Strategic Account Management by daviddeboer handyman

driving ďŹ rm performance with strategic account management prof.dr. kaj storbacka

driving ďŹ rm performance with strategic account management prof.dr. kaj storbacka inaugural essay

Straatweg 25 P.O. Box 130 3620 AC Breukelen The Netherlands www.nyenrode.nl

february 14, 2007 inaugural essay

driving ďŹ rm performance with strategic account management

Prof.dr. Kaj Storbacka

“There is hardly a week that passes when I don’t ask the unanswerable question: what am I now convinced of that will turn out to be ridiculous? And yet one can’t forever stand on the shore; at some point, ﬁlled with indecision, scepticism, reservation and doubt, you either jump in or concede that life is forever elsewhere.” Arthur Miller, “Are You Now Or Were You Ever?” from The Guardian/The Observer (on line), Saturday, June 17, 2000

Prof.dr. Kaj Storbacka 978-90-73314-94-8

No part of this book may be reproduced in any form, by print, photoprint, microﬁlm, or any other means, without written permission from the publisher.

Table of contents 7

Introduction and acknowledgements

Customer relationships as the unit of analysis Customer relationships and the heterogeneity of ﬁrm performance Customer relationships and ﬁrm performance measures Arguments, objectives, and research process

Relationship performance drives ﬁrm performance Relationships for the co-creation of value Customer relationships as resources Customer relationships as assets Relationship performance heterogeneity and customer portfolios Investing in customer relationships

Design elements of Strategic Account Management Defining strategic account management The roles and goals of a strategic account management program Inter-organizational alignment – aligning with customers Account portfolio definition Account business planning Account-specific value proposition Account management process Intra-organizational alignment – creating a collaborative culture of commitment Organizational integration Support capabilities Account performance management Account team profile and skills

Commonalities and variations across program conﬁgurations Equiﬁnality and the interdependence of program elements

Appendix 1: The life of a clinician - combining research and interventions

Appendix 2: The richness of longitudinal and multifaceted empirical data

References

Other recommended reading

DRIVING FIRM PERFORMANCE WITH STRATEGIC ACCOUNT MANAGEMENT

Introduction and acknowledgements

This essay is a long version of my inaugural speech, as I accept the position as professor of Sales and Account Management at the Nyenrode Business Universiteit in the Netherlands. Churchill once said “I am going to give a long speech as I have not had time to write a short one”. In order to give a short and concise speech, I have taken time to make a synthesized essay of a research process that started with a multi-client study in 19981999, initiated by my consulting practice Vectia Ltd., called “Key Client Management”. The research process is longitudinal in its true sense as I have, since then, participated in an additional four multi-client studies run in the Vectia context, all of which have had an impact on the content of this essay (see Appendix 2). I started to prepare the essay during the summer of 2006. As I did so, I noted that I had not utilized the very rich empirical data gathered during the interaction with the tens of individuals from organizations that ﬁnanced and participated in the studies. I also noted that there was a clear thread of logic throughout the years: the idea that effective management of value creation in customer relationships will have a positive impact on the performance of both the ﬁrm and its customer. The process of integrating my ideas and previous texts, with research published on strategic management, relationship and business marketing, value management, network management, and key account management, proved to be personally very rewarding. I should have done this earlier! There are several persons that have supported me in this process. Professor Ed Peelen from Nyenrode Business Universiteit has made the whole process possible by offering me an opportunity to apply for the position. The Sales Management Association, and especially its chairman Harry Stol and treasurer Casper Baan have continuously backed me up during the

DRIVING FIRM PERFORMANCE WITH STRATEGIC ACCOUNT MANAGEMENT

process. Faust Mertens has, through his work with the participants in the Sales Leadership Masterclass at Nyenrode, provided me an excellent forum to test my ideas. Professor Christian Grönroos from the Swedish School of Economics in Helsinki and Professor Adrian Payne from Cranﬁeld School of Management are role models and sounding boards I have relied on.

DRIVING FIRM PERFORMANCE WITH STRATEGIC ACCOUNT MANAGEMENT

Customer relationships as the unit of analysis

I would also like to acknowledge the support that I receive from the organizations sponsoring my chair, and the individuals in these organizations: AON, Ahrend, Gamma Holding, ING Bank, KONE, Nashuatec, Philips, Royal Haskoning, Schouten & Nelissen, and USG Capacity.

The July/August 2006 issue of Harvard Business Review was the journal’s first to focus only on sales. The editor, Thomas A. Stewart, motivates this decision, in his letter from the editor, by writing about the lack of serious research on the topic (Stewart 2006, p. 10): ‘of all the topics in the field of business, sales has probably gotten the least attention from serious researchers … the popular literature on sales management is just that: popular … a lot is rah-rah, testosterone-pumping stuff to lend hardcover legitimacy to the author’s career as a motivational speaker’1. Later in the letter he expresses his surprise about the gap between universities’ lack of interest in sales and the reality in the business organizations (ibid): ‘selling is changing fast … sales teams have become strategic resources …. sales representatives cease to be mere order takers (most orders are placed online, anyway) and become relationship managers … the organization of the sales force are among the most crucial decisions executives make … mistake in reorganizing sales can cost a company years of profits … sales is where the money is: no strategy can succeed unless a company takes control of its top line’.

As I do action research, the clients who trust me for advice, and challenge my intervention ideas are major contributors to the content of this essay. My colleagues at Vectia have likewise collectively contributed to the content of this essay, especially those with whom I have had the privilege to work in the multi-client studies. Suvi Nenonen has had a particular role in supporting my writing efforts during the last two years – many of the texts integrated have been scrutinized by her. I have also borrowed text elements related to customers as assets, customer portfolios and ﬁrm performance measures from a co-authored academic paper to be presented in a conference in July 2007. Hanna Puhakka has, in addition to her work with the ongoing benchmark study with the sponsoring organizations, assisted me with the laborious and time-consuming literature review.

It is not an understatement to say that the role of the sales is changing. Due to consolidation in many industries, customers’ buying power increases rapidly which forces suppliers to apply more advanced sales methods. Ulaga and Eggert (2006) report that many business customers today consolidate their supply bases and implement preferred supplier programs, leaving selling ﬁrms exposed to the risk of being commoditized, and pushed into a second-tier, or backup supplier role. As Stewart (2006) also notes, customers’ purchasing practices have changed more dramatically during the last twenty years than providers’ sales practices.

As always, my wife Brita and our children have been patient with me, as I have taken time off from our potential leisure time for my passion to write. January 2007 Kaj Storbacka

McDonald et al (1997, p. 738) make the same observation: ‘Unfortunately, sales management has tended to be labelled as a practical, non-academic subject; and many trainers specialising in selling/negotiation techniques have done the profession a disservice by putting the marketing/purchasing interface in adversarial mode. Thus, much of the literature is of the generic “how to do it” variety, with little theoretical/empirical underpinning and paying scant attention to context.’

DRIVING FIRM PERFORMANCE WITH STRATEGIC ACCOUNT MANAGEMENT

The change of sales is, however, only an expression of the comprehensive transformation of business systems that we are experiencing. The logic of value creation has changed as we have moved from a productiondominated, “inside-out”, value chain paradigm towards a knowledgeintensive, collaborative value network paradigm where firm boundaries, as well as industry and country boundaries, are becoming increasing permeable, fuzzy and fleeting (Day 1994, Dyer and Singh 1998). As Friedman (2006) so eloquently put it: ‘the world is flat’. The liquification of resources (Normann 2001) makes re-configurations of business operations much easier, not only enabling rapid change but rather emphasizing that the ability to understand changes in the value network logic and reconfigure the firm in relation to the network actors, will become a competitive advantage. Doz and Kosonen (2005) have described this ability as strategic agility, claiming that the ability consists of strategic acuity, resource fluidity and management unity.

the offering, expressed as solution, consultative or value selling (Hanan 1995, Bosworth and Holland 2004, Kaario et al 2003), and partly to the increased role of cross-functional team selling (Narus and Anderson 2005). The sales process is just a part of the customer interface and the relationship patterns. As Homburg et al (2002) note: ‘activities for complex customers cannot be handled by the sales function alone but requires participation from other functional groups’.

In this unpredictable environment the focus of analysis has to be expanded from the firm as the unit of analysis to the firm relations to suppliers, alliance partners, and customers as the units of analysis. This essay will focus on the relation between a firm and its customers, and specifically a firm’s most important customers.

The customers’ role is changing in fundamental ways, and this may require a total re-definition of how we view the firm, even change the theory of the firm (Conner 1991, Dyer and Singh 1998, Priem and Butler 2001, Slater 1997, Woodruff 1997). This essay is not the place for a detailed discussion about alternative theories of the firm. Instead it will examine elements of a possible theory, focusing on the role of the customer as a driver of firm performance. The argument is that previous theories suffer from myopia, and do not acknowledge the role of the customer as a resource and as a supplier of resources, and, furthermore, do not recognize the importance of the capabilities related to managing customer relationships in the increasingly dynamic market environment.

What is needed is not more focus on sales as such, but a more comprehensive, holistic view on how managing customers can support long-term sustainable ﬁrm performance; how customers can drive the deﬁnition and implementation of strategy.

Customer relationships and the heterogeneity of ﬁrm performance

The reconfigurations demanded by the collaborative value network paradigm will ultimately manifest themselves as redefined offerings to the customers. Offerings can, based on Normann (2001), be defined as organizers and enablers of co-creation of value in customer relationships. This indicates that firms are increasingly building offerings that require totally new relationship patterns, linkages, and continuous adaptations of firm and customer processes (Cannon and Perreault 1999), called “partnering” (Anderson and Narus 1991, Napolitano 1997), or collaborative relationships (Day 1994). The change is not about sales alone; the underlying driver is to be found in the changing role of the customer, and, consequently, in the ways companies are managing their customer interface. Sales will, however, be a key actor in this change, as no change is implemented; no innovation is proven successful, before someone sells it to the customer. The pressures on sales relate partly to the more complicated definitions of

A key ingredient of a theory of the firm is its ability to explain performance heterogeneity among firms2 - an issue that has been in the focus of strategic management research over a number of years. There have been many different approaches to try to explain heterogeneity. Early work in strategic management looked at both internal strengths and weaknesses of the firm, and on external issues related to opportunities and strengths in the market space (Ansoff 1965).

A theory of the firm requires explanations to three questions: (1) why do firms exist in place of alternate systems for organizing economic activities; (2) why are there differences in the scope, scale and types of activities between firms; and, finally (3) how can performance heterogeneity among firms be explained? See Conner (1991), Hunt and Morgan (1995), Slater (1997).

DRIVING FIRM PERFORMANCE WITH STRATEGIC ACCOUNT MANAGEMENT

The competitive strategy school (Porter 1980) seeks to explain the differences by looking externally, at industry structures and the firm’s positioning in the industry. This school of thought implicitly assumes resource homogeneity and resource mobility among competing firms in an industry. This means that companies cannot build competitive advantage based on controlling strategically relevant resources as all companies will acquire the resources necessary to execute the selected strategy from factor market. Wernerfelt’s influential article from 1984 introduced the resource-based view of he firm (RBV), where the focus has been “internal” in the sense that it focuses on characteristics of firm resources that contribute to performance in the form of competitive advantage. According to Barney (1991) resources are all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc., controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness. Researchers have argued that resources that are valuable, rare, inimitable, and non-substitutable (i.e., so-called VRIN attributes), create the foundation for sustainable competitive advantage (Barney 1991, Conner and Prahalad 1996, Peteraf 1993). Hence, RBV assumes resource heterogeneity between competing firms, and further that these resources are not mobile, which makes long term, sustainable competitive advantage possible based on internal configuration of strategically relevant resources.

DRIVING FIRM PERFORMANCE WITH STRATEGIC ACCOUNT MANAGEMENT

that ‘a firm’s critical resources may span firm boundaries and may be embedded in inter-organizational practices. Hence, the importance of customers’ resources as inputs in a co-creation context, or the customer relationship in itself as a resource, is not recognized. As the resource pool, the mission and values of customers are heterogeneous, demand heterogeneity will play a significant role in determining the heterogeneity of firm performance. It is common sense that a firm with “better” customers and “better” customer relationships will perform “better” than a competitor with “lousy” customers and customer relationships. Hence, a key issue will be to understand the antecedents of demand heterogeneity and the ways to match demand heterogeneity with the inherent resource base of firms. Matching the heterogeneous need in the market (by segmenting) with the heterogeneous resource base in a firm has been explored already by Alderson (1957, 1965), and more recently by Priem (1992), Hunt (1997, 2000), and Hunt and Morgan (1995). Eggert et al (2006) conclude that the focus of marketing metrics is shifting from aggregated measures like market share, profit, sales, towards performance indicators on the individual dyad level: relationship performance.

Customer relationships and firm performance measures Ardner and Zemsky (2006) claim that both competitive strategy (Porter 1980) and the resource-based view on strategy (Wernerfelt 1984, Barney 1991), focus on and “inside-out” view of strategy, and ‘largely neglect the demand environment in which these interactions take place’ (ibid, p. 26). The issue on how resources create value to customers has received less attention – it has almost been taken for granted. Priem and Butler (2001) note that the value of any firm resource is ultimately determined by demand-side characteristics. This indicates that the effectiveness of the firm’s strategy will be dependent on exogenous factors – primarily customers.

Improving a firm’s financial performance is acknowledged by various researchers as the main objective of marketing (Day and Fahey 1988, Srivastava et al 1998, Doyle 2000, Zou and Cavusgil 2002, Kumar and Petersen 2005). Vargo and Lusch (2004, p. 14) also emphasize the need to create new objectives and metrics for marketing strategies that are linked to financial performance: ‘Marketing practice accepts responsibility for firm financial performance by taking responsibility for increasing the market value rather than the book value of the organization as it builds off-balance-sheet assets such as customer, brand, and network equity’.

A shortcoming in the RBV literature is that it ‘views the ﬁrm as the primary unit of analysis’ (Dyer and Singh 1998, p. 660), and seldom acknowledges

In order to relate customer management activities to ﬁrm performance there needs to be agreement on how ﬁrm performance is measured,

DRIVING FIRM PERFORMANCE WITH STRATEGIC ACCOUNT MANAGEMENT

and how practices in customer relationships contribute to favorable development of these measures. Firm performance is ultimately judged by the shareholders of the firm. Thus, it can be argued that the optimal firm performance is reached when shareholder value is maximized in the long-term. The proposed measures for shareholder value can be divided into accounting and firm operations based and capital market based measures. The performance of firm operations can be measured by e.g. discounted future cash flows (Black et al 1998, Rappaport 1998), return on investment (Buzznel and Gale 1987, Jacobson 1988, 1990), sales (Dekimpe and Hassens 1995), price (Boulding and Staelin 1995), cost (Boulding and Staelin 1993), and economic profit of economic value added (Stewart 1991, Kleiman 1999).

measured as the discounted present value of all future economic proﬁt that the ﬁrm is expected to generate from the customer relationship.

According to the efficient market theory, all information of the future expected earnings are taken into account in stock prices (Fama 1970). Hence, capital market data can be used as measures of shareholder value. These include market capitalization in relation to the book value of the firm (Hogan et al 2002), Tobin’s q, which is the ratio of firm’s market value to the current replacement costs of its assets3 (Tobin 1969, Lewellen and Badrinath 1997, Anderson et al 2004), and MVA, market value added, which is the difference between a firm’s market value and its capital employed (Stewart 1991, Griffith 2004).

To conclude: it is suggested that firm performance can be measured with shareholder value, and that the contribution of individual customer relationships to shareholder value can be measured as the discounted present value of all future economic profit that the firm is expected to generate from the customer relationship. Furthermore it is suggested that it is interesting to explore how managing customer relationships can contribute to growth, profitability, renewal, risk reduction and whether divesting customer relationships can contribute to the above measures.

