Yet, contrary to what its providers would like us to believe, the new technology does not in itself provide competitive advantage. In fact, the very ubiquity of information and communications technology (ICT) systems means that owning the tools themselves is merely an entry fee-something that your company needs to even be in the game. If you're competing for major account revenue today, therefore, you've got to rely on something other than the latest generation of IT products and services.
There are multiple, interconnected aspects to that "something other," but one thread ties them all together. To achieve competitive advantage today, especially in targeting large or "strategic" accounts, the key differentiating factor is the ability to build relationships that bring your customers measurable value over time. In a sense there's nothing new about this imperative; bringing customers value has always been a key to success. But the world in which we now must do this has in fact changed-and changed in ways that are only marginally related to technology.
These changes present significant challenges to business professionals, and in this opening chapter we'll detail the most important ones. These are the "field position changes" that, as an account manager or member of an account team, you need to be thinking about before you can even begin to draft plans for approaching your Large Accounts. We present them here as eight essential lessons.
Lesson Two: Technology Changes Nothing
By information management system, we don't mean software. Perhaps the greatest single mistake of the dot-com years was the idea that technology in itself was going to make us all rich. In pursuit of that dream, company after company invested heavily in software that was designed to "automate" the sales and marketing process. First it was Sales Force Automation (SFA), then Customer Relationship Management (CRM), and then Enterprise Relationship Management (ERM). Some companies did very well with these new systems, but a shockingly large percentage of these fixes fell flat, bringing little to no returns on massive IT investments.
Systems failed for three related reasons. First, the purchasing companies allowed themselves to believe that the software would somehow run itself, and therefore failed to invest adequately in the ancillary services that CRM providers were only too eager to sell them-services like integration assistance, data cleansing, and most importantly training. Second, poorly trained and often suspicious sales and marketing people decided that the new "automation" software was just another gimmick-and one that would require them to enter data while getting nothing in return. So they just didn't use it-a phenomenon that became known in Silicon Valley as the "user adoption problem." Third, many companies, intoxicated by CRM's shiny bells and supersonic whistles, failed to analyze the processes that they were automating; what they got, therefore, was the same old selling blunders, only faster.
The lesson isn't to avoid CRM software, or any other technology. Used properly, good software can be as effective an account management tool as a clear-signal mobile phone or a broadband connection. But that's all it is. Software can no more turn an incompetent salesperson into a double-quota winner than a $200 driver can turn your average five-year-old into Tiger Woods. Results are never provided by a tool in itself. They're provided by the effective use of that tool in the hands of a professional who follows a replicable, tested process for ensuring success, and who knows that, however sophisticated your toolbox, it's still the effective management of relationships that drives long-term business.
That's an old lesson, of course. We've been teaching it in all our programs for more than twenty years. It bears repeating here because today, perhaps more than ever before, you need good tools to keep your competitive edge, and it's easy to be fooled into believing that they'll do the job for you. Because we know they won't, we focus in this book, as in our programs, on defining an account management process that is generalizable-a process for building solid, mutually beneficial relationships that can be supported by whatever technology you adopt.
Lesson Three: Customers Are Still in Charge
In the early days of the Internet, the more optimistic champions of online commerce predicted that, sooner or later, all transactions would move to this lower-cost channel, and the centuries-old brick-and-mortar model would become obsolete. The fact that this didn't happen tells us something critical about customer psychology-something that has tremendous implications for Large Account management.
What Internet transactions offer people isn't so much a replacement for their customary buying and selling behavior as an expansion of choices-this explains their popularity. Sometimes customers go online to make actual purchases on the spot; pioneering Web business leaders like Amazon built their reputations by offering that service. But even in some other leading online firms, like the electronic brokerage Charles Schwab, a heavy proportion of trading happens offline- at the branch offices that some individuals prefer. Some customers, moreover, use the Web as a research tool, gathering comparative data about prospective purchases and potential suppliers that enables them to make more informed buying decisions. And not all the decisions they make favor buying online.
In fact, over the past few years, airline and hotel customers, to pick only the most obvious examples, have become adept at using the Web as a bargaining tool. Armed with a low online quote, they can more effectively demand deeper discounts in the brick-and-mortar world. A similar comparison-shopping strategy works on the B2B level, where Internet auctions have dramatically intensified competition for corporate contracts.
Whether you're looking at individual consumers or Large Accounts, the outcome is the same. Even though only a relatively small portion of today's business takes place online, the mere presence of the Web as an alternate transaction channel has upped the ante for suppliers across all channels. The hard fact for businesses, online or off, is that the Internet makes customers more discerning and more demanding. Because they have become used to the instant, personalized, and cheaper responses available on the Web, they have come to expect equivalent levels of speed and service wherever they do business. One of the great ironies of the computer age is that machines have made customers more insistent on personal responsiveness.
For all businesses, therefore, the old adage about the customer always being right has taken on a special urgency. Customers today have been "reconditioned" by the Web. They are better informed, more aware of their options, and therefore more empowered than customers have ever been before. Making matters even more challenging in the B2B world is the fact that, when customers are asked to identify vendors' shortcomings, the single biggest complaint they make, according to HR Chally research, is that salespeople don't understand their businesses. This can have a chilling effect on customer receptivity. And, in more situations than most of us would like to admit, it means that the old loyalty effect is a fleeting phenomenon.
