Headlines proclaiming the latest healthcare merger, consolidation or vertical integration are hitting our screens with increasing frequency. The U.S. healthcare ecosystem is changing pretty rapidly now. Care delivery models are shifting, and cross-industry collaborations are more commonplace.
Pharma’s institutional customers are starting to look—and act—quite different, so our historically staid industry has to adapt. Pharma companies need to get closer to their customers to understand their changing needs and their changing definitions of value, and to get to know the new stakeholders and influencers entering the picture. If there was ever a time for the pharmaceutical industry to get key account management right, it’s now.
I recently called my colleague Mike Moorman, a managing principal who leads ZS’s sales business area and the firm’s B-to-B commercial strategy and transformation practice, to discuss how pharma companies can design a KAM strategy that meets their customers’ needs—and how to overcome the organizational and leadership challenges that are standing in their way. We dug into what KAM looks like when it’s done well, and what pharma organizations can learn from the KAM successes and failures of other industries. Here’s an excerpt from our conversation:
Q: Organizations in other industries have been successful with KAM in ways that pharma hasn’t. What lessons can pharma companies learn from KAM success stories like Cisco or Siemens?
A: Doing KAM well is hard, and actually it’s a point of strategic differentiation for companies. Even though best-in-class KAM companies span a wide range of businesses and industries, I think that there are some patterns to what they’ve done that has helped them to be more successful than other organizations. One is that they’ve managed to avoid what I might call the “big mistakes” like trying to go way too big, way too fast. Organizations that have gone that route tend to have very poor experiences with their KAM programs because, essentially, they’ve underappreciated the complexity of KAM and created an organization that’s large and bloated without the capabilities underneath to execute a KAM-type competency.
Two, successful companies have avoided relabeling reps as key account managers. Three, they’ve avoided over-relying on training and ambiguous value strategies. Instead, they’ve recognized that KAM is a business strategy, and not just a role. It’s a business strategy in the sense that it cuts across all aspects of the organization and requires a degree of coordination, not just for the team that’s engaging with the customer, but for all of the support functions that help enable that team. KAM is a means of creating a unique value and experience for a special segment of customers.
Q: And pharma leaders who’ve had success with KAM programs have said that KAM shouldn’t be relegated to commercial teams. It’s an organization-wide effort, but it’s frequently seen as a “sales” or a “managed care sales” thing. What mindset change needs to happen at HQ? Which silos need to be broken down for this to work?
A: For many organizations, the biggest culprit limiting their success is their own internal inability to coordinate and collaborate across the organization. In this regard, the enemy is often within. Executive engagement and a very clear operating model tend to play a very important role in helping break down silos and drive success. I think organizations that have been really successful with KAM have tended to start very small and are particular about the accounts that they pick. They also start with the right people, picking the right individuals and really recognizing that the KAM role isn’t just a general sales role relabeled.
They also have the right time horizons. Organizations that have been successful have recognized that building a KAM capability can take two, three or even four years, depending on the nature of the program. They’ve approached it with a high degree of urgency, but they’ve also recognized that you don’t accomplish this in one month or three months.
Successful organizations have employed something that we might describe as an “early experience team.” They start with a small team of superstars and a high-quality account list, and over-support them while they figure out KAM and demonstrate the impact that it can have. These early experience teams are not pilots. Pilots tend to be run as lightly supported experiments. With early experience teams, the focus isn’t, “Will it succeed?” but rather, “How do we make it successful and scalable?”
Those that have succeeded have been very systematic in terms of how they’ve approached KAM. There are at least 17 key drivers to KAM success. We’ll drill down into those drivers some other time, but they include aspects of strategy or engagement processes and tools, KAM people selection and development, metrics and incentives, and overall organizational alignment. Organizations that have been the most successful have understood those drivers and had a very clear, proactive road map for how to address them. In doing so, they’re able to build this capability over time.
Q: I’ve heard you say before that there’s a very strong operational discipline element to KAM. Can you talk a little bit about how disciplined account planning processes play a role?
