Customers Win, Suppliers Win With Gus Maikish And Noel Capon

It becomes particularly difficult when you’re packaging a deal that has multiple components. We have hardware businesses, software businesses, and services businesses. In hardware, you’re doing a deal that might involve multiple hardware lines and multiple software launches in different services. You try to put the deal together. Every one of these people has their pricing people who are protecting their price. I’d be like, “I’m at rock bottom. I’ll lose money if I go any lower. Make that other guy lower his price.” I could do all of that. I was empowered to do that.

As part of this new structure, I was given my CFO. Jack Althausen was my finance guy. He had worked in finance before. Every time we put a deal together, Jack would give me all of the details on every component, like the revenue and gross profit. Revenue less cost is the gross profit. After that, you’ve got the controllable SG&As. You take that out and then you’ve got NEBA, which is Net Earnings Before Allocations. That was the measurement that we used on my quotas.

I had a revenue plan and a profit plan. I could look at all the components and see where the costs, the revenue, and the profit were. With that information, I could construct a deal that would be a competitive deal that would be good for the customer and IBM. I had the authority to override all of those product division people, which made IBM more responsive and competitive. That was the point of it.

Let’s stop here and take a zoom on this new role that Gus took as Managing Director and the pricing authority in the global remit. You’ve seen lots of ‘Guses’ in other companies. How unique was this role? What was unusual about this approach that IBM took?

NC: Some of the most difficult questions per management have to do with organizational structure. Companies, in general, do not like to change the organizational structure terribly often because it means people’s careers, people’s responsibilities, people’s pay and so on and so forth. The move from domestic operations to global is an area where you probably have to make some organizational structure changes. The way most international companies organize is by geographic area. You have maybe the Americas and the EMEA, which is Europe, the Middle East and Africa. You may also have Asia-Pac. Most companies hold three, four, or five regions.

The regional VPs are of very high status. They have a lot of responsibility. They also have country managers and so forth. That’s the way many companies have developed to address international and global issues. The problem becomes when you get to the customer. The customer wants to make a decision around the world but they’re dealing with these different geographic units and product units. Often, for customers, that’s very frustrating, difficult, and time-consuming.

What IBM did was a major change. They said, “We’re not going to do that. We may do that for some customers but we’re going to have a global person who can make decisions for IBM. He or she does not have to go back to the geographic areas or the product groups.” This was a major shift. IBM had always been at the front edge of what was going on in account management, but this was a real change.

One of the things that Gus told me is that Sam Palmisano, who would soon later become CEO, passed on his authority to these managing directors of who Gus was one. It was very much a customer-focused organizational shift. He was bold because he did change what was going on in IBM. Gus’ case was very successful. He hasn’t said it yet but he drove those revenues from something around $200 million to something around $600 million in five or six years, which was a tremendous accomplishment.

The basic answer to your question is it was a major shift. IBM was innovative and bold from top management, gross point of view and Palmisano’s point of view. Gus was one. There were 30-plus people in Gus’ position who did very well. The other point that is important is it wasn’t just any account manager who got the job. IBM put senior people into that role because they were going to have this broad pricing responsibility.

I don’t know of many programs out there where the strategic account lead for the customer is given pricing authority. It was an amazing amount of empowerment. It all sounded good upfront. You accepted this difficult challenge. In a way, I was laughing in sympathy almost or euphemistically. Noel called CitiGroup a classic turnaround situation. Gus, the great thing is when you got the job, it all sounded good. You were well-empowered but then, you had to figure out what to do. What was your turnaround strategy? How did you decide that that was the way to go?

GM: I started to focus on each individual business area, like IBM’s business areas and Citi’s lines of businesses. I had an operations manager who gave me the breakdown of IBM’s business by Citi business areas and IBM’s business areas. There are hardware, mainframes, servers, PCs, storage devices, taped discs and all of those things. It’s the same with all of our software divisions. When you look at that, you try to figure out, “Why is this customer buying their Unix service from Sun and not from IBM?”

