By Harvey Dunham, Managing Director for Business Development, SAMA
By stirring the Board to force B2B companies’ CEOs to reduce the cost of their companies’ centralized functions, activist investors are unwittingly putting their most strategic customer relationships — and their colossal lifetime value — at significant risk.
In my role as Managing Director of Business Development for SAMA, I’m talking to customers every single day. And lately, I have received at least a half-dozen first-hand reports from our Corporate Member companies who have succumbed — or are actively resisting pressure from — their Boards to move their strategic account management programs out of their company’s central function organization and into either a business unit or region.
I won’t “name names,” but these include some of the world’s most venerated, recognizable companies. In all cases, activist investors are cited as the root cause and drive. The justification? To reduce costs by eliminating a handful of SAM program key roles in an effort to reduce costs and give shareholders a short-term profit lift.
Doing so is short-sighted, wrong-headed and flat-out self-defeating. Here’s why.
When done right, SAM programs work. SAMA research over the past two decades has shown, again and again, that a well-funded, well-executed strategic account management approach produces 2X growth (compared to a traditional approach), 10 percent higher margins and significantly improved customer satisfaction.
A SAM approach is required to sell innovation. According to research by Thomas Steenburgh and Michael Ahearne published in Harvard Business Review, senior leaders of companies express confidence in their ability to develop innovations but not in their ability to commercialize them. After studying more than 2,500 salespeople, those who effectively practice strategic account management dramatically outperform others in selling new products, services and solutions. The authors site SAM’s focus on balancing short- medium- and long-term growth in the service of helping their strategic customers achieve stronger business results — not just short-term sales growth.
Customers demand the ease-of-doing-business offered by strategic account management. Large and strategic customers do not want to deal with their suppliers’ internal complexity. They demand a single point of contact from their strategic suppliers who are
Responsible and accountable for the entire relationship, including all of their company’s products, services, solutions and innovations — at all of the customer’s geographic locations
Tied directly to the supplier’s senior leadership.
Focused on helping them (i.e., the customer) become a better company
Willing to organize their own company to achieve this outcome
And it’s not just this. Our current uncertainty about how much longer global economic growth will continue, how global political unrest will affect the future, and the threat of new disruptors in every industry leads to another sobering (yet often forgotten) reality: A supplier’s best chance of surviving the next recession DEPENDS on its largest, best managed and most loyal customers!
To CEOs: Resist all activist investor pressure to send your SAM program back to your regions or business units. You would be much better served by putting your strategic accounts at the center of your strategy as your best insurance policy to ride through the next macro-economic crisis.
To SAM program leaders: Help your CEO by making the clear and undeniable business case for SAM.
Digitalization is both a source of disruption and an enormous opportunity. We argue for the latter. Never has there been a better opening for SAM programs and strategic account managers to take on a bigger role in securing the future of their organizations.
The implications of digitalization are forcing SAM programs — and the SAMs who drive them — to redefine themselves on multiple dimensions. While many traditional SAM traits will remain, the overarching trajectory will see SAMs having to become even more strategic than they are currently.
The practical manifestations of becoming more strategic will take three distinct shapes:
SAMs will take alignment to the next level by becoming drivers of strategic development cross-functionally and inter-organizationally.
Strategic account management will be liberated from the shackles of the seller-buyer dynamic by transforming from account management to ecosystem or stakeholder management.
SAMs will develop new processes and skill sets that will make the future one of leadership, rather than of management.
The role and responsibility of the SAM are transforming from advanced, consultative, insight-based selling focusing on one customer relationship towards orchestration of mutual value creation in a larger ecosystem of organizations. To simplify, one could argue that strategic account management is becoming strategic ecosystem leadership — no longer SAM but SEL.
The elevated SAM’s new and important roles are summarized in diagram below.
From aligning to driving: strategizing
Traditionally, SAM has been viewed as a set of management practices that aim at inter- and intra-organizational alignment: Inter-organizational alignment to jointly (with the customer) develop a value proposition and a process for the delivery of the value proposition…and intra-organizational alignment to create a collaborative, flexible and committed customer-centric culture that enables value creation for the customer and value capture for the firm.
The goal of aligning functions and processes between selling and buying organizations is not disappearing, but the new digital reality means that it is no longer enough. Increasingly, SAMs will need to assume the role of “change champions” who drive change and strategy development.
Being a change champion can take several forms, but key to them all is to not fall into a trap of becoming an administrative and commercial coordinator – someone who spends her/his time on aligning, without having a development trajectory aiming for new value creation. A change champion may drive development in three different ways:
Driving strategy for the selling firm. The strategic account manager needs to be involved not only in executing strategy but also, increasingly, in driving strategic initiatives within his or her own organization. The SAM program should be a vehicle for top management to identify new business and renewal opportunities and to shape the firm’s strategy by providing deep understanding of strategic customers and the overall market.
Driving strategy for the customer. The strategic account manager needs to focus on helping the customer create value in new ways. Sometimes this takes the form of challenging various influencers in the customer organization and suggesting modifications to its present ways of running things. This implies new types of processes and skill sets, where strategic account managers are tasked with becoming “value innovators and transformation agents” by helping customer organizations to strategize.
Driving market development. As markets become more dynamic and malleable, and strategies are less market-driven and more market-driving, the SAM becomes a key market shaper and can, for instance, push the market boundaries by finding customers who are early innovators and then engaging them as lead customers in a process of collective learning. Additionally, facilitating dialogue with customers and other actors in the ecosystem can challenge dominating assumptions about the market, reexamine existing market boundaries and expand market boundaries.
