THE ACADEMY OF BUSINESS STRATEGY
REVENUE OPTIMIZATION BLOG
Business Fundamentals – essential for optimizing revenue
Franklin Pieterse (CBS) MBA NHD NDip
When approaching revenue optimization one must ensure that the business is ready and sufficiently sound to explore this very exciting strategy. The daily challenges may differ across markets and industries but essentially sound business fundamentals cannot be compromised. Optimizing revenue is about achieving more with less and being able to leverage key strengths to achieve profits at best cost. The science of revenue optimization (RO) is well established in the travel and hospitality industries. The real value and potential of RO is much broader.
Before one explores RO techniques I wish to set the basis for sound business practices. From my MBA (from USB) I’ve learnt that profitability is an essential requirement for business sustainability. The main aim of business however remains to stay in business. Business failure can be avoided by practicing sound business fundamentals but competitiveness and market leadership comes with optimizing revenue.
I am not for a moment suggesting that the thrill of business is in the survival game. In fact in my view the thrill of business is in the creation of something new and exciting, for some, it’s about changing lives and in having a significant impact in the way the world turns. The reality though is that most of us are exhausted by daily business battles. Day-after-day we see new challenges and new threats. For many the leadership experience is a frustrating one. You may hear managers complaining: “Our people are not doing what we expect of them”; “the markets are not responding the way we thought it would”; “the cash flow is chocking and limiting all our great ideas and plans”. In reality most managers share similar frustrating experiences.
I have the misfortune, or maybe the privilege, of direct exposure to a number of failed businesses over the last 10 years. I could write a book about business failure. Instead I wish to share my thoughts and insights on RO, through a series of articles. You may find it ironic, however I do believe that I gained valuable insights from each experience, which might not have been the case if I only had exposure to business successes. In actual fact, I also had exposure to some very successful companies and have become a scholar of success and failure, mainly considering technology-based companies and in particular the telecommunications sector. At Brandhouse I have seen RO in action and know that it can take a business from survival to competing and leading. I wish to touch on common mistakes we make in business but only to reflect on the behavior patterns that often lead the destruction of otherwise good ideas, lost in implementation.
My hypostasis is that sound businesses conform to good practices. RO at strategic and tactical level should be considered by sound businesses, with revenues to optimize. Sound business fundamentals will ensure a well functioning business, able to leverage its position for achieving greater success. My list of (10) key elements is proposed as a checklist for any businesses seeking greater performance although it is none exhaustive.
Firstly it is essential to have clear strategic intent, driven by a compelling and shared vision. This may not always be the statement on the wall or the worlds may come out differently if you speak to various members of the team but in essence all team players drive towards the same future for the business.
Secondly a common purpose is of equal importance. The sound organization tends to have a deep sense of purpose, know why it exists and what it is about. Some may refer to it as the mission and others my talk about core-business but all these terms answers the question of purpose.
Thirdly the sound business has a unique value proposition. It could be a unique product or service or simply the way they go about delivering value.
Fourthly sound companies know their target market (segments), tend to develop and deliver value based on the identified needs and wants of their markets.
Fifthly new companies often fail because they are not well capitalized. It simply means that companies entering new markets or launching products must do quality projections determining the required investment, time to breakeven and eventual profitability.
Sixthly core expertise and know-how cannot be substituted. Too often entrepreneurs approach areas outside their expertise thinking it looks easy. New entrants to a sector must invest in learning fast or procuring the expertise, skills and know-how that will enable performance and competitiveness.