In one area of the bank, we had a sales rep. Her name was Carrie Hegarty. She covered Citi mortgage. Her customers were buying IBM Unix servers. The question is, why are they buying it? Why do they see the value, yet the whole investment bank is buying Sun servers? What’s the difference? You go through every product line in each of our business areas, which are the hardware and software services and ask, “Why is that? Is it price? Is it functionality? Is it support? What’s the closet?” This is hardly a brilliant strategy but that is the way you start with any customer. “Why are they buying from somebody else? Why are they not buying from me?” That’s where we began.

You’re taking a global point of view. As I understood from what I learned from the book, Citi is very decentralized. They weren’t a centralized organization so much as they were more of a decentralized organization. You were creating a strategy for the whole account. How did you decide to approach this? I don’t want to call them multi-headed monsters but there are a lot of different dragons to slay in trying to come together and add value to the core of the company. How did you work that through?

GM: Let me say a couple of things in advance of asking that question. The relationship with Citi started this downhill slope sometime in the mid-1980s. In 1998, when they had the merger with Travelers, they had co-CEO Sandy Weill from the Traveler side and John Reed from the Citi side. John Reed stepped down. It was in February of 2000 that it was announced. He was gone, so there was a big change. A big change always creates opportunity. That is number one. You’ve got a different organization.

When I started in 2001, I knew the Citi team because they had reported to me as the Sales VP. The Citi team wasn’t a bad team. They had some strong players on the team, but they needed focus. This is a team that hadn’t made their quota more than once or twice in ten years. They get distracted. People worry about the next job, money, or envy. They’re like, “Somebody else is making more money than we are.” You end up with morale issues. There’s nothing that fixes morale issues like success. You get these people and get them focused on the long-term business and short-term business
.

My old boss, Wirt Cook, used to say, “Long-term is great but we have to eat along the way.” I want to know what the opportunities are. I put all these in the spreadsheet. I used Lotus 1-2-3. It was my version of a CRM. I type in all these opportunities and update them. When I type them, it requires me to remember them. I would have, in the beginning, 30 to 50 opportunities on my spreadsheets. Towards the end of my time, I would have 100. There were 25 account managers and product specialists.

Everybody needs to focus. You’ve got to focus on your area. Like the Marines, when we’re under attack, everybody’s a soldier and in the infantry. We all fight together for whatever that transaction or those transactions are. Some people had left. They took other jobs at IBM and some people resigned. After two years of success, everybody wanted to stay. I had Ralph Guzzo run the retail bank and another one on the other side. They were good people. No one was better.

In our first year, we had a quota of somewhere around $250 million. We made that quota by $200,000 during my first year there. This says a couple of things. 1) You can do it. 2) No transaction is too small. You’ll work in on something. If I have a salesperson and my team working on something, it’s not too small for me to get involved if I’ve got that person doing it. You never know. If you make that successful, it’s going to lead to other things. That’s the background.

Citi had a headquarters organization with some people that were the kinds of people I could deal with. Mel Taub was their CTO. Bob Druskin was the Head of Operations. Later, Debby Hopkins replaced Bob Druskin as the Head of Operations. These are people who wanted to make their organization work better. They’re smart and honest people. They’re not political like the people at Goldberg, Merrill Lynch or NBNA. They’re people who want to do the right thing. These are the people I can deal with. It’s hard to deal with people when you don’t know what their motivations are. I understood these people.

You want to find those people who want to do the right thing and you want to help them do it. What do they want to do? They want to bring their costs down and manage more effectively. How do you do that? You establish standards and enforce those standards. You can then consolidate and move stuff to lower-cost centers offshore or onshore. That’s the heart of their strategy.

I have a global team. We share information. I visited all the major sites around the world. I knew what was happening in Citi across the city and across the world. Some of these relationships and the business that we found is in the book, but this view is a value. A customer like Citi could hire IBM, Booz Allen, Deloitte or anyone to study the organization to find what my team knew is a by-product of our jobs. Where is the standard to follow? Where are the risks? What can go wrong? Where are the renegades? We want to fix our problems before they get escalated.