Becoming a driver of strategic development has two consequences. First, it will heighten the importance of value quantification and verification. To drive customers’ strategy or how the market develops, the SAM will need to tap into available data to show the potential for reconfiguring resources in the ecosystem to enable value creation relevant to influencers inside the ecosystem. Using data analytics will be the basis for credibility creation – a necessary foundation on which to build the case for change.
Second, SAM practices will need to be modified to better fit with the idea of driving change. Account planning will need to look beyond the buyer-seller dynamic to become increasingly collaborative. Value propositions will need to be made based on deep insight into influencer and stakeholder situations, and new tools will need to be applied to engage influencers and stakeholders in a collaborative process of co-creation. Digitalization provides tools and techniques for these modifications.
From account to ecosystem: orchestrating
A dramatic development that supports the elevation of SAM is the expansion of the “unit of analysis” – moving focus from the seller-buyer dynamic of strategic accounts to the larger ecosystem. If global accounts that involve hundreds of individuals are viewed as complex, then widening the perspective to include entire ecosystems makes them exponentially more so.
Increasingly, companies face situations where no single firm possesses all the resources or capabilities required to deliver the value required by strategic accounts. As solutions become more complex and components of the solutions become more digital, they are increasingly created and delivered by a “competency system,” or ecosystem — a combination of collaborating industry players.
The consequence is that strategic account management needs to be emancipated from the shackles of the seller-buyer paradigm so that it can focus on generating a better understanding of how resources in the broader ecosystem can be reconfigured to increase resource density for the strategic account. To put it succinctly: SAMs need to become industry players, ecosystem architects and ecosystem orchestrators – all roles that require a new set of skills and new tools.
In an ecosystems view, success is less dependent on the resources that a firm controls than on the resources to which the firm can connect. This flips traditional strategic account management on its head. Rather than start with what the firm controls and look for ways to leverage it, tomorrow’s SAMs will need to begin with the opportunity and then assemble the required resources in its wake. Key will be the ability to orchestrate actors and resources in the larger system to allow the firm to assemble and flexibly reconfigure resources so that value can be created for the entire ecosystem.
To seize opportunities that lie outside the grasp of any one firm, SAMs need to assemble partners, create alliances and enter into joint development efforts in which influencers and stakeholders are guided towards a common vision.
From management to leadership: facilitating
The key to being successful in driving strategic development in a customer organization or in an ecosystem of stakeholders is a simple realization: Change will never happen unless you can engage other individuals in the process. It requires leadership that facilitates others – customers, suppliers, other business partners and sometimes even regulators – to engage in a common change journey.
Moving from a firm-centric view to an ecosystems view implies an acceptance of complexity and uncertainty – and a corresponding loss of control. A successful strategic account manager encourages novelty and innovation not by directing but by allowing; not by stabilizing but by disrupting stifling patterns. In fact, in order to become a driver of change, one must decouple leadership from the individual and distinguish between “leadership”and “leaders.” SAM leadership should be seen as an emergent, interactive and distributed process of learning, influenced and enabled by the SAM process and strategic account managers.
Hence, we are not arguing that strategic account managers need to become better leaders, but rather that they will need to engage in processes of leadership that are characterized by facilitation and rotating leadership:
From self-centric to allocentric innovation. Orchestration of resources and activities in the ecosystem will require strategic account managers to switch from a self-centric, firm-based view to an allocentric (“other-centered”) view in which value is created for the whole market system by integrating resources from an ecosystem of organizations. To seize opportunities outside the firm’s grasp, the SAM will have to facilitate processes that help to assemble partners, create alliances and enter into joint development efforts.
Learn from jazz (i.e., rotating leadership): Part of orchestration relates to improvisation and allowing others to play their solos. Even if a jazz band has a leader, his/her roles are very different from the traditional orchestral conductor. The latter stands alone, high on the podium, and controls the performance with his baton, based on a score. By contrast, in jazz the leader is one of the players. And leadership rotates during solos, as everybody else builds a platform enabling the soloist to shine. Research has shown that rotating leadership — where organizations take turns leading the inter-organizational collaboration in distinct phases — and consensus leadership — where organizations work together, agree to common objectives and follow shared decision making — are associated with higher innovation outcomes than collaborations dominated by a single actor.
Strategic account management traditionally has been a set of primarily managerial practices: to make account-specific plans, execute them and follow up. Simultaneously, the more advanced programs have engaged in activities geared towards impact without authority, acknowledging that SAM programs on the one hand have an element of conflict management in them, but also that strategic account managers can exercise considerable power if they play the game well.
The managerial part of SAM is not going to disappear, but the leadership part will need to be elevated. This does not mean that strategic account managers will need to become more “leaders” than they are today, but rather that the SAM process will need to be designed in such a way that it enables distributed leadership in a collaborative process. Digitalization provides tools for this. Cloud-based collaboration also can, at its best, enable work to be organized more in projects and less in functions, and can enable the formation of flatter organizations. This would facilitate more people to be engaged in leadership.
An exciting time
To reap the benefits of digitalization, we need to ensure that digitalization is not used to engage in more administrative work or building more elaborate account plans. The name of the game is increasingly about added value, co-created between many stakeholders in the ecosystem. And this co-creation puts demands on strategic account managers’ abilities to navigate inside their own company as well as inside the customer’s and other stakeholders’ organizations.
For those who are ready for this new role, these are exciting times! Want to go deeper? Read the entire SAMA research report on which this post is based here.
Kaj Storbacka is professor of Markets and Strategy at the University of Auckland Business School’s Graduate School of Management. Elisabeth Cornell recently retired after nearly two decades at SAMA, most recently as senior knowledge content developer.