While much has been said over the years about customer-supplier relationships, organisations still don’t seem to get it right often enough. If we’ve heard the phrase, ‘No organisation is an island’ once, I’ve heard it a thousand times and it’s true. One of the vital few factors for long-term competitiveness of any organisation is having exceptional relationships with the right suppliers.
Over my 42 years of experience around the world having worked with over 160 organisations from Shell to Electrolux to IBM, Xerox, Royal Bank of Scotland, Johnson & Johnson and the list goes on. During those experiences, I’ve had the opportunity to go out and conduct in-depth face-to-face interviews with these organisation’s key strategic customers (B2B). When I conduct that interview I utilise a unique tool I developed called a ‘Relationship Review’. I won’t go into details on the contents of that instrument now, but save it for a later article. I will say however, that every time I have done this, the customer decision makers, decision influencers and users/user groups (when appropriate) have told me how much they enjoyed and appreciated the experience and the opportunity to share their views in an open and honest way. They also tell me that this interview has reflected very positively on the supplier as being an organisation willing to spend money on a consultant to do this and discover the truth. Their only concern? Will the supplier organisation (my client) take action? This is absolutely critical otherwise the trust and confidence built up during the interview process will be lost.
Suffice to say, that in addition to being a tremendous source of ideas for innovation, these key strategic customers generally tell it the way it is – no sugar coating. If they think the job your organisation – the supplier organisation is doing is ‘crap’ they tell you and why. They don’t hesitate to tell you who is their best supplier and why – that is, how your organisation stacks up to its competitors. They are without a doubt a great and reliable source of competitive intelligence. Please note that this interview must not be conducted by the sales staff if you want to gain truthful insight from your key strategic customers and hope to really strengthen the relationship you have with them! Use someone from your staff who is ‘neutral’ or use a 3rd party organisation.
After having conducted many thousands of interviews with at least 3 individuals or more in each customer organisation – key decision-makers, decision influencers and/or frontline personnel, users/user groups (as appropriate) who are in regular contact with your organisation almost daily, these key strategic customers paint a consistent picture of the ‘vital few’ characteristics – the ‘profile’ of an ‘ideal supplier’. Allow me to share what I have learned are the 10 ‘vitally important’ factors that can make all the difference in building an exceptional relationship with your best customers by being the ‘ideal supplier’:
Always being ‘easy to do business with’
- Simple, easy, uncomplicated as the customer perceives it
- Some years ago working with ABB (Asea Brown Boveri) I was involved in a survey of B2B customers who had either defected or reduced purchases. The results of the survey showed that 70% of them did so because ABB was ‘not easy to do business with’
- Having a single point of contact can be helpful; having bills of lading which are not in hieroglyphics (as Motorola once had); having inter-linked systems to see product availability and so on are just a few
- Being ‘easy to do business with’ adds value and strengthens the relationship
- It also means that your business processes are efficient – no redundancy, minimum downtimes/bottlenecks, each step in the process adds value – reducing your cost of doing business with customers and more importantly the ‘customer’s cost of doing business with you’!
- Keep in mind that every customer incurs two costs of doing business with your organisation. One is the ‘economic’ cost – ‘what do I have to pay to get what I want’. The other cost is ‘emotional’ – ‘how much pain do I have to tolerate to get what I want’.
- You can have the highest quality product at the cheapest prices in the world, but if the customer has to incur too much pain to get it, they will defect – guaranteed. One day I will share my experience with BT (British Telecom) when I had my business in the U.K.! Ouch!!!!!!!!!!!!!!!!!!
Being viewed as an ‘innovative’ supplier and providing creative solutions
- To begin, it means more than just copying the competition! However, if you perceive that you need to include what they do in your portfolio, but go at least one step further and innovate on what they have do, so be it.
- All innovations should generate ‘value’ where I define ‘value’ as the sum total of all benefits – intangible and tangible which accrue when the customer (or stakeholder) does business with you. As such, ‘value’ represents a source of differentiation and competitive advantage
- It means that the customer must view you as an organisation and a ‘team’ which is committed to helping them, the customer, be more successful. Yes, mutual success model but skewed toward the customer.