You want to maintain a relationship with those senior people who care about their business. Citi hired my predecessor. We had a client exec on Citi, Tim Tynan. He was a good man. He ran a large portion of Citi’s organization, including procurement. He helped us a lot with input. After six months or a year, he said to me that IBM had a good buzz at Citi. We were dealing with them fairly and honestly. That’s the way you build relationships. That relationship continued to grow and evolve until the day I left. They became a great customer.

Let’s jump out here for a moment and get your point of view on the strategy. To take this account over, Gus said a moment of disruption. I’ve read in various different articles to never waste a good crisis or a major change. Maybe you can give some comments on what to do when there’s a disruption and how to look at that. Is that a problem or an opportunity? What’s the strategy that Gus created going forward?

NC: One of the items that came out of the collaboration with Gus is something I’d been working on for a while. That had to do with what core strengths a global account or a strategic account manager has to have. We developed through this book. Some of this book is about Gus’ career but it’s also my latest thinking on account management. We developed this notion of the acumen sextet, which are six areas that the account manager has to be good at. Let me pick up on the one which you’ve been talking with Gus or Gus has been talking about. That’s what we call organizational acumen. What that means is understanding the customer in a very deep way.

What Gus went through exemplifies someone who has great organizational acumen. He understands the organization, knows where the problems are, knows which people are likely to be on your side and knows which people like to be on the side of the competitor. One of the roots of Gus’ success is that Gus had developed tremendous organizational acumen. He had some going in because he had been the VP of Sales and the Citi people reported up to him. In that first year or two years, he spent tremendous effort developing his knowledge of Citi. He was able to identify where the opportunities were and worked on them.

He was given a very aggressive goal. I should also say that Gus had both revenue goals and profit goals and both one-year goals and three-year goals. It was tightly managed from the top. He managed to make that first-year goal, which was an increase of 20% over the revenue of the prior year. You heard him say he made it, but he made that by identifying opportunities on the one hand and using the principal.

I like to talk about selectivity and concentration. He identified an opportunity, figured out important ones and concentrated his resources on various salespeople that worked with him. The organization acumen is one I like to talk about. Gus exemplifies someone that had tremendous organizational acumen certainly in those early years dating Citi.

This will probably touch on another one of those acumen points, I suppose. It does take a team. You can’t manage a customer this big.

NC: That’s the second acumen dimension, which is teamwork. Gus mentions he had 20-odd people on the team. Most of them were direct reports or solid lines. Some were dotted lines. For instance, maybe a salesperson in Australia who spent most of the time on Citibank would report solid line to a country manager in Australia but dotted line up to Gus.

You’ve got teamwork of the people that are close to you on an ongoing basis. There are also other people throughout the IBM organization who have particular skills that are needed to deal with some opportunities. You’ve got to be able to bring those people on board or you’ll have no reporting relationship with them whatsoever. Teamwork is another very important acumen dimension and Gus certainly exemplifies that. We talk about that in the book.

Gus, let’s go there a little bit. How did you pick this team up out? First of all, that lets you know what to do with a customer who knows the past hadn’t been successful. As I understand it, a well-known internal view was that Citi was a tough customer. In SAMA parlance, I suppose you were the SAM, the global Strategic Account Manager but each of them had their relationships and things they were responsible for. In a way, they were SAMs in their areas of expertise or locations in the world. I’d love to get your point of view on whether great SAMs are born, made, or both.

GM: For every one of those people on my team, if they weren’t a product specialist, they were a SAM in the part of the business that they manage. I had one in Singapore and some all over the world. To be successful at this, there are certain basic skills that you need, like communication skills. It’s the ability to take something that’s complex, break it down into simple components and be able to explain it to people who don’t necessarily have the depth that you do. You need a business sense, a technical aptitude if you’re working for IBM selling technology and most importantly, the ability to listen and understand what someone is telling you and remember it so that you can construct the right solutions.

Integrity is extremely important. A sense of responsibility is critical. This is what I always look for in people. If something goes wrong, you don’t look for someone to blame. You try to think about what you did wrong or what you might do differently next time. Some people have that. People have a presence and gravitas. That certainly helps but that’s rare. I’ve met a couple of people like that. Most of what it takes to be a good SAM is to have leadership. That is the best way to describe it. You can teach people products and give them business knowledge, but you can’t teach integrity or that sense of responsibility.

