Managing Strategic Accounts

In an effort to keep up with the latest news related to mergers and acquisitions, I am continually educating myself by pilfering through a never-ending inventory of content, online and elsewhere. Recently, I have read a number of very good articles and blogs on merger and acquisition strategies, processes, trends, etc., and many of these articles are very articulate in how they advise completing a successful merger or acquisition. 

Most recently, I read an article in Consulting Magazine that mentioned some staggering statistics related to the percentage of CEOs that were interviewed not knowing the clear strategic rationale or the long-term financial contribution that the deal would bring to the company.  The article was well done and went on to talk about the right questions to ask and shared many strong points related to today’s mergers and acquisitions climate.  However, nowhere in the article, or in many other articles on this topic, was there any mention of the need to clearly understand the customer base that is being acquired.  

I realize that many mergers and acquisitions are aligned to a pure financial play or intellectual property or other non customer-related attributes, but for those mergers and acquisitions that have greater strategic implications the goal still remains to impact the multiple or potential market share gain or successful entry into a new market.  So shouldn’t it be of primary importance to include a thorough examination of the customer base? Thorough, meaning a deep, fully representational view crossing segments, geographies, and the population as a whole? I have seen, first hand, the fall-out of completing an acquisition without proper due diligence on the customer base.  Needless to say, it didn’t end well.  This does not have to be the case.  Understanding your customers to create competitive advantages begins before and culminates with the completion of an exit with favorable valuation multiples.

Here is the link to the article from Consulting Magazine – it’s worth a read. 

Michael Good
Vice President, Strategic Account Manager

A maturing industry is one that is moving from rapid growth to significantly slower growth. An industry is said to be mature when nearly all potential customers are already users of the industry’s products; market demand thus consists mainly of replacement sales to existing customers, with growth hinging on the industry’s ability to attract new customers and convince existing customers to up their usage. Consumer goods industries that are mature typically grow at the rate of the economy as a whole – under 5 percent.

Michael Porter outlined several strategic moves companies can make as the new competitive character of a maturing industry begins to take shape:

-          Pruning marginal products and models

-          More emphasis on value chain innovation

-          A stronger focus on cost reduction

-          Increasing sales to present customers

-          Purchasing rival firms

-          Expanding internationally

-          Building new or more flexible capabilities

One necessary ingredient to insure the success of any of these strategic moves is a complete understanding of the customer. Let’s focus on cost reduction for a moment. Take cost out of a highly customer-valued and positively differentiated aspect of your business and you could negatively impact revenue in one quick move. Sounds logical, but how many times do business leaders simply require costs to be cut equally across all parts of the business because it seems to be fair for all involved? The answer: far too frequently.

Consider acquiring a competitor. An acquired firm’s customer base can provide expanded market coverage if you can retain the customers after the acquisition. To increase your chances of success you want to know how strong the acquired customer relationships are and what customers are loyal to (products, salespeople, brand, service, etc.). Deep knowledge of the customer can not only help you make the buy decision, but will also serve as the touchstone for your integration plan.

So, for all of you plotting your next strategic move in a maturing market – how well do you understand the customer?

Some of my colleagues and I are in the midst of preparing several executive-level client presentations. These are summaries of voice-of-the-customer input which will be shared with the CEO and executive staffs of these companies. 

This is a great situation. We know these CEOs want this information. Here are a couple of pieces of proof:

1.       We’ve been citing this Economist study quite a lot: The Digital Company 2013, How Technology Will Empower the Customer. From it, we learn that executives believe their most innovative ideas will come from customers rather than their own R&D functions going forward – and they believe customer information will be their primary competitive differentiator.

2.       IBM released their 2010 Global CEO Study. From their interviews with 1,500 global CEOs, they found that "CEOs are making 'getting connected' to customers their highest priority…"

So, we’re ready to seize these opportunities, and this means we’ve been having lots of discussions like: If I were CEO of Company X, what would I want to hear about our customers?

