged. There are ways for large organizations to continue being entrepreneurial. The key is to remove the constraints placed on a company’s structure, processes and strategy development. This will release its creativity and its ability to innovate and will enable it to look further over the economic landscape, seeing and creating new opportunities. As Stuart Read suggests, we have to enable employees to be more innovative by encouraging a more flexible mindset, providing planning tools that take a much broader view of markets and opportunities and, critically, by abandoning business-as-usual thinking. As Stuart Read notes, innovation thrives in uncertainty.

This may also involve some restructuring. For example, Stuart Read proposes dividing an organization into individual markets, as this creates a more entrepreneurial ethos. You will also need to ensure that employees have the latitude to pursue ideas. Flexibility lies at the core of creating value through developing new opportunities. By providing a flexible business environment that permeates everything from processes and structure to market analysis and strategy development, you will open up new avenues and greater revenues for your organization.

Finally, making organizations less hierarchical is also important when building a company that is truly capable of recognizing, capturing and harnessing new opportunities. In summary:

•   Support an environment that generates new ideas within a large company

•   Compartmentalize the organization into a portfolio of businesses

•   Create channels of continuous exploration and development

DELIVERING OPERATIONAL SUCCESS

This R for Revenue chapter would not be complete without cutting to the core of how a business functions. To do that, we need to ask: what benchmark determines whether an organization hums or roars?

The Star Model

Jay R. Galbraith is an authority on global organizational design and development. His book Designing Matrix Organizations that Actually Work: How IBM, Proctor & Gamble and Others Design for Success (Jossey-Bass, 2008), provides a useful approach to pursuing operational excellence: The Star Model. This is a way for organizations to build a better engine for growth by ensuring the decision-making process is effective.

The model consists of five main design policies that, when represented graphically, form the image of a star. These five outer edges represent pulse or pressure points for an organization. They are:

Figure 5.2: IDEO’s Innovative Culture Choices

•  Strategy –This sits at the top of the star because it signifies the leading concern for businesses, the blueprint for success. It includes goals, objectives, values, mission, products and services, markets, value propositions and competitive strengths, which organizations prioritize to determine their way forward.

  

•  Structure –This denotesthe position and placementofpower, the hierarchy depicted in an organizational chart. Structure consists of four segments: (1) specialization or the kind of jobs and numbers needed; (2) shape or number of human resources per department at each level; (3) distribution of power, that is, centralized or decentralized and lateral movements; (4) departmentalization or rules for forming departments and layers, including functions, products, workflow and markets.

  

•  Processes –This reflects how the management structure functions on both the vertical and horizontal axes. The vertical axis addresses the allocation of various forms of resources, whereas the horizontal one revolves around workflow.

  

•  Rewards –This sets out the policies and criteria that motivate people to drive an organization to achieve its goals, for example, salaries, promotions, bonuses, etc.

  

•  People –This refers to the human element: the policies to recruit, select, rotate, train and develop resident talent in order to move the organization along its desired growth trajectory.

  

It is important to understand that structure is only one line item on an organization’s watch list. With all of the changes taking place in the world, companies seeking to power up should focus on several dimensions. Take note of the points of intersection and their interplay in the Star Model, when designing policies. Shed the business-as-usual mindset. Instead, explore and exploit the changes that are occurring. Furthermore, to operate at high levels, impose balance, consistency and alignment in developing a business model. In essence, no corner of the star should outweigh any of the others. The most important part of using The Star Model is to think dynamically and form policies accordingly.

Once a company secures its operational foundation, what next?

You have ideas and hopes and you have built the organizational foundation to achieve them. To bridge the gap between these two positions, a gap where many fall down, you need to turn your attention to executing your plans. The goal is to lift revenue, and everything else you have done now relies on effective implementation.

In Execution: The Discipline of Getting Things Done (Crown Business, 2002), Larry Bossidy and Ram Charan emphasize the point that turning policies, programs and purposes into preferred performance is all about execution. As they put it, execution is “the missing link between aspirations and results.” It does not refer simply to tactics, but rather to full-fledged discipline that permeates every aspect of the organization, from strategic thinking and behaviors to systems and procedures. It is the final part of building our R for Revenue: execution turbocharges a company’s income stream.

Converting goals into gains sounds good, but how exactly do we achieve this? First, leadership plays a major role. Leaders must not only define the essence of execution, but also exhibit it. Essentially, you have to instill an execution-oriented environment throughout the organization. To start with, make sure that you know the business and the people and set clear goals and priorities. You should then follow through, checking, resolving conflicts, oiling the machine and ensuring that it functions well. It is important that everyone is realistic about the situation, and you must confront all aspects of performance, including mistakes. You must measure performance and reinforce results by rewarding accomplishments. Sharing knowledge and further developing your people through training and coaching is an important part of ensuring that effective execution will continue to deliver success. Also, to embed execution into the entire fabric of an organization, Larry Bossidy and Ram Charan recommend two actions. First, create the framework for cultural change by incorporating execution as a primary precept. Second, put the right people in the right positions by clarifying the roles and skills that will provide a competitive edge.

Finally, any aim to establish an execution-oriented strategy needs to link everything together: people, strategy and operations should not exist in separate silos. Connecting these functions forms a selfreinforcing system that drives operational performance even further.

Having considered the ‘hard’ and unforgiving issue of Revenue the next chapter explains the significance and impact of Rousers – those people who energize and drive performance, build relationships, provide resilience – from which revenue, reputation and ultimately success are derived.