Key takeaways

There are plenty of sales frameworks out there, but no cohesive operating model for how recurring revenue businesses can achieve sustainable growth. Until now...

Watch to hear Jacco talk through:

- the key principles of recurring revenue that all revenue leaders should understand
- how to align the functions of Marketing, Sales, and Customer Success using one consistent open standard
- the fundamental principle of recurring impact, and what it means for how recurring revenue businesses operate

Hi there, my name is Jacco van der Kooij, the Founder of Winning By Design. It is an exciting moment as what I'm about to share with you is the culmination of years of what we have been working on. Let me put it together for you. Historically, what you'll see is that we worked along a funnel. We call that the standard B2B model. This funnel actually was created and often seen as primarily generating revenue and profit at the outcome of perpetual deals. Now, what we noticed is that that funnel was split in two, often referred to as the marketing and sales funnel, but essentially it is in the deal funnel and the lead funnel. And that's what you see down here. Leads are flowing in and turning into deals. This was often assumed to be a linear relationship. In other words, when I wanted to have twice as much revenue, many sales leaders would say, well, if you double my quota, I'm gonna need twice as many sales people and I'm gonna need twice as many leads. And so we perceived that to be linear. One of the great things that happen as a result of that is that we really started to focus on what was the key activity, closing. And you'll often find this in the more conventional and traditional B2B sales organization, a big focus on winning the deal. You know, it is the most celebrated, awarded and so on and so forth. This put the gravity of that organizations often at that part where the deal closes, even to the point that the marketing function was supportive of that initiative to close deals. Today, what we see with recurring revenue as you see depicted down here, it can no longer be just generated based on recurring revenue. There is no recurring revenue. Those upfront dollar figures are not significant enough to offset the client acquisition costs, which constitutes both the marketing and sales cost. So what you'll see is that there's little to no revenue out of a recurring revenue deal and often that is not enough. So what we do is we create another set of activities. This other set of activities is referred to as the recurring revenue funnel. This is where those deals that come in that have closed and that have started to be onboarded are turned into a recurring impact. Now, that is where this key and the challenge starts to occur. This recurring revenue can grow or decline based on churns or resell and so on and so forth, and creates a recurring element by doing it again and again and again. What we notice however if you keep doing it again and again, a profit will be established over a period of time. That period of time as you will see in many market research out there sits somewhere between 18 and 24 months. And a lot of people have seen that this is about 21 months for the median across about the top 40 SaaS companies. It takes them 21 months to recoup the previous month's marketing and sales cost, 21 months. This tells you how important it is to establish that second part of the funnel. This also tell you that at the end of the acquisition funnel where we are looking at historically, there is no close. This is merely the start. And even calling it a close is not indicative of what it really is. What we now will do is we will line up both those funnels because when we line them up properly, new trends start to become clear to us. What you'll see down here is when we line them up, this model we call the bowtie for the obvious reason how it looks. First, what you'll see is no longer do we call it the close. We call it the mutual commit. Mutual commit, also commit. What we mean with that is both parties are committing themselves to achieve something. And what are they looking to achieve? They're looking to achieve impact for the customer. What you'll see on the left, we will continue to call that the acquisition funnel, but on the right, we'll call that the impact part of the funnel and combined, they form the bowtie. What you'll find is that there's a new first principle of business. This first principle is radically different than the historic principle of the previous B2B, what we've been working along for the past 20 to 30 and 40 years. The evolution that we have gone through no longer is able to catch up to this drastic change that has occurred. This occurrence of this new first principle is best stated by recurring revenue is the result of recurring impact. No recurring impact, no recurring revenue. If you do not get out of your monthly subscription what you want or your annual subscription what you want, your customer will not renew. Recurring revenue is the result of recurring impact. This is a first principle of recurring revenue business. This is the fundamental truth that if we adhere and build our business on that, we stand to do well. What you will see is that the recurring revenue in this world is not a function of linear function, it is a function of exponential mathematical formula. It is to the power of the amount of periods. The length of the contract, the renewal cycle, whether that over a three year period is three for three years or 36 for 36 months creates a compound impact that by far changes what we are looking at. Now, to give you a practical example, this happens all around is we often take examples from sports. And in sports, this has happened most recently in sports, we have the Golden State