P@37 – How did you get married with your strategic partners?

Key Account Management (for vendors with their customers) or Supplier Relationship Management (for buyers with their suppliers) are both sides of the same coin and two well-known topics. It seems obvious that long term and collaborative relationships drive more value for both parties. Unfortunately, most companies still need to improve the way they drive their strategic partnerships.

When thinking about business relationship management, I often have those 3 movie scenes coming immediately to my mind:
- The typical scene of an express marriage at Las Vegas, where, rather spontaneously, we see a couple rushing into a chapel and getting married in just 5 minutes. In many cases, it is quite extravagant. And I am not sure how long have many of those relationships lasted.
- The mythical movie ‘Runaway Bride’ with Julia Roberts and Richard Gere.
- And finally, all those movies in which after a good bunch of adventures a couple at last got married in front of both families and friends “for better and for worse”.

Business world is not so different from those movies as we all have heard or experienced examples of successful or failed relationships with good or more than surprising stories on how the relationship was built and then managed.

When considering a long term relationship, how serious and consistent both vendor and buyer teams are about:
- Managing the previous steps of analysis and strategy alignment?
- Defining and signing the right relationship terms and conditions?  
- Following and improving performance of daily operations? being transformational in term of outputs?

If we want successful long term business relationships, we need to answer 6 strategic questions:

1.- Do we know why we need a long term relationship? Are the business reasons for such alliance clearly defined? Are scope, goals, benefits, and risks of such strategic partnership clearly identified? On the buyer side, did we undertake or do we need a previous make-or-buy analysis?

2.- Do we have the right partner? To be sure that we are choosing the most capable vendor (buyer side) or performant customer (KAM side) now and for the future, do we have enough information about: 1.- the other party; 2.- the supply market (buyer side) or the customer landscape (KAM side); 3.- all existing alternative solutions or technologies? Are we sure that strategy and culture of both companies are aligned? From both sides, do we have the management teams seating down and talking about strategy?

3.- Will we be able to manage such relationship with the partner?Is a long term relationship the most appropriate option? As buyers will revise their ‘portfolio’ (or Kraljik) matrix and vendors their ‘preferencing’ matrix, are the results of both matrix compatible? Do internal teams of both parties understand the need and the consequences of managing a long term relationship? Are both parties willing and ready for such strategic and open collaboration? Have both teams been trained on long term relationship tools and tactics?

4.- Did we formalize the right business relationship model and contract?Is a service level agreement linked to performance and results an appropriate option or shouldn’t it be better to sign an outcome based contract? Do the parties agree to really share benefits and risks, meaning really splitting the pie in 2 without looking for a biggest portion?

5.- Do we have the right governance in place? Nowadays, in most business relationships, scope of work, expected outcomes, ways of working and commercial conditions are constantly changing. Do partners have the appropriate governance mechanisms in place to be able to negotiate and agree on all those changes? Do parties trust each other enough to be able to reach an agreement by negotiating in a transparent and collaborative way?

6.- Are we going for bold initiatives?Do the parties share the same vision about the relationship and the future in order to be able to go for bold projects and transformational solutions? Are both teams empowered to make the right and tough decisions that will lead to great innovations and benefits for both companies? Are negotiating teams reasonable enough to not tense too much the rope during those good faith negotiations?

Now please consider your more strategic and long term business relationships and answer those 6 questions. If you get a high proportion of positive answers, congratulations! You are or will be successful. If you obtain a majority of negative answers, I wish you the best after your quick marriage in Las Vegas!

As Key Account Managers (vendor side) or Category Managers (buyer side), how can we do better at managing key business relationships?


For more information on Supplier Management, please go to P@36 – Should we start to take care of our suppliers? Aren't they valuable external resources?