Foundations for 2024 Planning: The Bowling Pins Strategy

Foundations for 2024 Planning: Slides

Are you aligning your business plans with the right horizons? Buckle up, as we break down the Three Horizons concept in business planning and operations in this episode. We explore the potential pitfalls of focusing solely on the first horizon (current year's revenue and execution), and why envisioning your long-term goals (third horizon) could be a game-changer. Drawing upon the second horizon, which harmoniously blends the first and third, we illuminate its pivotal role in amplifying success. 

Venturing into the second half of our podcast, we steer our conversation towards the complexities of business growth, particularly in the lower middle market. Illustrating this journey with a bowling alley analogy, we underline the importance of learning from one segment before progressing to the next. What's more? We delve into the concept of the solution landscape and the importance of understanding your market and competition. With the Byerled Growth Framework in focus, we stress the essence of defining your ideal customer profile, segmentation, and understanding buyer dynamics. Gear up for a comprehensive understanding of strategies that propel sustained business growth and success.

Transcript

Gary: 0:00

All right, here we are for our first GTM workshop. We're gonna dive into 2024 planning and obviously everybody's up to their eyeballs in this right now, so maybe we've heard enough of it, but it's a good exercise, honestly, as we think about moving forward. This is an extension of the deep dive that we published last week or so around 2024 planning, and we thought it would be helpful to provide some additional context and actually then be able to answer some additional questions as well. So we won't spend a whole lot of time here, but we wanna thought we'd helpful to go through these concepts. So let's dive in, and I'll lead this for now and ask Andy and John and Tiana to jump in, make this conversational, because that's certainly the intent. The other thing is I apologize in advance for the raspy voice fighting a head cold, so forgive me for that. Hopefully that doesn't grade you too badly. All right, let's dive in. There we go, all right, so now okay, so let's jump in. I think the first really really good place to start is we have found that it is very important to be thinking about planning and operating in Three Horizons and that we did not originate this concept. This actually came out of a McKinsey concept that was around innovation, but we have found it to apply very well to planning and operating, and the thought is this is that inside of any one year, we need to be operating in Three Horizons.

Gary: 1:42

The first horizon is the year in which we operate, and so that dominates everybody's thinking typically and it should it's about this year's performance, this year's execution, this year's revenue. Well, how are we gonna meet our goals this year? However, if that's all we do and that's all we focus on, as we like to say, this year's targets are next year's baseline, and so we just spent an entire year doing everything we could to meet the year, and we haven't planted any seeds for the subsequent year or even beyond that. And the things that are the most powerful and impactful to a business are often the things that take the longest time to compound and they need to get them going. And so, as we think about planning, the first horizon is in year revenue. What are we doing today? It's about execution, it's about near-term feedback, it's about the things that we can affect in the calendar year or in the subsequent quarters.

Gary: 2:45

Jumping ahead to horizon three is actually more about where we wanna be, and I think this is particularly important and often lost with many revenue leaders is that the goal of the organization obviously in many cases we're led to believe is meeting our revenue targets. But there's a bigger reason. That's not the target. That's A, it's an outcome of inputs, but B, it's part of the equation of getting to the bigger target, which could be we want to raise capital in three years and therefore we need to have certain metrics that we need to be of a certain size, we need to have a certain growth rate, we need to have a certain set of efficiency metrics. We want to make an acquisition, we want to outright be acquired.

Gary: 3:29

There's a series of goals that are on the next two to three year horizon that we're working towards and preparing the company to look like we want it to look at that point in time. That might be three years away, but that is not, in the absolute terms, a great deal of time. And so horizon two is actually informed by what we are doing and learning in horizon one, where we know or think we want to be in horizon three, and that is horizon two. And so there's a little bit of work that is done in the current period, hence the little chart on the left over here, if I can get to it, yep, on the left hand side. That instructs how much time that we spend there, and so think about that.

Gary: 4:18

As we're going into this and we think about three horizons, most organizations spend all of their time on horizon one. As we finish this year and we look to next year, everything that we're doing is thinking about, and all of our time resources, energy is about horizon one, and therefore, when we get to the end of horizon one and start thinking about the next horizon one, which is the following year, we're right back in the same mix, because we didn't plant any of the seeds that allow us to compound. All right, before I jump in, andy, john, tiana, you guys want to add anything to that?

Andy: 4:53

Yes, please do yeah. So I think it's important to look at two big variables, if you will. One is are you trying to put revenue in the coffers in 24, versus are you planting the seeds of some some you mentioned in acquisition? That would be a good example some large operational thing, a new product launch and so on, that can be planned for right. So that's something that's very, very reasonable, I would argue.

