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Whatever Happened To Growth?
Earlier this year, one of our clients invited us to participate in an off-site meeting involving managers from his organization. The purpose of the meeting was to address the slowdown in the firm’s business that appeared to be accompanying the sluggish economy. Our client hoped that the team would be able to identify action plans that would enable it to meet the performance goals that had been set for the year, despite these challenging market conditions.
The first day’s meeting involved a series of presentations from marketing, sales, and financial leaders within the firm. A clear picture was painted – of a sales slowdown late in 2000 that was continuing through the time of this meeting. After these presentations, three teams were formed. The first team was assigned to target “customer conversions” from this firm’s two main competitors, the second team to evaluate the firm’s prospects of gaining business from within new markets, and the third team to focus on short-term margin improvements opportunities.
The reports from these teams at the end of the first day were discouraging. The “customer conversion” team had quickly speculated that each of its two competitors had also formed a conversion team – and the results of these strategies would be something like a “swap meet” during which the three firms exchanged a few customers, all at lower than currently prevailing prices. The “new markets” team announced that the firm’s marketing planners had looked at new market opportunities a few months earlier in the context of the firm’s planning process, but had not put into place any concrete action plans. The “margin improvement” team decided to rename itself the “archeological team”, since it viewed its main challenge as that of digging up the memos on travel restrictions and hiring freezes that had been issued almost every year during the 1980s and early 1990s. As the first day’s session concluded, one participant effectively summarized the mood of the meeting by asking “Whatever happened to growth?”
Lessons from Growth Leaders
On the second day of the off-site meeting, Blue Canyon was invited to offer our perspectives on this firm’s growth challenges. To begin these discussions, we shared several lessons from growth leaders in other business-to-business firms. Such lessons are often useful in helping to create a strategy to ensure that growth is something that results from planning and action, rather than something that “just happens”.
One case study involved a business-to-business supplier who was in the enviable position of being not only the market share leader, but also being positioned within the high-value segments of its industry. This firm had a long-standing reputation for the best products and for a commitment to service. Its market position and customer roster were like a beacon to competitors. When we began to work with this supplier on strategy, this firm’s executives were concerned about possible market share erosion should they fail to match the competition’s lower prices.
This firm’s customers had a different perspective. Their questions were about “what was coming next” and about “next generation products and even more services”. This firm’s major customers had accepted this firm as an important and valued supplier and looked to this supplier for innovation and leadership.
From these insights, our client learned several important lessons. It realized that in the business-to-business world, “strategic account” and “strategic supplier” relationships were two sides of the same coin. It realized that they had developed critical competencies that allowed them to earn the position it held with its major customers, and that straying from these competencies would be a prescription for disaster. This firm’s customers wanted this supplier to “Raise the Bar” and, when it did so, its prospects for growth remained solid.
A second lesson involved a manufacturer that reaches markets through a number of third-party distributors. A number of years ago, this company had concluded that it was imperative that it “Join Winning Teams” with regard to its distribution decisions. As it examined its customer chains, this firm recognized that success with end customers depended upon critical supplier->distributor team competencies – in service, logistics, technical support, and inventory management. Meeting these critical success factors required best-in-class supplier->distributor teams targeted carefully on specific end customer relationships.
Research into this firm’s end customers uncovered two distinct clusters of “winning teams” that would achieve sustained growth. Discussions with organizations involved in one growth cluster yielded compliments about the knowledge, familiarity, and commitment that this supplier->distributor team brought to the end customer relationship. According to these end customers, the relationship had been characterized by exceptional performance: the supplier->distributor team was viewed as “world class” in terms of their business systems and processes. In the other growth cluster, the supplier was viewed as an incredible innovator, one that could be counted upon the “keep us ahead of the competition”. This evaluation gained this supplier and its distributors a seat at the table with certain end customers, resulting in a competitive position that was all but impenetrable.
Growth lessons from this example include the importance of selective decisions about the intermediaries and major customers with which to invest and the payoff that can result from developing and showcasing competencies that create ‘win-win-win’ outcomes in business-to-business customer chains. To get beyond “transactional” relationships, investments and competencies are both needed. Growth plans must focus on the “winning team” opportunities within which payoffs can be realized.
A third growth lesson emerged from a firm facing a vicious cycle in its business-to-business market. This firm and its main competitors were trapped in a cycle of price competition that led to margin pressures. These margin pressures forced service and quality reductions and opened the door to competitors eager to buy the business at a still lower price. One executive in this firm worried that the cycle might “swirl us right down the drain” before long. The financial results – lower revenues despite higher unit volumes, and substantially lower profits – underscored the seriousness of his concern.
This firm decided that to reverse this situation and resume growing, it must “Change the Game”. Its question was how to do it. The solution that this firm reached was centered on its major customer relationships. With a selected group of major customers, this firm committed to market-based pricing. In fact, it promised these customers a steady pattern of reduced prices over the next several years. Doing so allowed it to take price out of the equation and create a foundation from which it could change the game.
