Publisher Description

Until now, the relationship between a company and its customers or suppliers has consisted of arms-length haggling over the price of a part or a service. Today, reveals alliance expert Jordan D. Lewis, customers and suppliers are actually embracing each other--sharing data, design work, and even research and development. The result, Lewis finds, has been a dramatic improvement in each firm's costs, quality, cycle times, and customer satisfaction--without added expense. Building on his groundbreaking work, Partnerships for Profit, Lewis shows managers how to maximize the potential of these new customer-supplier alliances--described by the Wall Street Journal as a "revolution"--by drawing upon his hands-on experience and research with best-practice firms worldwide such as Motorola, Chrysler, and Marks & Spencer. Although more and more firms now recognize the importance of customer-supplier alliances, few actually know how to make them work.Using interviews with employees ranging from top executives to purchasing and sales people, Lewis takes the reader inside these leading-edge companies and their top suppliers to show precisely how the "connected" corporation can double its competitive resources by forging customer-supplier relationships for greater financial strength, higher market share, more value, and increased operating flexibility. Lewis provides the tools managers need to structure and manage effective and successful alliances. He discusses all of the initial questions on how to get started--when to use alliances, how to choose the best partners, and how to set clear objectives targeted on high performance. Specific techniques are presented to foster joint creativity--from building interfirm teams to systems-based thinking--as well as methods for monitoring alliance performance and progress. Lewis also shows ways to develop the foundation of cooperation, negotiation, and trust between partners which is so crucial in achieving optimum competitive advantage.By capitalizing on the new customer-supplier alliances, any firm can increase its competitiveness regardless of industry, company size, or whether its focus is on goods or services. Lewis provides managers of all types with the framework they need to avoid the pitfalls and enjoy the full benefits of the connected corporation.

Author Biography

Jordan D. Lewis, an international consultant, author, and lecturer, advises many of the world's leading firms and is a well-known expert on strategic alliances. A Fellow of the World Economic Forum, he has been profiled by CNN, "Business Day," Wall Street Journal, Financial Times, and Japan Times. He lives in Washington, D. C.

Table of Contents

TABLES AND FIGURES INTRODUCTION The Research Agenda Key Firms: Motorola, Marks & Spencer, Chrysler, and Philips Consumer Electronics Company Benchmarking Customer-Supplier Alliances How to Use This Book 1. CUSTOMER-SUPPLIER ALLIANCES: UNLOCKING THE POTENTIAL Competition Is Driving Firms to Integrate Hallmarks of Powerful Customer-Supplier Alliances Common Myths and Misunderstandings Pitfalls on the Road Ahead 2. GETTING STARTED Objective: More Customer Value When to Use Alliances Choosing Customers for Alliances What to Allocate to Suppliers Choosing Suppliers for Alliances Competitors as Supply Partners Working with Internal Suppliers Committing to the Long Term 3. CONDITIONS FOR HIGH PERFORMANCE Using Focused Competition Always Have a Market Benchmark Sole, Single, or Dual Source? Reducing the Supply Base Earning Suppliers' Commitments 4. PRACTICES FOR JOINT CREATIVITY Set Clear Objectives Begin Early, Avoid Constraints Share All Relevant Information Protect Each Firm's Ideas Build Interim Teams Share Applicable Experiences Plan an Expertise Overlap Challenge Each Other's Thinking Think in Terms of Systems Define a Clear Interface 5. COOPERATING FOR MORE VALUE Quality Is the Foundation Combining for Design and Development More Powerful Competitive Strategies For the Most Benefits Take a Wider View 6. COOPERATING FOR BETTER TIMING AND COSTS Joining to Compete with Time Inventory Management that Beats Just-in-Time Cutting Costs Together 7. SUPPLY BASE MANAGEMENT Objectives-Based Performance Measures When Suppliers Have Problems Introducing New Suppliers Strengthening the Supply Base Keep Focusing the Supply Base 8. MANAGING CONTINUOUS IMPROVEMENT Sourcing Strategies for Supplier Management Strategies for Integration and Unique Design Choosing Suppliers for Unique Designs Using Premiums and Penalties 9. BUILDING TRUST AND HIGH PERFORMANCEv Make Connections at All Levels Constant Communications Avoid Trouble Seek Root-Cause Solutions Have Clear Rules of Engagement Maintain a Fair Balance Make Fair Demands Build a Spirit of Community Introduce New Programs Together Coordinate Long-Term Alignment Developing Trust Between Firms 10. ORGANIZING THE INTERFACE A Focused Organization for Each Customer Structuring to Be Consistent with Suppliers The Pros and Cons of Co-Location Customer and Supplier Advisory Boards 11. LEVERAGING THE CORPORATION Balancing Corporate and Business Unit Interests Creating Value Across Business Units Global and Multi-Site Alliances 12. NEGOTIATION BETWEEN PARTNERS Setting Stretch Targets Reaching Agreement While Avoiding Damage When Partners Disagree No Room for Bargaining Power Eliminating Contracts 13. SUCCESSFUL ALLIANCE PRACTITIONERS People, Performance, and Management Maintaining Continuity for Alliances External Alliances Need Internal Alliances Building Durable Alliances Reducing Not-Invented-Here Behavior Top Management Leadership Is Essential Choosing Customers and Suppliers as Alliance Partners 14. VALUE CHAINS AND ALLIANCE NETWORKS Value Chain Management Promoting Cooperation Between Suppliers Linking Rival Firms Gaining the Power of a Committed Supply Base Branded Goods and Value Chains Frontiers of Value Chain Development Using and Managing Alliance Networks The Limit on Alliance Performance NOTES INDEX A NOTE OF THANKS ABOUT THE AUTHOR

