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Theoretical Definition of Revenue Operations or Revops Using The Integrative Devices Framework

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Theoretical Definition of Revenue Operations or Revops Using The Integrative Devices Framework

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Tariq
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Table of Contents

1. Introduction ….1

2. Theoretical Drivers of Revenue Operations ….4

3. Conceptual Framework ….9

4. Methodology …13

5. References …14

6. Appendix …19
1. Introduction

1.1. The Rise of Revenue Operation in Business-to-Business (B2B) Technology Firms

The Fourth Industrial Revolution, characterised by the fusion of technology, has blurred the lines
between the physical and virtual worlds (Schwab, 2017). This technological revolution built on a
digital infrastructure has given relatively small actions and investments an impact disproportionate
to their size, forcing executives to rethink their business strategy and adopt new management
practices. (Hagel, Brown and Davison, 2008). Business model disruptions brought forth by
technological changes have transformed the software industry, where the business model has
moved from a perpetual licensing model to a subscription model. These companies must create
value across their customer lifecycle to improve market performance.
This customer lifecycle in B2B firms has marketing take the customer from being unaware of the
firms’ brand and products to awareness and interest. Post this; sales builds on this interest creating
consideration and purchase intent. Finally, customer success ensures product usage and converts
the customer into an advocate for the firm and its products to complete the customer journey. The
role of customer success was earlier handled by sales; however, given the short time horizon in
which customers need to experience value from their purchase, this specialised function is called
Customer Success (Zoltner, Sinha and Lorimer, 2019).

Figure 1 illustrates a typical customer lifecycle and the division of labour between sales, marketing,
and customer success functions.

This customer lifecycle is supported by a go-to-market strategy consisting of highly differentiated


functional and operational tasks across sales, marketing, and customer success.

1
Figure 2 illustrates typical highly differentiated functional and operational tasks across the sales,
marketing, and customer success functions.

These operational tasks can be merged under a separate department to help integrate these highly
differentiated functions and tasks.

Revenue Operations, or RevOps, adopted by fast-growing technology companies, integrates


operational tasks across the Marketing, Sales, and Customer Success functions. This integration
allows marketing, sales, and customer success to focus on highly differentiated functional tasks
while the revenue operations team creates an integrated operational task layer. This outcome is
similar to an integrative device (Lawrence and Lorsch, 1967). RevOps could be an effective
coordinator between marketing, sales and customer success by balancing the differences in each
function's time orientation, goal orientation and interpersonal orientation.

Gartner, an advisory and research firm, predicts that by the year 2025, 75% of the highest-growth
companies in the world will deploy a Revenue Operations or RevOps model (Gartner, 2021).
Gartner also has noticed that companies with revenue around USD 50 Million, like Bioconnect and

2
Clari, have incorporated the Revenue Operations model, as well as companies with revenue in
excess of USD 1 Billion, like Paypal and Workday; this shows the broad applicability of the concept
within the industry.

The Boston Consulting Group found that amongst technology companies, software-as-a-service
(SaaS) providers have already reported a substantial impact of Revops (Fabbri et al., 2020),
including

● 100% to 200% increases in digital marketing ROI


● 10% to 20% increases in sales productivity
● 10% increases in lead acceptance
● 15% to 20% increases in internal customer satisfaction
● 30% reductions in Go-to-market (GTM) expenses

SiriusDecisions, a Forrester Research company also noted that organizations that maintain focus on
revenue function alignment achieve up to 19% faster revenue growth and up to 15% higher
profitability than other companies (Therrien and Cunningham, 2019).

1.2. Research Aim

Given this impact, focus, and adoption of RevOps in the B2B technology industry and the economic
value attached to its role as an integrative device across the revenue functions, it mandates a
thorough investigation.

This research will investigate whether Revenue Operations or RevOps fulfils the conditions of an
integrative device between marketing, sales, and customer success and then measure its impact
on collaboration and business performance. Findings from this research should help functional
managers, current and future RevOps professionals, and senior management of high-growth
technology companies understand the role of RevOps in integrating the marketing, sales, and
customer success functions and their impact on business outcomes. Researchers can use the
outcomes of this research to further the understanding of integrative devices and how these
devices have a bearing on collaboration leading to business performance in the B2B environment .

