the seven keys to managing strategic accounts

2 Key Account Selling Programs and Strategic Account Management Programs: A Comparison 3 Reynolds & Reynolds—Southeast Toyota: An Example of Alignment 10 The Benefits to Southeast Toyota

THE SEVEN KEYS

TO MANAGING

STRATEGIC

ACCOUNTS

THE SEVEN KEYS

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INFORMA-to any claim or cause whatsoever whether such claim or cause arises in contract, INFORMA-tort or otherwise.

To our families, friends, and customers who have nurtured and supported us throughout this process.

PREFACE xiii

Why This Book? xiii

What Qualifies Us to Address This Topic? xiii

Who Will Benefit from Reading This Book? xv

What Is a Strategic Account? xv

S4 Consulting Acknowledgments xvi

Miller Heiman Inc Acknowledgments xvii

For the Reader Thinking, “I Can’t Read the Whole Book

Which Chapters Would Help Me Most?” xvii

Chapter 1

What Is Strategic Account Management? 1

How Does Strategic Account Management Differ

From Key Account Selling? 2

Key Account Selling Programs and Strategic

Account Management Programs: A Comparison 3

Reynolds & Reynolds—Southeast Toyota: An Example

of Alignment 10

The Benefits to Southeast Toyota 12

The Benefits to Reynolds & Reynolds 14

The Future of the Reynolds & Reynolds SET Relationship 14

vii

C O N T E N T S

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PART 1

GETTING EVERYONE HEADED IN ROUGHLY THE SAME DIRECTION: WHAT DIDN’T WORK

Chapter 2

Key 1: Define Strategic Account Management as a Business

Create Cross-Functional Executive Leadership 20

Understand and Align Around Accounts’ Business Challenges 21

Start Strategic Account Management Programs as Business Initiatives: Honeywell Industrial Automation

and Control Solutions 23

The Minnesota Power Story 28

Drivers for Minnesota Power’s Strategic Account Realignment 28What Key Players Did to Strategically Realign

Key 2: Create Firm Alignment and Commitment to Meet

What Is Organizational Alignment?—Three Critical Elements 38What Are the Benefits of Alignment? 41

What Makes Alignment So Difficult? 44

How Can a Firm Create Organizational Alignment? 46

How Account Aligned Is Your Firm? 46

Knauf Fiberglass Case—Video Focus Groups and

Employee SWAT Teams 52

Marriott International’s Alliance Account Directors and

Their “Volunteer Army” 55

Create Firm Alignment 60

Chapter 4

Key 3: Start with the Right Number of the

Right Strategic Accounts 61

Ways to Examine Strategic Accounts 62

How to Conduct a High-Level Portfolio Analysis:

The Six-Question Meeting 66

The GfK Custom Research Inc Story: How One Firm Cut

66 Percent of Its Customers, Doubled Its Revenues, Tripled Its Margins, and Won the Baldrige Award 71

Using Strategic Account Selection Criteria 76

Start with the Right Number of the Right Strategic Accounts 78

PART 2

TACTICAL ISSUES IN STRATEGIC ACCOUNT

MANAGEMENT IRONBOLT STEEL AND

EXECUTIVE VISITS: WHAT DIDN’T WORK

Chapter 5

Key 4: Create Human Resources Support for Strategic

How Do We Select Strategic Account Managers? 86

The H R Chally Strategic Account Manager

Competency Model87

The S4 Consulting Strategic Account Manager

Competency Model Categories 93

How Do We Develop Strategic Account Managers? 95

Strategic Account Manager Training:

The Motorola LMPS Story 95

How Do We Assign Strategic Account Managers? 101

How Do We Pay Strategic Account Managers? 105

The IBM Global Story 108

Create Human Resources Support for Strategic

Account Managers 111

Chapter 6

Key 5: Create Firmwide Relationships at Multiple

Levels of Relationships between the Firm and Its Most CriticalAccounts 113

Relationship Map Checklist 117

The Strategic Account Loss Cycle 119

Preventing the Strategic Account Loss Cycle 123

The U.S West/Dayton Hudson Story 124

The 3M/IBM Storage Story 127

Create Firmwide Relationships 128

Chapter 7

Key 6: Regularly Quantify and Communicate

the Value Received from and Delivered to

Quantify the Value Strategic Accounts Provide 132

Boise Office Solutions 138

Quantify the Value Delivered to Strategic Accounts 143

The Holland Hitch story 144

The National Office Supplies Story 146

Regularly Quantify and Communicate the Value Received

from and Delivered to Strategic Accounts 150

Chapter 8

A High-Level Overview of CRM Systems Challenges 154

Seven Steps to Successful Systems Implementation for

Strategic Account Management Programs 157

The UPS Story: The Development of the LINK System 163

Use Technology Judiciously 167

Conclusion: From Analysis to Action:

Benefit Number One: Strategic Account Management’s SustainableCompetitive Advantage 175

Benefit Number Two: Strategic Account Management’s GreaterAccount Loyalty 177

Benefit Number Three: Strategic Account Management’s GreaterAccount Profitability 179

The Marriott-Deloitte & Touche Story 180

The Value Delivered to Deloitte & Touche 181

The Value Delivered to Marriott International 182

A Game Plan for Moving Forward 183

The Getting-Started Actions 183

Results 186

REFERENCES 189

INDEX 191

WHY THIS BOOK?

