example business growth plan

For example, a business might include different or increasingly enticing incentives that come with one, five, and 10 referrals as opposed to a fixed incentive for each referral. A company will often leverage this strategy to encourage users to bring on a volume of friends and family that suits its specific business goals.

The strategy also adds an engaging element to the referral process. When done right, milestone referrals are simple to share with relatively straightforward objectives and enticing, tangible products as rewards.

3. Word-of-Mouth

Word-of-mouth is organic and effective. Recommendations from friends and family are some of the most powerful incentives for consumers to purchase or try a product or service.

The secret of word-of-mouth’s effectiveness lies in a deeply rooted psychological bias all people have — we subconsciously believe the majority knows better.

Social proof is central to most successful sales copywriting and broader content marketing efforts. That's why businesses draw so much attention to their online reputations.

They know in today's customer-driven world — one where communication methods change and information is available to all — a single negative blog post or tweet can compromise an entire marketing effort.

Pete Blackshaw , the father of digital word-of-mouth growth, says, "satisfied customers tell three friends; angry customers tell 3,000."

The key with word-of-mouth is to focus on a positive user experience. You need to grow a base of satisfied customers and sustain the wave of loyal feedback that comes with it.

With this method, you have to focus on delivering a spectacular user experience, and users will spread the word for you.

4. The "When They Zig, We Zag" Approach

Sometimes the best growth strategy a company can employ is standing out — offering a unique experience that sets it apart from other businesses in its space. When monotony defines an industry, the company that breaks it often finds an edge.

Say your company developed an app for transitioning playlists between music streaming apps. Assume you have a few competitors who all generate revenue through ads and paid subscriptions — both of which frustrate users.

In that case, you might be best off trying to shed some of the baggage that customers run into trouble with when using your competitors' programs. If your service is paid, you could consider offering a free trial of an ad-free experience — right off the bat.

The point here is that there's often a lot of value and opportunity in differentiating yourself. If you can "zig when they zag", you can capture consumers' attention and capitalize on their shifting interests.

5. In-Person Outreach

It might be a while before this particular approach can be employed again, but it's effective enough to warrant a mention. Sometimes, adding a human element to your growth strategy can help set things in motion for your business.

Prospects are often receptive to a personal approach — and there's nothing more personal than immediate, face-to-face interactions. Putting boots on the ground and personally interfacing with potential customers can be a great way to get your business the traction it needs to get going.

This could mean hosting or sponsoring events, attending conferences relevant to your space, hiring brand ambassadors, or any other way to directly and strategically reach out to your target demographic in person.

6. Market Penetration

Competition is a necessary part of business. Imagine that two companies in the same industry are targeting the same consumers. Typically, whatever customers Business A has, Business B does not. Market penetration is a strategy that builds off of this tug-of-war.

Market penetration increases the market share — the percentage of total sales in an industry generated by a company — of a product within a given industry. Coca-Cola, the most popular carbonated beverage in the United States, has a 42.8% market share. If competitors like Pepsi and Sprite were looking to increase market penetration, they would need to increase market share. This increase would imply that they are acquiring customers that were previously buying Coca-Cola or other carbonated beverage brands.

While lowering prices and advertising are two costly yet effective tactics to increase market share, they are part of a series of methods businesses can use for overall sales and customer retention.

7. Development

If a company feels as if they have plateaued and its current market no longer has room for growth, it might switch strategies from market penetration to market development. While market penetration focuses on a company and its current market, market development strategies lead businesses to tap into a new one.

Companies can decide to manufacture new products or find an innovative use for their project. Take Uber. Although few would say that the rideshare company has plateaued, six years after its launch in 2009, Uber launched UberEats, its online food ordering, and delivery platform. The company already had drivers set to take passengers to their destinations. Uber expanded their idea and has become one of the biggest names in the food delivery industry.

8. Product Development

For growth, many businesses need to introduce something new. Product development — the creation of a new product or the enhancement of an existing one — allows companies to attract new customers and retain existing ones.

Online fast-fashion retailers are an example of this. A company like ASOS built its brand off of clothing. To appeal to a bigger customer base, it has since added face and body products, a collection made up of ASOS products and other popular brands. If an interested customer prefers to shop for their clothes, makeup, and skincare products at once, the brand now serves as a big draw.

9. Growth Alliances

Growth alliances are strategic collaborations between companies. They further the growth goals of the involved parties. Take JCPenney and Sephora. For Sephora, it can’t hurt for the makeup retailer to have more stores across the country. JCPenney, however, needed to keep up with powerhouses like Macy’s and its fully-fledged makeup section.

In 2006, Sephora began opening stores inside JCPenney. As of 2022, Sephora Inside JCPenney is now in over 574 stores. Simultaneously, JCPenney now carries a selection of makeup to rival competitors.

10. Acquisitions

Companies can use an acquisition strategy to promote growth. By acquiring other businesses, companies expand their operations through creating new products or expanding into a new industry. One of the more obvious ideas for growth, this strategy offers significant benefits to companies. They allow for faster growth, access to more customers, lower business risk, and more.

Founded in 1837, Procter & Gamble is a consumer goods company known for its acquisitions. It initially started in soaps and candles but currently has 65 acquired companies that have allowed it to expand into different markets. The list includes Pampers, Tide, Bounty, Tampax, Old Spice, and more. Although its sales dipped between 2016-2019, Procter & Gamble’s net sales for 2021 were $76 billion, its best year within the last decade.

11. Organic Growth

As mentioned previously, organic growth is the most ideal business growth strategy. It could look like focusing on SEO, developing engaging content, or prioritizing advertisements. Instead of focusing on external growth, organic growth is a sustainable strategy that promotes long-term success.

12. Leverage Social Media

Having a strong social media presence can be invaluable to marketing and business growth. Be sure to establish brand pages on all social media platforms like Instagram, Facebook, Pinterest, TikTok, Twitter, etc. Social media can help you increase engagement with your target audience and make it easier for potential customers to find your brand. It’s also great for word-of-mouth promotion as existing customers will likely share your content with their network.

13. Provide Excellent Customer Service

It can be tempting to focus on acquiring new customers, but maintaining loyalty with your existing customers is just as important. Providing an excellent customer service experience ensures that you’ll continue to keep the customers you have, and there’s a good chance you’ll reap some referrals too.

The Key to Growing Your Business

Controlled, sustainable growth is the key to successful businesses. Industries are constantly changing, and it is the responsibility of companies to adapt to these changes.

Successful companies plan for growth. They work for it. They earn it. So what's your plan?

Editor's note: This post was originally published in March 2020 and has been updated for comprehensiveness.

Don't forget to share this post!

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Write a business development plan

Now that you’re in the growth stage of your business, set things in motion with a business development plan.

A business development plan sets goals for growth and explains how you will achieve them. It can have a short-term or long-term focus. Review and revise your plan as often as you can. And keep building on it as your business evolves.

How to write a business development plan

Your business development plan is your roadmap to growth, so make it clear, specific and realistic.

What to include in a business development plan

• Opportunities for growth: Identify where growth will come from – whether it’s in creating new products, adding more services, breaking into new markets, or a combination of these.
• Funding plan: Determine how you’ll fund your business growth. How much capital do you already have? How much more do you need and how will you get it? Check out our guide on financing your business.
• Financial goals: Work out what revenue, costs and profits you’ll have if things stay the same. Use those numbers as a basis for setting new, more ambitious financial goals.
• Operational needs: Identify what things about your business will need to change in order to achieve growth. Will you need extra people, more equipment, or new suppliers?
• Sales and marketing activities: Figure out what sales and marketing efforts will effectively promote growth and how these efforts will change as the business gets bigger and better. Make sure your sales and marketing plan is sturdy enough to support your growing business.
• Team needs: You may need people to take on some of the tasks you’ve been doing. Think about what parts of running the business you enjoy most – and you’re good at – and what parts you might want to delegate to others. And give some thought to the culture you want to develop in your business as it grows. Check out our guide on hiring employees.

