Duncan Jones (Forrester) on why Strategic Relationships Go Bad – part 2

We started coverage here of the excellent paper from Duncan Jones of Forrester, titled “Transform Your Strategic Supplier Relationships From Duels Into Duets”. (Available here).

He describes how the most strategic IT supplier relationships, that should be positive and successful, are often the most frustrating for both parties, and explains why this is the case.  And we’d agree - indeed, we’ve commented before on how and why “supplier relationship management” seems to have been top of everyone’s wish list for years, without many actually realising anything significant out of it.

He identifies three key factors which lead to dysfunctional behavior and disappointing outcomes:

  • No clear consensus on what partnership means.
  • A continuing over-emphasis on price.
  • Reluctance to give partners what they want in return.

Jones then goes on to suggest the “three keys to successful partnerships”.

· Trust is more important than contract clauses.

· Co-innovation delivers more than either party could have created by itself.

· Shared goals, risks, and rewards drive good behavior

“Trust” means developing a real shared understanding of what “partnership” means and avoiding the clichés. It also means working together when the unexpected happens rather than reaching for the contract or the lawyer’s phone number.

“Co-innovation” is, as you might expect, about understanding what you really want and expect in terms of innovation, and picking the right providers (easier said than done). That isn’t just defined by technical ability – there’s a lot more to it than that, and he gives an example -

“The sourcing director for a global bank based in Europe told us, “I pick partners that have a genuine desire to learn about my business and understand my needs.”

 Finally, shared goals, risks and rewards are ideas that many procurement people struggle with because they “begrudge suppliers for making a profit that they assume is at their expense”. But agreeing the goals, sharing credit and blame, and building the right measures into performance goals on both sides can really help to take the relationship forward in the right manner.

Jones then suggests that “some of your incumbent suppliers are incapable of meeting these criteria” (which will be true for virtually anyone reading this)!

And he wraps things up with the sensible suggestion that you start by creating one really effective partnership to use as a role model. That’s very sensible – I’ve always recommended in my consulting life that anyone who wants to “introduce SRM” does so on a small scale, pilot basis. Don’t run before you can walk and all that..

All in all, this is an excellent read.  I’m suspicious of anything that presents itself as the holy grail of supplier relationships, but this is a very intelligent piece of work, and if you can get hold of it, well worth an hour or so of your time.

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