In today’s interconnected global economy, organizations need to move beyond the geographic-area model that is proving inadequate for customers that operate globally. To address this challenge, organizations must design an organizational structure that interfaces more effectively with their global accounts, including providing support to global account managers (GAMs).
In our latest episode, host Harvey Dunham discusses Global Account Management with Noel Capon, the R.C. Kopf Professor of International Marketing at Columbia Business School. As one of the world’s leading marketing educators and a global leader in strategic and global account management, Capon also talks about his new executive education program at Columbia Business School, “Growing and Managing Global Customers.” The program is designed to help mid- to senior-level professionals in key, strategic, global, or corporate account management, international sales, or business development optimize their global accounts.
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Growing And Managing Global Customers With Noel Capon
HD: I have a real treat for you in store. We have got a special guest who’s going to be talking about one of the most complex topics that strategic account managers face and that is how to manage global customers and grow them. I’m so pleased to have a repeat podcaster. He’s getting to be a regular around these parts. Noel Capon is a professor of marketing at Columbia University and one of the leading academics in the subject of strategic and key account management. Noel, welcome back to the show.
NC: Thank you very much, Harvey. I’m very pleased to be here and support the show.
HD: Thank you. You are a great supporter. I don’t know where we’d be without you. This whole topic of growing and managing global customers, what are the biggest challenges? Why is this such a big issue that organizations face when managing global accounts? How do they overcome them?
NC: The way I look at it, I try and take a historical perspective. If we go back several years, the major way for firms to interface with their customers was through a regular salesforce. It’s geographically organized where a salesperson would have a territory and be responsible for the customer contacts in that territory. That salesperson would be caught up to a district manager, a first-line sales manager or something like that.
The first-line sales manager might have 6, even up to 10 or even maybe 12 salespeople reporting to them. That district sales manager reported a regional sales manager who had several district sales managers and they’d report up probably to a sales VP or sales manager. These customer relationships were typically handled domestically. Somewhere back here in a few years after the Second World War, maybe in the late-‘40s or early-‘50s, some senior sales executive discovered the 80-20 rule.
We started seeing the development of key accounts. They call them key account management in Europe and strategic account management in the United States. We saw the development of these programs. Often, they were called national account management programs. The predecessor of SAMA was called NAMA. It was the National Account Management Association.
Those programs had been fairly successful as we see by the growth of SAMA and the many people that are going to come to the upcoming SAMA conference. SAMA has grown in its activities that at the annual conference and then its certification programs. SAMA will certify other programs from organizations. It also has its certification, education programs and so forth. That has been all domestic and the success has been domestic but what’s happened over the years is those big domestic customers that companies have become global and essentially there are two major issues to be contended with.
First of all, I had seen the best organizational structure to set up a global account program. That has been very difficult for firms because it’s not always the case but in most cases, firm by country, there are country managers and those country managers report upwards. Many reports into what we call a geographic area structure where the firm may have an America division that was organized and directed by a regional vice president and then there would be EMEA, Europe to Middle-East and Africa. There would be Asia-Pacific because the Asia structure normally includes Australia and New Zealand.
Those are very well-developed structures with very strong vice presidents and country managers. The problem is that that’s often not the way that the customer views the world domestically. They want to view it globally. A simple example would be let’s suppose a customer is buying from your company. You are their supplier and they buy say 30 units in Germany, 40 units in France, 20 units in Britain, 60 units in the United States and 15 units in Japan. They are making these different contracts. In procurement, we have seen global expertise increase over the years.
Often, the customer does not view the world domestically. They want to view it globally. Click To Tweet
We have got these little contracts for 20, 50 or 40 units a year. If we add that together with a company, we are buying 300 units from your company around the world. We think that if we buy 300, we’d rather have 1 contract rather than 12 little contracts. We think that we should get a better price if we are buying 300 and if we are buying 20 here and 40 there.
In the geographic area structure, there’s no one to talk to. There’s no one in the supplier company who has responsibility for that to customers around the world. It’s been very difficult for the supplier companies to figure out how to organize to deal with global customers. In recent years, some companies have developed new organizational structures that are proving fairly successful in dealing with other issues.
