I was recently asked to critique a range of strategic account plans to provide feedback on both style and substance. One of the things I observed was that many of these plans had increasing the firm’s share of the client’s expenditure or “share-of-wallet” (SOW) as a key metric of success.

While there are numerous benefits of this measure, there are some important strategic and practical problems with SOW measures that are worth noting:

• Even though SOW is expressed as a percentage, it is often translated to a specific dollar amount. In doing this calculation it assumes that there is a defined or known quantum of spend. In many instances, the client’s spend on professional services is on a spectrum of predictability – from defined and budgeted, to possibly considered, to unknown and unbudgeted. How accurate (and useful) can a share of pie measure be when the size of the pie is highly variable – it could be a small party pie in one year and a boarding school shepherd’s pie the next?  If the client’s spend is without a clearly defined limit, there’s a big risk that your SOW goal is either set to low or capped, i.e. set at budgeted spend and/or focused on the areas that are most predictable and therefore most highly contested.
• SOW is often measured by looking at aggregated or total spend. The issue with this is that there may be a significant proportion of the client’s total spend that is undesirable or you have no intention of trying to capture. In this instance a low SOW target might be a perfectly acceptable goal. Defining SOW as “Desirable SOW” is a way around this but then you enter a measurement minefield, especially as you start trying to benchmark Desirable SOW across all your strategic accounts.
• SOW assumes there is a clear delineation between different types of professional services expenditure i.e. legal advice is distinct from accounting advice, which is distinct from consulting advice, etc.. In practice these definitional boundaries are not clear and becoming more blurred by the day. Take the area of risk management as an example – the lawyers, accountants, consultants and even engineers would see this as part of their pie. The client in turn would have their own definition and perspective. This issue may lead to us to grossly over- or under-estimate our potential share depending on whether the client considers us as credible providers in that area.

When metrics, like SOW, become less than shockingly clear, it seems that more and more time is spent debating definitions and data validity and, unfortunately, less and less time is spent on crafting winning relationship strategies. 

So if we don’t use SOW what other options are more appropriate or more practical?

My answer to this question is to think about the specific growth arenas in the firm-client relationship and to develop specific measures in each. By disaggregating SOW one can actually be more precise in measurement but also cue relationship/account managers to think more broadly and strategically about growth opportunities. From my experience there are five growth arenas that are worth focusing on – the FIVE C’s:

[I] Core – selling more of what’s currently provided to existing buyers and users. This is often accomplished by displacing the firm’s main competitors and/or capturing additional outsourced work.

[II] Core+ – selling more of what’s currently provided but to new users, locations and divisions within the same client organisation.

[III] Cross-sell – uncovering wants and needs of the client (beyond the Core), and matching them if possible with ready-to-deliver products, services, and capabilities of the firm.

[IV] Co-create – joint discussion, exploration and innovation with the client to identify new ways to build shared value. Arena IV implies working with clients to identify things that go beyond the known or budgeted expenditure. Co-creation is about coming up with fresh innovative solutions i.e. not necessarily just an existing product or service, to address a client need. A great example of this comes from a large global law firm which invites client representatives to an annual strategic account planning workshop to brainstorm co-creation opportunities.

[V] Co-venture – working with other suppliers to the client organisation where the combined offer can provide significant added value and/or lower costs to the client. Co-venturing also often goes beyond the realm of budgeted spend or well-defined needs. A recent example of this is an initiative of three large professional firms – one engineering, one law and one accounting – collaborating to help a new Chinese mining company establish operations in Australia.

These five arenas of growth can be represented in the graphic below (adapted from a model presented by Mike Schultz):

In the account planning critique assignment I mentioned above, 90% of the plans focused on growth in Arenas I, II and III. In my view, this perspective of growth potential is limiting. Part of successful strategic account management is the ability to “dream large” – to imagine big-picture growth opportunities that go beyond the obvious and that potentially deliver exceptional value to the client and the firm. In my view the real upside potential lies in Arenas IV and V. These are more complex and difficult to conceptualise and negotiate, but at the same time, they are generally more interesting, less contested and have the potential to totally transform the relationship.