Here are some key emerging themes:

-Share anything we’ve learned regarding future business – whether customers are planning to spend more and which types of customers provide the best growth opportunity

-Highlight what aspects of the current customer experience (the entire combination of their product and service offering) should be leveraged or improved to capture the future business

-Align with special interests – while the top two items are most key, it’s a good idea to also include anything you may have that you know is a current hot topic for the CEO (whether relevant to your overall story or not)

What else would you want to know if you were CEO?

Sonya McAllister
SVP/Principal

Last week, Walker hosted 44 representatives from 19 of our client organizations at a two day forum in Indianapolis.  We host this type of event twice a year, and each time I am struck by the quality of the companies and people that we get to work with.  I’m also continually impressed by their willingness to take a couple of days ‘off’ and step back from the day-to-day of our interactions to think strategically about how they want their customer listening programs to evolve.

While parts of our forums are focused on broader information sharing, sessions are always earmarked for account teams to meet and plan enhancements and new directions.  Inevitably, these business reviews lead to agreements to explore new opportunities which will enhance the overall value that our programs deliver inside our clients’ organizations.

As Strategic Account Managers in any industry, this ‘stepping back’ is something you can accomplish even if your company is not in the habit of hosting forum-style events.  Engage with the more senior contacts on your customer team in a meeting focused on new perspectives and connections to business strategies and objectives.  Together, build a roadmap that will strengthen the connection of your work to their core business issues.  Then start to drive the route, and see where it leads you.

Jennifer Batley
VP, Strategic Accounts

(This post originally published on SAM Source, on October 4, 2010)
 

Next week, we’re holding another of our Walker Forum events (www.walkerinfo.com/walkerforum). Recently at these events, we’ve been focusing on key aspects of customer-focused companies and how they compete, operate, adapt, etc. One of these areas of focus has been leadership. At our last Forum, we held a panel discussion among four executive sponsors of customer listening efforts in their organizations (summarized in a prior blog post at: http://blog.walkerinfo.com/blog/walker-information-blog/page/4).

Next week, we’re taking it a step further. We’ll be conducting a virtual interview with the CEO of an extremely customer-focused high-growth company. In the interview, he'll share his advice to other CEOs trying to rally their organizations around customers (and reap the benefits of that):

1.       Be seen and heard talking with and listening to customers – make sure the entire company knows this is your top priority.

2.       Put an objective rewards system in place to drive your desired behaviors – in this case, it’s a stock award when customer metric goals are achieved.

3.       Race to success – set high long-term goals and work back from those to drive annual plans to get to those goals as quickly as possible.

He suggests this approach will make a company’s shareholders as happy as his are – and, trust me, they are!

Sonya McAllister

Principal/SVP

A very smart, experienced businessman – a Senior Vice President in his company – told me last week that there is no customer loyalty in his industry.  Can this be true? Are there certain industries where customers do not develop a certain affinity or alignment with their preferred providers and behave accordingly?

In this particular case, we had some evidence to refute his hypothesis. We were talking about the semiconductor industry which happened to be an industry where we conducted an assessment of the state of customer loyalty across the industry a few years ago. While customers are generally less loyal to their providers in this industry than what we see in others, there is proof that those companies within the semiconductor industry which excel at building customer loyalty are dramatically outperforming their peers on key financial measures. This chart depicts the difference in operating income - with the orange line showing the operating income performance for the most customer-focused semiconductor companies (growing at 82%) and the red line showing operating income performance for the least customer-focused companies (growing at only 15%).  A pretty big difference, and we see the same results across many other financial measures.

Now, I get that customers who are buying semiconductor products are buying based on a lot of (primarily technical) factors.  But, when your performance on these factors is in an acceptable range, then customer loyalty does come into play and makes a big difference in how a company performs.

We’ve conducted similar studies in many other industries, and we find the same pattern. We also work with companies in industries ranging from accounting firms to retailers and have yet to find an industry where there is no payoff in building customer loyalty. But, I’m intrigued by the idea – is there an industry out there where customer loyalty or the strength of customer relationships does not come into play?

Communicating is critical in a customer listening program, strategic account management, and frankly in each relationship in our lives. Our company’s founder, Mrs. Tommie Walker Anderson, is often attributed with the saying “You’re 100% in control of your own actions, and 50% in control of all your relationships.” Today, I came across a story that is certainly humorous, but also emphasizes that different people have different relevancies and styles. This is all well and good in terming of variety being the spice of life and all – but it can create communication breakdowns and a lack of mutual success when one doesn’t consider what is relevant to the audience and individuals they are trying to engage.

