In article four we explored and discussed the fourth level of B2B customer relational interdependence, that of deep dependence. In article five, we explore ‘deep inter-dependence’. This is the nirvana of B2B customer management and the culmination of well executed ‘business to business’ relational development. An example of this could be seen within the aerospace sector as manufacturers come together to make the Airbus.
At this stage, the vendor has developed strategic relationships with a core group of customers in which they have become interdependent on each other for their value, volume potential and delivery. The balance and onus of trust and equitability is dependent on the other in a way that is acceptable to both parties. “We need and rely on each other for our success within the market”
What do we mean by Deep Inter-Dependence?
What do we mean
|Deep Inter-Dependence||interdependence – a reciprocal relation between interdependent entities (objects or individuals or groups) “You make me feel part of the team and value the part we play”The relationship operates on a level of mutualism and symbiosis with each gaining benefits from the other through their action, influence and reciprocity.|
What do we mean by Identification Based Trust?
|Identification based trust||Based on clear identification with the desires, intentions, values of another to the extent that it is possible to act for, think and feel like the other party. The relationship becomes intuitive , thinking for the other. Where this happens, Lewicki and Bunker (1996) suggest that “second order learning” begins to take place.Starting to think for the other, you understand what is required to maintain trust and adjusting the approach accordingly.
Identification based trust doesn’t operate in isolation from the other levels of trust. The levels of trust need to be in place as identification based trust builds upon these.
Second order learning is supported by four additional types of activities:
If you are doing these, it is likely you are already in a ‘Deeply Inter-Dependent’ relationship.
- Time; a period will have elapsed within the relationship allowing both sides to ‘get to know’ each other’ the experience of doing business, developing a collective history and bank of good, bad and ugly experiences, as these can be the real trust builders.
- Foresight; bringing market, category and performance insights, highlighting demand potential, value opportunities and potential pitfalls.
- Strategic alignment; ensuring the strategic intentions of both sides are not pulling in opposite directions.
- Intuition; the ability of the vendor to anticipate and predict potential problems, challenges or issues within the relationship. The ability to provide acceptable solutions that meet the needs of both parties.
- Shared meaning, value and goals; sharing the values, vision and aims that both sides have for the relationship and how these could be realised.
- Internalisation; voice of the customer within the organisation, which can be as simple as placing the ‘customer chair at meetings’, etc. This ensures the customer and their needs never leave the room.
- Trusted adviser and / or advocate; The position where you are asked by the customers for your opinion or advice on areas that might be on the fringes of the category or sector you operate within. They may ask for advice about the business, people, etc and trust your opinion.
Deep Inter-Dependence will often manifest itself within the relationship under the title of, strategic partnership, category lead, category partner or trusted advisor. It can be useful to find out your status as a supplier with your customer. The customer may well also operate a classification that could denote your position and provide useful insights into how they see you.
Customers will often look for vendors to clearly demonstrate the consistency and tenacious pursuit of relationship development before entering into long term strategic development. Here is a case in point; seven account managers contact the same customer yet represent different product groups and divisions. However, all pursue differing approaches to managing the customer. The vendor was focused on developing one clear approach to the customer across all the touch points. Pro-active joint business plans were developed and socialised within the customer. This was recognised at senior level, enabling the relationship to move from Deep Dependence to Deep Inter-Dependence. Which in turn manifested itself in a discussion around the development of a three year contractual relationship with value share opportunities.
This resulted in the relationship moving from one that revolved around an annual contract to one operating under a three year strategic framework.
Knowledge used Empathetically
A core platform for a Deeply Inter-Dependent relationship is knowledge and the insight it provides to enable the recognition of positive / negative factors or issues being experienced by the customer and to offer work arounds. Use of knowledge empathetically is the key; meeting needs and providing solutions to challenges before they arise. This may mean swallowing a short- term hit on value for the longer- term value enhancement.
A key element of Deep Inter-Dependence revolves around the customers representation within the vendor’s organisation. This provides a customer frame or perspective to vendor decision making i.e. a common method is placing the customer chair in meetings or asking an account team member to represent the customer within the discussions. Without this customer needs can often be overlooked.
