Kauflauf GmbH was founded in 2002.
First European organisation to offer _’ software as a service’_
The product portfolio included Customer Relationship Management and ERP software for – Auto Parts, Computer/ Office Supplies and Medical Devices companies
Product owners worked with design team, sales force to prioritize new features and anticipate customer demands
Their competitive advantage was derived from their successful field consultants who provided consulting and support to customers
Kauflauf had three divisions:
Development and Support services,
They had a strong competitive advantage due to _hands on consulting_ provided by field consultants backed up by the development group. As opposed to competitors who targeted larger firms, Kauflauf targeted middle market (revenues from €100 million to €1 billion) and top-tier smaller customers.
_CLIENT EDUCATION, HAND HOLDING AND CUSTOMIZATION_ were the main areas of focus for the sales force, in order to obtain customer loyalty. The culture of the company was _YOUTH ORIENTED AND ANTI-HIERARCHICAL_ . It was characterized by small company friendliness and deep pride in superior software engineering.
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An American woman who had lived with her family in Germany as a child, Jess had developed a love for the country and was fluent in the language. She has been hired as Assistant Product Owner (CRM product) for computer and office supply wholesalers and retailers.
Jess came with a proven track record. She had earlier worked with a rapidly growing CRM software service provider in the United States, where she demonstrated great success in growing market share.
Has high degree of analytical capabilities and keen grasp of market evolution.
Is deeply interested in computers, management and international business.
Able to speak German and form informal relationships with her colleagues.
To understand the market and customers.
To establish product development priorities to serve both existing and future customer needs.
To increase sales volume and enable greater penetration in the global CRM subscription software market
JESS WESTERLY’S PROPOSED CHANGE
Even if the external environment was not changing, the competitive landscape was stable and Kauflauf was doing well in terms of business and revenues, the company still required to bring about a change. The internal environment was changing and demanded for Kauflauf to shake itself up in regard to its strategy, processes and structure.
With its single minded focus to operate in the middle size market segment, the firm was operating in silos. There was a persistent failure to spot new development and opportunities in the market.
Thus, to trigger off innovation, increase sales revenue and build more agility in the company, Jess Westerly proposed a change in the sales call patterns at Kauflauf GmbH, with the field consultants redirecting atleast 30% of their time and focus towards larger, more established potential purchasers of CRM software services in the computer and office supply business.
Based on Jess westerly’s own quantitative analysis and simulations, she had identified that:
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Only 35 % of the consultant’s time went to customers who produced 85% of the revenues, while the remaining time was spent with smaller, less profitable accounts
By reducing the time spent with customers with annual sales volume less than € 250,000 (Class 5 and 6 clients) by 20%, and instead focusing on bigger prospective clients , Kauflauf could increase revenues by 30%
Field Consultants spending time on closing sales for companies with less than €100,000 in annual sales volume only yields suboptimal returns
Kauflauf’s recent success in getting business from Dart, one of world’s largest suppliers of computer parts through persistent call efforts also supported her proposal
Thus, the company was losing significant sales growth opportunities by strictly focusing on smaller accounts and neglecting large prospective companies.
WHY IT FAILED – THE RESISTANCE TO CHANGE
1. An organization-level change requires the change agent to clearly communicate the vision ahead to those being most impacted by the change. Jess Westerley did not speak to RSDs and consultants before sending out the memo to implement the changes.
2. Change requires the agent to form a core group of people who buy into his/her idea and begin the change process. Jess did not explain why there was a need for change, even though there were no changes in the company’s external environment. Internally, it seemed that all was well too. Hence, the field consultants felt that she was intruding into their work schedule. To them, it appeared that she was interfering with their work-patterns though she had no idea of how things actually worked.
3. Jess did not understand the challenges faced by consultants at different levels of experience – She did not seek the consultants’ opinion which could have contributed to the change. The issues that came to light when Jess sent out the memo were :
Consultants felt that this proposal was not for their market
They did not wish to work for a firm that served larger accounts
They doubted whether such a change would be good for the firms competitive advantage
They doubted Jess’ understanding of different markets
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They had concerns about Kauflauf’s development capacity to support class 1 and 2 sales
4. She did not get approvals from the higher management and RSDs before approaching the Field consultants. An approval from them might have made them think of the change more seriously. However, the entire change process that she suggested was completely based only on her analysis and simulations, and it did not have the backing of the higher-ups.
5. Large clients did not allow consultants to have access to top management and hence closing a sale was tougher and less probable. However, this was the one point which gave maximum motivation to the consultants. Since closing a successful sale required a lot more effort with larger clients, the consultants were left disappointed at times when all their efforts did not bear fruit. Hence they were up in arms against the idea of changing their call patterns towards larger clients.