Is There “White Space” in Your Customer Relationships?

7
2,716 views

Share on LinkedIn

When managing sales relationships with major accounts, is it better to have more points of contact between vendor and customer—or fewer?

The answer depends on whether those interactions add value to or subtract value from the customer relationship, according to Rob Cross, an author and expert in social networking, who led a symposium I attended last week, “Leading in a Connected World.”

More than “fuzzwords,” social network value added and value subtracted are measurable and meaningful in financial terms. Yet C-Level executives don’t think that way when creating CRM processes, account teams, and collaborative sales models. Oddly, the same companies that routinely scrutinize the cost of airline tickets don’t track efficiency of collaborative activities—a potentially far greater expense. That irony was underscored when the majority of the symposium attendees indicated that well over half of their time was undocumented, and spent in internal meetings, on the phone, or answering email.

Ever since the words “social” and “networking” were joined to mean informal channels of communication, CRM practitioners have offered conflicting ideas about how to make collaboration more effective. One Symposium insight: sometimes, “less is more.” This is because not every interaction produces value. Which interactions are the most valuable? According to Professor Cross, the best opportunities for value-producing collaboration are best-practice knowledge transfers, innovation, and revenue generation activities. The absence of those value-producing activities might be considered “white space” in the customer relationship. In Professor Cross’s words, effective collaboration doesn’t mean “everyone in the woods singing Cum By Ya to each other.” By uncovering where value is added or subtracted in collaboration, companies can garner the right resources, manage staffing, and organize teams.

So where is collaborative value added and where is it subtracted? Value is added when tacit knowledge for best practices, innovation, and revenue generation is exchanged between individuals. As for subtraction, there are two major sources. If the outcome of collaborative activities provides neither productivity improvements nor cost reductions, then those activities are value-subtracting to an organization. Second, consistent negativity from even one employee can have a measurable, cascading impact on the value an organization produces. And the impact is magnified in organizations that depend on collaboration for executing strategy.

In a PowerPoint slide, Professor Cross illustrated a basic social network. When individuals in a large, multinational company were asked “who do you receive information from and provide information to,” the network’s visual similarity to a giant hairball was stunning. It’s easy to get the impression that everybody talks to everybody. I would be challenged to explain to a CFO how that picture portends to drive value for his or her company.

But underneath that picture, communication silos exist. These silos are losing favor, particularly for business development operations. One symposium panelist, Tracy Cox, Director of Performance Consulting for Raytheon Corporation, debunked the idea that selling activities should be the exclusive domain of the sales department. He recommended that companies consider different collaborative routes to engage with high-potential prospects, noting that it’s important to “understand the key influencers and reputation holders in the customer community and how to leverage those connections for new business.” It’s myopic to think of the Account Executive as the focal point for facilitating those connections.

When more specific relationship questions are asked to produce the social network model, the lines in the amorphous hairball social network strip away, yielding valuable insight. Who energizes you in your business activities? Who do you go to in order to generate revenue? Who gives you a sense of purpose? When these connections are mapped, patterns emerge that are highly predictive in how real value is transferred within and between companies. Not surprisingly, for these questions, the best performing account teams not only had strong client connections, but also better networks into their own organizations.

In addition to the Raytheon panelist, two other panelists, Lisa Vertucci, Managing Director, Global Head of Talent Development of Lehman Brothers; and John Helferich, former Vice President of Masterfoods USA shared how their organizations have used social network modeling to create value through collaboration. The operational decisions they made began with asking these questions:

How can we make invisible value visible to our customers?
How can we create the most effective cross-boundary relationships?
How can we identify key new business opportunities?
How do we uncover which people provide greater than average value in cross-selling products and services?
What is the most expedient way to “grow the conversation” about an important topic?

As with forensic sleuthing for suspicious financial transactions, following the money path in a social network context provides a good starting point for figuring out what’s valuable—and what’s white space—in your customer relationships.

7 COMMENTS

  1. Andrew

    Great article.

    I am pleased that you had the opportunity to hear Rob Cross in person. I have not met him, but I have read his book and literally dozens of his articles on social networks in business. But he overlooks a number of things when discussing social connections in such hard and fast value terms: The social skills of the participants, the strength of their connections and their ulterior motives just to name three.