A sample business development plan

Avoid these common business development mistakes.

• Thinking short-term instead of long-term
• Underestimating how much money it will take to grow
• Not budgeting enough money to cover the costs of growth
• Focusing on too many growth opportunities: think quality, not quantity

Micro-planning can keep you focused

You may want to create some micro-plans for specific growth projects so their details don’t get overlooked. And you can build in some KPIs to measure your progress and successes. As your business grows, take note of your progress and make periodic adjustments to your business development plan to make sure it’s still relevant.

Support is out there

Remember you’re not the first to go through this. Seek out mentors, advisors or other business owners who can help you with your planning. Your accountant or bookkeeper may also be able to help or point you in the direction of the right people.

Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

Growing your business

Are you ready to drop the hammer and take your business to the next level? Let’s look at how to grow.

Before you leap into growth, reflect on where you’ve come from. Find out the stage of business growth you’re at.

Understanding your business performance will help you grow. Check out common examples of small business KPIs.

Increasing sales revenue is one obvious way to help grow your business. But how do you sell more?

You can grow your business by selling more things to more people, or fewer things to fewer people. Let’s look at how.

You’re all set to grow your business. But there’s so much to keep track of. Xero’s got resources and solutions to help.

Download the guide to growing your business

Learn how to grow a business, from planning to expansion. Fill out the form to receive this guide as a PDF.

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• January 23, 2018

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A Strategic Plan for Business Implementation: 3 Steps to Getting Business Growth Done

Let me ask you a question:

What’s the ONE thing your business needs to take the next BIG step in its growth?

Is it more ideas? More knowledge? More information?

You need to have a good system in place to make sure your ideas are being prioritized intelligently and implemented efficiently.

Probably not.

If you’re like most marketers, entrepreneurs, and business owners I know, you already have a whole pile of notes, ideas, and to-do lists still waiting to be implemented.

If anything, you might have TOO MANY ideas. Too many projects.

And the problem is that you need to get better at implementing those projects. Actually getting them DONE.

Am I right?

If your to-do list has 50 growth strategies on it, you certainly don’t need any more growth strategies. No, what you need instead is a method to…

• Decide which project to tackle first, and…
• Actually DO IT in an effective and efficient way

And that’s what this post is all about.

The framework you’re about to learn is the exact same process we use internally at DigitalMarketer to implement our business growth strategies.

It came out of the frustrations we had in our own recent growth…

As a company, DigitalMarketer went from being a small team of two to three people to being a team of over 50 people in a relatively short time.

But here’s the crazy part…

Even though our team ballooned in size by 25x, we didn’t actually get that much more work done!

See, you can’t just throw more money and people at a problem like this and hope that will fix the issue. Because it won’t.

Instead, you need to have a good system in place to make sure your ideas are being prioritized intelligently and implemented efficiently.

So, without further ado, here are the three steps to doing just that—a business growth plan for avoiding “shiny object syndrome” and actually implement a growth plan in your business …

Business Growth Plan Step 1: Align Your Team to a Single Goal

The first step is to align your team to a single goal and AVOID multiple simultaneous projects.

Instead of trying to achieve many different things at once, it’s much better to focus on one goal at a time. And don’t move on to the next goal until you’ve achieved the first one.

Goals should be sequential, never simultaneous.

Sequential goals ensure maximum efficiency because they allow you to put 100% of your focus on that one thing.

Simultaneous goals, on the other hand, are a recipe for chaos and inefficiency. And the more projects you have going at once, the less efficient you will be. Guaranteed.

This applies to your entire team, whether you’re a team of one or part of a much larger department.

One of the big mistakes that many companies make is giving a different goal or project to every employee.

For example: Bob’s project might be trying to grow the email list, while Lois is charged with increasing conversions, and Steve is in charge of trying to cut down on customer refunds.

The problem with a situation like this is that there are dependencies between these projects, and those dependencies can cause a lot of in-fighting between employees.

As a result, nobody is able to do a really great job of achieving their goal and you end up with another quarter of mediocre improvements and stagnant growth across the board.

But what if you could get your whole team—Bob, Lois, and Steve—all focused on the same goal at the same time? This way, there wouldn’t be any competing agendas. Chances are they would do a much better job than any one person could do on their own.

So, why don’t more companies work this way? The answer might surprise you.

The Secret Danger of Good Ideas

For many companies, the thing that’s stopping them from adopting a more efficient, sequential goal structure is too many good ideas.

It might sound strange, but it’s true…

Good ideas have killed far more companies than bad ideas.

It’s rare for a bad idea to bring down a company. Instead, failure is more often caused by trying to implement too many good ideas at once .

This makes sense if you think about it: we’re on the lookout for bad ideas. Anytime we try something that doesn’t work, what do we do? We stop doing it. We pivot. We try something else.

Bad ideas are usually caught and thrown out pretty quickly.

But good ideas?

Good ideas are dangerous.

Anytime we try a tactic that works well…

Anytime we come up with a new campaign that makes a lot of sense…

Anytime we see a competitor doing something that would work for us…

Anytime we come up with a marketing idea that “could be a game-changer”…

We pursue those good ideas.

Eventually, we start chasing too many things—and before you know it we’re knee-deep in “shiny object syndrome.”

This puts you in a tricky situation. Because you don’t want to ignore all those good ideas. But at the same time, you can’t afford to pursue them all at the same time.

So, what should you do?

How to Organize & Prioritize Your Good Ideas

I recommend using this four-step grid to help organize and prioritize your good ideas.

So first, draw out a grid like this on a whiteboard somewhere your whole team can see it:

Each column represents one of the four primary “Growth Levers.” These are the four ways you can grow a company . And the 4 Growth Levers are:

• Acquisition: Getting new leads
• Activation: Converting your existing leads into customers
• Monetization: Increasing the average order value of your existing customers
• Retention: Reducing refunds and churn rate

Then you’ll want to take each good idea and put it into the column where it fits best, like so:

Writing down all your ideas in a central location like this does two important things.

First, it organizes your ideas in a way that makes sense from a growth perspective AND makes it easy to focus and prioritize each idea. This will become crucial in just a moment.

Second, it gets those ideas out of your head and down on paper.

Many of us are walking around with too many ideas floating around in our heads. And trying to keep track of those ideas leads to cognitive overload.

Mentally, it feels like you have too many browser tabs open on your internet browser.

But when you write down your ideas, it’s like closing one of those tabs. It frees up some mental space because you know you don’t have to keep track of that idea in your head any longer.

Choose One Column to Focus On

OK, you now have your ideas all written down and organized according to the 4 Growth Levers.

The next thing you need to do is to choose a column to focus on for a period of time.

Because here’s the thing:

Impact doesn’t happen when you improve ten different parts of your business by 1% each. It happens when you make a giant improvement in ONE area.

So, for example, let’s say that for the next 12 weeks you decide to focus on Acquisition.

For now, you can ignore all your ideas that fall under Activation, Monetization, and Retention, and focus 100% on your Acquisition ideas:

The next thing you need to do is to prioritize those Activation ideas. And to do this, I highly recommend using the ICE Framework. ICE stands for…

So, what you want to do is this: for each idea, measure the Impact, Confidence, and Ease of each idea on a scale from 1-10.

