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Article -> Build Partnerships to Generate Long-Term Value

Date Added: February 2005

Recent research* demonstrates that organizations that build true partnerships with their audiences of suppliers, vendors, customers and employees create a sustainable competitive advantage.

True partnerships are rare in the market. Many merely are relationships - rather than partnerships - which do not generate as much value for those involved. And some may be adversarial.

Toyota and Honda represent great examples of organizations that effectively form partnerships with their audiences - especially when compared to the "big three" U.S. automakers (General Motors, Ford, Chrysler). While the "big three" continue to struggle, they historically have created adversarial relationships with one of their audiences, suppliers (and sometimes dealers and customers). Conversely, Toyota and Honda continue to increase their market share due to partnerships with their audiences.

A partnership consists of several activities:

  • Understanding audiences' needs. Proactively ask for their needs. Gain a true understanding, instead of basing decisions on perceptions. Trust their capabilities and co-commit to success.
  • Turning rivalry into opportunity. Share processes and systems with multiple audiences so they continuously can improve to lower your overall costs - and those of your customers - while increasing shareholder value.
  • Measuring audiences. Conduct quarterly assessments of audiences to proactively be aware of gaps. Continually communicate and get cross-functional teams involved in raising and solving problems.
  • Developing capabilities. Train audiences on processes that are critical to your business. This can create more opportunity (rather than rivalry) and more innovative solutions.
  • Sharing information. Schedule ongoing meetings to communicate and share information. Have specific agendas so information sharing is reciprocal (instead of one-way).
  • Conducting joint improvement projects. Exchange best practices and partner together so everyone experiences continuous improvement.

While some of these activities may seem "taboo" at first, the end-game is the same for all involved - increasing shareholder value. Toyota and Honda have proven that these activities with employees, suppliers, vendors and customers will generate market growth and long-term value.

If your goal is short-term value and adversarial relationships, continue with your current activities. If you want partnerships and a sustainable competitive advantage, follow the activities above.

*Liker, Jeffrey K. and Thomas Y. Choi."Building Deep Supplier Relationships." Harvard Business Review: December 2004, pages 104 - 113.

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