Corporate Planning Techniques

 for Localization Pros

BY RICHARD BROOKS

I recently carried out a piece of research for a professional institute in the UK. The project was to find out what small to medium enterprises (these are defined as companies with less than £50M in revenue) consider to be their biggest sales challenge(s).

Now that the research is in, the top-three challenges were: key account management, communication strategies, and strategic selling. Anyone working in sales will have noticed a change in the profession. Transactional customer interactions are automated.

Technology transformed an account manager’s job from predominantly informing customers about their company’s offerings to managing complex business-to-business (B2B) relationships involving value co-creation. Sales has become a broader discipline.

Developing your sales team to understand this can be a source of competitive advantage as it puts you closer to the customer than your nearest competitor. But it may require a change in an organization’s approach to sales management. Let’s explore what this means and what skills your client-facing teams need to enable this approach.

The Fight Against Commoditization

This approach is of particular interest to the localization industry. This industry creates a huge amount of value for its customers, and in most cases the value is measurable. I’ve been in the debate many times before that translation services are being commoditized (that is, indistinguishable from another provider and bought on price) resulting in a race to zero. While the argument is complex, the answer in part is how the customer sees the value of the service being offered.

Marketing teams will make personas of potential clients to help them to develop generic strategies to attract their interest; the same is true for procurement professionals. Procurement categorizes suppliers. They’ll often use a model similar to the Kraljic Matrix (1983) to quantitatively measure supply risk versus the impact on profits. The model draws up four quadrants with each one providing basic supplier/vendor management techniques; these are: non-critical (commodity), leverage, bottleneck and strategic items. You can often tell which box you’ve been put in by the seniority of procurement professionals you deal with and the type of conversations you have (sales people, being eternal optimists, assume they’re in the strategic supplier box, but very few actually are).

If you find yourself repeatedly selling your service on price, look internally at how your customer relationships are being managed and how value is being communicated. Consider the sales team to be the messenger of value. They must understand how your company’s service offering creates value within the context of the customer and then be able to communicate that value in a language the customer understands. It’s not up to the procurement team to work this out and then pay you accordingly — that’s your job.

Consider the concept of value in B2B sales to be the impact on the customer’s business minus total cost of ownership. Impact includes the top line, the bottom line and everything in between, including intangible items (reputation, governance, brand). Total cost of ownership expands to include procurement costs, switching costs, maintenance, and supply chain costs.

This invites a broader conversation, encouraging innovation and shifting focus away from the lowest-cost marketplace provider. To achieve this, we need to understand the customer’s world.

 

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Analyze the Customer’s World

Profits are created by your customer; they are not created by your products. Generating them means doing something your customer values.

Getting to the root of what your customer wants isn’t easy. In the words of Henry Ford, “If I’d asked the customer what they wanted, they’d have said faster horses”. Your customer might not know what they want or how your service can be leveraged into their supply chain to generate value. To find sources of value we need to analyze our customer’s business and understand how their model performs.

To gain a 360-degree view of the customer’s business we can look in the following places:

•  The environment they operate in
•  The industry in which they compete
•  The customer’s strategic goals

Most of the information you need to complete a PEST analysis for your customer is publicly available. Governments all over the world publish statistics on the economy, demographics, trends in consumption, etc; and finding it can be as easy as using a search engine. More specific market research reports are provided by entities such as The Economist Intelligence Unit, Datamonitor and Mintel.

Scanning The Customer’s Environment

All organizations are surrounded by environmental factors that influence opportunities to create profits. To determine which elements are changing in your customer’s world and what the implications of these changes will be, an environmental scanning tool such as PEST analysis can be used.

This tool is a straightforward process to identify and list out factors under the following headings:

• Political and Legal: factors affecting the customer and/or their markets which are the results of political and/or legal trends.
• Economic: factors affecting the customer which are driven by the economy.
• Sociocultural: factors impacting the customer driven by social changes. Think about demographic changes and changes in consumer habits. Note that cultural differences play an increased role as your customer’s products/services will be crossing borders.
• Technological: factors affecting the customer coming from a technology standpoint.

Most of the information you need to complete a PEST analysis for your customer is publicly available. Governments all over the world publish statistics on the economy, demographics, trends in consumption, etc; and finding it can be as easy as using a search engine. More specific market research reports are provided by entities such as The Economist Intelligence Unit, Datamonitor and Mintel.