Andy: 5:32

Short of Very tactical things, it's very difficult to impact next year's revenue with an even reasonably large initiative, other than possibly putting some things in place to say we've got trajectory, we've got a run rate at the end of the year. Because when you really talk about launching something and I would say anything that's reasonably involved from a go-to-market perspective, and you work backwards from a timeline perspective and when it's even possible from really depending on sales cycle as one big variable there, putting money in the coffers in the following year is very difficult from a timing perspective. It's just like we're already there. So I would even argue 2024 planning is really a forecasting endeavor based on what you already have in place from a monetary perspective, depending on the business, sometimes you have very short cycle sales and so on, and that you can impact more, but for the most part you're forecasting.

Gary: 6:48

You know I saw speaking of that, andy. I saw, I think. If we can find this, I'll share this in the notes. I think it was Norwest Capital Partners that just came out with a report, a benchmark report, on their portfolio I want to call it 32 or so companies, I think lower middle market would be accurate and if I remember correctly, the report was showing that even SMB-like transactions that had typically been two to four month sales cycles are now stretching to six months or more. So that's a fantastic point right Before when maybe we had 60 to 90 day sales cycles. Now, all of a sudden we're talking about multi-month. Well, we go into the first quarter and we're launching new initiatives to drive pipeline. That pipeline won't matriculate until the end of the second quarter and when that matriculates we won't actually be able to extract the learnings of what went well and what didn't go well, to iterate on it, until that time, at which point we're now into the third and fourth quarter. So you know, having those inputs early on and being realistic about that is important.

Andy: 8:01

And the other piece, and we talk about working from the middle out, which kind of cuts across some of the horizons as well. Those are things you can impact in the near term. Those are things that, for example, are already in pipeline, maybe customers you already have that you're looking to expand, former customers we talk about a lot right that you can reach back out to with new news. Those things you can impact in oftentimes a shorter cycle. But on that sales cycle side, first of all, coming off at 23, and we don't need to dwell on it too much, but that was a byproduct of a tougher year, if you will for sure, and tougher customers.

Andy: 8:47

And what goes hand in hand with a tougher economic year is customers who demand more, who want to know more. We talked a little bit about the example of what's my implementation look like. The buyers are asking that more and more up front, really wanting to know specs, integrations, nitty gritty. What does onboarding look like? What's that process, what's the timeline for that? We're making it tougher and that's just going to stretch out that sales cycle even more.

Gary: 9:18

One thing that I forgot to mention is, if you're listening to this in the podcast, the, the video for this actually is available under. If you go to GTMProco, we have the video so you can see the slides, and we'll actually make these available on the GTM Pro site as well. Go to GTM Workshop and you'll find it there. The intent is that this will be a follow-up to our deep dive and you'll be able to get some additional visuals there. So sorry, we didn't mention that earlier. Okay, so let's now talk about how we think about this, and this is a huge one, because many organizations, as we step into 2024, planning particularly the lower middle market. There's likely some major milestone move that's on the horizon, and horizon one by horizons, and it is. We're going up market, we need to push up market. We're launching a new product, a new platform. We're attacking new segments. There's a variety of growth levers that we want to pull, but the biggest challenge in that is that there isn't a recognition that when we do that, we're moving into uncharted territory. And so by that we reference Jeffrey Moore's bowling alley strategy from Crossing the Chasm, and we've modified it a little bit as we think about the segment that we serve and the job. So, if you're listening, imagine, if you will, a set of bowling pins, and the first pin is the segments and we'll use that term broadly. Could be industry sector, could be customer type, could be a variety of different things, but it's a collection of attributes that are consistent with that group size of business industry, that they serve problems that they're having. What have you? And then there's the job that you solve for that segment, the job to be done, and so we have to be thoughtful about that. It's easy to get trapped into the what problem do we solve? But what is the job that we are being hired to do? And we have a lot of visibility on that. We know what that is. We've got proof points around it. We have product market fit established by virtue of retention of customers. We've got a lot of knowledge around that. So then think of the second set of pins as either expanding to a new job to the same segment, or the same job to a different segment. In either case, we're introducing one new thing, and then, in order to get to a new segment and a new job, we actually have to go to the third tier, because we have to have learned from either one of those first, and then we go to the fourth tier is when you're able to expand into the fourth job or the third or fourth segment. So that's the bowling alley concept and it's extremely important because we have to recognize what are those steps that we're taking and what do we know, because any step outside of the segment that we serve or the job that we complete. So it could be as simple as what we're expanding we're launching this new set of features that allow us to upsell and cross sell into this new thing and expand into what would functionally be a new job.

Gary: 12:46

Because whatever that problem is that needs solved, that we believe we're now going to go solve, it's getting solved in some way, shape or form. It might be spreadsheets, it might be human endeavor, but if there's a problem it's getting solved in some way. We may have a better way to do that, but we don't necessarily understand what are the alternatives, what are the ways that they're doing to solve that, and does it actually open up a new set of questions or criterion that they're going to compare us against? When we do that, we just see it as well. We're taking one step to the left, one step to the right and it opens up, frankly, a Pandora's box of additional questions and complications that, if we don't at least go in eyes wide open, knowing that that's the case, then we're making plans, revenue plans, goals against things that we have a great less deal of visibility and being able to support.