Accounting based measures have major advantages as they enable analysis on an individual customer relationship level. Based on Nenonen and Storbacka (2007) it is suggested that economic profit is used as a starting point for measuring shareholder value creation. Economic profit defines the net operating profit after tax (NOPAT) and subtracts the cost of capital for the economic book value of firm’s assets used in the customer relationship under analysis. Empirical evidence shows that positive economic profit leads to an increase in shareholder wealth (Bacidore et al 1997, Kleiman 1999). Economic profit does not account for value potentials inbuilt in investments in customer relationships. The proxy of the shareholder value creation of an individual customer relationships can, therefore, be

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A q value bigger than 1 indicates that the ﬁrm has intangible assets that enable the ﬁrm to create earnings in excess of its tangible assets. As customers are intangible assets, the higher the q value is the more valuable the customer assets should be.

A key issue from a management point of view is to determine how shareholder value creation can be increased. Based on the commonalities identified in a literature review4, it is suggested that relevant measures are profitability (margins, NOPAT, spread, efficiency), growth, and risk (volatility). Additionally, most researchers propose some drivers that relate to renewal in order to generate additional or faster cash flows in the future (flexibility, duration, acceleration). Finally, some researchers suggest that divestitures or asset structuring is also a viable driver for improved shareholder value.

Rappaport (1998) and Black, Wright, Bachman and Davies (1998) have identified seven value drivers that affect shareholder value and its creation: sales growth rate, operating profit margin, income tax rate, working capital investment, fixed capital investment, cost of capital and value growth duration. Srivastava, Shervani and Fahey (1998) suggest that growing the cash flows, accelerating the cash flows, reducing the volatility and vulnerability of cash flows and enhancing the residual value of cash flows drive the firm value. Stewart (1991) has identified six shareholder value drivers: net operating profits after taxes, the tax benefit of debt associated with the target capital structure, the amount of new capital invested for growth, the after-tax rate of return of the new capital investments, the cost of capital for business risk and the future period of time over which the company is expected to generate a return exceeding the cost of capital from its new investments. Leibowitz (2000) argues that the main determinant of shareholder value is the franchise spread, the return that the company is able to earn on new investments over the cost of capital. Chen, Conover and Kensinger (2002) continue a similar line of thought with their list of ways to increase shareholder value: finding investment opportunities that provide more return relative to risk than investors can find on their own from the capital markets, reducing resources committed to areas in which the company does not have competitive advantage, getting acquired by another company, spinning off business units or asset pools that can stand alone, and paying out cash to the shareholders – given that the management cannot find competitive investment opportunities. Chen, Conover and Kensinger (2002) have identified four value drivers for a company’s stock. The first driver is the company’s current assets and the cash flows derived from them. This driver alone cannot however explain the valuation of companies at the capital markets. The present value of growth opportunities is another major value driver. Other real options may enhance value by reducing risks or adding flexibility. Phelps (2004) sees also the shareholder value of a derivative of company’s current and future value. The current value can be increased by increasing efficiency, while growth is the driver of the future value. Dranikoff, Koller and Schneider (2002) argue for asset structuring as sources for adding shareholder value. Even though selling off assets or business units may initially reduce the size of the company and cash flows, the proceeds of the divestiture can be invested into a more high-margin, high-growth business opportunities – thus creating added value to the shareholders.

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Arguments, objectives, and research process The content of this essay is built around three arguments. First, it takes a focal customer relationship as the unit of analysis. As suggested by Dyer and Singh (1988), Storbacka and Lehtinen (2001), Storbacka (2006), dyad or network routines and processes could be an important unit of analysis. The analysis will be primarily dyadic, but dyads are also parts of networks. Hence, the process, the value and the heterogeneity of the dyad may be influenced by chains of activities involving more than two firms, and constellations of resources controlled by more than two firms (Anderson et al 1994). The essay is built on the premises that an under-investigated source of performance heterogeneity is the firm’s ability to build and manage a customer base and especially manage the relationship to its most important (or strategic) customers, that support the effectiveness of the selected strategy and, hence, firm performance (Dyer and Sing 1998), in terms of growth, profitability, renewal, and risk reduction. Second, it is argued that to enable firm effectiveness in relation to the customer’s new roles, firms need a different set of capabilities. Day (1994, p. 38) defines capabilities as ‘complex bundles of skills and accumulated knowledge, exercised through organizational processes, that enable firms to coordinate activities and make use of their [resources]’. Eisenhardt and Martin (2000) have investigated dynamic capabilities which according to them consist of specific organizational processes like product development, alliancing, and strategic decision making. Strategic account management is viewed as this kind of a dynamic alliancing, boundary spanning capability. In a business-to-business context, firms need the ability to identify and manage customer relationships that contribute or could contribute significantly or critically to the achievement of corporate objectives, present or future (Burnett 1992), or who are pivotal to a compound success in a market (Abratt and Kelly 2002). Third, Eisenhardt and Martin (2000) show that the RBV assumption about resource heterogeneity between competing firms is not always true: ‘these capabilities exhibit commonalities across effective firms or what can be termed “best practice”. Therefore, dynamic capabilities have greater equifinality, homogeneity, and substitutability across firms than traditional RBV thinking implies’. Building on this and on the empirical

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data described in Appendix 2, the essay aims at identifying managerially relevant commonalities, or best practices, for effective strategic account management. Additionally, the essay discusses possible variations in strategic account management practices based on differences in customer relationship characteristics. The objectives of the essay can be defined as follows: (1) to examine the role of customer relationships, and specifically strategic accounts, in determining firm performance, (2) to define and characterize the elements of strategic account management, and (3) to describe commonalities and variations of strategic account management practices across effective firms. The research process carried out during the last several years builds on a tradition of action research that could be labeled “clinical research”, as described by Normann (1977), and Schein (1987). The foundations of clinical research are described in Appendix 1. Building on the clinical research tradition the data used in this research is very rich. As space limitations prevent more detailed narrative and as the role of this essay is to describe the results and avenues for further research, the data is only briefly described in Appendix 2.

DRIVING FIRM PERFORMANCE WITH STRATEGIC ACCOUNT MANAGEMENT

Relationship performance drives ﬁrm performance

As most firms are totally dependent on cash flows from customer relationships, there is a connection between firm performance and customer relationship performance. In order to understand how customer relationships, and specifically strategic accounts, influence firm performance, the content and logic of relationship performance is examined by defining how value is created in customer relationships.

Relationships for the co-creation of value Drawing on Barney (1991), Daum (2002), Edvinsson and Malone (1997), Eisenhardt & Martin (2000), Morgan and Hunt 1999, Kalafut and Low (2001) a firm’s resources are the physical (e.g. specialized equipment, geographic location), human (e.g. skills and knowledge), structural (e.g. routines, practices and processes), and relational (e.g. relationships to suppliers, partners, alliances and customers) assets that can be used to implement value-creating strategies. Vargo and Lusch (2004a), drawing on Contantin and Lusch (1994), make a distinction between operant and operand resources5. Operant resources are used on operand resources (and other operant resources) to produce an effect. An operant resource is, hence, not an input in value creation. The input is the “service” that the operant resource renders (building on Penrose 1959 as quoted by Hunt 2000). Operant resources are often invisible, intangible, dynamic, infinite ‘and not static and finite, as is usually the case with operand resources’ (Vargo and Lusch 2000, p. 3). Capabilities are, drawing on Day (1994), and Morgan and Hunt (1999), defined as a firm’s ability to utilize its operant resources effectively (to 5

Wikipedia deﬁnes the adjective operant as something that operates to produce an effect. Operand is usually used in mathematics, where an operand is one of the inputs (arguments) of an operator. For instance, in 3 + 6 = 9, ‘+’ is the operator and ‘3’ and ‘6’ are the operands.

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achieve goal). Ramirez and Wallin, 2000 and Blois and Ramirez (2006) have suggested a way to categorize capabilities based on whether the value finally created is internally or externally focused. Building on this it is suggested that internal (intra-organizational) capabilities aim at improving the efficiency and operational performance of key business processes, such as manufacturing processes. Relational (interorganizational) capabilities are the firm’s abilities to effectively manage practices related to the content and structure of interaction and exchange between and supplier and customer, i.e. referring both to supplier and customer relationships.

Ramirez (1999) explored the logic of value co-production7, claiming that customers do not destroy value in their consumption process but rather co-create it. The work of Prahalad and Ramaswamy (2000; 2002; 2003; 2004a; 2004b) and Prahalad (2004a; 2004b) on the co-creation of value embraces a holistic perspective. Their work accentuate a new set of premises: value is co-created by the consumer and the ﬁrm; value is embedded in experiences: products and services are carriers; experience fulﬁllment webs are not a sequential and linear value chain; innovation is about experiences; technologies, products and processes are critical but not the goal; and, customers make the key decisions and the associated trade-offs.

Dixon (1990, p. 342) claimed that the response to Alderson’s (1997, p. 69) challenge that ‘what is needed is not an interpretation of the whole process of the utility [value] created by marketing, but a marketing interpretation of the whole process of creating utility [value]’ still remains6. In their comprehensive and penetrating article Vargo and Lusch (2004a) do an excellent job in responding to the challenge by proposing a service dominant (S-D) logic for marketing. Central to S-D logic is a focus on the value-creation process that occurs when a customer consumes, or uses, a product or service, rather than when the output is manufactured. Vargo and Lusch (2004a) articulate this in their sixth foundational proposition by claiming that ‘the customer is always a co-creator of value: there is no value until an offering is used – experience and perception are essential to value determination’. Grönroos (2000) argues that it is the customer that creates value and that this value creation is supported by interaction throughout the relationship with the supplier. He also adds that focus should be on the customer’s value-creating processes.

Building on the above discussion customer relationships will, in this essay, be defined as longitudinal social and economic processes for the co-creation of value. Business-to-business customer relationships consists of three main processes (Figure 1): the customer value-creating process, in which the customer organization applies its capabilities in a series of activities and management practices to achieve particular goals (Woodruff 1997); the firm value-creating process, in which the firm applies its capabilities in a series of activities and management practices to improve firm performance; the encounter process, in which dyad actors use relational capabilities in collaborative activities and practices of interaction and exchange for the co-creation of value. Ulaga (2003) claims that the measurement of value creation in buyer– seller relationships is still in its infancy. Recent research (Flint and Mentzer 2006) argues that business customer value can be viewed in several ways8. Pardo et al 2006 have identified three categories of value in a strategic account management context: exchange value, which is the value originating in [strategic account management] activities by the supplier and being consumed by the customer; proprietary value, being created and consumed only by the firm as it creates and operates its [strategic] account activities for its efficiency or effectiveness exclusively; relational value, the co-produced value (for firm and customer) that

With this deﬁnition follows that the customers are not to be viewed as passive recipients of value created by the ﬁrm. Prahalad and Ramaswamy (2000) characterize the evolution of customers from ‘passive audiences’ to ‘active players’. Firms do no exist in order to distribute value along a value chain, but rather to support its customers in their value-creating process (Day 1999, Normann and Ramirez 1993, Storbacka and Lehtinen 2001).

As a personal note I would like to see this as one of the central problems of marketing as a “science”. I was born in 1957, when Alderson’s book was published. You would think that scholars before me would have solved this already.

The terms co-production and co-creation are often used interchangeably in. I generally use the term co-creation rather than coproduction, adopting the view of Vargo and Lusch (2006) that the term ‘co-producer’ is somewhat tainted with connotations of a production-oriented logic.

A quotation from Flint and Mentzer (2006, p. 142-143): ‘First, value can be viewed as a trade-off between what is received and what is given up (Zeithaml 1988). Second, business customers value functional benefits, service benefits, and relationship benefits, and tolerate certain monetary and non-monetary sacrifices (Lapierre 2000; Ulaga 2003). Often changes in non-monetary sacrifices significantly affect the strength of supply chain relationships. Third, value can be viewed in terms of a hierarchy of goals or desired consequences whereby supplier attributes are viewed as valuable because they facilitate goal attainment and minimize sacrifices incurred along the way (Bagozzi and Dholakia 1999; Woodruff 1997). Fourth, value can be viewed in terms of the interaction between suppliers’ products/services, customers’ use situations, and customers’ desired goals and end states (Woodruff 1997).’

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emanates from being party to a relational constellation embedded in collaborative and co-operative activities. In this essay it is argued that actors in the dyad determine the performance of the relationship by assessing the total impact of the interactions on the effectiveness and efficiency by which the actor achieves its mission or goals (assumed here to mean firm performance), a view that incorporates the three categories suggested by Pardo et al (2006). An essential managerial aspect of relationship performance is to find the balance between the firm view and the customer view. Blois and Ramirez (2006) argues that ‘although firms exist to help customers and organizations to create value they only do so in order to capture part of that value for themselves’. In their recent article, Sirmon et al (2007) argue that in order to capture value, firms must structure their resource portfolio, bundle resources to build capabilities, and leverage capabilities to exploit market opportunities. The value co-creation process consists of determining the total value formed during the interaction between firm and customer, how this value is shared between the customer (value creation), and the firm (value capture). Relationship performance from a firm perspective can, hence, be measured by value capture. This essay will primarily focus on value capture. It is however important to note that long-term value capture is not possible if the customer does not perceive that the relationship creates value to him. Value creation is hence a pre-requisite for value capture (e.g. Gosselin and Bauwen 2006). Figure 1: Elements of a customer relationship.

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There are several facets to value capture, as customer relationships can be viewed as a resource for the firm’s value-creating process, as an asset that creates future economic benefits for the firm, as a risk that influences the heterogeneity of firm performance, and as an investment when the firm allocates resources to improve the exchange. These facets will be examined in the next four sections. It is argued that the same facets are, with some important limitations relating to relationships as assets (Ford et al 2003), relevant for a discussion on customer value creation, especially in a business-to-business context.

Customer relationships as resources A key issue in evaluating value capture from customer relationships relate to the magnitude and relevancy of customer’s extant resources, and their propensity to apply these resources in their supply relationships. Ford et al (2003) discusses the level of involvement in supplier relationships and concludes that there should be a mutual understanding on what results are desired from the relationship. Dyer and Singh (1998, p. 661) argue that ‘a firm’s critical resources may extend beyond firm boundaries and be embedded in interfirm routines and processes’. They examine relationship specific investment, knowledge exchange, combining of complementary resources or capabilities as possible sources of relational advantages. Morgan and Hunt (1999) argue that firms can get access to critical resources through partnerships, and by combining such resources to its own a firm can produce a competency that results in a competitive advantage. They further examine how financial, legal, physical, human, organizational, relational and informational resources can contribute to relationship-based competitive advantage. Spencer (1999) suggests that relationships with certain customers (key accounts) can function as access routes to tap into strategic resources for the firm, ‘providing it with much of its strategic identity’ (p. 308). Storbacka et al (1999) suggest that the following issues should be considered when examining a customer relationship: relationship strength, growth and profitability potential, learning value and reference

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value. Stahl et al (2003) suggest that the growth potential, networking potential and the learning potential of a relationship should be considered when calculating lifetime value.

Customer relationships as assets Several scholars have suggested that customer relationships could be viewed as assets (Ford et al 2003, Gupta and Lehmann 2003, Rust et al 2004, Stahl et al 2003, Storbacka 2006). According to Hogan et al (2002), the notion that a firm’s relationship to a customer can be viewed as an asset is grounded in both the resource-based view of the firm (Barney 1991, Wernerfelt 1984) and the relationship marketing paradigm (Morgan & Hunt 1995). Marketing scholars have long endorsed the suggestion that customers are a firm’s most important asset (Levitt 1986, Wayland and Cole 1994, Cravens et al 1997, Anderson et al 1994)9.

Viewing customers as resources and assigning different kinds of roles to customers has been one of the starting points for service management (Grönroos 1990, Normann 1983, Storbacka and Lehtinen 2001). The customer can be a customer (payer), a consumer, a competence provider, a controller of quality, a co-producer, and/or a co-marketer. Wernerfelt (1984) suggests that customer loyalty is an attractive resource as it builds resource position barriers that can act as entry barriers. Priem and Butler (2001) suggested that sustainable competitive advantage could be based resources such as: information technology, strategic planning, organizational alignment, trust, organizational culture, administrative skills, top management skills, and quanxi. The Chinese construct guanxi relates to a personal connection between two people in which one is able to prevail upon another to perform a favor or service, or be prevailed upon. Guanxi creates relationship ties that may constitute entry-barriers, and are, hence, related to customer loyalty.