This book grew out of two questions our clients most often askwhen they are managing strategic accounts: “What are thechallenges others have faced with strategic accounts, and howcan we overcome them?”

During our years of experience, through constantlychanging business conditions, we have tested, retested, and re-vised many of our original answers to these questions One ofour enduring insights remains: There is no by-the-numbers ap-proach to implementing strategic account management Everyfirm must come at it a little differently At the same time,though, this book lists the strategic account management chal-lenges our clients have most often struggled with We also pres-ent proven ways to overcome those challenges

Our clients and colleagues encouraged us to consider howour experience might benefit a wider audience This book is ourresponse, crystallizing what we have learned in strategic ac-count management Our goal is to help you save time andmoney as youimplement or refine a strategic account manage-ment program

WHAT QUALIFIES US TO ADDRESS THIS TOPIC?

This book is a joint effort from S4 Consulting, Inc and MillerHeiman, Inc

S4 Consulting, a leading-edge relationship managementfirm, has helped business-to-business clients use strategic ac-count management to improve their business performance

xiii

P R E F A C E

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since 1986 S4 Consulting uniquely focuses on gaining the nal firmwide commitment and support that are so critical forthe success of strategic account management Huge benefits oc-cur when sales and other departments work together more ef-fectively, when interdepartmental barriers are lowered, andwhen everyone is headed in roughly the same direction.Information S4 Consulting personnel have gathered andprocessed from interviews with thousands of strategic accountcontacts helps us better guide companies to optimize those re-lationships This outside-in approach can pay huge dividends.S4 Consulting’s commitment to using strategic account man-agement to improve business performance, has led us to de-sign, conduct, and co-sponsor SAMA’s annual Strategic Ac-count Management Performance Award for the USA Many ofthe case studies in this book are from nominees and recipients

inter-of that award

Miller Heiman, a leading developer and provider of salesdevelopment solutions for sales organizations and profes-sionals around the world since 1978, has made building ex-ceptional sales organizations its single-most important ac-complishment The Miller Heiman team of consultants hashelped more than one million sales professionals use the rightstrategies and tactics to win business and turn prospects intocustomers for life Miller Heiman has pioneered several

highly respected sales process programs, including Strategic

Selling®, Conceptual Selling®, Large Account Management Processsm, and Negotiate Successsm

Both firms are committed to helping companies improvetheir bottom-line performance by effectively managing theircustomer assets A book focused on strategic account manage-ment seemed a natural topic for collaboration

Because people seem to learn best from comparing whatworks with what doesn’t, each chapter includes examples ofboth The firms cited as positive examples have verified thefacts describing their cases We have disguised the negativeexamples by creating composite cases: for each example ofwhat doesn’t work, there are 5 to 10 more cases with similarsituations

WHO WILL BENEFIT FROM READING THIS BOOK?

There are a number of readers for this book Our primary ence is any decision maker whose primary task is optimizingthe firm’s assets and anyone who wants to manage—as as-sets—that small percentage of customers who usually provide

audi-a disproportionaudi-ate shaudi-are of the firm’s revenue/profits Thesereaders may be starting or refining

an existing strategic account

man-agement program The cases and

insights should be an invaluable

resource for any executive, drawn

to developing systematic sales and

management processes, who

wishes to avoid critical and costly

errors in doing so Early in the

book we contend that unless these

executives—CEOs, COOs, VPs of

Finance, and decision makers from

all functional areas—are aligned to support the strategic count management program’s goals and objectives, the pro-gram will almost certainly tailspin in costly flames

ac-Other readers who can benefit from this book are the verybest of those who manage strategic account relationships—acomplex, challenging, and often very rewarding task Peoplewho do this job well are relationship assets in their own right

We have found their commitment to self-development veryhigh indeed They are always looking for ways to improve theirskills and their overall management approach, to improve ser-vice and relationship quality to their assigned customers

WHAT IS A STRATEGIC ACCOUNT?

