Industrial Engineering

Managing Change to Boost Relationships

 

https://www.iise.org/iemagazine/2019-06/html/brown/brown.html

ISE Magazine June 2019 Volume: 51 Number: 6

By George F. Brown Jr.

Those of us in business markets accept that change is a constant reality, one that spans people, technology and just about every dimension of activity. Relationships are often among the factors that change, sometimes for the better, sometimes involving a significant disruption to at least one of the firms involved. Executives and teams responsible for strategic customer relationships in business markets are acutely aware of the potential for change and must invest significant resources to secure relationships with key business partners.

What has emerged from new research on such relationships is that additional groups within the supplier organization, involving engineering, service and product development teams, are increasingly important to the goal of securing such strong relationships.

It is a major challenge to progress to even the strong preferred supplier-customer relationship level shown in the figure, and in fact only a minority of business relationships progress beyond the traditional transactional, on-again and off-again relationships common in business markets.

In the research and articles cited earlier, the key relationship management competencies were clustered into three categories: relationship competencies, implementation competencies and innovation competencies. The new themes that have emerged from research conducted with clients serving strategic accounts in business and government markets fall into all these clusters. But as noted, what customers are looking for in each of the three categories has expanded in important new directions.

New challenges facing  relationship management

In the previous research, we learned that the first hurdles that supplier organizations must address involve showcasing strong relationship competencies. Without those, skills in other categories are unlikely to move the needle much, as customers that are not confident about the relationship are unlikely to place much trust in the supplier organization. Showcasing strong competencies in that category involves developing familiarity with the customer’s organization, being collaborative, show-casing knowledge and having a commitment to the customer. Good advice still!

Several recent quotes from executives in customer organizations suggest what they are looking for along this theme:

  • “We are so different than we were when we first began to work with (supplier). Then, we were basically a U.S. company. Today, over 70% of our sales are outside the U.S. They are good in some countries but absent in others. That’s an issue.”
  • “In the last few years, we have become a major player in the internet of things. Any supplier that isn’t similarly focused is going to have trouble working with us. We not only need to see that expertise, but to know the people involved and work regularly with them.”
  • “Once, our business was selling products. Now, we are actually categorized by the business publications as a service firm. We have to have suppliers that can help us succeed as a service provider, as well as offering ingredients we need for our products that are easy to support as part of our service offerings. We need our suppliers to help us deliver services, and that starts with product design and goes through 24/7 technical service support. That’s what we expect in a key supplier.”

the importance of successful connections throughout the customer organization is shown as an important element of higher level relationships. The geographic dimension to this is probably obvious to most executives; if your customer is active in China and Brazil, you had better be able to serve them there.

But the other quotes suggest it goes much further than geography. A strong supplier must be effective in working across the customer organization, with the “e” teams, the service groups, those designing products that can easily be supported, etc. Customers have made it clear that coverage enters into their decisions about how much faith they will put into each supplier relationship. It is a competency that firms working to achieve strategic relationships must demonstrate.

For suppliers that have mastered the key relationship competencies, the recommended next area of focus is implementation. We have learned over and over of relationships shattered by implementation failures. The core competencies in this regard involve a firm’s processes, its ability to link effectively to its customers, whether it is viewed as a best-practice supplier and the cadence of interactions it has with customers. Again, these remain valid areas of emphasis, which is not surprising.

Two additional and related themes have emerged in recent research with customers. One represents a bit of a sea change from the past: Many customers expect their strongest suppliers to take ownership of the implementation process.

  • “We aren’t looking for them to do a hand off. We expect them to get it done.”
  • “If (the supplier) is making changes in its product or along some other dimension, we expect them to take responsibility for the changes we’ll have to make as a result. Not just tell us about it. Do it.”

Those quotes define ownership. Earlier, the “boundaries” of implementation were largely centered in the supplier’s do-main. As a simple example, customers expect on-time, in-full deliveries.

But those boundaries have expanded, and customers now expect implementation involvement and support that extends into their own domain. In my experience, few suppliers are skilled in this regard, and the competencies required of a team handling implementation support are quite different, often requiring high-level engineering and product know-how. It will take some real work in many firms to master and showcase this competency.

The second emerging dimension involving implementation emphasizes integration. To some degree, this theme is an explicit recognition of change. Customers emphasize that they are changing, and their suppliers have to change with them in a consistent and integrated fashion. Many of the comments heard from customers focused on the future, the evolution of their own business environment and the need to evolve with-out unnecessary delays or lags.

