Making Business Development into a Sustainable Growth Driver: Some Lessons for Success

As this has been another week with a dearth of actual deal and funding activity, I thought I would instead share a post regarding business development, and particularly about how successful revenue creation through partnership plays an increasingly important role in growth prospects.

In my career, I have often found that business development often holds a lot of promise as a growth driver in terms of business-to-business distribution, but rarely delivers, so the point of this article is to share some of the learning lessons that could prove the difference between success and failure.

I think that applying these lessons is particularly relevant in the current environment because, while the level of interest in digital transformation across many of the large financial service verticals continues to be as strong as ever, the reality is that the pace of investment, summer months not withstanding has slowed and strategic initiatives are being delayed by months, and quarters.?It is hard to trace this back to a single factor, but undoubtedly decision makers are currently finding it difficult to execute long-term plans when there is so much technology disruption taking place, (where AI is both a positive and negative driver), as well as regulatory change, and uncertainty related to return expectations for so many different asset classes.

Amidst this tough environment, it is not surprising that many businesses that less than 2yrs ago were demonstrating growth rates of 30%+ have more recently seen this slow sharply, raising serious questions around estimating the “right flight path” for organic growth in the next year.

For some businesses, a performance retrograde of this type can be difficult to navigate, but a strong business development effort can sometimes provide both a panacea as well as defensive strategy to help firms whether a direct buyer downturn.?This is particularly true when B/D targets are operating in the same ecosystem but are delivering a related but separate value proposition to the same types of personas. This has the potential to introduce synergies without cannibalization, and spurs parties to think differently about how to best leverage know-how, market presence, and data, often leading to entirely new opportunities that touch revenue pockets that were unattainable or unknown before.

When I look at firms that augment direct commercial success through strong business development, I often see the same characteristics appear from leadership, through to execution and support. First, firms that are strong in building distribution channels ae usually capable of delivering their value proposition in a way that greatly reduced integration complexity for the partner, as well as the change management that often comes with it. By change management, I both mean the way that a business process works, as well as how activities are threaded together to make a whole.?While the term “embedded” may be the current “buzz” word to define applications that can work seamlessly within the technology boundaries of larger and more complex (and often legacy) core systems, it seems certainly true that when firms look to replicate familiarity into their user experience as oppose to impose change management requirements (as a given), they create more opportunity for fast operational readiness and revenue generation for channel partners.?This often means spending as much time on the user and operator experience, as the functional objective.

Second, business development efforts are rewarded when innovation is focused on tackling pain points that will, once solve, quickly translate into competitive advantage, and revenue generation. ?A good example of this is in the digital on-boarding space, where many book of record system providers enjoy access to very large “sticky” client communities, but lack the ability to build flexible, open, and well architected high throughput STP capabilities.?As a result, although users recognize these systems for regulated financial service businesses are mandatory, they also represent a tremendous pain point for efficient account opening, capital collection, and asset transfer, where appropriate. The net result of this is not only a drop in conversion rates, but also a reduced appetite by clients and intermediaries for using solutions that are inefficient, yet also, expensive. ??A business development approach which initiates collaboration, and even the formation of consortiums that can share a broader vision is the ideal way to address this, introducing usable innovation to a “slower moving” incumbent, while also creating scalable commercial outlets that are often multi-faceted. I have seen this spur larger financial product manufacturers and custodial organization to take a different view on distribution opportunities.

Innovation in relation to both the core value driver, and the right type of integration experience are the foundational elements that organizations that drive commercial value via business development must be able to execute, but they will usually fall short in their outcomes without the right type of client success approach. SAAS companies, with their agile develop and release approach have really changed the nature of what client success does and means to sustainable growth, and this is just as true when business development is set to be an additional growth engine rather than just direct sales.?In fact, it seems to be the case that the B/D function will generally fail in its conversion and engagement efforts if it is not supported by its own client success efforts.?

In my experience, the presence of dedicated teams that train, advocate, and generally enable channels to execute flawlessly often represent the difference between success and failure.??While it is true that leadership will often question the initial business case of overcommitting to client success as part of business development, when channel has both a large client bank as well as a much larger commercial sales and marketing organization, it is essential if one is going to convert initial leadership enthusiasm with actual delivery of growth from the trenches.

In conclusion, as financial ecosystems across core financial services such as banking, asset management, wealth management and insurance continue to converge, the evolution of a well-defined and supported business development operation is going to prove essential to augment traditional direct organic growth.?While as a pure alternative approach, it will most probably deliver inferior operating margins, it can make up for this in terms of deployment at scale, as well as new types of product and service solutions that deliver solely through collaboration and cooperation rather than through only applying an internal build philosophy.