Strategic accounts are those customers who most readily help afirm achieve its strategic and financial goals

They are chosen as strategic accounts because they havemet specific criteria and they are most likely to provide a return

on the higher level of investment that managing such accounts

Our primary audience is any decision maker whose primary task

is optimizing the firm’s assets

requires These customers may be large, they may be small

(tar-geted emerging accounts, for ample), but they have strategic sig-nificance for the supplier

ex-This book will use threewords interchangeably to describesuch customers: strategic account,account, and customer Althoughall customers are important, thereare certain customers you cannotafford to ignore or live without.You must treat strategic accountsdifferently (unless they requestotherwise) and invest more inthem You need to select and invest in these accounts wisely

S4 CONSULTING ACKNOWLEDGMENTS

This book is the product of years of collaboration

First, Joe and I would especially like to acknowledge DanShaffer, our partner and friend at S4 Consulting for 20 years.His wisdom and systematic problem solving have provided in-estimable value to us, our company, and our clients

Second, we would like to thank some of our colleagues,particularly Doug Bosse, Dave Jones, Steve Vucelich, LenShaffer, Jose Acevedo, and Nicholas Wolfson, who have con-tributed significantly to our conceptual and methodologicaldevelopment We would also like to acknowledge Jim Guilkey,Sally Trethewey, Rosa Yeh, Maribeth Quinn, Wes Mayer, KarinHuey, Urko Wood, Suzanne Lowe, Sharon Bierman, MikeSternad, Sarah Volker, Barbara Gossman, and Erin Hinkle, whohave provided valuable support Together we have learned tomake a difference

Third, we thank our business partners, those fromwhom we gained new ways to look at business, service qual-ity, and meeting client needs: Valarie Zeithaml, BobWayland, Bob Archibald, Kaj Storbacka, CRM Finland, andLisa Napolitano, Director of The Strategic Account Manage-

Strategic accounts

are those

customers that

most readily help a

firm achieve its

strategic and

financial goals.

ment Association Each helped guide our thinking in ing relationship assets.

manag-Finally we thank those at Miller Heiman with whom wehave worked so closely: Sam Reese, Jason Buma, JennaPoinier, Harry Magure, Ryan Olsen, and Erin Anderson.Without their efforts and feedback, this would have been avery different book

MILLER HEIMAN INC ACKNOWLEDGMENTS

We would like to express our appreciation to Joe Sperry andSallie Sherman of S4 Consulting Their knowledge and past ex-periences greatly contributed to the concepts and methodologythat made this book possible We would also like to extend ourappreciation to Damon Jones, Jason Buma, and Jenna Poinierfor their careful editing and skillful review of the material Weare also grateful to Harry Magure for providing his legal exper-tise throughout this process, Ryan Olsen for his project man-agement efforts that went into the completion of the project,and Erin Anderson for his graphic design contributions Lastly,

we would like to thank Catherine Dassopoulos of McGraw-Hillfor facilitating a smooth and enjoyable publishing experience

FOR THE READER THINKING, “I CAN’T READ THE WHOLE BOOK WHICH CHAPTERS WOULD HELP ME MOST?”

We suggest starting with the Introduction, which provides ourapproach and general thesis After that, here is a listing, withabstracts, of the book’s eight remaining chapters The abstractswill help readers get right to the issues that concern them most

Introduction: What Is Strategic Account

Management?

The Introduction defines strategic account management andcontains a high-level look at its particular rewards and chal-lenges

Part 1: Getting Everyone Headed in Roughly the Same Direction

Key 1: Define strategic account management as a business

strate-gic account management purely as a sales initiative, chancesare good that only sales will “own” the account This meansthat the sales team will have to spend at least half its time inter-nally marketing to functions that may feel no special urgency tomeet the needs of strategic accounts Cross-functional execu-tives need to align the entire organization—from other execu-tives down—in owning the strategic account relationships Inour experience, that is the fastest way to optimal performance

in strategic account programs

Key 2: Create firm alignment and commitment to meet

organiza-tion needs to understand why strategic accounts are so criticaland how they can best serve those customers Strategic accountmanagement can fail when one or two departments remain em-bedded in the status quo Unless all departments and all employ-ees are committed to supporting the strategic accounts’ needsand expectations, account management will always be one cus-tomer phone call away from disappointment Lacking commit-ment, the firm will find it very difficult to gain the momentumneeded to shift from an internal focus to a business strategy

Key 3: Start with the right number of the right strategic

declaring their 65 largest revenue producers “strategic counts” (whether or not they are profitable) If a supplier startswith its 65 largest customers, aggressively promoting the cus-tomer management program’s improved service levels, it willvery likely find broken processes and systems early in the jour-ney These may require months to fix and, while they are beingfixed, customers are not receiving their promised service lev-els Starting with too many customers makes it difficult for theprogram to demonstrate success and leverage its initial invest-ments Starting with the wrong customers is almost as bad If a

ac-supplier doesn’t do some sort of portfolio analysis of potentialstrategic accounts, it can find itself making large investmentsfor little or no return.

Part 2: Tactical Issues in Strategic

Account Management

Key 4: Create human resources support for strategic account

customer management program include: (1) How do we findaccount managers? (2) How do we develop account managers?(3) How do we assign account managers? and (4) How do wepay account managers?

