Thursday, May 21, 2015

Longevity Factor #3: Customers and Suppliers are True Business Partners

Old companies tend to believe they cannot maintain success without the cooperation of others, so they put a premium on actions that will retain their suppliers and customers from generation to generation. They regard working with vendors to develop the capabilities needed to continue to supply their own organization as an obligation. Continuing to provide long-term customers with the products and services they desire is seen as a responsibility. Responding to new needs or problems identified by customers results in learning and development that helps ensure the firm’s survival. Incorporating new technologies developed by suppliers and other business partners helps keep the old companies relevant. These relationships with business partners that result in mutual learning are an example of the behaviors proposed by Peter Senge in his description of “learning organizations." The learning organization facilitates competitive advantage through employee engagement in the customer experience and collaboration with key business partners, which ultimately boosts business performance. And, as former CEO of General Electric, Jack Welch states: “An organization’s ability to learn and translate that learning into action, is the ultimate competitive advantage.”

Because these old companies view the relationship with their business partners as something more than simply economic transactions or the trading of goods and services for financial gain, they are willing to share technologies and ideas that other companies would consider company-confidential. Such long-term relationships thus result in mutual learning: the willingness to learn from all transaction partners was seen by the old companies as an important factor in their firms' long-term survival. This emphasis on long-term relationships leads to a kind of symbiosis with their business partners. These close-knit, mutually-supportive relationships have a significant effect on the company’s ability to weather environmental challenges as well as their ability to learn and adapt over time. 

Old companies are significantly more likely than younger firms to emphasize their corporate values and product story when working with customers, and they also make more of an effort to see that their products are used in the best way. Further, old companies work hard to gain an understanding of key customers, using customer service and after-sales services as a way to build long-term relationships with customers - and to learn from them. Often the old companies even define their purpose in terms of helping customers accomplish their purpose.

 This emphasis on long-term relationships should not be interpreted to mean the old companies don’t also seek out new business partners: In our research, old companies placed even more importance on developing new customers than did younger ones. However, the old companies truly believe they cannot maintain their success for a long period of time without the help of their business partners. When customers and suppliers become trusted business partners, both parties are willing to share information and do favors for each other that don't necessarily have any readily apparent financial gain attached. This willingness to share information, technologies, and ideas becomes a two-way street, resulting in mutual learning and mutual success.

This longevity factor of long-term relationships with customers applies across industries. When I first started researching 100 year old companies, I thought there was a preponderance of retail organizations and it made sense that building good customer relations was an important factor in ensuring repeat business. But after building a representative data base of 100 year old companies, we found that the retail industry isn't represented at a higher rate than in the general business population. Old companies scored extremely high on issues of building long-term customer relationships regardless of industry. It may seem obvious that old companies are more likely to emphasize their corporate history, culture, and product "story" when working with customers. But it goes beyond the selling: the old companies were significantly more likely than younger firms to make every effort to see that their products were used in the best way. This involvement in how customers utilize the company's offering is what leads to learning opportunities for future changes and improvements. Thus the old companies are able to survive upheavals in their industry, advances in technology, and other environmental and social changes that leave their competitors behind.

When I attended IBM's 100th anniversary celebration as a guest speaker, I sat in the back of the room for the opening keynote address. As one of IBM's corporate leaders talked about the company culture that enabled them to survive for the last century, one item she mentioned was their long-term relationships with customers, which led to mutual learning and success. Without any prompting – or knowledge of who I was and what I did – the gentleman sitting next to me leaned over and said: "Our company has been an IBM customer for 80 years and I can tell you what she's saying is absolutely true. They work with us all the time on problems we have and help us find ways to address them."

By viewing their relationship with business partners as something more than the exchange of goods and services for financial gain, old companies have built a supportive network that reaps great benefits in the long run and have helped ensure, not only survival, but success, for over a century. As Swedish investor Marcus Wallenberg says: "Established firms have a huge advantage in the marketplace because of their strong customer and supplier bases."

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