Thursday, June 13, 2013

What the Revenue Machine Is Dependent Upon

Peter Drucker, the business sage, once commented that relationships drive revenue.  Like much of what Drucker says, this deceptively simple statement is packed with dynamite.

We operate in a numbers-oriented business culture.  Nearly everything that determines value in a business, we are told, relates to something explicitly measureable on the balance sheet or P&L statement.  The quintessential business measure, of course, is operating earnings, which, in turn, is most directly driven by revenue.

We forget, however, that revenue is largely a proxy, a number that ultimately reflects other, often non-quantifiable, values in the business.  Foremost among these is the strength of the company’s relationships — specifically, relationships with customers, employees, distributors and other corporate audiences.  As Drucker understood, business is ultimately about people.  If a company’s business relationships are stellar, weak revenues will almost always be short-lived.  If relationships are dysfunctional, strong revenues can rarely be sustained.

Maintaining good relationships in business has never been an easy task.  But today it is both more challenging and more important than ever.  Most companies operate in a marketplace that has become both global and hyper-competitive.  In this kind of environment, loyalty has gone the way of the three-martini lunch.  At the same time, the internet has dramatically increased the number of eyes on a company, and it has given once powerless “citizen experts” the ability to dramatically affect reputation.  These are just two of the many new relationship realities facing business.

Today’s business operating climate is indeed a reputation economy.  It is an environment where reputation has become an asset as vital as plant, property or equipment.  Therefore, one of the major management challenges facing executive leadership is vigilance about the company’s reputation, assessing the many ways in which its credibility could be damaged and its trustworthiness enhanced with all of its most important constituents.

Building, strengthening and protecting relationships is the centerpiece of corporate growth…as fundamental as the quality of the service or product provided.  At the very root of reputation and the relationships that build it, is corporate organizational behavior, which resonates today throughout the internet’s echo chamber every minute of the day.  Each and every one of us needs to be conscious of that every minute of every day.

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