Anyone who has been a CIO will tell you that a significant amount of time is spent managing relationships with suppliers. These can be good or not so good at times, but the question really is how to best maximize the value for the benefit of all concerned.
The first thing to realize is that not all supplier relationships are created equal, as suppliers come in all shapes and sizes. Many of these relationships will be purely transactional in nature, which is fine as long as that is a common understanding between the two parties. These transactional relationships will be driven mainly by cost and service level objectives with the commercial terms often managed through sourcing or procurement functions.
On the opposite end of the spectrum are strategic supplier relationships. By definition, these will be the most important and impactful to the agenda of the CIO and will require the personal attention of the CIO. Of course, many suppliers will position their product or service as deserving the designation of “strategic”, but the reality is that it should only be reserved for a select few.
So what makes a good strategic supplier relationship and how does it truly become “win/win?” Here are a few principles for consideration from a CIO’s perspective based on past experiences:
1) Transparency – openly sharing the CIO’s strategies and plans, including organization obstacles and constraints can help suppliers better serve those needs. From the suppliers’ side, freely sharing of their product shortcomings and the related roadmaps does help enable better decision-making for both parties and builds a sense of trust.
2) Clarity – being very clear on mutual priorities will better focus scarce resources on the initiatives that serve the greater good and minimize the “disconnects.” Suppliers clear on their core competencies and value-add contributions are of much greater strategic value than those that chase every opportunity with less than ideal solutions.
3) Accountability – ultimately there needs be an “owner” of the relationship on both sides who is committed to the success of the outcomes. Someone who will help steer issues and decisions through their own organization and who hold people accountable for their part of the process.
4) Viability – while price will always be a consistent consideration in any business exchange, so should the commitment to the overall ROI from the relationship and to the efficient use of resources for both sides. Strategic relationships need to be clear on the “gives” and the “gets” and ensure that value is derived and delivered from those activities, which should also include the option to stop doing things that are only of low value.
5) Longevity – by definition, strategic relationships tend to be more future focused. The planning horizon should be a minimum of 18 months and ideally at least three years. Obviously, this does not preclude shorter term objectives and planning, but it does tend to focus on investing in and developing the relationship to achieve full potential value and performance over the longer term.
While all suppliers usually want to be a “partner”, it can be an overused and abused term. Strategic supplier relationships are few and far between. Those relationships that are of the greatest value to CIOs are often built on principles that do enable a true “win/win” for both sides versus the traditional adversarial approach.
In a world of unending competition and faster innovation cycles, CIOs need every advantage that they can get and leveraging their best and most strategic relationships to help with those challenges does make eminent sense for all concerned.