As part of Russell Reynolds Associates’ commitment to understanding the future trends and challenges that our clients will face, we publish reports which examine the transformations taking place across major business sectors. In each of our studies, we look at an industry from the inside by gathering the views of experts, executives and senior commentators.
In this report, we explore the changing dynamics of the technology solutions industry, drawing on interviews with executives in the IT hardware and electronics sector in Asia/Pacific and Europe.
Executive SummaryOne of the critical challenges facing management teams is to strike the right balance between providing strategic leadership while remaining close to market developments and customer needs. All too often the higher up the corporate ladder executives climb, the less contact they have with clients.
Structuring The Business Around ClientsOur research identifies three structural elements which are changing to fit the new, post-sales environment: account management, product proposition and executive remuneration.
Account Management Programmes that Mirror Client OperationsThere is unanimous recognition that organisations—and the individuals within the company—need to become more client focused.
"When I joined the company fifteen months ago, it was fully product focused. Now, we’re mid-way through that process, and I intend to make it far more client focused,” says Toon Bouten, President and CEO, GN Netcom.
Our interviewees indicate that account management in their organisations is often not structured along regional lines, as many former sales teams were, but shaped to match a client’s operations.
“Philips structures its teams to favour a deep understanding of the client’s inner business. For example, our Satellite and Telecom account teams are kept separate, even though they may be in the same country, and for convenience, it might have been easier to manage them under one regional sales team in Spain,” says Philippe Alcaras, former General Manager Home Networks, Philips.
Another leading executive agrees, “We have established teams according to client size and client sector—these dimensions override any regional platform.”
One CEO explains, “We have an organisation which enables the business line to be as close to the client as possible. Along with the general manager of that business line, we ensure that the maximum number of competent people—not only commercial but also technical—are spending more and more time with the client.”
Evolution in the Product PropositionThe product offering and proposition vary greatly across the business services industry according to client requirements, market opportunities and the cultural heritage of the company. Our interviews indicate that businesses with more of a solutions heritage are further along the journey towards client alignment than other suppliers with a strong product heritage.
Products are also evolving as manufacturers invest in understanding customer preferences and feedback. For some, this results in modifications to the product; for other suppliers, it has prompted a bespoke approach. This has led to a corporate structure which aims to track the evolving needs and tastes of the buyer.
“We ensure a more customer-oriented focus by incorporating customer feedback into product development and by locating engineering within each country. Although this results in some duplication, it ensures there is a much closer linkage between each country’s customers and our product development,” explains Olaf Swantee, Senior Executive Vice President, Personal Communication Services, UK and Europe/Middle East Operations, Orange.
In addition, our executives agree that in steering their brand, marketing and offering towards client alignment, it is important that this focus does not detract from delivering product excellence in a competitive market.
“The challenge is to transform the organisation from product focused to client focused while still maintaining product excellence,” notes Philippe Alcaras.
Executive Remuneration that Drives Relationship Management SkillsRemuneration packages are changing to reflect greater client alignment across the industry, with recognition that incentives geared to short-term revenues are not the optimum route to major deals in the future (see Diagram 1).
Almost all the organisations in this research link executive remuneration to client relationships, typically accounting for 30 percent of overall remuneration, with assessment usually linked to client feedback and satisfaction data.
Other companies have gone further and remunerate on the basis of a combination of revenues achieved (representing approximately 60 percent), client management metrics (20 percent) and team management assessment (20 percent).
Client management metrics include measurements such as “breakthrough” targets to acquire a particular client or achieving improved year-on-year client satisfaction scores.
At this stage, cross-selling into the client organisation is yet to be reflected in the remuneration structure. None of the companies in this research currently rewards cross-selling. This suggests one of two possibilities: first, that cross-selling requires an even deeper understanding of complex issues best handled at the leadership level or second, that nurturing client relationships is still at the stage of ‘multi-touch’ rather than ‘cross-touch’.
‘Multi-Touch’ Executives Are Needed To Deliver A Client-Oriented ApproachOur research indicates that the industry needs two elements to provide a client-oriented approach: first, teams that deliver a ‘multi-touch’ organisation and second, senior executives with the right background and a holistic approach to leadership.
Teams that Deliver a ‘Multi-Touch’ OrganisationIt is no longer only the client relationship director who communicates with clients. Relationships are typically held and nurtured by teams, under the guidance of an account director, whose primary objective is to ensure that clients are served through multiple contact points across the company. This new, ‘multi-touch’ organisation, therefore, requires complex matrix management in order to handle issues such as geographic duplication and significant investment in training.
