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Commercial excellence: from concept to reality

January 7, 2015

projectThose who follow the work of IACCM will be familiar with our assertions that commercial competence is becoming a major topic for business leaders. Faced by the growing complexity and competitiveness of a networked world, the ability to make better commercial judgments and to act fast upon them is a critical source of differentiation. Businesses are moving from a focus on efficiency in managing the internal enterprise to effectiveness in managing external markets.

Anyone who still doubts those IACCM forecasts should do a search on ‘commercial excellence’. You will find that all the major consultancies are now active in this field and that there are significant employment opportunities for ‘heads of commercial excellence’, including examples of ‘commercial excellence job families’. The internet search implies a strong focus on sales and marketing, with the role very much geared towards segmentation, analytics, portfolio management and oversight of channels. It is – quite correctly – a market management and sales enablement role, drawing widely on the development of standards and the use of technology. In most cases, the goal is quite clearly to improve sales and raise margins. Hence responsibilities frequently include contracts and pricing.

This development is increasing the gap between the more strategic role of a commercial manager, versus the more tactical and operational activities of contract management. A strong interdependency remains, but the way that ‘commercial excellence’ is evolving suggests that this will be the role to undertake detailed market research, to focus on analytics and to define commercial practices and offerings, whereas contract management will be more aligned with specific deals and negotiations.

One of the most important points is that these roles are quite clearly about generating revenue and profit. While issues of control and compliance obviously remain important, they are the backdrop, not the purpose. This shifts commercial (and in that sense contract management also) away from the Legal orientation that has been an increasingly dominant feature of the last few years.

And what about Procurement? We know that in many organizations, Procurement wants to be seen as ‘commercially competent’. As I have observed in several recent blogs, that is problematic while existing performance metrics remain in place. A focus on savings and risk allocations  inevitably undermines rounded commercial judgment. It is also notable that at present Commercial Excellence is being defined in very much a sales-oriented context (which is much more in line with the traditions of this title). However, my view remains that organizations can flourish only if they align their sales and procurement activities. Over time, I believe we will see an integrated commercial function looking at markets and their management holistically. The dependence of sales on the quality of the underlying supply network is now so strong that a disconnect immediately impacts performance.

As the only professional association representing commercial management, IACCM will continue to define and report on the emergence of ‘commercial excellence’. For the last year, we have been working on new and updated training programs and expanding our research to inform and equip the market. For those with an existing commercial role or title, these changes will often be challenging because they represent a significant shift in responsibilities and skills.

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