What defines strategic accounts and how do you work with them?
Global Head of KAM, Jan Schluechter from Novartis talks to Nick de Cent about how the pharma industry is getting to grips with the concept of key account management.
Key account management is a frequently misunderstood concept in pharma; indeed, the term can be quite broadly used to cover all kinds of sales engagements with larger institutions that go beyond the classical model of promotion to physicians. However, Novartis Global Head of Key Account Management and Customer Model Innovation, Jan Schluechter argues that, to understand KAM, you need firstly to define what your key accounts are.
He bases his understanding of a key account around three principles. To qualify as a key account, the customer must be:
- Important– influential in the market, its decisions impacting a larger number of people;
- Sizeable – big enough to justify a dedicated KAM resource; and
- Governed – meaning that a formal group of stakeholders has the central, binding decision-making power, which is followed through.
Accordingly, not all large customers qualify as key accounts, says Schluechter, who has responsibility for his company’s top strategic accounts. Particularly in cases where individual physicians may still have considerable autonomy, deploying a KAM model may be a “waste of resources.”
One important measure of success is the ability to grow the business faster than the market – by outcompeting your competitors. Schluechter’s approach at Novartis has seen some strategic accounts grow at up to three times the market rate.
His methodology for defining such accounts is to list all large customers and then to rank them according to the three principles mentioned above. Key accounts tend to fall into three categories: funding bodies such as a government organization, region or city; institutions that manage a budget such as a local health authority; and providers such as hospitals or HMOs. In emerging markets, there is often a fourth category – trade players such as pharmacies or wholesalers – although, in the more mature European and US markets, these represent a largely logistical dimension.
KAM activity has a strong link to market access; however, pricing is access-related rather than KAM-related, Schluechter maintains. “If I started to deal with NICE (National Institute for Health and Care Excellence), I would not categorize them as a key account; however, to stay in the UK market, CCGs (clinical commissioning groups) are. Nevertheless certain principles of KAM are relevant for both.”
KAM standards and skills
At Novartis, Schluechter has worldwide responsibility for key account management with more than 600 people. Consequently, he has been responsible for the implementation of KAM standards as part of the Novartis operational excellence model in over 30 countries and has been driving the reorganization of the global commercial organization.
You have to find out what really are the hot topics for them – the pain points in the account.”
He views the core focus of the interaction between Novartis and strategic accounts as a win-win-win situation, where everything will benefit the patient. There is an emphasis on developing the relationship into a partnership, such that an “excellent salesperson is not necessarily the best KAM.” Schluechter adds: “The term ‘KAM’ is too heavily used.”
KAMs have to be proficient at dealing with the external world of their account but also have to be skillful at managing the internal, in-company environment. On the external side, this includes understanding the customer stakeholders, their structure, drivers and KPIs.
“You have to find out what really are the hot topics for them – the pain points in the account.” It requires KAMs to have good analytical capability and also to be highly proficient at listening. However, this competency is not simply about asking questions but requires KAMs to formulate a clear hypothesis around issues, so that the pharma company can provide a superior solution based around upfront intelligence and research.
They have to make sure the company is able to deliver.”
Of course, customer interactions represent only half the equation – the KAM also needs to provide the internal perspective. “They have to make sure the company is able to deliver.” And this means engaging at all levels, from the C-suite to the shop floor and the supply chain – and displaying exemplary influencing and project management skills.
KAMs also need to be able to measure the impact of their activity: relevant metrics go beyond classical sales numbers; these should be forward-looking KPIs such as account penetration or account satisfaction – a similar measure to the net-promoter score metric used in other industries.
Schluechter suggests that KAMs ideally work in the role of an orchestrator for their organization, enabling it to deliver value to the client. If successful in this, the client gets what it is looking for. However, if not, KAMs can also be a “huge bottleneck” in the relationship. “He has to make sure that things are being delivered.”
An entrepreneurial mind-set is important but this has to fit within the context of the corporate environment. “How much autonomy and flexibility does the company allow?” For instance, the KAM role is not the same as that of a general manager, Schluechter maintains. This approach helps to start it off but you do need systems in place.
Schluechter’s preferred model is a modular approach, perhaps customizing modules – for example, a patient pathway – that have been successful in the past and then tailoring them for a particular customer".
Co-creating solutions with customers is an important component of the role of a KAM. “A pre-defined solution doesn’t really work.” However, completely bespoke solutions pose an efficiency problem for the pharma industry. Schluechter’s preferred model is a modular approach, perhaps customizing modules – for example, a patient pathway – that have been successful in the past and then tailoring them for a particular customer.
Industry understanding of KAM
So, how well does the wider pharmaceutical industry understand the KAM model? Schluechter’s view is that pharma is still coming to terms with its implications. “The majority are going through a sales approach; only a few are adopting the partnership approach – perhaps 20% of the industry. Overall, the industry is still in the mode of observing and testing what they should do,” he says.
There can be similar issues on the customer side. One of the current barriers to KAM is that “not all our customers are ready,” Schluechter suggests. An important limiting factor can be customers focusing on price rather than value. “Certain markets – integrated markets – are more suited to KAM than others,” he adds.
Nevertheless, if you ask a country manager “How much of your sales is driven by individuals (physicians) and how much is influenced by governing key accounts?” that figure has reached 60-70% in some markets today, Schluechter reveals. It’s all about central decisions: the physician is still important but the decision power lies with a small number of central or regional decision-making bodies.
Looking forward, Schluechter predicts that “those governing institutions will have an influence over more than 40% of our business.” At the same time, while KAM is typically structured country by country, there are increasing examples of key accounts expanding their operations beyond a single country – for instance, a US hospital chain building sites in the Middle East, China or Latin America. This is a trend that will need close observation as it implies a global key account management approach. “Regardless of global or local KAM, the first mover will have a clear advantage,” he concludes.