Theory Seeks Practice

It seems there’s a new tag line for business concepts every few months.

Take revenue performance optimization (RPO), for example. It’s a methodology designed to help companies manage revenues, especially during rapid growth. But isn’t this what companies have always tried to do? Of course. But the times have changed, say RPO’s adherents, and RPO is designed to adjust to this change.

“Executives have spent their careers managing hard financial assets,” says Floyd Kvamme, partner at venture capital company Kleiner, Perkins, Caufield & Byers. Kvamme is also a member of the board of directors at Santa Clara, Calif.-based Brio Technology, which recently donated US$1 million to the Columbia University Graduate School of Business in New York City, for the study and analysis of the RPO concept.

“In 1978, 83 per cent of the market capitalizations of nonfinancial companies was made up of plants, real estate and equipment,” Kvamme explains. “In 1998, those had shrunk to only 31 per cent. It’s a new game. Executives must manage their new assets.” Those assets are the knowledge of a company’s top performers, which has never been sufficiently tapped before.

In theory, RPO will help companies improve revenue from their existing businesses by as much as 10 per cent to 30 per cent by better managing information assets. But how?

RPO goes beyond expense control through budgeting to establishing repeatable methodologies based on the practices of top performers, says Nelson Fraiman, a professor and codirector of Columbia’s W. Edwards Deming Center for Quality, Productivity and Competitiveness. Companies will thereby discover ways to more efficiently tap their current customer base, offer the sales force more qualified leads and supply product bundles more closely matching market demand.

Technology enables the RPO process, but Fraiman says the school will not be tied to any one vendor.

Janet Dang, general manager of applications at Brio, says the company’s gift is not simply altruistic. “We look to Columbia to develop RPO’s scientific plans and practices, which we and our customers don’t yet know how to pursue.”

Stay tuned.