Key 5: Create firmwide relationships at multiple levels of lationships between the firm and its most critical accounts.

re-We have often seen account managers developing and taining strong relationships with the tactical customer employ-ees such as technicians or purchasing people While it is impor-tant to develop such relationships, the account manager hasadditional tasks: (1) developing deep and multilevel relation-ships within the account—from executives down; (2) determin-ing the strategic account’s various buyer influences; and (3)identifying, within their own firms, those who could best helpmanage relationships within the strategic account The goalhere is to establish a firmwide relationship, based on ongoingparallel linkages between supplier and customer

main-Key 6: Regularly quantify and communicate the value

strategic account management requires solid returns on its vestments The program’s executive sponsors and those serv-ing the account, perhaps working with the finance people,should determine the customer’s long-term relationship assetvalue and its replacement cost They should also be able toquantify the value delivered to customers Without continuallyquantifying and communicating value, there is no way to jus-tify relationship investments internally or to justify a premiumprice externally

Key 7: Use technology judiciously.There is a difference tween being technology-driven and technology-supported.The technology-driven company, occasionally without deter-mining its overall needs, invests in the “latest and greatest”technological breakthrough The technology-supported com-pany determines what it needs and then finds the best tools tosupport its strategic ends We have seen that a technol-ogy-driven approach to strategic accounts can be a very expen-sive bandwagon to hop on Technological caution can save afirm millions of dollars.

be-Part 3: Conclusion

the keys and benefits of strategic account management, vide a high-level implementation roadmap, and offer somenext steps

C H A P T E R 1

Introduction: What Is

Strategic Account

Management?

Let’s begin by considering:

key account selling?

3. What are the benefits of strategic account

management?

4. What are the challenges of strategic account

management?

WHAT IS STRATEGIC ACCOUNT MANAGEMENT?

Strategic account management is a systematic process for aging key interactions and relationships with critical accounts.Writers sometimes quote the Pareto Principle to describe stra-tegic accounts: 20 percent of the customers generate 80 percent

man-of the revenue/prman-ofit It’s usually an apt comparison, althoughthe numbers can vary dramatically if the firm’s strategy has tar-geted emerging or medium-sized accounts Still, strategic ac-counts tend to provide a disproportionate share of a firm’s rev-enue/profit We call such customers co-destiny accounts

1

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The supplier’s future tends to be intertwined with theseaccounts’ success With clients whose contribution is that criti-cal, strategic account management can play a crucial role in afirm’s marketing strategy That’s why successful strategic ac-count management tends to be a firmwide initiative, systemati-cally and proactively delivering strategic solutions to multiplecontacts at targeted accounts—to capture a dominant shareover time.

Strategic account managers are salespersons who mustgenerate profitable revenue, quarter-to-quarter and over thelong term At the same time, they are general managers, over-

seeing assigned relationships asseparate assets in the customerportfolio Businesspeople some-times distinguish between sales-people who are hunters and thosewho are gatherers—those whoget the business and those whomanage the business afterwards.True strategic account managers(SAMs) are both and neither ofthese classifications: they arehunters but within their assignedaccounts, continually working toincrease account share They also must manage those ac-count relationships, and be accountable for ongoing andlong-term financial growth

HOW DOES STRATEGIC ACCOUNT

MANAGEMENT DIFFER FROM KEY

ACCOUNT SELLING?

Most of the time, the sales team initiates strategic accountprograms Sales may see an opportunity to generate morerevenue by focusing its efforts on the larger accounts Salesoften begins these initiatives with what we call a key accountselling approach Key account selling is a part of strategic ac-count management but it is not the same thing The distinc-

tion between the two is

impor-tant for our discussion The

following chart distinguishes

be-tween these two (of many)

ap-proaches in managing an

impor-tant account Figure 1-1 isolates

the behaviors of a key account

selling approach and a strategic

account management program

The chart concentrates on

behav-iors because of the ever-present

problem of program names: a

supplier may have a key account

selling program called a strategic

account management program

(common) or a strategic account

management program called a

key account selling program

(also common) Our primary

in-terest is in what these firms do

with their crucial customers

KEY ACCOUNT SELLING PROGRAMS AND

STRATEGIC ACCOUNT MANAGEMENT

PROGRAMS: A COMPARISON1

Key account selling approaches tend to be initiated by sales,they tend to work on a shorter planning horizon, to measuresuccess primarily on incremental, perhaps quarter-to-quarter,revenue, and they tend to sell mostly existing products to asmall number of people within a large number of accounts

In many cases, these programs require a great deal of ternal selling because sales, while usually not customizing of-ferings, may come up with creative discount, financing, deliv-ery, or service options Their creativity puts pressure on otherdepartments to do things differently for large customers This

Successful strategic account management tends

to be a firmwide initiative,

systematically and proactively

delivering strategic solutions to

multiple contacts at targeted accounts—

to capture a dominant share over time.

1

© S4 Consulting, Inc.

