Linking value creation to value capture to formalize and drive execution

LINKING VALUE CREATION TO VALUE CAPTURE TO FORMALIZE AND DRIVE EXECUTION

Owens Corning: 2022 SAMA Excellence Awards™Winner for Young Program

By Sara TheisProgram Leader Owens Corning

In the core composites business, Owens Corning (OC) plays in very mature market spaces. In many cases, we developed several of our end-use markets (e.g., fiberglass boats, tub & shower, automotive body panels) together with our customers from 50-plus years ago. But over time, lower-cost competitors slowly eroded our market share as well as our value proposition. We knew we needed to make intentional strategic choices in order to stay competitive in an ever-changing marketplace.

During a strategic growth ideation session in late 2019, our leadership team defined our winning aspiration to be “the partner of choice for customers who rely on us to deliver productivity and growth in ways others cannot.” We also realized we weren’t allocating resources appropriately to deliver on this promise considering 80% of our standard gross margin comes from about 20 customers. As an outcome of the session, we decided to narrow our focus and leverage Key Account Management (KAM) as a key capability to drive the growth strategy.

While the business already had Key Account Managers with defined account plans, the plans were updated in PowerPoint only once per year and hardly referenced, both internally and with the customer. Furthermore, attempts at a formal KAM process were done largely ad hoc, with minimal oversight and leadership support, which left us struggling to align and mobilize cross-functional teams to deliver customer value. We also had no formal method to measure Customer Expected Value (CEV) in order to create and capture value in a quantifiable way.

As a result, Account Managers didn’t have much leverage when it came time to negotiate contract renewals with these accounts. Thus, the idea for developing a formal Key Account Management (KAM) Operating Model and Management System was born.

Key players

Recognizing the business challenges of quantifying customer value and executing our key account plans, the General Manager of the Americas, the Director of Sales, and the Director of Marketing collaborated to design a formal Key Account Management (KAM) Operating Model and Management System, including a new hybrid Sales & Marketing Program Manager role to establish and run the overall program.

The KAM program is governed by our Composites Leadership Team and sponsored by our Chief Growth Officer. Our Extended Team is made up of leaders from Supply Chain, Customer Service, Technical Sales, Marketing, IT, R&D, Legal, and Operations.

Each Key Account is supported by a cross-functional team to help identify and create differential value based on the customer’s goals and objectives. Typically, the core team is comprised of Technical Sales, Supply Chain/Customer Service, and Product Management, and we pull in other resources such as R&D, IT, and Operations as needed.

Due to the success of the initial KAM program in North America, we have since scaled the KAM program to other regions including South America, Europe, and India.

Key components

Our KAM program is made up of five key elements: Culture, Talent, Segmentation, Operating Model, and Management Systems.

The first two represent the “Who” in putting the customer at the center of everything we do and ensuring we have the right talent in key roles. The last three represent the “How” in making strategic choices by segmenting our customers, operating with customer centricity, and measuring results.

Culture

In the words of our Director of Sales, we “drove a cultural transformation on how to operate with customer centricity.”

We started our journey with a Road Show to introduce the “Why” behind our strategy, as well as the KAM Operating Model, to various functional teams in order to obtain buy-in early in the process, manage change, and align expectations. As part of this, we published a “cheat sheet” of our newly minted “Key Growth Accounts” to signal a behavior change in giving these customers extra care and attention, as well as a series of “baseball cards” or Key Account plans-on-a-page to educate the teams and ground them in the business realities of our top growth customers. Today, more than 100 OC employees are actively engaged with customers across multiple functions, including Marketing, Technical Support, Business Development, Supply Chain, R&D, IT, Operations, HR, Sourcing, Sustainability, and more!

Talent

To set a baseline, we utilized the SAMA 360 Competency Assessment tool for 32 of our KAMs to assess our strengths and opportunity areas when compared to industry benchmarks. With that output, we worked with SAMA partners to build and deploy a formal training and development curriculum to address our common opportunity areas. We are also integrating other SAMA content, like the Academy sessions and Resource Library, into Individual Development Plans to help build capabilities across our team.

Segmentation

Building upon our existing needs-based segmentation, we further segmented our customers into growth vs. maintenance accounts based on current financials and projected market growth (market attractiveness), as well as willingness to partner (ability to win). Through this process we identified 20 accounts — 18 direct and two distribution partners — where we thought we could create differential value and get paid our fair share of that value.

As a team, we review this list twice per year using a “Fit Scorecard” in Valkre to help quantify who should remain on the list. Typically, we swap out two to three accounts based on leading and lagging indicators and have tried six-month pilots to see if we can move the needle toward becoming a trusted advisor.

Operating Model

While we knew what it meant to be customer-centric, we didn’t know what it looked like on a day-to-day basis. We established a Core Team that meets weekly, an Extended Team that meets monthly, and a Leadership Steering Team that reviews results quarterly. Each account team meets for one hour every two weeks to review the value creation plan and to discuss project status, and the next milestone, as well as any barriers or issues that need to be escalated to the Core Team in order to maintain momentum. After the first year, we reduced the cadence of these meetings, since the Operating Model became more efficient and part of our standard work practices without requiring as much oversight.

Management System

We knew this journey would be difficult using a massive Excel spreadsheet, so we invested in Valkre as the technology enabler of our KAM process. The account teams update project status, Customer Expected Value (CEV), the Fit scorecard, and other functionality as a real-time digital version of the account plans. The Program Manager then shares regular reports on portfolio health and leading indicators, while our Finance team tracks lagging indicators to assess the business impact of our efforts. By linking value creation to value capture, the Core and Extended Teams can then make data-driven adjustments to at-risk projects, priorities, and resource allocations when needed.