The International Accounting Standards Board10 defines an asset as ‘a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise’. Hence you can argue, from an accounting point of view, that assets have to fulfill three characteristics: future economic benefits, past events, and control. A customer relationship easily fulfills the first two criteria. Based on the above definition of a customer relationship, it most certainly is a resource, and specifically an economic resource defined as ‘the scarce means that are useful for carrying out economic activities, such as consumption, production, and exchange’11. A customer relationship is a result of past events as a relationship does not exist if the firm has not allocated resources to service the customer (and the establishment of a customer relationship requires that there has been at least one event: an encounter or a transaction). The key issue to debate is control. It is, however, not necessary, in the accounting sense of the term, for the control of access to the future economic benefit to be legally enforceable for a resource to be an asset, provided the firm can control its use by other means. Increased control can be achieved with more effective management practices - such as strategic account management.

It is important to note that customer relationships should not be analyzed in isolation. A relationship that may not be valuable from a cash flow perspective may bring resource to the firm that can be used to develop new technologies or offerings, or help the firm enter new relationship or markets (Ford et al 2003, Varadarajan and Cunningham 1995). It can be concluded that customer relationships are operant resources that may influence a firm’s performance in terms of potential for growth and profitability by growing into new markets or creating new relationships based on access provided by existing relationships, lower risk due to stability and longevity of cash flows, renewal in terms of access to technological competence that can be used for efficiency, or offering development purposes. 9

Levitt (1986) claims that a company’s most precious asset is its relationships with its customers. Wayland and Cole (1994) claim that ‘a company can out-perform its industry’s average by better managing its portfolio of customer assets’. Cravens, Greenley, Piercy, and Slater (1997, p. 497), declare that ‘… satisﬁed customers are assets who represent long term value to an organization’. Anderson, Fornell, and Lehmann (1994, p. 62) present an equation for the measurement of current customers’ net present value.

Framework for the Preparation and Presentation of Financial Statements

Financial Accounting Standards Board, Concepts Statement No. 6, Elements of Financial Statements.

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The idea of customer asset management has received interest both from finance12, accounting13, as well as from marketing scholars. Within marketing the customer asset management literature can be divided into two schools of thought: the marketing efficiency school and the marketingfinance interface school (Nenonen and Storbacka 2007). The marketing efficiency school (e.g. Blattberg and Deighton, 1996, Hansotia 2004, Rust et al 2004, Thomas et al 2004) focuses on optimizing the use of various marketing instruments to influence customers’ behavior and improve customer profitability in the long run. These studies often focus on finding the right balance between customer acquisition and customer retention investments.

weaknesses. First of all, profit needs to be defined in such a way that the capital invested in order to serve customers is accounted for. Selden and Colvin (2003) call for the use of economic profit, while Ryals and Knox (2005) propose the calculation of risk-adjusted customer value that is based on customer revenue, risk and cost forecast and also exposed to the weighted average cost of capital in net present calculations. The key issue according to Storbacka (2006) is to identify revenues from the customer relationship, total cost of delivery, TCOD (which is the sum of COGS; cost of goods sold and COMC; cost of managing customers), and amount of capital that managing the customer relationship requires and the cost of that capital (for instance measured by the weighted average cost of capital)14.

The marketing-ﬁnance interface school (Hogan et al 2002, Dhar and Glazer 2003, Mathias and Capon 2003, Selden and Colvin 2003, Storbacka 2004, 2006, Venkatesan and Kumar 2004, Ryals and Knox 2005) does not limit customer asset management activities to customer acquisition and retention – the value of existing customer relationships can also be increased through e.g. cross and up-sales, reduced customer relationship management costs and reduced capital employed. Furthermore, other measures than the accounting proﬁts are used.

Secondly, customer relationships should be viewed on a longitudinal basis, focusing both on the history of the relationships (over several financial years) in order to understand longitudinal heterogeneity as well as migration effects, and also on estimating the future development of the revenue (growth) and economic profit (NOPAT) of the relationship. Blattberg and Deighton (1996) define customer asset as the sum of all discounted profits from all customers of the company. Hogan et al (2002) agree with Blattberg and Deighton (1996) on the fact that a company’s customer asset is derivative of both the existing and potential customer assets15.

The starting point for measuring value capture is customer profitability, i.e. accounting profit per customer per annum (Mulhern 1999, Kaplan and Narayanan 2001, Storbacka 1994, 1997, Storbacka et al 1999). This retrospective and cross-sectional analysis, however, has significant 12

In the finance world the interest in customer relationships relates to the steadily increasing market-to-book (M/B) ratios. In the early 1970’s the average M/B ratio of S&P 500 companies was approximately one. This means that the “books”, i.e., the P&L statement and the balance sheet gave a fair indication of a firm’s value. An investor could determine the value based on analyzing the yearly accounts. Since those days the relation has increased steadily, and the average for S&P 500 was approximately 2.5 in the year 2003 (Lev 2000). An M/B ratio of over 2 indicates that only half of the value of the firm can be measured by analyzing the annual reports. A CEO who wants to maximize shareholder value has to be interested also in the “other half” of the company’s value – she/he must be interested in managing the assets that are not visible in the accounts (Mathias and Capon 2003). These assets are generally called intangible assets. Intangible assets can be categorized in many different ways. Typically research identifies structural assets (the company’s ability to execute different processes and its management system), competence asset (the company’s existing competences that can help the company maintain and develop its competitive advantage, such as patents), and relationship assets (the company’s relationships to suppliers, partners, alliances and customers) (Edvinsson and Malone 1997, Kalafut and Low 2001, Daum 2002). It is in the interest of the shareholders to better understand how intangible assets contribute to firm performance and shareholder value. There is a need for better transparency of how firms manage the intangible asset. Overall, it can be argued that investors are � thinking behind this is that companies with a better customer base have a brighter future – a reasoning that is easy to accept on a conceptual level.

The interest among accounting scholars and practitioners stems from the newly introduced IFRS 3 accounting standard, which governs the treatment of assets in business combinations. The key issue is that the treatment of intangible assets has changed. According to IFRS 3, assets acquired must be initially measured at full fair value. An intangible asset is recognized if its fair value can be measured reliably. Furthermore, IFRS 3 prohibits the amortization of goodwill. Instead goodwill must be tested for impairment at least annually, i.e. the current fair value needs to be established. The practical outcome of this is that the value of customer relationships (if they can be measured reliably) needs to be recognized and established in the balance sheet. Hence, there is an on-going discussion of how customer relationships could be reliably measured.

In valuating the customer assets the customer lifetime value (CLV) models are the most commonly used ones. Most CLV models are built around three main components: expected proﬁt generated by the customer, company’s retention rate and a discount rate. Customer lifetime value models or their variations are used in the majority of customer asset management studies (e.g. Blattberg and Deighton 1996, Hogan et al 2002, Stahl et al 2003, Bolton et al 2004, Gupta et al 2004, Pfeifer et al 2005). The greatest source of ambivalence in CLV models comes from predicting the future customer proﬁtability accurately enough. This question is

Cannon and Homburg (2001) have analyzed the customer ﬁrm costs, and concluded that lowering customer cost can be a key way to create value for customers and gain larger customer shares.

Both Blattberg and Deighton (1996) as well as Hogan, Lemon and Rust (2002) use the term ‘customer equity’; the terms ‘customer equity’ and ‘customer assets’ are both used in the academic literature, often interchangeably. It is important to understand that in an accounting sense an asset is not the same as ownership. In accounting, ownership is described by the term “equity,” (see the related term shareholders’ equity). Assets are equal to “equity” plus “liabilities.”

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addressed by Verhoef and Donkers (2001), Campbell and Frei (2004) and Malthouse and Blattberg (2005). The assumptions are dependent of the industry under investigation (built-in bonds and inertia in the relationships) and the competitive situation and strategy of the company (market leader competing based on customer intimacy vs. challenger competing based on aggressive price competition).

value has to be related to the firm’s strategy and objectives. The value of a customer should, therefore, be analyzed in terms of the fit between the strategic objectives of the utilized business model and the extant customer base. Secondly, there is customer relationship heterogeneity, which relates to the characteristics of the relationships the firm has been able to build to its customers. A customer may be very valuable, have a major growth potential, but the firm is not able to create a relationship that helps it to tap into this growth opportunity. The central determinant of customer relationship heterogeneity would be the business model used to manage relationships: what is the strategy used to attract customers, what is the competitive advantage, what are the value propositions, how are the customer relationships managed, what retention mechanism are used, etc. A particularly interesting viewpoint when analyzing the heterogeneity of customer relationships is to recognize volatility of cash flows or economic profit over time (Stahl et al 2003). This volatility can be expressed as customer beta (Dhar & Glazer 2003). There are different types of bonds (Liljander and Strandvik 1995, Storbacka et al 1994)16 in all customer relationships that prevent exit. In their simplest form bonds are geographical (location-based). They can be social (personal relationships), psychological (brand), financial (volume discounts, affordable price level), technical (committing to a proprietary standard) or structural (airline loyalty schemes and their levels). To reduce relationship risk, bonds can be analyzed, planned and managed (Storbacka and Lehtinen 2001). For example in account management, the number and level of contacts with the customer and the nature of the customer relationship can be managed to increase bonds.

It can be concluded that customer relationships are assets and their contribution to firm performance is synonymous with the discussion on using shareholder value, as defined earlier in the essay, as a measure: revenue (and its growth), economic profit (and its development) combined with a longitudinal (CLV) view.

Relationship performance heterogeneity and customer portfolios Customer relationships will drive the heterogeneity of firm performance as the cash flows generated by the customer relationships vary both from one relationship to another, as well as over time. The heterogeneity of value capture can be said to be the risk dimension of customer assets. In understanding value capture heterogeneity it is of importance to distinguish between analyzing the customer, the relationship to the customer, and the interdependence between customers in a customer base (Storbacka 2006). First, there is customer intrinsic heterogeneity, which relates to the magnitude and relevancy of customer’s extant resources. It is evident that customers with larger value capture potential are more valuable than customers with a low potential. The credit risks associated with customers differ (credit risk comes in two shapes: the credit risk of an industry or geographical segment (telecommunication, Latin-America) and the credit risk of individual companies). It also clear that some customers are more able than others to execute their strategy. Regardless of the industry there may be differences between different customers’ ability to sustain growth. The value of individual customers is always relative. A customer can be more valuable to one firm (or business model) than the other. The

The third way of analyzing value capture heterogeneity relates to the interdependence between customers in a customer base, i.e. customer

Comprehensive list (edited by me) proposed by Liljander and Strandvik (1995): Legal bond (contract between the customer and service provider), economic bond (lack of resources may force the customer to buy a service that fits the customers budget, price reductions based on relationship), technological bond (the purchase of a specific brand which requires the use of a specified dealer for � the service from other than one or a few service providers because of distance), time bond (a service provider may be used because of suitable business hours or because of a flexible appointment system), knowledge bond (the customer may have an established relationship with a doctor who knows the customer’s medical history; it also works the other way, so that the customer gains knowledge about the service provider, e.g. the scripts of how to behave are known to the customer, which reduces uncertainty), social bond (exist when the customer and the service personnel know each other well, contact is easy, there is mutual trust), cultural bond � (customers may be inclined to prefer some service providers because of certain personal values), psychological bond (the customer is convinced of the superiority of a certain service provider (brand image).

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base heterogeneity. Groups of customers, as in customer portfolios, can be reviewed in order to understand the correlation and concentration of customer and customer relationships heterogeneity (risk and the synergies between customers and customer relationships). It is important to understand these linkages, and to locate the source of correlation or concentration. If the source is an external factor, such as geo-political situations, currencies or industries, the only way to manage the correlation is to reduce its magnitude, i.e., to allocate resources to less risky customers / portfolios. If the source is internal, it should be actively managed or “hedged”. As shown above, there is an inherent, relationship specific risk concerning the future returns on customer relationships that influences the performance of the relationship. When customer relationships are viewed as asset there is a logical link to modern portfolio theory (Markowitz 1952, Sharpe 1964) as its aim is to manage future revenues from multiple assets that are subject to risk. Modern portfolio theory was created to assess the risk and return of financial instruments, but was adopted in the early 1970’s to the literature and practice of general management, in the form of product and business portfolios. This development was driven by the diversification and internationalization trend, leading to increased need for tools to manage the resulting complexity. Wind and Mahajan (1981) classifies portfolio frameworks into three groups: product-based matrices (BCG growth/share matrix, McKinsey/GE business assessment array, business profile matrix and discretional policy matrix), statistics-based models (conjoint analysis based approach & analytic hierarchy process) and finance-based models (risk/return model, stochastic dominance approach). Another application area for modern portfolio theory appeared in the industrial marketing and purchasing group (IMP Group) as relationship portfolios. Several IMP researchers (Fiocca 1982, Campbell and Cunningham 1983, Krapfel et al 1991, Yorke and Droussiotis 1994, Zolkiewski and Turnbull 2000) have created relationship portfolio models that are aimed at managing customer or supplier relationships. The majority of these portfolio models have been created to aid managers in strategy creation, even though the studies do not take into account

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any financial aspects of the relationship. Only some of the later studies like Zolkiewski and Turnbull (2000) consider customer profitability or other financial aspects to be relevant dimension in relationship portfolio models. Additionally, very few of the relationship portfolio models have been tested empirically; the study by Yorke and Droussiotis (1994) being one of the exceptions. Nenonen and Storbacka (2007) have used empirical data to create relationship portfolios based on the cross-sectional economic profit of the relationships. Based on this evidence there is major heterogeneity in how customer relationships generate profit to a company. Selden and Colvin (2004) suggest that firms should be viewed ‘not as groups of products or services or functions or territories, but as portfolios of customers’ (p. 7 – slightly altered). Based on this analysis it is obvious that there is major heterogeneity in current and potential value capture between customer relationships. This suggests that customer bases should be grouped into portfolios and that firms should be interested in, not only their mix of business, their product-mix, but also their customer [relationship]-mix (Storbacka 2006). This has three implications for a firm aiming at improving its performance. First, the firm has to secure that is has the optimum mix of customer relationships in its customer base, in relation to firm goals and selected strategy. Second, a firm needs to recognize the heterogeneity of customer relationship performance and create relationship portfolios accordingly. Some of these portfolios will be more valuable than other for the firm (in relation to goals and strategy) – these consist of strategically important customers. Third, in order to deal with the heterogeneity the firm may need to differentiate their encounter processes between relationship portfolios or even between individual relationships. Storbacka (2006) label the above management activities customer asset management, arguing that: ‘Managing customer assets is not a project or a tool. It is a fundamental change in thinking; a revolution in assumptions of how sustainable shareholder value is created’ (p. 149).

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and different levels of control can be exercised. Hence a customer relationship requires continuous investments!

Investing in customer relationships Customer asset management aims at improving ﬁrm performance by improving value capture. The key tool is to allocate ﬁrm resources between different customer relationships and portfolios. This allocation can be viewed as investments in customer relationships17.

Dyer and Sing (1998) identify investing in relationship-specific assets as an opportunity to create competitive advantage. They identify three types of specificity: site specificity (i.e. successive production stages that are immobile to their nature are located close to one another), physical asset specificity (i.e. specialized equipment or dedicated plant), human assets specificity (i.e. dedicated personnel who learn systems, procedures).

The use of the construct “investment” calls for further clariﬁcation. Traditionally, investments are seen as an allocation of resources where the cost associated with the resource is activated into the balance sheet. Hence, the investment is assumed to have an impact not only on the ongoing year, but on future accounting periods as well. Companies with a customer asset management approach need to take into account both the balance sheet, and the P&L statement when analysing customer relationships. Consequently, analysis of investments into customer relationships must cover both the balance sheet and P&L statement.

Firms start to recognize that many investments into product development, new distribution and communication channels, and IT solutions are spurred by needs to improve relationship performance, and are, hence, actually investments into customer relationships. Furthermore, customers may engage in quite lengthy investment processes of their own, which in turn lead to substantially long purchasing processes. Lengthy purchasing processes often necessitate signiﬁcant ﬁrm investments in maintaining the sales process and customizing the products and processes to match the customer’s needs. Moreover, in industries where the customer base is consolidated, the risks involved in such investments grow, making it vital for the supplier company to be able to choose the right customer relationships to invest in19.

