Commercial excellence: Your path to growth
The journey to outperforming your peers begins
with a clear-eyed view of what matters most.
Competition is accelerating.
Many attackers are now using superior
execution rather than better offerings to outperform incumbents and drive
growth.SUBSCRIBE
To combat this pressure, incumbents and
attackers alike should build and sustain best-in-class commercial capabilities
to gain significant competitive advantages. In many cases, that entails
adopting best practices from other industries.
The rewards can be substantial. Based on
our assessment of more than 200 commercial capabilities at 200 clients,2 we found that businesses that were
top performers—those with superior commercial capabilities—consistently deliver revenue growth about 1.9 points
higher and earnings growth about 4.7 points higher than peers in the same
sector.
Comparing
yourself against the best
Performer leaders across sectors have one
thing in common: they continuously assess their commercial capabilities not
just against competitors but against global best practices to find areas where
significant improvements are possible. More mature industries, such as
chemicals, mining, and agriculture, constrained by production capacity and competing
heavily on price, tend to focus more on operational rather than commercial
excellence. Leaders have taken a page from software and IT companies, for
example, which have no production constraints and therefore tend to focus more
on building advanced commercial capabilities to accelerate growth and
shareholder value.
While there is no single recipe for
success, our research shows that in each industry, top-quartile performers
share above-average strength in similar capabilities. So, while the path to success
may vary by company and sector, a path does in fact exist.
Investing wisely in commercial
capabilities can be difficult because what drives value tends to change over
time; capabilities that provide competitive advantages today will become industry
standards tomorrow. Our research shows
that the gap between the top and bottom quartiles tends to narrow. This
means commercial excellence is a journey, not a destination: it requires
continuous self-assessment and improvement, including agile adoption of new
best practices as they emerge.
In fact, to perform at the highest level,
most companies need to do more than constantly improve their commercial
capabilities; they must also shift their focus and double down on new
capabilities that drive differentiation. For example, top-quartile energy and
materials companies used to differentiate themselves by overperforming in three
areas: price and contract management, marketing enablement of sales, and
channel-partner management. But our latest research shows that those companies
should now focus on new capabilities, such as sales and account management and
commercial support .
Trust
the data
One of the biggest challenges in large,
distributed, and field-oriented organizations is the absence of a structured fact
base to measure commercial capabilities and compare them with best practices.
Senior executives may have keen intuition—they may know, for example, that the
company’s commercial capabilities should be stronger—but they may not know
exactly what to do, such as how to find the pockets of best practice internally
or how to scale them rapidly without disrupting the organization.
We find that companies tend to improve
their performance faster by relying more on facts and analytics than on
anecdotes and intuition. Tools and databases can help them gather and process
deep qualitative and quantitative data with minimal organizational disruption.
How to
avoid big stumbling blocks
Armed with a deep and up-to-date fact
base, senior leaders can prioritize commercial-excellence capabilities from an
ROI perspective and look beyond departmental priorities. They can also then
rally the organization to build and sustain those capabilities to drive
sustainable revenue and earnings growth.
Benchmarking against best practices and
identifying capability gaps will not be enough to achieve commercial
excellence. Transformations tend to stumble when the strategy isn’t clear or
the implementation isn’t properly supported. Key questions, for example,
include how the company will drive commercial impact and organize the
commercial agenda for success.
Some commercial transformations fall short
when companies try to implement a standard one-size-fits-all approach without
taking into account mind-sets or behaviors. Others fail to reach scale because
the organization doesn’t track the impact of improved capabilities or their
direct link to performance.
While the route to success varies by
company, a sound plan usually has five characteristics:
1. A discovery process that helps commercial leadership
across functions align on a framework and language. Leaders should reach a common understanding of
current capabilities and global best practices, and an objective, holistic view
of improvement opportunities.
2. Clearly linking each commercial capability with specific
outputs and results. Managers know how each capability
will help, where it will perform best, and what economic impact they can expect
from it.
3. The prioritized capabilities are perfectly aligned with
long-term strategy. Managers understand how each
capability will help to achieve the vision.
4. Business leaders and influencers remain highly engaged
to drive adoption to reach critical mass. An
executive sponsor of the transformation sets the tone and maintains momentum,
in part by enlisting support from other leaders.
5. Capability improvements can be tracked and quantified. Senior leaders should know how much of the
expected impact has been captured and where they are in the transformation
journey.
Organizations that make the shift from insights
to action and ultimately to sustained impact incorporate commercial capability
development into their standard management processes, including annual
operations plans, long-range planning, and talent reviews. The most effective
companies not only take specific action to build capabilities, such as
assessing current capabilities, setting aspirations, assigning owners, and
launching initiatives; they combine these actions with accurate and timely
performance management. They may measure impact on key-account management
capabilities, for example, in terms of account growth, profitability, customer
satisfaction, and churn at a granular level. In organizations that fail to
track and reward progress consistently, some managers may come to see
commercial excellence as the “flavor of the month” rather than a new way of
working and thinking.
Once a company has a structured way of
thinking about commercial excellence—what matters most in the industry and how
the firm is performing against best practices—it can replace habits and biases
with facts, dig deeper into the true sources of competitive advantage, and make
targeted investments in the new capabilities that will help drive profitable
growth in a changing marketplace.
These investments often include new tools,
training, and talent that complement each other; it’s a world of “and” rather
than “or.” Improving pricing and reducing leakage can quickly generate at least
some of the funds required to invest in longer-term improvements. Improvement
models vary: some companies create a central commercial-excellence team, while
others give line leaders capability-building responsibilities.
Commercial excellence is one of the most
powerful levers for consistently delivering superior shareholder returns. We
have found that a fact-driven view of what matters most can align leaders’
decision making and inspire everyone in the organization to pull in the same
direction: toward more profitable growth.
By Russell Groves, Kun Lueck, and Stefano Redaelli
https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/commercial-excellence-your-path-to-growth?cid=other-eml-alt-mip-mck-1811&hlkid=2724aad956f94efea7e1fe3933351cf7&hctky=1627601&hdpid=21672e28-077b-4b21-9341-a4c5a0de0d02
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