Management thinkers like to point out that businesses are living in a ‘VUCA’ world – Volatile, Uncertain, Complex and Ambiguous. Emergent trends such as rapid technological development (and obsolescence), and sudden economic and political fluctuations, have led firms to rely increasingly on building highly collaborative and mutually adaptive relationships with major customers through Key Account Management (KAM). KAM programs aim to manage strategic accounts in a coordinated manner with a view to increasing the value derived from these crucial customers. KAM programs often assume reciprocity, trust and supplier-customer collaboration. However, the rate of failure of KAM implementation is substantial, with many organisations reporting failure to achieve the intended outcomes.
We asked ourselves what lay behind these high failure rates – were these poor strategic choices, or ineffective operational implementation? Using longitudinal case study research covering a six-year period, we investigated the intraorganisational practices that underlie the successful implementation of KAM. We examined how managers went about implementing KAM and the way in which the implementation processes unfold.
We found that practices at two levels - ‘strategic’ and ‘operational’ – and, critically, the management of dilemmas associated with these practices, underpin the ability to roll out KAM programmes successfully. Most organisations underestimate the importance of intraorganisational alignment, and put excessive focus on external, customer – facing processes at the expense of the necessary internal reorganisation and transformation.
Strategic practices include:
1. Compelling business case for embarking on KAM, often as a result of a customer demand / need.
2. Well-informed understanding of KAM as a systematic approach to broaden and deepen relationships with customers, accompanied by training and management development initiatives for account managers and support teams.
3. Formal definition of structures and procedures but incorporating some flexibility and adaptation. These structures are customer centric and sensitive to the way the key customer is organised.
4. Institutionalised KAM processes such as tracking and KAM evaluation schemes. These include reviewing inputs (activities and initiatives) as well as outputs (financial returns).
5. Support systems for KAM, both formal (e.g. committees) and informal (e.g. individual senior manager support).
6. Differentiated offerings and service levels exclusive to key accounts.
7. Management of trade-offs: balancing short and long-term activities and results.
Operational practices supporting the implementation of KAM include:
1. Development of account planning tools such as key account plans including analysis, actions and planned investment; regular updating of plans.
2. Customer review routines that evolve over time including review of value propositions, key account portfolios, insights from marketing research incorporated into key account plans, etc.
3. Measurement practices including key account items on board agendas; engagement of senior people with key accounts, etc.
4. Incentive mechanisms that feature a balanced approach (input and output measures).
5. Key account selection criteria that are clear and widely-accepted across the organisation.
Dilemmas to be managed
Our research showed that effective implementation of KAM is characterised by context-specificity, which requires a mindful understanding of the customer organisation’s local circumstances. When implementing KAM, a delicate balance between short vs. long term and forcefulness vs. flexibility is needed. Effective implementation of KAM relies on objective measures of progress and on subjective evaluation of business relationship development.
Thus, KAM implementation entails changes in practices, processes, and structures, and in managerial mindsets to reconcile the paradox inherent in working across boundaries (internal-external) and time frames (short-long term). Overall, it requires relentless managerial effort, sustained support in continually reviewing practices, and a critical mass of skilled individuals supporting the supplier’s organisational transformation in order to thrive in today’s ‘VUCA’ business world.
Dr. Javier Marcos Cuevas is a senior Lecturer in Sales Performance and the Director of the KAM Best Practice Club at Cranfield School of Management. He recently co-authored From Selling to Co-creating: New trends, Practices and Tools to Upgrade Your Sales Force (BIS, Publishers).
Lynette J. Ryals is the Professor of Strategic Sales and Account Management and Pro Vice Chancellor (Education) at Cranfield University. She has published Key Account Plans (Butterworth-Heinemann) and Managing Customers Profitably (Wiley) and numerous articles and reports on KAM.