Although customer symbiosis has enormous upside for both suppliers and customers, the barriers remain formidable. Most suppliers are structured with strict boundaries separating product lines, and with R&D focused on creating the next iteration of a product, rather than on tailoring it for customers’ incremental gains. Changing these habits and the structures that support them requires a difficult overhaul of the corporate culture. Companies may find it necessary to reinvent their strategies and operations, and even economic measures, to concentrate on customer needs and on the lifetime value of customers, not just transaction profitability. The business model may have to be retooled to allow teams to develop solutions by combining products and services that exist across a company’s entire set of offerings, without having turf wars.
Structuring a Symbiotic Relationship
For a supplier, the three keys to a successful symbiosis strategy are:
- Changing its mind-set from one focused on selling products and services to one centered on risk-based, goal-guaranteeing partnerships.
- Developing additional capabilities to be sure that the risks are manageable.
- Creating an intimate alliance that lets customers get inside the supplier — a relationship that true solutions providers speak of as “opening the kimono” to customers.
The first step in a successful symbiosis strategy is choosing the right customer. Even those suppliers that overcome structural and operational barriers to solution provision may find they don’t have the customers whose needs are appropriate for a symbiosis program. Large businesses typically are the best candidates because they need to pursue efficiencies or partnerships to improve margins. Potential candidates have to be willing to try a completely new type of relationship with their suppliers, a joint effort they probably never even considered before. As a result, in most industries, only about 10 to 20 percent of a typical large supplier’s customers would be both big enough to need a symbiotic relationship and culturally flexible enough to be receptive to one. Another 10 to 20 percent might benefit from symbiosis, but want to see proven results elsewhere first. But even though the potential customer base may be only 30 percent of a supplier’s customers, that group of companies should account for a much higher proportion of revenue, profits, and innovation.
The next step toward symbiosis is identifying what can be offered to that customer — specifically, identifying which skills or which products can be individualized to fit the customer’s needs. Going through this often time-consuming process can be difficult for salespeople who are being measured on strict short-term revenue goals. Consequently, it’s critical that chief executives motivate and encourage sales, marketing, and product development staffs by emphasizing the importance of the long-term returns that solutions can bring. Often that means reworking compensation plans and decisions about promotions so that employees working on customer symbiosis aren’t penalized.
It’s also essential for a supplier to produce clear performance benchmarks linked to the solution. A finite measurement reveals whether or not the new partnership is working — a necessary comfort for the customer. For suppliers, these benchmarks are vital because a solution is such a risky and often long-term venture; there must be certainty that with growth in revenue there will be an equal increase in profitability. Finally, suppliers must find a way to provide the symbiosis in a repeatable, scaleable way. Creating each solution with a clean sheet of paper isn’t economical.
The biggest challenge that suppliers face is restructuring how they work with customers. Even after solutions candidates are identified from a supplier’s customer base, designing the partnership is a tedious process. Because the supplier has to sell symbiosis to a customer, it is the supplier that generally has to initiate the arrangement. Generally that means doing a significant amount of advance research to approach a customer with an idea that demonstrates a clear understanding of its business and its business problems. A recent Booz Allen review of public documents indicated that suppliers cited knowledge of the customer and its marketplace as the biggest gap that they had to address. Customers with a need to cut margins and decommoditize their sales channel are frequently very receptive to exploring the potential in symbiotic partnerships.