The head we organize for addressing global customers, that’s one of the major problems. That’s at the corporate level and then there’s the issue of the individual global account manager. It’s difficult enough if you are a strategic account manager dealing with a major customer in one country but now if you have going to have a certain responsibility for that customer around the world, that’s a very different issue.
There are some ways to go about that from the point of view of the global account manager which is very important. In a broad answer to your question, there are two issues. One is at the corporate, the organization structure level and then secondly, at the level of the global account manager, they had to do their job and do a better job with their customers.
HD: Thanks for that overview. It makes it clear what the problem is. I might ask you to clarify one point because you brought up something that I have heard of but not everybody’s heard of it surprisingly enough, which is the 80-20 rule. Could you spend a moment and explain that to people so that they understand the significance of these customers?
NC: I have this view that somewhere back in the distant past, maybe in the ‘40s or ‘50s, some senior executive in sales read Animal Farm written by George Orwell. That’s the farm that gets taken over by the pigs. The chief pig says somewhere along the line, “All animals are equal but some are more equal than others.”
The senior sales executive said, “I can apply that to my business. All customers are equal. They all get revenue but some are more equal than others.” Anyone who read this, look at the list of customers and how much revenue you get from each customer. Take the top 20% of those customers and see what percentage of the revenue comes. What you will find in very skewed distribution is companies have a few customers that give them a lot of revenue and then many more customers are also very important and maybe in the future, they give a lot of revenue but don’t give so much.
The notion is that if you have got a small number of customers giving you a large percentage of the revenue, maybe you got to spend a little bit more time and effort worrying about those major customers than you do the other customers. If you lose one of those customers, these major customers or gain a new one, that’s a very big deal and will have a major impact on the future of the organization.
You have to worry about the amount of effort that goes into major customers and that cuts across a lot of areas of the firm. For example, what you don’t want to do is put a rookie salesperson up against one of those major customers, the person you want to address that customer whom we call those account managers rather than salespeople or sellers.
You want those to be fairly senior people who know their way around your company or can learn their way around the customer company. Also, people who have some degree of experience. Maybe a lot of gray hair for some of them but who can do a first-rate great job. It also speaks to the issue of where senior executives or CEO spends their time.
There’s one critical question for many companies, which I have done some work on. SAMA executive is going to do some work on it looking at the role senior management plays in dealing with customers. The CEO has a lot of things on his or her mind. That’s certain but one they should be worried or concerned about is what’s their relationship with their major customers.
HD: Thank you for taking the time to illustrate the absolute importance of these customers that you can’t afford to lose. That’s the key point. From an organizational perspective and the fact that doing business globally as we have all known for the last few years has become a very difficult challenge with global supply chain issues, turbulence and COVID. There’s been so many. What is it that companies can do to organize themselves to make sure that they treat these customers well?
NC: Let me give you an example. It goes back a few years. It concerns one of the firms that probably has the best reputation for dealing with customers and that’s IBM. I’m speaking IBM a few years ago when it had seen all about mainframes. It was IBM and the seven dwarfs. Something happened in Europe.
IBM was organized by country. There were IBM Britain, France, Germany, Japan and so forth. Each was their CEO and irregular functions, marketing, maybe production and even R&D. Those country managers are pretty important. This is a situation that occurred in Germany. In IBM Germany, one of its major customers was Exxon. Part of the reason Exxon was so important to IBM was that Exxon had its European data center located in Germany.
Over the years, IBM did it very well with Exxon. IBM’s products worked, the mainframes worked, the software worked and they had good service. IBM served Exxon very well. Exxon was very pleased with IBM’s service and gave IBM a lot of business. In that business, there are capital goods so it’s fairly lumpy. The revenue doesn’t come in every year or some come in every year. With capital goods, you get maybe a bit of a good year. You sell a lot. Maybe you have a couple of down years and then you sell a lot more. That was the way things had been.