3
2. Theoretical Drivers of Revenue Operations

2.1. Orientation Towards The Market And Interfunctional Coordination

Most organisations adopt market orientation to improve their market performance by creating a
sustainable competitive advantage to deliver customer value. Market orientation is defined as a
culture that creates the necessary behaviour to deliver superior value for customers and superior
performance for the business (Kohli and Jaworski, 1990). The three behavioural components that
define market orientation are customer orientation, competitor orientation and interfunctional
coordination (Slater and Narver, 1990). While customer orientation and competitor orientation
focus on the acquisition and dissemination of customer and competitor information throughout
the organisation, interfunctional coordination deals with the concentrated effort of all business
units in using the information acquired and acting upon it to create superior customer value.
Companies with high market orientation can also create entry barriers in their markets. (Slater and
Narvar, 1990). Market orientation has been seen as a source of competitiveness across
manufacturing (Aldas-Manzano, Kuster and Vila, 2005), services (Hughes, 2002) and even
non-profit organisations (Gainer and Padanyi, 2005). Market orientation equally applies to all
organisations, irrespective of their size and scope (Liao et al., 2011). This broad applicability means
market orientation can be applied to business-to-consumer (B2C) and business-to-business (B2B)
firms. While B2B firms are less market-oriented than B2C firms (Gounaris and Avlonitis, 2001), the
impact on business performance due to market orientation is higher in B2B than in B2C firms
(Avlonitis and Gounaris, 1997). Hence, fast-growing B2B companies must adopt market
orientation to improve and sustain their business performance.

To benefit from market orientations, organisations must ensure that multiple functions work
together to create customer value. Interdepartmental connectedness and conflict are antecedents
to implementing market orientation (Kirca, Jayachandran and Bearden, 2005). Interfunctional
coordination has also shown a positive correlation with tasks related to customer success
(Tomaskova, 2018). Given that customers are the most important stakeholder for any organisation,
it is prudent to understand whether interfunctional coordination exists between relevant functions
that interface with customers.

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Marketing, sales, and customer service are the most direct links between a company and its
customers (Ryals and Knox, 2001), even though the complexity of the customer's buying behaviour
has enabled any function within an organisation to create value for the customer (Porter, 1985).
The effective interfacing of sales, marketing and customer service is pivotal in acquiring,
disseminating, and using market information to anticipate customer needs and maintain strong
customer relationships (Kohli and Jawosrky, 1990).

Marketing's interdependencies with other business functions must be systematically incorporated


into a business's marketing strategy (Wind and Robertson 1983). It is crucial for marketing and
sales to function in line with the expectations of market orientation, given their large overlap of
resources (Guenzi and Troilo, 2007) and their coordinating role in the implicit and explicit
connections between the customer and the company (Hughes, Le Bon and Malshe, 2012).

2.2. Role and Interfacing of Sales and Marketing

In most organisations, the sales function is responsible for the actual sale by encouraging
customers to acquire new or related products or services based on their needs. The shift from a
selling orientation to a customer orientation has given rise to the relationship selling approach
(Schurr, 1987) that involves securing, developing, and maintaining long-term relationships with
profitable customers (Johnston & Marshall, 2003). In most B2B firms with large and powerful sales
teams, there has been an emphasis on a more market-oriented perspective (Goetz, Hoelter and
Krafft, 2013). The sales function must also be valued as a critical market intelligence source
(LeMeunier-Fitzhugh and Piercy, 2006).

The marketing function supplements sales by focusing its resources and efforts on creating
customer value, accumulating and distributing market intelligence within the firm, and anticipating
and addressing customer needs (Homburg, Workman and Krohmer, 1999).
These marketing and sales functions are considered separate departments in most B2B
organisations, reflecting the specialisation required by each function to operate in increasingly
competitive and demanding business environments (Dewsnap and Jobber, 2000; Vaid, Ahearne
and Krause, 2020). These findings indicate that while complementary, the cooperation between
marketing and sales is imperative for business performance.

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Research shows that collaboration between marketing and sales has a positive and significant
effect on business performance (LeMeunier-Fitzhugh and Piercy, 2007). A firm's business
performance greatly depends on how these two functions work together (Cespedes, 1993; Guenzi
& Troilo, 2007; Smith, Gopalakrishna & Chatterjee, 2006) and how smooth, well-coordinated, and
conflict-free their interface stays (Dewsnap & Jobber, 2000). Strong ties between marketing and
sales allow for superior value creation and enhanced performance (Huges, Le Bon and Malshe,
2012). The involvement of the sales organisation by the marketing department during all stages of
the marketing strategy-making (MSM) process leads to successful strategy development and
implementation (Malshe and Sohi, 2009). In summary, the collaboration between marketing and
sales is beneficial across strategy design and implementation, leading to superior business
performance.

