In a recent article over in IndustryWeek on why it is time to tell your CPO to collaborate with suppliers, A.T. Kearney outlined their four dimensions of strategic value that they claim will allow an organization to unlock the next level of value. The four dimensions of value they outlined are:
through improving the value proposition for existing customers or generating sales to new customers
- risk management
to deal with a world of increasingly unpredictable and devastating risks
- value-chain optimization
by tweaking the value chain to benefit all players by allowing them to focus on their strengths
- structural capabilities
that improve agility, responsiveness, scalability and even corporate social responsibility
And, according to the article, they depend on collaborative relationships with the supply base. However, in order to succeed in these relationships, the parties must reach mutual value. So how do the parties reach win-win situations? They start by using a value-screening process that takes the following steps:
- Develop a Relationship Baseline
does the existing relationship provide a competitive position, strategic direction, and/or joint commercial flow in an aligned culture?
- Identify Initial Value Hypotheses
is there a potential opportunities that brings a level of value to both parties?
- Align with Internal Partners
which opportunities bring the most value to the organizations?
Then, according to A.T. Kearney, the next step is to turn supplier collaboration into a core competency. This is not an easy process, but it is a manageable one. It revolves around:
- the formation of value creation teams,
- the establishment of foundational processes, and
- management of the transformation.
These core actions become part of a two-to-three year transformational roadmap which, when completed, will address all key suppliers and, hopefully, provide value well above and beyond typical cost reduction strategies. And if they are done right, they should enable the four dimensions of value outlined above.
Are they worth it? Any organization that grows, controls risk, and improve its structural capabilities and value chain should be able to create and sustain value even in weak economic environments, so they are worth it. Are they enough to get you to the next level? On their own, probably not as they don’t require innovation (as renovation is often enough for companies who are not leaders), but they are good value dimensions.