Advanced relationships will be cemented through a shared vision, goals and strategy. This can be evidenced through products, solutions, services, co-created or co- developed with core customers.
A key competitor differentiator and source of competitive advantage is when the relationship develops a level of intuivity. The vendor meets potential problems with solutions before they even realise. This pro-active approach and understanding enables trust, and generates competitive advantage, as competitors are often unable to replicate this.
Within Deep Inter-dependence as the vendor, you may be closer to the market, product, sector than the actual customer. They will rely on you to provide pro-active insights to problems before they see them or they become an issue.
It is not uncommon for the vendor to cement the relationship and put their money where their mouth is by committing resources to a deeply inter-dependent relationship. This can be seen when the vendor becomes embedded with the organisation through co-location customer team member represented within customer management meetings. It can also be seen through the co-location of facilities when the vendor places the means of supply or fulfilment close to the customer.
Are you the first vendor your customer turns to for advice, even when it’s not your direct area of expertise?
It is important to know your place and importance within the value chain. What cost do you represent to the customer product or value you deliver to the customer category or portfolio. How easy are you to replace ? Vendor and customer within DI Rels will have both developed interdependence within the value chain that strategically aligns the relationship at key phases i.e. specific processes, specifications.
A high level of interdependency and integration manifested through high levels of planning and information sharing. This works both ways with shared insight for mutual value generation.
Systems and processes will often become extended to include the customer through electronic data interchange (EDI), intranet portals or through web enabled planning tools. Data and information sharing is often common with the insight being shared through regular reviews and updates. The development of joint business plans would reflect a long term perspective to the relationship if they are co-created, providing the basis for mutual value generation and delivery mechanism.
Let us be clear on this as Joint Business Plan’s are an important element of Deep Interdependent relationships, however also exits with Deep Dependent relationships. What is the difference? Within Deeply dependent relationships the joint business plan(JBP) will often be driven by the customer following their format. Within the Deeply Inter-dependent relationship the JBP will be co-developed, co-owned and often driven by the vendor. This is one of the key determinants in moving the relationship if undertaken correctly. It has the potential to deliver significant additional value;i.e. Customer generic JBP = Deeply Dependent relationship = x value, Co developed and owned JBP = Deeply Inter-Dependent relationship = x + y value. This can be as much as 7:1 additional value through a co-created, developed and delivered JBP.
It is common within Deeply Inter-Dependent relationships for both sides to share common memberships, joint forums, institutions, etc, i.e. Institute Grocery Distribution, Financial Services Forum, Professional Services Forum, etc. These offer an opportunity to come together and explore ways the relationship offers further potential within a like minded environment. The JBP framework provides the conduit to implement and manage the development of the relationship.
- A shared vision of the relationship socialised and owned through the organisation.
- Wiring plans ~ head to head established between the vendor and customer against the backdrop of number three.
- Stakeholder mapping & contact planning undertaken to develop the depth and breadth of contact and working through the relationship
- Customer development through a Strategic customer planning framework
- Two to three year joint business framework that has been co-developed, manifested within a time-bound agreement, beyond the sector or market norm. This operates as the relational glue and route to the delivery of point one.
So, where do we need to pay attention as we could lose value?
- Trust levels within the relationship become undermined over time.
- The customer business performance comes under pressure with the resulting knock on effect.
- Value creation fails to materialise further up the value chain through the customers commercial caps & comps failings.
- Relationship boundaries become blurred and commercials loosened.
- Becomes too big to fail
So, what are the potential upsides?
- Vendors improve their commercial skills; insight based selling, principled negotiation and partnership development.
- Lever relational trust to build equitability, leading to more value for both sides.
- Can be an enabler for staff co-location, often seen as a catalyst for relationship development, as you become embedded and seen as part of the team. This is key in the development of trust and interdependence.
- Increased share of the business
- Higher levels of loyalty
- Customer as ambassador
- Early adopters of New product development/Old product development
- Improved promotional uptake
- Creating barriers to exist and increasing customer stick ability to the vendor, making it harder to defect
- Joint working develops unique elements of the Customer Value Proposition, competitors are unable to replicate.
For more information on this you can email Mark Hollyoake