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The Social Web and Global Account Management
Last Friday I attended the inaugural address of Prof. dr. George S. Yip on ‘Managing Global Customers’. Prior to the inaugural representatives of Shell, KLM Air France, TNT Express and Unilever presented their approaches to global account management. It was a very interesting afternoon.
What is Global Account Management (GAM)?
In essence, these are programs designed to serve global accounts. According to Yip ‘multinational companies need to manage their relationships with multinational customers in a globally integrated approach’ (p.5) During the event various perspectives and theories were discussed.
During the event it became clear that one of the key dilemmas for multinationals is balancing between local autonomy and global integration. For example, how much autonomy do local sales organizations have to negotiate pricing and delivery conditions? During his address Yip gave an interesting example of a local subsidiary in Australia that, eager to close a deal with a customer, made a significant discount to a multinational customer. Of course, HQ was not involved in this local deal, but the implications were enormous. The main responsible for purchasing at this customer then made a call to the corporate account manager saying thank you for the significant savings. The account manager, having no information on this local deal, acted surprised. The customer explained to him that under the current agreement the local price was applicable worldwide. This meant that an individual local deal resulted in that the local pricing agreement, i.e. the discount, was globally applicable. In this example, local autonomy resulted in globally reducing priced prices. According to Yip, this was one of the key drivers for this multinational to initiate a global account management program.
During this day various approaches to GAM programs were introduced. The approaches different in the extent to which power and autonomy is transferred from local to global. The form which has the most power locally is the ‘coordination GAM’ - ‘the national sales organizations retain a great deal of power’. On the other hand the form which provides most power globally is the ‘separate GAM’ – ‘In this approach a supplier creates a separate business unit with total responsibility for global accounts’ (Yip & Bink, 2007, Harvard Business Review, September 2007, p. 110)
Diamond and bowtie relationship models
‘Customers love global account management programmes. The key is to get your organization aligned behind them.’ (Bart Logghe, Senior director of the international retail board, Royal Philips Electronics)
The above quote was taken from the book written by George S. Yip and Audrey J. M. Bink ( Managing Global Customers: An Integrated Approach, 2007, p. 68) It addresses the need to align the organization with the GAM approach chosen. During his inaugural Yip addressed two approaches, namely the bow-tie and the diamond model:
‘In a traditional sales-purchasing situation, the structure of the relationship between the two companies resembles a ‘bow-tie’ with all the activity within one company leading to one person who has contact with the other company (account manager at the supplier and purchasing officer at the customer). The integrated approach advocates a more integrated relationship structure that resembles a web or diamond shape in which employees from many different departments and functions have a direct relationship with each other and relevant people within the other company, as illustrated in the figure below’ (Yip, 2009, ERIM p. 27)
This diamond relationship model is quite interesting. It not only addresses a communication and collaboration challenge, but also a compliance and control challenge:
What is Global Account Management (GAM)?
In essence, these are programs designed to serve global accounts. According to Yip ‘multinational companies need to manage their relationships with multinational customers in a globally integrated approach’ (p.5) During the event various perspectives and theories were discussed.
During the event it became clear that one of the key dilemmas for multinationals is balancing between local autonomy and global integration. For example, how much autonomy do local sales organizations have to negotiate pricing and delivery conditions? During his address Yip gave an interesting example of a local subsidiary in Australia that, eager to close a deal with a customer, made a significant discount to a multinational customer. Of course, HQ was not involved in this local deal, but the implications were enormous. The main responsible for purchasing at this customer then made a call to the corporate account manager saying thank you for the significant savings. The account manager, having no information on this local deal, acted surprised. The customer explained to him that under the current agreement the local price was applicable worldwide. This meant that an individual local deal resulted in that the local pricing agreement, i.e. the discount, was globally applicable. In this example, local autonomy resulted in globally reducing priced prices. According to Yip, this was one of the key drivers for this multinational to initiate a global account management program.