Cost items in the P&L statement can also be seen as “investments”, from a customer asset management point of view. This view is supported by the fact that certain resource allocations on the cost side of the P&L statement will have a long term impact on the company’s possibility to create and capture value in the future – even though they cannot be activated into the balance sheet according to current accounting standards.

Investments into customer relationships have two goals. First, investments are made in order to optimize the customer base by acquiring new customers and possibly terminating20 some existing customer relationships, to ensure both an optimal customer relationship-mix as well decrease customer intrinsic heterogeneity (towards small risks and big potentials). Second, investments are made in order to enhance existing customer relationships (or move them from one portfolio to another) and capture more value21. This essay will focus on the latter goal. The performance of a customer relationship and the balance between value creation and value capture is broadly speaking deﬁned by the ﬁrm’s business model. Business models have traditionally been discussed in an

Ford et al (2003) argues that there are similarities and differences between ﬁnancial portfolios, and customer relationship portfolios. Both attempt to balance individual investments with levels of risk and reward, but the customer relationship portfolios cover a much wider range of investments: sales and management time, offering and operations development, physical resources etc18. Furthermore a customer relationship is perishable, i.e. the volume of the asset cannot be determined by the ﬁrm (Nenonen and Storbacka 2007), as no ownership

According to McDonald et al 1997, the IMP school sees relationships as ‘both a valuable resource and an investment: to increase economic and technological efﬁciency; to serve as an information channel; and to reduce uncertainty’ (p. 739).

Most companies do not have a process by which they allocate resources to customer relationships. The problem in itself is simple: “investments” into customer relationships are made in many batches by several different functions – and nobody pays attention to the investments as a whole. Marketing invests into certain relations or segments from a customer acquisition point of view, sales people invest into speciﬁc relations from a cross-sell and up-sell point of view, customer service invest into developing service models for chosen customer groups, product development invests into a number of segments by creating products designed speciﬁcally for them, e� a comprehensive perspective of the customer relationships.

As one of the leading minds in the ﬁeld of strategic account and customer asset management, Dr. Peter Mathias, has put it: “There is no asset value in investing in losers” (see Storbacka 2004).

Theoretically it seems rational also to invest in terminating customer relationships. This would mean focusing on ending the relationship in such a manner that does not harm the company brand. See also Selden and Colvin (2004).

More detailed accounts on investing in customer acquisition and retention can be found in Blattberg & Dayton (1996).

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internet context (Afuah and Tucci 2000, Osterwalder 2004). Increasingly the business model concept is used as a general construct explaining how a firm is in interaction with suppliers, customers and partners (Zott and Amit 2002). Several business model definitions have been proposed ( Afuah 2003, Amit and Zott 2001, Chesbrough and Rosenbloom 2002, Magretta 2002, Osterwalder et al 2005, Storbacka 2006)22. Building on these, and Miller (1996), business models are defined as configurations of interrelated elements, describing the content, process and management of exchange that facilitates the co-creation of value in customer relationships. Content of exchange refers to all resources required in the exchange. Process of exchange refers to the structure and content of the encounter process (parties involved, ways of interaction, and relation to firm and customer value-crating processes). Management of exchange refers to how the involved parties assemble their portfolio of resources and capabilities, and how they control and coordinate the allocation of resources.

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Design elements of Strategic Account Management

The origin of strategic account management can be traced to the 1970’s23. Originally the practice grew out of personal selling, and became “major account selling” (Coletti and Tubridy 1987, Sherman et al 200324), and had its theoretical foundation in the transaction cost economics (Williamson 1975) theory of the ﬁrm (Conner 1991, Gosselin and Bauwen 2006). Essentially these foundations lead to a focus on just selling more of the same to the biggest customers. Building on the development of market orientation (Day 1994, Homburg et al 2000, Jaworski and Kohli 1993, Kohli and Jaworski 1990, Narver and Slater 1990, Slater and Narver 1995), service and relationship marketing (Berry 1983, Grönroos 1984, 2000, Gummesson 1994, 2002, Jackson 1985, Sheth and Parvatiyar 2000, Zeithaml et al 1985), value management (Normann and Ramirez 1993, Srivastava et al 1999, Woodruff 1997), business relationships (Anderson and Narus 1990, Cannon and Perreault 1999, Dwyer et al 1991, Ganesan 1994), networks and the IMP school (Anderson et al 1994, Håkanson 1982, Ford 2003), and the resource based view on strategy (Wernerfelt 1984, Barney 1991, Dyer and Singh 1998, Morgan and Hunt 1999) the logic and content of strategic account management has come to focus more on cross-functional management of collaborative, network-embedded dyadic relationships, for the co-creation of value.

Improving relationship performance can be achieved by investing in business model changes to inﬂuence the content, process and management of exchange.

Afuah (2003) defines a firm’s business model as ‘a set of activities which it performs, how it performs them and when it performs them, to earn a profit’. Amit and Zott (2001) view business models as depicting ‘the content, structure, and governance of transactions designed so as to create value thorough the exploitation of business opportunities’. According to Magretta (2002), business models answer the following questions: ‘Who is the customer? What does the customer value? How do we make money in this business? W� Rosenbloom (2002) claim that the functions of a business model are to articulate the value proposition, identify the market segment, define the structure of the value chain required to create and distribute the offering, estimate the cost structure and profit potential, describe the firm’s position in the value network, and formulate the competitive strategy. Osterwalder et al (2005) define a business model as ‘a conceptual tool that contains a set of elements and their relationships and allows expressing the business logic of a specific firm. It is a description of the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable and sustainable revenue streams’.

The Strategic Account Management Association deﬁnes strategic accounts as ‘complex accounts with special requirements, characterized by a centralized, coordinated purchasing organization with multi-location purchasing inﬂuences, a complex buying process, large purchases, and a need for special services’25. 23

For a comprehensive review, see Gosselin and Heene (2003), Homburg et al (2002), Weilbaker and Weeks (1997), Wengler et al (2006), Workman et al (2003). For those interested in the history, see Barrett, J. (1986), Coletti and Tubridy (1987), Napolitano (1987), Pegram (1972), Sengupta et al (1997b), Shapiro and Moriarty (1980), Shapiro and Moriarty (1982), Shapiro and Moriarty (1984a), Shapiro and Moriarty. (1984b), Stevenson (1980), Stevenson and Page (1979).

See Sherman et al (2003, p. 4) for an excellent comparison of Key Account Selling and Strategic Account Management programs.

“What is strategic account management?”. Strategic Account Management Association web page (http://www.strategicaccounts. org/public/about/what.asp) 2006.

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Strategic accounts are, based on literature, described as customers in a business-to-business market identified by selling companies (firms) as of strategic importance for the firm’s ability to achieve its goal, create competitive advantage, secure future growth, long-term financial performance, and, ultimately, shareholder value creation (Abratt and Kelly 2002, Burnett 1992, Capon 2001, McDonald et al 1997). It is argued that what makes a customer relationship strategic varies among firms, based on their strategy, competitive situation, structure of customer base, industry logic, and geographical spread (Gosselin and Bauwen 2006, Homburg et al 2002, Percy and Lane 2006, Workman et al 2003, McDonald et al 1997). As shown above, the construct “account” is used to denote “customer”, not the “relationship with the customer” - making the idea of strategic account management a rather interesting proposition. In this essay the unit of analysis is the relationship to the strategically important customer. Hence, account is viewed as a synonym to customer relationship. Based on this, strategic accounts are to be viewed as relationships that are of strategic importance both to firm and customer (Gosselin and Heene 2003). The collaborative element requires commitment also from the customer. This notion is echoed by the research findings that indicate that the configurational fit between firm and customer business models is a key variable to explain account management performance (Gosselin 2002, Homburg et al 2002, Workman et al 2003).

Defining strategic account management Strategic account management is a firm’s dynamic26 relational capability (Eisenhardt and Martin 2000) for market/customer-sensing and customerlinking (Day 1994). Strategic account management focuses on co-creation of value and is both “inside-out”, i.e. implements strategy in order to achieve agreed corporate goals, and “outside-in”, i.e. identifies business and renewal opportunities by deeply understanding the customer’s valuecreating process, and influences the firm’s strategic process (Gosselin and Heene 2003). Strategic account management is, hence, a truly boundary 26

Eisenhardt and Martin (2000 p 1107) define dynamic capability as “The firm’s processes that use resources—specifically the processes to integrate, reconfigure, gain and release resources—to match and even create market change. Dynamic capabilities thus are the organizational and strategic routines by which firms achieve new resource configurations as markets emerge, collide, split, evolve, and die”.

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spanning (Macdonald et al 1997, Singh & Rhoads 1991) practice, spanning boundaries between the firm and the selected customers, between different functional groups and hierarchical levels within the firm and the customer’s organization, and often between geographical areas (and, thus, cultures). It can be said to be dealing with the increased complexity of relationship patterns, as customer relationships are becoming multi-national and multi-product and managed multifunctionally, with multi-level involvement in multiple parallel channels (Storbacka et al 1999, Wilson and Daniel 2007), and embedded in networks (Ford et al 2003, Anderson et al 1994). The key ingredients of the work done in strategic account management relates to the inter- and intra-organizational alignment of all the above dimensions in such a way that relationship performance (value creation and value capture) is improved. Strategic account management can strive to influence this by changing different elements of the firm’s business model and/or improving the interconnectedness of firm and customer business models. Building on Anderson et al (1994) and Workman et al (2003), a definition of a business relationship in a network context needs to consider actors employing resources to perform activities, within a [formalized] configuration (Meyer et al 1993, Siggelkow 2002, Miller and Friesen 1984). The actors are the special personnel, the strategic account management teams, headed by a strategic account manager that usually is responsible for a number of accounts and reports high in the organization (Boles et al 1999, Homburg et al 2002, McDonald et al 1997, Workman et al 2003). Burnett (1992) defines strategic account management as ‘the process of allocating and organizing resources to achieve optimal business with a balanced portfolio of identified accounts’. According to Homburg et al (2002) strategic account management programs include ‘special activities … such as pricing, products, services, distribution, and information sharing’ and that they involve ‘in addition to marketing and sales, functional groups such as manufacturing, research and development, and finance’ (p. 40-42). An interesting question to consider, is the degree of formalization of a strategic account management program, i.e. does strategic account

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management need to be formalized in order for it to be effective? Workman et al (2003) define formalization as the ‘extent to which and organization has established policies and procedures for handling its most important set of customers’ (p 11). They surprisingly do not find a positive correlation between formalization and effectiveness and conclude that ‘activities and resources are more important than actors and formalization’. Rather than a formalized program they claim that firms need to do differential things for their strategic accounts, they need to do them proactively, and align their organization in order to provide the resources and support need to deliver on the promises made to strategic accounts.

of the elements is to create harmony, consonance, or fit between the elements (Normann 2001, Meyer et al 1993, Miller 1996). According to Meyer et al (1993) configurations are constellations of design elements that commonly occur together because their interdependence makes them fall into patterns. Miller (1996, p.509) suggests that configuration ‘can be defined as the degree to which an organization’s elements are orchestrated and connected by a single theme’. Miller suggests that typical themes could be “innovation” or “efficiency”. It is suggested that “strategic account management” could also be such a theme, around which a pattern or program can be orchestrated (Hui Shi et al 2004).

This prescription, however, easily sounds like a prescription of formalization – creating an interesting conﬂict in the interpretation of their research. They also conclude – in a footnote – that powerful, and maybe therefore not so proﬁtable, customers demand highly formalized programs and that this has had an impact on their empirical results. Wengler et al (2006) suggest another explanation. They claim that many organizations have not yet recognized that there is a difference between “strategic account management” and “key/major account selling”27 (Sherman et al 2003). If the organizations are only focusing on the latter they often feel that there is no need for formalization, outside the marketing/sales organization.

Hence, a strategic account management program (SAMP) can be deﬁned as a relational capability, involving task-dedicated actors, who allocate resources of the ﬁrm and its strategically most important customers, through inter- and intra-organizational alignment of business model elements, in order to improve account performance (and ultimately shareholder value creation). Account performance is to be viewed as both value capture and value creation.

Other researchers and practitioners (Abratt and Kelly 2002, Burnett 1992, Capon 2001, Millman and Wilson 1995, Sherman et al 2003, Spencer 1999, Storbacka et al 1999, Wengler et al 2006, Wilson et al 2002), focusing on the strategic aspects of account management, seem to argue for the need of a formalized strategic account management practice, or program. The way strategic account management is discussed in this essay pinpoints its strategic importance, making it a much more interconnected and collaborative practices than “major accounts selling”. As strategic account management manages the exchange of resources, it is part of the business model. Business model elements are interlinked: one cannot change the management of exchange and expect that the process and content of exchange will remain the same, and vice versa. Hence, a particularly important aspect of the orchestration or conﬁguration 27

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See Coletti and Tubridy (1987) for a description of the major account sales viewpoint.

As resource allocation is a top management issue, so is also strategic account management. Decisions on creating and building a strategic account management program, and its role and goals have to be anchored in top management. It is suggested that a SAMP consists of four inter-organizational alignment design elements: account portfolio definition, account business planning, account-specific value proposition, account management process; and of four intra-organizational design elements: organizational integration, support capabilities, account performance management, account team profile and skills. The elements in Figure 2 are grouped in a two-by-two matrix created by the intra- and inter-organizational alignment and two levels of analysis: the program level and the dyad (or individual account) level. All elements are organized on a circle around the raison d’être of the SAMP (roles and goals), in order to illustrate that all elements have to echo this meaning, and to highlight the interconnectedness between all elements: change of one element may require change of several others.

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Some firms have found implementing SAMP’s difficult, as showing true business benefits is often easier said than done. There are several reasons for this. One explanation is the detached manner in which firm have approached strategic account management, leading to insufficient investments and poor fit with other business model elements. Another reason lies in the fact that companies have not appreciated that “strategic account manager” is not a synonym for “sales person”: nothing is changed by giving out new titles to sales people. In defining the raison d’être of a SAMP, the traditional view on account selling needs be replaced with a focus on the “strategic” and the “management” issues of a SAMP (Millman and Wilson 1995). Sherman et al (2003) suggests that SAMP should be viewed as a ‘business rather than a sales initiative’. A SAMP should implement strategy in order to achieve agreed corporate goals, but it should also be a vehicle for top management to identify business and renewal opportunities, and influence the firm’s strategy process by providing deep understanding of the customer’s value-creating process and align functional and business unit processes accordingly.

Figure 2: Design elements of Strategic Account Management ��

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Typical goals that can be achieved with a SAMP are growth, improved profitability, reduced risk due to asset and information sharing, reduced risk due to volume commitments, reduced risk due to joint planning for future, trust and interdependence, reduced risk due to increased dependency by customer28, cost savings due to reduced production costs, reduced transaction costs due to better information, reduced uncertainty and routinized transactions, consistency leading to better fit which ultimately leads to increased efficiency and effectiveness, and facilitation of introduction of new products and services due to increased trust (Ellram 1991, Harvey et al 2003, McDonald 2000, Senn 2006).

The roles and goals of a strategic account management program Literature suggest commitment to SAMP strategy, active participation, involvement with strategic accounts in terms of site visits etc., conflict resolution between functions, regions and product areas, and the creation of a customer oriented culture in order to remove barriers in the supply chain, as possible roles for senior management (Capon 2001, Millman and Wilson 1999, Napolitano 1997, Sherman et al 2003). Millman and Wilson (1999. p. 336) even argue that without ‘total senior management involvement, the process is unlikely to succeed’. This total involvement and commitment requires that the SAMP answers to senior management’s concerns regarding the organization’s effectiveness, defined as a firm’s ability to achieve its goals with the available resources. Senior management has to perceive that there is a financial logic in building a SAMP. Thus, a SAMP should aim at supporting the firm to achieve its strategic goals set by the top management of the firm. Typical corporate goals for listed companies (as discussed earlier) relate to shareholder value, which is driven by growth, profitability, renewal, and risk reduction.

