Aconsultant’s job can be defined in three ways: Bring back sales, bring back customer information that can lead to sales, and leave behind alliances with top-tier decision makers.
Sometimes a sale will build an alliance. More often, alliances help build sales.
There are four levels on which alliances must be structured in a key customer account. Three of them are in the upper management tier: top managers, financial managers, and operating managers. The fourth is the purchasing level, where the traditional adversary relationship must be converted into a more partnerable affiliation.
The objectives of all key account alliances are similar, regardless of the level at which they are to be achieved. Their overriding goal is to ensure customer continuity. Unless key account relationships are continuous, there will be no way to maximize the profit opportunity that a major customer represents. Unless you can keep your key customers, everything else is academic.
Making Mutually Profitable Alliances
Three strategies will help you build lasting alliances: Collaborate, educate, and negotiate.
- Collaborate. In key account situations, it takes two to make every sale. An unpartnered consultant cannot sell within a customer’s company. There will be no one to sell to. There will be no one to sell with. There will be no one to help sell. For consultant and collaborator, there must be the same dedication, the same commitment, and the same conviction that a sale will add genuine value to both parties. When a sale is finally made, it should be impossible to tell who made it. This is the test of a true collaboration: The sale is the thing, not the seller.
- Educate. You and your key customers must do more than buy and sell if your relationships are to be continuous. Along with making new dollars, you should both be making new information available to the people on each side who will be collaborating on proposing sales. Not only must you both earn as a result of your relationships, you must both learn as well. Professional growth and personal growth should attend profit growth.
- Negotiate. The main subject area of the mutual education between collaborators is how to improve profits. This requires continuing back-and-forth dialogue. The flow of input must be unimpeded. The ideal environment is rich in options but sparse in negative thinking, put-downs, editorializing, or defensiveness against anything that is "not invented here." Free-swinging relationships where there is a high degree of give-and-take allow you and your customers to avoid losing out on important opportunities. They also allow you to cash in fully on solving the problems that come off the top of the customer’s head.
Alliances with Top Managers
By selling as a consultant, you can obtain access up and down the entire vertical chain of a customer’s C-level organization, including the chief operating officer, who is usually the president, and the chief financial officer. If you sell to a division or subsidiary of a large customer company, your top allies may be its COO and CFO. Selling to several divisions or to the corporate management itself will require you to partner at the top company level of chief executive officer as well as at top divisional levels.
Alliances with Middle Managers
For the most part, your alliances will be at Box Two midlevels of cost centers and line-of-business profit centers.
At the profit center level, you will be partnering with two different types of business managers: those who run margin businesses and others who run turnover businesses. Each type requires its own partnership strategy. At the same time, you will also be partnering with cost center managers who service, support, and supply the lines of business.
Partnering with margin business managers. A margin business makes money on high profit per unit of sale. Most margin businesses are brand businesses, smaller rather than larger, and serve niche markets. A small improvement in volume for a margin business can yield a large increase in profits. When you PIP margin business managers, propose to increase their sales revenues without raising their variable costs or propose to reduce their variable costs without having an adverse effect on their revenues.
Partnering with turnover business managers. A turnover business makes money on high volume. Most turnover businesses are commodity businesses, larger rather than smaller, and serve mass markets. A large improvement in volume for a turnover business is required to yield significantly improved profits. When you PIP turnover business managers, propose to increase their sales revenues while keeping operating funds requirements constant or reducing them. Alternatively, you can propose to reduce operating funds requirements, as long as you do not reduce revenues. Operating funds requirements can be reduced by cutting down on current variable costs or by displacing some of them by leasing or outsourcing assets instead of purchasing them.
Improving cycle times of a turnover business, such as its time to market or its order fulfillment rate, are the most cost-effective strategies to improve its manager’s performance. By speeding up cycle times, you can increase the amount of goods shipped and billed. This speeds up cash flow without having to increase sales volume by increasing the speed of collecting accounts payable. Accelerating the order fulfillment cycle also reduces inventory costs by cutting down on the amount of funds that are tied up in working assets. Accelerating collections cuts down further on the same funds. Each operating cycle that you speed up improves productivity by reducing a manager’s unit costs of labor and materials.
