Why The Revenue Lifecycle Approach Is Gaining Momentum: Part 1

Product Leader at Conga | Investor | Autodidact.

The notion of a “revenue lifecycle” may seem relatively new, but the concept itself is as old as business operations. It can go by multiple names—lead-to-cash, quote-to-cash or lead-to-revenue—but the underlying process is the same regardless of the name.

Put simply, the lifecycle of each customer is what matters to a business. The flip side of the customer’s experience is the business’ revenue lifecycle. Each customer is at a different stage—some have been customers for years, others are considering their first purchase, some have purchased and are currently onboarding and others may be reducing licenses or terminating.

All of these customers share something in common: They’re at some stage in the customer lifecycle—or, for the business, some stage of the revenue lifecycle. They are all at a point between prospect/consideration, quote/proposal, contract negotiation, order fulfillment, payment collection, revenue recognition or renewal.

While the revenue lifecycle is essentially the same for all businesses, how it’s managed varies dramatically. Many run a siloed approach with few integrated systems, and this can lead to problems. Others are more streamlined. For the former case (siloed), sales reps end up spending more time on administrative tasks (versus selling) and legal spends more time on manual tasks. In my experience, siloed companies may also lose revenue from invoicing mistakes.

These are all problems created by operations that are viewed and managed in isolation.

No One Owns Revenue Lifecycle

The above-mentioned issues can arise for a simple reason: There is rarely a single owner for all of these revenue lifecycle systems across the business. Because there are many owners, there is no true owner.

It has a benign cause: As organizations grow, job roles become more specific and targeted. The flip side of this coin is that “specialized” can also mean “siloed.” As responsibilities grow, handling problems outside of one’s sphere of responsibility just isn’t possible. The problems may be too large, out of scope and engender political wrangling, causing the problems created by siloes to persist.

The complexity of large organizations drives increasing specialization of roles, which works against viewing the revenue lifecycle holistically. Incentives drive behavior. For organizations to laser focus on the full revenue lifecycle, someone needs to own it and be incentivized to see the whole picture and have the power to bring all stakeholders on board.

Organizations with a streamlined revenue lifecycle give greater focus to each function as a step in a larger process. In the absence of a single owner, there are a couple of options.

1. Using trusted advisors in transformation—such as professional services firms—who see the whole picture from an outside perspective and can make objective decisions.

2. Software providers whose influence extends beyond point solutions into the larger revenue lifecycle.

The Impact of Silos

A customer recently told the story of her experience starting a new transformation role with a large international business. Her charge was to get the systems integrated and aligned.

The problem was that she was not able to figure out who owned which system inside the company. Sure, she had access to an org chart and job titles, but it wasn’t clear—even internally—who to speak with. I was surprised with how she solved this problem: She called externally to each software vendor and asked who their contacts were within her own company. This is one example—not unique—illustrating just how siloed systems and departments can become.

The return on investment in taking a full revenue lifecycle approach can be huge. Consider a 3% to 5% revenue loss from invoicing mistakes. While it may seem like a small number at first glance, fixing that problem represents between 25% and nearly 50% of profit growth for a typical business (the net profit margin for S&P 500 companies in the last five years was 11.3%). Just from plugging the leak. Imagine how many dollars are waiting to be picked up from taking additional steps to treat the revenue lifecycle as a unified whole.

The revenue lifecycle is internally focused, so it only tells part of the story from a business perspective. In my next post, I’ll talk about the flip side of the revenue lifecycle—the customer journey—and discuss revenue lifecycle management from the customer’s perspective.

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