By Javier Marcos, PhD, Director, Key Account Management Forum
Strategic account managers face increasing pressure from their strategic customers in the form of enhanced quality of service expectations, growing product requirements and further customization of their offers, amongst others. To respond to these pressures effectively and to grow business with their strategic accounts, SAMs need to address a number of competing demands such as internal and external orientation, short- and long-term goals and top- and bottom-line financial outcomes.
In this article, I will explore some of the paradoxes strategic account managers face and provide an approach to managing them constructively in the pursuit of sustainable value creation with strategic accounts.
Imagine, if you will, a day in the life of Sam Richards, a strategic account manager working for TechCo, a digital technology company. She starts her workday at 8:30 AM in a meeting with her team to conduct the final review of next year’s operational and delivery plan for her strategic customer, a large oil and gas company we will call OilCo. From there, she goes on to the performance and development review of one of the team members before participating in a virtual meeting with OilCo to present next year’s operational plan. It’s an important meeting to which TechCo is committing significant resources. The hope, for Sam and her team, is that the success of the operational plan will open opportunities for developing a new generation of services – not just for OilCo but potentially for other customers as well.
Following a short break for lunch, Sam meets colleagues to discuss future systems architecture and then attends another technical meeting to familiarize herself with the latest cybersecurity solutions TechCo is developing.
Afterwards, she attends a budget and forecast meeting with Chris, a senior colleague from Finance before being invited to participate in the compensation committee to discuss next year’s incentive plans. After that, she has a short catch-up with a colleague from Legal to discuss some clauses of a new contract.
Before leaving for the airport for a work trip, Sam attends one last virtual meeting with a marketing director from OilCo to discuss some issues they are facing with data integration and consolidation.
Looking at Sam’s daybook, you can see that her time is split between internally and externally oriented tasks. How she chooses to invest her time will determine the extent to which she is able to achieve the ambitious outcomes she needs for her organization and OilCo. But she also faces other competing demands: between activities that drive short-term gains versus those meant to build capability for long-term revenue growth. Like most account managers, she needs to find a way to handle both top-line and bottom-line growth with her strategic accounts.
All sales professionals face strategic dilemmas when it comes to managing their pipeline. Should they prioritize growth within existing customers or focus on acquiring new ones? When looking at opportunities and bids, should they focus on smaller but more secure deals or larger, riskier ones?
Managing a team also requires Sam to balance competing priorities. Does she increase decision-making quality by involving more people or speed up decision making by involving fewer people? Is she better off motivating her team through financial rewards or intrinsic motivation? Promoting individual performance or stressing overall team performance?
Paradoxes exist in everyday life. How leaders choose to address them has become a crucial dimension of leading a modern organization. Paradoxes are contradictory, yet interrelated. They exist simultaneously, and one cannot be disentangled from the other. Paradoxes persist over time. Leaders ignore them at their peril.
The situations that strategic account managers face entail such complexity that focusing only on one of the poles outlined above (e.g., top-line vs. bottom-line growth) will rarely provide optimal answers. For Sam to succeed, she will need to facilitate the continuing investment of internal resources to develop innovative products and services for OilCo. These investments are significant, so she will need to ensure healthy profit margins for the account to justify these investments. But she will also need to bid for new work streams and contracts with OilCo, where she will face competition from other technology providers.
In highly volatile, demanding and intensely competitive contexts (i.e., in today’s climate), making trade-offs between two approaches seldom drives meaningful value creation. Rather, the current environment requires novelty, holistic approaches, flexibility and new ways of ensuring sustainability. Take the hospital business, for instance. Hotel companies need to both develop novel ways to provide a superior guest experience while also maintaining high safety standards to prevent COVID-19 in their hotels. In life sciences, companies need to implement a holistic approach to respond to the varied, often competing, demands coming from diverse stakeholders, including patients, clinicians, payers and hospital management executives. I could cite similar paradoxes facing companies in manufacturing, logistics, professional services and other sectors.
The question then becomes how can strategic account managers deal with these paradoxes and competing demands in ways that enable alignment and deeper engagement with their clients, ideally resulting in above average growth? When faced with competing demands, people usually adopt one of three approaches.
#1: Trade-off. In this approach, leaders evaluate the advantages and disadvantages of each choice and then select the option that best meets their objectives. Very often, to address these competing demands, executives take a trade-off “either/or” approach. They evaluate the advantages and disadvantages of each choice and then select the option that they think best meets a particular goal. For instance, in pursuing the accomplishment of the annual sales quota towards the end of the period, one could consider the tradeoff between upselling/cross-selling to existing customers versus advancing deals with new customers. This approach is likely to result in accomplishing one objective at the expense of the other.
#2: Compromise. Fundamentally, this approach addresses the integration of elements from both options to find an improved alternative. For instance, a classic paradox from the innovation management literature involves the tension between exploration and exploitation. Exploration is focused on identifying and investing in new technologies and new capabilities to develop new value propositions. Exploitation, on the other hand, emphasizes scalability and efficiency in the use of existing resources. In addressing business growth, a leader may feel the need to compromise between exploration and exploitation.
This, however, may not be an optimal choice. In today’s marketplace, long-term success requires excelling at both exploration and exploitation simultaneously. Excessive internal focus can limit the search for new opportunities in the marketplace, while excessive external focus can hinder the commitment needed internally to resource the execution of strategic account plans.