• Impact : How big of an impact will this idea have on your business? A 1 means that this idea will have a minimal impact, while a 10 means that this idea is a real “needle-mover” with the potential to dramatically grow your business.
• Confidence : How confident can you be that this idea will work? If you’ve tried it before and it worked well, this might be a 9 or 10. If it’s a gamble, it might be a 1 or 2.
• Ease : How easy or difficult would it be to implement this idea? The easier the implementation, the higher the score.

You should make this a discussion with your whole team. Give everyone a vote and average the results for each idea.

Here’s an example of how we scored a few different ideas here at DigitalMarketer using the ICE Framework. The ideas were “testing new homepage opt-in copy” and “launching a podcast.”

Test New Homepage Opt-In Copy  

We knew that our homepage was a significant source of opt-ins. So, we knew that if we could move the needle and increase that conversion rate, it would have a high impact on our lead flow. (Impact of 10.)

At the same time, we had never tested the copy that was on the homepage. So, we were reasonably confident that we could beat that copy that was currently there. (Confidence of 9.)

Finally, because this involved changing just a few lines of text, it was super quick & easy to implement. (Ease of 10.)

ICE score: 10 + 10 + 9 = 29 / 3 = 9.7

As the ICE score suggests, this idea was really a no-brainer for us. As a result, it shot up to #1 on our list of priorities.

And we would go on to update the homepage to…

Launch a Podcast  

We knew that if we could launch a podcast and have it do really well, that could be a huge needle-mover for our business. It could help grow our brand and generate awareness by reaching a massive number of people who listen to podcasts. (Impact of 10.)

However, we had never launched a podcast before—so we had no experience in that arena. As a result, we were not highly confident that we would be able to produce a great podcast right out of the gate. (Confidence of 2.)

And because we had never done a podcast before, implementing this was not going to be easy. It was going to involve lots of research, investing in new equipment, setting up a studio, and lots of other setup. Definitely not an easy process. (Ease of 1.)

ICE score: 10 + 2 + 1 = 13 / 3 = 4.3

This was a classic “moonshot” idea for us. Pulling it off would be tough, but the potential payoff was huge.

Keep in mind that just because it had a low ICE score, that doesn’t mean we didn’t do it. It just meant that we didn’t do it first . Instead, it got pushed down on the priority list of Acquisition ideas.

As you may know, we DID end up launching a podcast—and the Perpetual Traffic Podcast was a smash-hit beyond anything we expected. It turned out to be well worth the risk.

( RELATED: How to Launch a Podcast, Drive it to the Top of the Charts, AND Keep it There in Just 4 Steps )

The great thing about the ICE Framework is that it makes the process of project selection really transparent to the whole team, and nobody ever feels like their ideas are being ignored or disregarded.

Every idea gets scored by the team according to the ICE Framework, and everyone on the team gets a say in which projects get tackled first.

Business Growth Plan Step 2: Work in Focused Sprints (Not Exhausting Marathons)

People, teams, and companies perform best with short bursts of intense work followed by a rest.

We are NOT designed for long marathons.

(It’s interesting to note that according to legend, the first Greek runner who ever ran a marathon ended up falling down dead at the end of it.)

We tend to work much better when we can go all-out for a couple hours, then rest and recharge our batteries so that we’re fresh when we go at it again.

I’m not saying that you shouldn’t work hard, and I’m not saying that you shouldn’t work hard for long periods of time.

What I’m saying is that your work should follow a cycle that allows you to put forth 100% effort and then recover from that effort so you can do it again.

Work really hard, rest.

…you get it. 🙂

Fortunately, this sprint-based style of project implementation works perfectly with sequential goals because it allows you to pursue one single goal for that short period of hard work …

Then you take a break before pursuing the next goal.

And when you add all those sprints together, you get what we call a “season.”

Business Growth Plan Step 3: Work in 12-Week “Seasons”

We experience life in seasons. We’re never in one consistent mode all the time.

This applies to many different timeframes. Obviously, it applies to the seasons of a year, as the weather changes from cold, snowy winter to hot, thriving summer and back again.

But it also applies on the level of a week, where we have five days of focused work followed by two days of rest and recovery.

Similarly, each day can be thought of as having its own “seasons” too; often the morning involves some ramp-up time, after which we increase to our most productive period in the late morning. From there it’s common to have a lull in the afternoon, after which we ramp up again to finish our work in time to head home at night.

So, that’s why I think it makes sense to approach growth projects using that same idea of seasons.

And when it comes to putting growth projects into action, these are the five “seasons” of implementation:

• Learn : This is where you learn the principles that will help guide the implementation of your upcoming project. This isn’t “just in case” learning, where you’re researching something you might, maybe implement someday. It’s “just in time” learning where you’re figuring out how to implement one big idea that you’re about to work on NOW.
• Implement : This is where the rubber meets the road. Stop attending webinars, watching videos, and reading blog posts. Now’s your chance to take ACTION. Whatever your project is, this is the time to put in the legwork to get it done.
• Celebrate : Once you’ve finished implementing your project, take a moment to sit back and celebrate all your hard work! I don’t recommend celebrating your results at this point—because after all, not every project is going to be a win. Instead, simply celebrate the fact that you got something done. That you learned something. That you took meaningful action to grow your business.
• Optimize : Often we will implement something, but that implementation will be shaky at best. We’ll build a bridge, but it will be a rickety bridge with lots of holes and problems. That’s why we need to take time to optimize—to improve what we’ve implemented, to fix the bugs, to iron out the kinks. This is an important step because it helps us to get the best results from whatever it is we just implemented and make sure we’re putting forth a polished and professional effort.
• Rest/Repeat : Now that your project has been implemented and optimized, I recommend you take a little time off to rest before going at it again. This is important to recharge your batteries so that when the next season starts, you’re ready to give it all you’ve got and really kick butt on your next project.

Here at DigitalMarketer, we follow this season in 12-week cycles. We find that 12-week cycles work really well for a couple reasons.

For one thing, 12 weeks is long enough to allow you to really dig in and implement some significant solutions.

Secondly, 12 weeks gives you four quarters each year. This lines up perfectly with the 4 Growth Levers, which means you can focus on each Growth Lever once a year.

Our 12-week season looks like this:

We take just one week to learn, followed by four weeks of implementation. After that we give ourselves a week to celebrate, then we spend the next four weeks optimizing our work. Finally, we take a short two-week break before starting all over again.

3 Business Growth Mindsets

Now that we’ve covered the three steps of implementing a growth project, I want to briefly hit on three critical mindsets to getting growth done.

Business Growth Mindset #1: Patiently Impatient Thinking  

“Patiently impatient thinking” means that you work with a sense of urgency…

Really push yourself to get your work done as quickly and efficiently as possible…

…while also understanding that results always lag behind your efforts.

A good analogy here is to think of this in terms of exercise.

You need a sense of urgency while putting in the work while being patient for the results.

If you want to lose weight and get in shape, how would you achieve that goal?

For one thing, you would probably start working out, right?

And if you wanted to get in really great shape, you would work out intensely. With a sense of urgency.

But at the same time, you have to recognize the fact that you can’t transform your body overnight.

It takes time for the results to come.

And the same thing is true of growth strategies. You need a sense of urgency while putting in the work…

…while being patient for the results—knowing that they will take some time, but they will come eventually.

Business Growth Mindset #2: High-Impact Thinking   

The second important growth mindset is to foster high-impact thinking.

And to illustrate what I mean by that, I want to warp back to high school physics class for a minute. Let’s talk about Newton’s Second Law of Motion, which states:

Force = Mass x Acceleration

What this equation basically says is that to generate a lot of force you either need a lot of mass…or a lot of acceleration.