I saw an interview with Sam Palmisano, our former CEO. He said, “We hire smart people. Smart people can learn anything, but they can’t learn integrity if they don’t have it. If they don’t have it, you have to get rid of them.” In IBM, we had a certification program for our client execs and people who manage the larger accounts. I was the Chairman of the board for that program at IBM.

It was a joint program we did with Harvard Business School. It had stiff requirements. Noel has a program like that with Columbia. SAMA does as well. You can teach people business skills, but you can’t teach them that sense of responsibility. Are they born that way, or do they learn it somehow in the course of their lives? They’re like, “This is mine. I own it. I’m going to make it work.”

Initially, you’re right. Citi was not an attractive account for people but after I was there for my second year, there were people who came to me and said they’d like to join the team. They saw the success and the potential. The buzz gets around. These are some of the people that I knew. People came to me and said that I knew what their skills or abilities were.

I would always say to them, “Have your manager call me. I don’t poach people.” I got Ravi and Jim Glenister. Those were some of the people in the book. I also had Gary Napolitano and Renshaw. They were in the book. They approached me and said they wanted to join the Citi team. That’s how I recruited. It wasn’t me talking people into it. It was the other way around.

I have a quick observation. It’s amazing to me how fast good news travels when it is relative to a customer on the way up, salespeople making good bonuses and all those kinds of things. The word does travel fast. It goes fast both ways. It’s interesting. Noel, would you like to weigh in on this a little bit? Do you have comments on Gus’ point of view about SAMs?

NC: Let me wrap up my acumen dimensions since we’re working into that. The first is strategic acumen. That is the notion that the SAM has to understand the strategy of his or her company but also learn and understand the strategy of the account. Both of those will change over time but the account manager needs to know that. The idea is if you can link those strategies together or find linkage points, those are places where there’s opportunity. We start with strategic acumen.

The second is organizational acumen. That’s understanding the customer. We talked about that. The third one is team-building acumen. We talked about that. The fourth is business acumen. What I mean by that is the ability to make deals. That has changed. It was one thing to bring what I call functional value. That’s the value of your products and services to the customer. Increasing customers want to know the finances. They want to know from a financial point of view why that is worth purchasing versus those of competitors. The skillset of the account manager, in addition to the things we always know, is a big financial piece.

The fifth one is resource acumen. That’s being able to spring the resource add of your company to help address the opportunities that you find. They could be all over the organization. Gus can probably speak to this better than I can, but IBM is an enormous, sprawling company with a tremendous amount of expertise, especially technical expertise, all over the organization. You’ve got to know that and then be able to bring that to bear on the opportunity. That’s critical. That’s something that Gus, because of his many years in IBM, had a pretty good handle on.

The final acumen dimension is one that you have been talking about and that’s what I call personal acumen. It’s the ability to work hard and have integrity. We spend some time on this in the book. This is an area where SAM has been doing some research. The words may be somewhat different but it’s the return to integrity.

There is another one, which is very important. That’s the notion of managerial courage. It’s being able to make some decisions that may go against the grain or the general direction of the way the company is going but forcing those decisions through. We’ve talked about this in the book. There was a time somewhere in the 2000s when IBM started to focus on services. They left that business in 2022 but then, services were a big deal. What came down from the top is everybody has got to focus on services.

Gus had some mainframe deals. Mainframe is not a serious thing, but it was a big product. He pushed back against some of the thrust to services. He was like, “That’s terrific. I’ll do that but we’ve got to try and sell this hardware.” That took a lot of managerial courage. Those are the six acumen dimensions. We developed that during the course of writing this book. At some level, this book is a biography of Gus’ time as an Account Manager through his three major accounts, but it is also the latest thinking on strategic account management. There are some things in there which have certainly not appeared in my previous books.