Warriors. They found that the mathematical results of the three point line based on two of their shooting guards were more indicative and were better than the two point line. And as a result of that changing the conversion shot between the three point and a two point shot, they were able to change the game and many will say they've changed the NBA because of it as more and more shooters started to become very accurate at that three point line. Everything changed. No longer is it tall players surrounding the basket, it became perimeter shooters and rapid play. The game changed. So too has the game changed in our world of recurring revenue. We can no longer adhere to these standard methodologies, to things as you are familiar with as BANT and MEDDIC. There will be a role for it. I'm not trying to say we let them go and I'm gonna come back to that, but we have to consider that something has drastically changed. Recurring revenue has caused a fundamental shift that is displayed down here in this bowtie where primarily the focus was on closing and closing the deals and now it is achieving profit by a result of reoccurring revenue, which is the result of delivering recurring impact. This is a significant change and it does not come naturally to most organizations. It does not. Historically, comp plans, recruiting programs, expertise, it is deeply ingrained into our culture to celebrate the win and to primarily have a maniacal focus on winning and closing those deals. Yet, mathematically, we see that this is no longer where the revenue and the profit are generated. I wanna take a closer look and show you what the challenge of that is. When you take a closer look and when we line up lead generation, lead development and so on and so forth, it seems to be that the client would normally flow through in this direction. This is however not how it happens. What we have done is each department has been given a volume metric. For example, lead gen could be an MQL volume metric and that volume metric is measured. I delivered you 200 MQLs this month, it is up to you to convert XYZ. Not only did we see that they created these silos, furthermore, we see that alignment was further emphasized as each department, each function in the business started to adhere to its own model, it's own methodology. None of these methodologies were aligned with achieving recurring revenue and therefore achieving recurring impact or rather recurring impact and as a result achieving recurring revenue. None of them had that in the fundamental. Let me prove that to you. Historically, our lead gen campaigns are based on ICPs. If you look at the definition of an ICP, there is no description in the traditional ICP of what impact it is that the customer wants to accomplish. We talk about it's the CFO, we talk about the title, the role, the region and so on. But impact is not specifically mentioned. In many cases, lead gen's output is an MQL. Similarly, we will run in full parallel companies, programs, campaigns and strategies which we will refer to as ABM or ABS or ABX and so on and so forth. This is targeting also often described too in a popular terminology as a reverse funnel. And what we see down here, you'll see that the outcome of that is MQAs, a very different metric, very differently done. Again, we're not necessarily in these program looking to see what kind of impact we can have, impact is now a different thing versus what the lead gen campaign is. If you further this down and we look at lead development function, such as sales development and so on, we see that they are using different techniques, for example, SPIN selling by Huthwaite Institute, a great methodology to learn how to ask a client questions. But when we look at SPIN selling, again, often I recommend a technique and a technique we would highly recommend that your sales professionals learn, what you'll see with this technique it doesn't necessarily take into account recurring revenue. It was not invented during that particular point in time. BANT goes even back further. It was not invented for a recurring revenue. So if we start creating forms of qualification on BANT, we once again this is not designed. The outcome of that could be referred to in certain terminology as SQLs. I refer to them as discovery calls. Again what we are going to see is that if you move down, sales actually runs off a different funnel. Those funnel often is based on opportunity stages, those opportunity stages are very linear. You see very rarely that it is a closed loop that systems go back and forth or our opportunities go back and forth. They actually only move through a few stages. When we look at the methodology in use down here, MEDDIC, it is a great methodology, which we continue to recommend that you do. But MEDDIC primarily is a deal inspection methodology. It helps and improves forecasting. When we look at MEDDIC, natively, it focuses most of its efforts, most of its letters from the acronym are focused on closing the business, not on delivering the impact or making sure that you close the right deal. This is a key indication that again once again in this case MEDDIC doesn't really fit with the impact methodology from the get go. We need to make some modifications there. As we activate, like many companies are starting to use a mutual action plan step by step, why? Because most of it is a checklist. This is not really to achieve impact for the customers, most of these things are let me show you how to do it, step you through check, check, check. I delivered you the training, you absorbed the training, check, check, double check and we move forward. Good luck with the product. All these things have not in common that they have a primary mindset to help the customer achieve recurring impact so we can be rewarded with recurring