Growth ideas are the same way.

An idea with high mass and low acceleration might be like a steamroller. A steamroller doesn’t move very fast…but it’s so big and massive that once it reaches its target, it generates a massive amount of force.

For us, launching the Perpetual Traffic Podcast was a steamroller idea. It took a lot of work to get it moving, but once it launched it made a big impact on our business.

An idea with low mass and high acceleration might be more like a bullet. Bullets aren’t very heavy. They weigh just a couple ounces. But they’re shot with so much velocity that they are able to generate a massive amount of force.

The great thing about bullets is that you can implement lots of quick and easy ideas in a short amount of time. You can fire them off one after another.

In the 12-week implementation season, we spend the Learn and Implement phases focusing on steamroller strategies that will really move the needle.

Then during the Optimization phase, we focus on lots of bullets that we can implement to improve that steamroller idea as quickly as we can.

Business Growth Mindset #3: Leadership Thinking

I hear from a lot of business owners who claim to be the “visionary” for their company. They think their job is to come up with ideas, and that it’s the rest of their team’s job to implement them.

Leaders don’t merely plan…leaders lead. They DO! Because good leaders understand that…

“A good plan violently executed now is better than a perfect plan executed next week.”—U.S. General George S. Patton

You don’t need a perfect plan. You need a good plan that gets DONE. And as a leader, it’s your job to make sure that happens.

Here at DigitalMarketer, our leaders do the most work. They lead by example.

Don’t be one of those leaders who sits in your ivory tower and just dictates orders down the mountain. Instead, roll your sleeves up and get your hands dirty doing the work yourself.

That’s why this growth implementation plan is so important.

And that’s how you lead a company.

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6 Key Levers of a Successful Organizational Transformation

• Andrew White,
• Michael Wheelock,
• Adam Canwell,
• Michael Smets

Leaders, don’t overlook your employees’ emotional journey.

Organizational transformations are extremely difficult on a personal level for everyone involved. A team of researchers found that in successful transformations, leaders not only made sure their teams had the processes, resources, and technology they needed — they also built the right emotional conditions. These leaders offered a compelling rationale driving the transformation, and they ensured employees had the emotional support they needed to execute. This meant that when the going inevitably got tough, employees felt appropriately challenged and ultimately energized by the stress. By contrast, leaders of the unsuccessful transformations didn’t make the same emotional investment. When their teams hit the inevitable challenges, negative emotions spiked, and the team entered a downward spiral. Leaders lost faith and looked to distance themselves from the project, which led employees to do the same. The researchers identified six behaviors that consistently improved the odds of transformation success.

Disruption used to be an exceptional event that hit an unlucky few companies — think of the likes of Kodak, Polaroid, and Blackberry. But in today’s complex and uncertain world, as we face challenges ranging from climate change to digitization, geopolitics to DEI, organizations must treat transformation as a core capability to master, as opposed to a one-off event.

At the same time, leaders must recognize that transformation is fraught with risk. In 1995, John Kotter found that 70% of organizational transformations fail , and nearly three decades later, not much has changed. Our own research, in which we spoke to more than 900 C-suite managers and more than 1,100 employees who had gone through a corporate transformation, showed similar results: 67% of leaders told us they had experienced at least one underperforming transformation in the last five years.

Considering that organizations will spend billions on transformation initiatives over the next year, a 70% failure rate equates to a significant erosion of value. So, what can leaders do to tilt the odds of success in their favor? To find out, we interviewed 30 leaders of transformations and surveyed more than 2,000 senior leaders and employees in 23 countries and 16 sectors. Half of our respondents had been involved in a successful transformation, while the other half had experienced an unsuccessful transformation.

So what tactics did the leaders of successful transformations use to manage the emotional journey? To find out, we built a model to predict the likelihood that an organization will achieve its transformation KPIs based on the extent to which it exhibited 50 behaviors across 11 areas of the transformation. This model revealed that behaviors in six of these areas consistently improved the odds of transformation success. Organizations that are above average in these areas have a 73% chance of meeting or exceeding their transformation KPIs, compared to only a 28% chance for organizations that are below average. Our research suggests that any organization that can effectively implement these six levers will maximize their chances of success.

Our research also found that a key difference in successful transformations was that leaders embraced their employees’ emotional journey . Fifty-two percent of respondents involved in successful transformations said their organization provided the emotional support they needed during the transformation process “to a significant extent” (as opposed to 27% of respondents who were involved in unsuccessful transformations).

Managing Change

Transformations are extremely difficult on a personal level for everyone involved. In the successes we studied, leaders not only made sure their teams had the processes, resources, and technology they needed — they also built the right emotional conditions. These leaders offered a compelling rationale driving the transformation, and they ensured employees had the emotional support they needed to execute. This meant that when the going inevitably got tough, employees felt appropriately challenged and ultimately energized by the stress.

By contrast, leaders of the unsuccessful transformations didn’t make the same emotional investment. When their teams hit the inevitable challenges, negative emotions spiked, and the team entered a downward spiral. Leaders lost faith and looked to distance themselves from the project, which led employees to do the same.

The Six Key Levers of Transformations

So what tactics did the leaders of successful transformations use to manage the emotional journey? The six levers that maximize the chances of success, according to our research are:

1. Leadership’s own willingness to change

Many people believe that a leader’s job is to look outward and give others guidance, but our research suggests that to help their workforce navigate a transformation, leaders need to look inward first and examine their own relationship with change. “If you are not ready to change yourself, forget about changing your team and your organization,” as Dr. Patrick Liew, executive chairman at GEX Ventures, told us.

In our interviews, leaders spoke of working on their own development, including engaging more with their emotions and becoming accustomed to the discomfort that accompanies personal growth. Leaders needed to “look into a mirror,” as one told us, and realize that they were part of the problem before the shift to a positive trajectory could take place. They needed to remove their own fear before they could help their employees get through this change.

“As someone who was tasked to lead this [transformation], if I’m being honest with you, it was pretty unsettling at the start, because I think by nature most of us like to know the path we’re going on,” as one COO from the automative industry told us. And a senior vice president in the global business services industry described needing to become more vulnerable and honest on their path to self-discovery: “I think I became even more aware of myself, who I am.”

2. A shared vision of success

Creating a unified vision of future success is another all-important foundation point of a transformation. In our research, 50% of respondents involved in successful transformations said the vision energized and inspired them to go the extra mile to a significant extent (as compared 29% of respondents in low-performing transformations).

Employees must understand the urgent need to disrupt the status quo. A compelling “why” can help them navigate the inevitable challenges that will arise during a transformation program. Many of the workers who took our survey said that they “wanted” and “needed” the vision to be communicated clearly. When leaders share a clear vision, the workforce is more likely to get on board. But if people don’t understand the vision or need for transformation, success is hard to achieve.

“It’s not about me telling people ‘This is what’s going to happen,’” as a managing director in the medical device industry told us. “It’s about me creating this shared sense of ownership…and then [coaching] my team on what they need to achieve. We very consciously want our teams to really buy into this is how we, as a collective, want to work.”

3. A culture of trust and psychological safety

Trust and care from leaders can make a difficult transformation more emotionally manageable. At the most basic human level, we all know what it feels like to be seen, listened to, and heard by another person. It can validate our effort, motivate us to work harder, and help assuage emotions like doubt, fear, anger, and sadness. Workers in our study shared that they wanted leaders who were patient and who also had, in the words of one employee, a “calm and teachable spirit.”

