Tips on dealing with business storms before they hit
One particular example was cited in both interviews with the supplier and with the engineers in this company. That example involved an initiative several years earlier in which the supplier came up with an idea that shaved a significant amount of time from the product development process. As a result, their customer was able to get to market quite rapidly, and in fact enjoyed a period in which they were the only one among their competitors out with the “next generation” product. All of the individuals that discussed this event did so quite positively, noting that the firm had realized a significant and sustained gain in market share as a result of being first to market.
There are many examples in which significant contributions involve initiatives that “take time out” of processes such as product development, facilities construction, or equipment commissioning. The contributions from reducing the time required for such processes can involve both direct cost savings and benefits in terms of sales and revenues. While always a challenge to evaluate, time is an important factor in the value creation equation, and efforts to identify ways in which suppliers and customers can manage “take time out” are often rewarding.
The supplier involved in this case study recognized that they had made these contributions, and believed that they had made their customer better off as a result. They felt that these elements were a significant element in the correct calculation of value creation. Their disappointment with the customer was largely defined by the customer’s failure to recognize and value these contributions. The inconsistency in the supplier and customer views about such contributions was another instance that should have been spotted and triggered action on both companies’ parts to reconcile from a fact-based perspective.
The final recommendation drawn from this case study reflects the fact that in strong relationships, many of the most important contributions aren’t explicitly connected to the products and services sold by the supplier to the customer, and therefore aren’t formally embedded in the prices of such products and services. Such contributions may be connected to those products and services, but only in an indirect way. It is therefore essential that the principals managing an important CoDestiny relationship discuss these “adjacent” contributions and explicitly address the issue that the value associated with them isn’t reflected in product and service prices. The discussion must be explicit, reflecting an opening statement of the form “Both of our organizations know that such contributions are a key ingredient in our shared successes, and both of our organizations want to ensure that they continue into the future. How do we jointly recognize such contributions and ensure they continue in the future? How do we jointly recognize such contributions and ensure that the value created is translated into rewards for both of our firms’ shareholders?”
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