Review

"Business Week"This readable book provides a realistic road map for forging true alliances.
"Wall Street Journal"Meticulously dissects customer-supplier alliances to reveal what makes the best ones tick.
Arthur R. TauderExecutive Vice President, McCann-Erickson WorldwideHere is a mind-opener as to the power of customer-supplier alliance and a practical guide to make productive alliances happen.
Jerald A. BlubergSenior Vice President, Dupont CompanyThere is a tidal wave of vertical alliances coming and Jordan Lewis provides the knowledge and experience base to enable all companies to join it.
Sir Colin MarshallChairman, British Airways PLCNo business is immune from the pressure to bring more value to its customers, and its suppliers can play a key role in that process. "The Connected Corporation" places the management finger firmly on the pulse of this imperative.

Review Quote

Wall Street JournalMeticulously dissects customer-supplier alliances to reveal what makes the best ones tick.

Excerpt from Book

Chapter 1 CUSTOMER-SUPPLIER ALLIANCES: UNLOCKING THE POTENTIAL Our first reaction was to get angry and say, "Why didn''t you do this before?" They said, "Because you didn''t ask." Rolando Anderson, global purchasing head of Asea Brown Boveri, after a supplier made a part at 30 percent lower cost when ABB gave it design responsibility We now realize that the people who make these components know a lot more about it than we do. Ronald Woodard, president of commercial airplane production, Boeing Imagine that some firms could double their competitive resources -- and greatly improve their costs, quality, cycle times, technology, customer satisfaction, and more -- usually without added expense. Who could ignore the chance? In fact, this prospect has always been nearby for most firms. Yet most have rejected it, perhaps because of a mistaken desire to avoid becoming dependent on others. Until now, virtually the entire art of business strategy has focused on how a firm could wring more from its own assets. Relationships with suppliers were at arm''s length, confined to an exchange of terms from the customer and price from the supplier. By withholding all other data about its plans and processes, the supplier thought it was guarding its margins; the customer believed it was avoiding reliance on the supplier, which might exploit this dependence to win a higher price. Such narrow relationships prevent joint creativity. Firms that refuse to share knowledge limit what they can do together. Confining the possibilities also encourages a transaction attitude: What each firm gets from suppliers depends on its bargaining power alone. A transaction mentality, though, assumes an endless line of suppliers -- for every one discarded, another is waiting to serve. This logic overlooks the possibility that an unbridled use of power will damage suppliers or drive them away. It also ignores the full potential of what suppliers can do, and it guarantees that a customer will get little more from its suppliers than what others get. By contrast, working with suppliers to create unique value adds them to a firm''s distinct competitive resources. Since suppliers get one-half of a typical firm''s revenues, cooperating with all of them doubles its competitive resources. And that is just the supply side of the picture. Companies have long recognized that success requires getting close to customers: Only by better serving customer needs can firms outflank their rivals. Remarkably, this celebrated paradigm of marketing is incomplete. No firm can get close to a customer unless the customer wants this. Every firm is both a customer and a supplier. It is not consistent to seek closer ties with one''s customers while refusing to build the same kind of relationships with one''s suppliers. Yet many firms that make great efforts to partner with their customers do just this, forcing suppliers to take risks alone and demanding price concessions and other actions that weaken suppliers'' commitments and even the firms themselves. In a time of savage competition, such practices are self-defeating. As might be expected from increased competencies, close collaboration can produce dramatic results compared with arm''s-length transactions: Higher Margins. British retailer Marks & Spencer (M&S) has consistently been the most profitable firm in its industry, and its suppliers have enjoyed above-average profits as well. "M&S has depended very largely on the partnership approach, which has made possible our outstanding values and, in turn, excellent sales," says chairman Sir Richard Greenbury. Lower Costs. Chrysler began using supply alliances in 1990. Between 1991 and 1994, higher motivation of suppliers and their better integration into Chrysler''s operations led them to propose cost savings totaling $1.1 billion. In the 1994 model year alone, more than $500 million in savings were achieved. Because about 69 percent of the total cost of producing Chrysler''s cars are managed by its suppliers, these savings were a major reason why Chrysler had the lowest costs and highest profits per vehicle of any automaker in North America. And Chrysler is still in the early stages of building supply alliances. More