Focusing resources on a limited number of strategic accounts may, or can be perceived to, also entail a series of negative consequences. Examples of these are price reductions pressures, dependence on limited number of customers, need to provide value-added services without corresponding price enhancement, lack of innovation, conservatism, lack of alignment in reality, linking the ﬁrm’s future to the success of the strategic customer in the customer’s end-use market place, threat of strategic relationships being temporary and transitory, and potential anti-trust violations 28

Birkinshaw et al (2002) discusses resource dependence (in a global account management context) and argue that the power of the ﬁrm increases the more strategic the ﬁrm’s product/service is to the customer.

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(Harvey et al 2003). An important distinction to make in analyzing strategic accounts is to separately analyze the profitability (%) of the account, and the profits (€) generated by the account. Although the definition of a strategic account does not automatically imply that they are high-volume accounts, many of them are. High-volume customer relationships have been shown not to necessarily be very profitable (compared to other customer relationships), but they will often generate a large portion of the firm profit (Storbacka et al 1999, Storbacka 2006).

strategic account managers get access to key resources within the firm, and involve top management. Next, the four inter-organizational design elements of SAMPs (i.e. account portfolio definition, account business planning, account-specific value proposition, and account management process) will be presented in more detail. Account portfolio definition Selecting the right accounts for a SAMP portfolio has been identified as the key to success by most authors. The opportunity costs of selecting the wrong accounts are considerable. Not only will the firm waste resources on the wrong account, but it may also lose the potential upside of deepening cooperation with a truly valuable account. It can be argued that selecting the right accounts is – together with the above mentioned top management commitment – the most important issue to focus on. Other SAMP elements seem to show more features of equifinality; i.e. the other elements can be managed in several different ways, and still create the same level of SAMP effectiveness - assuming congruence, or fit between all elements.

Piercy and Lane (2006, p. 23) also discuss the ‘collapse of strategic account relationships’ and rightly highlight that in addition to a decrease in sales for the account, there may be cost impacts from ‘adjusting operations capacity to allow for short-term volume reduction, disentangling integrated systems, rebuilding processes previously shared with the key account, reallocating or removing personnel previously dedicated to the key account, putting in place new arrangements to retain whatever residual business there may be in the account’. It is important that top management understands and assesses both the opportunities, and the likelihood of negative consequences of a SAMP, before a decision to initiate one is made.

The selection has to be built on an analysis of the account’s strategic importance to the firm on the one hand and to the customer on the other hand: The selected customers should be strategically important to the firm, and the firm should be strategically important to them!

Inter-organizational alignment – aligning with customers Napolitano (1987) suggested that the primary focus of strategic account management is to orchestrate the inter-organizational relationship to ensure the attainment of mutually beneficial goals. Inter-organizational alignment is defined as a process of increasing the organization’s understanding of the selected customer’s business concerns and opportunities, and jointly developing a value proposition and an encounter process for the delivery of the value proposition. It may require adaptation of both firm and customer business models. Workman et al (2003) analyzed the effectiveness of SAMPs and found that firms should build corps de esprit among actors in a SAMP, proactively initiate high intensity activities within strategic accounts, ensure that

From a firm perspective, accounts should be selected based on their role as an asset, as a resource, as a risk, and as an investment29. Factors to consider in the asset dimension are: current and potential revenue, current and potential business volume (in terms of tons or number of products sold), current and potential total cost of delivery, current and potential invested capital. Factors to consider in the resource dimension is: level of technological competence and joint R&D opportunities, opinion leadership or reference value, position in attractive network, strategic and cultural fit, customer ranking of the firm as a supplier. Factors to consider in the risk dimension are: financial stability, customer satisfaction, loyalty and longevity, willingness to commit account specific resources or 29

The factors have been created based on the analysis earlier and based on the literature review, see e.g. Abratt and Kelly (2002), Capon (2001), McDonald et al (1997), Napolitano (1997), Sharma (2006), Sherman et al (2003), Storbacka et al (1999).

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make account-specific investments, correlations with existing accounts, concentrations in the customer base. Factors to consider in the investment dimension are: account specificity of the investment (can it be leveraged in other accounts), level of investment in relation to expected return, availability of necessary capabilities, required degree of adaptation in order to be able to serve the customer. The final portfolio of accounts can be analyzed in terms of homogeneity, i.e. does the firm select customers that portray similar strategic characteristics, or does it acknowledge that customers can be valuable and strategic for many reasons. Yorke and Droussiotis (1994) suggest that a combination of customer share and customer perceived strength could be used to differentiate between accounts. Storbacka (2004, 2006) suggests that customer can be divided into capacity optimization, cash flow maintenance, and renewal and growth portfolios, based on their role in supporting the firm in improving its performance. Problems may arise if accounts are selected only based on a retrospective analysis, leading to increased resource allocations to accounts with a “brilliant past”. In account selection, firms should focus on indicators that depict the future performance potential of the account (Spencer 1999). Managing the selection process can be more important than setting the selection criteria. The SAMP needs to establish a management process, on a program level, that defines a goal for the number of strategic accounts it plans to manage, defines how to establish and apply the selection criteria, and defines the decision making procedure. As a SAMP in itself is an investment and as it implies the re-allocation of resources towards the selected accounts, firms should ration the number of accounts (McDonald 2000): there should preferably be too few rather than too many strategic accounts. Especially as a program is initiated, it is sound managerial judgment to start with a few accounts and gradually add new ones as experience shows that the program works (Sherman et al 2003). There are several ways to apply the selection criteria: an organization may choose to require a minimum level from all or some criteria in order for an account to be selected (typically these scores relate to risks, such as financial stability). Alternatively, the account

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attractiveness can be assessed by combining all selection criteria into one score with a weighted average (Capon 2001). The decision making process relates both to selecting and de-selecting strategic accounts. As the account environment is dynamic and dependent on competitive action, accounts that have been viewed as strategic at one stage may later develop in ways that do not warrant the strategic account investment level. As in all strategy work, the choice not to select, or to de-select a strategic account may be as important a decision as the decision to select one. This raises two important questions: how often is the choice made, and who makes the decision. The empirical evidence suggests that it takes time to align and develop an account is such a way that its performance improves. Additionally, the development work needs to be done according to certain procedure that is driven by the annual planning process of the firm. Hence, it is suggested that decisions on selection and de-selection are taken once a year. A typical decisionmaking process is based on executive committee making yearly decisions based on suggestions by the SAMP organization’s analysis and consequent proposals. Account business planning Strategic account management is a long-term activity, building on resource allocations that should not be changed lightly or too frequently. SAMP could be viewed as an investment process, whereby the firm (and the customer) invests in their relationship in order to balance risks and return. There could, according to McDonald et al (1997, p. 742), be a 10year span from ‘identifying the attractiveness of an account to achieving the full potential of the relationship with that organization’. Decisions about such investments require an investment plan, called in this context an account business plan. The plan and the planning process fulfill three roles. The account planning process is, first and foremost, a mechanism for enhancing organizational learning (Senge 1990), by involving information acquisition, information dissemination and shared interpretation activities, often executed using a data base that could be viewed as an organizational memory (Slater and Narver 1995). According to Abratt and Kelly (2002), the firms and the account teams need to acquire information that helps them to understand the customer

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and their main concerns, problems, and strategic issues. The information and the conclusions drawn from it should be recorded in a database. The information acquisition is a team effort that crosses functional borders and involves top management. Secondly, the account business plan is a tool to get commitment from firm management to assign the resources needed to develop the account in such a way that the identified potentials can be realized. One argument that speaks on behalf of making resource allocations to accounts transparent is the fact that these investments should be dealt with as strategic resource allocation issues. The resource allocation between strategic accounts should be aggregated to such a level that they can be managed through normal investment processes and decided by the executive committee or the board. Gosselin and Heene (2003) argue that in order to secure the performance of the account, a strategic account manager must be able to address all the existing competences of the company. The third role relates to inter- and intra-organizational alignment. The account business plan can be used as a tool for communicating about the account’s business internally in the firm, in order to create awareness and promote an account oriented culture, and within the customer organization in order to stimulate demand (Millman and Wilson 1999). The above mentioned three roles make account business planning, both the content and the process, a key tool for program level management of a SAMP. A particularly important issue when assessing the opportunities available for the firm, is not to focus only in getting a bigger share of the customer’s wallet30, but to also use firm’s resources and capabilities to grow the customer’s wallet (Mathias 2005)31. In short, account business planning aims at understanding the opportunities for increased value creation in the strategic account dyad (as part of the value network), and at designing an account-specific value proposition and earnings logic that improves 30

Eggert et al (2006) have shown that there is also a positive, non-linear (read: “exponential”) relation between customer-perceived relationship performance and customer share. This indicates that also customers exert value from concentrating their purchases.

In fact! interesting) wallet.

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the performance of the account in terms of increased value creation and value capture. According to Adner and Levinthal (2001) customer may differ in the value that they derive from an offering (or from having access to the firm’s resources) because they have different abilities to exploit the offering. This may be due to heterogeneity of internal capabilities, or due to that they have different scale at which they can apply the offering (for instance in producing an offering that can be used by a large downstream customer base). Building a value proposition that helps the customer to overcome these obstacles can significantly improve account performance. As Millman (1996) reports, the experiences from account business planning are not always positive; it is often seen as a “necessary evil”, focusing on one-way (upwards in the organization) flows of information and an absence of vertical and horizontal co-ordination. Such planning is more of a control than a support activity. The account business plan may, from a learning point of view, be less valuable than the planning process. A strategic account business plan should be firmly rooted in corporate strategy as it taps into firm’s strategic resources and provides the corporation with defining resources (Spencer 1999). The planning process, hence, needs to be connected to the yearly planning cycle of the corporation, given that such a cycle exists. Corporate planning needs to give its input to strategic account planning, specifically focusing on the goal setting for the strategic accounts, and conversely, strategic account planning should feed corporate planning with investments needs and ideas for new offerings. The empirical evidence also suggests that planning should be coordinated with the customer organization’s strategic planning cycle. It can also involve the creation of joint forecasting processes in order to minimize capital tied up in the value chain. Typically the planning covers issues like: description of strategic account (business environment, technical environment), present offering and relationship process, analysis of the relationship (customer’s valuecreating process, value capture, future business potential), resource allocation and responsibilities between account manager and team, opportunity articulation, monetary and operational goals, action plan (generic, common actions, account-specific actions), and a contact

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matrix (describing the contact patterns between ﬁrm team members and customer representatives)32.

improve relationship performance, it can change its business model in order to develop its capacity to either add to the customer’s total pool of resources (relevant to the customer’s mission and values), or capabilities to utilize available resources more efficiently and effectively. Creating value for the customer is, hence, always relative. An offering component that one customer holds dear may be insignificant to another. To understand if an offering component is valuable, a firm needs to compare activities in the exchange process to the customer’s goals. If a firm’s offering helps the customer to reach goals, the exchange is valuable. This also implies that if a firm does not help its customer to reach goals, both parties are participating in a process that destroys value (Storbacka 2006).

The resource allocations, defined in an account business plan, can be divided into “P&L investments” (i.e. cost allocations from increased activity levels), and “balance sheet investments” (i.e. actions that are visible in the balance sheet and influence the level of capital invested in the account). Examples of account investments are: sales projects, joint R&D projects, product, service or customer service process adaptations and customizations, financing of inventory, distribution channel financing, investments into business process alignment initiatives, marketing support to channel companies, discounting schemes, and opportunity costs for the made resource allocations.

According to Vargo and Lusch (2004), ﬁrms ‘can only make value propositions: since value is always determined by the customer (valuein-use), it cannot be embedded through manufacturing (value-inexchange).’ Storbacka and Lehtinen (2001, p. 5) claim that ‘the traditional distinction between goods and services is meaningless’ – the offering will consist of a mixture of goods, services and information components and often offering needs to be viewed as processes. Another way to approach the same issue is to articulate offerings as service providers, as Gummesson (1995, p. 251): ‘customers do not buy goods or services: they buy offerings which render services which create value’. Normann (2001, p. 114) deﬁnes offering as ‘artefacts designed to … enable and organize value co-production’.

Account-specific value proposition Empirical evidence, supported by literature (Homburg et al 2002, McDonald et al 1997, Millman and Wilson 1999, Sengupta 1997, Sherman 2003, Wengler 2006), show that the key difference between account selling and strategic account management is that the value proposition for the selected strategic customers is “special”, specific to the account, and different from what other customer are being offered. McDonald et al (1997) suggests that strategic accounts should be offered ‘on a continuing basis, a product/service package tailored to their individual needs … success depends ... on skills of the supplier in meeting customer needs’ (p. 737). Strategic account management aims at gaining a strategic supplier status with the firm’s strategic customers. Ulaga and Eggert (2006) suggest that as such status is achieved, product and price become less important differentiators and that relationship benefits display a stronger potential for differentiation. They identify service support, personal interactions, a firm’s know-how and its ability to improve a customer’s time to market, product quality and delivery performance, as possible differentiators.

A value proposition is defined as the firm’s suggestion to the customer on how its resources and capabilities, expressed as artifacts (goods, service, information, and processual components, such as experiences), can enable the customer to create value (Flint and Mentzer 2006). Anderson et al (2006) suggest that a firm should identify all benefits customers receive from the offering, identify the favorable points of difference, and pinpoint the one or two points of difference whose improvement will deliver the greatest value to the customer33.

Normann and Ramirez (1993) suggest that ‘the key to creating value is to co-produce offerings that mobilize customers’ (p. 69). If a ﬁrm wants to

Millman (1999) reports that planning procedures ‘range from loose approaches working on an “order book” time horizon; to highly mechanistic procedures imposed by parent companies, requiring conformity to planning manuals and involving forecasts and targeted performance criteria’ (p. 638). An outline of an account plan can be found in most managerial books on key account management, se for instance Capon (2001, p. 399).

Anderson et al (2006) claim that is useful to divide the elements of the value proposition into three types. ‘Points of parity are elements with essentially the same performance or functionality as those of the next best alternative. Points of difference are elements that make the supplier’s offering either superior or inferior to the next best alternative. Points of contention are elements about which the supplier and its customers disagree regarding how their performance or functionality compares with those of the next best alternative.

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The idea of a value proposition has a strong resemblance to the discussions about “partnering” (Anderson and Narus 2001), and “systems selling” (Dunn and Thomas 1986, Hannaford 1976, Millman 1996, Page and Siemplenski 1983), a discussion that according to Millman 1996 ‘seems to have been stalled - as though it is waiting for some development to take it to a new level of conceptualization’. Millman (1996, p. 632) sees systems selling as ‘delivering a comprehensive “package” or “bundle” of product/service attributes and benefits to selected customers. The package may comprise both standardized and customized components; including hardware, software, installation, product/process know-how, maintenance, consultancy, training, etc., normally promoted to customers as a “total solution” from a single source’34. In addition to identifying the composition of the offering, systems selling also refers to the mapping of buying/selling centre interaction. A key driver of strategic account management is the abundance of opportunities to reconfigure value networks, and thus redefine relationships between actors. Anderson et al (1994) discuss deconstructed firms, value-adding partnerships and virtual corporations. The empirical data and the literature discusses issues like “outsourcing of non-core processes”, “moving downstream in the value chain”, “transitioning from products to services”, moving “from selling products to selling solutions” (Auguste et al 2006, Olivia and Kallenberg 2003, Wise and Baumgartner 1999). Whatever the logic of the reconfiguration is, it will ultimately aim at redefining the content, process and management of exchange in customer relationships (i.e. it changes the business model) in order to capture more value and drive firm performance. In fact, such new business models are often developed and tested in collaboration with strategic accounts. Value propositions will, hence, become the reference points and organizers of relationships. As they influence so many elements of the 34

Anderson and Narus (2001, p. 107) suggest 10 ways to augment the offering: pull promotional programs, warranty, maintenance and! technical assistants, logistics and delivery systems, computer networking capabilities, share expertise programs, value-enhancement and co-design programs. Auguste et al (2006) discuss the usage of services to protect or enhance the product or to develop a separate growth business. Economies of skill and economies of scale can be used to achieve both goals.

