Continuous innovation is essential for companies to remain competitive in any industry. Businesses refusing to adapt to product and process improvements have quickly been left in the dust by competitors. Stability in business is based on the ability of management to consistently and effectively adapt to changes in the external business environment.
In collaborative partnerships, suppliers and customers work jointly to develop products that will be popular on the open market. A recent article published by Michael Schrage in the Harvard Business Review shed some light on how to develop partnerships that are conducive to effective collaboration.
Despite the common misconception that a company’s “best” customers are those that provide them with the highest sales volumes, Schrage points out that long-term profitability is much more reliant on those customers that are open to collaborating on innovative ideas. Regardless of size, these are the customers that should actually be valued as strategic partners.
The essence of a partnership is that both parties must keep each other’s interests in mind at all times. Small suppliers in Asia and other manufacturing centers around the world must realize that major multinational corporations, while important to their short-term profitability, will cease any business relationship as soon as their products are outdated.
In global supply chains, large corporations are tied to numerous suppliers for their wide-ranging production needs. To stand out in this large pool, innovation partners must be able to prove that they have what it takes to consistently develop effective new products. Suppliers can prove themselves to these large customers by first targeting businesses with a smaller share of the market and proving that they are capable of keeping up with the pace of change.
Once a supplier can show that they have been effective innovators in the past, large corporations will be more open to forming a truly collaborative partnership with them. As always, “actions speak louder than words”. Suppliers must be willing to “walk the walk” before they try to “talk the talk” with global customers. If suppliers are not cognizant of the true relationship that they have with a large customer, they will find their innovative capacity crushed before it has a chance to develop.