At this point, IBM had got a very big contract with Exxon. There’s a meeting between Exxon people in Germany and IBM Germany. They go through what you go through. At the end of the meeting, the people said, “Good meeting here. Everything is fine but we are going to be making one change.” The IBM people ask what that is and the next one says, “We have bought all this stuff but we are going to move our data center. It’s not very far. Just a few miles down the road but we will need a little bit of help maybe from your service guys to help us take it down and set it up again.” IBM said, “That doesn’t seem like a problem.”
There’s one point about it. We are going to move it across a country board. We are moving it from Germany to Denmark. The IBM guys said, “I’m sorry to lose you. It was a customer in Germany but I’m sure we can arrange for IBM Denmark to pick up that relationship.” IBM Germany speaks to IBM Denmark and the response they get is, “Over my dead body.” They don’t want to deal with Exxon. “They are your customer. You stick with them.”
IBM Germany guy said, “What’s the issue?” The Denmark people say, “We run a pretty tight ship in Denmark. We have revenue requirements from corporate and profit requirements. We meet those profit requirements but we do that by running a pretty tight ship. We are pretty lean in terms of our service engineers. People go out to customers. We make sure they are working all the time. There’s no downtime. We don’t have the capacity to take on such a huge customer, especially since there will be not only the regular maintenance but also the issue of getting them set up in their new Danish location. We are not interested.”
This is a surprise to Germany and Germany thinks about it. They understand the issue. They said, “The one thing we could do is may have some of our German service engineers come and help with setting up in Denmark.” This happened in the ’80s. The Danish IBM guy says, “We had a bunch of business from Germany in the early-‘40s that didn’t go down so well. We can’t do that. We would be unable to have a set of German engineers in Denmark. It wouldn’t work culturally.”
Eventually, they saw that. I’m not sure exactly what they do. Maybe they send some British people or sorted it out but that gives you a sense of the problem. Everyone would agree that for Exxon to move to Denmark and Denmark to give the appropriate service, it would be good for IBM in total but would not be good for IBM Denmark. They wouldn’t be seeing any revenue in the near future because there’d been this big deal in Germany. Plus, they got a real problem with managing their service operation.
The problem you get into is that organizations are made up of different parts or even what’s good for the company may not be good for one particular part of that company. You have got to figure out an organizational structure with appropriate responsibility and/or authority that enables the company to serve the customer without creating major internal confidence. That’s not an easy thing to do.
HD: It’s very clear and that’s painful to hear too. Think about it. It’s given you a customer. If you can get in this particular case, people think about that fact. Don’t think about next year. Think about the next ten years. These data centers are going to be there for a long time. You got lots of opportunities. It’s almost like planting a seed and watching it grow but I know very well what the problems are. After the seed has grown and it’s producing lots of fruit, then we will help you out get your problem until then.
NC: I don’t know what the specific issue is here. Maybe the Danish country manager is a high-flying executive. They see themselves in Denmark for 2 or 3 years. They are creating good results and then looking for some other position. Some may try and figure it out. If they take on Exxon and end up dropping their profits over the next few years, that’s going to play havoc with some individual’s promotion prospects.
I don’t know if that was the issue here but you come across that all the time. It’s the conflict between what’s good from my part of the company and what’s good overall. We see it all over corporate life but we see it near this example. I’m sure anyone who reads this show will have their examples from their firms where they have seen this thing play out.
HD: I have asked for many years one question. “What’s your most difficult customer, your internal customer or external customer?” It’s internal 100% of the time. It doesn’t matter what industry or company. That’s part of the global challenge but then there’s also the ability of the SAM, the Strategic Account Manager or key account manager, whatever term is being used, to be able to get their organization to behave even though it’s difficult. What skills are you seeing that the key account managers and strategic account managers have to master to be successful?
NC: There are several. I have a group of these. I called them the Acumen Six Techs. These are six areas of competence that the global account manager has to have and they got to know their customers. That’s why in general we need to have seasoned executives who know their way around organizations and can develop these sets of relationships with customers.
