Mar 17

'Growth' as a Strategy is Antiquated for B2B Software Businesses

Many companies I’ve worked with believe that growth is their strategy. Growth is an outcome. Believing it’s a strategy can lead to decisions that take you astray of the outcomes you desire.

What I’ve seen time and again is that companies set the financial plan based on assumptions of the previous year or quarter and sprinkle in some risk and some growth aspirations, and this becomes the baseline financial plan. Puts and takes go here and there, and out pops the annual budget, which becomes the plan of record (which is a spreadsheet, not a plan). In truth, growth is just how many nautical miles you do in a day toward your destination—it is not your destination.

It’s like rowing a boat feverishly in circles, trying to convince your buddies you are getting somewhere and having fun. I know you and your investors want to see growth because it’s a measure of momentum and predictability. It’s proof that whatever you’re doing is working, but it doesn’t demonstrate long-term sustainability and value. It could just as easily be evidence of luck.

The common mindset among many executives is to show investors top-line growth as quickly as possible. The belief is that this will provide more options for how to exit the business down the road. The challenge with this thinking is that no small or midsize B2B software business is ever able to grow at all costs. You need a North Star that benefits your unique customer segment and a logical path to get there to help guide the trade-offs and priorities you must make.

It’s difficult to generate meaningful, predictable growth and showcase value creation in a transaction, which might include evidence of a reduction in customer churn, a reduction in the cost of customer acquisition and service, market leadership momentum, and operational discipline, without some thoughtful strategic focus. Without a larger strategy, aspirations of growth can stall because of a lack of market fit; it can start costing too much because you are going in too many directions, it can get too difficult because you are in a segment with too many competitive barriers, or you just aren’t set up for good execution.

If you want sustainable growth, you need a sound strategic plan—and it’s not the numbers in your annual financial plan.

Having good software is glorious, but the tech industry is littered with products that were good, even great, but are no longer around. This is also why a technology roadmap is not the same thing as a sound business and GTM strategy that matches the expectations of today's digital customers.

Some companies have products that are just okay or good enough but have found a way to be compelling and enduring. What makes these good-enough products winners is that they have a business strategy that forces them to maintain focus. They have asked themselves the tough questions:

What is my destination, and how will I get there?

What customers are most important to me, and why?

What makes me so different that customers can’t live without me?

What guides decision-making and prioritization on a daily basis?

What needs to be in place for me to execute well?

They have found a way to achieve growth because they have a holistic strategy with an endgame that is the guiding force when hard decisions need to be made.