June 20 by Lin Shearer

Manufacturers today – from those who produce Industrial Equipment to High Tech and MedTech devices—face intense and continuous change. New products, services, and experiences driven by digital disruption and frictionless global commerce have competitors fighting to meet their customers’ ever-changing needs and growing expectations.

This digital and global disruption has created both an opportunity and a challenge for manufacturers. The technology is available to change their business models to run faster and become easier to work with, making the pursuit of commercial excellence a challenging – but achievable – strategic imperative.

Driving Commercial Excellence – How Today’s Manufacturing CFOs Can Lead the Effort to Optimize End-to-end Commercial Processes, Drive Profitable Growth, and Maximize Enterprise Value

Commercial excellence builds on operational excellence to automate and optimize crucial go-to-market and revenue-driving processes—and ultimately to improve the customer experience across all sales touch-points.

At Apttus, we look at this digital transformation as a progression from digitalizing key commercial processes, embedding them with behavior-changing applications, and then layering on artificial intelligence once a critical mass of data has been collected. In a previous post, we explored some tactics to start to impact the efficiency and effectiveness of the revenue value chain: from Sales to Legal to Revenue Operations. Here we provide an overview of the critical processes that CFOs can collaborate on with the COO and other operations leaders to digitalize each stage in the revenue process to maximize revenue yield and drive down cost.

commercial excellence

Solutioning, Configuring, and Pricing Deals

Whether configuring a single piece of complex machinery, medical equipment, or computer hardware – or structuring a complex deal for outfitting an entire factory or hospital, getting the solutioning, configuration, and pricing right can have an immediate impact on top line revenue and margins. And because the quality of actions at each step in the revenue process is cumulative, it’s important to present the best possible offer for the customer—and the manufacturer—from the start.

Solutioning is comprised of the set of activities that allow a company to 1) collect a prospect’s requirements; design and configure an appropriate and relevant solution; 2) price the solution competitively; and 3) generate and present a proposal and quote.

Key systems required for this stage include:

Sophisticated product search to access rich product information quickly
Product lifecycle management tools to keep product specs up to date
Access to existing orders for that same prospect or similar customers
Guided selling capabilities for less technically-savvy sales execs or prospects

This range of tools allows everyone from a technically advanced sales engineer to sales execs, channel partners, and even end customers to get to the precise solution needed quickly.

After the configuration of products and services, comes the pricing of the deal. Pricing is arguably the single most powerful lever in determining overall profitability for a company as it affects both the top line and bottom line together. There are numerous studies that have covered this, from a 1992 HBR study that found “a 1% improvement in price, assuming no loss of volume, increases operating profit by 11.1%” to a 2014 Bain brief that discovered “companies earn an 8% increase in operating profit for every 1% of improvement in realized price.”

Key pricing capabilities include Profitability Analysis, Price Setting and Guidance, Discount Controls, and establishing a clear Approvals process. Start with analyzing historical data to understand elasticity by customer segment, vertical, and channel to optimize initial price setting to meet revenue and margin goals. With this analysis as a baseline, you can then put in place rules-based Guidance and Discounting Controls to align sellers to profitability targets by eliminating rogue discounts and exposing sellers to price and cost waterfall analysis to understand impact on deal margins. Combined with an Approvals process based on clear discount thresholds, you can increase the number of low-touch deals—increasing your speed of doing business and freeing your deal desk to focus on higher-value, more strategic opportunities.

 

Contracting

The next major stage in the revenue process on your journey to commercial excellence is contracting. Most CFOs and their operations colleagues are all too familiar with the effort that goes into contracting. The inherent complexity of contract negotiations to close a deal can delay approvals and a seller’s responses to customers, leading to lost deals. And unfavorable payment terms increase working capital requirements, leaving less cash on hand for investment projects.

Unfortunately, too many business leaders and execs view this phase in the revenue process simply as a blocker to getting a deal done. There needs to be a paradigm shift in approaching contracting because not doing this well means the inability to negotiate favorable terms, which creates monetary risk exposure.

Focus efforts on this step to uncover insights from transaction data to help optimize and set favorable payment terms, then standardize preferred contract terms and conditions to reduce risk exposure and drive compliance for your business. Key capabilities for this stage include authoring and approval workflow tools and processes to reduce time spent generating contracts and thus accelerating deal cycles.

We’ve seen customers achieve dramatic improvements in the contracting process—29% faster response to customers, 33% increase in contract processing volume, and 33% faster contract cycle times. Cost reductions can also be achieved through streamlining contract administration processes and increasing contract processing capacity. Customer results have shown 38% increase in compliance, 35% increased control of custom terms and conditions, and a 30% reduction in legal fees.

Order Management, Billing, and Renewals

After the deal is won, there are celebrations for hitting sales milestones and quarterly goals and then focus shifts to the next set of pursuits and achieving the next quarter’s results. It is easy to overlook that the revenue process is not yet done and that business operations are impacted through this third phase of the end-to-end commercial process.

One example of challenges experienced here is the lack of visibility and reporting of customer commitments. This can lead to discrepancies between bookings and billings or revenue leakage. This impacts actual revenue yield and has the added disadvantage of cash flow costs as Accounts Receivable suffers due to delays and inaccuracies.

Focus here on reducing the discrepancy between bookings and actual billings by gaining full visibility into upcoming receivables and automating the invoice process. Then move quickly to address recurring business with your existing customers as manual renewal processes create potential for missed renewals and additional revenue leakage. All too often, businesses focus mainly on the acquisition of new business. It is essential to also maintain, renew, and grow business from existing customers and take advantage of the opportunity to establish enduring customer relationships and maximize customer lifetime value.

Finally, lack of visibility into existing customer assets requires additional administrative cost to fulfill upgrades and re-orders which hinders the ability to upsell and cross-sell at time of renewal or re-order. With a commercial system that enables Asset Based Ordering, i.e., generating quotes and orders from a view into your customers’ products and services entitlements. Manufacturers can create offerings and sell aftermarket services, for example, based on the customer’s existing equipment or machinery assets.

Commercial Excellence is the Foundation for Customer Experience Transformation

The foundation for your journey to Commercial Excellence begins with digitalizing the end-to-end revenue process. This enables the introduction of data-driven incentives—promotions for your end customers, rebates for your partners, and sales compensation for your internal sales teams—shaping behavior to optimize pricing, margin, and deal size. Once a critical mass of data has been collected, the next step is to apply artificial intelligence and machine learning to proactively uncover and address risk, capitalize on new opportunities, and further optimize revenue yield.

Digitalizing and optimizing these internal processes also serves as the foundation for the fast, convenient, and tailored experiences your customers have come to expect based on the bar set in their consumer lives. With your internal processes running like clockwork, you’ll be well positioned to provide real-time, self-service e-commerce experiences as well as faster response times and more profitable deals facilitated by your channel partner and direct sales teams.

A manufacturer’s success – and their stock price – is measured by how much revenue it generates, how fast, and at what cost. And today’s Manufacturing CFO can play a key role in leading the effort to transform end-to-end commercial processes to bend the revenue yield curve in the near term and ultimately serve as the foundation for the high-quality customer experiences that your end customers and distributors have come to expect.

Learn more about how to achieve commercial excellence in the C-Suite Guide to the Middle Office.

commercial excellence

Trending Blogs