A VP of Marketing who has launched a strategic account management initiative in his company in the past year made the comment to me this week that his account teams were skeptical of the impact executive sponsors could have in their accounts. 

Even though I know we strategic account managers like to be in control of everything going on in our accounts, this surprised me a bit. All evidence I’ve seen shows the positive impact gained by having top-to-top relationships between your company and your account.

Some examples of the evidence:

-The Strategic Account Management Association (SAMA, a great resource in this topic area) says right on their web site: “Executive sponsorship is considered a critical success factor for any organized strategic accounts effort.” (http://www.strategicaccounts.org/public/knowledge/glossary.asp)

-Grover Smith of Cisco presented his company’s executive sponsorship program at the recent SAMA annual conference. He shared that they expanded their program from 15 executives covering 30 customers in 2006, to 125 executives covering 194 customers today – and they did so because they see a positive impact on revenue, customer satisfaction (which we all know leads to growth), and keeping Cisco focused on the customer’s top priorities.

-In some best practice gathering interviews recently completed with the highest performing strategic account managers at a Fortune 500 company, each one of the 6 high performers interviewed cited (without prompting) the influence of their executive sponsor on their overall success (high customer loyalty and high revenue growth) with the customer.  

So, it seems like a good idea, right? If you’re starting to think so, try these tips to ensure your executive sponsor is a growth contributor:

-Be sure to find the right executive that fits with your customer. Grover Smith of Cisco shared that their sponsors are selected via a six-step process with the last step being an expectation setting/match analysis meeting between the account team and the proposed sponsor.

-Keep your executive (and you and your entire team) focused on your customer’s priorities rather than your own.  

Remember, you all want the same thing – success for your customer (okay, so that will lead to your success too…nothing wrong with that). 



Sonya McAllister,
SVP/Principal

At our recent Walker Forum, I had the pleasure of leading a panel discussion among some of our attendees who are senior leaders in their companies. The theme of the panel discussion was "Leading a Customer-Focused Organization." We asked these leaders why their companies are particularly customer-focused and how they maintain that, and here’s some of what we learned:

• Customer listening initiatives are an integral part of their companies’ strategies and are regularly discussed at the CEO-staff level.

• Achieving their current level of customer focus has been a journey – one that was often started by a crisis. One of these executives told a story about having to swap out his own company’s equipment and replace it with a competitive offering in order to address some persistent customer problems. This experience really showed their executive team they needed to better understand their customers’ businesses and the integral role their products and services played.

• Constant communication is needed to keep their companies on the journey. That communication is targeted to all levels in the organization, from the CEO-staff to the product and service delivery teams.

• In many cases, monetary incentives are used to keep employees’ priorities in the right order.

The results of these efforts are tangible. Increased profitability, improved customer experiences, and fewer critical customer incidents were all cited as bottom-line outcomes. We see these kinds of benefits time and time again. It’s what led us to put together the Walker Index (below right) to demonstrate how customer-focused companies perform over time. 

The Walker Index is a stock index comprised of current Walker clients. Companies are included in the index only during their tenure as Walker clients. Companies that are attracted to Walker are committed to using the stakeholder perspective as an impactful management tool. The Walker Index indicates that these companies outperform the broad markets – by about a 5:1 margin! 

Unless your company is achieving these kinds of results today, you may want to challenge whether you’re sufficiently customer-focused.


Sonya McAllister
Principal/SVP

• Internal financial measures, such as sales, revenue and repeat purchase pattern metrics
• External financial measures, such as your customers’ stock performance
• Annual Reports, which provide insight into strategy, leadership, markets and financials
• Customer feedback, from sources such as annual relationship surveys, transaction surveys, customer service interactions, and your own interactions with the client team
• Public information, as available on your customer’s own website, as well as other online sources of opinion and fact
• Industry information, from analysts and relevant publications or other expert sources
• Competitive information, available from most or all of these same sources