Connecting Goals and Go-To-Market Initiatives

HBS Working Knowledge

This post originally appeared on HBS Working Knowledge.

In some respects, developing strategy is the easy part. Executing that strategy in alignment with strategic priorities is where real mastery of management takes place. Harvard Business School senior lecturer Frank V. Cespedes shows how it is done. Key concepts include:

  • Strategy implementation is essential for marketplace success and often essential for longer-term valuations and growth options.

  • When companies get serious about developing and executing an integrated strategy in the field, three front-and-center issues are pricing, market segmentation and opportunity selection, and performance management.

  • Aligning strategy and sales is ultimately a leadership issue, requiring leadership team dialogue and coordination across functions.

In some respects, developing strategy is the easy part. Executing that strategy in alignment with strategic priorities is where real mastery of management takes place. We asked Harvard Business School senior lecturer Frank V. Cespedes, who is faculty chair of a new HBS Executive Education program, Aligning Strategy and Sales, to give us a glimpse into how it’s done.

Working Knowledge: Why is it so important for companies to create a stronger connection between their strategic priorities and their go-to-market initiatives? How critical is it to their long-term revenue growth?

Frank V. Cespedes: For most firms, the largest, most difficult, and increasingly expensive part of strategy implementation is aligning field behaviors and go-to-market systems with espoused strategic goals.

It’s the largest because doing this well is essential for marketplace success and often essential for company valuations and growth options. A key to meeting growth potential is eliminating the gulf between big-picture strategy and day-to-day field execution.

It’s often the most difficult part of implementation because you’re dealing with a combination of core factors in business: market analysis, strategy development, incentives, people management, developing a performance culture, and sustaining that culture in the face of inevitable market changes that are often outside the control of the selling company.

And it’s increasingly a bigger portion of expenses for firms. For example, a recent study indicates that while production efficiencies have enabled an average S&P 500 company to reduce the cost of goods sold by about 250 basis points over the past decade, SG&A (selling, general and administrative costs) as a percentage of revenue has not declined.

Aligning strategy and sales is therefore critical to long-term revenue growth for most firms, and poor alignment means both direct and opportunity costs for companies. But it’s especially critical for owner-president, privately held, and entrepreneurial firms. They are often competing with bigger and better-resourced companies in their markets. They need to move faster and more coherently than big companies, and that means they must be better than big companies at aligning their strategic priorities and their go-to-market initiatives.

That may be unfair, but it’s not a level playing field out there. Doing this well is, or should be, an important component of competitive advantage for these firms.

Read the full article.

Yes, You Can Raise Prices in a Downturn

HBS Working Knowledge

This post originally appeared on HBS Working Knowledge.

If you and your customers understand the value represented in your pricing, you can—and should—charge more for delivering more. An interview on “performance pricing” with researchers Frank Cespedes, Benson P. Shapiro, and Elliot Ross. Key concepts include:

  • Pricing builds or destroys value faster than almost any business action.
  • Performance pricing seeks to maximize both the customer benefit and the selling company’s profitability.
  • The idea is to create more space between the value provided to customers and your cost.
  • Performance pricers make attractive returns in almost every business—at least over the full business cycle.

As economic turmoil continues, many companies are reconsidering their strategies with an eye toward going lean and slashing prices.

And that might work for a few companies—but very few. Instead, companies should compete “on the basis of initiatives for which their customers willingly pay higher prices,” says Frank V. Cespedes, a senior lecturer at Harvard Business School, who spent 12 years running a professional services firm.

That’s right. Higher prices, not lower.

“Competing on price is ultimately a bet on your cost position.”

Cespedes teamed with Benson P. Shapiro and Elliot B. Ross to write the paper “Performance Pricing in Tough Times.” Shapiro, an authority on marketing strategy and sales management, is the Malcolm P. McNair Professor of Marketing, Emeritus at Harvard Business School. Ross is a former McKinsey consultant and President of The MFL Group in Beachwood, Ohio.

In this interview the researchers discuss pricing strategy and what ingredients are necessary to convince customers that higher prices are worth the cost.

Read the full article.