A: Account planning is certainly a very important aspect of the customer engagement process in key account management, but it’s only one component of the overall customer engagement process.
That said, what does good account planning look like? One characteristic is that account planning should be a team sport. It’s not just about the KAM role. It’s not an individual sport. Organizations that are particularly proficient and effective at account planning approach it as an account team activity, so that implies the idea and understanding that KAM isn’t just about the individual who has the KAM role. KAM is about that team, that group of people, customer-facing roles that touch the account that need to share information with each other, that need to plan strategy with each other and need to execute together.
The best approaches to account planning engage that team to help synthesize and define what the key needs and priorities are for their customer, recognizing that all of the various players on that team have a line of sight into that to be able to decide what the solutions are and how to tailor those solutions for that particular customer, and to be able to coordinate their own individual roles with respect to how they’re going to execute behind that plan.
Q: If I go to pharma companies and say, “You need to do key account management,” 90% of them will say: “Yep, we’ve got key account managers. We’re doing it.” But I see a lot of the things you pointed out as gaps. How do we get senior executives to understand some of the challenges and to get on board with, “OK, we know why this is different and why different things are needed,” but then also, “We’ll personally invest in making this a success”? How do we get that broader organizational buy-in at a high level?
A: Other organizations have been successful in engaging their executives by establishing a common vision as to what they’re trying to accomplish with KAM, and an accountability for the executive team that the KAM success, in many ways, rests with them. In fact, some of the most successful organizations have created an executive board that owns the overall KAM program. In doing that, one of the things that they’ve tackled is one of the big challenges of KAM, and that’s the challenge from within: the challenge of breaking down silos and driving organizational alignment of cross-functional execution.
To get the broader organizational buy-in for KAM, we need to prove that it works. At least from my perspective, proving it means that we do a smaller program with a very select set of accounts where we’re able to engage them in a new way—the KAM way—and, as a consequence of that, begin to see business impact that motivates us to want to roll these programs out more broadly.
I think that the “prove it” step is fundamental to being successful with KAM on two fronts, really. First, it’s fundamental in terms of being able to develop a KAM capability that could be scaled out, one that we would be willing and excited to propose organization-wide. Second, it allows companies to have true case examples of the kind of impact that KAM can have, and internal advocates who’ve “lived it.” I think the organizations that have been the most successful in achieving organization-wide enthusiasm for KAM have had that as a very key ingredient.
For some organizations, the thing that really motivated their executive team to pursue KAM in a very serious way was the customer, the voice of the customer. The customers essentially told them: “I don’t want to work with you anymore in the way in which we’ve been working together. I want you to engage me in a different way. You’re too hard to work with. It’s draining value for me and it’s undermining the value for you.” KAM is all about customer centricity. Many times, the voice of the customer is one of the strongest and most compelling factors that motivates the executive team.
The other thing, of course, is seeing the writing on the wall, being able to understand the trends that are taking place in the marketplace in terms of provider organization and control, the way in which that control is manifesting itself in share shifts, and understanding the impact that that’s having on volumes for pharmaceutical companies. As we’re able to quantify that, that very quickly commands attention and raises a significant question about how we’re going to be successful with these new kinds of organizations, recognizing that a lot of the decision influence doesn’t sit with just the clinicians anymore.
The writing certainly is on the wall. Pharma’s customers are changing, so pharma’s commercial models have to adapt accordingly. As an industry, pharma historically has been accustomed to making long-term bets for which companies don’t see the payoff for 20 years, so the two- to four-year KAM timeline should be easy for organizations to comprehend and plan around. Yet we continually see this commercial pressure to say that any KAM experiment should yield results in three to six months. Companies are applying unrealistic short-term goals to an effort that yields long-term results, and they’re approaching their KAM programs’ development tactically rather than strategically. Then they’re growing dissatisfied and disillusioned when their KAM efforts don’t yield anything consequential early on. Key account management takes patience, executive-level buy-in and organization-wide participation, as well as the careful and constant management of all stakeholders’ expectations. The rewards, though, are worth the effort.
WHITEPAPER: The Missing Keys in Key Account Management