Winner Takes All

An emerging purchasing trend, which is as troubling as it is exciting, is the effort by large companies to reduce the number of their suppliers. These organizations have specialists who analyze all expenditures to find areas where they can reduce costs. There is an administrative cost associated with doing business with each supplier. This includes, but is not limited to, the cost of processing purchase orders, invoices and payments, as well as the meetings, follow-up phone calls and emails associated with this transactional activity.

Focus on Core Competencies

In addition to reducing cost, the executives of large organizations are realizing the need to focus on their core competencies and work with key partners to provide complementary competencies as needed. The achievement of value creation through complementary partnerships takes a lot of time and effort. It is simply impossible to educate a large number of vendors to enable them to provide value at this level. Moreover, value creation at this level often requires adaptation and flexibility from the supplier. Many suppliers are simply unwilling to invest the time to really learn about their clients nor to change structurally in order to meet client needs.

This emerging trend provides enormous opportunity for those suppliers that are willing to respond appropriately. For example, when a buying organization spends $500 million dollars, across 50 different vendors in a particular industry, decides that it will now limit its purchases to 3 vendors, it’s obvious that those who win, will win big. The influx of not only cash flow, but also strategic knowledge and insight, will propel the winning suppliers light years ahead of their competitors. As market dynamics continue to change, and customers look to their key suppliers to help them adapt to new challenges, these suppliers will gain deep insight into how their solutions create strategic and economic value for their customers. This insight will enable them to position themselves in the market in a much more compelling way than their competitors.

Implications

The implications of these changes for sales professionals are enormous. Salespeople who create value solely by developing deep product knowledge will find themselves less valued by both customers and employers. There will be an increasing demand for salespeople who can grasp a 360 degree view of their customers and use this perspective to customize real solutions to the customer’s most pressing challenges. No doubt, these customized solutions will require effective selling skills in order to be adopted by the customer. The real sales effort, however, will be focused internally as these customized solutions must be sold internally to those who will naturally resist change and the costs associated with it. The salesperson of the future must be a business person who can understand the economic costs and advantages of every solution proposed, and who will only propose solutions that are economically viable for both the customer and the employer. As a businessperson with a strategic mindset, he or she will be highly trusted by customer executives as well as their own executives.

Not everyone is capable of performing at this level. Fortunately, it’s not necessary for everyone to do so. Product-focused salespeople can still create tremendous value in this new world if they work as part of a team. The Key Account Manager must be focused on gaining deep insight about the customer’s business as well as coordinating the development of deep relationships with all the key stakeholders. Of necessity, they will lack the deep product knowledge that is required when addressing specific customer needs. Other team members can provide this knowledge, and with the Key Account Manager’s leadership, can do so within a context that highlights the value of the solution.

The Emerging Challenge

The emerging challenge for suppliers will be the mastery of team selling, the gathering of in-depth customer knowledge and insight, and the willingness to adapt structurally in order to meet the new demands of key customers. These challenges, though difficult, are not insurmountable. Many organizations are beginning to meet them, and as a result, they are enjoying extraordinary economic benefits. Those who fail to meet these challenges will find themselves shut out. That will be a devastating outcome as we move into a new era where the winner takes all!