F I G U R E 1– 1

Key Account Selling Programs and Strategic

Account Management Programs: A Comparison

Key Account Selling

Programs

Strategic Account Management Programs

1 Under a year

2 By revenue potential

3 Vertical market

Planning Horizon Customer Segmentation

7 Account manager who can commit resources

Primary Concerns 10 Profitability

11 Short- and long-term revenue and profitability

12 Account’s business challenges

15 Generous salary with some incentive bonus

16 Overall account plan

17 P&L of account relationship

18 Sales and/or general management skills

19 Strategic thinking

20 Excels in ability to influence without authority

21 Deep understanding of customer’s and supplier’s business

pressure can leave those other functional departments seeingkey accounts as key irritations.

We know a manufacturer whose sales group decided todevelop a key account selling ap-

proach The firm kicked off the

program by announcing to its 15

largest customers how great the

new effort would be, and started

coming up with innovative ways

to serve those customers But after

they made creative commitments

to the customers, internal

func-tions continually blocked their

way Those departments saw no

particular reason to do things

dif-ferently Sales spent so much time

marketing internally that one sales

representative joked that he

needed to carry cushions around

for his knees because he was

beg-ging so much The results were not

as humorous when the supplier’s

responsiveness and reliability—as

well as account satisfaction

num-bers—declined markedly At the

end of the year, the key accounts

program was serving only a few of the original customers—and those were not being served very effectively

When the manufacturer tried to determine how to prove the situation, those in manufacturing said, “You have tounderstand: sales’ dream deal is our worst nightmare.” Theysaid that when the sales teams promise a dramatically reduceddelivery time for a small custom order, that lowers the entiremanufacturing operation’s line utilization and slows other crit-ical production runs (both of which were major components

im-in manufacturim-ing’s compensation) The sales team must ize that departments may have solid reasons for resisting asales mandate—even if the initiative proposed would generate

Key account selling approaches tend to work on a shorter planning horizon, to measure success primarily on

incremental, perhaps quarter-to- quarter, revenue, and tend to sell mostly existing products within

a large number of accounts.

significant short-term revenue If the program is going to ceed, the entire organization must understand and alignaround the account selling program’s goals—particularly if thefirm ultimately wants to move to a true strategic account man-agement process It is, at best, an uphill battle for sales to de-velop a strategic account management program by itself.

suc-What Are the Benefits of Strategic

Account Management?

The benefits from a strong strategic account management gram can be huge At its best, strategic account managementcan offer a competitive advantage, the key to greater loyalty,and the road to higher profitability

pro-One of the more dramatic amples of what strategic accountmanagement programs canachieve financially comes fromBoise Office Solutions Until 1992,Boise Office Solutions (BOS) was adual distributor with one channelselling directly to business and awholesale channel selling to officeproducts dealers This dual-distri-bution business model deepenedchannel conflicts during a timewhen BOS’s largest customerswere becoming much more sophisticated—and much more de-manding In 1992, BOS reinvented its business model by sellingits wholesale-distribution business and establishing a nationalaccount management program The incremental revenue gen-erated by the BOS national account program—even allowingfor revenue growth by acquisition—is dramatic:

2000: $1,500,000,000

2001: $1,600,000,000

We will hear more about Boise Office Solutions later in thebook and provide other successes of customer management,such as Honeywell Automation and Control Solutions, whichserves a dozen of the world’s largest oil companies In twoyears it grew business 61 percent in a flat-to-declining marketand cut selling costs 40 percent, while moving to a systematicaccount management program We will also see how Reynolds

& Reynolds’ Enterprise Solutions Group generated a 55 percentcompounded growth rate on sales to its largest single cus-tomer, Southeast Toyota

The payoffs from an effective strategic account ment program can be significant—and they are usually muchmore than dollars A well-designed and well-executed strate-gic account management program can minimize, or in somecases, eliminate competition The more quickly you get thatprogram up and running, the more quickly you can realizethose payoffs This book will guide readers through the imple-mentation pitfalls and to those payoffs

manage-What Are the Challenges of Implementing

Strategic Account Management?

We have asked directors of

suc-cessful account management

pro-grams what it took to create that

success Few directors have said,

“Piece of cake We got it right the

first time.” At the same time, these

directors tend to agree that they

re-ceived tremendous personal and

professional benefits from

system-atically managing critical customer

relationships: the approach has

usually made account

relation-ships significantly more fulfilling

Even the most successful directors emphasize the challenges at the beginning and stress how much less costly it is to do

it right the first time.

and more profitable than the more typical transactional tionships After success and clear returns, it’s much easier tosupport strategic account management But even the most suc-cessful directors emphasize the challenges at the beginning andstress how much less costly it is to do it right the first time.Strategic account management programs falter when firmsunderestimate the time, resource requirements, and complexity

rela-of rolling out the program We have worked with very ful business leaders who started out believing they could dele-gate the entire implementation of the program to a middle man-ager and completely roll it out in three to six months of thatmanager’s free time These firms are very profitable and run byvery intelligent businesspeople But having never implemented

manage-ment—and lacking any real-worldguidebooks on the subject—it’s notthat surprising when their strategicaccount initiatives do not succeedthe first time Decision makers un-derstandably rely on what theyknow, which may be sales or oper-ational models These models areunfortunately inappropriate forimplementing strategic accountmanagement They tend to createunintended consequences in im-plementation—as we’ll see throughout this book It’s much likeplaying ice hockey with a tennis racket Youmay work veryhard, but the chances are low that youwill score, and youwill al-most certainly get beaten up some This book provides appropri-ate models, thereby limiting the number of your implementationbruises—and wasted resources

