The Future of Key Account Management
When asked about the future of Key Account Management (KAM), thought leaders tend to discuss three factors: supply chain management, risk and technology (1).
Supply Chain Management
Supply chain management continues to evolve. Despite much price pressure in recent years, it is noticeable that sustainability has also become very important to the purchasing profession. The Chartered Institute of Purchasing and Supply has a Sustainability Index to help their members manage this particular risk in making supply choices (2). In grocery, consumers have become concerned about intensive farming, plastic packaging, food miles and wastage. In manufacturing there is considerable pressure from policy-makers to find solutions to carbon emissions and other forms of pollution. Transparency and trust are needed to reduce risks in supply chains, and that means that suppliers and customers should be working together with more long-term mutual objectives.
Counteracting that to some degree, the power of dominant brands in supply chains creates pressure to standardise, simplify and reduce prices as much as possible. The only response is to reduce the costs to serve dominant brands. It is likely that business relationships will polarise even more between those which are driven by masses of automated transactions and those which are consultative and focused on innovation. However, in some cases, players in supply chains may seek to reconfigure the supply network to neutralise the power of dominant brands. Reconfiguration may be facilitated by technology.
Risk
The risks of KAM are on the radar of strategists in the field. Strategists need to avoid over-focusing on KAM or using KAM approaches in the wrong accounts. If it is difficult to capture value, the business case for KAM relies solely on intangible values derived from relationship building. While this may avoid some hidden costs, it does not justify over-investing in customers who are not partners.
There are also legal risks to manage, as KAM might be seen as some kind of “distortion of trade”. Very few cases have been brought by competitors who believe that particular suppliers are over-servicing particular key accounts to an extent that distorts trade or constitutes a quasi-partnership, but it is a possibility that a test case will emerge in the future.
The main organisational risk in KAM is the requirement to keep up-to-date with the technology which can drive an effective infrastructure, which is discussed in the next section. There are also risks associated with human resources; the loss of skilled key account managers or influential member of the key account team can disrupt a project or a relationship. The turnover of buying staff in the customer might also be challenging.
Finally, there are marketing risks. A KAM approach should contribute to reputation-building in a market sector, but things can go wrong. A negative critical incident in a key account might create some bad publicity, as well as damaging the customer relationship. Contingency plans are always necessary for possible failures.
Technology
Overall, the most important and varied theme that occurs when practitioners and researchers of KAM contemplate the future is the effect of technology. The Internet of Things and Artificial Intelligence will mean that many transactions and exchanges of information can happen between suppliers and customers without the intervention of humans. Purchasers certainly want to push an e-commerce approach as far as they can, in order to save time and money. This will obviously affect the resource needed to sell standardised goods, but will it really affect key account management?
The technology underpinning KAM will always need continuous improvement. It not only needs to make sure that transactions and communications run smoothly and easily, but it needs to do more to generate insight, as we have discussed in previous sections. Sales enablement can accelerate key account management. If highly-paid key account managers can spend more time on thinking and less time on fire-fighting delivery or paperwork problems, then they can generate more returns for their employer and the customer.
In the pharmaceutical sector, the term “hybrid account manager” has appeared. “Hybrid” is normally interpreted as a mix or something very versatile. In the case of management, it is associated with in-depth knowledge of technology and the ability to apply it to management challenges. It is certainly the case that more opportunities for solutions for customers are associated with technology, such as telemetry in Logistics, AI in machinery, and video capture in retail. So key account teams need to be aware of technology’s potential, from multiple perspectives.
A “hybrid account manager” also has to know how to get the best out of applying technology in a business relationship, whether it is the right communications medium at the right time, or sharing data insights, or using internal systems to drive activity in an extended account team. He or she will be an early adopter of everything technology can do to connect decision-makers and businesses.
The importance of the application of technology in key account management is certainly growing. Early adoption of new technologies might help organisations to differentiate their key account management approach at a time when every competitive advantage has to be leveraged.
Notes:
- McDonald, M., & Rogers, B. (2017). Malcolm McDonald on Key Account Management. Kogan Page Publishers, London
- https://cips-sustainabilityindex.com/
Conclusion
It is often surprising that the basic tenets of key account management, such as careful selection of accounts and capturing value, are still hard to achieve thirty years on.
“Optimisation” is the longest period in KAM evolution, as improvements are sought. The barriers to improvement occur in several of the 7Ss, but there is always an element of not having the right information, having too much information and no analysis, or having a system that might be helpful if only it could be navigated.
Of course, changing IT systems is difficult, but someone should look at the hidden costs of poor systems. The risk of doing nothing to improve the sales enablement system to support key account managers and their teams may outweigh the risks of change.