This supplier also committed to higher quality and service standards for these selected major customers, and instituted collaborative processes to “take costs out of the system”. Delivering on this commitment was a major challenge, and forced the firm to reinvent its approaches, processes, and programs. Multi-functional teams were assigned to each major customer, and key experts from across these functional groups invested quite seriously in developing insights and coming up with action plans. Surprisingly quickly, this firm discovered short-term action opportunities, and was rewarded by its major customers with more business.
Growth for this firm involved a decision to recognize, for the first time, that some of its customers were critical to its success. It learned that new approaches involving ‘special treatment’ to these relationships were appropriate – and imperative. It learned that there could be virtuous cycles as well as vicious cycles in the major customer environment, and that changing the direction of these cycles could only occur with proactive effort and commitment from across the organization. The supplier confirmed that the touch points in major customer relationships were far more extensive than sales->purchasing, and that some of the most valuable interactions involved rather surprising combinations of people from the two organizations.
Best-in-Class Growth Lessons
Our research, as illustrated in the experiences described above, has clearly pointed to some best-in-class growth lessons that can be learned and implemented by strategic account organizations in other business-to-business environments. Blue Canyon Partners, Inc. and SAMA are sponsoring a new research project to extend this knowledge base and share information that helps to answer the question “Whatever Happened to Growth?” for executives and practitioners working in the strategic accounts environment.
Critical knowledge foundations about driving growth with strategic accounts fall into several categories, including:
- Relationship Assessment. Strategic account relationships can be systematically categorized along several Tiers, from Supplier to Preferred Supplier to Extended Enterprise Member to Partner. The growth potential and the guidelines for strategic account management vary across these Tiers in a systematic fashion, which can guide strategic account managers in developing their forecasts and action plans.
- Competency Assessment. There are three categories of organizational competencies that are especially relevant in the business-to-business strategic accounts environment: the Relationship Competency, the Implementation Competency, and the Innovation Competency. Where a business-to-business supplier stands with respect to each competency can be assessed, uniquely in the context of each individual strategic account. From this assessment, focused action plans can be developed to enhance the specific competencies most likely to enable a strategic accounts team to take a major customer relationship to the next level.
- Strategic Accounts IdeaBank. A practitioner’s inventory of “best practices and creative practices” has emerged from working with growth leaders among business-to-business firms in many industries. The ideas included in this IdeaBank reflect action steps that strategic account leaders and teams have developed and implemented in order to meet the ongoing challenge of ensuring that their strategic accounts are their firm’s engines of growth. These ideas are as diverse as is the strategic accounts environment itself, from globalization to services to ‘e’. Accompanying these ideas are assessments of what elements – within the business environment, the company, or the strategic account organization – were important for success.
The research project being launched by Blue Canyon Partners, Inc. and SAMA is designed to extend this knowledge base and make it available to participants and SAMA membership. The first phase of the research will involve placing Blue Canyon’s assessment tools, as described above, on the SAMA web site. Participants in the research project can assess one or more of their strategic account relationships using these tools. The participant can compare their strategic account relationship and the associated competencies with benchmark information gathered from Blue Canyon’s previous research. This feedback will be accompanied by ideas as to the areas of focus that will most likely be successful.
A second phase of the research will involve one-on-one interviews with participants in the earlier phase identified as potential contributors of best practices or creative practices to the IdeaBank. Summaries of the ideas that emerge from these discussions will be included in future research papers and in presentations and discussions at the SAMA 2002 Annual Conference.
Answering the Question
For many organizations, strategic accounts can be the solution to the challenge posed by the question, “Whatever Happened to Growth?” This will occur when strategic account teams and executives make the case to their organization that growth prospects are real and that investments in strategic account relationships will yield a high rate of return.
We believe that this research project will help strategic account teams and executives make this case in three ways. First, it will document how growth leaders have realized success through strategic account relationships – and identify clear and actionable ideas about how to start the growth process. Second, it will strengthen a systematic process that defines the investments in key competencies that will advance each specific strategic account relationship. Third, it will provide information to realistically quantify the payoff that a firm can expect if it invests in its strategic account relationships. Blue Canyon Partners, Inc. and SAMA invite you to participate in this important research process and to share in the benefits that will emerge.
 George F. Brown, Jr. and Atlee Valentine Pope, A Blueprint for Success with Major Customers, Evanston, IL: Blue Canyon Partners, Inc., 1999.
 Atlee Valentine Pope and George F. Brown, Jr. Three C’s of GAM: Customers, Customization, and Competitive Advantage, Velocity, Summer, 1999.
 George F. Brown, Jr. and Atlee Valentine Pope, Solving the Business-to-Business Services Paradox, The Professional Journal, September (Part 1) and October (Part 2), 2000.
 Atlee Valentine Pope and George F. Brown, Jr., eSAM: Creating the ‘e’ Footprint for Strategic Accounts, Velocity, First Quarter, 2001.