We talk about growth quite frequently on this blog but for some businesses, it is an elusive concept. All too often, we come across software vendors that have achieved stable revenues over time, but are failing to achieve any significant year-over-year growth.
What we have found is that many software vendors struggling with long-term sustainability tend to be complacent with their position in the market. Once these companies have successfully launched a flagship product, they tend to rest on their laurels. However, this is a dangerous and potentially fatal mindset in the world of software, as the industry is susceptible to market shifts and disruptive competitive technologies. To achieve substantial and sustainable growth, a software business needs to constantly innovate.
While there is no one-size-fits-all approach to growth, we at Volaris have identified ‘Initiatives’ as a good place to start growing organically.
What is an ‘Initiative’?
At Volaris, we define ‘Initiative’ as a specific project designed to achieve organic growth that meets the following criteria:
1. Can be measured separately from the rest of the business
This means that the revenues the Initiative generates can be clearly identified. By running the Initiative as its own P&L, it allows the company to clearly separate investments into research and development from operational cash flows, and measure the profitability of the project. It also prevents the company from incorrectly allocating cash flow issues to an Initiative that are actually within the core operations.
2. Involves doing something different
Simply raising sales targets is not an Initiative because it doesn’t involve a change in actions performed by the business. An Initiative should be something that is new, such as entering a new market (geographic or industry-wise) or developing a new product. Raising sales targets or prices do not help the company diversify and protect it from displacement—which are key objectives of launching an Initiative.
3. Has someone in charge
An Initiative should have a project champion. The role of the project champion is to oversee and coordinate all aspects of the development process from conceptualization to sales. This is the person who will be held accountable for meeting deadlines and budgets. Often times, this person is a Product Manager, but will work closely with all the other departments involved in bringing a product to market (e.g. sales and marketing).
4. Can be cancelled
If an Initiative fails to meet baseline expectations—be it sales targets or profitability margins, it can be cancelled. Setting milestones and targets early on helps avoid investing large sums of money in an idea that is doomed to fail. Recognizing that an Initiative will not work early on allows the company to focus on its next idea, and companies must be willing to accept when an Initiative fails.
How does your business work towards organic growth? What are some of the best practices that your business uses to ensure initiative success? Please let us know in the comments section below.
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