Partnering with cost center managers. A cost center manager is preoccupied with running an operation in the most cost-effective manner based on best practices, TQM (total quality management), continuous innovation, and JIT (just-in-time) inventory. Cost center managers in R&D, manufacturing, engineering, marketing, information systems, and human resources are always being measured by their contributions to cost. As a result, work flows and cycle times are key indicators of performance for them. Wasted materials, wasted time, and wasted money are constant targets for improvement.
Opportunities to apply Consultative Selling strategies to customer cost reduction are expanding in proportion to the expanded needs of customers to strive ceaselessly toward the holy grail of zero cost. While variable costs are always the preferred targets for PIPping, at Boeing, as at many other capital-intensive businesses, "We treat every cost, whether fixed or not, as variable and challenge them."
Philip Condit, Boeing’s CEO, has linked cost containment to each manager’s KPIs. Each facility is charged for the cost of its inventories in computing the economic return of a unit. "All of our bonus and incentive programs key off on this computed economic return." All of the profit-improvement propositions of Boeing’s suppliers should do the same.
Agreeing Through Negotiation
Negotiation is the agreement style that partners use. It is designed to make sure that every partner wins something and that no partner loses everything. If any of the partners come away without a win, they have not been negotiated with; they have been commandeered. They have been mastered, not partnered.
What is it that each partner in a partnered negotiation must win? Each must win new, improved profits. Customer partners must have their profits improved by coming away with a lowered cost or higher revenues or earnings. Supplier partners must have their profits improved by coming away with a lowered cost of sale and a higher margin.
In vendor selling, negotiation centers on price. As soon as a price is proposed, discounting begins. Vendors often mistake this process for negotiation. They call it "negotiating price" when they really mean "discounting price." Discounting price is not negotiation because the suppliers cannot win. They can only limit their losses. If their margins are not directly attacked, they will be subjected to other forms of price pressure such as requests for free goods and services, advertising or promotion allowances, free carrying of inventory, and so on.
Because price does not exist in Consultative Selling, partners do not include it in their dialogues. Instead, they negotiate about the yield from the consultative substitute for price: investment. How much can it earn? How soon can it start to flow? How sure can we be—how can we be even surer—that we will receive the muchness we have planned as soon as we have planned for it?
These are the three subjects of partnered negotiation. Both partners want to maximize the sureness of their deals together. Without sureness, everything else is fanciful; Profit Improvement Proposals will be fiction, like a midsummer night’s dream. Within the constraints that sureness imposes on the partners, how much return can they manage from their investments, and how soon can they hold it in their hands?
In your role as a consultative seller, you must always be ready to propose more muchness or soonness. The way you do this is by constant what-ifing: What if we add this positive value to our proposal: What effect will we have on return? What if we subtract this negative value from our proposal: What effect will we have on return? With PIPWARE, each option takes only a minute to answer.
The best partnerships consistently earn the highest returns from their investments. They realize that each of them is making an investment of money, time, and resources, and that each must maximize its payoff. As a result, it is not just the consultative partner who proposes and the customer partner who disposes. Both propose to add the maximum value to their mutual proposals. Both what-if each other so that their proposals are true joint ventures. Joint proposals, in which each partner is invested both personally and professionally, are the outcomes of partnered negotiation.
If you are asked how you know you are practicing partnered negotiation, a joint Profit Improvement Proposal is not only your best answer; it is your only answer.
Separating Partners From Nonpartners
Every decision maker can be considered as a fraction. The denominator is always the same: common needs and aspirations. Every numerator, though, is exceptional; numerators are composed of individual differences. In order to penetrate a customer organization, you have to analyze what is individual as well as what is common. This can be done by answering two questions: "Who are the decision makers I can partner with?" "Who are the decision makers I will have difficulty partnering with?"
