Executive Summary
Growth plans are necessarily built on assumptions. Financial assumptions tend to be visible, quantifiable and challenged extensively. Assumptions about clients and markets can be harder to substantiate, even though they may ultimately determine whether the plan succeeds. One of marketing’s most important strategic contributions should be to bring market and client understanding into these decisions, helping senior management challenge the assumptions behind growth before significant investment is committed.
The assumptions behind growth
A growth plan can become remarkably precise.
Revenue is forecast by year. Costs, margins and headcount are modelled. Investment requirements are established and different scenarios tested. By the time the plan reaches an executive committee or board, considerable work has gone into establishing whether the numbers add up.
But those numbers depend on another set of assumptions.
We think there are enough clients with the problem we have identified. We think they regard it as sufficiently important to solve. We think our proposition is better than the alternatives in ways they will value. We think they will pay what we intend to charge. And we think we can reach them, persuade them to buy and do so at broadly the rate assumed in the plan.
Any one of those assumptions can be wrong while the financial model built on them remains perfectly coherent.
This is particularly important in financial services, where establishing the existence and scale of a problem does not necessarily establish the size of the commercial opportunity.
There may be a large theoretical market and compelling evidence of inefficiency, cost or unmet need. The analysis may be entirely valid. The mistake is in assuming that some proportion of the problem can simply be converted into revenue.
The commercial case needs to establish something more.
What has to be true?
One of the most useful questions senior management can ask of a growth plan is simply: what has to be true for this to work?
Perhaps clients need to regard the problem as a higher priority than they currently do. They may need to change an established process or provider. The proposition may need to command a particular price to support the economics. Sales cycles may need to be shorter than experience suggests, or a relatively small sales team may need to win a significant proportion of a specialist market.
None of those assumptions is necessarily unreasonable. But they should be visible and understood.
Businesses naturally accumulate evidence in favour of an opportunity as they investigate it. Client conversations confirm that the problem exists. Industry research establishes its scale. Competitor activity suggests there is demand. Early prospects respond positively to the proposition.
All of that is useful but it is not the same as establishing the commercial assumptions required for the business case to work.
A prospective client saying that a problem matters is not necessarily evidence that they will pay to solve it. A large market does not establish that a particular business can access it economically. A positive response to a proposition does not tell you how quickly clients will adopt it.
The purpose of challenging these assumptions is not to find reasons not to invest. It is to understand which assumptions are fundamental to the commercial case and how well they can be supported.
Look outside the business
Some of the hardest assumptions concern what happens outside the organisation.
How will clients behave? What do they value sufficiently to pay for? What might cause them to change? How will competitors respond? Which parts of the market are genuinely accessible? What could prevent adoption even if the proposition itself is strong?
These are marketing questions, although not necessarily in the way marketing is typically understood.
They have little to do with content, campaigns or communications. They are questions about markets, clients, competition and demand. And because the answers influence where the business invests, what it builds and how it expects to grow, they are also commercial questions.
Marketing should therefore bring something distinctive to the discussion: an informed external view of the market and the client. That doesn’t mean marketing owns the decision. Sales, product and finance will all bring different perspectives, and the quality of the decision should benefit from the tension between them.
At C-suite level however, I would expect the marketing contribution to extend beyond managing the function. A CMO should understand the market well enough to challenge what the organisation believes about its clients and its opportunities.
That territory inevitably overlaps with other functions. A CMO does not own the client because they represent marketing, any more than a CFO owns every decision involving money.
Nor does the title confer the right to influence those decisions. That has to be earned through the quality of the evidence, judgement and commercial understanding the CMO brings to them.
The important issue for senior management is therefore not which function owns these questions. It is whether the assumptions are being challenged from the outside in before they become commitments.
Challenge before commitment
Assumptions become progressively more difficult to challenge once the organisation has committed to them.
A proposition has been developed. People have been hired. Revenue targets have been agreed. The board or investors have been given expectations. Sales has begun building pipeline. Questioning the original assumptions now has consequences.
It is much better to discover before making a substantial investment that the accessible market is smaller than expected, that clients value something different or that adoption is likely to take longer.
That information may make the original opportunity less attractive. It may also make the eventual business considerably stronger.
A smaller but genuinely addressable market is more useful than a very large theoretical one. A proposition built around something clients value sufficiently to pay for is more valuable than one designed around an internally compelling view of the problem. A realistic view of adoption is a better basis for investment than a growth target reverse-engineered into the pipeline required to achieve it.
Sometimes the result will be a decision not to proceed.
That is not a failure of the process. Avoiding investment on the basis of better information is itself a commercial return.
Better questions before better answers
None of this removes uncertainty from a growth decision. Markets change, competitors respond and clients do not always behave as research suggests. Senior management will still have to make decisions with incomplete information.
The objective is not certainty. It is to know which assumptions matter most, what evidence supports them and what happens if they prove wrong.
This is where the argument from my first Executive Insight becomes practical. Involving marketing earlier is not valuable because marketing should have greater influence. It matters because the business gains better market and client understanding before important commercial assumptions become commitments.
The contribution is not another forecast. It is a better, more robust challenge of the assumptions behind the forecast.
A growth plan should be tested on more than whether the numbers add up. The spreadsheet tells you what happens if the assumptions are correct.
Senior management also needs to ask whether they are.
Executive Takeaways
- Growth plans depend on assumptions about clients and markets as much as financial assumptions.
- Quantifying a problem does not establish the size of the commercially accessible opportunity.
- Senior management should identify the assumptions that have to be true for a growth plan to work and understand the evidence supporting them.
- Questions about markets, clients, competition and demand are marketing questions, but their consequences are commercial.
- Senior marketing leadership should bring market understanding and commercial judgement to those questions alongside sales, product and finance.
- Challenging a weak assumption before investment is considerably less expensive than discovering it was wrong afterwards.
Questions for Executive Teams
- What has to be true for our growth plan to work?
- Which of those assumptions are supported by evidence and which are principally judgement?
- Have we distinguished the scale of the problem from the opportunity we can realistically access?
- What are we assuming clients will do differently from what they do today?
- Which assumption would have the greatest impact on the investment case if it proved wrong?
- Who is challenging our view of the market before significant investment is committed?
