Extreme Revenue Growth by Victor Cheng: Summary & Notes

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Rated: 8/10

Available at: Amazon

ISBN: 0984183515

Related: To Sell is Human, The 1-Page Marketing Plan

Summary

A book originally recommended by Dan Martell, this is another succinct, actionable read for those interested in growing companies, particularly those with high-growth potential (ie. scalable).

The most valuable part of this book is the idea of thinking in systems, and the breakdown of those systems as they apply to “growth engines” (methods of making your company grow), hiring, product development, and more.

Notes

Introduction

Extreme Revenue Growth

  • There are three key decisions you need to make to achieve extreme revenue growth;

  • Picking the right growth opportunities to pursue, and picking the right approach for each opportunity,

    1. Managing growth by standardizing your operations, and developing business processes that can handle many more customers than you have today, and

    2. Sustaining growth by using a disciplined system for managing your growth portfolio, building your team, and maintaining accountability for results.

Part I: Creating Growth

Chapter 1: The Revenue Growth Engine

A Revenue Growth Engine Consists of Five Key Components

  1. A target customer who’s aware of his or her problem.

  2. A promise that your company makes to prospective customers.

  3. A distribution channel for reaching and transacting with the target customer.

  4. A product or service that fulfills the promise made to the customer.

  5. A sustainable competitive advantage.

Key Ideas:

  • All revenue growth starts with the target customer, who has a problem.

  • To get a customer to buy you must make them a promise that is unique, credible and compelling.

  • Distribution is critical because, without it, your prospects will never see your product.

  • Design products to be easy to sell (ie. compatible with your distribution channel) and to fulfill expectations you set with the customer.

  • The lifespan of your revenue growth engine depends on the sustainability of your competitive advantage.

Chapter 2: The Customer: The Person with the Money Makes All the Rules

  • All revenue growth opportunities start with getting to know the person with the money-the customer

  • You can’t make your customers want something they don’t want or need

  • Adjust your target customer over time to adapt to changing markets and to create new opportunities

Chapter 3: Make Customers a Unique, Compelling & Credible Promise

  • The key to driving sales is to present customers with a unique, credible promise that includes a compelling benefit.

  • There are several ways to differentiate your company from your competitors: offer the polar opposite of what the competition is offering (“zig” when others “zag”); be #1 in your industry at something, even if you have to be dead last at everything else; solve a bigger or broader problem than your competitors are accustomed to solving; or focus on a narrower customer segment than your competitors are willing to focus on.

  • A more unique, more compelling, promise only drives more sales if the promise is credible. To boost the credibility of your promise provide overwhelming proof that what you say is true through customer testimonials, product demos, free trials - and provide highly specific details to boost the credibility of your promise.

Chapter 4: Distribution: The Most Valuable Asset of All

  • Distribution is one of the most under-valued and under-utilized methods for extreme revenue growth.

  • Until you have access to a prospective customer, nothing else matters.

  • To dominate new customer acquisition in your market, lead your industry in revenues per customer. The company that makes the most per customer is the company that can afford to spend the most to get a new one.

  • To expand distribution focus on getting your distribution to work on a small scale (ie, “the repeatable unit”), document what you did right, and multiply it.

  • It’s not enough to grow fast, you need to grow fast in a way that can be duplicated and multiplied. That’s the difference between growth and sustained growth.

  • Exceptional revenue growth comes from disciplined focus on using A/B testing to generated tiny incremental improvements weekly that add up to significant growth over time.

  • To dominate 3rd party distribution, provide partners with a well honed sales process produced through A/B split testing, premium priced products, and a higher payout percentage- all of which puts more money into the distribution partner’s pocket

Chapter 5: Create Easy-to-Sell Products That Customers Love

  • The Cheng Rule of Product Development: You can’t build a product to solve a problem you don’t understand.

  • Test the effectiveness of your product development team by asking to see a list of the customers they spoke to before they came up with the current product design.

  • It’s better to complete 100% of the features needed to get one growth engine to take off than to complete 50% of the features for two growth engines.

  • The UI IS the product and should be designed before the technology.

  • The most important feature in B2B applications is the ROI report (aka. The report that proves the customer was so smart to buy your product)

  • The second most important feature in software products is the “Suggest a Feature” feature.

Chapter 6: The Sustainable Competitive Advantage

  • A sustainable competitive advantage is a “soft” or “hard” asset that’s difficult for a competitor to duplicate.

  • A soft asset might be a product development process capable of producing new product revisions in only four months, while the rest of the industry takes seven months. 

    1. Another soft asset might be a method of recruiting and interviewing that consistently attracts exceptionally gifted employees.

    2. A hard asset could be a patent on a novel product design, a manufacturing facility, or a warehouse.

  • How long you can sustain revenue growth is directly tied to your competitive advantages, and how difficult it is for a competitor to copy them. (The Amazon 6 fulfillment centres story)

  • Every revenue growth engine opportunity should: exploit a pre-existing competitive advantage, create a new competitive advantage or enhance a pre-existing advantage, or both. This is the only sure way to sustain growth over the long term.