“Orchestrating the team to ensure multi-level engagement with the client is more of a management process than a sales activity,” notes René Svendsen-Tune, President and CEO, Teleca.
So, with the focus on fewer, more long-term client relationships, the sales team has been replaced with a multi-level, multi-functional team interface (see Diagram 2). Those tasked with generating sales now find themselves alongside colleagues from a variety of functions and levels, not only engaging peer-to-peer with the client but also reporting back with knowledge and insight. This helps to build client and market knowledge at the senior levels, captured and aggregated by the leadership team.
The objective is clear: every employee needs to be aware of the client, not just the people in sales. However, this cannot be achieved by simply cross-training everybody. Companies need to pursue a structured approach to help individuals engage with executives in different roles across the client organisation. This is well recognised. Irrespective of their stage at becoming more client focused, all participants talked about actively orchestrating, coordinating or organising their resources. For example, one manager described specific training programmes that result in “licence to sell” and “licence to manage” internal qualifications.
"Our account director marshals GN’s engineering, finance and logistics people to achieve a level of intimacy with clients,” says Toon Bouten.
Most important of all, of course, is communication: everybody, at each level and in all functions, needs to develop client insight. This enhances the relationship from the external perspective and encourages executives to engage in internal dialogue on building sustainable relationships.
Executives with the Right BackgroundThe background of executives emerging as leaders in this sector demonstrates the prominence now given to account management skills and a track record in managing major client relationships. For leadership roles, our participants were unequivocal about the need for senior executives to have a holistic leadership approach in addition to vision, creativity and change management experience. Participants defined holistic leadership in terms of strong client relationship expertise, supported by functional knowledge, profit and loss experience, technological understanding and the ability to head complex teams in order to drive evolution from within the company (see Diagram 3).
“We need executives with the creativity and ability to challenge legacy mindsets—without creativity, businesses will not grow,” asserts Hiroyuki Tsutsumi, Managing Director, Japan Service Providers Operations, Cisco Systems.
Executives with Holistic Leadership SkillsAs a result of shifts in the industry, client relationship management is cited by all our research participants as an indispensible part of the holistic skills set of senior leaders.
Executives previously considered at too high a level for sales are increasingly sought after for senior executive, client relationship roles, reflecting the growing demand for leaders who have the experience, gravitas and savoir faire to be significant deal-makers.
“How important will it be for my successor to have a background in client management? It is a must, an absolute must,” says Philippe Alcaras.
What does the importance of holistic leadership mean for the organisation as a whole? It is essential for successful businesses to focus on a marketing and post-sales client experience that involves multiple touch-points across multiple levels and functions.
“At Cisco we call it the ‘high-touch’ approach: an account manager coordinates Cisco resources—marketing, finance, system engineers—to engage with the customer,” says Hiroyuki Tsutsumi.
The high-touch approach is driven primarily by the complexity of a sector that supplies a huge range of products to a variety of different clients in a number of niche sectors.
As one executive explains, “Our product addresses one small bit of the client’s problems. Our people need to be really good at understanding not just the product but also the client’s problems and the client’s overall life.”
A client-focused structure requires a more process-driven, rigorous approach to managing client relationships, starting with hiring the right candidates, training those who will interact with individuals in the client organisation and balancing the profiles of executives in the boardroom.
“Sales is not an art any more; it’s a science. We need to excel at the process, understand numbers and have a deep knowledge of hiring and compensation, as well as segmenting, identifying and actioning opportunities,” explains Olaf Swantee.
Executives who Can Assimilate Information and Act FastThe multi-touch organisation needs to be led by a multi-touch business leader, who assimilates information and knowledge regarding clients from numerous sources across the organisation. In this way, a knowledge cycle is interlinked to the sales and business cycles. Although the overall sales cycle remains long, the business cycle is accelerating—for example, it is as little as two months for games makers who need to replace or update their products. A shorter business cycle, in turn, demands a faster knowledge cycle so that major strategic decisions can be made and tactical moves implemented in very short timeframes.
“Long term is no longer five years— it is eighteen months,” counsels one executive.
It is, therefore, imperative to gather, analyse and share information continuously about clients, their business objectives and developments in their sectors. Business leaders need to aggregate this information to build a mosaic of knowledge in order to make fast decisions based on well-formed instincts.
“There are seldom large individual customer insights: generally, it is a large number of small, individually meaningless observations which, when aggregated, give an enhanced appreciation of what is going on. Information collection, aggregation and analysis are key,” explains Philippe Alcaras.
