Putting the customer at the center. Sounds easy, a popular advertising slogan in Italy in the 1960s would have said. And it may seem obvious to a non-expert.
Yet the strategy of creating a key account management, in other words, making the most important customers the focal point of the company’s actions, has caused a real storm at 3M, the U.S. multinational, whose turnover in Europe, Middle East and Africa, where this new approach was proposed, was about 5 billion euros in 2014, when the change began. Bologna Business School examined the evolution for a case-study.
The decline in revenue derived from key accounts in the previous two years and the fact that even earlier their growth was lower than that of “standard” customers, as opposed to what one would expect, were the sparks that ignited the suggestion that 3M address the problem by abandoning a regionally based matrix organization, in which each region was managed almost independently and communicated little with the others, and replacing it with one in which the customer is the unit of analysis, with an integrated and faster information exchange system so that customer data can be tracked and shared internally.
The change began with extensive market research that over eight months led to interviews with 3M’s major customers (including some of the biggest names in the industrial, automotive, and aerospace sectors, who spared no criticism of the system in place and the relationship with the supplier), specialized research centers, competitors that had recently faced the same issues, and more than 500 employees worldwide. 3M is indeed present in some seventy countries, and its complexity also stems from its nature as a conglomerate operating in four main sectors (security and industry, transportation and electronics, health care, consumer goods) with a portfolio of more than 60 thousand products under different brand names.
The research identified problems in several areas: failure to align resources and processes with the needs of major customers, the lack of systems to track the performance of various accounts with a consistent set of indicators and a common approach, weak internal communication systems, and poor senior management involvement and leadership. These were problems that are in part common to all complex matrix organizations, where clients have to develop multiple relationships with different divisions and regions.
The strongest resistance to change came, not surprisingly, from regional or individual division managers. Challenging this, however, the proponents of reorganization were able to oppose the success of a pilot project in the Nordic countries, which was well received by major customers, and the opportunity to extend it to another region, along with a clearer definition of key performance indicators, more in line with the new customer relationship management, before making a decision on an overall strategy.
The key challenges of introducing key account management at 3M can be summarized under four headings: sales growth, organizational change, governance, and internal communication. Under the latter heading, for example, it became clear that the group was not accustomed to information sharing, that customer data was often not easily accessible or, in some cases, not even fully collected. And it remained uncertain whose responsibility it was to identify and rank customers.
A task force was created to take action on a number of key issues: selecting and managing the most important customers, allocating decision-making power, and improving customer experience by creating pan-European contracts so that they could be concluded more quickly and efficiently instead of having to go through several regional or divisional approvals.
The internal discussion, some of it quite heated, eventually led to a joint effort to adopt a different organization, with the goals of reducing complexity, creating a single point of contact for customers, making it easier to do business with 3M, improving transparency, and creating a better connection within the group, so that customers perceive the added value of the scale of “Big 3M.” In short, putting the customer at the center. “It sounds easy. Like making good coffee.”