Creating a systematic way to manage strategic accounts is

a little like putting down the road as you’re driving on it: Youmust maintain your firm’s financial performance while rein-venting the way it serves its most critical customers That is per-haps the greatest challenge in implementing strategic accountmanagement

Creating a

systematic way to

manage strategic

accounts is a little

like putting down

the road as you’re

driving on it

Thanks to the experience of cartoon character Dilbert andothers, most workers are now highly suspicious of new orga-nizational change initiatives This means that strategic ac-count management—or almost any major change initia-

tive—fails if it is perceived as a program du jour Employees

have seen far too many programs started and then stopped.One secret of successful strategic account management pro-grams is that they start small, as a

critical part of the business

strat-egy, and then migrate to become

standard operating procedure as

soon as they have demonstrated

their success

Reinventing the way you

serve critical customers usually

requires an organizational shift

from internal efficiencies to

ex-ternal effectiveness This shift is

particularly challenging because

in many companies, most

em-ployees have inward-focused

performance measures and, on

average, only 30 to 40 percent of

employees ever interact with customers To achieve this kind

of shift, the entire firm needs to understand viscerally howcritical these strategic customers are, and start to own them.Here is a communication, educational, and performance op-portunity worth the challenge

For the shift to take root, you must include all relevant partments in the planning, goal setting, and process redesignfor account management Having their say will make it easier

de-to lower any walls that may have risen between them Unlessthe supplier removes its internal cross-functional barriers, thestrategic account—and the strategic account manager—will beforced to try to jump over them

The most sophisticated account management programs

we know live in organizations committed to co-creating valuefor customers whose destiny is intertwined with their own

Unless the supplier removes its internal cross-functional barriers, the strategic account— and the strategic account manager— will be forced to try

to jump over them.

That’s simply a way of life for firms such as Marriott tional, Boise Office Solutions, and IBM, all of which earnedcases in this book.

Interna-The game of business has changed dramatically in the lastdecade Ten years ago, companies could often function more as

a golf team—a group of talented individuals, each bent on

win-ning his own way That approachwon’t work very well in the globaleconomy, rife with consolidation,mergers, and wildly varied expec-tations Many companies insteadmust respond to markets and cus-tomers more like a basketball orhockey team, with everyone work-ing together to win the game Toextend the metaphor: in straightgolf, there are no assists The new business model, however, isall about continuing assists: working together more effectively

To respond as rapidly as market and customer conditionschange usually requires much greater interdependence—bothwithin the organization and between the firm and its strategicaccounts Firms usually should align around and work towardthe goals and strategies driving customer management Firmsthat can reinvent their business models while maintaining fi-nancial performance, firms that can remove departmental bar-riers and gain commitments from all functions to play the samecustomer-centered game, tend to enjoy the rewards oflong-term financial success As one example, let us turn to theReynolds & Reynolds—Southeast Toyota story to see the value

a strategic alliance can create

REYNOLDS & REYNOLDS—SOUTHEAST

TOYOTA: AN EXAMPLE OF ALIGNMENT

Reynolds & Reynolds is a $1 billion company headquartered

in Dayton, Ohio, which provides integrated tion-management solutions to the automotive retail market-place Its products include retail and enterprise-management

informa-The new business

model is all about

continuing assists:

working together

more effectively.

systems, networking, e-business applications, web services,CRM, consulting, and leasing services The Enterprise Solu-tions Group at Reynolds manages strategic accounts Enter-prise Solutions has 15 partnership executives, and they workwith the 20 largest automotive retail and distributor groups inNorth America, helping them achieve outstanding businessresults Enterprise Solutions accounts generate more than $90million in annual revenue.

The account in this case is Southeast Toyota Distributors(SET) based in Deerfield Beach, Florida It is one of the most re-spected automotive companies in the world, with exclusivedistribution rights to market new Toyotas in the southeasternUnited States SET has 163 dealer locations that outperform allothers in the industry, regardless of brand, in nearly every mea-surable category—sales per outlet, profit per outlet, dealer sat-isfaction, and customer satisfaction SET also owns two othercompanies that offer financial services, such as insurance andextended warranties, to more than 1,500 retailers SET and itsaffiliated companies have annual sales of $7 billion

In 1997, Reynolds’ Enterprise Solutions Group startedworking with SET, helping it achieve its business objectives.Gary Coveyou, the Reynolds’ SET Account Manager, created adedicated account team for SET with Reynolds employeesfrom the following areas:

■ Financial Services

At Reynolds & Reynolds, strategic account management

is not simply a sales initiative It is clearly a business initiative.With this team, Coveyoudeveloped an account playbook for

