Distributors must actively target specific accounts to gain a competitive advantage with the new collaborative e-business model. They must successfully identify customers with a collaborative vision, or they will waste time, energy and money. It's important to implement an executive-level, relationship-building process with your target customers now. Relationships require time to build trust. But if you fail to make the time commitment and your customer partners with one of your competitors, it will be very difficult to gain access after the fact.
The business relationship-building process can be compared to dating and marriage. The customer and distributor will enter into a committed relationship and there will be issues that will test the relationship. A successful business partnership and a successful marriage depend on relationship-building or the dating process. Partners must understand each other's strengths and weaknesses before they commit to the partnership.
Family culture has an impact on the success or failure of a marriage. Company cultures are equally important. Distributor management and customer headquarters are like the parents while the distributor's suppliers and manufacturing plants are like siblings and extended family. The parents and relatives influence the marriage relationship just as management and the distributor's suppliers influence the business relationship.
Dating requires multiple contacts in different settings for couples to determine if marriage is a possibility. Meeting parents and relatives will help the couple understand family cultures and provide indicators for a harmonious long-term commitment. During the dating process, the couple will identify their family culture and establish a vision (kids or not, save or spend, day care or stay at home, etc.) for the relationship. If they have common visions and come from similar cultures, their marriage will have a better chance for success. A business relationship, like marriage, requires a great deal of give and take. There will be some unexpected challenges, but they will usually be worked out if there is a common culture, a common vision and a true commitment to each other.
Collaborative e-business model. The e-commerce model uses technology to gain a competitive advantage. It's relatively easy to duplicate quickly. The collaborative e-business model is focused on building trust between business partners and using technology to automate processes. Because of its basis on trust and commitments between suppliers, distributors and their customers, the collaborative model is hard to duplicate. It takes time and due diligence to build trust and mutual commitment. Many companies don't truly utilize long-term planning, so relationships remain low level and narrow.
The collaborative model is focused on building relationships at the upper-levels of customer organizations, where the partnering selection will be controlled. Existing low-level relationships continue to be valuable, but as customers adopt the collaborative e-business model, low-level contacts will provide only limited supplier selection input. They are your allies, though, and will be valuable coaches as you expand your relationships to upper levels. The cost to build better and broader relationships is not high. Long-term failure to establish strong ties, though, can be extremely costly.
Executives of target companies will be available to distributors during the relationship-building process because they have a partnering mentality. This is a process that many competitors will observe but not appreciate until it's too late. Partnering is based on trust, a common vision and a similar culture. Once partners are chosen, the door to the executive office will be closed to those not selected.
Target accounts. First, target companies that are vertically integrated or collaborating between business units. As they fully implement their intranet, they will experience efficiency gains in production and waste reduction. Production information will be shared between business units real-time. Consequently, changes can be made on-the-fly, reducing returns of manufactured components. Another advantage of this philosophy is that made-to-order material can be delivered to the assembly line as needed, minimizing waiting for parts.
These companies will bring suppliers into the collaborative process to optimize cost reduction by sharing real-time production information with them. Buyers will build relationships to define their suppliers' vision/culture and partner with those suppliers whose vision/culture more closely matches theirs.
The end result of this initiative will be a win-win relationship for these customers and select suppliers. They will work with fewer suppliers at a reduced cost; their suppliers will become low-cost producers; and they will all gain market share. Open communications is the key to this whole process. Some suppliers will accept this as an opportunity to improve and grow, others will be intimidated by the process and interpret (incorrectly) this initiative as another price-cutting process instead of a strategic, long-term partnering opportunity.
Target industries that were early adopters. The second group of industries to target are those that were the first to adopt an e-business model. The automotive industry and its tier-one suppliers were among the first to jointly develop a new procurement model that utilizes technology to reduce waste. Their tier-one suppliers were forced to adopt the e-business model. They have already realized, or soon will, that technology alone does not provide a competitive advantage. This cost-reduction phase can be replicated, relatively easily, by utilizing technology. In a February 2002 article on e-business in Line 56 magazine, Michael Porter, a Harvard professor, said, “The great paradox of the Internet is that its very benefits also make it more difficult for companies to capture those benefits as profits.” The trust so vital for true collaboration must be developed the old fashioned way — by building broad relationships.
Target companies that aren't afraid of change. Third, target individual companies led by CEO's that have a history of leading change. GE is a good example. Jack Welch added e-business as GE's fourth growth initiative during his tenure and its promotion was pervasive in many areas of the company, including its Web site and in its annual report. Do some research and you will see where specific companies are heading.
Target companies that have a past history of using technology to differentiate themselves from their competition. These target accounts will most likely be larger industrial companies with money earmarked for technology. Each distributor will realistically only have a few of the four target groups in their territory. Most customers are taking a wait-and-see approach for three reason:
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They do not have the money required to evolve a technology advantage.
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Their customers are not forcing them into e-business.
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They have no collaborative e-business vision.
This is an evolution, and old habits are hard to change, for buyers and sellers. A fair price and quality are givens. Both parties must focus on building strong upper-level relationships and learning to trust each other. Personal agendas and self-interest must be eliminated, and buyers and sellers must look for each other's interests. This is a long-term process with no shortcuts. The goal is to establish a strong working relationship with the best-of-the-best based on trust, a common vision and a similar culture.
In most cases, several suppliers can deliver a quality product at a competitive price. Can they be trusted to continuously work on process improvements to maintain a competitive price, or will chosen suppliers become complacent and take the partnership for granted? Suppliers and their customers must develop a common vision and culture for the partnership, based on trust, to make collaboration and their commitments work.
