For those of us who have lived through multiple technology cycles, we know that investment capital rarely yields outsized returns when it is easy to find and cheap to deploy. The recent technology mindset of driving growth off inefficient expansion motions and inflated valuations is no longer an investable option for shareholders and executives. The world has moved back to the most proven model of value creation – building companies on sustainable trajectories. There have been flurry of articles setting out the operational tactics, financial metrics and organisational frameworks that are certainly part of delivering profitable growth, but is there something deeper?
At Farview, our approach has always been to work with companies who are seeking durable growth over a multi-year horizon. For us, what is the ultimate marker of durability? It is maintaining (and even accelerating!) year on year growth rates on ever greater efficiency returns, even as businesses add more scale and the absolute uplifts get ever larger.
We believe achieving durable growth must be underpinned by a fundamental mindset that prevails across a technology company, rather than discrete measures. The elements we set out below are neither comprehensive nor easy to deliver. Indeed, many of them are intangible and hard to measure. In combination though, we believe they are the most effective way to realise the path to durable growth.
Understanding Customer Value and Iterating Pricing to it
Most technology companies beyond a certain threshold of scale have products and solutions that deliver value for their customers. A significant number though, rarely validate core sources of that value, and use pricing approaches which have not been touched for many years. Defining customer value and structuring packaging and pricing schema that work to enshrine that value, is too often something that falls between functional areas and lacks clear ownership. A reality further complicated by the fact that pricing is also an area where focus and associated changes frequently create a high operational tax. Lacking an internal champion and requiring heavy effort, packaging and pricing are left in legacy models with complex ad-hoc work arounds, often resulting in heavy discounts from list targets.
We often see companies offering customers the benefit of an entire application under a single license price. It is simple to outline and may feel like a great value proposition. The consequence though is to surrender all features and future roadmap benefits without any discrete marker of incremental value. That lack of a value marker makes roadmap prioritisation a more subjective debate. Modular and / or tiered approaches provide tangible validation of value in selling and contracting cycles – delivering better feedback loops all around.
Taking the translation of customer value from artistic debate to a hardened iterative process around packaging and pricing often unlocks significant growth opportunities. It drives better sales cycles based on clearer value fit and gross margin uplift through reduced discounting and tighter alignment to unit costs, ultimately securing enhanced drop-through profitability. Focus on value and pricing reduces latency in most go-to-market approaches for minimal hard cost, enabling companies to re-invest into expansion cycles with deeper precision and higher conviction.
Hiring the Right People for the Stage of Maturity
As businesses scale, they get inherently more complex: more products, more geographies, more segments and more go-to-market motions. Every additional dimension means this complexity compounds on itself. Being able to cut through, requires the addition of team members with specialist skills and experience relevant to the stage of maturity. Importantly, it requires hiring for those who see the opportunity to build towards a more defined and structured future. Perhaps most fundamentally, deep functional capabilities must be matched with cross-functional understanding, as cross team co-operation will be at the core of any company seeking durable growth.
We see enabling roles as fundamental underpins for durable growth, the return on the incremental sales rep or engineer will be inherently lower without appropriate skills in areas like product marketing, sales operations, product management, project office, FP&A. And don’t forget organisational wide learning & development. With the right team in place, businesses can then focus on developing efficient and scalable processes that align with their growth objectives. Complementing these processes with appropriate systems that facilitate seamless communication, data sharing, and automation creates a cohesive and streamlined operational environment. Crucially, by investing in the right people for roles that link across functional areas and prevent siloed thinking, businesses lay a strong foundation for long-term success.
Driving ROI-Focused Decision-Making
Durable growth demands every functional area of the business to think about the return on investment it delivers. At the most basic level, this requires identifying relevant targets that align with the goals of each function. The financial theory of that is easy: by running every incremental dollar investment as ROI-driven, businesses ensure that resources are allocated effectively and efficiently, driving maximum impact. The practical reality of that can be a lot harder: how do you measure areas like engineering where outcomes may be subjective and hard metrics can drive perverse outcomes – just cutting code lines does not mean good code is being cut and great product delivered. To wade through some of the subjectivity, if a team sees value in a return measurement and is willing to be measured by it, that is likely the best indicator of its worth.
Even more important than the KPIs themselves, all functions of the business should be involved in the dialogue to define and manage the key metrics and targets. It is crucial for the entire team to interlock and prioritize initiatives and outcomes collectively, promoting a culture of accountability where interdependencies are understood. Tough and challenging conversations to underpin commitments should be encouraged. The spreadsheet can only get so far in demonstrating returns; the true outcome comes from realised commitment of the complete team.
Demonstrating Success to Foster Organizational Buy-In
Growing revenue and profits may sound like obvious nirvana to a senior executive team and institutional investors, but making it resonate and become a rallying call across the whole organisation is perhaps less natural. The idea of getting more out, with the less or the same in, is not naturally something people sign up for with enthusiasm. It sounds hard and often is.
Fostering belief and support from the entire organization requires intentional and consistent communications. By celebrating the discrete successes of achieving more with less, businesses reinforce the notion of efficiency and effectiveness. Instilling confidence, motivation, and collective commitment to the right way of operating, ensures continued success and durable growth.
Building the Mindset
None of the above form an easy step by step playbook. In the abstract, they might well be seen as self-evident platitudes. Yet our experience tells us they form the core of durable growth outcomes on the journey to €100m revenue and beyond. When they sit in the DNA of an organisation, they enable growth to come from within.
This is not an elegant formula or correlated graphical output, but by intertwining these elements into the fabric of the organization, technology companies can navigate the competitive landscape with confidence, continuously improving and delivering exceptional results.