Part II: Managing Growth

Chapter 7: The 10 Times Test

  • A system that is scalable is one that can handle enormous surge in volume or usage without falling apart. This term applies to people-powered systems as well as technology systems.

  • The key to getting a system scalable is to remove bottlenecks that slow down the performance of a system.

  • Revenue generation is a system too - a system that is also constrained by bottlenecks

  • Your entire company should be focused on anticipating, finding, and eliminating bottlenecks that constrain revenue growth

  • The 10 Times Test: if your revenues increased by 10 times overnight would your company be able to handle it or would your systems “break”?

Chapter 8: Standardize Your Operations

  • Fast revenue growth cannot happen without scalable processes in place.

  • Having documented processes in place makes it easy to identify and fix root problems that constrain your revenue growth.

  • The different between the entrepreneurial CEO and the “professional” CEO is knowledge of proven processes.

Chapter 9: Every Problem is a Systems Problem

  • The key to managing extreme revenue growth is relying on documented, repeated, scalable systems.

  • The great CEOs will manage at a high level but occasionally take deep dives into the minutiae to flush out a problem.

  • Every problem you think you have in your business is actually the symptom of an underlying systemic problem or flawed process.

  • Every “problem” that occurs twice is not really a problem at all; it’s a symptom of a flawed process or system.

  • The mother of all problems is the lack of documented, repeatable processes that are continually improved and refined.

  • Extreme growth magnifies all problems and places great urgency on solving the little problems before they grow into big problems.

Chapter 10: Managing the Portfolio of Growth Engines

  • The key decisions that should be continually revisited are:

  • What projects should I approve and fund?

    1. What projects should I stop because the ROI is no longer attractive?

    2. In what order should projects be pursued, given resource constraints?

    3. What are the dependencies between projects? (Do I need the free cash flow produced by growth engine A to fund growth engine B?), and does this impact the other three types of decisions?

Key Ideas:

  • There are three roles for the CEO that can not, and should not, be delegated to others:

  • Managing the portfolio of growth engines

    1. Recruiting, allocating, and managing talent

    2. Keeping your team accountable for results

Chapter 11: Managing the Growth Portfolio

  • Managing your portfolio of revenue growth engine opportunities is an active, highly time consuming process, and most CEOs don’t devote enough time to it.

  • A new growth engine opportunity can be created by modifying any of its 5 key components: the target customer, the customer promise, the distribution channel, the product, and the competitive advantage.

  • Most high-tech and Internet companies mistakenly over-focus on the importance of the product at the expense of the other components of a growth engine.

  • The key to managing a growth engine portfolio is not to have as many growth engines as possible, but to effectively deliver on your growth objectives with the simplest possible portfolio.

  • A key to knowing when to remove a failing or mediocre performing revenue growth engine is to establish a minimum return on investment requirement for your entire portfolio.

Chapter 12: Talent: The Rocket Fuel for Sustained Growth

  • The key to assembling the right executive team starts by knowing yourself. Stick to your exceptional talents, and hire others to cover your weaknesses.

  • “B” players focus on completing assigned activities, “A” players focus on delivering results.

  • Consider firing the bottom 10 to 20% of your employees every year to continually improve the overall quality of your team.

  • Hiring Step #1: Define results you want from a role before recruiting for it. Write a “result description” instead of a “job description”.

  • Hiring Step #2: Identify the key skills and knowledge areas needed to produce each result you require.

  • Hiring Step #3: Don’t hire the best candidate (ie. the least worst candidate), hire the candidate who is 100% qualified.

  • Hiring Step #4: Look for specific proof of skills and knowledge areas needed to deliver the outcomes you desire.

  • Hiring Step #5: Hire people with upside potential.

Chapter 13: Accountability: The Breakfast of Champions

  • A CEO must hold people accountable for results, not activities.

  • Use a four-step “Accountability System” to ensure that the right things are getting done on time.

  • Step 1: Define the revenue goal for the company as a whole.

  • Step 2: Identify the revenue contribution expected from each revenue growth engine.

  • Step 3: Assign one person per revenue source to deliver the expected revenues.

  • Step 4: Use a monthly operations review to enforce accountability.

Part IV: How to Get Started

Chapter 14: 3 Strategies to Jump Start Growth

  • The most common problems my new clients suffer from without realizing it stem from the issues related to “managing growth” (process standardization, the 10 times test, and systems).

  • The second most commonly overlooked bottleneck to growth comes from people-related problems, notably, a lack of disciplined processes or systems for recruiting people, managing them, and holding them accountable for results.

  • There are three strategies for jump starting growth for fast, immediate surges in revenues.

  • Strategy #1: Think Bigger.

    1. Strategy #2: Isolate, focus on, and fix the biggest revenue growth bottleneck.

    2. Strategy #3: Start by exploiting the under-utilized asset.