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business model, engagement and commitment from most functions will be paramount for the success of a SAMP. Based on the empirical data, the most important functions to involve are production/operations management (who often “owns” the physical asset, i.e. production capacity) and finance (who is concerned with financing the customerspecific customization efforts and interested in understanding possible returns). From an operations management point of view, a firm has to do tradeoffs in relation to its strategy. Siggelkow 2002 argues that flexible manufacturing systems and wide product variety reinforce each other: the wider the product variety, the more valuable are investments in increasing the flexibility of the manufacturing system; and conversely, the more flexible the manufacturing system, the greater the benefit (i.e. the lower the cost) of increasing product variety. However a firm has to choose between various dimensions of operational performance as ‘no plant or operations system can provide superior performance in all dimensions simultaneously’ (Heikkilä and Holmström 2006). A typical trade-off that needs to be discussed is the trade-off between standardization and customization; an increase product variation increases the average unit cost if operating policies remain unchanged. The typical outcome of standardization/differentiation optimization would be to find a balance between standardized modules and a capability to efficiently assemble different module combinations in order to customize account-specific offerings. As the value proposition defines the content of exchange in the account, customer-specific value propositions will, from finance point of view, relate to the earnings logic of the firm. The value propositions and the offering definitions will determine the earnings logic, i.e. how value created in the relationship is shared. An important aspect of this relates to the pricing logic, i.e. how does the firm charge for the components used to augment the product or for the effects of customization on their operations.

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Account management process Abratt & Kelly (2002) argue that strategic accounts are multi-location accounts with complex needs requiring individual attention through a carefully established relationship process. Millman & Wilson (1999) state that ‘[strategic] account management is ﬁrst and foremost a process of customer management in business-to-business markets’. Their focus is on processual issues, and hence they also claim that strategic account management processes are ‘those activities, mechanisms and procedures which facilitate the effective management of [strategic] accounts’ (p 328).

distributive to integrative negotiations, from routine to extensive problem solving, from mechanistic to organic coordination, and from unilateral to joint adaptation, as relationships become more collaborative (Narus and Anderson 1995). The complexity of the relationship patterns will, hence, be dependent on the strategy, business model, and value proposition of the firm. McDonald (2000) describes different configurations of strategic account management relationships (from exploratory to integrated), and supplies a description of the processes - involving management, operations, administration, and sales - for the different configurations.

The account management process defines the process of exchange in the account, and, hence, its role is threefold: first, to generate knowledge, and disseminate a shared interpretation of this knowledge (Campbell (2003) calls this “customer knowledge competence”) as a foundation for value creation; second, to secure the delivery of the agreed value proposition by creating configurational fit (Hui Shi et al (2004) discuss standardization, participation and coordination fit); and third, to build relationship strength and longevity, by attaining goal congruence, and systematically constructing bonds, consisting of mutual resource dependency with relationship-specific resource allocations or investments (Sengupta et al 1997a).

The account management process begins by establishing a view on the necessary encounters needed in order to deliver the value proposition. These encounters will be handled by different functions and on different organizational level. In addition encounters may be carried out in different channels. Following Payne and Frow (2004), channels can be defined as both indirect channels such as agents and distributors, and as direct channels such as the Internet, call centre and field sales force. Wilson and Daniel (2007) identify seven dynamic capabilities relating to a firm’s ability to use innovative channel combinations35.

A central tenet in managing relationships with strategic customers is the symmetry of relationships in terms of power and resources (in contrast to most of the discussion in relationship marketing). Reciprocity has been shown to be important in symmetric relationships. Demonstrating flexibility to the customer shows that the firm is not exploiting the customer’s commitment and creates the infrastructure of long-term orientation in buyer-seller relationships: i.e. trust (Ganesan 1994, Morgan and Hunt 1994). Narus and Anderson (1995) have identified a number of relationship management tasks that aim at relating the firm’s and the customer organization’s activities to each other. These tasks are: communication, negotiation, problem solving, coordination, and adaptation. They argue that relationships can be analyzed on a continuum ranging from purely transactional to purely collaborative (Anderson and Narus 1991). The content of the relationship management tasks will vary dependent on the type of relationship: from thinner to thicker information, from

This enables the ﬁrm to establish a correct team structure for effective management of the account. As one actor/function will be involved in giving promises that another actor/function is supposed to deliver, a key issue is to supervise the organization’s “promises management” process (Price and Schultz 2006). Gosselin and Heene (2003) claim that a SAMP is an important part of the competence leveraging, value creation, and value capturing processes of the ﬁrm. Sales and sales management can, therefore, be seen as a subactivity (although an essential one) of strategic account management. The total account management process aims at ensuring continuous business and generating business opportunities. The role of the sales process is to cultivate the opportunities to orders. This view highlights the need for “relational selling” as proposed by Guenzi et al (2006). 35

The dynamic capabilities are: Active review of the route to market in a cycle of strategy development and implementation; The alignment of route to market with different segment and product characteristics; The creation of innovative channel combinations; Iterative development of customer value proposition melding planned and experiential approaches; Integration of processes and IT to support multi-channel customer relationships; An organisational structure which balances the need for innovation and integration; Metrics and rewards which reﬂect multi-channel customer behaviour.

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It is important to distinguish between sales and the sales process. An effective account management process needs to contain a sales process that enables members of the account team to identify, and follow up opportunities in the account. From a managerial point of view the sales process should enable identification of opportunities in different phases of a sales funnel, as a starting point for sales forecasting. A thorough analysis of the opportunities is also necessary, partly to establish decision gates for continuous scrutiny of resource allocations, and partly in order to predict the implementation of the account business plan (i.e. are the opportunities in the funnel consequent with the account plan and the planned value proposition). The role of personal relationships as social bonds has been debated. The trend is towards matched systems and processes (Sharma 2006), instead of purely personal relationships. One particular viewpoint seems, however, to grow in importance as the accounts become more strategic, namely management involvement. Senn (2006) reports that Siemens is experiencing success using a ‘‘top executive relationship process’’, that aims at ‘orchestrating contact among customers and Siemens executives; obtaining executive support for the contact planning; establishing a consistent process for executive meetings and actions; and systematically managing information gained from the executive engagement’ (p. 29). Intra-organizational alignment – creating a collaborative culture of commitment The intra-organizational alignment relates to creating a collaborative culture of customer focus, flexibility and commitment. This requires that all employees and functions of the firm understand the strategic account’s status and needs, the value proposition given to the account, and that they are committed to provide the resources necessary to support the account’s performance (Millman and Wilson 1999, Abratt and Kelly 2002). This alignment is often referred to be one of the central determinants of SAMP effectiveness. Homburg et al (2002) report that ‘cross-functional KAM companies stand out with respect to both performance in the market andadaptiveness’. Sherman et al (2003) suggest three elements of organizational

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alignment: a common vision and set of values, systematic and on-going communication of vision and values, structural changes. Next, the four intra-organizational design elements of SAMPs (i.e. organizational integration, support capabilities, account performance management, and account team profile and skills) will be presented in more detail. Organizational integration A SAMP is above all an organizational challenge. Homburg et al (2000) have examined changes in marketing organizations. They argue that the overall changes to marketing organization, identified in literature, relate to three main themes. First, functional boundaries are becoming more permeable, and firms increasingly use cross-functional teams. Secondly, alliances with external partners are more important, and third, new capabilities are needed, such as market/customer orientation, organizational learning and market sensing. In short a description of the context for a SAMP. Homburg et al (2000) continue by doing a robust analysis of companies moving from product-focused, and geography-focused structures towards customer-focused structures. This change is in the core of implementing a SAMP. Most organizations tend to have an organizational structure focusing on product and geography. Adding the “third dimension” i.e. the customer or account viewpoint raises questions relating to efficiency, complexity and flexibility. Within a product-focused organizational structure sales people are essentially product specialists (Homburg et al 2000). The idea of a SAMP is to enable account managers to build value by understanding and responding to concerns and opportunities that customers encounter. This may require the ability to asses the whole value chain, including customer’s customers and possible end-users. The difficulty of an account management organization stems from the fact that the strategic account manager (and his team) does not only act as a liaison, or coordinator, but rather as a the “single point-of-contact” for the customer; interpreting the customers situation, making value propositions and ensuring that the promised value is delivered. Hence, to be effective, strategic account management cannot be viewed as a support dimension of an organization, but rather as a core dimension.

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A firm wanting to succeed with a SAMP needs to design its structure and management process in order to be responsive to the strategic customers. Referring to the definition of strategic account management used in this essay, strategic account management cannot be confined to the sales functions, but rather it crosses the boundaries between several functions, product areas, geographical areas, and hierarchical levels. Hence, it will be a core element of the organization, should a firm choose to implement it. Hannan, Burton, and Baron (1996 p. 506) suggest that an organizational element is part of the ‘organizational core if changing it requires adjustments in most other features of the enterprise … coreness means connectedness, elements in the core are linked in complicated webs of relations with each other and with peripheral elements’.

Some accounts may be strategic as they enable an efficient utilization of existing resources and capabilities, whereas others may be geared towards exploring for new resources and competencies; for renewal. According to Tushman et al (2004) the organizational design literature is quite unresolved on those organizational designs that facilitate a firm’s ability to deal with the paradoxical demands of exploration and exploitation. In their paper they analyzed different organizational designs: cross-functional design, unsupported autonomous design, functional design, and ambidextrous design. The notion of ambidexterity, or ambidextrous organizations seems to be particularly interesting in a strategic account management context. According to Gibson and Birkinshaw (2004) successful organizations in a dynamic environment are ambidextrous – ‘aligned and efficient in their management of today’s business demands, while also adaptive enough to changes in the environment that they will still be around tomorrow’ (p. 209). The value of ambidexterity lies in the fact that organizations are always faced with some degree in conflict (e.g. differentiation versus standardization), and, hence, trade-offs need to be made.

Kempeners and van der Hart (1999) have examined different ways to organize strategic account management. They conclude that implementing a SAMP is a long-lasting laborious process, and that there are no clear ideas on how to organize a SAMP, or about the place and responsibilities of an account manager. Furthermore, based on interviews, they note that many companies talk about account management euphemistically: there may be no systematic account management program installed, or there may be “hidden key accounts” as identified by Wengler et al (2006). Kempeners and van der Hart (1999) arrive at the same conclusion as Shapiro and Moriarty (1984): there is no perfect solution. It is easy to agree with them regarding the difficulties of finding the perfect generic solution. The solution needs to be built on the idea of congruence around the roles and goals of the SAMP. From a structural point of view the customer-focus issue is only one viewpoint. The organizational challenge of a SAMP is actually a part of the fundamental concern for any organizational structure: the challenge of managing both efficiency and flexibility at the same time. For a firm to create long-term success it has to, not only move down a particular learning curve, but also create new learning curves (Abernathy 1978). March’s (1991) argument that sustained organizational performance is rooted in the ability of a firm to balance exploitation with exploration has been supported by several recent studies (e.g. Benner and Tushman 2003, Eisenhardt and Martin 2000, He and Wong 2004). The role of a SAMP will be defined along the same dimensions of exploration and exploitation.

Gibson and Birkinshaw (2004) distinguish between structural and contextual ambidexterity. Structural ambidexterity relates to dual organizational forms, or organizational architectures that are composed of tightly coupled subunits that are themselves loosely coupled from each other. Within subunits, the tasks, culture, individuals and organization arrangements are consistent, but across subunits, tasks and cultures are inconsistent and loosely coupled (Tushman and O’Reilly 1998, Sutcliffe et al 2000). Some business units focus on exploration (adaptation), while others focus on exploitation (efﬁciency, alignment). Structural ambidexterity has its limitation in strategic account management, as accounts with very different goals and value propositions have to be aligned with multiple business units (built around product and/or geography) that also may have dissimilar goals and basic strategies. Hence, an effective SAMP needs to shift focus from trade-off (either/or) thinking to paradoxical (both/and) thinking (Gibson and Birkinshaw 2004) or reconciliation of dilemmas36 (Trompenaars and Hampden-Turner 36

It has been helpful to make the distinction between managing conflicts and reconciliating dilemmas. Conflicts need to be solved whereas dilemmas need to be managed. As many of the SAMP trade-off conflicts are unsolvable, it creates more effectiveness if all parties accept this and focus on “living” with the dilemmas, instead of being paralyzed by the conflict.

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1998). This cannot be solved structurally – what is requires is contextual ambidexterity, defined by Gibson and Birkinshaw (2004, p. 209) as ‘the behavioral capacity to simultaneously demonstrate alignment and adaptability across an entire business unit’. They argue that, in order to improve contextual ambidexterity, organizations need to focus on stretch (induce members to voluntarily strive for more, rather than less, ambitious objectives), discipline (set clear standards of performance and behavior, create a system of open, candid, and rapid feedback, and consistently apply sanctions), support (allow actors to access the resources available to other actors, freedom of initiative at lower levels, and senior management prioritizing guidance and help rather than exercising authority), and trust (fairness in decision processes, involvement of individuals in decisions and activities affecting them, and staffing positions with people who possess required capabilities). The above analysis puts emphasis on the ability of the firm’s top management. Strategic integration needs to happen in the executive committee. Senior management need to steer a balance between driving innovation together with customers and improving firm efficiency by standardizing, being centralized and decentralized, and focusing shortterm and long-term simultaneously (Gibson and Birkinshaw 2004, Tushman et al 2004). Lewis (2000) argued that in the end, managing tensions ‘denotes not compromise between flexibility and control, but awareness of their simultaneity. . . emphasizing the coexistence of authority and democracy, discipline and empowerment, and formalization and discretion’ (p. 770). To put it simply: implementing an effective SAMP requires mature management. Some practical questions require consideration. With a few exceptions (generally very large global accounts that are organized as separate business units) all SAMP are structurally organized in some matrix with regard to the prevailing product and/or geographical structure. This creates a need for transparency - solving issues related to measurement, remuneration and management of strategic account managers are essential to succeed. The matrix leads to a situation where strategic account managers have a solid line to a specific business unit and a “dotted line” to the account (sometimes semi-formal) team. In addition, there usually is a dotted line to a SAMP office or a senior manager in

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charge of the SAMP. McDonald et al (1997) claim that there is need for a steering committee at top management, where the strategic account team and functional teams can troubleshoot implementation. Gosselin and Heene (2003) claim that the strategic account manager must be a part of the firm’s executive decision process. Being part of the process may mean that there are rules for escalation, i.e. when there is need to secure access to resources (such as production capacity) in order to deliver the value proposition promised to the strategic account, the account management team needs to have access to functional or business unit decision making. The strategic focus implies that a strategic account manager should be responsible for as few strategic accounts as possible (Gosselin and Heene 2003). Typically a strategic account manager would be responsible for a small number/portfolio of customer or a single customer dependent on the account’s ability to finance resource allocations. Sengupta et al (1997b) show that fewer accounts is better for account performance. There are some tools that can be used to solve the issues arising in a matrix. One tool is the roles and responsibilities matrix; a technique used to define the responsibilities for each role in the account team and its counterparts in the functional or business unit organization. On the matrix the different roles appear as columns, with the tasks listed as rows. The matrix can then be used to communicate the roles to the appropriate people associated with the team. This helps set expectations, and ensures that people know what is expected from them. The process for charting and reconciliation of a given dilemma, proposed by Trompenaars and Hampden-Turner (1998), have similar features. Support capabilities A SAMP was defined as a dynamic relational capability, i.e. processes to ‘integrate, reconfigure, gain and release resources to match and even create market change’ (Eisenhardt and Martin 2000, p.1107). Capabilities, defined as ‘repeatable patterns of action in the use of assets to create, produce, and deliver offerings’ (Ramirez and Wallin 2000), become distinctive when they create value for the firm and selected customers in ways that competitors find difficult to imitate (Blois and Ramirez 2006).