SET that laid out how Reynolds needed to sell, deliver, andsupport its business solutions The SET account team realizedfrom the start that it is just as important to build solid relation-

ships as it is to deliver great cal solutions

techni-Reynolds had started the lationship before 1997 by selling

re-to individual SET dealerships itsdealer management system, anenterprise resource planning(ERP) system for automotivedealers with accounting, inven-tory, vehicle management, CRM,and other functions In 1997,Coveyouand his account teamsold SET corporate on the benefits

of working with Reynolds &Reynolds to develop the next generation of its dealer manage-ment system Because it was a critical step in its long-rangestrategy, Southeast Toyota dealers then bought the currentReynolds & Reynolds dealer management systems Bothfirms realized that such an alliance would lead to greater busi-ness results for many years Coveyou had seen that SoutheastToyota was the perfect partner—and a marquee account—forsuch joint development

By 1999, Reynolds had installed its current dealer agement systems in 80 percent of SET dealerships While in-stalling these systems, Reynolds people were also interviewingmore than 200 SET associates to capture their requirements anddevelop the functional specifications for Reynolds’ next gener-ation of solutions and services

man-THE BENEFITS TO SOUman-THEAST TOYOTA

When we asked Reynolds & Reynolds to quantify the benefitsboth they and Southeast Toyota had received from the alliance,their relationship was such that representatives from bothfirms sat down together to determine that dual value Therewere several major areas of value-added for Southeast Toyota:

The SET account

team realized from

the start that it is

■ Eighty percent of Southeast Toyota dealerships are ing Reynolds Dealer Management systems Reynoldshas discovered that those dealers are, on average, real-izing $200,000 more in annual net profits than SETdealers not using the system This is substantial con-sidering dealers are categorically small businesses.

us-■ Since SET began using Reynolds’ web services, it hasseen a 52 percent increase in generated leads The per-centage of these leads that closed is up a whopping 45percent from last year—more than 6,500 new vehiclessold It’s hard to come up with an average price for aToyota, given price ranges

between $20,000 for a

Co-rolla to more than $55,000

for a Land Cruiser If we

use a conservative

esti-mate of $22,000 per

vehi-cle, though, Reynolds’

Internet lead-generation

system brought SET more

than $143 million in

incre-mental revenue last year

■ SET also realized

signifi-cant savings in its parts

department As Wayne Crater, SET’s Director of PartsOperations, says, “The partnership between SET andReynolds & Reynolds has paid significant benefits toboth our dealers and SET Dealer parts departmentshave experienced increased sales, due in part to theadvanced marketing tools from R&R, while at thesame time [dealers] have lowered their inventory val-ues and decreased levels of obsolete inventory In ad-dition, the ability of R&R to provide SET parts manag-ers with several software enhancements minimizedthe new system learning curve and [gave them] a sys-tem tailored to their requirements All these accom-plishments translate into increased profitability forboth our dealers and SET.”

Reynolds’ Internet lead-generation system brought SET more than

$143 million in incremental revenue last year.

■ Key Improvements for SET Parts Operations

1 Parts and Accessory sales have grown in excess of

21 percent, or $475 million, during the past fiveyears to more than $2.26 billion Reynolds has pro-vided an inventory-control parts marketing system,which enabled SET to reach this growth, increasetheir profits, and achieve operational efficiencies

2 Of the 163 dealers, 114 were stocking excessive solescence inventory Reynolds helped to reducethe count by 65 locations, from 114 dealers to 49

ob-THE BENEFITS TO REYNOLDS & REYNOLDS

■ Since the partnership began in 1997, Reynolds’ sales toSET have jumped from $1.8 million to more than $16million in 2001

rate with SET is 55 percent per year

■ Over the last five years, Reynolds’ document solutionssales to SET have leaped more than 500 percent, itsservices revenue from SET has increased more than

500 percent, and Reynolds was selected as SET’s sive provider of web services

exclu-The more value Reynolds delivers, the more value SoutheastToyota provides It is a classic example of what is possible withstrategic account management

THE FUTURE OF THE REYNOLDS & REYNOLDS SET RELATIONSHIP

Reynolds & Reynolds is hardly resting on its laurels in the SETrelationship Gary Coveyouis currently implementing a plan

to provide financing and support services to all SET dealers forToyota’s Technical Information System This is the first timeReynolds has ever financed and supported a third-party sys-tem But Reynolds’ goal continues to be helping SET meet its

business objectives, and SET is a solid reference for newReynolds’ prospects—a powerful marketing aid in a fiercelycompetitive marketplace.

