Strategic Accounts As Engines of Growth
Last month, we were invited to meet with a marketing and sales executive at a leading industrial organization. The purpose of this meeting was to discuss his vision for his firm to move their strategic account relationships to a higher level. As a relative newcomer who was brought in to head the firm’s strategic account organization, he had come to recognize that these major customers were demanding, complex, and constantly evolving. He also understood that these accounts were critical to his firm’s future success. To underscore his interest in further nurturing these relationships, he shared with us his summary of an initial meeting with one of his larger “eight figure” accounts.
While this account was one of the firm’s older, more established customers, the executive believed that the account was undergoing some changes that his organization was not able to effectively “put its arms around”. Several years ago, the customer had introduced a centralized procurement organization. Our client noted that, from his perspective, the prevailing corporate contracts contained reasonable and fair terms and conditions. Nevertheless, purchase orders were no longer being placed as frequently from the customer’s local plants as in earlier years. This executive also reported that his strategic account team’s recent overtures toward introducing new product developments were quickly transformed into requests for price reductions. In addition, the account executive’s efforts toward bringing the latest training concepts to the customer’s field team were being met with a lukewarm reception. The customer’s field team seemed to be extraordinarily concerned with inventory and delivery issues, not training. As a result, the rate of revenue growth with this relationship had receded over the last several years and opportunity with this account was languishing.
Contributions from Best-in-Class Relationship Management
This executive summarized his story by saying that “this is a big account, in some ways it’s a good account, it’s certainly an important account – but it doesn’t feel at all like a strategic account”. He was right. Interviews with dozens of strategic account “team leaders” – individuals responsible for their organization’s strategic account teams – defined a very distinct set of expectations for best-in-class strategic account relationship management[0]. From across many segments of the global economy – manufacturing and service firms, North American and European firms, Fortune 100 firms and smaller niche firms – a set of consistent messages has emerged. Effective strategic account relationship management should yield some clear and important contributions, as summarized in the following graph:
Blue Canyon’s research confirms that business-to-business suppliers are less focused on new customer development and more interested in growth of their existing customer base. In essentially every discussion Blue Canyon has had with leaders of strategic account groups, we have learned that it is these critical customers who are expected to deliver the highest growth opportunities – to serve as their firm’s engines of growth. Most of those with whom we spoke reported that this expectation had escalated in the uneven economy of the past two years, with even greater importance than was the case during the boom years of the 1990s.
Unambiguously, these leaders have reported to us that these specially selected accounts are the ones that are expected to consistently outperform the rest of their firm’s other market segments. In fact, the strategic account groups also often have the highest visibility within the supplier firms. One executive reported that his strategic account teams have the highest expectations, face the most demanding revenue budgets in the company, and are accountable for holding regular customer reviews at the President’s level.
Strategic Relationships – Not Just Strategic Accounts
Again and again, our research shows that successfully meeting these growth goals doesn’t just happen. The distinction made by the executive cited earlier – namely, that “big, good, and important doesn’t equate to strategic” – has been echoed over and over by the team leaders with whom we’ve spoken. Their own observations make this point quite eloquently:
| Table 1: Insights about “Strategic Relationships” from Executives in Charge of Strategic Account Teams |
| “Until the customer tells us we’re a strategic supplier, I can’t believe that they are in fact a strategic account for us.” |
| “Strategic accounts bring the opportunities to you, instead of you always having to try to push the ideas on them.” |
| “I knew we had a strategic relationship with [a certain account] when they balked at implementing ‘e’ supply chain management practices because it would get in the way of their relationship with us.” |
| “If our products and services aren’t critical to our customer’s performance and results, it is silly to try to put the label ‘strategic’ in any sentence describing the relationship.” |
| “You can assess the relationship by asking two questions. First, does the customer think of us as a solutions provider? Second, have we provided them with solutions?” |
| “The common denominator with successful strategic account relationships is 100% around the customer: Do they have a desire to go beyond a ‘buy-sell’ relationship? Is there a champion in the customer organization who sees value from a strategic relationship?” |
| “In a true strategic relationship, the customer considers us critical to their ability to get to where they are trying to go.” |
| “The best strategic accounts are willing to open the door, allow us to help them. There is an ongoing invitation to bring expertise into their firm.” |
| “Before a real strategic account would [make a particular decision], they would ask us for inputs, knowing our interests and theirs were aligned.” |
| “No matter how many carloads [of our firm’s product] we shipped to them, I knew we didn’t have a strategic account with this firm when we are simply referred to as the company that sells them [name of the product].” |
To firms looking to realize these contributions, three messages from this group of experienced strategic account team leaders stand out in terms of importance. First, it is essential that those working with the customer manage the relationship at a “strategic level”, minimizing the time consumed by managing transactions and in fire fighting. The strategic framework must foster an environment that invites the supplier to make differentiated, high value contributions to its strategic account. The right strategic framework should allow the supplier to “do the right things…right” – proactively bringing the right value propositions to the customer[1].