In fact, customer defection, or "churn," is a major problem everywhere. In the telecommunications industry, which coined the term, it's particularly severe. Our client Ged Holmes, who implemented LAMP when he was head of business sales at the British mobile network leader O2, cites "staggering" industry churn averages of between 18 and 24 percent. "It's only through a tremendously disciplined approach to the account as a whole," he says, "that telcom providers are able to keep that under control. You've got to realize that your job isn't to write new contracts, but to sustain the profitability of the business you already have. In a customer-centric world, that's a constant challenge. And the only way you can meet it is to respond to customers' demands for consultative service. It's not about giving them more technology. It's about using technology to help them plan the future."
Lesson Four: Short Lists Are Getting Shorter
The rise of supply chain management both as a technology and as a business strategy, has fundamentally altered the way suppliers are obliged to do business. A dozen years ago, your proposal might be judged based largely on its intrinsic merits: price, product reputation, compliance with an RFP's specs, ability to deliver against a deadline, and so on. That's no longer enough. Today's leading corporations are systematically gauging the total cost of doing business with their competing suppliers- and are moving toward ever shorter short lists of those who make the grade. This conscious narrowing of the vendor base is happening across the board, whether the cost to be covered entails a communications network, office supplies, or a potentially outsourceable HR function.
For anyone trying to manage a Large Account, the widespread adoption of supply chain management means that procurement has become a central factor in sales. As procurement specialists look for ever more ingenious ways to trim costs, the natural tendency-often a conscious one-is toward commoditization. This tendency, increasingly, is becoming quite scientific. Not only do companies rely on back-office automation systems to drive personnel costs out of routine procurements. In addition, many European firms now tap the resources of purchasing institutes to help them rationalize the supply chain management process. And the largest firms maintain huge procurement departments, specifically tasked by the C level to drive costs down.
Don McKelvie, a LAMP client and Director of Worldwide Sales of the leading oilfield service supplier Baker Atlas, notes that the procurement specialty has emerged, at least in part, as a result of the merger and acquisitions mania. "In the acquisitions process," he points out, "many oil companies spent millions of dollars more than the acquired company's assets were worth. One way of showing Wall Street that the resulting synergy justifies their investment is to hammer their suppliers into volume discounts. This is why the super majors and some larger independent oil companies pay literally hundreds of employees to manage procurement. That creates a challenge for vendors, because some procurement departments justify their entire existence by pushing suppliers down into a commodity position."
In the new procurement-driven world, "getting out of commodity" is a major challenge. We'll address it throughout this book, when we speak about maintaining your position on the Buy-Sell Hierarchy.
Lesson Five: It's Not About Making the Sale
In an arena where every buyer impulse is driving you toward commodity, focusing on individual transactions only ensures that status. To ensure success-even survival-in today's Large Account arena, you've got to set your sights on three or four years out, and on building long-term business, not just today's "opportunities." The reason is logical enough: Adding up quick serial wins gets you perceived as shortsighted, while working for the account's long-term benefit helps to ensure account retention. And in today's environment, retention is the name of the game.
Bill Clement is Director of Enterprise Development for Siemens Building Technologies. He draws a good distinction between companies that are truly relation-based, or customercentric, and those that he calls "opportunistic." "In an opportunistic company," he says, "you work from quarter to quarter at best, and sometimes even from deal to deal or, in our industry, what I'd call from project to project. In other words, you focus on single opportunities, and this tends to make you in the worst sense opportunistic. When you approach business this way, it's difficult to leverage your successes, because you don't see the relationships you're building as part of a larger, account management picture." Without such a picture, as Clement rightly insists, the best project management in the world will bring only limited returns.
The reason is that, in Large Account management today, successful firms help their clients run their businesses-not just purchase supplies or utilize services. The overall goal of any good LAMP process is to ensure better business returns for the targeted Large Account. This means keeping the focus not on your customer per se, but on your customer's customers-the accounts or consumers and other stakeholders that, over time, are making your Large Account successful. It means asking, regularly, how a given initiative or sale ties in to the Large Account's overall business strategy.
Experian Sales Director Neville Seabridge articulates this well when he talks about information. "Businesses have loads of information about their clients, including marketing information. But they seldom have enough information about those clients' own marketing problems, and that's an important area to concentrate on. Rather than selling products into customer organizations, the real challenge is to understand their pain points, their problems with customer retention, and deliver solutions that will alleviate those problems." The central lesson of any truly Win-Win business is that your success is a function of your customers' success. Not for this quarter alone, but for the long haul. Businesses are successful over time because they add value to their customers' businesses while simultaneously realizing value themselves. Only this kind of mutual benefit justifies continued investment in a relationship. To many senior-level people, who must answer to shareholders quarter to quarter, this is a difficult lesson to act on, especially when markets are volatile: Some of them frankly still see long-term account management as an investment that they're making in their successors' careers. But it's a valid lesson nonetheless. And the narrowing of the vendor base makes it an all the more urgent imperative.