- There are some 8 sources of innovation and 10 sources of value – all of which need to be explored. Normally organisations fail to do a thorough job here often focusing on their comfort zone or practicing ‘myopia’ by confining themselves to 2-3 sources in either case – sources of innovation or sources of value. Don’t limit yourself if you expect to compete for a place in the future and create ‘secure’ relationships with customers and other stakeholders – meaning creating organisational relationship with key customers that are so strong that they would not leave you even upon penalty of death!
- In my book, ‘The Wisdom Chronicles: Competing to Win’, I have two chapters devoted to the concept of ‘value’ and also discuss innovation. In fact I define the true purpose of any business as being ’the creation and delivery of value to all key stakeholders’
Decision-making is perceived as being very fast
- Here it needs to be the case that all people involved with the customer – sales, service, technical support – whomever, are viewed as being empowered to act in the best interest of the customer except in potentially exceptional circumstances, e.g., in the medical area, your dialysis machine the customer has at home fails and a patient meets an untimely death; an organisation faces severe downtime – loss of revenue for what the customer perceives as being either unnecessary or for a prolonged period as a result of some issue – don’t make your problem the customer’s problem!
- Fear and intimidation needs to have been removed from the organisation so the employees feel they can take initiative on behalf of the customer or to make process improvements or more, otherwise empowerment cannot work
- Said more clearly, decision-making needs to be pushed down as far as possible in the organisation – closest to the customer
- I have conducted ‘empowerment’ programmes for organisations such as Xerox. The Headquarters was in Toronto and the ‘pilot’ was done as far away as possible – in Vancouver. Management was scared to death that frontline employees would ‘give away the farm’ and wanted to continue to play (along with supervision and first line managers) the role of sheriff or policeman
- Discussions with frontline employees were held in focus groups with admin, service and sales. Frontline people were asked, ‘How much authority do you think you need to have to make 80% of the customer issues go away? The answer was $250. And it worked! We allowed 20% maximum of issues to be escalated to first level management or supervision and virtually nothing had to go beyond that. Both first line management and supervision needed their training as well – on how to ‘turn in their badges’ and how to ‘coach’ frontline or recognise them for a job well done – everyone learning from the experience through sharing sessions of ‘best and worst’ experiences at staff meetings.
- The fact is that ‘empowerment’ can never take root in an organisation where there is too much control or lack of trust with management. In such an environment, even if you empower frontline, most them will not use it as they are afraid they will be beaten up for doing too much or that senior management will just ‘turn off the faucet’ anyway, so best to not get used to having the added decision-making capability.
- Facts are that in Motorola and Xerox I saw was that senior management who often made the worst decisions! Whenever a customer complaint reached their desks they would be heard to scream ‘make it go away’ and so the word would come down from upon ‘high’ to fix it no matter what it took. Frontline employees took a much more reasoned approach based on all the critical factors which should have been considered, but which were blatantly ignored by senior management!
- In my experience, frontline employees knew the customer far better, had a better relationship and made a better decisions time after time than senior management!
- Doing it right the first time, every time, on time!
- You might call this a ‘hygiene factor’ as it relates to getting the routine things done and done almost flawlessly on a consistent close to a 6-sigma (3.4 defects per million opportunities) basis such as on-time deliveries, on-time service calls, complete deliveries, accurate and timely invoices, returning emails or telephone calls and so on
- Guaranteed, consistent failure to get it right consistently in these ‘basic needs or hygiene’ areas will result in customer defection. Customer trust and confidence will erode. They will think to themselves, ‘Wow, if this organisation can’t even get it right on a regular basis with the simple things, why should we trust them with more important issues?
- I remember a case where the President and senior staff of a Division of Corning which made laptop computer screens went to Japan to speak with the CEO and senior staff of Toshiba. The Corning CEO stood up and began to say that they were there in the hope of building a stronger business relationship with Toshiba. Before he could finish, the CEO of Toshiba stood up and asked the Corning CEO to be seated. The Toshiba CEO went on to say, ‘your deliveries are always late, your invoices are always incorrect’. Until such time as you can show us you can handle these routine issues correctly, first time, every time and on time, we do not wish to increase our dependency on your organisation’. End of story!