Second, these team leaders have emphasized the importance of becoming a “solutions provider” to the strategic account. Reaching this position often requires that the customer is willing to redefine the roles and boundaries between the two organizations, inviting the supplier to remove previous roadblocks. Team leaders communicate that getting to this point is not an overnight event – it requires investments in the relationship and uninterrupted “proof statements” to eliminate possible concerns about the supplier’s reliability[2].
Achieving a Strategic Relationship and Becoming a Solutions Provider
Two case studies – from among many similar ones that emerged in discussions with these team leaders – illustrate the challenges of achieving “strategic relationships” and becoming a “solutions provider”. The first case study involves a building systems supplier that had a very large customer relationship with an organization with over 1000 sites around the country. This customer has approximately 10,000 pieces of equipment in the field from multiple suppliers, all of which required maintenance and repair. This customer’s operations were vulnerable to disruptions should equipment go down.
The supplier working with this customer developed a new approach to equipment maintenance and repair – and in fact took on service responsibilities for their customer on an outsourced basis. Their approach involved a comprehensive look at what was required to achieve a solution. The supplier purchased and equipped service technicians with lap top computers. They developed a near real time database of event activity, providing a storehouse of necessary information about the equipment, its service history, event frequency, etc. This supplier also developed and established a comprehensive training process for the service technicians to enable these technicians to use these new tools. Essentially, this supplier ‘e’ enabled the whole maintenance and service environment.
Like most success stories, this one included a win-win outcome. The new approach to service dramatically cut the customer’s response time for servicing the equipment. Repairs are 99+% completed in four hours or less across the customer’s 5000+ service calls per year. From the supplier’s perspective, growth from this strategic account last year was over 30% in both revenues and profits. This supplier is now rewarded with essentially all of the new product orders and replacement orders from this customer.
A second success story involves a supplier to the telecommunications equipment industry. It had a long history working with a particular customer, with product shipments on almost a daily basis. As has been characteristic of this industry, technological progress has been at a rapid pace, and the supplier and customer involved in this relationship both recognized that they were “paying a high price by not being together on these technology changes”.
In collaboration with this telecommunications customer, the supplier developed a strategy to take on significant design and integration responsibilities on the customer’s behalf. The supplier assumed responsibility for new product development for a key module that was an ingredient to the customer’s product. To successfully re-design and evolve this module, the supplier first integrated its own components with those of several other suppliers. The supplier created new tooling, technical documentation, end customer training, and inventory management strategies. Essentially, as the account manager summarized it, “[our firm] took a seat at the customer’s product development table, brought our own expertise to the situation, and made sure that [the customer] was always getting the full benefits of the newest technologies that were emerging from our own efforts”.
