- Partnership-oriented relationships start with transparency
- B2B partners take smart risks to gain the greatest probable ROI
- The partnership's payoff is long term
During an interview for a Gallup business-to-business (B2B) study, the CEO of a large consumer goods company told me an interesting story. Years ago, when he was in the company's sales department, he was part of a team that met with the founder and leader of a major retailer. The retail leader commented that their respective companies had a great relationship, but it was shaped too much like a bow tie.
From the retail leader's perspective, the retailer's procurement teams and the consumer goods company's sales team were in the center of the relationship, driving much of the interaction between the two companies. On either side of those groups were two great companies that didn't fully understand each other, so their relationship didn't take full advantage of each other's value chain and core competencies. In the leader's mind, this structure wasn't maximizing value for either company.
The retail executive thought that his company's procurement team and the consumer goods company's sales team were driven by their individual objectives and compensation programs. As a result, the teams were working diligently to achieve their own metrics and personal goals, so they were missing big opportunities for shared benefits, cost savings and growth.
The retail leader's directive was to unknot the bow tie and create a true partnership, one in which both companies were transparent about costs but allowed each other to make a profit. He also believed this partnership needed top-level leadership support, a formal business plan and a solid structure to maximize time and investment.
That idea of unknotting the B2B bow tie stayed with the consumer goods CEO long after he left the sales department, and it continued to inform his thinking all the way to the C-suite. His story stayed with me, too, especially when it occurred to me that the practice of "unknotting the bow tie" underpins some of the best B2B relationships Gallup has studied.
Common Traits That Great B2B Relationships Share
Gallup conducts thousands of B2B customer interviews -- some with global Fortune 500 executives, some with small-business owners -- on behalf of our clients every year. When working with B2Bs, Gallup measures both engagement and impact. Over and over, across all clients and in all industries, we see how important it is for B2Bs to know their customers, bring them new ideas and then make those ideas work.
But the most impressive and unique relationships -- when the partners have unknotted the bow tie -- show some very specific traits. In no particular order, here are the common themes I've noticed in the most successful companies we've worked with.
- The partnership starts at the top. In the best B2B relationships we've studied, the supplier knows the customer's business and both sides take chances on new ideas, offer transparency and take a long-term view. But the partnerships that unknot the bow tie also have an element of "top-to-top" in them: Senior executives in the supplier organization have a real partnership with senior leaders in the client company. Far too often, suppliers and customers are penny-wise and pound-foolish, largely because individual incentives and compensation plans create barriers to real openness and creativity. Before suppliers and customers can explore options that might add a little cost in the beginning, but offer joint value creation and savings in the long term, senior leaders in both companies must be invested in a beneficial partnership.
- Both sides are willing to take chances. Like everything else in business, if there's no risk, there's no return. On the supplier side, risk means going first, showing value early and making an investment in the relationship before a return is apparent. On the customer side, risk includes entering a long-term relationship that may have higher initial costs but offer much lower long-term costs and increased value over time. Both parties involved know that unforeseeable issues can change the playing field or that key players on either side could leave. Companies that unknot the bow tie accept those risks if there's a strong probability of a high return on their investment.
- True partnerships start with transparency. This means that both sides are honest about what they want to achieve, how experienced they are in certain activities and ventures and what their costs and margin requirements are. When done correctly, "showing your cards" creates an enormous amount of trust and allows both customers and suppliers to look for win/win opportunities. In every partnership where this level of transparency exists, there is a fundamental understanding that each company is in business to make money and that both businesses should be allowed to earn a living.
- Take a long-term view. Building meaningful relationships takes time, and this includes customer relationships. B2B customers often make long-term investments, wedding their company to a specific supplier for a substantial length of time. For suppliers, winning this kind of business can be complicated, be risky and can take years. Companies that unknot the bow tie typically understand the time frame involved and recognize that the payoff on either side may not come this quarter or even this year.
- Put joint objectives, goals and expectations in writing. For B2B partnerships to succeed, both sides need a formal, joint business plan that details each company's role and responsibilities. These plans are specific about what each company hopes to gain from the relationship, how long this will take and the expectations on both sides. Both businesses meet regularly and often as a cross-functional team, which allows for diverse opinions to be shared. This cross-functional team includes executive sponsors, functional managers and day-to-day relationship participants.
The Rewards: Growth and Cost Savings
Gallup's work with our B2B clients shows that not every customer-supplier relationship can or will become a true partnership. Developing these relationships takes time, effort, planning, an appetite for risk and extreme levels of trust. B2B leaders who can approach their customers or suppliers with the intent to unknot the bow tie will reap growth and cost savings that more than compensate for the risks they take.