Rick Boyer, Reynolds & Reynolds’ vice president, prise Solutions Group, sums up his feelings about the firm’sstrategic account management: “The foundation for Reynolds

Enter-& Reynolds’ enterprise account management model is a nation of account strategy, account planning, a dedicated ac-count team of highly skilled employees, and a careful integra-tion of the customer into this process to ensure we deliver acomplete set of value-based solutions Ou r model has re-sulted in significant success for both our customers and forReynolds.”

combi-de

A word about strategic account management in a bear

imple-ment strategic account

manage-ment is in a bull market We are

not ignoring the economy—we

can see those parentheses on our

401K’s as well as anyone But we

believe this book’s keys are even

more valid in a bear market

be-cause strategic accounts remain a

supplier’s greatest assets In the

Harvard Management Update,

Da-v i d S t o u f f e r q u o t e s A d r i a n

Slywotsky as saying, “In

uncer-tain times, your best customers

provide an even greater share of

the profits It’s important,

espe-cially now, to see the world through their eyes.”2Our ence has been that, even in good times, many suppliers tend

Even in good times, many suppliers tend to underinvest in the customer relationships on whose future they depend.

2

Stauffer, David (2002) “Five Missteps to Avoid in Volatile Times,” (p 3) from

Harvard Management Update, September, Volume 7, Number 9

to underinvest in the customer relationships on whose ture they depend.

fu-That would be especially unwise at a time when accountsare hungry for value in any form Each of our seven keys ap-plies to protecting as well as expanding strategic accounts

P A R T 1

Getting Everyone

Headed in Roughly

the Same Direction:

What Didn’t Work

Federated Tire His professional life was governed by tworules: (1) Federated’s customers must pay within 30 days and(2) if they did not pay, he gave them one warning before he cutthem off past 60 days If Orson broke either of these rules, hisboss, Ed Bolton, Federated’s comptroller, came down on himhard—“for his own good,” as he often told Orson Ed, whoseleadership style had been compared to that of Benito Musso-lini, had done so much for Orson’s own good that Orson wasterrified of him and kept past-due receivables nonexistent Edsaw this fear and the absence of past-due accounts as triumphs

of progressive management

Federated Tire’s largest customer (30 percent of grosssales) was Dutton Retail, a national account that was havingmajor problems with the recession, which created severecash-flow problems and forced it to stretch out payments tosuppliers Because Federated’s marketing/sales departmentwas killing itself trying to maintain Dutton’s order levels, itnever occurred to marketing/sales to emphasize to other func-tional departments how critical Dutton was to Federated Mar-

keting/sales assumed that everyone had to know Dutton was

Federated’s number-one customer

17

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Everyone didn’t know Orson knew that Dutton’s revenuelevels were higher than most, but his performance evaluationswere not based on knowing strategic accounts He was evalu-ated on those two rules, and as Dutton stretched out the pay-ments even farther, it broke Ed Bolton’s first rule it went be-yond 30 days On day #31, Orson sent out the dunning letterthat Ed had written, a masterpiece (thought Ed) at declaring

that customers were not going to take advantage of Federated.

John Reardon, Dutton’s accounts payable manager, wasneither particularly guilty nor motivated by any wish to takeadvantage of Federated But he did feel anger pure enough tocut through steel He knew that Dutton’s marketing managerswere working with Federated and couldn’t understand the mo-tivation of the individual who had sent him and his companysuch a letter He filed and forgot it

Time passed At 60 days, Dutton had still not paid the billand Orson sent Dutton a letter that went far beyond dunning Itfirst cut off all product deliveries It then mentioned—none toosubtly—the massive law firm held on retainer

If Reardon had been angry after receiving the first letter,

he was furious at the second He took it in trembling hands tohis CEO, Stan Dutton, who read it and then reread it, his facegrowing more purple Dutton picked up the phone and calledFederated’s CEO and, in an icy tone, told him that he wasovernighting a check for the entire amount owed and that—by

the way—Dutton would never buy tires from Federated again.

deThis story is true, with the names changed to protect the guilty.We’ve been surprised at how many businesspeople have saidthe same thing had happened at their firm Chapters 1, 2, and 3focus on how to get your departments heading in roughly thesame direction—toward meeting the needs of strategic accounts

C H A P T E R 2

Key 1: Define Strategic Account Management

as a Business Rather Than a Sales Initiative

This first key is the most critical Embrace strategic accountmanagement as a way to improve your firm’s overall businessperformance When a supplier, as is common, defines strategicaccount management primarily as a sales initiative, the returnsare limited Everyone, not just sales, needs to own the strategicaccount If other departments see account management only as

a sales initiative, salespeople are likely to have an ing, uphill battle

unreward-The Federated story that precedes this chapter showswhat can happen when sales alone owns the relationship, andother departments focus on their own issues The other de-partments need to be on board because sales almost never de-livers the offering; it depends on other functions’ committedand coordinated efforts to create and deliver value We havetoo often seen sales ask other departments to expend a greatdeal of effort—with no reward and possible penalties—tomeet the strategic accounts’ needs When those departmentshave not been a part of creating the strategic account program

or its goals, they may resist or even refuse sales’ requests Insuch cases, neither the customer nor the supplier wins Butboth can win if strategic account management starts as a busi-ness rather than a sales initiative

19

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