We need banking, but do we need banks? We need groceries but do we need supermarkets? We need services and consumables but do we need to receive these things in traditional ways? Do we need distributors?

The answer is: Only if distributors truly create value in the process of getting stuff from the source to the user. At my seminars, when I ask distributors what their product is — the usual answer is service.

Wrong! Your product is logistics. Wal-Mart has done an excellent job of disintermediating those that Sam Walton believed did not add enough value to the chain. What about your customers and suppliers? What do they say about you?
My research indicates that for you to cost-effectively achieve world-class levels of logistic services, you must adopt what I call Total Organizational Partnering. I realize partnering is a term that has been grossly abused over the last decade. Nonetheless, it is what you must achieve. Partnering is an idea that is loosely used to describe anything from teamwork to alliances to contractual partnerships.

Partnering, as I define it, is the process of two or more entities coming together for the purpose of creating synergistic solutions to their mutual challenges. Again, I recommend you adopt Total Organizational Partnering as your business strategy.

Partnering is not a flavor-of-the-month management strategy to be hastily adopted and then abandoned just as quickly. Rather, it is a long-term strategy for success. Partnering is not instant gratification. To adopt Total Organizational Partnering, you’ll need to understand the Partnering Pentad model.

A pentad is simply the name given to a group of five. The Partnering Pentad represents the five key areas of your business. In each of the five areas you must develop successful relationship (alliance) strategies. It is the quality of these relationships that hold all the areas together. Once in place, you’ll have Total Organizational Partnering.

Strategic External Alliances: This is the area of your business where you develop alliances with outside entities for activities where you have core competencies that complement one another. For many distributors, these include buying/marketing groups and targeted specialty alliances for software/technology development.

By sharing core strengths, two or more can create an environment of synergy yielding all involved more than the sum total of their collective contributions. Landmines to watch out for are core values of alliance members being too different, circles of interest overlap being too little and continual management change of one or more alliance partners.

Supplier Alliances: Many distributors are most concerned about this area — no supplier, no customer. Just-in-time delivery (JIT) and electronic data interchange (EDI) ordering have become commonplace today.

Eventually, you will have these relationships both up and down the supply chain — providing you are still in business.
Frequently, what I hear from suppliers about their customers is, “They’re talking about marriage but acting like a one-night-stand.”

Not long ago I delivered an opening keynote presentation to an association of industrial distributors. Unfortunately, upon visiting the websites for some of that industry’s major suppliers, I noticed that very few had hyperlinks to the distributors’ websites. I call that a missed opportunity.

To successfully compete in the world of B2B e-commerce, you must adopt alliances. The biggest landmines in this area are neglecting to review the quality of the relationship and neglecting to explore areas for improvement. What is it that you do that your suppliers cannot? Which of your activities actually adds value to your suppliers’ efforts and desire to get their goods to the end user?

Customer Alliances: These weigh heavily in determining your total volume and profitability. In this area, you must be externally driven. Your customers will consider you an important vendor as long as they feel they’re receiving good value. Value-added is a term that much is being written about. Integrator Applied Distributors, is now documenting its value-added services with its customers. Agriculture and food-processing conglomerate Cargill has moved to value-based purchasing. They measure the total value proposition of their suppliers rather than just buying on price alone.

You must be value-driven rather than product-driven to understand what your customers want. What they perceive as value is their reality. The important land mine to watch out for is short-term thinking on your part when making customer-relationship decisions.

Employee Alliances: To many distributors, this is a non-issue. Meaning, they don’t pay attention to them. What motivated the WWII generation is different from what motivates Baby Boomers and is different from what motivates members of Generation X.

Just because something motivates you, doesn’t necessarily mean it will motivate those of a different generation. If you want your employees to take ownership in your business and to consider it as sacred as you do (even though they don’t have legal ownership), then you must empower your employees.

Empowering means giving them the authority and encouraging them to accept the responsibility to do the job. Then, acknowledge their successes and failures in an environment of safety — one where you encourage and reward risk-taking.

The major landmine to watch out for is the ego trap, yours of course. To give power, you must be a powerful person, one who possesses personal power rather than power acquired from your position. Permission cards and employee recognition certificates are a great start.

Owners or CEOs as the Optimal Partner: This is the final, and in many ways the most important, leg of the pentad star. Not the most important from the perspective that everything revolves around you, but in desiring a culture of true partnering. True partnering starts at the top.

You must lead the charge and show by your actions, more than your words, that Total Organizational Partnering is truly your preferred and accepted business strategy.

The critical land mine here is when you arrogantly believe that you are at the center of the pentad and that all the alliances should revolve around you. The coveted center of the pentad star is reserved for all the relationships that bind the separate legs.

Globalization is the primary driver behind partnering alliances. Large multinational companies are building alliance relationships to gobble up market shares in every conceivable industry and location. Large families of businesses are competing against one another.

Therefore, smaller organizations feel the pressure and the partnering trend becomes “monkey see, monkey do.” A secondary driver is based on the fact that organizations generally adopt a new paradigm based on the recommendations of others. Change evolves through one’s witnessing the success of others. Organizations and leaders with strong reputations within an industry or economy have immense influence over their contemporaries.

Ed Rigsbee is the author of the books PartnerShift, Developing Strategic Alliances and The Art of Partnering. For more information call 800-839-1520 or visit his web site.




POSTED ON: 9/1/2001