Thursday, August 21, 2014

B2B Relationship Management

The Dwyer, Schurr and Oh model of Buyer-Seller relationships describes 5 phases in the development of B2B relationships (1) awareness, (2) exploration, (3) expansion (4) commitment, and (5) dissolution. While the exact roadmap varies, the high level topography of the relationship can be represented in the following diagram.

The dynamics of the relationship vary depending on the phase of the relationship. The value derived by both parties in a good relationship increases as the relationship deepens. This deepening of relationships involves building of personal trust between representatives of the seller and the representatives of the buyer which at an aggregate results in organizational trust between the two organizations. The primary job of B2B relationship managers is to understand the phase of the relationship and work towards building and maintaining organizational trust. Such trust presupposes value, so clarity on how value can be created for stakeholders on either side through the relationship is a key skill. Transactions involving promises of value followed by actual delivery of value help in building trust in the processes, products, people. As trust increases, the need and cost of transactions decrease (less redundant QC and governance, less wastage of negotiation time and costs, tighter integration between respective organization processes, products, people) to maximize end-to-end value delivered to customers of buyer. So the skill to consistently make and deliver on promises of value is a key skill for relationship managers.
But sometimes there are problems originating in either organization which slowly destroy trust, increasing transaction cost, reducing value delivered. Typically this happens when either the consistency of promises of value and actual value delivered decreases or when the communication around this misses the wood for the trees. I have faced this kind of situation multiple times. In each case, inevitably the solution is to go back to basics. Understand what value means to each stakeholder, improve consistency of promises made and actual delivery of those promises and communication regarding all these. Typically once the minimal repair is done, even if both parties restart talking together and agree a roadmap of the remaining repair (another promise), the executives on both side relax and if the roadmap is delivered, the relationship heals. Most relationships go through ups and downs and all the above happen to varying degrees over these ups and downs. I have had the good fortune to have turned around multiple customer relationships that I have worked on.
But there is one other aspect of buyer-seller relationships which needs attention. As described above, increasing trust increases integration between buyer and seller. There is then a need and opportunity for the seller to understand more and more of the buyers business and vice versa. This is a positive feedback loop and kickstarting it requires a particular level of trust to be reached as well as a particular level of competency to develop, without which the relationship cannot grow further. However if the trust and competency develops, it becomes neccessary and possible to work together to define joint go-to-market plans to benefit both parties. I have not had the good fortune yet to see any relationship go to this level successfully. It is my goal to reach this level with atleast a few of my clients over the next few years.
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