Managing Director and Senior Partner; Global Leader BCG TURN and Transformation
Revenue growth can be a major value driver in transformations. In a survey of global business leaders whose companies underwent a transformation in the past five years, BCG found that 95% of transformations utilized one or more revenue growth levers.1 Notes: 1 BCG surveyed 2,005 global business leaders on their experience and perceptions of revenue growth in transformations. Respondents were from North America, Europe, and Asia and represented a mix of company sizes (by annual revenue), industries, and business functions. All respondents were key decision makers in their companies’ transformations and held C-level, VP, or director roles during the transformation. In most cases (77%), at least half of the transformation’s financial impact was achieved through revenue growth levers, with the remaining impact coming from cost reduction and organizational enablement levers.
Growing revenue in a transformation is particularly important when the transformation is undertaken amid an economic downturn or industry-specific disruption. Our experience shows that companies with robust revenue streams are better positioned to respond to the risks associated with any transformation and to the urgency created by disruptive events. Using revenue levers can therefore greatly improve the odds that a transformation program will achieve its financial objectives and create both immediate and lasting impact.
Rapid revenue growth in a transformation can have these near-term benefits:
Furthermore, revenue growth that is sustained during and after a transformation can yield these long-term outcomes:
We have worked with companies in several industries that have used revenue levers to improve their growth trajectories within the first year of a transformation—even during a crisis. The key to their success was knowing both what revenue levers to use and how to implement them for maximum impact. While our focus in this article is on organic revenue growth in B2B and B2C companies that provide “considered purchase” products or services, many of the revenue levers we describe can also be applied to companies that provide “impulse buy” products or services.
Our approach to revenue growth in a transformation begins with the revenue levers themselves. We have two main criteria for deciding which revenue levers a company should prioritize: direct impact on P&L and rapid delivery of the impact.
There are several ways to create rapid P&L impact, most of which depend on utilizing a company’s existing products and sales force. This approach does not necessitate heavy investments, so most of the value created goes directly to the bottom line. At the outset of a transformation, therefore, we do not focus on revenue levers—such as launching new products or expanding into new markets—that typically require significant incremental costs and multiyear timeframes to achieve impact.
We have found that the following six revenue levers are most effective for driving rapid and sustainable P&L impact across a wide range of industries. Deploying these levers can help maximize both earned and realized revenue by, for example, expanding the number of sales leads, increasing the value of individual sales, increasing sales frequency, increasing recurring or subscription-based sales, improving sales win rate, improving pricing, accelerating the sales process, and preventing revenue leakage.
All of these revenue levers typically start generating impact approximately three to six months from launch. Exhibit 1 summarizes the typical impact and approximate time to impact for each of the revenue levers, based on our experience.
We also select revenue levers that can be scaled across multiple business segments or geographies and that require relatively small amounts of investment in order to maximize value capture. It is worth emphasizing that, by using the right revenue levers, companies can grow their base revenue while implementing cost reduction levers, with margins remaining consistent or even improving in the course of the transformation.
Growing revenue during a transformation can be quite challenging. For example, because the various stages in the revenue life cycle are all interconnected, applying a revenue lever at one point in the cycle will affect other points. In most transformations, however, companies focus on only a few discrete parts of the revenue life cycle. Taken together, the six revenue levers we focus on here address the interconnected stages of the cycle and allow companies to address the interdependencies among them.
To ensure maximum P&L impact during—and after—a transformation, we follow a three-phase sequence:
The key to successfully driving rapid and sustainable revenue growth through this approach is capability building. At BCG, we think of capabilities in terms of four components that we help clients implement:
We have found that embedding capabilities with all four of these components into our approach is critical to getting P&L impact that is both quick and sustainable. Exhibit 2 summarizes our entire approach to implementing revenue levers in a transformation.
BCG recently supported several companies in growing their revenue during a transformation and realizing many of the short- and long-term benefits described in this article:
In all our work with clients to achieve revenue growth in transformations, we focus on creating direct P&L impact quickly, without the need for heavy investment. We tailor our approach to each client while drawing upon our extensive knowledge and experience, and we work shoulder to shoulder with clients to accelerate value creation. Helping to fix processes and align incentives so that the impact of our work extends across business functions, we also focus on enabling the right people. Finally, we help ensure not just quick revenue boosts but also sustainable future growth—so that top-line wins continue far beyond the transformation timeline.
BCG TURN is a special unit of BCG that helps CEOs and business leaders deliver rapid, visible, and sustainable step-change improvement in business performance while strengthening their organizations and positioning them to win in the years ahead. BCG TURN helps organizations change their trajectories by turning their upside potential into radical performance gains. The BCG TURN team consists of transformation practitioners and battle-tested experts with a proven track record in large-scale transformation. BCG TURN is invested in the sustainable success of clients, with a focus on performance acceleration and a commitment to value delivered.