Cross-Practice

The Chief Revenue Officer and Their Growing Role in Tech Companies

A Holistic Approach to Generating and Optimizing Revenue

The chief revenue officer is a relatively new executive position, at least in regards to the decades-long history of the technology industry. Obviously, the sales function has been around for most of that time, and at enterprise technology companies, the sales organization holds great power and prestige.

It is historically led by a senior vice president (SVP) of sales who came up through the ranks of the tech industry and succeeded at every step. They usually have great deal-making skills, superhuman people skills, incredible focus, and a knack for clearing out the red tape, both internally and with the customer.

But what happens when the “deal” isn’t the main driver of revenue anymore? In a recurring revenue model world, the bulk of the money changes hands months or even years after the sales organization has done their work. Initial purchases are driven by business buyers using Operational Expense (OpEx) budgets, meaning the initial purchases are smaller and you’ll get less money upfront. Those “quarter-making” multi-million dollar enterprise license deals will become fewer and farther between.  

This new reality will require a new approach–leadership that thinks about revenue in a holistic way, from the pre-sales process to the renewal and beyond.

What Is a Chief Revenue Officer and What Do They Do? 

A chief revenue officer (CRO) oversees almost every aspect of scaling, growing, optimizing, and generating revenue. The CRO works across departments to connect marketing, sales, customer success, revenue operations and more to approach revenue holistically.

The CRO’s function is clearly broader and more strategic than the remit of most SVPs of sales. Now, not all CROs oversee all of those functions. Often, these duties match up with a general manager or president of a particular business unit as opposed to a designated CRO. (And, yes, in some cases it’s just a new and trendy name for the head of sales).

However, a true CRO, whatever he or she is called, is thinking about more than bookings. They’re responsible for revenue growth across the entire Land, Adopt, Expand and Renew (LAER) customer lifecycle. They have to balance growth and profitability, and need to drive efficiency and effectiveness. They need to make sure that the customer has a consistent, connected, and coherent experience.
 
The challenge is that none of these problems are addressed by the traditional sales organization. Sales is built to bring in new, big deals. Marketing is built to find new customers, not drive consumption in existing ones. The formula for growth, heretofore, has been to hire more salespeople and spend more money on marketing. This drives costs up, not down.

What executive in your organization is responsible for dealing with these challenges and exploring and optimizing these future growth levers? Maybe the chief technology officer (CTO) is thinking about product-led growth. Maybe the SVP of marketing is thinking about customer led growth. But who is thinking about these levers holistically? Or how these growth levers complement traditional sales and marketing investments?

If there is not a CRO in place, the answer is most likely nobody. Someone must be able to see and coordinate the big picture.

The Role of a CRO vs. a Sales Executive

Sales executives are responsible for driving revenue; however, their focus is more on the short term. They need to hit their booking targets this month, this quarter, this year. To achieve their primary objective, they are focused on signing big, new deals all while trying to hire and enable new sales reps and partners to make the number next year.

68% of companies in our T&S 50 and Cloud 40 Index (where we track the quarterly financials of the most influential cloud and technology solution providers) do not have a CRO in place. When asked who is ultimately responsible for driving revenue growth, the CEO’s from those companies will most likely turn to a senior sales executive. (Sorry marketing and product management, it’s the truth).

The CRO must have a longer term focus and a broader remit than the sales executive. How will the company cost-effectively grow revenue two, three, and five years from now? Also, the CRO must have a broader perspective–they are thinking about all the levers for growing revenue, not just the traditional levers. The CRO heavily collaborates with the chief financial officer (CFO)--they are joined at the hip. Why? Because they are speaking the same language: cost effective growth!  

The chart provides a side by side comparison of the sales executive role to the CRO role.

As you can see, the metrics for the CRO will have to be different than they are for sales and the compensation structure will have to change along with it.  While CROs will be measured on revenue and growth, you’ll also need to factor in  overall profitability, cost structure, and even voice of the customer metrics. These KPIs will be shared through the entire revenue organization, the same way quota is divvied up in traditional sales organizations.

The Future of Revenue

This change in focus–from bookings to revenue and from selling to optimizing for the customer lifecycle–will require executives (and their boards) to take a risk in order to gain the reward. Your company may miss a quarter or two as the changes are put into place.  You may have to spend money to develop new capabilities around data and analytics, and make greater investments in their post-sales people and processes. However, soon the market may not give you a choice.

Companies who start thinking about the big picture around revenue can ride the wave of these new trends to success. Those who don’t may soon find themselves pulled underneath this rising tide.

For more on how to start your journey towards data-driven revenue growth, check out our research report on how to use TSIA's APLAER model to unlock your potential.

This blog post is an excerpt from the members-only research report Why CROs Will Become Commonplace.
 

  July 15, 2022