Andy: 13:41

Yeah, that's the key point. There is anything that's greater than one. As far as a segment or a job in this graphic isn't unknown, yeah, and if it's an unknown, you've got to be very careful planning for revenue against that, because it's an unknown and you know it's unpredictable. You know how much money it's going to take to really get the learnings that are going to allow you to have a repeatable business against that. It's all a learning curve and it's time.

Gary: 14:14

Yeah, that's the point here. Right is that the further we move away from that first course segment, the less confidence we have in the inputs to this and there's increased uncertainty associated with that. Basically, you're in a test and learn environment. In a lot of ways, you're back to product market fit days. You may very well be doing things that are non-scalable so that you can get the learnings.

Gary: 14:40

It's actually more important to get the learnings and get them quickly so that you can iterate and make changes, than it is to just plow forward with your hypothesis of what you think is going to work. And I think, when you get to planning, having the intellectual integrity from the team to be able to say time out, we have a bunch of smart people in the room, but a bunch of smart people with opinions. We don't actually have a lot of evidence to support what this is and therefore we all have to admit that we just don't know. And therefore, how are we going to design our organization in the first quarter in a way that allows us to get and close that knowledge gap? And it may be things that you can do very quickly to do that and increase your degree of confidence before you plow forward with whatever motions that you have in mind. I actually have a question what should companies be asking themselves to really?

Andy: 15:37

put themselves into a context where they know a little, with a little more certainty, if they're ready to move forward.

Gary: 15:47

That's a great. It's like you read the next slide here, tiana. Yeah, so this is just some examples of you know. Think about the clarity. When we say clarity of GTM inputs, what do we mean by that? Well, we talked a little bit about it, but it is really. What do we do? We have evidence that our solution fits the job, not only today, but looking forward, relative to all the other options that are being presented to our customers daily.

Gary: 16:18

It's, you know, naive to think that all of the landscape of solutions aren't also targeting our competitors with messages around hey, our solutions, you know, does it takes a different approach and does it better? The other is around messaging, which is do we actually understand the way our customer describes the problem, feels the problem, sees the symptoms, how it reveals itself, and does our messaging resonate with that? Do we have evidence that that's the case? And that is often seen through landing page conversion rates and demo discovery and you know, moving things through your opportunity process to help you know your conversion rates, your win rates. What have you? That's where that's evidenced. And then the other piece of this is really in buyer group and targeting. So we have a particular customer type that we're going after a particular specific buyer. We have, you know, probably through trial and error, determined what targeting criteria and work, what message is resonating with that particular buyer, what the buyer group actually looks like, what the procurement process looks like. We have knowledge of that and know how to work that Buying cycle. How long does it take? What is speaking of a procurement process? How long is that cycle Like? What is their typical? What are their objections? What is the process that they have to go through? Who are the other people that have to get involved in the process?

Gary: 17:55

Solution landscape is another one where and we say intentionally solution and not competitive landscape, because competitors are part of the solution landscape we may very well have other alternatives and I think we're seeing that more and more in the size clients, frankly, in many of the spaces that we serve, because companies in the lower middle market that are private equity backed, have typically been operating for five, seven, 10 years, are usually, by definition, operating in marketplaces that are very highly competitive. There are a lot of solutions in there and we're starting to see, because growth is getting harder to come by organic, raw, new customer growth. More and more companies are playing in each other's sandbox. And so now the solution landscape gets even murkier because companies that were once part of your ecosystem, partners and otherwise, are starting to become competitors. And I hate to even drop the AI bomb, but with AI, people are now starting to rethink how do I actually solve this problem? Are there other ways to go about this, completely different solutions? So that's why we talk about we understand the solution landscape.

Gary: 19:23

And then, lastly, is pricing and packaging, which is so often thrown over the wall to a product exercise, sometimes a marketing exercise? To us, it is a go-to-market exercise because it is going to inform how we actually go to market and we understand how that works. We understand how we're compared to the solution landscape and, again, the further that we move away. So, tiana, I don't know if that answers your questions, but these are the kinds of things that, objectively, you can say. If I'm going to go, look at how well I know, these are the kinds of things that I can look at and say what is our degree of confidence that we know this, and we know it from the buyer's perspective, right, not solely from our perspective, when we feel good about that relative to our competitors, but we have a good feel for how the buyer views these variables. Okay, so we actually posted this on LinkedIn the other day and for those again that are listening, it is.

