Are you an equal partner with your customers, planning for long-term growth together? Or are the battle lines still drawn in every commercial negotiation as you try to hit sales figures and preserve your margins?
In recent years there has been a noticeable shift among large client organizations from buying stand-alone products and services to buying integrated solutions. Global companies have seen supplier rosters shrink from hundreds to just a handful. The suppliers that make it onto the list are the ones that offer the customer something different, something compelling. And that something is, increasingly, a strategic partnership.
What Does Partnering Really Mean?
For the most successful firms, gone are the traditional adversarial lines between customer and supplier. Instead there is a more inclusive approach, where both sides work toward shared goals, treating each other with respect and trust. More suppliers are seeking long-term partnerships with customers, rather than chasing short-term sales.
A coaching client of mine, David, is a regional vice president for a large IT solutions provider. Originally asked by his client to bring in a new sales force system, he found his progress hampered by the client’s procurement and finance processes, which were cumbersome, repetitive, and reliant on manually updating spreadsheets. The resulting delays were eating heavily into David’s profit margin from the contract.
He said to me, “Their finance systems are so outdated! They could turn things around at twice the speed and hit their growth targets in half the time with a few simple changes.” Motivated by both a desire to remove this stumbling block and help his client—whom he respected and admired—he made time to get to know their wider commercial objectives and understand how the whole business functioned.
Eventually he sought a meeting with the CEO to share his thinking on simple, cost-effective steps the client could take that would make a dramatic shift in its performance. There was no immediate financial benefit for David’s own firm from this offer, but the client was so struck by David’s commitment to supporting its goals that the two firms have been working much more closely—to mutual benefit.
So what has brought about this dramatic change of thinking about the relationship between clients and suppliers?
For me it is a shift toward encouraging business leaders to see beyond the immediate impact of their business and look at the big picture for the business over the long term. There are, of course, practical benefits, such as benefitting from economies of scale and reducing the number of suppliers that companies need to work with, but mostly it is because there is a tangible commercial benefit from this more collaborative approach.
Think Like a Partner—Not Just a Provider
Building a strategic partnership means more than simply delivering what your customer needs on time and at a price that beats the competition. It means understanding your customer’s business, their strengths, weaknesses, opportunities, and challenges, and identifying ways to help them achieve their objectives. It also means being committed to forging long-term relationships and working on a shared risk and reward basis.
One of my clients is currently going through the transition from supplier to partner and completely redefining what success means for him. He no longer faces the monthly challenge of securing the best price possible from his main customer’s often unpredictable orders and the constant fear of being undercut by a few dollars per unit. Now he has a framework agreement in place with this customer, and finds himself invited into strategy meetings, working toward shared growth objectives that are five, six years into the future. They are even thinking about building a new plant together.
Creating a partnership with customers will help your organization maintain the focus you need to make good decisions. It will give you a much better understanding of what success looks like for them and help you anticipate what your customers need even before they know they need it—ensuring your own long-term success as a valuable ally for your client.
However, the relationship has to be built on both sides. It’s not just about the supplier making all the changes and sacrifices. Client companies must recognize opportunities as well. It’s no longer a case of getting suppliers down to the lowest possible price to increase margins of profitability; it’s more about recognizing that their success is closely linked to yours and they should be treated as equals, not as subservient to your needs. As my client Robert, vice president of procurement at a global IT company, puts it, “I always treat my large suppliers with mutual respect and strive for win-win outcomes. They are critical partners of our success. We need them just as much as they need us.”
Today’s suppliers are increasingly seen as key partners. Global leaders must be able to transcend traditional client-supplier differences and focus on common goals, sharing more about the company’s long-term strategies and objectives with suppliers than they would have previously. Treating suppliers like partners also means avoiding viewing a supplier as a scapegoat when something goes wrong or imposing unreasonable demands for the client’s benefit alone.
Here’s a great example. My client George is country president of a global engineering firm. He described a situation where he turned a potential disaster into a business opportunity with a major Chinese client.
A problem had arisen with his firm’s equipment that had affected production. The CEO of his client’s company was angry and threatened to sue, in front of members of both teams. He was flexing his authority in front of subordinates and asserting his dominance over suppliers.
George’s approach was to try and take the heat out of the situation by inviting the CEO out to dinner to discuss the situation one on one. Over dinner he made sure that he listened more than he spoke. Once the CEO had calmed down a little, George was honest with him about the frailties in the current machinery and proposed a strategic solution: the CEO could invest money in new equipment so the company could increase production to an even higher level. George also offered to have the company trade in its old equipment with an attractive discount to purchase the new equipment. As a result, both companies would benefit from this valuable business opportunity.
By taking a more strategic, big-picture approach to finding a solution, not only did George smooth over the immediate crisis that had resulted from the production problems, he also secured a significant investment deal that ensured a long-term client relationship. Moreover, he allowed the CEO to save face (an important facet in Chinese culture) in front of his team by increasing the pace of production and improving performance, which more than made up for any lost time.
Here are five ways to reshape the way you think about your relationships with your suppliers and customers.
- Act like a partner. Develop a much deeper understanding of your client or supplier’s business at both a granular and strategic level. Build collaboration between your team and theirs through team-building days, shared projects, and smart use of technology.
- Look at the big picture. It’s about how you can work together to build a long-term partnership and both gain as a result. That may mean making small sacrifices in the short term, on either side, to achieve a larger gain in the long term.
- Create joint business plans. Act like a single organization. You don’t have to actually set up a business together, but if acting like it will secure both parties significant opportunity and growth, then why not bring them together in all but name?
- Share the risk and responsibility. Share the financial implications of the partnership, such as investment in production machinery or human resources, and the acceptance of risk.
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Value each other equally. It’s no longer “I win; you lose” in business deals. Clients shouldn’t be trying to screw suppliers for the best deal and suppliers should not be trying to artificially mark up deals to protect their margins. Recognize the value both parties bring to the deal and treat each other with respect. Share your numbers and your strategy and work out how to ensure that you both get a good deal now—and years of growth into the future.