    Let me illustrate what I mean. Whereas you would probably be willing to talk to a long-time friend about ,e.g. your company’s social media strategy, you almost certainly wouldn’t be willing to talk about it to a salesman. Your friend has the required social skills to, well, be your friend, most salesmen do not. You have a strong personal relationship with your friend, but not with most salesmen. And perhaps most important. Your friend wants nothing from you other than your friendship, unlike the saleman, who sees you as a source of untapped wealth. You get the point. Social networks are about more than just graph theory. They are about relationships between people.

    Although salemen are wise to understand something of the dynamics of social networks in customer organisations, that is not enough. They will not succeed when these insights are just used as a tool to more quickly get to a decision maker with their usual tired patter. As has been discussed widely, the biggest problem that most salesmen face is themselves. That they are in it for the sales, rather than the mutual value add. Particularly, the relational value they should add as a partner over the customer’s entire consumption lifecycle.

    Salesmen’s own language gave them away. Talk of “leverage connections for new business”, “greater than average value in cross-selling products and services” and “grow the conversation” all point to the one-sided, shallowness that we expect from most salesmen. Give me your order then I will be on my way. Such talk has no place in even the shallowest of relationships. And it should have no place in social networks either.

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

    Further Reading:

    Rob Cross’ website
    http://www.robcross.org/

  2. Graham:

    You have hit on what was one of the eye-opening things I learned last week. The real value of customer relationship management is not about simply creating lots of connections, but it’s about creating and maintaining connections to develop the greatest opportunities between trading partners.

    So the more valuable question is not “who do you talk to at work?” but “who energizes you through your conversations?” (Admittedly, a subjective question, but probably more telling when it comes to tracking where value flows within and between organizations.) By looking further into qualitative factors, opportunities for value creation can be identified that transcend the often-mercenary sales conversations that you describe.

    This insight was important for Raytheon, which realized that much of the tangible value the company produces is invisible to its customers. The impact of that problem was felt downstream–including the perception that some of their products were commodities, and missed business opportunities. Network mapping helped identify areas for opportunity–for example, in research and development. For an aerospace company, the activities of its R&D department are highly important to its customers. So when cross-boundary dialog exists between R&D departments, one value that Raytheon provides becomes more visible than with the old model of only sales talking to purchasing about production schedules and purchase orders.

    In the case of Wal-mart, or any other company that requires effective logistics management for executing strategy, sharing best practices and innovating in supply chain management is mutually valuable. Why not open up the connections between experts in the value chain, and strengthen the relationship in the process?

    I think the essence of the symposium was to understand the value of doing that, and to learn how companies have tapped social networking models for substantive financial gain.

  3. Andrew

    A great response to my challenge.

    I think you are right. Networks are everywhere and can be used for mutual advantage. I have personally used them to drive large-scale organisational change, to spot hidden knowledge to enable organisational innovation and of course, for engaging a much broader auduence in discussion about all things customer-related.

    Social networks have been well understood since the 1960s. And well written about in a management context since the 1980s. One of the best books on social networks in organisations is Ralph Stacey’s ‘Strategic Managemnt & Organisational Dynamics’. In it, he introduces the idea of the ‘shadow system’ that underpins the formal organisational structure and that gets things done. Particularly when the going gets a bit tough. Today we would recognise theshadow system as the organisational social network.

    It is only in the last five years that we have had the computational tools to amalyse large-scale social networks. Not only organisational networks oir sales networks, but also much much larger customer networks like the ‘calling communities’ which are at the leading edge of much of mobile telecoms customer management experimentation today.

    It will be interesting to see how it all pans out over the next few years. Any bets where it is going?

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

  4. John Helferich, former VP of Research and Development for Masterfoods, contends that overlaying required business process workflows onto social network models represents an unmet need, and there are great opportunities for entrepreneurs and others who can fill the void. (Who should know these nuances better than someone who has been measured on the output of global collaboration?)