- The moral of the story? To build a loyal and certainly a secure relationship with customers you have to earn it by laying a foundation of being flawless on the basics – the routine things. The customer expects it and you had better deliver!
Having people with the right attitudes, knowledge and skills or competencies
- People do make the difference whether senior management always chooses to believe it or not
- In fact, while many factors, as indicated in my book, ‘The Wisdom Chronicles: Competing to Win’ are critical, it may well be that in the final analysis, people are not only an organisation’s most precious asset, but it most important source of competitive advantage.
- Your people (partial list only) can distinguish your organisation – differentiate it from others by being viewed or engaging in these and other behaviours:
- More technically oriented
- Possessing relationship skills
- Understanding the customer better than the competition
- Understanding their own organisation better
- Acting as trusted advisors
- Acting as solutions providers and therefore valuable resources
- Taking a more consultative approach rather than just a ‘get the order’ approach
- Building trust and confidence consistently
- Showing that they care
- Having a willingness serve – an attitude of service
- Unafraid to go the extra mile – being an advocate for the customer
- It is your frontline people who build or destroy relationships with customer – not senior management. However, senior management needs to be out interacting with and building relationships with their peers in customer organisations. Just think for a moment, ‘How many interactions occur between your people and customers every day in your organisation? How many of these interactions strengthen the relationship? How many weaken it? I have seen surveys of customer satisfaction in electric utilities where the more calls a customer made to customer service, the lower the customer satisfaction became! You don’t want this in your organisation! This phenomenon even exited at Xerox at one time. At the same time one needs to be concerned about consistency. While Compaq Computer had 8 call Centres, Siemens had almost 100 around the globe. Customer expect the same level of service excellence no matter which one is called.
- In fact, I can guarantee you that even today I can walk into any organisation and find that at least half of the leadership team, if put in front of a customer and asked to conduct a discussion to strengthen the relationship, would, in fact, act as a lethal weapon and damage the relationship instead. Why? Because few senior executives possess ‘relationship mastery’ – something I will discuss in future articles. In part, this is due to the fact that the succession planning of most organisations is just dead wrong – if they even have one. Few of them ensure that high-potentials are given experiences at different levels in their career to interact with customers from working in a call centre to being an account manager. They are ‘out of touch’ with reality and the true voice of the customer too often and for too long.
- Xerox, AT&T Universal Card Services and other world-class organisations mandate that senior executives take calls from customers – for information and complaints, in that organisation’s call centre – a practise which is guaranteed to ‘shift paradigms’ and ‘change mindsets’. They ride with sales managers, they engage in ‘back to the floor’ experiences along with other learning and development activity.
- Yet, you would be surprised how senior management answers the following question most often when I ask: ‘If you had the choice between great people and mediocre business processes or mediocre people and great business processes, which would you pick?’ Most often they pick business process! WRONG! Great people are going to find a way to work around dysfunctional processes, make heroic efforts to satisfy the customer and ultimately, if empowered, fix the processes to make them better or best practise.
In Part I, we have covered the first five (5) characteristics of what defines an ‘ideal supplier’ based upon thousands of interviews with key customer accounts of well-known organisations around the world. The results have been very consistent. Find out the remaining five (5) key characteristics in Part II.
In the meantime, have each member of the leadership team rate your organisation on the five characteristics above for one of your most important key customer accounts. Use a scale of 1-5 where 1 = poor and 5 = excellent. Compare and discuss results – differences especially – converge on what the leadership team as a ‘team’ considers reality to be. When Part II is available, I would suggest you do the same.
Then you should go out face-to-face with key decision-makers, decision-influencers and users/user groups (if appropriate) in at least 3 of your key customer accounts – picking one that is not happy with you. Prepare your scores first and then compare their scores with yours. Get together with them and discuss the differences and the root causes of those differences. It is a powerful exercise which works incredibly well based upon my experiences over the past 42 years and will build stronger relationships.