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Policy matrix its just here that instead of markets you've got
key customers each one of these blobs is an actual
Customer its the name of a customer
so you're saying each of these customers in this case you probably got say twenty
and some of them are bigger than others in terms of the wallet size
and what you're saying is which ones are more or
less attractive to us and the answer is
it is going to be
the size of the wallet isnít it
it's going to be
the percentage return on sales that any supplier can make out of them cuz
some screw their supplies
some are much more
benign
And its the percentage growth isn't it
some customers are growing
some are in declining businesses
Now i think youíll agree that
attractiveness means the potential for growing your profits over the next three
years and it's not beyond the wit of mankind to work out which of these key
customers is going to offer you the best potential for growing your profits over
the next three years so that puts them on the vertical axis
And on the horizontal axis you're saying have we got a good relationship with them
Or havenít we
now the way you do it properly and correctly if you're doing a property
accountant programs is to do a proper swot
on your key accounts so i don't want to go into that
now when you've done that you've got the point of intersection you will see that
for example there's a big one like that
what it says it's not very attractive
and we haven't got much of a relationship with them but why are you
dealing with them
i give you a little case history this was a paper company i cannot mention the name of it
but i was talking to the directors and one of them said to me
malcolm
the biggest paper user in the world and again i will not say who it is
he said theyíre getting rid of all their paper suppliers and they are
Going to
just choose two to supply their paper needs all over the world
And he gave the name of the company and i said
i know what he's going to do this guy he's going to choose on price isnít he and he
said how do you know that malcolm i said cuz iím a professor
and
he said well what should we do and i said well you are a high fixed cost business
Arenít you paper mills
i said what would happen if you lost hundreds of thousands of
tons of production from one of your mills and the answer is the fixed costs are
still there arenít they
so you're going to have to absorb them in whatever volume is left which means
you're gonna have to put your prices up and in a
Static or declining market you Canít do that
i said so you need this customer donít you
So he said well what should I do and I said do the internet bidding do all that and i said
make sure you win the contract at whatever price make sure you win it
Youíre one of the two
And when youíve won it
Withdraw all support from them
That isnít in the contract
in other words you manage that customer for net free cash flow
You donít set out to delight them do you and excite them and all the silly things we put
In our mission statements
you can outsource things you can get your costs down you can actually make money
out of that
But not if you start behaving stupidly
but it's still a key account isnt it
Not a very nice one but its still a and you need it donít you
you really need customers like that and then you get some down here
Like that one there
it's a big generator of cash