revenue. And as a result, many of these pictures as you will see down here, the hoops that the client has to jump through is quite a journey. Now, what we now need to accomplish is how do we align all this? How do we align that the customer not only stays with us because we achieve recurring impact, but perhaps how we grow, more seats, more consumption, more usage, more impact. How do we align all this? For that, I'm going to take a look at the cloud. We are part of the cloud and in many ways, the solution sits right in front of us. In this case, Salesforce ran into a similar problem when it wanted to interoperate with its app. One for example is DocuSign. And what you'll see is they created as a clear example, they created the AppExchange. And in this AppExchange, you'll see they created an open standard with an API into it and anybody who adheres to that standard can interface with Salesforce and as a result can interface with each other. That is what we are now in need of. Why can we apply this level of open standardization to customer services as well, not just through products where fields are being written and written in red but also with services. For that, we found the need to develop an open standard for a recurring revenue operating model. Recurring revenue is clear. Operating model is where you will see that this no longer we can start separating this is marketing, marketing is awareness and sales does all the closing and customer success does the onboarding. What we start to see more and more that these functions are deeply intertwined. At the core however is the ability to achieve customer impact. Once we know when we deliver customer impact, recurring revenue will be the outcome. Now, let's take a look at how we would create an open standard. First of all, we would use a bowtie data model. We say it's like look, we no longer can adhere to the funnel. The funnel is an incomplete perspective on what is happening. We need to complete it in its entirety. Second what we need to do is we need to make sure that everybody realizes that this function has a compound impact scientifically on the basis of an exponential function towards these latter two stages where the length of the contract, the increase or decrease have an exponential impact. This is a new scientific model that clearly shifts a focus to that right side. What needs to bond all of these functions, all of these things, all these departments, all of the programs is the achievement of helping, is the goal to help the customer achieve the impact that they want. And to do that via multiple models, via multiple functions, we call that the operating model. And you hear me constantly talk about functions, not departments because marketing may have different function. One function may be an awareness campaign, such as the web or a website, but there may be a function for existing customers and so on and so forth. Marketing has multiple functions, sales may have multiple functions and customer success for sure has multiple functions. By looking at them as functions that need to be connected but they are connected through achieving the customer impact, we can start to see where we need to create interfaces. What you'll see down here, earlier I used an example of ABM. ABM, account based marketing, account based strategy or ABX, are all great acronyms that describe the same thing. Focus on a fewer clients that you really hand pick. And it's a great methodology, which we wholeheartedly support. What if we would integrate your existing ABM methodology with the impact based framework? What if we start mapping your existing BANT framework to the impact framework? What if we do that? We do that through what is called a methodology programming interface. It's the same thing as an API, I just wanted to make sure it sounds reasonable. MPI, a methodology programming interface. What we are doing is we have created that pink swirly line all across and we call that the SPICED framework. It's an impact based framework. And then all we do is we help and we publish, are about to publish all these interfaces to that, so that whenever you're running MEDDIC or MEDDPIC or MEDDPICC with double C, whenever you do that, we encourage you to continue to do that. That is an investment that you've made that you wanna recoup that investment. We do need to however make sure that we align all these different methodologies. Now, some of these methodologies are very well known and easy to integrate. MEDDIC actually is quite an easy one to integrate, as is MAP. But some of these methodologies today and particularly in customer success, we see that they are determined by a tool. In absence of an existing methodology, we often see that the tool become the determining factor in that, whether that is a Zendesk or a Gainsight or a Totango. They become the customer success methodology. We say again the tool is great, keep using what you're doing, that's not the problem, but let's make sure that we create a programming interface to that. This gives us an ID on how we are going to do this. Now, what we find is that this is so needed right now, there is such a huge hunger for this, such a huge demand for this that we feel we at Winning by Design who have deployed let's say several hundreds of clients with that, we believe that it is of a global importance that we make this an open standard accessible to everyone. And this open standard, I wanna take you through. I wanna describe that for you. Now, what is an open standard? What do we mean with that? And so I'm gonna take a look here as I am going. What you'll see down here is we are complying with that code. Now, here comes what that is. What this code says is it says you're able to share, to use, to adapt, to remix. We want you based on the materials that