AMA: Adobe Sales Strategy & Operations Lead, Jacky Ye on Revenue Ops KPIs

At a high level, there's generally two buckets of metrics that Sales/Rev Ops teams look at that are fundamental to understanding the health of the business: revenue generation and revenue retention. 1. Within revenue generation, the main three categories of KPIs are pipeline execution/progression, pipeline generation, and pipeline coverage. * Pipeline progression and execution is about how much of the existing pipeline the sales team has progressed (matured from one stage to the next) or closed (booked $'s). Focus is on current quarter. Typical KPIs are $'s booked, the amount of pipeline in various stages of maturity, and close ratios. For $'s booked, the two main levers we evaluate are $ attainment vs. target and Y/Y growth. Both are important because they measure different things. Targets measure expectations. Y/Y growth measures pace. You can have a product growing 100% Y/Y (fast pace) but it could still be short of targets because expectations are even higher. * Pipeline generation and creation is about how much pipeline is being created. Focus is on future quarters, with longer timeframe ranging from Q+1 to Q+4 or even Q+6 depending on length of the sales cycle. Typical dimensions that pipeline generation are tracked against are: * Creator type - who's sourcing the pipeline? Is it a BDR, an account executive, etc.? This matters because oftentimes, different sources of pipeline will have different rates of conversion. * Pipeline composition - what's the product mix of the pipeline? What's the deal type mix? Is it a lot of upsell? Cross-sell? Are we building enough pipeline across the portfolio? * Close quarter - when is this pipeline expected to close? Are we building a lot of pipeline for the near-term and medium-term future? * Pipeline coverage is the amount of pipeline in flight. Focus is typically on immediate next quarter. The KPIs ops and sales will focus on are coverage ratios - the ratio of pipeline in a given timeframe vs. the sales targets for that timeframe. E.g., if we have $100m of pipeline against a $25m target for Q2, then we'd have a 4x ratio. This is typically the main early indicator of future success, but there are many other ways you could investigate this, including looking at mature vs. total pipe coverage. Looking at historical conversion rates, and in-quarter create and close rates, etc. to understand what is "sufficient" coverage. 2. Within retention, the main categories of KPIs are attrition, renewals, and usage/adoption. 1. Attrition - this is a fun one. How much revenue did you lose from existing customers. Typically this is measured against targets. Very straightforward to understand and typically broken up into full attritions and down sells. 2. Renewal Rates - very similar but rather than absolute $'s lost you look at %'s. Two flavors of this that I've typically seen. Renewal rates against RBOB (renewal book of business) and Retention rates against BOB (book of business). 1. RBOB Renewal % - of the $'s that were up for renewal this year (or quarter), how much of it did you renew? 2. BOB Retention % - of your total annual recurring revenue, how much of it did you retain? 3. Product Usage/Adoption - are customers getting the most out of their existing products? What's their usage % (# licenses utilized, # activations, etc..)?

The worst KPIs I've seen are those that encourage the wrong behavior or provide a false sense of security that the business is doing better than it really is. Take pipeline coverage, for instance. Pipeline coverage is a fundamental KPI. There's no sales ops team in the world that doesn't measure pipeline. But the best teams know that when identifying the right KPIs, quality is just as important as quantity. Having a large quantity of pipeline means nothing if there's no thought behind how the quality of that pipeline is assessed. Sure, it might be great on paper to have a 5x coverage or a 10x coverage against next quarter's target, but how do you know you can "trust" that pipeline? The KPI is only meaningful if you have confidence that it is real, i.e., if you have systems to pressure test and accurately benchmark that metric.

I'll be the first to say it. It's really hard. There's no perfect answers and attempts to quantify this kind of uncertainty can sometimes like a reach, and at worst, feel like complete BS. But this is a really important question. How do you determine what "good" looks like when you're doing something you haven't done before? 1. I think the first step is admitting that there's no single "right" answer. If you let go of thinking that there's one perfect solution, you allow yourself to move past unrealistic expectations and get started on the work. You have to be ok with knowing it's going to be directional. But having a direction is way better than not knowing which way to go at all. As the saying often goes, done is better than perfect. There's a good chance that your KPIs will evolve as your thinking matures and you learn more about the market you're entering. 2. The second step is to really understand the art of assumption making. Realistic goals start with realistic assumptions. So if your assumptions are reasonable, chances are your goals will be too. Now, what's considered reasonable might be very different for different people, but remind yourself that goal here is to narrow down your range of possible outcomes into something that feels actionable. 3. The next step is to determine whether a "tops-down" or a "bottoms-up" analysis makes more sense. For the sake of example, let's say the KPI you've decided to focus on is # of new customers to acquire. 1. One top-down analysis could start with market sizing, where you quantify the TAM (total addressable market) based on population, your target demographic, and other salient and available data points, then identify, based on that TAM, what % would be reasonable to target. Your final answer might look something like: "We should target acquiring X # of customers which represents Y% of the TAM." 2. A bottoms-up analysis might involve looking at internal data and seeing if there have been similar historical precedents. What's been the customer acquisition rate from other markets the company has entered? Do these markets offer similar-enough comparison points? If it's not a straightforward 1:1 comparison, is there some type of aggregation you could do? 4. The final step, and arguably the most important, is to simply get started, learn, and iterate. Once you've acknowledge that the KPI is there to set the direction, the real work begins when you start moving in that direction. You'll quickly get a sense of whether your assumptions were right, or whether they need to be updated. The final note I'll add to all this - and this is sometimes the dose of realism that we get dealt - is, sometimes the goal is not to be realistic. Sometimes, the question is "what's required?", not "what's realistic?". If the CEO challenges you to grow revenue by X% or if you need to hit X target in order to keep the business afloat, you have no other choice but to figure out how to make it work. Humans are curious, in that way. We're capable of doing things that we can't even imagine yet or that we think are impossible.