#3 A third approach, different from the trade-off and the compromise, can be defined as engaging. The approach relies on identifying and in engaging the synergies of opposing alternatives. As an example, Unilever engaged concurrently the “profit” and “purpose” paradox back in 2010 when the company set out to grow its business while also increasing its positive social impact and reducing impact on the environment. Unilever’s mission today is “making sustainable living commonplace,” illustrating its commitment to engage in finding the synergies between the two goals of profit and purpose.
Paradoxical thinking is challenging, given the temptation to focus on one alternative at the expense of another, swing from one extreme to the other or get stuck in the middle and miss out on the benefits of either pole.
You may be thinking, why bother, when embracing paradoxical thinking doesn’t come naturally to most of us? Because encouraging tensions in managing our complex and strategic accounts can yield promising and novel results. Paul Polman, the former CEO of Unilever, said this: “Stressing tensions puts pressure on how we use resources and lower costs as well as on how we innovate.”
Tom Muccio, Procter & Gamble’s former president of global customer teams, based the company’s strategy to grow with its key account Walmart by adopting a paradoxical thinking approach, enhancing relationships with buyers and simultaneously with other functions (logistics, IT, operations and supply chain). By doing so, Muccio enabled mechanisms to not only solve day-to-day operational problems but also to implement the “reinventing the future” strategy, a long-term-oriented framework to bring about mutual growth for both the retailer and the manufacturer.
Paradoxical thinking often helps to surface assumptions, thus enhancing the quality of decision making. Rolls-Royce evolved from being “just” an admired engineering company to also being an innovative provider of advanced services and power solutions in Aerospace, Land & Sea. Their servitized business model has become an inspiration for many other companies in a range of sectors. Only by holding a paradoxical mindset could one envisage the design of an organization that simultaneously excels at creating dependable products while also offering complex services to customers. The service-oriented model that Rolls-Royce pioneered created innovative revenue mechanisms that better align the interests of the company and those of its customers.
Developing paradoxical thinking can also help us identify new strategic options and capabilities that otherwise may have lain hidden. While linear thinking would lead one to believe that businesses are better off focusing exclusively on developing their core capabilities, highly dynamic business environments require the ability to expand services beyond core offerings. Everyone knows Amazon as one of the world’s largest online marketplaces, but not everyone realizes that Amazon Web Services (AWS) owns a 32 percent share of the world’s cloud services market. And while AWS may contribute only modestly to Amazon’s overall revenue, it accounts for a large share of Amazon’s total profit.
Some organizations proactively create and foster paradoxical thinking. Lego, for instance, identified 11 management paradoxes, and they encourage managers to consider them in the context of their contribution to the company. Lego encourages its leaders “to be visionary” but also “to keep one’s feet firmly on the ground.” The company pledges to “aim at consensus” while also being “able to cut through.” Leaders at Lego are encouraged “to be dynamic” and also “to be reflective.”
In 1973, the design theorists Horst Rittel and Melvin Webber coined the term “wicked problems” to describe challenges that are ill-defined, ambiguous, subjective and too complex to be solved by rational systematic processes or by pre-defined solution concepts.¹ In today’s world, characterized as it is by high levels of interconnectedness and increasing complexity, key customers will look to their most strategic suppliers for solutions that are non-trivial and non-obvious. They will – explicitly or implicitly – demand that their suppliers put forth the effort to help them address “wicked problems” that affect their businesses and their customer bases.
Your strategic accounts will surely face wicked problems, if they are not already. Whether it’s redefining their business models in times of pandemic, finding new energy sources to help combat climate change, connecting highly disrupted global supply chains, diversifying technologies to counter the scarcity of components, engaging a productive workforce with unconventional values and attitudes… your strategic accounts are experiencing wicked problems. Addressing them requires paradoxical thinking, and thus, strategic account managers need to develop the ability to think paradoxically by embracing seemingly opposed strategic options. They need to leverage resources creatively to help their customers achieve their goals, which often have conflicting and paradoxical dimensions.
To use a sports analogy, strategic account managers may need to become triathletes. In sports, your physical features may favor one particular discipline (say, swimming) over others (say, running). In triathlon, participants need to train to develop strength simultaneously in swimming, cycling and running, as winning a triathlon requires the holistic and simultaneous development of all. Likewise, effective strategic account management requires the ability to engage simultaneously commercial, relational and operational agendas.
Account managers will need to develop ambidexterity to seamlessly navigate across both the long- and the short-term dimensions of their customers’ strategies. To do this successfully requires more than just account managers who are willing to embrace new ways of thinking. They also need an organizational environment and governance systems that acknowledge and recognize both outcome-based and measurable financial performance as well as activity-based, behavioral performance. A balanced combination of both enables SAMs to better align their companies’ priorities with their customers’ requirements and ambitions.
Paradoxical thinking can enable account managers to find an optimal balance between stability and change – in other words, to accelerate process improvement with their key accounts and consolidate and preserve the stability of resource allocation decisions. At the end of the day, the success of strategic account management programs requires sustained commitment over time.
If you, like Sam Richards, experience competing demands in your work, reflect on your default approach and consider paradoxical thinking as a way to better engage with these seemingly conflicting demands.
Javier Marcos, PhD, is an Associate Professor of Strategic Sales Management and Negotiation at Cranfield School of Management (UK) and the Director of the Key Account Management Forum. You can find him on LinkedIn.