This collaboration can take the form of close interaction or integration of the two functions.
Marketing and sales representatives are expected to interact closely and jointly find solutions to
customer's needs to increase customer acquisition and retention (Johnston and Marshall, 2005).
Highly integrated marketing and sales departments will better adapt and react to market changes
by formulating and implementing effective strategic responses (Lyus, Rogers and Simms, 2010).

Over the last few decades, research has uncovered the benefit of having these two functions work
closely. It has been observed that when marketing and sales work well together, organisations see
substantial improvements in key performance metrics like shorter sales cycles, lower market entry
costs and lower costs of sales (Kotler, Rackham and Krishnaswamy, 2006). Higher the alignment
between marketing and sales, we have seen a positive impact on metrics like the number of
qualified leads, lead conversion rates, new account acquisition, sales forecasting accuracy,
customer retention rates, average account billing size, revenue growth and achievement in sales
quota achievement (Peterson, Gordon and Krishnan, 2015).

Like taxes and death, marketing-sales conflicts are inevitable. Many business-to-business (B2B)
firms find this collaboration to be plagued by problems such as but not limited to misaligned
systems, processes, and compensation plans, as well as sub-optimal organisational structures
(Malshe & Biemans, 2014).

6
In complicated or quickly changing situations, there are good reasons to move marketing and sales
into an integrated relationship across the buying funnel; however, there are severe penalties
during the handoff between Marketing and Sales (Kotler, Rackham and Krishnaswamy, 2006). The
marketing and sales relationship, whilst strongly interdependent, is reported as neither
collaborative nor harmonious (Dewsnap and Jobber, 2000). The marketing and sales interface in
B2B firms experiences multiple dysfunctions across communication paucity, lack of collaboration,
and overt conflict (Malshe, Johnson and Viio, 2017).

The paradoxical thought worlds of marketing and sales that are characterised by different and
opposing customer orientation, goal orientation and time orientation are bad for the cooperation
quality between marketing and sales but good for the market performance of the business unit
(Homburg and Jensen, 2007).

The contradictory mindset of marketing and sales personnel represents the competing tension
within the interface and manifests across different organisational levels (Malshe and Krush, 2020).
The varying self-interests across senior, middle, and frontline personnel of the marketing and sales
function foment unique impediments to marketing strategy (Malshe, Hughes, Good et al.).

Research has explored solutions to address the marketing-sales interface issues. These include
appointing positions that integrate the marketing and sales function, splitting the marketing
function to improve coordination with sales, setting shared targets and rewards, and combining
metrics (Kotler, Rackham and Krishnaswamy, 2006). Research also suggests an integrative
framework across communication, structure, process artefacts, team visibility, social and
philosophical linkages to improve the marketing and sales connection strength (Malshe, 2011).
These integration approaches tend to be more challenging to implement given the marketing and
sales relationship’s paradoxical nature and the highly differentiated nature of each function.

2.3. Need for an Integrative Device

While it is crucial for marketing and sales to be highly differentiated and integrated as functions,
the degree of differentiation between marketing and sales observed is inversely proportional to
their degree of integration. In this case, integration is defined as the process of achieving unity of
effort among the departments to achieve organisational tasks and not a structural integration.

7
Seminal research has shown that highly effective integrative devices in the form of cross-functional
coordinating departments, teams and task forces enabled organisations to attain this antagonistic
state of being highly differentiated and highly integrated. The effectiveness of these integrative
devices is measured by their intermediate position, influence derived from technical competence,
rewards related to total performance, influence at the requisite level and throughout the
organisation, and modes of conflict resolution (Lawrence and Lorsch, 1967).

Integrative devices such as Trade Marketing and Category Management have positively affected
marketing and sales collaboration in B2C firms (Dewsnap and Jobber, 2009). Interfunctional
integration embraces the notions of either interaction and collaboration or both (Kahn, 1996).
Amongst these, collaboration has been the strongest indicator of performance (Kahn and
McDonough, 1997; Kahn and Mentzer, 1998). These interfunctional integration constructs are
similar to the construct of interfunctional coordination in market orientation and have a similar
impact on business performance.

While there is limited research on the effectiveness and practicality of such integrative devices in
the B2C context, there is no known research on the role of integrative devices in the B2B context.
Hence, it merits investigation whether Revenue Operations as an integrative device across
marketing and sales in B2B firms could help address some of the interface's dysfunctional
challenges, improve interfunctional coordination and market orientation, and impact business
performance.