In a workplace with a high degree of psychological safety , employees feel confident that they can share their honest opinions and concerns without fear of retribution. When trust and psychological safety are missing, it’s difficult to persuade your workforce to make necessary changes. For example, one senior leader told us that employees at their company were extremely fearful of the transformation and didn’t feel that they could speak up about the problems they saw. Not surprisingly, the transformation did not go well.

4. A process that balances execution and exploration

Transformations obviously need disciplined project management to drive the program forward. But our research showed that leaders of successful transformations created processes that balanced the need to execute with giving employees the freedom to explore, express creativity, and let new ideas emerge. This empowers the workforce to identify solutions or opportunities that better meet the long-term goals of the transformation.

“Innovation requires the right people and processes,” said one respondent to our anonymous survey. “Both are critical to encourage collaboration and experimentation.”

We also found that creating space for small failures can ultimately lead to big success, whereas fear of any failure can lead to missed opportunities. Forty-eight percent of our respondents involved in successful transformations said the process was designed so that failed experimentation would not negatively impact their career or compensation to a significant extent. By contrast, only 29% of respondents in unsuccessful transformations said the same.

5. A recognition that technology carries its own emotional journey

The leaders in our study ranked technology as the biggest challenge they faced in their transformation efforts. There are a lot of emotions to manage when new systems or technology are introduced, from stress over how it works to fear about whether it will cause job loss or slow down the system.

In the underperforming transformations we studied, we saw the narrative shift away from the vision to focus on the technology itself. Whereas in the successful transformations, leaders ensured that technology was seen as the means to achieve the strategic vision. Furthermore, they prioritized quick implementations of new technology — focusing on a minimum viable product rather than perfect implementation. Lastly, they invested resources into skill development to ensure the workforce was ready to create value using the new technology.

“There were kickoff sessions with our senior managers to bring them in at the beginning of the process,” a vice president of a company in the media/advertising industry explained. “These sessions aimed to show them that what was being built was something that they had helped design, rather than something that was presented to them as a fait accompli…This minimized the numbers of active detractors.”

6. A shared sense of ownership over the outcome

In the successful transformations we studied, leaders and employees worked together to co-create an environment where everyone felt a shared sense of ownership over the transformation vision and outcome.

A prime example of this is many companies’ rapid shift to virtual and remote working during the pandemic. Because of the speed and urgency of the change, leaders needed to collaborate closely with the workforce to create new ways of working and be much more responsive to their views on what was or wasn’t going well. This mass co-creation helped build a sense of pride and shared ownership across both leadership and the workforce.

“In a transformation, things pop up all the time,” as Christiane Wijsen, head of corporate strategy at Boehringer Ingelheim, told us. “When you have a movement around you, supporters will buffer it and tweak it each time. When you don’t have this movement, then you’re alone.”

To conclude, it’s worth reiterating that all transformations are tough. Even during successful programs, there will come a time where people start to feel stressed. The skill at this difficult stage is being able to energize your workforce and turn that heightened pressure into something productive, as opposed to letting the transformation spiral downward into pessimism and underperformance.

What we saw throughout our research is that leaders who are truly working with their employees are much more successful. They acknowledge and manage emotions, rather than pushing them aside or ignoring them. The best leaders create vision across the organization and a safe environment to work together and listen to each other.

“You’ve got to be very, very respectful of people at a working level,” as Thomas Sebastian, CEO of London Market Joint Venture at DXC Technology, told us. “You’ve got to understand the emotional side and consider a completely different perspective, such as how is this transformation going to make their life easier.”

Success begets success. Once a workforce has undergone a successful transformation, they will be ready to go again. And given the pace of change in the world, organizations have got to be ready to go again.

• Andrew White is a senior fellow in management practice at Saïd Business School, University of Oxford, where he directs the advanced management and leadership program and conducts research into leadership and transformation. He is also a coach for CEOs and their senior teams.
• MW Michael Wheelock leads a primary research and advanced analytics team in EY Knowledge. His team designs and delivers global, mixed methods research programs to support EY’s flagship thought leadership.
• AC Adam Canwell is head of EY’s global leadership consulting practice. Adam has published extensively on leadership and strategic change. Adam has sold and delivered transformation programs across multiple industries in both the UK and Australia, working with FTSE 100 (or their equivalent) organizations .
• Michael Smets is a professor of management at Saïd Business School, University of Oxford. His work focuses on leadership, transformation, and institutional change.

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Growth Business Plan Template

This template helps you to create a business plan for a growth-oriented company. Use this resource to speed up the preparation process with a proven outline to communicate your business plan in a professional, compelling format that will improve your chances of attracting a banker or equity investors.

Although positioned at the beginning of the plan the executive summary is best completed at the end. It's primary purpose is to "sell" the plan to the intended audience, enticing them to read on. It should be an easy-to-read overview presented concisely, ideally on one side of A4.

What will your business be doing in 5 years time? What will it have achieved? What are the main growth targets for sales revenue and profit by the end of year 3? By the end of year 5?

What does the product or service do (the features)? What benefits make the offer unique, or just different? What customer problem does your product or service solve? How would you describe a typical customer for the offer? How do you know they will spend money on your product and/or service?

What is the market potential in terms of sales revenue? Is the market growing, staying the same, or declining? What is causing this? Who are your main competitors? Describe their strengths and weaknesses. How will the business compete and grow in the market (e.g. faster service, lower cost etc.)?

Which routes to access your target customers will you choose (e.g. shop, distributor, website etc.)? What is your basic approach to pricing (e.g. high price/low volume, low price/high volume)? What range of promotional methods will you use (e.g. email, social media, advertising, discounts etc.)? How will the pattern of your sales develop and grow over the next 3 years?

What assets (e.g. equipment, machinery etc.) are needed to get started and grow your business? What are the ongoing resource requirements (e.g. premises, outsourced services etc.)? What are the key processes in your business (the activities that makes the most difference for your customer)? How do you measure and cost the capacity available for supplying your product and/or service? Who are your key partners (e.g. suppliers, subcontractors) and what is their role?

Who are the key team members, their roles and profiles (e.g. skills, experience) Are there any important gaps in skills and/or experience to fill? How will these gaps be filled now, and in future to achieve your growth targets (e.g. employ, specialist consultant)? Who will act as your mentor/adviser?

What are the key internal measures of performance that must be closely monitored (e.g. unit costs, response times etc.)? What are the key external measures of performance (e.g. monitoring customer satisfaction and needs, market and competitor intelligence)? What potential events would have a significant adverse impact on your business or prevent its growth? What is their likelihood? What specific countermeasures will you take?

List the main goals, activities and/or events in the next 12 months that will help you to reach your growth targets.

What is your financial contribution to the business? Is there any additional funding needed? Where will it come from (e.g. friends, family, bank, business angels, venture capital)? What will it be used for? You may wish to add comments and highlights on the financial projections below such as financial milestones already achieved (e.g. break even) and/or the assumptions made (e.g. about the rate of forecast growth).

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How to Write a Five-Year Business Plan

Noah Parsons

15 min. read

Updated March 8, 2023

Learn why the traditional way of writing a five-year business plan is often a waste of time and how to use a one-page plan instead for smarter, easier strategic planning to establish your long-term vision. 

In business, it can sometimes seem hard enough to predict what’s going to happen next month, let alone three or even five years from now. But, that doesn’t mean that you shouldn’t plan for the long term. After all, your vision for the future is what gets you out of bed in the morning and motivates your team. It’s those aspirations that drive you to keep innovating and figuring out how to grow.

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What is a long-term plan?