Value for Customers. M&S and its suppliers are constantly pushing the frontiers of value, and often break important new ground. Together, they created the easy to iron cotton shirt, machine washable silk, and machine washable lambswool knitwear. For piece dyed knitwear, M&S and its suppliers cut the time between factory order and store receipt from twelve to sixteen weeks to a few days. In foods, M&S is a widely acclaimed source of fresh, attractive items, made without preservatives and yet totally safe, some with a shelf-life of just one day. An example was the development of precooked rice, which requires extreme care to produce the taste and texture that appeal to consumers, while totally avoiding bacteria -- for which rice can be a breeding ground. Larger Market Share. Motorola''s Paging Products Group (PPG), which has won 60 percent global share of its markets, could not have done that without cost, quality, cycle time, technology, and other advances made by its suppliers. Underlying such benefits at Chrysler, M&S, Motorola, and other firms are more specific gains from customer-supplier alliances: * Ongoing cost reductions that can double those possible through market transactions * Quality improvements that exceed what individual firms can possibly do alone * Design cycle times 50 to 75 percent shorter than those in traditional relationships * Increased operating flexibility, which in some firms has yielded an economic lot size of one -- the ultimate in flexible manufacturing * More value for the customer''s customers, including faster and better responses to new needs and opportunities * Enhanced leverage with technology, including earlier access to new concepts and more control over technological change * More powerful competitive strategies, gained when a customer adds its supplier''s expertise to its own The techniques described here are generally applicable to all firms, regardless of size or industry. Best practice in customer-supplier links is largely independent of whether the activity involves materials, parts, equipment, or services. In some cases, however, such as risk sharing with suppliers, the methods to use depend on whether the customer is a retailer or distributor, or whether it sells directly to other firms. Competition Is Driving Firms to Integrate Commerce has traditionally involved a chain of independent firms, each adding separate value to items bought from others. Typically, each link in that supply chain has been an arm''s-length pact. Buyers shopped for price and performance in the open market. Whenever the marketplace offered a better deal, one supplier was left for another. These arrangements are regarded as central to the success of market economies. This notion is faulty, for they also impede economic growth. In fact, supply firms cite poor relations with their customers as one of the most critical barriers to their improved competitiveness. For example, U.S. and European automakers long suffered from high costs relative to their Japanese rivals. A main obstacle to reducing these costs was the firms'' hostile relationships with their suppliers, which are only now being turned around. Similar problems troubled the computer chip business. Sematech, the nationwide semiconductor alliance, was launched to perform R&D on a scale that would save firms that make chip manufacturing equipment, which had grown dangerously weak. Yet the creation of Sematech did nothing to address a crucial cause of the problem: longstanding adversarial relations between chip producers and their equipment suppliers. Sematech members, representing 80 percent of U.S. chip volume, did not involve suppliers in their planning, nor did they share data on equipment performance. Business relations were conducted purely on short-term considerations, although today the situation is changing. Driven by brutal competition, supply chains in every industry are moving toward integration. The demands on individual firms have become too vast to be met by each one acting in isolation. For a company to deliver maximum value to its customers, it must receive maximum value from its suppliers. Moreover, no firm working alone can differentiate its products as much as is possible with suppliers'' help. Nor can it have lowest costs if its suppliers do not, or top quality without their support, or shorter cycle times than theirs, or more generally obtain their best efforts on any task unless they choose to apply them. No contract or amount of bargaining power can create these benefits. They can be gained only in an environment of cooperation and mutual commitment. To distinguish the new, integrated arrangements from typical arm''s-length supply chains, the former will be referred to here as value chains. Hallmarks of Powerful Customer-Supplier Alliances By definition, a strategic alliance is a relationship between firms in which they cooperate to produce more value (or a lower cost) than is possible in a market transaction. To create that value, they must agree on what it is, need each other to achieve it, and share the benefits. Without a shared objective, meaningful cooperation is not feasible. Without mutual need the fi

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