Recently we commissioned a research study to better understand how forward-thinking, top-performing life sciences and high tech companies excel at revenue management. Specifically, we sought to learn about the macro trends impacting revenue, the top challenges life sciences and high tech companies face in revenue management, and what does “best in class” look like.
Macro Trends Are Impacting Revenue
To understand the goals and objectives of organizations across industries it is important to first understand the global macro trends that are influencing and impacting them. Through this research we were able to determine that there are three major trends that are changing the way they manage revenue. We found that:
- 78% of respondents report artificial intelligence (AI) as having a somewhat or extremely large impact on their ability to manage revenue
- 69% report a somewhat or extremely large level of impact for digital transformation
- Two-thirds of life sciences and high tech revenue comes via partners
While AI and digital disruption are years-long trends, they are still in early and varying stages of implementation across enterprises. It was interesting to learn that the impact on revenue was very high across respondents and that both AI and digital disruption continue to have a significant impact on companies’ ability to manage revenue.
Regarding partners, the scale of complexity for managing increasing partnerships and increasing indirect sales revenue is massive. By adapting to these trends, organizations will be well positioned to meet their revenue management goals.
Companies Face Several Threats in Maximizing Revenue
Revenue leakage is the number 1 stumbling block on the way to maximizing revenue.
In fact, a McKinsey study showed that there is an estimated $1 trillion of revenue leakage worldwide. Our study validated that this is alive and true for life sciences and high tech companies. It makes perfect sense why this is so important. Revenue leakage, often from incentive overpayments, reduces top line revenue and negatively impacts margins.
The study also discovered how challenging it is for life sciences and high tech companies to manage pricing on a global scale – from standardizing pricing worldwide, to setting the right price at the outset to ensure profitability from gross to net. As product catalogs and regional requirements continue to expand, it is harder than ever to standardize and set the right price, and too often this results in lost revenue.
The third challenge is the ability to maintain compliance. This includes compliance to contracts, ensuring what was originally agreed to is executed, and compliance to changing regulations and governing bodies. Compliance can be one of the biggest disruptors to revenue execution. It can be as simple as granting discounts below contract terms simply because those contracted terms are disconnected from the negotiating process. Or as complex as sudden legislative changes that can change the way entire eco-systems conduct business.
What Top-Tier Companies Are Doing
Finally, the study shows that companies that can overcome these challenges and meet their goals are considered best in class across several dimensions. Across the board, top-tier organizations were more likely to be doing well in the holistic revenue management process:
- 85% of top organizations were more likely to be doing well with the ability to cross-sell products to increase their share of wallet
- 79% were more likely to be doing well with stock price growth
- 63% were more likely to be doing well with improving profit margins
- 57% were more likely to be doing well with reducing revenue leakage
This aligns perfectly with what Forrester states: “Companies that have implemented a managed lead-to-revenue process are demonstrating results with about 30% better performance in marketing contribution to pipeline and revenue and 50% higher revenue growth.” – Lori Wizdo in Optimize Revenue Results With An L2RM Business System
This study is a great example of how strategic revenue management is and the incredible impact it can have on business performance. It is loaded with other statistics and most important the 2019 State of Revenue Report includes recommended steps for organizations to take to become leaders when it comes to revenue execution. Download the report today.