Here is a brief excerpt from an article written by Russell Groves, Kun Lueck, and Stefano Redaelli for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.
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The journey to outperforming your peers begins with a clear-eyed view of what matters most.
Competition is accelerating. Many attackers are now using superior execution rather than better offerings to outperform incumbents and drive growth.
To combat this pressure, incumbents and attackers alike should build and sustain best-in-class commercial capabilities to gain significant competitive advantages. In many cases, that entails adopting best practices from other industries.
The rewards can be substantial. Based on our assessment of more than 200 commercial capabilities at 200 clients, we found that businesses that were top performers—those with superior commercial capabilities—consistently deliver revenue growth about 1.9 points higher and earnings growth about 4.7 points higher than peers in the same sector (Exhibit 1).
Comparing yourself against the best
Performer leaders across sectors have one thing in common: they continuously assess their commercial capabilities not just against competitors but against global best practices to find areas where significant improvements are possible. More mature industries, such as chemicals, mining, and agriculture, constrained by production capacity and competing heavily on price, tend to focus more on operational rather than commercial excellence. Leaders have taken a page from software and IT companies, for example, which have no production constraints and therefore tend to focus more on building advanced commercial capabilities to accelerate growth and shareholder value.
While there is no single recipe for success, our research shows that in each industry, top-quartile performers share above-average strength in similar capabilities (Exhibit 2). So, while the path to success may vary by company and sector, a path does in fact exist.
Investing wisely in commercial capabilities can be difficult because what drives value tends to change over time; capabilities that provide competitive advantages today will become industry standards tomorrow. Our research shows (Exhibit 3) that the gap between the top and bottom quartiles tends to narrow. This means commercial excellence is a journey, not a destination: it requires continuous self-assessment and improvement, including agile adoption of new best practices as they emerge.
In fact, to perform at the highest level, most companies need to do more than constantly improve their commercial capabilities; they must also shift their focus and double down on new capabilities that drive differentiation. For example, top-quartile energy and materials companies used to differentiate themselves by overperforming in three areas: price and contract management, marketing enablement of sales, and channel-partner management. But our latest research shows that those companies should now focus on new capabilities, such as sales and account management and commercial support (Exhibit 4).
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Here is a direct link to the complete article.
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