Scanning the Customer’s Industry

No discussion on industry analysis is complete without mentioning Porter’s five-forces framework (see M. Porter, How Competitive Forces Shape Strategy, 1979). The tool enables a scan of the state of competition and underlying economics within a particular industry. It shows us how forces interact to drive profitability and growth in a particular vertical. Specifically, Porter identified five forces that govern industry competition:

• Threat of new entrants
• Threat of new entrants
• Bargaining power of suppliers
• Rivalry within the industry
• Bargaining power of customers

The collective strength of these forces determines the ultimate potential for profit. Companies seek to create a position in an industry that is less vulnerable to attack from head-to-head opponents and erosion of market share to the supply chain.

With the knowledge gained about your customer’s industry, think about how your service can help your customer to solidify relationships, differentiate products, integrate operations, and gain technical leadership.

 

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The Customer’s Strategic Goals

If your customer is listed on any stock exchange, they’ll issue investor relations reports to their shareholders; these will be in the public domain. Make it your business to read and summarize this information and think how you can position your firm to help them achieve these goals quicker.

If the company isn’t listed, information will still be published in the form of audited accounts. Social media can be useful — with a huge pinch of salt. Strategic intent can also be interpreted by looking at the job roles they advertise for. More advanced due diligence can be applied in the form of mystery shopper visits or talking to the customer’s customer.

Finding Value

To help explain how value is created within a company, let’s look at Porter’s Value Chain (M. Porter, The Competitive Advantage: Creating and Sustaining Superior Performance, 1985). This model is a way of breaking down a company into its strategically relevant areas so we can begin to identify the areas of competitive advantage.

It consists of a number of primary and support activities. Primary activities have an immediate cost advantage on the production, maintenance, sales, and support of the products or services that the company creates. These activities consist of: inbound logistics, production, outbound logistics, marketing, sales, and service.

Support activities help the primary activities and form the basis of any organization. They consist of firm infrastructure, human resource management, technology development, and (everyone’s favorite) procurement.

This is typically part of a larger value system that includes companies either upstream (suppliers) or downstream (distribution channels). This perspective about how value is created helps you to see that each business activity adds value as opposed to them being costs. To badly paraphrase Carl Sagan, the beauty of a business is not the resources that go into it, but the way those resources are put together.

 

Classifying your Key Accounts

Not all of your accounts are equal and resources within your company are limited. To maximize return on your investment, focus on strategically important customers. Some customers will only ever require a low-cost transaction. At the other end of the spectrum, some will offer you the opportunity to invest, innovate, and add value.

Start with your top 20 customers. List out all of the customer-attractiveness factors to determine your ideal customer. Go through them methodically and apply a weighted score to each customer factor. In table 1, I’ve given an example of six factors; the ones you choose for your business might be different.

We then need to consider our relative strength with the customer, scored from low to high. Once you have these two numbers, plotting the customer attractiveness and relative strength places the customer somewhere on this 2×2.

This gives us some generic strategies as a starting point for each quadrant. Note that you can only provide key account management for companies who appreciate value. Over-servicing accounts who do not appreciate it is a waste.

With this research completed, you should have an in-depth understanding of your customer’s business and how to achieve their strategic goals. Rather than boasting about yourself, this method presents value in a language a business can understand. For example, Popeye doesn’t want spinach — he wants the outcome that happens when he eats spinach (date Olive, knock out Bluto, lift steel beams).

This is the same for your customers. They don’t want localization services. They want the ability to sell their own products to a new region of hungry consumers. Being the enabler of this will allow you to have much more meaningful conversations with your customer and help to move you to the illustrious position of strategic supplier.


Presenting Value

One of the largest costs in your business will be the attraction and onboarding of new clients. By applying key account management principles, you’ll retain customers longer, growing your and their business while they use your services. That’s a win-win situation if ever there was one. Creating long-term demand from customers through value creation is a sustainable and potentially limitless opportunity.

When presenting our value proposition to the customer, we should demonstrate that dealing with us will create advantage, not merely avoid disappointment. Far too many value propositions do not explicitly show what value is created and the benefits thereof. The areas where we can support can be classified under the following headings:

• Strategic: Issues that will ensure the customer’s long-term success.
• Strategic: Issues that will ensure the customer’s long-term success.
• High Potential:
Items that could potentially lead to differen-tial advantage to the customer.
• Key Operational:
These need to be solved quickly to avoid disadvantage.
• Support:
Non-urgent areas of value that still need to be solved to protect market positions.

Invariably this will come down to the numbers. Learn the language of finance, because accountants run the world. Show the customer how your service will affect their future cash flows. Show them the percentage return on investment, the payback period in months, the internal rate of return, and the net present value of your service offering when it’s deployed within your customer’s business. If you can, you are in the top 10% of sales people in the world.

RICHARD BROOKS is the CEO and co-owner of UK-based Language Service Provider K International. He spent over 25 years in the localization industry and held executive board positions at the European Language Industry Association and the Association of Language Companies.

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