  • “The supplier that waits for us to tell them what we need is behind the curve. They have to be working with us, ahead of the game, doing what is needed so we stay ahead of the pack.”

Delivering along this dimension requires strong insights about technology, the possibilities for innovation, disruptive change and other such factors going well beyond “being a good listener and following through on what is heard.” This is highly demanding, and in truth requires quite an investment in the relationship to reach the point where the supplier organization knows where its customer is going, let alone gains its trust to be welcomed as a partner on the journey.

But hard as it might be, the messages from customers clearly define the importance and contribution strong integration competencies can make to a long-term relationship. Involving the right people in the relationship will be a new challenge, one critical to success.

Finally, for suppliers that have the potential to reach the level of a strategic business partner, having developed the needed relationship competencies and showcased strong implementation competencies, the focus expands to include innovation competencies. The basic skills seen as important there haven’t changed: creativity, energy, breadth and timeliness. Those were always cited as characteristics of the suppliers viewed as the best at innovation by their customers. And, in truth, those competencies always demanded contributions from across the organization. But, again, an important new theme has emerged that expands upon those core strengths.

The expectations of customers about their suppliers has evolved in a unique way, as reflected in these messages:

  • “We used to have model cycles, with all the changes coming when we introduced a new model. Now we evolve and refine products over their life. Our suppliers need to under-stand and contribute to today’s business model. It’s every day, not every three years.”
  • “With so much of the value associated with our product involving software, we can make changes that create value at any time. Suppliers that help us to identify such opportunities are the ones that we treasure. They are the ones that work with us to stay fresh in the marketplace, delight our own customers and capture value in the process. Doing that goes on day after day.”

In describing this important area of contribution, customers also frequently cited how much they love positive surprises. One executive told of the difference among his firm’s suppliers with the statement “When (another firm) calls, it’s usually bad news and causes some sleepless nights. But when (preferred supplier) calls, I get excited because it’s usually to tell me of an idea we can implement to grow the business we share. I love those calls.”

Every case study we heard from customers that involved a success story related to refinement was centered on the relation-ship between the engineering teams in the two organizations. One such case history included a customer quote that best summarizes the challenge: “If those people didn’t know each other and interact all the time, (this achievement) would never have occurred and we would have missed a golden opportunity.”

Taking action

There are two important steps business-to-business executives and their organizations can take to build upon the new insights that have emerged, enabling them to elevate key customer relationships. The first such action requires expanding the dash-board that specifies the performance metrics to be measured relating to each of the themes identified earlier, along with explicit and largely quantitative goals for each of those metrics.

Too many significant business relationships operate without an explicit statement of important performance goals. A key element of managing change involves new metrics and measurements and making sure the right people and groups are aware of and care about them. The metrics and targets are almost certain to be unique to each strategic customer and the core elements of knowledge about that relationship are critical ingredients in thinking about how to define and quantify them.

Having worked with many firms on incorporating these new insights into their plans, it is clear that even defining the metrics associated with these new themes can be a challenge. But as we have heard so often, “If it isn’t measured, it doesn’t matter.” And, as noted earlier, the groups that will have primary accountability for achieving targets will often be different than those on which the earlier spotlight was focused.

The second key action step recognizes that in the best-in-class business relationships, there is a constant focus on the future. Therefore, a second priority in creating foundations for long-term strategic relationships is defining the future-oriented topics on which the two firms should collaborate and thinking about which people should be involved in that collaboration. That future focus is a necessity in thinking through how a supplier can contribute along the dimensions of integration, ownership and refinement savvy.

All of those contributions have a future dimension to them, one that will define the areas in which the supplier organization, across many of its units, will have to deliver contributions to its strategic customers. Again, experience suggests that these themes are more challenging and impact more broadly on the supplier organization than do some of the long recognized core competencies. But the winds have shifted a bit, and the sails need to be adjusted in response.

Strong business relationships can yield rewards for both firms involved, a reality long recognized by most business leaders. Proactive steps are required, however, to ensure relationships remain strong despite the inevitable changes that will take place in both organizations and in the business environment. New competencies will become important to even a supplier’s strongest customers, and new groups within the supplier’s organization will have to step up to showcase them.

Changing customer needs must be understood and acted upon by any supplier that has a goal of building and sustaining strong higher-level relationships with its key customers.