Synopsis

An established US player in the data communications industry was gearing up for an exit. However, its Asia Pacific operation, headquartered in Singapore and operated in China, Vietnam, Malaysia and Thailand, was underperforming significantly. Our consultant was tasked with identifying the causes, proposing a restructuring strategy and creating a strategic sales and marketing plan for the region.

Begin with the end in mind

Before undertaking the task, our consultant spent some time with the US executive management team gaining a full understanding of their end game that allowed us to commence the project with clarity. He had a clear mandate not just to propose solutions but also, once approved, to implement them. This meant that the consultant had sensitive knowledge as to the future intentions of the company that would be the driving force of the project, and that needed to be withheld from the operating region.

This entailed a restructuring plan that included sensitive redundancies and the removal of long time distributors for lack of performance reasons. It would also mean hiring new staff in key positions and the appointment of key new distributors.

Complacency breeds failure

Our review of the activities and meeting personnel in the AsiaPac region, revealed that that the local sales director and effective operating head of the region had become a little too comfortable in his role. Renumeration packages were not biased towards performance and as such, a number of key personnel did not appear significantly motived to change the status quo and seek out areas of improvement.

The data comms industry at the time was extremely competitive and in Asia margins were particularly tight due to the availability of competitive, locally developed equipment. Many of the company’s distributors were not being driven hard enough to explore the newer benefits of the company’s flagship products and instead were likely to recommend a local alternative.

It was clear that the organisation and sales strategy needed a complete shake up.

Break it before it’s broken

At first sight, from the perspective of the local sales director (and for some in the US executive team), performance appeared acceptable, with the admission that he could probably do more. In other words, he didn’t actually think anything was broken, and simply saw the circumstances as the US head office being overly optimistic in its sales expectations.

However, from the consultant’s perspective, one of almost certain knowledge of what was to come, it was clear that the current operation would have to be significantly broken, if it was to be put back together in a form that would yield results to match future expectations.

After meeting the main distributors in each of the main operating territories and discussing potential strategies with the incumbent regional sales director, it was decided that the sales director had to leave. Furthermore, it was clear that relationships with distributors had reached a point where potential conflicts of interest had arisen. Accordingly, certain distributors were released from their contracts and new ones appointed.

Don’t chase horses

The Asia Pacific region for the firm had operated a fairly typical distributor based sales model at the time. The model wasn’t working though. This was because the company’s products were just one of several available solutions to the distributor when responding to competitive tenders. 

Tenders were typically from the region's most prolific and high profile Telcos at the time. Timelines were usually tight and the cheapest bids often got the deal. The distributor typically faced a dilemma - pitch the easiest and cheapest product solutions and hopefully make money on volumes, or start pitching for contracts where a more complete solution was required. Although these pitches could be more lucrative in the long run, due to the variety of product types involved, the distributors needed to invest a considerable amount of effort.  

This called upon the distributor’s technical marketing staff to fully understand the applications involved and prepare effective positioning arguments using the company’s entire product range. Also, in those circumstances where only a portion of the solution could be provided by the company, they needed the ability to source complimentary products and weave them into an effective and cost effective product solution for the client.

For many of the original distributors for the company, this was simply not achievable.

Our consultant’s strategy was to rebuild the company’s AsiaPacific operating capability around ‘structured solutions’ and not so much towards volume sales, although that was unavoidable in some instances.

The rationale for this was that the market dynamics had been changing for a number of years. The new dynamic was for companies in this sector to become more of a ‘strategic supplier’ for specific applications. While this may have lowered initial sales projections, it did provide for a granger growth path in the future, one less susceptible to price gouging and price based competition.

The new approach and supporting sales and marketing strategy, aimed to create a dynamic environment of technical and marketing expertise, attractive to the Telcos when looking for new supply partners.  The plan was both to assist the distributors in winning more strategic and lucrative contracts, and to afford the client Telcos support. This scenario arose when Telcos were supplying solutions for private contracts, where the expertise, experience and  knowledge that the team behind them had could assist in building the competitive case for using the company’s products. As a result there were several contract situations where the company’s team helped prepare aspects of the Telco’s own tender responses.

So, rather than chase after low margin volume business, the company shifted focus and became a supplier that distributors and Telco’s gravitated towards.

Realise, rationalise and adjust

For this client and more specifically its regional staff and operating base, the realisation was very hard indeed. It amounted to an acceptance of total change to match a world they had not appreciated which was changing faster than they were.

Rationalisation meant coming to terms with a sales strategy that was essentially defunct and a distribution base that simply wasn't up to the job. In addition the company needed to develop a new approach that required a sales person, or in this case, a distributor with the capabilities to do more than just mail, email, attend trade shows and ship products. The company needed distributors more willing to embrace ‘structured solutions’, effectively selling complete solutions for often bespoke applications.

The adjustment, in all fairness, was more of a hammer blow than a tap. However, the initial adjustment in the mindset of the US executive management team, towards structured solutions, proved effective and yielded a more capable organisation that was more attractive to a potential buyer.

Outcome

The process of adjusting the company’s Asia Pacific operations took close to 12 months. However, the first year of operation yielded a profit and improved margins. Most importantly, closer ties with strategic clients. 

This was enough to assist in the successful and profitable sale of the company nine months later.