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There a several “sub-capabilities” needed in strategic account management programs. Already in the research project on national account management launched by Marketing Science Institute (MCI) in the early 80’s, it became evident that account management is an organizational process and that the account managers need support systems. Shapiro and Moriarty (1984) suggest that certain part of the organization, beyond account managers, need to be integrated: information systems, administration, field and technical service, logistics, manufacturing/operations management, application engineering, development and product engineering, finance, legal, control, and marketing. All of these are true also today. The level and content of support is dependent on the firm’s strategy, the SAMP content and roles, and the dynamic of the industry.

competitive advantage (Day 1994, Slater and Narver 1995). Gosselin and Heene (2003) claim that a SAMP is involved in the process of building competences. Hence, the role of information processing and sharing is key for effectiveness (Birkinshaw et al 2001), and technology in terms of sales force automation or CRM systems37 that facilitate a common database and support tools for encounters can be a central tool (Sharma 2006). Knowledge flows can, based on Gebert et al (2003), be classified into three categories: knowledge for customers (i.e. knowledge on products, markets, and suppliers), knowledge about customers (i.e. customer histories, connections, requirements, expectations, and purchasing activity), and knowledge from customers (i.e. knowledge gathered to sustain continuous improvement or new product development). Based on Day (1994) and Sharma (2006) it can be suggested that the creation of environmental (market sensing, technology monitoring) and competitive scanning processes are important as inputs to the account business planning process (focusing on “customer scanning”). Empirical evidence shows that customers are often conservative. Investing only in “customer listening processes” may therefore create a barrier toward renewal and innovation. Customer insight, therefore, has to be matched with business intelligence. Day (1994) argues that there needs to be a matching of outside-in processes and inside-out processes of technology, manufacturing, and logistics. The ability to drive value creation in strategic accounts may have their starting point in new technology and products, new manufacturing, sourcing, logistics, or even financial engineering capabilities.

Möller and Törrönen (2003) have suggested a framework for categorizing capabilities based on a relational value continuum, where the extremes are “low relational complexity combined with current time orientation” and “high relational complexity combined with future orientation”. The argument is that mowing towards relationships that are more focused on future value creation potentials, and thus involve more complex relationship patterns, requires a more complex set of capabilities. Examples of such capabilities could be a “relational capability” (i.e. working key-account management, qualiﬁed technological support personnel, committed personnel with team-working skills, ability to view things from the customer’s perspective, organization-wide relational orientation, sharing of proprietary information, making propositions enhancing the customer’s business processes, information systems integration), a “networking capability” (i.e. organization-wide network player orientation, key personnel share and support the achievement of joint goals, and mobilization and maintenance of multilevel and multifunctional contacts between several actors), or a “capability of mastering the customer’s business” (i.e. track record of understanding the business logic of the customer, track record of proposing major suggestions leading to business improvements or new business concepts, and capability of offering ‘‘externalization’’ of some key business processes or complete business). Effective organizations are conﬁgurations of management practices that facilitate the development of knowledge that becomes the basis of

There are two specific capabilities that usually reside outside the account management teams that the teams need to be able to access. First, support in value quantification and account performance monitoring from the finance function is needed in order to show to firm and customer that the account performs according to the role and goal definitions. Second, account teams may need extensive support in contract management from legal departments - especially in cross-national contexts, involving crosslegal structures and /or changing earnings logics (for instance long-term service contracts) – to manage the long term legal risks. 37

According to Gebert et al (2003) a widely accepted classiﬁcation of CRM systems is: operational CRM, that comprise solutions for sales force automation, marketing automation, and call center management, analytical CRM (data warehousing and data mining) that manage and evaluate knowledge for a better understanding about customers, and collaborative CRM, that synchronizes customer encounters and communication channels (e.g. telephone, e-mail, and Web).

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Account performance management Building on Workman (2003), strategic account management effectiveness is defined as the extent to which account performance improves. The underlying assumption is that relationship goals such as development of trust, increased information sharing, reduction of conflicts, commitment to maintain the relationship, lead to positions of advantage (Day 1994) and this in turn leads to improved performance in the market; such as revenue growth, market share, customer satisfaction, and retention of customers. This essay suggests that an important part of strategic account management is the capability to measure account performance and quantify the value created in the strategic account. This could be called “controlling the exchange in the account”. Value quantification is important both towards the firm and towards the customer. The dimensions of value quantification will vary dependent on the audience. All the measures discussed earlier in the essay can be applied. For finance, the metric must relate to the accounts’ ability to generate sustainable economic profit – the metrics to quantify are: present and future revenue, total cost of delivery, capital invested and risk. As strategic account management is a long-term investment, it is of particular importance not to rely on retrospective (“lagging”) indicators of value, but also take a longitudinal view (“developments over periods of analysis”), and identify prospective (“leading”) indictors38. Examples of leading indicators are: customer acquisition cost, customer retention or turnover of customer base, number of long term contracts, order backlog, work-in-process, communication efficiency, advance payments, receivables turnover, inventory turnover, invested capital, automation rate of repetitive core tasks, make/buy ratio of none-core tasks, sales funnel size and new product development (Storbacka 2006). A value proposition should also involve the process of quantifying the effect of applying the proposition on the customer’s value-creating process. Sherman et al (2003) report that firms that quantify the value they deliver to customers tend to be more successful in their strategic account management programs. Anderson et al (2006) suggest, based 38

This view is introduced by Dr. Peter Mathias and documented in Storbacka (2004b). See also Mathias (2005) where he discusses the idea of “wallet of the past”, “wallet of today” and “wallet of the future”.

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on case evidence, that value proposition must be distinctive, measurable (quantifiable in monetary terms), and sustainable for a significant period of time. The quantification of value can be done for each account specific value proposition using “value word equations” (i.e. demonstrating the logic by which a feature turns into a benefit and how this can be measured), or based on long-term evidence from similar accounts, using “value case histories” (i.e. to demonstrate the value generated in previous situations and use these as references). Account team profile and skills McDonald et al (1997) conclude that in order ‘to co-ordinate day-today interaction under the umbrella of a long term relationship, selling companies typically form dedicated teams headed up by a [strategic] account manager’. The strategic account manager can be defined as the custodian of the strategic customer relationship, orchestrating the deployment of firm-wide resources to provide the delivery of the value proposition. A strategic account manager is a role that can be characterized as boundary spanning (Singh & Rhoads 1991, Singh 1993), and as such characterized by issues related to autonomy, authority and consideration (i.e. levels of support from superiors, co-workers and customer representatives). Millman and Wilson (1999) refer to an account manager as a “political entrepreneur”, highlighting the strategic, business management and relational requirements. The selection of the right account manager and account team members will be dependent on the roles and goals of the SAMP. A SAMP that focuses on creating breakthrough innovations of business models in collaboration with strategic customers warrants one skill profile and team structure, whereas a program aiming at increasing growth and profits within the existing business model requires another one. Nevertheless, the experience backgrounds, competences and skills needed to perform the task of a strategic account manager are far beyond those of a sales person (Gosslin and Heene 2003). As McDonald et al (1997, p. 748) state: ‘A key account manager needs far more skills than a sales person. In fact, it is misleading to consider it as merely an extension of a

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sales career’. In order to manage across firm-customer, functional, and cultural boundaries they have to have knowledge and/or experience from sales, marketing, business development, strategy, control, and operations, as well as command high levels of authority and status in both their own company and the customer’s organization (Cespedes at al 1989). According to Gosselin and Heene (2003), the strategic account manager ‘must be positioned and viewed in the company as a senior executive, responsible for participating in shaping the business strategy through his competence and knowledge of key customers’ (p. 25). Often the strategic account manager needs the credibility of seniority to be able to convincingly discuss strategic and financial issues with the customer (and firm) top management. The strategic account manager has to have the willingness to develop the account on a long-term basis. He/she is not necessarily the best sales person, nor the one with the longest experience of the customer, but the one who is best positioned to improve the performance of the account. The skill sets, hence, are very close to those of a general manager. McDonald et al (1997) report that typical account manager skills would be integrity, product/service knowledge, communication skills, understanding the customer’s business and business environment, and selling/negotiating skills. Sherman et al (2003) refers to a specific skill set for the strategic account manager: the ability and willingness to take initiative, commit time and effort to ensure success, provide proactive assistance/support, develop technical competencies, and train others. Capon (2001) defines and differentiates between business management skills, boundary spanning and relational skills, leadership and teambuilding skills. The skill sets required to successfully manage strategic accounts are varied and usually requires a team39 of individuals – sometimes both on the firm and the customer side (Narus and Anderson 1995 refer to this as “groupon-group sales”40). Weitz and Bradford (1999) argue that cross-functional teams are necessary because the individual sales person does not cover 39

The time is � a shoeshine” in Arthur Miller’s words (from the 1949 play “Death of a Salesman”).

This also relates to the concept of “Buying Centre” proposed by Webster and Wind in 1972, and discussed by McDonald et al (1997, p. 738). Purchasing is also becoming a team effort.

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all the facets of firm resources and competences, nor will he by himself possess enough intrafirm influence to propose and implement value propositions that create competitive advantage. Increasingly, managing the strategic account is a team effort involving sales, marketing, operations, finance/control, logistics (Kempeners and van der Hart 1999). The number of team members and the formalization of the team effort vary, based on SAMP goal and characteristics, between formal and informal teams; they may even involve representatives from the customer organization. There is surprisingly little research on factors influencing the effectiveness of team selling, although most researchers argue for a shift of focus in the unit of analysis from the individual sales person to the selling team (Workman et al 2003). A central theme to the role of a strategic account manager is, hence, his/her ability to influence people both within and outside the firm. If the team-building is informal, strategic account managers exert influence without any formal authority. Helsing et al (2003) provides the following model for creating impact without authority: establish personal credibility, build internal network, create customer advocates, determine organization feasibility, apply influence skills, and involve senior management. Cohen and Bradford (2005) have identified five different types of organizational currencies that can be exchanged as a basis for exerting influence: inspiration (providing inspirational visionary goals), task (providing support, resources, assistance, and knowledge), position (providing possibilities to enhance career and become recognized by higher-ups), relationship (providing closeness, emotional backing), and personal (providing learning and creation of self-esteem). Formal account teams may perform more effectively in more complex relationships where the value proposition requires both input from many functions in the firm and ability to change elements of the customer’s business model and value-creating process. In formal team arrangements team members need to allocate time that they devote to their account. Team members spend less time in front of the customer than the strategic account manager, but they ensure that everything happens smoothly in each encounter. As McDonald et al (1997) conclude: the strategic ‘account manager conducts the orchestra’ (p 753).

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The human resources issues relating to strategic account management relate to building a remuneration systems applicable for team based management of accounts, and to the availability of training and development in topics such as interpersonal skills, commercial awareness, interpreting business performance, advanced marketing techniques, building business cases, and understanding trends in the strategic account’s industry (McDonald et al 1997).

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Commonalities and variations across program conﬁgurations

This chapter focuses on analyzing the commonalities and variations across different types of SAMP. It will be argued that there are certain commonalities across firm that want to use strategic account management to drive firm performance – often labeled “best practices”. It is, additionally, suggested that the program elements need to be configured in order to achieve fit. A SAMP is a relational capability, involving task-dedicated actors, who allocate resources of the firm and its strategically most important customers, through inter- and intra-organizational alignment of business model elements, in order to improve account performance. Based on this definition the effectiveness of a SAMP has to be determined based on its ability to improve account performance, measured as value creation to the customer and value capture for the firm. Based on the empirical evidence, and the discussion of SAMP elements in this essay, some commonalities of effective strategic account management configurations are collected in Table 1. The content is defined as “guiding principles”, rather than literal descriptions, as details will vary among firm applications.

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SAMP element

Commonalities across effective conﬁgurations

Account portfolio deﬁnition

- Selection criteria, aligned to the SAMP role and goals are deﬁned and communicated. - There is a yearly process for selecting and de-selecting strategic accounts. - Selections are decided by the executive committee.

Account business planning

- Account business planning is integrated with the ﬁrm’s yearly strategic planning process. - Account plans focus on recognizing future value creation opportunities, designing action plans for improved account performance. - Account planning is done in cooperation with the customer.

Account speciﬁc value proposition

- There is a differentiated value proposition defined for the strategic accounts. - The offering is defined in conjunction with operations in order to secure earnings logic. - The offering is configured of standardized modules, and pricing logic is defined

Account management process

- A generic encounter process for strategic accounts is defined, that balances the need to match customer and firm business model elements, and the need to build personal relationships between different functions and hierarchy levels. - A knowledge management process is defined for generating and disseminating customer insight - The sales process is used to monitor the progress of the account business plan.

Organizational integration

- The roles and responsibilities of account managers, team members and functional/regional management are clearly deﬁned. - The SAMP is represented in the executive committee. - There is an escalation mechanism deﬁned to ensure operational resource prioritization to strategic accounts when needed.

Support capabilities

- Business intelligence is fed into the account planning process. - There is IT support for the knowledge management needs of the SAMP. - The roles of administrative support functions (ﬁnance and legal) are deﬁned.

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Equifinality and the interdependence of program elements Miller (1996, p. 511) argues that ‘the fit among the elements of an organization may be evidenced by the degree to which strategy, structure and systems complement one another’. Hence, a key issue to consider is the fit between the elements of the SAMP model. Elements are said to interact if the value of one element depends on the presence of the other element; to reinforce each other if the value of each element is increased by the presence of the other element; and, to be independent if the value of an element is independent of the presence of another element. A firm with many organizational elements that reinforce each other is said to have a high degree of internal fit (Siggelkow 2002). Creating a successful configuration implies that the core elements are reinforcing, such that the overall system is in a state of coherence or consistency (Siggelkow 2002), or as Miller and Friesen (1984, p. 21) argues ‘configuration, in essence, means harmony’. Homburg et al 2002 report that several approaches to strategic account management are equally successful. This supports the argument often discussed in the configurational approach (Meyer, Tsui and Hinings 1993, Miller 1996), i.e. the idea of equifinality. Equifinality implies that different types of configurations are possible as long as they are configured in such a way that there is internal fit or congruence between the elements. The SAMP elements discussed in the essay will be present in all configurations of programs; elements will interact, be reinforcing and independent; but they will be configured differently in different contexts.

Account performance management

- Value capture is measure using both retrospective and prospective measures. - Value creation to customers is quantiﬁed and communicated on a regular basis. - There is a reporting system for account performance follow-up.

It can be argued that all elements in the SAMP model interact in one way or the other. That is the inherent logic of the model. But an interesting question to discuss is whether elements are reinforcing and whether there are critical elements that set the foundation for conﬁguring effective programs. These elements could be called framing elements as they set the scene and determine the prerequisites for other elements.

Account team proﬁle and skills

- Qualification criteria (skills) for the strategic account team are defined. - There is a specific development program defined for strategic accounts. - Account managers and account team member have their own remuneration system.

It is, for instance, obvious that several of the elements reinforce each other horizontally across the model. The support capabilities will have an impact on the account business planning and the planning will build support capabilities. The account-speciﬁc value proposition will form

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the basis for creating account performance and the metrics selected to measure account performance will influence the definition of value propositions. There is also a reinforcing effect between the account team profile and the defined account management process. There are also reinforcing effects vertically and diagonally between elements. The account business plan will obviously influence the account management process, and vice versa. The organizational integration will influence the account team’s ability to create interesting value propositions and deliver them. Based on the discussion in the essay some elements can be said to be critical or framing elements. The first element – that has been already defined and depicted as framing – is the SAMP role and goals. The issue that will frame a firm’s ability to improve account performance the most is the level of coreness, i.e. how core or peripheral is the SAMP for the firm – in relation to its strategy and corporate goals. If the SAMP is peripheral it means that the account team will not get access to the resources that need to be invested in the account in order to improve performance. The simplest way to approach this is to ask why a firm would start a SAMP. Boles et al (1999) identified many different reasons: increase market share, change in business strategy, allow increased product/service customization, ensure better customer relationships, market place pressures, becoming more attractive to large clients, and a general category including issues like gaining a competitive advantage, providing increased customer satisfaction. Many of the reasons are likely to frame the SAMP in a favorable way. Secondly, the definition of the account portfolio will determine the mode of the program. Success in selecting customers with a strategic fit, in terms of willingness to build collaborative relationships, will frame much of the other elements: the planning, definition of value proposition, the account management process, account team profile, and organizational integration. Selecting accounts is certainly one of the key drivers of demand heterogeneity and will, hence, influence firm performance heterogeneity. Viewing customers as assets implies that also strategic customers should be divided into portfolios. In the light of the customer portfolios presented in Storbacka (2004, 2006), it seems evident that a

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firm wishing to maximize shareholder value creation should not manage strategic accounts as one homogeneous group. The third framing element is the value proposition. A value proposition defines both the work division and the earnings logic of the account, and will, hence, drive the ability to improve the performance. At its best the value proposition can be used to decrease demand heterogeneity. In high velocity environments demand heterogeneity is usually higher, as there is no “dominant design”. By collaborating in research and development with strategically important customers a firm can create preference overlap or preference symmetry that evolves into a dominant design decreases demand heterogeneity, and helps the firm to position itself in the market (Adner 2002). Finally, it can be argued that the organizational integration will be a framing condition. Homburg et al (2000) argue that the dimensions of organization are structure, coordination, culture and power. Defining these dimensions from a SAMP point of view will eventually determine the program’s ability to execute its role and goals. The configuration of [strategic] account programs is, according to Homburg et al (2002), influenced by characteristics of buyers and of the market environment, such as purchasing centralization, purchasing complexity, demand concentration, and competitive intensity. Several attempts have been made to classify strategic account management configurations. Millman and Wilson (1994) developed a typology for the different (lifecycle) stages of development of strategic account relationships. This typology was developed by McDonald et al (1997) and finally by McDonald (2000) in to a continuum from exploratory to integrated. Percy and Lane (2006) distinguish between major accounts and strategic accounts. Homburg et al (2002) arrive at a taxonomy of eight approaches or configurations of [key] account management, ranging from “no KAM”, and “country club KAM”, to “cross-functional, dominant KAM” and “top management KAM”. Gosselin and Bauwen (2006) have created a typology of accounts (transactional, captive, key and strategic accounts), and claim that there are only two types of relationships that will be possible in the long run: the partnership based strategic accounts and transactional sales based transactional accounts.