Are long-term business plans a waste of time, why write a long-term business plan, what a 5-year plan should look like, how to write a five-year business plan, vision setting is the purpose of long-term planning.

A long-term or long-range business plan looks beyond the traditional 3-year planning window, focusing on what a business might look like 5 or even 10 years from now. A traditional 5-year business plan includes financial projections, business strategy, and roadmaps that stretch far into the future.

I’ll be honest with you, though—for most businesses, long-range business plans that stretch 5 and 10 years into the future are a waste of time. Anyone who’s seriously asking you for one doesn’t know what they’re doing and is wasting your time. Sorry if that offends some people, but it’s true.

However, there is still real value in looking at the long term. Just don’t invest the time in creating a lengthy version of your business plan with overly detailed metrics and milestones for the next five-plus years. No one knows the future and, more than likely, anything you write down now could be obsolete in the next year, next month, or even next week. 

That’s where long-term strategic planning comes in. A long-term business plan like this is different from a traditional business plan in that it’s lighter on the details and more focused on your strategic direction. It has less focus on financial forecasting and a greater focus on the big picture. 

Think of your long-term strategic plan as your aspirational vision for your business. It defines the ideal direction you’re aiming for but it’s not influencing your day-to-day or, potentially, even your monthly decision making. 

No one knows the future. We’re all just taking the information that we have available today and making our best guesses about the future. Sometimes trends in a market are pretty clear and your guesses will be well-founded. Other times, you’re trying to look around a corner and hoping that your intuition about what comes next is correct.

Now, I’m not saying that thinking about the future is a waste of time. Entrepreneurs are always thinking about the future. They have to have some degree of faith and certainty about what customers are going to want in the future. Successful entrepreneurs do actually predict the future — they know what customers are going to want and when they’re going to want it.

Entrepreneurship is unpredictable 

Successful entrepreneurs are also often wrong. They make mistakes just like the rest of us. The difference between successful entrepreneurs and everyone else is that they don’t let mistakes slow them down. They learn from mistakes, adjust and try again. And again. And again. It’s not about being right all the time; it’s about having the perseverance to keep trying until you get it right. For example, James Dyson, inventor of the iconic vacuum cleaner, tried out 5,126 prototypes of his invention before he found a design that worked.

So, if thinking about the future isn’t a waste of time, why are 5-year business plans a waste of time? They’re a waste of time because they typically follow the same format as a traditional business plan, where you are asked to project sales, expenses, and cash flow 5 and 10 years into the future. 

Let’s be real. Sales and expense projections that far into the future are just wild guesses, especially for startups and new businesses. They’re guaranteed to be wrong and can’t be used for anything. You can’t (and shouldn’t) make decisions based on these guesses. They’re just fantasy. You hope you achieve massive year-over-year growth in sales, but there’s no guarantee that’s going to happen. And, you shouldn’t make significant spending decisions today based on the hope of massive sales 10 years from now.

So, what is the purpose of outlining a long-term plan? Here are a few key reasons why it’s still valuable to consider the future of your business without getting bogged down by the details.

Showcase your vision for investors

First, and especially important if you are raising money from investors, is your vision. Investors will want to know not only where you plan on being in a year, but where the business will be in five years. Do you anticipate launching new products or services? Will you expand internationally? Or will you find new markets to grow into? 

Set long-term goals for your business

Second, you’ll want to establish goals for yourself and your team. What kinds of high-level sales targets do you hope to achieve? How big is your company going to get overtime? These goals can be used to motivate your team and even help in the hiring process as you get up and running.

That said, you don’t want to overinvest in fleshing out all the details of a long-range plan. You don’t need to figure out exactly how your expansion will work years from now or exactly how much you’ll spend on office supplies five years from now. That’s really just a waste of time.

Instead, for long-range planning, think in broad terms. A good planning process means that you’re constantly revising and refining your business plan. You’ll add more specifics as you go, creating a detailed plan for the next 6-12 months and a broader, vague plan for the long term.

You have a long development time

Businesses with extremely long research and development timelines do make spending decisions now based on the hope of results years from now. For example, the pharmaceutical industry and medical device industry have to make these bets all the time. The R&D required to take a concept from idea to proven product with regulatory approval can take years for these industries, so long-range planning in these cases is a must. A handful of other industries also have similar development timelines, but these are the exceptions, not the rule.

Your business is well-established and predictable 

Long-term, detailed planning can make more sense for businesses that are extremely well established and have long histories of consistent sales and expenses with predictable growth. But, even for those businesses, predictability means quite the opposite of stability. The chances that you’ll be disrupted in the marketplace by a new company, or the changing needs and desires of your customers, is extremely high. So, most likely, those long-range predictions of sales and profits are pretty useless.

With the exception of R&D-heavy businesses, most 5-year business plans should be more like vision statements than traditional business plans. They should explain your vision for the future, but skip the details of detailed sales projections and expense budgets. 

Your vision for your business should explain the types of products and services that you hope to offer in the future and the types of customers that you hope to serve. Your plan should outline who you plan to serve now and how you plan to expand if you are successful.

This kind of future vision creates a strategic roadmap. It’s not a fully detailed plan with sales forecasts and expense budgets, but a plan for getting started and then growing over time to reach your final destination.

For example, here’s a short-form version of what a long-term plan for Nike might have looked like if one had been written in the 1960s:

Nike will start by developing high-end track shoes for elite athletes. We’ll start with a focus on the North West of the US, but expand nationally as we develop brand recognition among track and field athletes. We will use sponsored athletes to spread the word about the quality and performance of our shoes. Once we have success in the track & field market segment, we believe that we will be able to successfully expand both beyond the US market and also branch out into other sports, with an initial focus on basketball.

Leadership and brand awareness in a sport such as basketball will enable us to cross over from the athlete market into the consumer market. This will lead to significant business growth in the consumer segment and allow for expansion into additional sports, fashion, and casual markets in addition to building a strong apparel brand.

Interestingly enough, Nike (to my knowledge) never wrote out a long-range business plan. They developed their plans as they grew, building the proverbial airplane as it took off.

But, if you have this kind of vision for your business, it’s useful to articulate it. Your employees will want to know what your vision is and your investors will want to know as well. They want to know that you, as an entrepreneur, are looking beyond tomorrow and into the future months and years ahead.

Writing out your long-term vision for your business is a useful exercise. It can bring a sense of stability and solidify key performance indicators and broad milestones that drive your business. 

Developing a long-range business plan is really just an extension of your regular business planning process. A typical business plan covers the next one to three years, documenting your target market, marketing strategy, and product or service offerings for that time period. 

A five-year plan expands off of that initial strategy and discusses what your business might do in the years to come. However, as I’ve mentioned before, creating a fully detailed five-year business plan will be a waste of time. 

Here’s a quick guide to writing a business plan that looks further into the future without wasting your time:

1. Develop your one-page plan

As with all business planning, we recommend that you start with a one-page business plan. It provides a snapshot of what you’re hoping to achieve in the immediate term by outlining your core business strategy, target market, and business model.

A one-page plan is the foundation of all other planning because it’s the document that you’ll keep the most current. It’s also the easiest to update and share with business partners. You will typically highlight up to three years of revenue and profit goals as well as milestones that you hope to achieve in the near term.

Check out our guide to building your one-page plan and download a free template to get started.

2. Determine if you need a traditional business plan

Unlike a one-page business plan, a traditional business plan is more detailed and is typically written in long-form prose. A traditional business plan is usually 10-20 pages long and contains details about your product or service, summaries of the market research that you’ve conducted, and details about your competition. Read our complete guide to writing a business plan .