Decision Makers Who Make Good Partners
There are six types of decision makers who have high partnering potential. High-partnering decision makers summarizes their principal characteristics and most probable negotiating modes.
Manager Type
Characteristics
Negotiation Modes
Bureaucrat
Rational, formal, impersonal, disciplined, jealous of rights and prerogatives of office, well-versed in organizational politics.
Follows rules; stickler for compliance; more concerned with tasks than with people; logical strategist (but can be a nitpicker); predictable negotiator.
Zealot
Competent loner, impatient, outspoken, a nuisance to bureaucrats, insensitive to others, minimal political skills.
Devoted to good of organization; aggressive and domineering negotiator; blunt and direct; totally task-oriented.
Executive
Dominant but not domineering, directive but permits freedom, consultative but not participative, sizes up people well but relates only on a surface level, cordial but at arm’s length.
Organization-oriented; high task concentration; assertive negotiator; adroit strategist; flexible and resourceful.
Integrator
Egalitarian, supportive, participative, excellent interpersonal skills, a born team builder, a catalyst who is adept at unifying conflicting values.
Shares leadership; permits freedom of decisions and delegates authority; welcomes ideas; open and honest negotiator who seeks win-win relationships.
Gamesperson
Fast-moving, flexible, upward- moving, impersonal, risk taker, one convinced that winning is everything, innovative, opportunistic but ethical, plays the game fairly but will give nothing away.
Wants to win every negotiation; enjoys competition of ideas, jockeying for position, and maneuvers of the mind; sharp, skilled, and tough negotiator; can be a win-win strategist.
Autocrat
Paternalistic, patronizing, closed to new ideas that are not invented here, not consultative or participative, but partnerable on own terms.
Binds people emotionally; rules from position of authority; makes pronouncements of policy; a sharp trader who negotiates on a tit-for-tat basis.
Decision Makers Who Make Difficult Partners
There are six types of decision makers who have low partnering potential. Low-partnering decision makers summarizes their principal characteristics and most probable negotiating modes.
Manager Type
Characteristics
Negotiation Modes
Machiavellian
Self-oriented, shrewd, devious, and calculating, insightful into weaknesses of others, opportunistic, suave and charismatic, can turn in an instant from collaboration to aggression.
An exploiter of people; cooperates only for selfish interests; totally impersonal negotiator, unmoved by human appeals; will win as inexpensively as possible, but will win at all costs.
Missionary
Smoother of conflict, blender of ideas, must be liked, identifies harmony with acceptance, highly subjective and personal.
A seeker of compromise and leveler of ideas to lowest common denominator; negotiates emotionally with personal appeals to agree for own sake.
Exploiter
Arrogant, what’s-in-it-for-me attitude, coercive, domineering, rigid, prejudiced, takes advantage of weakness, makes snap judgments, unswayed by evidence.
Exerts constrictive personal control over negotiation; makes others vulnerable by using pressure and fear to get own way; demands subservience; sees others as obstacles to be overcome.
Climber
Striving, driving, smooth and polished demeanor that masks aggression, opportunistic, without loyalty to others, goes with flow.
Excellent politician; uses self-propelling change to call attention to self; always thinking ahead; self-serving negotiator based on what-will-this-do-for-me?
Conserver
Defends status quo, resists change, favors evolutionary improvement, uses the system skillfully to safeguard personal position and prerogatives.
Imposes own sense of order and nonimmediacy on negotiation; slows everything down; preaches traditional values; defensively blocks innovation and undermines agreements before implementation.
Glad-hander
Superficially friendly to new ideas but essentially a nondoer, effusive, socially skilled and politically skillful, superior survival instincts.
Overreactive and overstimulated by everything but impressed by little; promises support but then fades away; endorses only sure things that can do some personal good; never takes risks.
Consultative Selling enables sustainable commercial relationships. As long as a customer manager’s profit contribution is being improved by a consultative seller, they can continue to grow each other as "partners in profits."