Aggregation requires considerable client management experience at the very top and a leadership style that drives client knowledge across the company. Participants highlight the need for previous functional experience so that information captured by CEOs and senior executives resonates and contributes to the overall picture and leadership of the business.
One CEO explains, “The business cycle is accelerating: the ability to react fast, anticipate and invest in advance will become increasingly important—we do not have time any more to gather all the facts and figures before acting.”
Executives who Nurture Client RelationshipsIn our study, we found that senior executives spend from just under a quarter to a third of their time with clients, spending up to half of their time with clients during the delivery process. At the board and senior executive levels, client interaction is an acknowledged priority. However, at other levels, the challenge for leaders is to ensure that client interaction is seen as a key part of every role.
“We have some executives who are particularly good at putting effort into understanding the customer, by walking the streets and listening in at call centres. But the real challenge is getting the middle managers to do the same: we need to get them away from their desks, and this is not easy,” says Olaf Swantee.
All companies are searching for ways of maximising the time senior executives can spend with the client. The process to prepare and brief the executive for client interaction is extremely important.
“There needs to be a very high-quality relationship and high quality of dialogue: you cannot go and talk about the weather,” says René Svendsen-Tune.
In addition to the investment in preparation and training, respondents highlight the need for capturing customer insights and incorporating them into their business processes, across both the technical and executive functions.
“No R&D initiative should be commissioned before being fully validated through customer insights,” advises Philippe Alcaras.
The knowledge cycle must support the accelerating business cycle, in order to achieve sufficient return during the sales cycle.
Building Talent Is Not Just Hiring From CompetitorsThe main resourcing challenge faced in hardware and electronics is finding executives with a holistic perspective, combined with sufficient client relationship experience. Today, advancement in the industry depends upon long-term client relationships and the ability to make significant deals.
When looking for C-suite executives or filling a client director role, it is critical to assess how advanced a company is on its journey to becoming fully client-aligned. The business’ current stage has an impact on the skills and experience required for a particular leadership role, as well as on the type of individual who will be attracted to the organisation and role.
Sources of TalentFinding the kind of executives who can take a company from good to exceptional is a challenge best addressed by identifying candidates from the following three groups.
- Developing internal candidates
As businesses continue to enhance their client-facing processes, they create a naturally growing pool of young executives who have gathered client relationship exposure in their career development. The challenge for these firms will be to retain these executives, in whom they have invested with rigorous training geared to client alignment.
For executives already at a senior level, the long-term importance of sector knowledge and specialisation has again created a natural pool of leaders with long-term relationships in the industry and excellent deal-making potential.
- Attracting candidates within the technology sector
However, global sourcing is not a panacea. Finding the best executives in the world requires a keen understanding of the industry dynamics of each market and how they impact company structures and executive talent. For example, there are noticeable differences between the approaches of European and U.S. companies in hardware and electronics. European companies engage directly with clients to a greater degree than their U.S. counterparts, requiring a more bespoke approach, whereas U.S. businesses tend to interact more with distributors. For U.S. firms, this results in a more conservative, perhaps traditional approach to client relationships.
“U.S. competitors are more traditionally organised, with a single touch-point as opposed to a full account team,” notes Toon Bouten.
However, this is beginning to change. The transformation from product to client focus is rapidly gaining ground in the United States, where companies are beginning to hire executives specifically from client-aligned organisations in order to accelerate this shift.
- Capturing fresh ideas from candidates in other sectors
Philippe Alcaras comments, “Aeronautics is a good example of a long-cycle B2B business, and in that industry, they have done some very successful hiring from other sectors. Companies should go outside the sector more for recruitment; for example, the automobile industry has yielded some particularly successful signings.”
There is much emphasis on finding executives with the correct balance between cost containment, operational discipline and efficiency on the one hand, and creativity and entrepreneurship on the other. This challenge goes across a number of different industries, and considering candidates only in the hardware and electronics sector is unduly restrictive.
“I can easily find cost-cutters, and I can easily find entrepreneurial executives who can expand sales. I need people who can do both,” says Olaf Swantee.
To increase the talent pool at the senior executive level, it is important to temper the focus on sector-specific experience with the potential of candidates from other areas. Sector experience is important, but this needs to be viewed holistically—it is the appropriate application of expertise that is important. This requires fresh thinking that can take a company from good to great.
AppendixRussell Reynolds Associates would like to thank the following individuals for the time and insight they shared as participants in this research.
Philippe Alcaras Former General Manager Home Networks, Philips