Companies that write traditional business plans typically have a “business plan event” where a complete business plan is required. Business plan events are usually part of the fundraising process. During fundraising, lenders and investors may ask to see a detailed plan and it’s important to be ready if that request comes up. 

But there are other good reasons to write a detailed business plan. A detailed plan forces you to think through the details of your business and how, exactly, you’re going to build your business. Detailed plans encourage you to think through your business strategy, your target market, and your competition carefully. A good business plan ensures that your strategy is complete and fleshed out, not just a collection of vague ideas.

A traditional business plan is also a good foundation for a long-term business plan and I recommend that you expand your lean business plan into a complete business plan if you intend to create plans for more than three years into the future.

3. Develop long-term goals and growth targets

As you work on your business plan, you’ll need to think about where you want to be in 5+ years. A good exercise is to envision what your business will look like. How many employees will you have? How many locations will you serve? Will you introduce new products and services? 

When you’ve envisioned where you want your business to be, it’s time to turn that vision into a set of goals that you’ll document in your business plan. Each section of your business plan will be expanded to highlight where you want to be in the future. For example, in your target market section, you will start by describing your initial target market. Then you’ll proceed to describe the markets that you hope to reach in 3-5 years.

To accompany your long-term goals, you’ll also need to establish revenue targets that you think you’ll need to meet to achieve your goals. It’s important to also think about the expenses you’re going to incur in order to grow your business. 

For long-range planning, I recommend thinking about your expenses in broad buckets such as “marketing” and “product development” without getting bogged down in too much detail. Think about what percentage of your sales you’ll spend on each of these broad buckets. For example, marketing spending might be 20% of sales. 

4. Develop a 3-5 year strategic plan

Your goals and growth targets are “what” you want to achieve. Your strategy is “how” you’re going to achieve it.

Use your business plan to document your strategy for growth. You might be expanding your product offering, expanding your market, or some combination of the two. You’ll need to think about exactly how this process will happen over the next 3-5 years. 

A good way to document your strategy is to use milestones. These are interim goals that you’ll set to mark your progress along the way to your larger goal. For example, you may have a goal to expand your business nationally from your initial regional presence. You probably won’t expand across the country all at once, though. Most likely, you’ll expand into certain regions one at a time and grow to have a national presence over time. Your strategy will be the order of the regions that you plan on expanding into and why you pick certain regions over others.

Your 3-5 year strategy may also include what’s called an “exit strategy”. This part of a business plan is often required if you’re raising money from investors. They’ll want to know how they’ll eventually get their money back. An “exit” can be the sale of your business or potentially going public. A typical exit strategy will identify potential acquirers for your business and will show that you’ve thought about how your business might be an attractive purchase.

5. Tie your long-term plan to your one-page plan

As your business grows, you can use your long-term business plan as your north star. Your guide for where you want to end up. Use those goals to steer your business in the right direction, making small course corrections as you need to. 

You’ll reflect those smaller course corrections in your one-page plan. Because it is a simple document and looks at the shorter term, it’s easier to update. The best way to do this is to set aside a small amount of time to review your plan once a month. You’ll review your financial forecast, your milestones, and your overall strategy. If things need to change, you can make those adjustments. Nothing ever goes exactly to plan, so it’s OK to make corrections as you go.

You may find that your long-term plan may also need corrections as you grow your business. You may learn things about your market that change your initial assumptions and impacts your long-range plan. This is perfectly normal. Once a quarter or so, zoom out and review your long-range plan. If you need to make corrections to your strategy and goals, that’s fine. Just keep your plan alive so that it gives you the guidance that you need over time. 

Part of what makes entrepreneurs special is that they have a vision. They have dreams for where they want their business to go. A 5-year business plan should be about documenting that vision for the future and how your business will capitalize on that vision.

So, if someone asks you for your 5-year business plan. Don’t scramble to put together a sales forecast and budget for 5 years from now. Your best guess today will be obsolete tomorrow. Instead, focus on your vision and communicate that. 

Explain where you think your business is going and what you think the market is going to be like 5 years from now. Explain what you think customers are going to want and where trends are headed and how you’re going to be there to sell the solution to the problems that exist in 5 and 10 years. Just skip the invented forecasts and fantasy budgets.

Noah is currently the COO at Palo Alto Software, makers of the online business plan app LivePlan.

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AI-powered marketing and sales reach new heights with generative AI

Artificial intelligence (AI) and machine learning (ML) continue to push the boundaries of what is possible in marketing and sales. And now, with the ongoing step-change evolution of generative AI (gen AI), we’re seeing the use of open-source platforms penetrating to the sales frontlines, along with rising investment by sales-tech players in gen AI innovations. Given the accelerating complexity and speed of doing business in a digital-first world, these technologies are becoming essential tools.

Inevitably, this will impact how you operate—and how you connect with and serve your customers. In fact, it’s probably already doing so. Forward-thinking C-suite leaders are considering how to adjust to this new landscape. Here, we outline the marketing and sales opportunities (and risks) in this dynamic field and suggest productive paths forward.

Our research suggests that a fifth of current sales-team functions could be automated.

How AI is reshaping marketing and sales

AI is poised to disrupt marketing and sales in every sector. This is the result of shifts in consumer sentiment alongside rapid technological change.

Omnichannel is table stakes

Across industries, engagement models are changing: today’s customers want everything, everywhere, and all the time. While they still desire an even mix of traditional, remote, and self-service channels (including face-to-face, inside sales, and e-commerce), we see continued growth in customer preference for online ordering and reordering.

Winning companies—those increasing their market share by at least 10 percent annually—tend to utilize advanced sales technology; build hybrid sales teams and capabilities; tailor strategies for third-party and company-owned marketplaces; achieve e-commerce excellence across the entire funnel; and deliver hyper-personalization (unique messages for individual decision makers based on their needs, profile, behaviors, and interactions—both past and predictive).

Step changes are occurring in digitization and automation

What is generative ai.

Many of us are already familiar with online AI chatbots and image generators, using them to create convincing pictures and text at astonishing speed. This is the great power of generative AI, or gen AI: it utilizes algorithms to generate new content—writing, images, or audio—from training data.

To do this, gen AI uses deep-learning models called foundation models (FMs). FMs are pre-trained on massive datasets and the algorithms they support are adaptable to a wide variety of downstream tasks, including content generation. Gen AI can be trained, for example, to predict the next word in a string of words and can generalize that ability to multiple text-generation tasks, such as writing articles, jokes, or code.

In contrast, “traditional” AI is trained on a single task with human supervision, using data specific to that task; it can be fine-tuned to reach high precision, but must be retrained for each new use case. Thus gen AI represents an enormous step change in power, sophistication, and utility—and a fundamental shift in our relationship to artificial intelligence.

AI technology is evolving at pace. It is becoming increasingly easy and less costly to implement, while offering ever-accelerating complexity and speed that far exceeds human capacity. Our research suggests that a fifth of current sales-team functions could be automated. In addition, new frontiers are opening with the rise of gen AI (see sidebar “What is generative AI?”). Furthermore, venture capital investment in AI has grown 13-fold over the last ten years. 1 Nestor Maslej et al., “The AI Index 2023 annual report,” AI Index Steering Committee, Institute for Human-Centered AI, Stanford University, April 2023. This has led to an explosion of “usable” data (data that can be used to formulate insights and suggest tangible actions) and accessible technology (such as increased computation power and open-source algorithms). Vast, and growing, amounts of data are now available for foundation-model training, and since 2012 there’s been a millionfold increase in computation capacity—doubling every three to four months. 2 Cliff Saran, “Stanford University finds that AI is outpacing Moore’s Law,” Computer Weekly, December 12, 2019; Risto Miikkulainen, “Creative AI through evolutionary computation: Principles and examples,” SN Computer Science, 2(3): 163, March 23, 2001.