I’ve got to zoom in, if I may. There was one point. It seemed to me that this was a real turning point in the relationship with Citi early on. You discovered the root cause of one of the reasons why IBM wasn’t more successful. It had to do with the way Citi allocated costs internally. My feeling is that it would take somebody who had been an executive at a large company like IBM and had held the positions that you had to even understand that nuance.

With finance, you’ve got to allocate your costs somewhere. Sometimes, it’s not clear where you put the cost. Finance makes that decision. They put the costs where they want to put them. People figured that out internally and they’re like, “If I do this, it will be better for my budget than if I do that.” You figured that out. Could you maybe tell the story a little bit and share that insight that you got? That seemed like a critical turnaround.

GM: This is about the cost allocation and the Citi system to do it. We were looking at why their mainframe business was slowing down and they were moving to service. There are a lot of reasons for that. Part of it is the educational system and the skills people have. There are a lot of issues. One of them was cost allocation. I knew that because one of the guys on my team was having a conversation about the data center. I asked him how much they charge their users. Every company does this. You have a data center. You’ve got to charge it back to the users. There are a couple of ways to do it. You could charge by how many MIPS they use.

MIPS is the measure of Million Instructions per Second. It’s what it stands for. You measure the power in a mainframe. You can charge by MIPS or by transaction. There are a number of ways to do it but the most common one is MIPS. I got the number. I don’t remember what the number was. Let’s say $25,000 per MIPS is what they charged their user. When I heard that, I said, “There’s got to be something wrong with that. I worked at Merrill for all those years and Merrill was charging the users $18,000 per MIPS. Why would Citi be charging $25,000? Why is it that Citi would be charging so much more?” That started the work.

I met with Mel Taub, one of those people who always wants to do the right thing. He called his finance guy, and we had a conversation about it. The finance guy was already working on fixing it. I got him more information from the IBM outsource people about what we charged for MIP. I couldn’t tell them what Merrill charged but I told them they’re charging a lot more.

You then got to figure out the nuances in the system. The system is making people do the right thing and not the wrong thing. Their system was causing people to say, “Mainframes are too expensive. I’m going to put this on a Unix server.” The reason the mainframe was not more expensive had to do with the allocation that they were using. That’s the example that we use in the book.

I would argue that most people would miss that. Noel, were you going to make a comment?

NC: First of all, allocations always worried me. It gave me trouble. Good accountants have this rule. As the doctors have the Hippocratic Oath, the oath for accountants is if you see a cost allocated. You may be better off not allocating and treating it as a cost center. The number of times that I’ve seen companies get in trouble because of the allocated costs is they would be making a profit based on direct costing. If you throw in allocation, then they’re losing money. That can be a real problem.

What you see here is an example of this organizational acumen. Think about that. You’ve got someone from the outside going into the customer and saying, “The way you’re doing this basic function of allocation is wrong.” That’s amazing. The level of insight Gus was able to develop about this problem of helping Citi solve problems they were beginning to realize they have — that’s tremendous organizational acumen. To be a successful account manager, you have to know as much about what the customer is doing as the customer knows themselves. That’s the way you identify these opportunities. This is a story that we do talk about at some length in the book. It’s a great story. It shows account management at its best.

Gus, in your career development, you started at the IBM data sales training academy, as I understand it. You were in that for a year. Where along your career did you learn this? I doubt that you learned it at home or in school. It was the school of hard knocks, perhaps but not academically.

GM: You learn these things in the course of your experience. I was very lucky that I started at IBM and my first customer was the National Bank of North America. It had about 3,500 employees. You can get your arms around that. You see what they’re trying to do. In the 1970s, we wanted to automate their branches and put teller terminals in. ATMs were a fairly new thing at the time. We wanted to get some ATMs there so the customers could serve themselves. They wouldn’t need a teller.

There was a period of high inflation in the ‘70s. The cost of tellers kept going up. You want to replace the expense with capital. Make a capital investment in an ATM and you can replace some tellers. It’s a financial decision. You start there. I had some other jobs at IBM. Those were some things we don’t talk about very much in the book but then, I moved on and got Merrill Lynch. This is a national company. They’ve got 500 and somewhat branches around the US and 35,000 or 40,000 employees. It’s more complex. The things you learn at NBNA are applicable here as well.