During this day various approaches to GAM programs were introduced. The approaches different in the extent to which power and autonomy is transferred from local to global. The form which has the most power locally is the ‘coordination GAM’ - ‘the national sales organizations retain a great deal of power’. On the other hand the form which provides most power globally is the ‘separate GAM’ – ‘In this approach a supplier creates a separate business unit with total responsibility for global accounts’ (Yip & Bink, 2007, Harvard Business Review, September 2007, p. 110)
Diamond and bowtie relationship models
‘Customers love global account management programmes. The key is to get your organization aligned behind them.’ (Bart Logghe, Senior director of the international retail board, Royal Philips Electronics)
The above quote was taken from the book written by George S. Yip and Audrey J. M. Bink ( Managing Global Customers: An Integrated Approach, 2007, p. 68) It addresses the need to align the organization with the GAM approach chosen. During his inaugural Yip addressed two approaches, namely the bow-tie and the diamond model:
‘In a traditional sales-purchasing situation, the structure of the relationship between the two companies resembles a ‘bow-tie’ with all the activity within one company leading to one person who has contact with the other company (account manager at the supplier and purchasing officer at the customer). The integrated approach advocates a more integrated relationship structure that resembles a web or diamond shape in which employees from many different departments and functions have a direct relationship with each other and relevant people within the other company, as illustrated in the figure below’ (Yip, 2009, ERIM p. 27)
This diamond relationship model is quite interesting. It not only addresses a communication and collaboration challenge, but also a compliance and control challenge:
- How to facilitate better communication by giving all local and global stakeholders real-time access to relevant customer information based on a single source of truth? In many organizations customer information is scattered in many different systems.
- How to improve the way employees from local autonomous subsidiaries are working together with their coworkers in global account management roles? For example, how do local and global roles work together in responding to a tender.
- How to promote compliance with internal (global / local) policies and external regulations? You want to avoid cases such as the Australian subsidiary above.
- How to establish more control over GAM processes and related key indicators? (growth of margins, turnover, quality of relationship, payment behaviors, etc.)
During the day TNT Express discussed that they were using electronic workflow systems to unify everyone involved in for example a tender or a proposal. It shows that new technologies can facilitate GAM coordination models.
GAM from a customer intimacy point of view.
In addition to the presentation of Yip’s empirical work on GAM programs, the day offered a lot of views from the field. TNT Express, for example, presented their GAM approach and its evolution in the last years. Currently, TNT Express identified about 130 global accounts served by a dedicated group of 130 individuals in sales and sales support jobs. It fits the profile of a ‘coordination GAM’. Hugo Koppelaars, director of Solutions & Commercial at TNT Express addressed the fact that a GAM is all about people. Having the right people to execute a GAM program is key.
Earlier I defined customer intimacy as people collaborating in a structured and customer centric way to create customer value and achieve results. This definition can surely be applied to a GAM, to quote from the Shell presentation: ‘It is about making the pie bigger, not about slicing or dividing the pie’. In essence, a GAM should deliver both customer value and achieve results for the supplier.
One of the distinguishing elements in my definition is that customer intimacy is about people, and not necessarily about organizations. It is ultimately about people who build bonds and relationships with each other. The diamond model seeks to facilitate relationship building between various people from a supplier and customer. However, it seems that there is little information on how to evolve from a bow-tie relationship to a diamond relationship model.
Towards a social GAM perspective?
Social networks such as Facebook, Hyves, Twitter and Linkedin provide new ways for people to stay in touch with each. One of the key strengths of these social networks that they enable people to stay in touch with a level of regularity and intimacy that previously was not possible (see also earlier post).
Applied to GAM: Given that the success of the GAM depends on how people work together and form relationships, a GAM that leverages social networks outperforms GAMs that do not leverage social networks. In other words, a GAM that is built on a social network is more likely to be successful.
Social networks also facilitate innovation. A nice view is that of McAffee: 'Weak ties are sources of innovation, they are ways for you to get introduced to people who you would not know otherwise'. (see also earlier post on the strength of weak ties)
Applied to GAM: A social diamond model in which people can form both strong and weak ties among each other outperforms a relationship model in which people have only strong ties among each other.
Social networks have the potential to resolve problems in communication and collaboration. These are just two example of how social networks can potentially add value.
What about the compliance and control challenge? In order to execute a GAM program a supplier designs processes and assigns the right people to deliver on these processes. The supplier also makes choices in how to approach this GAM program (high local autonomy vs. high global integration) GAM processes also must have a degree of uniformity and measurability to maintain control over the process. In today’s connected world a large variety of solutions exist to get internationally distributed teams organized quickly. These can be customer relationship management tools or solutions focusing on business process automation.
The examples listed in this paragraph hopefully provide food for thought on how social networks can ‘make the pie bigger’ for both the customer and the supplier.
vrijdag 8 mei 2009
donderdag 7 mei 2009
Executive Social Marketing Bootcamp
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Executive Social Marketing Bootcamp
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