Consultative sellers do not make calls. They make projects that can migrate from one profit contribution to the next so that the seller’s initial cost of sale is amortized over infinity. Nor do consultative sellers transact business through finite, sporadic engagements. Instead, they become partners in perpetuity. As long as managers have a line of business or a business function to run, their profit contributions are always susceptible to improvement, just as their KPIs are always made more stringent and less readily achievable.
The traditional product vendor skills of maximizing the number of calls per day in order to sell something to everybody have no place in Consultative Selling. The same is true for the service vendor skills of selling finite engagements whose termination, no matter how successful, more often than not leaves their vendors back where they were: on the street to start all over again.
The selling in Consultative Selling should take place once, at the beginning of each partnership, when PIP number one must be agreed on. From then on, the principle of capital turnover should act as the flywheel of each relationship so that its cash flow never stops. The benefits of continuity of turnover—PIP turnover, customer capital turnover, and the seller’s turnover of customer investments—compose the added values of partnering. Once a partnership gets up to speed, the seller’s cost of sales and sales cycle time should approximate zero. So should the customer partner’s cost of acquiring new profit opportunities from the seller.
Partners who are brought together by Consultative Selling gain new money together. But that is not all. They also gain in the time value of their new cash flows. Funds can be earned or saved faster. They can be reinvested faster. There are more funds to reinvest each period because they become available sooner. This is where the payoff of Consultative Selling comes from.
Improving the Odds on "One and it’s Done"
You can improve the odds on achieving "one and it’s done" partnering efficiency—the Six Sigma of Consultative Selling—by taking two factors into account before you commit to a PIP’s creation:
- The customer manager’s actual and potential "What elses?"
- The manager’s actual and potential "Why Nots?"
As your partnerships mature, what elses and why nots become easier for you to know, either experientially because you are exposed to them in the course of your relationships or intuitively based on knowing your partners. At the outset of new relationships, however, you may have to ask; unasked or unanswered, you may have to reason your way to go-no go decisions about PIPping.
Assaying the "what elses" means learning the customer managers’ investment options, the claims that the managers, their top managers, or suppliers of competitive options may have made on the funds you would like to stake out for yourself. Rival claims come from three main sources:
- A mandate from upstairs that freezes funds for a use that top management regards as critical to the success of the business. This may entail a performance improvement in the direction of best practices, an acquisition to fill a gap in a product line, or a reallocation of resources to beef up services at the expense of products.
- A priority that gets funded first because it is a hotter button than your hot button. This may be a personal quest on the part of a manager that makes equal subjective as well as economic sense. Or it may be an investment that a manager must make to safeguard a previously funded initiative, such as an upgrading renovation or repair.
- A better offer that has a more compelling return in terms of its muchness, soonness, or sureness. Such an offer does not need to be directly competitive with your own proposition in either its application or choice of operational function. It needs only to challenge for similar funds at a similar level of risk in order to be competitive.
Assaying the "why nots" means learning customer managers’ investment constraints that are outside their priorities and hurdle rates. Constraints, most of which are self-imposed, come from two main sources:
- A lack of sufficient sureness to proceed. Uncertainty may come from concern that your proposed profit improvement is too small to be worthwhile or too large to be credible. This constraint may be overcome by guaranteeing the proposed results and reducing up-front cost as much as possible by gainsharing.
- A heightened sense of risk. Commitment may be inhibited by concern that exposure to forfeiture of principal is too high or that a protracted delay in its recovery is a signal of eventual forfeiture. This constraint may be overcome by reducing the time to payback, either by cutting back on the amount of funds invested in year zero or accelerating the flow of benefits.
Fast closing your PIPs the first time every time is essential to maximizing the net present value of the technology that enables their outcomes. It is therefore directly related to the margins you can claim in return for the value you add. PIPs that encounter delay add to their cost of sale and to your customers’ cost of acquisition. Similarly, PIPs that end up as scrap incur opportunity cost for both of you. This gives sellers and customers alike a vested interest in maintaining a "one and it’s done" turnover schedule.