We also utilized the SAMA Program Assessment tool to assess our strengths and opportunity areas when compared to industry benchmarks. As a result, we are currently addressing our executive visibility, compensation plans, and value-creation plans for the maximum business impact.

Internal KPIs that help measure success

• Leading Indicators / Value Creation: Customer Expected Value (CEV) and Portfolio Health (e.g., at-risk projects, completion rate, strategic vs. tactical, etc.). We also measure Functional Inclusion or “diamond model” relationships between our team and the customer.

• Lagging Indicators / Value Capture: Above-market growth, customer share of wallet, incremental price/volume/mix (PVM), and standard gross margin.

External validation

Through an annual Customer Relationship Survey, the business achieved a record Net Promoter Score (NPS) score of 86, marking a 28-point increase from the prior year. While this isn’t all attributed to the KAM program, it’s certainly an indication that our customers are appreciating the difference in how we’re engaging them.

Qualitatively, our customers have noticed a change in how we’re creating value for them, and as a result, they’re engaging us in different ways. Below are a few examples of feedback we’ve received from customers:

• “The level of engagement from the OC team has been incredible on projects that are relevant and meaningful to our growth strategies. In particular, the advanced modeling work to optimize the design of our composite manhole cover will help us win more jobs among fierce competition.” - General Manager, Direct Customer #1.

• “I wanted to express my thanks to the Owens Corning team. Your willingness to support our project with your time and expertise is exemplary and is much appreciated…your responsiveness and communication were amazing! We consider Owens Corning to be a key supplier and partner in our quest to bring high-performance products to our customers, and we look forward to working with all of you in the years ahead.” - President and CEO, Direct Customer #2.

• “We’ve seen the teams working really well together, and we have felt that there is a very engaged group at OC that is driving to find any and all solutions that will help position us to avoid any customer let-downs. Please ask the team to keep the great communication coming.” - VP of Marketing, Direct Customer #3.

Results

By linking the customer delivered value from our KAM program to the contract negotiation process, our Commercial team felt more confident in asking for a greater share of wallet and/or higher price premiums because we felt we had earned the right to ask for it.

In just one year after implementing a formal Key Account Management program, the North American Composites business:

• Gained four points of market share.

• Increased 20% in volume.

• Increased 31% in revenue.

• Increased 75% in standard gross margin vs. prior year, which was more than half of our three-year growth goal.

As we continue to evolve our KAM approach, we are starting to openly ask our customers if they’re willing to reward us for value even before we embark on projects with them to further de-risk and ensure we’re making the right strategic choices to grow our businesses together.

Lessons learned

We proved that a very mature, 50-plus-year-old business can grow organically with existing customers, even when lower-cost competitors can supply similar products.

We can create differential customer value beyond our products. While product innovation is still a core competency for us, we discovered we can surprise and delight our customers with other sources of value such as enhanced service platforms, marketing support, productivity improvements, sustainability initiatives, Human Resources and Procurement benchmarking, and more.

In short, we win when our customers are more efficient and profitable. If we understand how those customers make money, we can help them grow, improve their productivity, and/or decrease their costs. As we deliver on this commitment to customers, they reward us with a higher share of their business at a price premium and earn loyalty over other suppliers. We’ve also discovered that customers openly share information when you pursue shared goals and develop “diamond model” relationships.

Many functional team members were hungry to get customer exposure, and our formal KAM program provided the forum to do that in a relevant and meaningful way. Before, our Sales team would begrudgingly take functional team members to a customer for a standard facility tour and general business overview. Now, the team members are deeply engaged with customer contacts on value-creation projects, so they can connect with purpose and provide greater value.

While it’s tough to juggle both the near-term and long-term growth goals of the business, we found that a strong partnership between the Sales & Marketing functions provides an ideal environment for both challenge and support. For example, it’s one thing to throw stones at an account plan from an academic standpoint, and it’s quite another when both teams are working together to build and execute account plans, so they have a sense of shared ownership and accountability. We’ve learned that KAM is not a sales process; it’s a business model. And it’s not purely KAM-led; it’s a team sport. As such, you need support from multiple functions with a strong Core Team as led by Sales, Marketing, and General Management.

Advice for others

Strong leadership endorsement drives behavioral change. And not just lip service. We benefited from highly engaged leaders who saw KAM as critical to our success in executing our growth strategy, and repeatedly held their teams accountable for focused execution.

KAM success is dependent on both internal, organizational, and customer readiness. Value co-creation is a two-way street, so regularly review your account list (say twice per year) to ensure you’re partnering with the right customers. If they’re not willing to engage now, they may be ready in the future.

A structured operating model with cross-functional team participation drives execution with speed and scale. We tried putting the ownership on the Key Account Manager to find resources needed to execute their account plans on their own, and it fell flat. We needed a formal structure with a dedicated resource to herd the proverbial cats, escalate issues, measure success, and optimize the process as we went.

Program management allows for a portfolio approach to leverage resources across accounts. It’s terribly inefficient for each Key Account Manager to create customer value from scratch, when we can scale differential value propositions across multiple customers who have similar needs with minimal customization. We moved much faster and efficiently with a centralized resource to align with functional leaders on a portfolio of programs vs. individual value creation projects.

Focusing on value co-creation helps shift the conversation away from price as well as the various uncertainties in today’s marketplace. While we can’t control challenges like COVID-19, supply chain bottlenecks, trade tariffs, and sustainability challenges, we can control how we engage our customers to create differential value and stimulate growth in these uncertain times. n

Sara Theis is Program Leader at Owens Corning. She can be contacted at sara.theis@owenscorning.com.