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Arnold et al (2001), Birkinshaw et al (2001), Gosselin and Bauwen (2006), Harvey et al (2003), Millman (1996), Montgomery and Yip (2000), Senn (1999), Wilson and Weilbaker 2004, Wilson et al (2000), and Yip and Madsen (1996) pinpoint the fact that the geographical dimension drives both intra- and inter-organization complexity, which warrants for the distinction between key account and global account management. From a program configuration point of view, it can be argued that there are several interesting avenues for further research. In addition to the above proposed categorizations, efficient configurations of the SAMP elements will be dependent on internal issues such as the role and goals of the program (innovation/exploration vs. efficiency/exploitation), and applied business models (Storbacka 2006 discusses generic business models; the firm can choose to be a producer, application provider, or shaper). Configurations can also be determined based on relationship characteristics such as customer buying behavior (Kaario et al 2003 discusses product, solution, and value sales), supplier segmentation or buyer-supplier relationship portfolios (Kraljic 1983 discusses the grouping of purchasing activities into purchasing management, sourcing management, materials management, and supply management; Bensaou 1999 discusses contextual profiles, from market exchange, captive supplier, captive buyer, to strategic partnership), customer asset management portfolios (Storbacka 2004, 2006 discusses renewal, cashflow maintenance, and capacity optimization portfolios), and relationship patterns (Ford et al 2003 discuss low involvement and high involvement relationships, whereas Anderson and Narus 1991 discuss a continuum from purely transactional to purely collaborative relationships). Finally configurations can also be determined based on industry characteristics and business logics (Eisenhardt and Martin 2000 explore differences between moderately dynamic and high velocity environments; the empirical evidence suggest that firms operating towards an installed base of captive equipment (Oliva and Kallenberg 2003) adapt different configurations compared to process industry firms supplying offerings that function as inputs to the customer’s manufacturing process). The research process will continue by exploring the impact of the described issues on the configuration of effective strategic account management programs.

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Appendix 1: The life of a clinician - combining research and interventions

The founder of modern social psychology, Kurt Lewin (1890-1947), is credited with the phrases ‘nothing is as practical as a good theory’ and ‘if you want to understand an organization the best thing is to try to change it’. These statements describe my view on managerial research – the research should not be focused only on developing abstract and descriptive theory, but theory that guides action in present time. The action research tradition founded by Lewin (1946) is today a diverse set of research approaches (Reason and Bradbury 2001). According to Reason and Bradbury (2001) action research ‘seeks to bring together action and reflection, theory and practice, in participation with others, in the pursuit of practical solutions to issues of pressing concern to people, and more generally the flourishing of individual persons and their communities’. Gummesson (2001, p 37) views action research as a ‘situation when researchers assume the role of change agents of the process and events they are simultaneously studying. In contrast to the mainstream researcher who is serenely detached, the action researcher is deeply involved’. As a combined researcher and a consultant this is exactly what I have been: deeply involved in improving strategic account management practices in many organisations, from regional to global, from manufacturing to services. The involvement has varied from defining strategic account management programs to providing executive training when implementing the programs globally. The research process carried out during the last several years builds on a tradition of action research that could be labelled “clinical research”, as described by Normann (1977), and Schein (1987, 1995). Both Normann and Schein suggest that the improvement of the organization is the ultimate test of validity for [clinical] research. The basic idea is that if

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good (better) theory is generated the organization’s health is improved. My view on what the “organization’s health” means has changed over the years. Today my view is that in order for management research, in a firm context, to be relevant and non-trivial it needs to build foundations for developing meaningful management tools that provide guidance for how practitioners can improve firm performance. There are some important characteristics of clinical research that needs to be emphasized in order to facilitate an understanding of how the content of the essay has been formed. The first characteristic is the systemic view on firms and their environment. Any activity by any function in any firm is always related to actions and activities by other firms and functions. Hence, issues like strategic account management cannot be understood without relating them to a larger context, to changes of practices in functions related to strategic account management. This is especially important in this essay as strategic account management is boundary spanning (McDonald et al 1997) to its nature. Its role is to relate crossfunctionally inside the firm and with the selected customer organization. As Grönroos (2006) observes, the provider’s processes have to be viewed as open systems for the consumer, but likewise the consumption is an open system for the provider. Secondly, in a clinical perspective it is not possible to distinguish between the researcher and the research object as they are interlinked and both engaged in actions aiming at improving the performance of the firm. As Reason (2001) puts it: ‘if one accepts that human persons are agents who act in the world on the basis of their own sense making; and that human community involves mutual sense making and collective action, it is no longer possible to do research on persons. It is only possible to do research with persons, including them both in the questioning and sense making that informs the research, and in the action which is the focus of the research.’ This is a good description of the contemporary consulting environment in developed firms. Many of them are systematically involved in collective cognition processes and the researcher is just one participant in the learning journey (Senge 1990). The content of this essay is expressed by me, but has been influenced and formed by the numerous interactions that I have engaged in, based on the interventions that I have done in many organizations over the last 8 years.

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Third, clinical research focuses on creating change by using language and metaphors as intervention tools. According to Schein (1987, p 39) clinical research is focused on ‘problem areas that require remedial action, toward the dynamics of change and “improvement”. It is therefore normative in its orientation and requires underlying theories that provide normative direction - concepts of health, effectiveness, growth, innovation, integration and the like’. Change is about learning, and learning is about changing the frame of reference of key actors (Normann 1977). Based on this assumption, the key tool of the clinician as a consultant is language or metaphor development, by which the consultant tries to open new aspects of reasoning about business or organizational development. The clinician and the consultant work with a model (or framework) and create interventions in the organization in order to accelerate the speed of learning (Argyris 1970). The underlying models may or may not be explicit, but it is important to recognize the underlying models in order to understand and accept the interventions that are proposed, and the results of the interventions. The fourth characteristic, and the important distinction from consulting, is the focus on reflection: the ability to “take one step back” and reflect on the results of the action. Normann (2001) calls this to be concerned ‘with our own consciousness of our process of design and learning’. Based on the experience from the interventions (interviews, reporting sessions, workshops, executive education, definition and implementation of new processes/practices etc.) the researcher has to spend time and energy on reflecting on the tensions between initial framework (pre-understanding) and empirical reality, between consultant and client (or representatives of the client organisation), between existing theory and reality. This essay can be viewed as a result of such reflections. Reflection is non-linear, non-sequential, iterative process of systematic combination that aims at matching theory with reality (Dubois and Gadde 2002). The important word is combining: the aim is to combine data gathering with data analysis, compare the evolving framework with existing theory from literature, and put side by side the evidence and experiences from many simultaneous interventions (consulting assignments) in order to see patterns and sharpen the constructs used to describe reality (Eisenhardt 1989).

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The reflection process is not always transparent. Even if the reader would have access to the same data, and participate in the same interventions, the generated theory would most probably be different. The preunderstanding and experience base of the clinician strongly influences his/her ability to generate theory and to focus it on certain aspects of the experience. This process is also highly creative, and hence, especially suited to generate novel theory. Experienced clinicians also learn to trust and use intuition, the ‘elaborate integration of huge amounts of data, in a good sense subjectively processed in a nanosecond; it can be specified as “implicitly systematic”’ (Gummesson 2001, p 34). Intuition is often fuelled by the tensions and pressures that form a natural context of consulting assignments. Client pressure forces the clinician to focus full-heartedly on performing the assignment to the client’s full satisfaction. Intuition is more likely to happen in these moments of total concentration; the clinician needs to be able to reflect under pressure and articulate the often holistic sharpening of the framework that occurs in the moment. The dialectical process that merges seemingly contradictory evidence helps the clinician to create deep insight and reframe observations into a new gestalt.

organisation etc. This material should also be accepted as a relevant ingredient in the reﬂection process.

An interesting aspect of reﬂection, and generating deep understanding of a situation, relates to what Reason and Bradbury (2001) calls “different forms of knowing” – ‘knowledge of our purposes as well of our ideas, knowledge that is based in intuition as well as the senses, knowledge expressed in aesthetic form such as story, poetry and visual arts as well as propositional language, and practical knowledge expressed in skill and competence’. Their argument is that an action researcher has to be interested in different forms of representations; the metaphor of text may be limiting. To distinguish between the explicit and the tacit (Nonaka and Takeuchi 1995) is important – and to value the tacit part. Normann (2001) examines the same issue by discussing layers of consciousness. To achieve depth of knowing requires long-term engagement and also the ability, interest and sensitivity to interpret the different forms in a holistic way. In a consulting context much can be said about the importance of informal data-gathering, at social context, during coffee breaks, observing practices and rituals, participating passively in management team meetings, reading non-related material describing the value systems in an

In this essay I have explicated my mental models by describing the very rich empirical data collected over a period of 8 years, and by summarizing my view on some foundational “pre-understanding” issues, speciﬁcally about the role of customer relationships in driving ﬁrm performance.

Finally, the combination of consulting and research entail inherent conﬂicts (Gummesson 1991) that can both be a problem and fuel relevancy of the research process, as described above. Clinical research places considerable emphasis on the researcher and his role in generating new understanding. Being a subject in the research process creates a necessity to explain the background and previous experience of the researcher. The experience forms the researcher’s “pre-understanding” of the research area and his/her “individual framework”, which helps him to structure reality but which may simultaneously prevent him from seeing certain aspects of the problem by acting as a “blinder” (Prahalad 2004). Hence, a clinical researcher makes underlying models and assumptions explicit in order to help other researchers and the clients to understand the platform on which the research/action is built. Pure consultants tend to emphasize the interventions (consulting tools) without necessarily focusing on (or even understanding) the underlying models or the fundamental paradigms behind the tools.

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Appendix 2: The richness of longitudinal and multifaceted empirical data

My interest in customer relationships started in the early 90’s and eventually resulted in a doctoral dissertation about customer proﬁtability (Storbacka 1994) and a book about customer relationship management (Storbacka and Lehtinen 2001), in which some of the key issues of moving from a transactional to a relational view of exchange were examined. After this initial exploration I have focused solely on customer relationship management issues, working as a clinician with assignments both in consumer and business relationship contexts. The empirical evidence related to this essay consists of ﬁve multi-client studies involving a total of 48 organizations, of experience from interventions, in the form of consulting assignments and executive training, and of on-going interaction with the extensive knowledge resources of the Strategic Account Management Association. This evidence has been supported by an extensive literature review. The research process is longitudinal in its true sense as it started with a multi-client study in 1998-1999, initiated and managed by my consulting practice Vectia41 Ltd., called “Key Client42 Management”; the study resulted in a managerial book (Storbacka et al 1999). Between 1998 and 2006 I have participated in an additional four multi-client studies run in the Vectia context, all of which have had an impact on the content of this essay. In 2002-2003 a study named “Sales Driver – Next Generation Strategies and Tools” was carried out and this also led to a managerial book (Kaario et al 2003). In 2003-2004 the study focused on “Customer Asset Management – Strategies and Tools for Investing in Customers”, and I, consequently, published an article covering some of the ideas (Storbacka 2004). In 2004-2005 the multi-client study built on the previous one and focused on managing business models. This study was called 41

For more information, please visit www.vectia.com.

At this time I was still ﬁghting the idea to call customers or customer relationships “accounts”. I still resent the idea but have been forced to recede.

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“m€arnie - Business Model Innovation for Earnings Growth”. A book was published based on this and the previous study (Storbacka 2006). Finally in 2005-2006 the study was called “Transforming Sales – Creating and Winning Strategic Sales Cases”. No text versions of this study have yet been published.

I have, in parallel with these multi-client studies, continuously carried out interventions in the form consulting assignments, where the frameworks have been tested and constructs sharpened. The interventions that have had the biggest impact on this essay have all been 12-18 months long and involved both the development of a strategic account management program and its multi-national implementation. From a sample point of view there has been a bias towards manufacturing companies. As a part of the intervention and separately, as part of long-term engagements in executive MBA courses, I have also during the last 8 years done a fair amount of executive training in Europe, North America and Asia. The frameworks described in the essay have been tested and inﬂuenced by the participants of these training sessions and workshops.

The interaction with the organizations involved senior level executive vice presidents and their direct reports. Considerable efforts were placed at involving ‘reﬂective practitioners’ (Schön 1983; Gummesson 2002b) who expressed an interest in involvement in conceptual development. Figure 3 provides a generic overview of a multi-client study research process.

An affiliation that has played a particular role in developing my view on strategic account management is SAMA or Strategic Account Management Association43, headquartered in Chicago, Ill. Ever since my first interest in this area in 1998, SAMA has continued to provide me with access to its massive knowledge resources44. Since 2004 I am also a member of the board of SAMA, which gives me a possibility to, on a continuous basis, reflect on the development of the strategic account management practices globally. A particularly interesting initiative of SAMA was the Strategic Account Management Innovation studies carried out at the end of the 1990’s. These studies basically provided both practitioners and academics with case evidence of commonalities across effective firms, and as such pushed the boundaries of existing knowledge about strategic account management45. Another rich source of data can be found in the annual conference presentations by academics, business practitioners and consultants, also available on the SAMA web-site.

Figure 3. Multi-client study research process ��

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The managers participated in three full-day workshops. The ﬁrst workshop focused on describing the pre-understanding and identifying suitable data collection methods. The second workshop focused on

evaluating and scrutinizing potential new frameworks. The final workshop involved sharing research findings and debating elements of the framework. Subsequently, some further refinements were made as a result of working with managers in their firms.

The work processes for all the multi-client studies have been similar. Study participants were drawn from a total of 48 large organizations operating in the business-to-consumer and business-to-business sectors. Fourteen of the organizations were large global companies; the remaining were major regional or national ﬁrms. The organizations covered several industries: airlines, energy, chemicals, construction, ﬁnancial services, forest industry, hospitality, investment goods manufacturing, pharmaceutical, process manufacturing, retail, shipbuilding, and telecommunication.

��

I would like to particularly thank the former CEO Lisa Napolitano; her energy and knowledge base has been an inspiration to me. She has also provided me with excellent access to SAMA’s vast knowledge resources.

Some resources are available for free on www.strategicaccounts.org. Becoming a member gives access to the total resource base.

The studies were conducted together with a consulting company called S4 Consulting, and the partners of this company have published an interesting book based partly on these studies (Sherman et al 2003).

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Together with the sponsors for my chair at Nyenrode Business Universiteit, there is currently a benchmarking process on-going, aiming at identifying world class strategic account management practices. In relation to this, and to the essay, I have carried out an extensive literature review, which has focused, in addition to strategic account management, on strategic management (especially the resource based view and demand heterogeneity), value creation in customer relationships, customer asset management, and offering design.

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