we're going to provide, use it and become better of it. Deploy it within your company as you see fit. Put it on slides and sheets and present it where needed. We wanna make sure that you do all this. We wanna obviously make sure that there's an attribution to the open standard model so we can create popularity around it. And we wanna make sure that it is non-commercial use. What do we mean with that? We primarily mean is that you cannot sell it. It would be very dishonest if we create this open standard for all of us to use where yet, one company will start monetizing that. That is what we want to avoid. Now, this open standard is what we are going to market with. We want all of you to experience that. What we're going to do with that open standard, we're going to make our models available. These models have been published on the YouTube. We aggregated them and we're created a clear classes and so on, open classes. One of the first of its kind will soon be delivered I think on June 17th, I believe that is we will be delivered via the revenue collect, but we also will be talking about it elsewhere. We will be giving these and sharing this information openly also via our YouTube channel in an effort for everybody to understand and to use these models. These models are the fundamental basis of our consulting business, which is based on, yeah, we have over 800 customers helped these days. What you'll see what we are going to do, not only the models we're gonna make available, we also are gonna make sure as an open standard we provide the full impact and critical event framework which is wrapped around in its SPICED framework, situation, pain, impact, critical event and decision. We wanna make sure that we are able to create a programming interface to this open standard framework. No license of specific is needed. You don't need to pay, there's no revenue. You can simply start using this right away. You can use the YouTube videos or if you prefer, you can buy value added services from the company, such as open classes, which are given every two weeks and so on and so forth. Now, what we do is we are now making this as of immediate available as a beta. We can now go and I'll take you through our website where this is available. If you are interested, we are taking on beta customers right now until full release in June. What you'll see here is the landing page of that. You'll see down here the model. Obviously, this starts to look awfully familiar with what you get, what steps that you get and so on. You'll see down here, these are for revenue leaders. Revenue leaders are people who are running sales organizations inside the company, but also for consultants who want to do what we do, but want to do that with a larger, with their own customer base. We are making this available as resources. And what you do, you simply fill out this field and with it, you will get a license sent to you to use it and to make sure that once you do not break and you start not selling these level of licensing that you can keep using it. Again, you can wrap your services around it. That is absolutely fine. You can put 100 sales people on it or 200 or 300, there is no license for that. That is what we wanna make sure that we protect is that in our goodwill nobody is abusing that. That is what we are starting to prepare for you. This creates an open source model where we are providing our content, very similar to an open source world underneath an open standard and that open standard can be adopted as you'll see. It will be up to us in this market to create a great outcome for future generations. I believe the outcome for future generations of marketing, sales and customer success professional will not happen if we build it on continued proprietary standards. I believe we need to open up the world, bring everybody in and create this uniform platform. I believe that historically all sales, customer success and marketing professionals from their guts wanted to do this, they wanted to make sure they delivered a customer with the right impact. What was missing is a comprehensive full-on operating model that included marketing, sales and customer success. And at the core of that had what you may have referred to in the old days as customer centricity, but it essentially is deliver the customer the impact that they want and the recurring revenue will be the result. Clearly, to achieve recurring impact as the goal, we'll deliver as the outcome recurring revenue. This is the fundamental reason why I'm so... Or this is the reason why I'm so excited to share with you. I've always had that view I've always wanted to do this. And within the next 30 to 60 days, this dream has become a reality with hundreds and hundreds of customers already implementing this based on the books, the videos and so on. We hope that this will help you in your years to come and as a result we can provide any of services to you, but we left that all up to the open market. With that said, thank you very much. My name is Jacco van der Kooij. I'm the Founder of Winning by Design and it is my pleasure and my treat to share with you the work and the lessons we have gained over the past 10 years, thank you.

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There are plenty of sales frameworks out there, but no cohesive operating model for how recurring revenue businesses can achieve sustainable growth. Until now...

Watch to hear Jacco talk through:

- the key principles of recurring revenue that all revenue leaders should understand
- how to align the functions of Marketing, Sales, and Customer Success using one consistent open standard
- the fundamental principle of recurring impact, and what it means for how recurring revenue businesses operate

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