They have also got to know their way around their organizations. In other words, what they hopefully do is identify the needs of the customer but we are dealing with big companies so you have got to be able to dig into their organizations to figure out where the expertise is that they can bring to help solve the customer’s problems. There are two important areas.
Thirdly, they got to have what I call business acumen. A number of years ago, it was sufficient to bring the company’s resources to the customer and solve some problems and satisfy some needs. Increasingly, we want to make sure the economics are right. What that means from the point of view of the account manager is they have to have an ability with the finances to be able to figure out and show the customer, “If you buy our product or service, it’s going to do the job.” It will do so in such a way that you will benefit financially and I’m seeing that more and more.
Another important issue is managing teamwork. If the account manager identifies a need and a problem in the customer, he or she has then got to go back into their company and pull together, maybe from different parts of the organization, a team that can come together to solve this problem and satisfy this need. They got to have the appropriate personal acumen and be straight shooters. The customer has to know that they can trust the account manager.
That doesn’t happen overnight. That’s built up very slowly by a series of appropriate decisions, not letting people down, keeping confidence and so forth. What the global account manager has is a knowledge of what goes on in the customer company that very few people in the customer company have. It comes with the job that the account manager talks to or should be talking to people all over the world that represent the customer and the customer’s different divisions and functions.
They have got to work hard. It’s difficult being a global account manager. It’s one thing to be an account manager where you cover a huge territory like for instance the US. That’s difficult enough in its own right but you are dealing across time zones and different languages. You need to be enthusiastic and have a lot of stamina to be able to deal with that. To the point that you may have, you got to manage some people who work for you in a different country who have their organizational issues.
Let’s suppose I’m the Global Account Manager for Siemens. Siemens based in Germany is my customer but also I have Opera. As a company, we have business dealing with Siemens in say Argentina, Peru or something like that. I’m not going to be going to Peru every time Siemens has an issue. Presumably, I got someone in Peru who’s working with me but does that person work for me or do they work for the country manager in Peru or Latin America? Those are difficult issues. I got to figure my way around those. That’s why we generally think of people a little more senior managing these major global accounts.
HD: It’s not easy thinking about it. This is the reason. As I understand it, you are going to teach a new executive education course to try and help leaders of companies in this.
NC: We at Columbia in our executive education are putting on a two-afternoon program. It’s the first one at the end of June 2023. It’s a length of 2 to 5 or something like that in one day. The next day, we will work through these issues. We will probably do that. What’s great about one of our customers is a person who signs up for this program will hear from me and hopefully, I got a few things to say but they also hear from their other participants who also have their issues and would have the combination of lecture, discussion and conversation.
What I’m hoping is that someone who signs up for that program will come out of it recognizing that the issues they have are not the only ones. Other people have the same issues. We will probably get some ideas from each of the participants on how they are dealing with issues. They will hear from me and some experiences that I have. I have done some of these in the past. It’s hopefully going to be very valuable for a participant.
HD: It’s certainly a huge problem and challenge. I hear aspects of these challenges almost every day here at SAMA. I expect that a lot of people will be clamoring to attend. That’s wonderful. I’m thinking about this with organizations that have struggled with these issues that you have helped. When people decide that they have got to tackle this issue with global accounts, what results do they get? What’s the payback?
NC: There are a couple of companies that I have worked with and we will talk about this in a program. I have done some work with people at IBM and Cisco where they have tackled this. For IBM, it was a problem for many years. This had very good domestic strategic management programs. I remember speaking to a very senior guy at IBM. He was a legend at IBM in sales and marketing. He ran sales and marketing at IBM.
He said to me, “One of the major customers come said to me, ‘You got to change your name.’” The executive of IBM said, “What do you mean to change our name? International Business Machines, what’s wrong with that?” The customer said, “That’s the name. You are not international. You are very good domestically but you are not able to deal with these issues like the Denmark one that came up that operated across countries.” That’s a major issue.
IBM finally resolved that issue. This was a Lou Gerstner and Sam Palmisano issue they resolved. They had a task force look at it. They found they were not getting as good growth from their major customers as they were with some others. They developed a system that gave a lot of responsibility and authority to a set of global account managers.