FIRST MOVERS
The collaborative model is based on establishing strong, business-to-business, top-level relationships to build trust. Relationship building takes time and effort, but not huge expenditures. Consequently, smaller, forward-thinking companies can compete and win over large competitors in this arena. Trust can arm your company for victory and knock out the competition. The collaborative e-business model offers a real “first-mover advantage.” Why? Because it takes time to build real trust. It can't be rushed. Have the vision to take action now and be a first-mover. Time is of the essence to ensure success.
Harnessing customer knowledge in your company. Company sales history is a matter of record, but most corporations have done a poor job of documenting “tacit knowledge” — implied or unspoken knowledge about customers filed away in employee's heads. The first order of business should be to record or document this important customer knowledge. Next, companies have to determine who will receive the information and what information will be accessible to them. Third, companies have to determine how to keep the data current.
How do corporations harness the customer knowledge in employees' heads? Education and training are the keys. First, employees need to understand the value of customer knowledge and how it will benefit them, the company and the customer. Second, performance measures must be focused on knowledge gathering and updating. Third, people must see positive results from knowledge sharing.
Employees need to understand the value to the customer when everyone is delivering a consistent message to that customer at all touch points. Customers will recognize the connection existing between companies when they share knowledge and begin to exhibit a better understanding of them and their needs and provide true continuity of service. They will favor companies that provide the same level of quality service and customer knowledge from associates throughout the supply chain rather than from disjointed competitors.
Incentive plans and performance measures must encourage updating of customer information. Adding personal information to the database must be a priority for every employee. Employees must get the time they need to do this or customer/company interaction will not improve. After this information is collected, a manager must be responsible for the continuous sorting and filtering of all the information.
Traditional companies can learn much from dot.com companies. They mastered the art of letting the customers provide and update their own information. Customers need to understand the value of that information and how it can be used, and they need to update the information. This is an ongoing project that involves everyone in the company, from top to bottom. Upper-level contacts need to be well documented, too. Those contacts may reveal valuable information about the customer's decision-making processes.
Companies need to overcome the tendency of employees to “squirrel away” knowledge. Some perceive knowledge as power lost once it's shared. Others view knowledge as job security.
The three most common motivations for implementing these “knowledge management” projects are growing revenue and profits; retaining key talent and expertise; and improving customer service, according to Greg Dyer, in a March 2000 article in Knowledge Management magazine.
Knowledge management should be implemented as a pilot program, rather than as a large all-encompassing project. A small project has a better than average chance for success and drafting the right people is the key to its success. Problems develop when companies take on a large all-encompassing project.
Key decision-makers. A successful sales effort will create win-win results. The salesperson helps the customer solve problems, identifies opportunities for sales growth, and is the contact between the customer and his factory. Successful salespeople will help their companies understand when to be flexible and change policy or standards. They must have enough influence within their companies to negotiate give-and-take agreements and be partnership builders.
The objective of a good sales strategy is to get yourself in the right place with the right people at the right time so you can tactically make the right presentation. Successful reps will know their customers in such detail they can anticipate customer questions and issues prior to the customer bringing them up, and will be prepared with the appropriate response. They must simultaneously think as the customers and the rep.
In the book Strategic Selling, the four buying influences present in every complex sale are identified — the economic buyer, technical buyer, user buyer and coach. They are identified as follows:
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The economic buying influence gives final approval to buy, based on if your product matches the company need and if it's a good value for the money. He or she is the one individual who can say “yes” when everyone else has said “no,” and vice versa.
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The technical buying influence screens out possible suppliers. Their focus is on the product or service itself, and they make their recommendations based on how well the product or service meets a variety of objectives and specifications. Technical buyers cannot give the final yes, but they can (and often do) give a final no.
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The user buying influence makes a subjective judgment about the potential impact of your product or service on their job performance. Their personal success is directly tied to the success of your product or service.
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The coach guides the rep to your particular sales goal by leading you to the other buyers and by giving you information that you need to position yourself effectively with each one.
The buying influences have different responsibilities and authority. Once they are identified they are equally important to you. The coach is a friend who wants you to succeed. Coaches will be found inside and outside of the customer's organization. Share your strategy with your coaches and get their input. The more coaches you have the better, because you can compare their input to your own thinking and make strategic decisions.
The economic buyer is the most difficult key decision maker to identify and build a relationship with. The more risk the product or service you are selling represents to the customer's business, the higher up the organization that contact will be. In a large company, it could be the CFO, executive vice president, or at the director level. In smaller companies it will probably be the CEO. Your coaches will help to identify the economic buyer: their personality, values, background, and hot and cold buttons. All of this information is critical because it will influence the way you approach the contact, and you may have only one opportunity to make your impression.
If you lay the groundwork correctly, the customer's other buying influences will be your coaches. Ideally, one of your coaches will introduce you to the difficult-to-reach economic buyer. You must know your role prior to the meeting, so follow the coaching you have received in preparing for the meeting. This may be an appropriate time to introduce a member of your management team to the customer.
Your goal is to build a relationship with the economic buyer, and this cannot be accomplished in one meeting. The goal of each meeting should be to provide the stepping stone for the next meeting. Hopefully, you can establish both a social and business relationship. It's in the economic buyer's best interest to establish key supplier relationships because that person makes important decisions that the company will live with for years.
Business success will require that the distributor and their loyal suppliers have numerous contacts with their customer and build strong relationships with customer decision makers. The key is penetrating the whole organization top-to-bottom, especially identifying and focusing on all buying influences.
Tom Paulsen is president of Tom Paulsen and Associates, Rockford, Ill. He is a collaborative e-business consultant with more than 30 years of supplier-distributor experience. He can be reached at (815) 229-2555 or [email protected].