The win-win outcome associated with this case study is also evident. The customer realized significant performance improvements as a result of the supplier’s contributions, improving on its ability to optimize its products for the unique operating environments in which they were to be used. The customer also achieved a significant improvement in time-to-market, as engineering activities that previously had been done sequentially were now being done in parallel. From the supplier’s perspective, its gains were not limited to revenue growth as the customer consolidated purchases with them. They gained as well in terms of the long-term stability of this key relationship and in their ability to bring high-value contributions from which they were able to realize appropriate prices.
These two case studies illustrate the complexity of the challenges of reaching the point where relationships are strategic – ones where the supplier considers the customer a strategic account and the customer considers the supplier a strategic supplier. The ideas advanced by team leaders about how to reach this point were quite varied, but included a number of clear (and quite demanding) themes:
| Table 2: Strategic Account Relationship Management Priorities – Examples of Ideas Frequently Mentioned by Strategic Account “Team Leaders” | |
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Achieve a “strategic relationship” |
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Be a “solutions provider” |
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Internal Foundations for External Success
The third message from the strategic account team leaders was different from the earlier two messages in that it focused on the internal prerequisites for success with strategic account relationship management. Achieving a strategic relationship and becoming a solutions provider were viewed as outcomes that could only be achieved when an organization had put into place certain internal foundations for success.
While most team leaders admitted the need for “more progress” within their organizations with respect to such internal foundations, they provided valuable insights as to what they believed to be the best-in-class characteristics of an internal environment that would facilitate success with strategic accounts. Their recommendations were concentrated across five dimensions:
| Table 3: Internal Foundations for Success with Strategic Account Relationship Management | |
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Human Resources |
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Finance |
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Information and Information Technology |
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Knowledge Management |
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Culture, Processes, and Leadership |
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The examples provided by various team leaders included numerous success stories within which characteristics of the internal environment enabled their teams to achieve success with strategic accounts, a few horror stories wherein external success was thwarted by internal factors, and numerous examples of works in progress involving partial solutions, solutions on one side of the Atlantic, and solutions that “were there one day, absent another”. Like the external factors described earlier, these internal factors were described as requiring constant vigilance, demanding sustained attention, jobs that are never done, and important organizational priorities in which today’s best-in-class should be considered only a starting point for tomorrow.
Summary
The team leaders with whom we’ve spoken were clear that strategic accounts can be the engines of growth for their firms, as well as sources of other important contributions to their organizations. They cited success story after success story that showcased the win-win outcomes that result from “doing the right things…right”. They spoke with nearly one voice in their confidence that strategic accounts can be engines of growth if their firm focuses on the strategic aspects of the relationship, emphasizes its role as a solutions provider, and develops an internal environment that facilitates the organization’s ability to meet the challenges of their demanding, complex, and constantly evolving strategic accounts.
[0] These interviews were conducted as part of a research project sponsored by Blue Canyon Partners, Inc. and the Strategic Accounts Management Association (SAMA). The overall project is described in Whatever Happened to Growth?, published in Velocity, Fourth Quarter 2001.
[1] A detailed approach to developing a strategic framework for major customer relationships is described in A Blueprint for Success with Major Customers, Blue Canyon Partners, Inc., Evanston, IL © 1999.
[2] Research by Blue Canyon Partners, Inc. suggests that it is only in higher “Tier” relationships that customers are likely to involve suppliers as “solutions providers” in areas critical to their success. The key competencies and processes associated with reaching these higher Tier relationships are described in Growth Is a Project, published in Velocity, First Quarter 2002.
[3] A Blueprint for Success with Major Customers describes three competencies associated with success with strategic account relationships: the Relationship Competency, the Implementation Competency, and the Innovation Competency.
[4] eSAM: Creating the ‘e’ Footprint for Strategic Accounts, in Velocity, Winter 2001, provides examples of the contributions that can be made from linking the business systems of suppliers and their major customers.
[5] Three C’s of Global Account Management: Customers, Customization, and Competitive Advantage, published in Velocity (Summer 1999), describes the challenges of succeeding with global customers.
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