Lesson Six: Account Management Is Business Management
A generation ago, an "account manager" was understood, often disparagingly, as someone who managed the relatively nondemanding work of follow-up and service-non-revenue- producing tasks like handling complaint calls, taking clients to lunch, and providing documentation. Today, in top firms you get to manage a major account only after you've proved your effectiveness in the selling arena. You've got dedicated responsibilities for overseeing all aspects of the relationship with the account-including both P&L and relational aspects. You may have an office at the customer's site, and "live" there part of the time. You're the account's advocate in your own organization- so much so that, in some companies, top management may sometimes wonder about whether or not you've "gone native." You're aware, in fact, that you have to manage your company's perception of your loyalty-and never promise the Large Account anything that you aren't sure your firm will be willing to deliver.
As a Large Account manager today, in fact, you function less like a salesperson than like a business development specialist or general manager-roles that require much different skill sets than most salespeople possess. You run a team of professionals whose responsibilities, like yours, are focused virtually exclusively on one account. That account is, in a real sense, your external asset-a kind of extended business unit of the parent organization. You've therefore moved beyond selling. Your compensation and influence reflect your senior role. So do the expectations that your company has of you. You've got a quota that reflects the importance of the "business" you manage. You may have P&L responsibilities. And you've got the resources, on your own say-so, to get the job done.
This scenario, which is already a reality in many Fortune 500 and other leading firms, is destined to become more and more typical. The wave of the future is clear: Large Account management is becoming a senior management function, driven by executive vision and appropriate resource allocation devoted to building relationships that in some cases develop into actual joint venture partnerships and that in all cases must deliver real customer value. Only this approach provides safeguards against customer defection. If your company isn't moving in that direction, you're already behind the curve.
Lesson Seven: The Lone Ranger Has Left the Building
When we started teaching LAMP in the late 1980s only the largest of our clients-firms like Hewlett-Packard and AT&T- utilized the integrated skills of designated teams to manage their ongoing relationships with Large Accounts. Today that has become a best practice across multiple industries. The days are past when a single person could hold all the relevant information about an account in his head and manage it as his private turf. Today, account management requires the coordinated effort of cross-functional teams, composed not just of salespeople, but also of people from a wide range of support and service areas. There are four points that are important to remember about these teams.
First, other than a small core, the team is typically made up of ad hoc rather than permanent members. Since it is designed to meet the account's needs in a dynamic environment, its composition-and the responsibilities of its members-have to be flexible. Once an account team gets locked into a permanent, graven-in-stone position on a corporate org chart, it loses its ability to respond to the needs of the client. One of the main challenges facing account managers today is how to coordinate the activities of these flexible entities.
Second, the best account teams are carefully and consciously aligned with the customer's teams. Team best practice today means working regularly with the Large Account to understand its changing needs-and placing your people face-to-face with the appropriate people in the account, to quickly and most effectively respond to those needs.
Third, because people only do effectively what they're rewarded for doing, the compensation structure of a Large Account team must respond to the differential input of all the team members, not just the superstar Lone Rangers who ride in at the end of the quarter and close the big deals. Large Account management is not a "sales function." If you want it to work, you must reward everybody who contributes.
Fourth, the team must have the internal resources and authority to function for the client as a resource provider. To do so effectively, it must have the executive support and interdepartmental clout to meet the client's needs instantly when they arise. This is why, in many companies, top managers serve as executive sponsors and active team members, often meeting with their executive counterparts on the customer side. Without the leverage provided by executive involvement, teams can easily fall victim to the deadly trap of overpromising and underdelivering. And herein lies one of the great advantages of the LAMP process. In the words of one client, "LAMP is the best tool for marshaling internal resources that our firm has ever seen."
Lesson Eight: You Ain't Seen Nothing Yet
The final lesson, while it speaks especially to the momentous changes of the past decade and a half, also goes back to a principle that we identified in our very first corporate program, Strategic Selling. It's that whatever got you where you are today will not be enough to keep you there as we go forward. Change will continue to be the only constant, and the pace of change will continue to accelerate. Therefore, the absolute essential for a good account management program is to have a process planning tool that is flexible enough to respond not only to the challenges that you're already facing, but also to those you haven't yet imagined.
Information technology specialists are fond of quoting Moore's Law-a rule of thumb defined by Intel co-founder Gordon Moore that computer capability, in terms of chip speed, increases by a factor of two every eighteen months. However accurate this estimate may be, it points to an immensely important fact that far transcends the specifics of computing capacity. It's that, in an ICT-dominated world, change proceeds exponentially, not arithmetically. Which means that, however rapidly the business environment has been changing up to now, we ain't seen nothing yet.
We're in no better position than anyone else to tell you what the next ten years will bring. But we can say one thing for certain.
In an exponentially morphing world, you need flexible tools-tools that will help you meet tomorrow's challenges, whatever they may prove to be. The planning process that we describe in this book is one of those indispensable tools.
Copyright © 1991, 2005 by Miller Heiman, Inc.
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