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What does gen ai mean for marketing and sales.

The rise of AI, and particularly gen AI, has potential for impact in three areas of marketing and sales: customer experience (CX), growth, and productivity.

For example, in CX, hyper-personalized content and offerings can be based on individual customer behavior, persona, and purchase history. Growth can be accelerated by leveraging AI to jumpstart top-line performance, giving sales teams the right analytics and customer insights to capture demand. Additionally, AI can boost sales effectiveness and performance by offloading and automating many mundane sales activities, freeing up capacity to spend more time with customers and prospective customers (while reducing cost to serve). In all these actions, personalization is key. AI coupled with company-specific data and context has enabled consumer insights at the most granular level, allowing B2C lever personalization through targeted marketing and sales offerings. Winning B2B companies go beyond account-based marketing and disproportionately use hyper-personalization in their outreach.

Bringing gen AI to life in the customer journey

There are many gen AI-specific use cases across the customer journey that can drive impact:

A gen AI sales use case: Dynamic audience targeting and segmentation

Gen AI can combine and analyze large amounts of data—such as demographic information, existing customer data, and market trends—to identify additional audience segments. Its algorithms then enable businesses to create personalized outreach content, easily and at scale.

Instead of spending time researching and creating audience segments, a marketer can leverage gen AI’s algorithms to identify segments with unique traits that may have been overlooked in existing customer data. Without knowing every detail about these segments, they can then ask a gen AI tool to draft automatically tailored content such as social media posts and landing pages. Once these have been refined and reviewed, the marketer and a sales leader can use gen AI to generate further content such as outreach templates for a matching sales campaign to reach prospects.

Embracing these techniques will require some openness to change. Organizations will require a comprehensive and aggregated dataset (such as an operational data lake that pulls in disparate sources) to train a gen AI model that can generate relevant audience segments and content. Once trained, the model can be operationalized within commercial systems to streamline workflows while being continuously refined by agile processes.

Lastly, the commercial organizational structure and operating model may need to be adjusted to ensure appropriate levels of risk oversight are in place and performance assessments align to the new ways of working.

• At the top of the funnel, gen AI surpasses traditional AI-driven lead identification and targeting that uses web scraping and simple prioritization. Gen AI’s advanced algorithms can leverage patterns in customer and market data to segment and target relevant audiences . With these capabilities, businesses can efficiently analyze and identify high-quality leads, leading to more effective, tailored lead-activation campaigns (see sidebar “A gen AI sales use case: Dynamic audience targeting and segmentation”). Additionally, gen AI can optimize marketing strategies through A/B testing of various elements such as page layouts, ad copy, and SEO strategies, leveraging predictive analytics and data-driven recommendations to ensure maximum return on investment. These actions can continue through the customer journey, with gen AI automating lead-nurturing campaigns based on evolving customer patterns.
• Within the sales motion, gen AI goes beyond initial sales-team engagement, providing continuous critical support throughout the entire sales process, from proposal to deal closure. With its ability to analyze customer behavior, preferences, and demographics, gen AI can generate personalized content and messaging. From the beginning, it can assist with hyper-personalized follow-up emails at scale and contextual chatbot support . It can also act as a 24/7 virtual assistant for each team member, offering tailored recommendations, reminders, and feedback, resulting in higher engagement and conversion rates. As the deal progresses, gen AI can provide real-time negotiation guidance and predictive insights based on comprehensive analysis of historical transaction data, customer behavior, and competitive pricing.
• There are many gen AI use cases after the customer signs on the dotted line, including onboarding and retention. When a new customer joins, gen AI can provide a warm welcome with personalized training content , highlighting relevant best practices. A chatbot functionality can provide immediate answers to customer questions and enhance training materials for future customers. Gen AI can also offer sales leadership with real-time next-step recommendations and continuous churn modeling based on usage trends and customer behavior. Additionally, dynamic customer-journey mapping can be utilized to identify critical touchpoints and drive customer engagement.

This revolutionary approach is transforming the landscape of marketing and sales, driving greater effectiveness and customer engagement from the very start of the customer journey.

Winning tomorrow’s car buyers using artificial intelligence in marketing and sales

Commercial leaders are optimistic—and reaping benefits.

We asked a group of commercial leaders to provide their perspective on use cases and the role of gen AI in marketing and sales more broadly. Notably, we found cautious optimism across the board: respondents anticipated at least moderate impact from each use case we suggested. In particular, these players are most enthusiastic about use cases in the early stages of the customer journey lead identification, marketing optimization, and personalized outreach (Exhibit 1).

These top three use cases are all focused on prospecting and lead generation, where we’re witnessing significant early momentum. This comes as no surprise, considering the vast amount of data on prospective customers available for analysis and the historical challenge of personalizing initial marketing outreach at scale.

Various players are already deploying gen AI use cases, but this is undoubtedly only scratching the surface. Our research found that 90 percent of commercial leaders expect to utilize gen AI solutions “often” over the next two years (Exhibit 2).

Our research found that 90 percent of commercial leaders expect to utilize gen AI solutions “often” over the next two years.

Overall, the most effective companies are prioritizing and deploying advanced sales tech, building hybrid teams, and enabling hyper-personalization. And they’re maximizing their use of e-commerce and third-party marketplaces through analytics and AI. At successful companies, we’ve found:

• There is a clearly defined AI vision and strategy.
• More than 20 percent of digital budgets are invested in AI-related technologies.
• Teams of data scientists are employed to run algorithms to inform rapid pricing strategy and optimize marketing and sales.
• Strategists are looking to the future and outlining simple gen AI use cases.

Such trailblazers are already realizing the potential of gen AI to elevate their operations.

Our research indicates that players that invest in AI are seeing a revenue uplift of 3 to 15 percent and a sales ROI uplift of 10 to 20 percent.

Anticipating and mitigating risks in gen AI

While the business case for artificial intelligence is compelling, the rate of change in AI technology is astonishingly fast—and not without risk. When commercial leaders were asked about the greatest barriers limiting their organization’s adoption of AI technologies, internal and external risk were at the top of the list.

From IP infringement to data privacy and security, there are a number of issues that require thoughtful mitigation strategies and governance. The need for human oversight and accountability is clear, and may require the creation of new roles and capabilities to fully capitalize on opportunities ahead.

In addition to immediate actions, leaders can start thinking strategically about how to invest in AI commercial excellence for the long term. It will be important to identify which use cases are table stakes, and which can help you differentiate your position in the market. Then prioritize based on impact and feasibility.

The AI landscape is evolving very quickly, and winners today may not be viable tomorrow. Small start-ups are great innovators but may not be able to scale as needed or produce sales-focused use cases that meet your needs. Test and iterate with different players, but pursue partnerships strategically based on sales-related innovation, rate of innovation versus time to market, and ability to scale.

AI is changing at breakneck speed, and while it’s hard to predict the course of this revolutionary tech, it’s sure to play a key role in future marketing and sales. Leaders in the field are succeeding by turning to gen AI to maximize their operations, taking advantage of advances in personalization and internal sales excellence. How will your industry react?

Richelle Deveau is a partner in McKinsey’s Southern California office, Sonia Joseph Griffin is an associate partner in the Atlanta office, where Steve Reis is a senior partner.

The authors wish to thank Michelle Court-Reuss, Will Godfrey, Russell Groves, Maxim Lampe, Siamak Sarvari, and Zach Stone for their contributions to this article.

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