8
3. Conceptual Framework

In a comparative study of six organisations in the same industrial environment, it was noted that
subsystems differentiated from each other in terms of formal structure, goal orientation, time
orientation and interpersonal orientation. This degree of differentiation was inversely related to
the degree of integration required (Lawrence and Lorsch, 1967). Various studies around the
thought worlds of sales and marketing have highlighted the difference in the time orientation
between sales, which has a short-term orientation, while marketing has a long-term orientation.
The same studies point out that from a goal-orientation perspective, marketing focuses on
products, whereas sales focuses on customer accounts (Cespedes 1995; Lorge 1999). The
members of Sales and Marketing tend to have similar interpersonal skills and hence would have a
similar socially oriented interpersonal style (Homburg and Jensen, 2007; Lawrence and Lorsch,
1967). These thought world differences in orientation positively affected overall market
performance, while any difference in competence negatively affected performance (Homburg and
Jensen, 2007). Research indicates that when Sales and Marketing are fully integrated, both
redesign the relationship to share structure, systems and rewards. They also develop and
implement shared metrics. This integration is difficult as one needs a change the culture to
support integration. Some of the best examples of integration were found when there was shared
responsibility, disciplined planning, metrics-driven, tied rewards and results and were managed
through systems and processes. Integrated sales and marketing lead to better customer
experiences and positively affects the top line and bottom line (Kotler, Rackham and
Krishnaswamy, 2006).

Integrative devices tend to emerge in environments where there is a need for integration between
the differentiated functions of sales and marketing. These effective integrative devices were
determinants of the structure and orientation of the integrative subsystems; influence attributed
to the integrative subsystem, the perceived basis of rewards for integrators, total influence in the
organisational system, locus of influence in subsystems and modes of conflict resolution. These six
determinants increase overall integration and differentiation, leading to high performance
(Lawrence and Lorsch, 1967).

In an exploratory study of sales-marketing Integrative devices such as trade marketing and


category management, it was observed that effective integrative devices led to higher levels of

9
collaboration and business performance (Dewsnap & Jobber, 2009). This effective integration was
explained by organisational factors like structure, senior management and operating characteristics
(Dewsnap & Jobber, 2000).

Given the importance of the integration of sales and marketing, the most significant impact on
business performance is the effects of collaboration between sales and marketing
(LeMeunier-Fitzhugh and Piercy, 2007). Hence, if an integrative device can improve collaboration, it
should improve business performance.

Revenue Operations or RevOps integrates the operations subsystem across sales, marketing and
customer success. In some organisations, the customer success subsystem is part of the sales
subsystem; however, for better understanding, these are kept separate in this research. This
understanding can be confirmed during the research interviews and will help define Revenue
Operations or RevOps.

For Revenue Operations or RevOps to be identified as an integrative device, it must fulfil the six
determinant conditions of an integrative device (Lawrence and Lorsch, 1967). These conditions are
stated below.

3.1 Structure and Orientation of Revenue Operations

● An integrative device needs to be equally oriented to the time orientation of its subsystems
(Sherif, 1958; Seiler, 1963). Hence, we must understand if RevOps is oriented equally
towards long-term (marketing) and short-term problems (sales and customer success).
● An integrative device needs to be equally oriented to the goals of its subsystems (Sherif,
1958; Seiler, 1963). Hence, we must understand if RevOps is equally oriented toward sales,
marketing and customer success goals.
● An integrative device needs more structure for task-oriented subsystems and less for
complex, uncertain tasks. In the case of operations, the integrative device could have more
structure, given the task-oriented nature of the function (Sherif, 1958; Seiler, 1963). Hence,
we must understand if RevOps is more structured across the subsystems.
● An integrative device in a subsystem with environments of moderate certainty would have
more people in social interpersonal orientations, and subsystems with either high or low

10
certainty would have members with more task-oriented interpersonal relationships (Sherif,
1958; Seiler, 1963). In the case of sales, marketing and customer success operations, the
environment is moderately certain. Hence, we must understand if RevOps is in social
interpersonal orientations with people in the sales, marketing and customer success
subsystems.

3.2 Influence on Subsystems

● An integrative device is perceived to be legitimate if it could initiate activities for the basic
subsystems. This legitimacy in terms of status could be measured in terms of the influence
attributed to it (Seiler, 1963). Hence, we must understand if RevOps can initiate activities
for the basic subsystems of sales, marketing and customer success.
● An integrative device would exercise influence over the subsystems basis professional
expertise in an environment with complex, unprogrammed problems involving technical
issues (Blau and Scott, 1962). Hence, we must understand if RevOps's influence on its
subsystems stems from professional competence.