They called them Global Account Directors. They selected them from seasoned executives who had often gone back into the field. They may have been in the field earlier in their careers. They went back in to manage individual accounts. There were about 30 in the initial batch that IBM set up. There were some very positive results. The one former executive I got very close to, a guy called Gus Makish with whom I think you met, we wrote a book together about his career.
The CEO gave these 30 account managers hand selected from senior IBM executives. It’s a lot of responsibility with a lot of authority. To answer your specific question, my friend Gus, who was at the time a very seasoned account manager, was given Citibank or Citigroup as his customer. At the time that Gus acquired Citigroup as a customer, IBM’s revenues from Citigroup were plus or minus $200 million a year but IBM thought that this should be much higher. Gus retired from that position. Something like 6 or 7 years later, the revenue was $600 million a year. It tripled in 5 or 6 years. That’s a pretty good example.
You had two things going on. You had both a lot of support from the top. First of all, you had the development of this program by Gerstner and Palmisano but then you had support from the two of them. Periodically, Gus would call on the CEO and the CEO would come and there would be a meeting but also other senior executives like the chief financial officer would visit with Gus. Gus had access to not only the CEOs but also other senior executives who would come in support of what he was doing at the account. That paid off.
HD: Those kinds of numbers are mind-boggling. What a great way for Gus to be able to end his career.
NC: He’d formally done some major work as an Account Manager for Merrill because Merrill Lynch was largely domestic. Earlier on, he worked at a regional bank in New York, which was also domestic. With his first major global customer, I don’t have a good sense of what the other account directors did but I passed it from them.
HD: Maybe to what people’s appetite a little bit more, what are a handful of 2 or 3 best practices that you see your organizations doing to interface more effectively with their global accounts, including providing support to the global account manager?
NC: One best practice is executive sponsorship. We see that in domestic care accounts but certainly in global key accounts. The basic idea is that someone from the executive committee, a very senior executive, will “be assigned” to one of these global accounts. Gus working with Citigroup had a senior IBM executive who was his executive sponsor and that executive sponsor played two roles.
One role was to be with him in meetings with customers. It was someone who was not at the CEO level. It’s in between if you like. It’s more senior than Gus who was able to make some commitments that maybe Gus couldn’t make better at IBM. This was someone who knew what was going on in the company at the highest levels.
He brought some extra gravitas to the customer but also played a major role internally. If Gus found roadblocks, the roadblocks where we talked about the Denmark situation years before, he or she would be able to work internally to smooth the road within the company. I believe that is the case that executive sponsor programs when they were first set up were mainly set up for the first job of adding gravitas at the customer level but in reality, they are very powerful and important internally at getting stuff done and removing roadblocks.
Executive sponsors are very powerful and important internally at getting stuff done and removing roadblocks. Click To Tweet
That’s probably one of the more important successful organizational changes we have seen over the years and that can be very positive for programs overall. You get some problems with these. Sometimes the account manager doesn’t fit well with the senior executive. Sometimes you have to arrange divorces and new marriages. Sometimes that has to happen. Overall, that’s been a very positive review.
HD: I can assure anybody that attends this class that it will be a treat. You will learn tons of things from Noel. It’s your experience, Noel. Every time I speak with you, I learn new things and write things down. I wish you all the best of luck with this class as always for sharing it with SAMA and giving us an opportunity to share it with the community. They love to hear from you. It’s nice to know what you are up to next.
NC: Thanks for that support. I’m not going to say this because you said some nice things about Columbia. I have been a board member of SAMA. I must be getting on decades and it is an organization that’s devoted to the idea of the 80-20 rule. In terms of strategic management in general, this is not the first effort as a global account manager because some work years ago, Dave from Xerox and also an IBM colleague did some work. We are hoping to bring this to people in general, the SAMA community in particular. We’re hoping many will sign up and they will learn a lot. That’s the goal.
HD: I’m sure they will. Thank you so much. You are a great contributor and we so appreciate it. Thanks for everything you do.
NC: Thank you very much.