Welcome back to a new edition of Engineering Revenue!
Engineering Revenue is a weekly newsletter for investors, CEOs, and executives that helps demystify the principles of revenue generation and value creation for lower-middle market businesses.
The Go-To-Market Landscape is Evolving Rapidly
Operating and growing a business is an interdisciplinary endeavor that demands seamless coordination across all go-to-market functions to achieve a singular, primary outcome: driving consistent, sustainable revenue growth. To be effective, organizations must master dozens of go-to-market competencies, each of which are managed by different internal teams. This is further complicated by rapidly changing buyer preferences and the shift from a linear, funnel-driven buying process to a more dynamic, data and digitally-driven model. To use an analogy, what once resembled an organized assembly line with a detailed manual, now feels more like assembling a 5,000-piece puzzle without any instructions. To create a revenue engine that fires on all cylinders requires coordination among all of these different moving parts,? and alignment around a common goal is critical.
The challenge of misalignment among go-to-market functions is nothing new though. For instance, the issue of misalignment between sales and marketing is a tale as old as time. In fact, it feels like sales and marketing leaders have been trying to solve this issue for decades and for good reason. This lack of coordination is costly, with estimates suggesting businesses lose over $1 trillion annually due to inefficiencies,? missed opportunities, and lost revenue (Harvard Business Review). Traditionally, sales and marketing departments have been the primary caretakers of managing the customer lifecycle, but even that is changing rapidly.
As the go-to-market landscape evolves, businesses are increasingly specializing across different segments of the revenue cycle to adapt to changing buyer behaviors, further exacerbating alignment challenges. Within SaaS companies, we see a proliferation of roles like sales development, account development, and business development, all designed to nurture top-of-funnel leads and support account executives. Similarly, the role of customer service has evolved from a reactive cost center to a proactive profit center. These teams are now integral to customer adoption, retention, and expansion efforts, underscoring their importance in the growth equation. With the complexity of go-to-market strategies continually increasing, aligning these diverse functions has escalated to a critical board-level issue. Businesses must address this alignment to ensure sustainable and predictable revenue growth.
The Link Between Go-To-Market Alignment and Revenue Generation
While it may seem obvious, the significance of aligning all go-to-market functions cannot be overstated, especially when it comes to revenue generation. For investors, CEOs, and growth leaders, ensuring alignment among various growth functions should be a recurring topic in every board and leadership meeting.
But why should this topic get so much attention? Simple:
- The alignment among intangible assets disproportionately impacts the growth equation. These assets, although they are not balance sheet items, make up most of the growth investment mix in B2B organizations. Any business can unlock more growth and value by improving the return on these commercial growth assets.
- Organic growth is unanimously positive in all regards for a business. It improves short-term performance. It improves employee morale. it generates inertia and momentum among customers, investors, industry stakeholders, analysts, and employees.
- Organic revenue growth – the increase in a company’s sales over time – is the primary basis for creating long-term equity value. What investors are buying - and managers are trying to generate – are sustainable, predictable, and transferable future cash flows. Put simply, the more scalable revenue growth is, the more valuable a business becomes.
Despite the mission-critical nature of alignment and its overwhelmingly positive impact on the overall business, companies still struggle with implementing this philosophy and it’s largely because companies try to solve foundational strategic issues with quick tactical execution.
Common Tactical Solutions and Their Limitations
Here is how B2B companies try to solve go-to-market misalignment. It is all tactical in nature when the fundamental issue for GTM misalignment is much more foundational and strategic, but organizations try to solve the alignment problem with tactical execution because it’s easy to implement and just as easy to report because it is all activity-based.
- When go-to-market teams repeatedly fail to meet targets, leadership concludes they are setting the wrong goal and they adjust KPIs and performance metrics. For instance, the sales team consistently complains that the Marketing Qualified Leads (MQLs) provided by marketing are low quality. Leadership concludes they need to shift focus from MQLs to Sales Qualified Leads (SQLs) to ensure marketing's objectives meet the sales team's criteria.
- To address underperformance, CEOs and boards often resort to organizational restructuring. If there's misalignment between sales and marketing, appointing a new leader or altering the chain of command should solve the problem, right? A common approach involves placing marketing under the Chief Revenue Officer (CRO), which may lead to the elimination or demotion of the Chief Marketing Officer (CMO) role, thus centralizing command for tighter alignment.
