preventing effective

customer ownership

Is the number of points of contact in your sales process preventing effective customer ownership?

In numerous recent advisory projects we have encountered declining sales trends. In almost all cases, management blamed the market conditions and/or a lack of sufficient financing to invest in capex and working capital.

At the request of either the shareholders and/or the banks, we were asked to perform a quick-scan to provide a better understanding of the company’s current operational and financial performance and its commercial position, and to provide advice on improvement areas, including an option analysis. Unlike most advisory firms, we people our teams with limited financial analysts and no consultants, including instead the appropriate professionals with in-depth proven industry knowledge and experience in areas such as production, logistics, distribution and sales. This enables us to complete an accurate operational assessment of the company, typically in four to six weeks, which we present in a quick-scan document.

The characteristics of these companies are usually quite similar. The owner initially started the business selling a particular product or service and the business has grown step-by-step either organically and/or through buy-and-build, has had multiple general managers, is operating on a multi-site and/or multi-country basis, has at least two to three management layers, is reasonably but not optimally ‘in-control’ and, last but not least, is financially stretched or even over-leveraged.

In one of my previous blogs (BCM blog: It's time to put sales back at the top of the CEO agenda!), I already alluded to the fact that, due to the recent crisis, most of management’s time and effort has been spent on cost leadership and cash management which, based on our analysis and observations, has led to companies focusing inwards, resulting in stagnating or even declining sales. However, when we dive deeper into the operations, we come across another phenomenon which I can summarise as too many ‘contact points’ leading to a lack of clear and defined customer ownership.

After a period of growth and confronted with the crisis late in 2008, management’s classic response was to address their oversized, multi-site, decentralised production and/or services, logistics and sales & marketing organisations by the counter measure of ‘centralisation’ to achieve cost leadership. This response can make sense if properly implemented, with the changes embedded in the organisation including a clear and ongoing focus on the customer. A decentralised organisation is by definition close to the customer and this breeds client intimacy which, in turn, solidifies sales. An organisation centralised by function, on the other hand, does not guarantee client intimacy. On the contrary, if not properly designed and implemented, it will result in many more ‘contact points’ in the primary processes, and customer ownership suddenly seems to be unclearly defined in terms of decision-making.

In these types of circumstances, again and again we have seen cases where senior management is not even aware, despite many signals and warnings given by second and third management layer, that due to the centralisation of functions, the customer suddenly no longer sees ‘the real face’ of the product and/or service provider. Client intimacy has been blown away and the company’s position has rapidly gone from preferred partner to one of many suppliers, with price being the only differentiator. Looking at the negative effect on sales of the financial crisis compared to this centralisation effect, in some cases the latter has been responsible for more than 50% of the company’s sales downturn!

What do we mean by ‘too many contact points’ and a lack of customer ownership? Typically what you see after a centralisation process is that a process triggered by the customer involves too many lower-level players and not enough senior management for a decision to be reached or action to be initiated. Due to the fact that customer ownership may still be in place in theory but no longer in terms of direct line of command, the consequence is that the customer perceives a stifling level of bureaucracy and lack of decision-making, leading to frustration followed by ‘acceptance’ by employees (“it is what it is”) and, last but not least, little or no escalation, which means that nothing ever improves because issues stay under senior management’s radar.

These situations are definitely repairable. Usually the positive effects are instantly measureable and typically quickly validated by key customers who embrace the change and will respond by immediately increasing their business with the company. However, in my opinion, for the right response to made properly and effectively, it requires an outsider to pinpoint the problem. Not only to identify the issue, but also for industry experts to validate the proposed changes, so that no time is lost in making the necessary improvements.

I would be delighted to discuss this and any other topics with interested clients or candidates. Please don’t hesitate to get in touch with me at www.bluecapitalmanagement.nl and, on behalf of all the Blue Capital Management partners, I wish you well.

Klaas Wagenaar

Partner