    ERP companies and CRM software firms are “poster children” for ignoring this issue, and attempting the implementation equivalent of pounding square pegs into round holes. Some CRM providers contend that the greatest cause of CRM failures is failure of users to adopt the system. How many times have we heard (or said) “The software does exactly what it’s supposed to do–these people just won’t change!” The assumption behind those assertions is that ease-of-use is what drives user adoption.

    But reality might be different. Behind those observations are long-established connections in a social network that the software’s organized “to be” flowchart never considered! (And the picture looked so compelling in the product literature!)

    Great wealth will flow to those who can see both utopic workflows and social networks and can make them work as one.

  5. Andrew

    Good point.

    I have been involved in a large number of software implementations over the years. The most successful ones (mostly 20 years ago, when I was an IT Manager on customer software projects) were where the software was custom designed with users and with users in mind.

    The least successful ones (mostly in the last 10 years, when I was a user-side management consultant) were where the software was out of the box with management in mind rather than users. Let’s not mention the usual suspects like Siebel, SAP and Oracle. Oops, how did these three names slip out of the hat!

    It’s amazing the difference customer-centric software, where the customer is both the co-creator and the user, makes to the successful implementation of software in almost any business setting.

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

  6. Andrew

    Do you have more information on how Raytheon and Masterfoods harnessed organisational social networks to assist in BPR?

    The use of SNA to identify key people in the organisation to assist in process innovation – particularly the brokers with connections to other small worlds of innovators – is now pretty much standard fare. Or at least it should be. Ditto for the close, central, connected staff to drive the communication of process change.

    But is there more to it than that?

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

  7. Hi Graham:

    Overall, my take on this is that Social Network Analysis is under-utilized in business process re-engineering. (Given that, any firm that can master how to do this today has a decided competitive advantage!) The panel discussion provided some compelling examples in which companies used SNA as the central tool for organizational and workflow decisions. I found a link to the University of Virginia website that summarizes the symposium I attended and described in the blog, although the article is somewhat weak in terms of answering your question:

    http://www.virginia.edu/uvatoday/newsRelease.php?id=5061

    In any case, I excerpted the text below by Mary Summers that most closely provides an answer:

    “Leading off the discussion was Raytheon’s Cox, who said that Cross’ method of network analysis had achieved “huge results” — measurable by the billion-dollar contracts that resulted — for his corporation. Raytheon had turned to network analysis when, a few years ago, they found that “growth opportunities” seemed to be shrinking.

    “On the surface,” Cox said, “things looked good. But collaboration wasn’t really occurring; we were still organized day to day around region and function.”

    With its collaborative issues and bottlenecks laid bare, Cox explained, Raytheon was able to alter its culture in a way that enabled it to foster a “huge performance edge.”

    Lehman’s Vertucci said that network analysis allowed her, too, to see her organization in a new light. Surveying the top-performing 10 percent of Lehman’s vice presidents, she said, she came to the stunning realization that this tiny fraction of managers was responsible for some 43 percent of the company’s relationships. Such high-performers, she said, tend to be “doing things” to build strong connections: offering their advice and expertise, mentoring and helping to solve problems.

    Vertucci then came to another realization: By relocating some of these top performers, she could help strengthen the ties between the company’s global and domestic offices, an area she knew to be a weak point. “Top performers had ties across all different areas,” she said, “and they’d bring those connections with them.”

    McKinsey’s Graham then spoke, stressing the importance of leveraging external networks. Graham, who formerly served as chief knowledge officer at public relations heavyweight Hill & Knowlton, pointed out that in industries like public relations, “many important relationships are external to the firm — so it’s important to invest in those who have excellent external contacts.” A firm believer in the value of network analysis, Graham spearheaded Hill & Knowlton’s membership in the Network Roundtable.

    In addition, he created a premium research product called “Influencer Network Analysis” to map the relationships among the individuals, media and organizations that are shaping opinions across various industries and realms of public life.

    The panel discussion closed with a presentation by Helferich, the former head of research and development at Mars Inc. Mars, he explained, has three primary divisions — pet food, candy and rice — which didn’t always collaborate as effectively as the company would have liked. Using network analysis, he said, Mars was able to “make the invisible visible” and “see what was really going on.”

LEAVE A REPLY

Please enter your comment!
Please enter your name here