Making Mutually Profitable Alliances

Three strategies will help you build lasting alliances: Collaborate, educate, and negotiate.

1. 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.

2. 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.

3. 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.

1. 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.

2. 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.

3. 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.