We did an automation branch project with them as well. That was a replacement for what they had but that TGA was a huge deal. What I learned at NBNA on how you propose it and implement it on something that’s smaller and simpler is transferable to something that’s larger and more national. You then go global and have all those other complexities added to it. When you get into a global account, you’ve got pricing issues and contract issues. Our capability to support something worldwide is not the same everywhere.

I worked in Vietnam. They could have used the IBM global service or the business consulting people that we had but they don’t exist in Vietnam. You have to bring them in from Australia or Singapore. The cost of that, particularly in terms of what things cost in Vietnam, was prohibitive. There were these differences you have to deal with all over the world. If you drop somebody into that and say, “Here is your new job at IBM. You’re going to manage CitiGroup worldwide,” it is impossible but it’s a gradual learning thing.

NC: Let me build on that and talk about one of the career directions that Gus did not pursue. It illustrates this notion of organizational acumen in trying to understand what’s going on with the customer. Gus talked a little bit about tellers and working with tellers at NBNA. What he didn’t say was that as part of that job, he went to teller school to become a teller.

Way back, Gus could’ve gone off and had a career as a teller. The point about that is to understand what the technical issues were for tellers and where IBM could be a value, he needed to understand what a teller did. He then put in the investment to go through teller school and become a certified teller. With organizational acumen, that’s what you got to be prepared to do. You put in the investment to learn as much as you can about the customer so that you’re in a position to aid that customer and bring value to them. That’s something Gus did throughout his career.

GM: The bank allowed me to attend their teleschool. It was a two or three-week training program. I was studying with one of the systems engineers in the tellers. As a result of studying the teleschool and then going to the branches and understanding it, I understood their systems at the end of this better than their executives did.

I knew what a teller did and what happened when somebody had made a deposit. We could track that through the bank and understand the costs every step of the way. That’s the way we convince the bank to automate the branches. The knowledge that you gain by doing that with the knowledge of the customer’s business is you become an expert in their business.

They could hire a consultant to do that with millions of dollars but it’s a by-product of my job. To sell this, I’ve got to understand the system. I learned that at NBNA and it helped me throughout the rest of my career in sales. Understand the customer, understand their problems, and understand how you can help them solve those problems. That’s what we do.

I would love to go on for hours but that’s not practical. That’s an incredible story. From our previous discussions, we could talk for hours about this. It’s been insightful. I thank you so much for your time. Do you have any last comments you’d like to make?

NC: I’ll make a comment about this series of which Gus and I are going to be one part. We’ve given you a sense that this book that we put together is for the reader to learn how to deal with a regional, national, and multinational company by following Gus’ career and along with IBM. The final thing we should say is that during the period of Gus’ career, IBM had some different series of results. They were doing great in the ‘70s, less good in the ‘80s and early ‘90s and recovered in the late ‘90s and 2000. That runs through the book. For anyone who is in the account management business, there is tremendous learning in this book from what Gus did. Also, it is my latest thinking on account management.

Hopefully, from what we’re doing and from all the other episodes you’ve run in this show, this is giving SAMA members and others ideas of what the cutting-edge material is in account management. SAM is doing a tremendous job both for the SAMA community and those peripheral to the community in pushing through the intellectual capital development of SAMs globally. Thank you very much for the opportunity for Gus and me to be a part of that.

It’s such a pleasure. Something that I’ve learned along the way is that adults learn best from stories and practices. It’s true you’ve shared some great best practices. You’ve had amazing experiences, both of you. We’re so grateful for your time. I do encourage those who want to learn. Maybe it’s the equivalent of the teller school and Gus learning how to be a teller or you want to learn about great strategic account management. Go to WessexLearning.com or Amazon. Look for Customers Win, Suppliers Win. You won’t be sorry you did this. It will be the best investment in yourself and your career that you can make. With that, thank you very much. I appreciate your time. Hopefully, this won’t be our last conversation.

NC: Thank you.

Important Links

• Gus Maikish
• Columbia Business School
• Customers Win, Suppliers Win
• Managing Global Accounts
• WessexLearning.com