Gary: 20:30

We call it the zone of impatience. And as you move to new, down the bowling alley, down the you know, from pins row one excuse me, row two to row three, the reality is that your market, your customers, are less and less aware of you as a solution. And in many cases, as we're expanding into new segments or new products, the complexity of buying that solution gets more intense and requires more education, and so we move away from solution aware to problem aware to unaware. That, frankly, goes back to what we said before. It takes time. And if we set out to tackle the third row of the bowling pins with a new product to a new segment and expect, with multi-quarter sales cycles, that we're going to have a material impact on revenue again with, even in today's environment, even with war chest like resources which almost nobody has anymore, even with that, you will run out of time in 2024 before you can make a dent in that.

Gary: 21:51

And that's this zone of impatience and that's also the importance of thinking about Horizon 2. If that's where we need to go as an organization, if it's upmarket, if it's launching a new product, whatever it is, then absolutely work needs to be done in 2024 to make that make an impact, to be where we need to be, to be where the puck is going to be. Which means, then, that we have to allocate resources to making sure that that happens and not get everybody consumed in running on a hamster wheel in Horizon 1, just meeting this year's numbers, because if we do that, we may meet this year's numbers, but we will have done none of the hard work that does take time, that is required to compound in order to make that happen. So that is the core concept behind the zone of impatience.

Andy: 22:40

Just a couple practical aspects of that. So if you're going to a different segment with a different product, they don't even know you. They don't know you as a brand that's available for that. So just being present there takes time to kind of almost matriculate in the market that they even recognize you as a provider of that kind of a solution. And then all the watering holes, if you want to call it that, the places that those buyers which are different from your current buyers go to find that information. One example would be a G2 for a particular type of product, a G2 crowd. You know you're not present there yet. Now you should go ahead and be present there, but that takes a while to get there, to get placement, to get those customer reviews and so on for that aspect of the business that you're going after. So just you know you think about those examples. Those take a while to really build momentum.

Gary: 23:52

Absolutely so hopefully you get that information and build that. I think so. This is a framework that we put together, really from our experience of working with lower middle market companies being on boards. There's lots of frameworks around go to market, but for us, the core concept as we think about using this for planning and this, tiana, I think, goes to a little bit to your question is okay, what do we do about this as an organization? And so, again, for those that are listening, the Byerled Growth Framework. It's a seven step process and it's in this format, but it really is, again, not surprising.

Gary: 24:29

We first need to thoroughly define, confirm and unite on whom we serve and why we serve them, who and why. That's around your ideal customer profile segmentation. So there's three components to that marketing customer segmentation and this goes to that Horizon 3 as well. This is where the Horizon 3 really starts to creep in, which is we aren't just doing things in this year to meet this year. This year is a block in the continuum towards where we want to go, and so part of marketing customer segmentation is what customer segments do we serve today well and why do we serve them well? And that's understanding jobs to be done in Byer Dynamics, but which customer segments do we need to serve as we look ahead to Horizon 3, and what is that gap? And now we can start being realistic about how do we go about closing that gap. How do we, both in terms of knowledge and product, in organizational requirements, so on and so forth. Then we get to, once we understand who and why.

Gary: 25:43

The fourth point is positioning and messaging, which is the what. What is it we're putting out into the world that is enabling the buyer to buy? How are we helping them? How are we providing them value? And then, lastly and this is interestingly where a lot of organizations want to start is what we call in the revenue engine, which is the when, where and how. This is where you get into data and distribution, measurement, people, process and tech. We love action, we love to go do things, and so we'll go build this engine before we've decided who and why and what we're going to say. And that thing is efficient. We've got metrics all over the place and we've got people running 100 miles an hour and we've got tightly defined sales processes and outbound rhythms and marketing campaigns, but we haven't united and aligned our resources against who and why, which is critically important, especially in the lower middle market, because we do not have the luxury of missing. We have to get that right and we have to know if we're not getting it right very quickly. So this is the framework that, from almost a rubric, when we start a planning session, we say, all right, are we jumping ahead to the blue zone, which is the revenue engine, before we have thoroughly validated that this is where we're going and everybody agrees with that and why we're going there. Okay, well, that is the.

Gary: 27:17

That's a little bit additional color on the deep dive. So if you haven't had a chance to read the newsletter, you can go to deep dives. It's on the 2020-24 planning bowling alley and that'll be jump right out at you. And then this recording will be available on gtmproco under GTM Workshop and if you have any questions, we want to hear from you and hit us directly. We'll jump on a call and go into this, because we know, frankly, how important it is. If you're a revenue leader in a lower middle market company and you're dealing with some of these challenges right now and you're feeling like the organization's out over its skis a little bit on a new segment, a new product launch, what have you? Shoot us a note to gtmpro at yieldgroupco that's the yield team and we'll all get that email and we'd love to set up a call and then answer any questions and help you work through it. So let us know. But anyway, I appreciate everybody joining. I hope you found this helpful and until next time, bye.