3.3 Perceived basis of Rewards for Integrators

● An integrative device is perceived to be rewarded for the performance of the entire set of
activities they are integrating, i.e. rewarded for the achievement with others of a
super-ordinate goal (Zander and Wolfe, 1964). Hence, we must understand if RevOps is
perceived to be rewarded for all activities across the sales, marketing and customer success
subsystems.

3.4 Total Influence in the Organizational System

● An integrative device that feels that they have a high influence on the organisation would
be likely to think that its point of view was being given adequate weight by other groups
and, therefore, would not feel hostility toward the members of other subsystems (Smith
and Ari, 1964; Horwitz, 1964). Hence, we must understand if RevOps has a high total
amount of perceived influence in the organisation.

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3.5 Locus of Influence in Subsystems

● An integrative device has the influence at levels of the organisation to resolve


interdepartmental conflicts at the level in each subsystem where the most knowledge
about sub-environmental conditions is available (Smith and Ari, 1964; Tannenbaum, 1962).
Hence, we must understand if RevOps can exercise a sufficient degree of influence to
resolve interdepartmental conflicts at the first-line and middle management levels

3.6 Modes of Conflict Resolution

● An integrative device uses conflict resolution modes of confrontation or problem-solving to


achieve effective integration (Blake and Mouton, 1964). Hence, we must understand if
RevOps achieve conflict resolution by either confrontation or problem-solving across
members of its subsystems.

The conceptual framework basis of the above determinants from existing research is presented in
Figure 3

To understand the role of Revenue Operations or RevOps in integrating the sales, marketing and
customer success functions, we will first have to confirm our understanding of RevOps, and then
check if it adheres to the determinants of an integrative device leading to better collaboration and
business performance.

12
4. Methodology

To explore whether Revenue Operations or RevOps is an integrative device between sales and
marketing that improves collaboration and business performance, we can adopt a qualitative
research approach. The design for the same will be confirmatory to confirm that RevOps adheres
to the six determinants of integrative devices as per the model defined by Lawrence and Lorsch
(1967) and part exploratory to gather insights on how these determinants apply to RevOps in the
current business environment given existing theory and research is limited (Churchill and
Iacobucci, 2005). This will be done using semi-structured interviews with Revenue Operations
professionals until we see patterns being observed confirming or challenging the hypothesis on
whether RevOps is an integrative device.

13
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6. Appendix: Semi-Structured Interview Guide

General Can you tell me about your role?

Can you tell me about your company?

Determinants How would you define RevOps?

Why do you think RevOps is needed? What is the problem it solves?

How is RevOps deployed in your organisation? Team Structure?

Who does RevOps report into?

Which functions does RevOps work with? Internal Stakeholders?

Concepts Structure and Orientation of Revenue Operations

Do you work on long-term projects? Examples

Do you work on short-term projects? Examples

Do you align with the goals of the sales organisation? Examples

Do you align with the goals of the marketing organisation? Examples

Do you align with the goals of the customer success organisation? Examples

Is your organisation structured? How

Do you interact with the members of the sales team? Nature

Do you interact with the members of the marketing team? Nature

Do you interact with the members of the customer success team? Nature

Influence on Subsystems

Do you work in a proactive or reactive way?

Do you initiate tasks for various teams?

Do you feel you can influence various teams? Basis

Perceived basis of Rewards for Integrators

What are the metrics you are measured on?

Do you have a bonus structure? What is that based on?

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Total Influence in the organisation system

Other than the revenue functions, who else do you work closely with?

Do you run projects with other functions?

To what level do you work across other functions?

Do you feel you have a certain level of influence across other functions?

Locus of Influence in subsystems

Do you resolve issues across functions?

Do you make decisions to resolve issues across functions?

Modes of Conflict Resolution

How do you go about conflict resolution?

While resolving issues, do you use confrontation as a method?

While resolving issues, do you use problem-solving as a method?

Consequence What is the impact of your work as a RevOps professional on the overall
performance of the organisation? How is this impact achieved?

How does your work help internal stakeholders across Sales, Marketing, and
CS?

How does your work help other stakeholders?

Does your work improve the alignment of sales, marketing and customer
success? Can you explain how?

Does your work improve collaboration across sales, marketing and customer
success? Can you explain how?

Does your work help integrate sales, marketing and customer success? Can
you explain how?

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