Written by Steve Gielda, Principal – Ignite Selling
In June 2009, the World Health Organization declared a pandemic. A new virus strain of swine-origin H1N1 was spreading at a rapid rate. By the beginning of 2010, the virus had caused 17,000 deaths. Within six months, hospitals who had been relying on a “just-in-time” approach to procure gloves, masks, gowns, and drapes had shifted to a “just-in-case” stock piling. With shortages looming, many hospitals operated in near-crisis mode. This trend was wreaking havoc on not only specific suppliers, but also on the entire supply chain
We were working at that time with an industry leading supplier who was trying to weather the storm. One of their top performers was Susan. She recognized that this trend was impacting all of her customers in some significant way. A few of her customers had a greater sense of urgency and put higher demands on her. In one sense, Susan was thrilled with the fact that all of her customers were placing large orders. She couldn’t process the purchase orders fast enough. However, all of the fun ended quickly when Susan’s company told her that they could not ship products due to a manufacturing backlog. What was Susan going to do? She knew that if she couldn’t deliver on those orders, the customers would go to the competition. In the short-term, it would mean lost revenue and bad will. But what would be the long term impact? Would this be the beach head her competitors had long sought? The opportune moment to displace her?
Susan and her colleagues had much to consider as they pondered their options and a strategic, workable response to the crisis. One piece of encouragement came from the fact that the entire sector was likely in similar straights as Susan’s company; demand had outstripped supply, and most of Susan’s competitors were in no better position to deliver than Susan was. In some areas of the US, elective surgical procedures were being put on hold because the hospital didn’t have the surgical gloves and masks necessary. Hospitals had begun to develop proactive strategies to combat this trend.
Working with Susan, we developed an approach we called ICE, which stands for Industry, Company, and Executive. It’s a simple acronym to remind us of an effective way to assess the environment from a macro-view.
Susan first looked at her Industry. What were the trends? Were they long-term or short-term? How were those trends affecting her customers? Her customers’ other suppliers? In Susan’s case at hand, it was the shortage of gloves and masks. This trend was significantly changing how a hospital operated on a daily basis. Although most people regarded this shortage as a short-term trend, Susan wondered what the long-term ramifications would be. How would this change the way hospitals managed their supply chain?
Susan next narrowed her focus to the Company, not only the hospitals in question, but also the competitors against whom Susan was selling. What were they doing to counteract this market trend – or capitalize on it? Susan observed that some hospitals were making the decision to delay elective surgical procedures. Many were performing only emergency procedures or presently scheduled ones.
The final part of Susan’s ICE strategy focused on Executives. What is the effect on the trend on them, and what are their responsibilities? To whom are they accountable? How are they measured? What goals and objectives do they have, and how are the trends affecting them? Susan actively looked for ways she could align her goals with theirs, to help them weather the storm.
Susan decided that speaking to her customers’ leadership – in most cases, the hospital administrator – would give her a valuable perspective on their plans to deal with wide-spread shortages. She soon discovered that her top four hospitals had chose a similar, two-fold approach.
First, they decided that all inventories of gloves and masks would be controlled solely by the hospital’s Materials Management group (in other words, centralized purchasing and inventory control). Secondly, each hospital dictated that the type of glove and mask that would be used throughout the hospital would be chosen by Materials Management rather than by clinicians. Clinical staff no longer made the decision regarding what type of glove or mask could be used in their departments. The goals of these hospitals was to continue to offer safe, high levels of quality care to their communities, even if it meant frustrating the preferences of their medical staffs.
For Susan, this was an extremely disadvantaged course of action given her strong position among the user community. Though the clinical staff preferred her company’s products, during this time of crisis, their personal preferences no longer mattered. Therefore, the hospital merely distributed whatever gloves and masks they had in inventory to the different departments in the hospital.
Materials Management was distributing two additional manufacturer’s gloves and masks throughout the hospital during this time of crisis since Susan’ company couldn’t supply enough inventory. What could Susan do to ensure that when the pandemic of the H1N1 virus was done and inventories got back to normal, that his customers would want to continue to use his products?
Susan decided to meet the challenge head on. She scheduled meetings with key decision influencers among each hospital’s Material Management group, including the Directors. She knew that they had been given a new mandate, which gave them new and sweeping authority. Susan realized they each had a responsibility to help the hospital meet its goals of continuing to provide high quality and safe care to the community. During the height of the crisis, the Directors were merely in reactive modes, simply trying to find inventory to support the needs to their hospitals. A few of the Directors were keenly disappointed that Susan’s company could not meet their demand. Susan told us that she believed they felt betrayed. They have been loyal customers of hers, and now she was not delivering when they need her most. Susan knew her position was precarious. After all, loyalty to a supplier is a completely secondary consideration compared to operational readiness.
Susan considered the long-term implications of the supply crisis. How would it affect all of her customer relationships? How could she provide them the level of support they had become accustomed to when she didn’t have product to ship? Could she continue to meet their needs? What could she do now to ensure the she did not lose these customers when the crisis passed?
Susan eagerly sought the involvement of her senior management. After all, they had as much at stake in this as she did. They decided to implement a two part strategy. Part one involved high-level executive contact. Susan and her leadership met with each Director of Materials Management. The purpose of these meetings was to allow the customer to be heard, and to demonstrate how important they were. In addition, they thought it might be a good idea for the customer to have a better understanding of how the pandemic was affecting supply worldwide. The hope was that if both parties shared in the impact of the crisis, then they might jointly be able to come up with new, alternative approaches to navigating the troubled waters.
The next part of the strategy was to meet with each of Susan’s key users in her hospital accounts. She planned to talk with them about the crisis and help them understand why she couldn’t fulfill their needs. And while the long-term influence of clinicians on purchasing decisions seemed to be waning, she was not certain this was a long-term trend. So she also invested time in re-convincing her advocates why her products were a better match for the hospitals’ goals of patient case. In other words, she validated why her product was superior, but empathized that during the crisis everyone had to adapt.
Top performers like Susan understand that to be successful in a hyper-competitive market they must be proactive. They must pay close attention to the trends in the industry; learn how those trends are affecting their customer, and what goals and new responsibilities do the executives they sell to have to achieve.
We cannot predict black swan events, by definition. But by being prepared and using the tools at our disposal, we can better weather the storms that inevitably surround the event. Not just surviving, but perhaps even thriving.