The business environment is constantly changing. These changes in markets, competition and technology are hurting the results of many companies.
The priorities for companies are to create superior customer value, retain high value customers, be more innovative and be more efficient. However, there is immense pressure to drive down operating costs, compete increasingly on price, and respond to rising customer demands.
Many companies find it impossible to respond to change and simultaneously pursue strategic priorities. So, they end up mainly reacting to change.
Changes in markets
When a market or part of a market consolidates it means fewer customers, fewer suppliers and fewer distributors. This consolidation increases the market power of customers because there are fewer, larger customers. Similarly, this concentration reduces the number of distributors, meaning you have less choice and your distributors have more power. Fewer, larger customers means they can wield more power in the market.
If you believe that your organisation is immune from these changes in customers, then ask yourself: what percentage of last year's revenue was generated by your top ten customers? Compare this with the percentage of revenue five years ago that was generated by your top ten customers. In some companies this percentage can be as high as 95 percent.
Many executives are unaware that so few customers generate so much revenue. How is this possible? The change has been gradual over decades rather than a sudden jump between financial years. If one of their top customers left, many executives are unaware of the scale of the impact to their profits.
There is also a change in how much 'share of wallet' companies have of their top accounts' business. To leverage economies of scale and secure price reductions, buyers have consolidated. Successful suppliers can discover they have 100 percent of many of their top account's business. This means there is little room for growth and an enormous risk if they lose any of these accounts because of the significant levels of business.
Changes in competitors
In these markets competition increases. As a market consolidates this creates fewer and larger competitors, which obviously increases the competitiveness of the marketplace. Also parts of the large market fragment, producing new but small, agile companies who will aggressively compete for some parts of the customer's business.
Changes in technology
As the information revolution continues, computing power doubles every five years. Every day, customers and competitors are sharing information faster. This can create new competitors as the world becomes more global, manufacturers in other countries can complete the work at much lower costs. Or global organisations can work on projects for every one of the 24 hours in a day, shortening lead times dramatically.
Technology also offers opportunities to collaborate on ideas faster to accelerate innovation in new products, services or sales channels. Sharing information also offers opportunities for streamlining, automating and standardising business processes.
What would drive you to implement SAM?
So, how can you use these changes to your advantage and find opportunities for improving your business results? One way is with the implementation of strategic account management (SAM). Managing your accounts more strategically can provide many benefits, read about them in this blog, Why manage your accounts strategically?
Here are some of the reasons that drive companies to need SAM. They are both positive and negative reasons and are initiated internally and externally.
How many of these drivers affect you and your organisation? Can you make your top accounts a framework for success? Find out how on this practical course at the University of Newcastle, Sydney: Manage Top Accounts for Results.