- To fix communication and cross functional collaboration challenges, businesses implement new technology systems. The belief is that centralizing communication and documentation will enhance collaboration along the revenue cycle. While the concept of a single source of truth is sound, technology alone often fails to address the root cause of misalignment issues. Evidence from industry studies supports this view, with nearly 50% of CRM implementations failing, according to Forrester, and CSO Insights reporting that less than 40% of CRM users achieve adoption rates above 90%.
Businesses often adopt execution-focused approaches because they provide a tangible sense of taking immediate action to address problems. While these measures might offer temporary relief and a feeling of progress, they typically fail to tackle the underlying issues that lead to misalignment, cause revenue leakage, and contribute to overall underperformance.
Addressing Common Root Causes of GTM Misalignment
- Re-orient the go-to-market model around revenue, not just sales. Traditionally, revenue responsibility has fallen on sales teams, operating under the old ideology that more sales reps plus more activity equals more revenue. This model operated like a linear assembly line, pushing buyers through a process of “lead to close-won”. However, today's digitally enabled buyers don’t want to be funneled through a cookie cutter sales process. The modern go-to-market approach is becoming increasingly integrated, involving not just sales but also marketing, customer service/success, product development, and finance functions. Each of these functions now plays a crucial role in enabling buyers and capturing revenue. This demands a holistic optimization of processes. This challenges the traditional revenue generation mindset, which very often isolates sales as the primary driver of all decisions. For example, creating a 5% increase in conversions between deal stages in the sales process or improving call connection rates by 2% to drive more booked meetings. Such a narrow view of revenue generation risks overlooking significant opportunities to realize revenue across the entire customer lifecycle. This also gets GTM teams stuck in the “improving the incremental” mindset, when in reality the underlying issue has to do with the revenue operating model, so businesses are caught in the revolving door of optimizing a fundamentally broken model.
- Re-evaluate the incentive structures across the entire go-to-market organization. Incentives undeniably drive all behavior, yet many organizations just accept the standard incentive model as best practice when in fact it has not evolved as the overall GTM model has rapidly shifted. Leaders need to scrutinize this model as the revenue generation becomes increasingly integrated across many functions. This means that businesses need to challenge the broadly accepted metrics that create false proxies for revenue generation. For example, if marketing's incentives are tied solely to the number of Marketing Qualified Leads (MQLs) generated, their efforts will focus more on quantity rather than the quality or revenue potential of those leads. This misalignment can result in marketing activities that do not necessarily contribute to overall pipeline generation. Similarly, sales and customer success teams have incentive structures? that do not reflect their impact on the revenue cycle. By restructuring incentives to focus on revenue as a common metric across all growth functions, organizations can incentivize behaviors that genuinely drive growth and avoid the pitfalls of outdated operational models that fail to leverage their full revenue potential.
- Evaluate ROI Adopt a holistic approach to evaluating ROI on investments that encompasses all revenue-generating functions.? Many organizations operate their growth assets in silos, leading to a fragmented view of their investments and its impact on revenue generation. Investments in various parts of the revenue process are often assessed independently, without considering their cumulative effect on the entire revenue operation. This can lead to erroneous conclusions that certain investments are ineffective, prompting premature shifts in strategy. This not only stifles the understanding of how different parts of the organization contribute to revenue, but also encourages a narrow focus on short-term gains rather than sustainable growth. To overcome this challenge, organizations must adopt an integrated view of revenue generation, viewing them as interconnected components of a single revenue-generating system. This unified perspective enables a more accurate assessment of how investments across different functions contribute to overall revenue goals, facilitating better strategic decisions and creating a sustainable growth model. By recognizing the interconnected nature of revenue operations, companies can align their investment strategies with a comprehensive view of their business’s growth drivers, enhancing both the effectiveness and efficiency of their growth bets.
To operate a synchronized go-to-market strategy, companies must move beyond piecemeal solutions and embrace a holistic approach to revenue generation. By aligning incentives, re-evaluating investment ROI through a comprehensive lens, and restructuring go-to-market strategies to include all revenue-impacting functions, businesses can address misalignment and build a culture of collaboration and sustainable growth. Only then can they unlock the full potential of their go-to-market efforts and secure a competitive advantage in an increasingly complex business landscape.
