Tips on dealing with business storms before they hit
The first two recommendations emerge directly from this case study. The first recommendation is that it is essential that the key principals in a CoDestiny supplier-customer relationship get together regularly and ask the following questions: In terms of your expectations and priorities, what has changed since we last met? Looking forward, what changes do we have to anticipate and address? What new nightmares are keeping you up at night?
The second recommendation reflects the fact that in any significant supplier-customer relationship, there are going to be many “touch points” between the two organizations. That’s almost always a very good thing, as the insights necessary to spark value contributions often emerge from unexpected connections across the two organizations’ departments and staff. But there can sometimes be a downside to such unconnected exchanges of information. The second recommendation is therefore that the principals in the relationship must regularly say to each other, “This is what we’re hearing from your organization and how we plan to react to it. Are we all on the same page?”
The “two sides to the story” that were so sharply illustrated in this case study are especially dramatic in supplier-customer relationships that involve products with long life cycles in which total cost of ownership calculation is complex. In such circumstances, the focus on purchase price or “first cost” is often the basis of tension and the root cause of the differences between the perspectives of the supplier and the customers. That was an important part of the problem in the case study described above, where the ingredient supplier’s focus and confidence was based upon the life cycle contributions that they were making to this customer through both the quality of their product and the contributions that they were making through the relationship. The customer’s focus, on the other hand, was driven by their belief that their own customer’s cost calculation was skewed toward first cost and that their customers had relabeled other factors as ‘unnecessary bells and whistles.’
This fact leads to the third key recommendation. Within significant supplier-customer relationships, best practice organizations implement processes to ensure that there is a common understanding of what creates value — and what doesn’t. This process involves formal meetings, information sharing, and interaction about what should and shouldn’t be included in the valuation calculation. The third recommendation is to always ensure that both organizations are on the same page in terms of the calculation through which value is assessed, with the processes oriented toward that goal, checking regularly to see if the metrics and weights given them have changed since the last discussion. Had such a process been employed between the two firms involved in the case study, that should have enabled them — and others in similar relationships — to have created a solid foundation for a sustained “win-win” relationship.