See Relationships as Valuable Assets
I cannot stress too often that a quarterback is not in the game by himself, nor should he expect to bear all the burdens of conducting the offense. Successful quarterbacks want as much solid and useful information as they can get during a game, and one who tries to do it all on his own is heading for some disappointing game days.
From The Art of QuarterBacking, by Ken Anderson of the Cincinnati Bengals
Professional athletes are never in the game by themselves, and they always want as much useful information as they can get. The quarterback might be seen as the star of the team, but in his book, Ken Anderson goes on to say that besides listening to the coach, the QB needs to tune in to the guys in the backfield, the linemen, and even the players on the sidelines. To win the game, he needs every one of these people not just for their blocking, tackling, running, and receiving, but also for their perspectives on threats and opportunities unfolding on the field and how to deal with them.
Savvy managers, entrepreneurs, and professionals understand that they, too, are surrounded by people who can help them. They see their relationships with those people as valuable assets, and that is the first principle of Relationship Asset Management (RAM). When you see relationships as assets, you focus on them. You are attuned to every one of them, and you employ them to move your organization and everyone with a stake in it toward their goals. You realize that without relationships, you don't have a business. And you know that when you're on top of your business relationships, you're on top of your game.
Mining the Value in Relationships
We're here to blow the whistle and call a timeout! We want you to join us in a huddle and hear a game-winning idea: You've got to protect your assets out there and put them to work for you and your company.
Is this warning necessary? Aren't managers and entrepreneurs already managing their assets? Aren't they tracking down materials breakage and plugging inventory leaks? Don't they immediately put idle equipment and empty office space to use? Aren't they ridding the shop floor of wasted time and motion? Haven't they declared open season on fraud, embezzlement, uncollected debts, and other financial losses?
Of course. Yet they often sit stone still as some of their most valuable assets leak out, sit idle, or lose money. The assets in question are the company's relationships. So, we're saying, let's take a look at what's happening to our business relationships and develop a game plan for identifying, evaluating, developing, and protecting these assets.
The fact is, many managers don't see their relationships as assets. True, most know that customer relationships are important. The same goes for those with employees. However, as important as those two stakeholder groups are, they are just part of the picture. Every relationship that the company has with everyone it touches or could benefit from touching is an asset or a potential asset. In business, assets must be mined for their full value. That's the approach that we recommend managers and entrepreneurs take to their relationships.
Many companies don't fully consider the role that relationships play in their business. For instance, in the early to mid-1990s, a major cereal, cookie, and snack food company laid off a large portion of its veteran sales force. These men and women were being paid more than the company would have to pay younger, less experienced recruits. So, in a typical economically driven personnel decision, management laid off large numbers of seasoned salespeople. The move was justified by financial strategy, which aimed to cut costs, a common objective for companies in mature markets. The move also seemed justified by marketing strategy. After all, with long-established, household-name brands, management believed that the products had a permanent franchise on supermarket shelf space. Didn't they basically sell themselves?
Not exactly. From 1996 through 1999, the company's total annual cookie, snack, and cereal sales decreased dramatically. Analysts reported that the company had underestimated how important the relationships that its salespeople had formed with supermarket and grocery-store managers were. It turned out that the battle for shelf space depends on more than having solid brands. It also depends on the relationships that a company's salespeople have with the people who control the shelf space in the stores.
The relationships that those salespeople had built with the store managers over the years were valuable assets. Those assets were destroyed in a matter of weeks because of one management decision. Implicit in that decision was the failure to view relationships in this case, relationships between salespeople and customers as assets.
Assets enable a company to reach its goals. That's why assets have value and why companies invest in them, manage them, and maximize the use of them. That's also why relationships are assets: They enable a company to reach its goals. We're convinced that a major reason so many companies don't manage their relationships as assets is that managers don't fully understand the role that relationships play in reaching goals. Or maybe relationships are too intangible for most managers to see as assets. Yet information is intangible, and most companies now view it as being on par with the traditional resources of land, labor, and capital. The investment of billions of dollars in information technology and the creation of the position of chief information officer both attest to that. However, a company needs relationships with employees, customers, suppliers, investors, government agencies, competitors, and a huge array of other entities and individuals as surely as it needs offices, computers, vehicles, and information.
No business of any size can function without relationships because they provide the context in which people do business. When that context is missing when people don't really know one another, or when relationships are distorted by mistrust, greed, or bad feelings doing business becomes far more difficult, if not impossible. The better a company's relationships are, the better that company will function. What's more, doing business by developing relationships is much easier, far more personally rewarding, and a lot more fun.
Microsoft might be the best recent example of a major company failing to manage all of its relationships effectively. As of this writing, Microsoft faces the possibility of a federally ordered break-up of the company. Whatever your opinion is of the court's decision (we have our opinion, too), and whatever the ultimate outcome is of the case and of the appeals to follow, one thing is certain: Microsoft did a poor job of managing its relationships with two important constituencies its competitors and the government. As reported in the November 1, 1999, New York Times, complaints from Netscape Communications about Microsoft's competitive practices "captured the Justice Department's attention and touched off the investigation and trial." Two years before the trial, Sen. Orrin Hatch called Microsoft chairman Bill Gates before his judiciary committee and gave him "a political shellacking." Novell Corporation, another Microsoft competitor, happens to be based in Utah, which happens to be Sen. Hatch's state.
With an 80 to 90 percent share of the world's microcomputer operating system market, these were risks that Microsoft could have foreseen. A near-monopoly actually benefits from competition or, at least, the appearance of competition. For instance, in the commercial credit-reporting business, where Dun & Bradstreet has long held about an 85 percent share, D&B tolerates competitors, such as TRW's business credit-reporting division and other, smaller credit bureaus. With antitrust laws on the books, healthy competitors are arguably a key success factor for a near-monopoly. However, Microsoft's practices angered its few genuine competitors, who took their case to the government.
When Microsoft finally perceived the risks it faced, it began a serious lobbying and public relations effort. But that effort was occasionally clumsy and certainly too late. The Times article mentioned, "Mr. Gates long disdained the capitol [Washington, D.C.] as an analog anachronism in a digital age and refused to devote time or resources to courting government leaders. That has now changed, in a big way."
If a Relationship Asset Management (RAM) strategy had been in place and had been properly executed, Netscape, Sun Microsystems, and Oracle would not have felt the need to counter Microsoft's market power with lobbying and campaign contributions. The government would have not received complaints or, if it had, it might have taken measures short of literally making a federal case out of it. Yet in all fairness, it would have taken extraordinary foresight for Microsoft to view a good relationship with the government as an asset. Few companies in unregulated industries do. Also, most companies automatically adopt an aggressive posture toward competitors. That's part of why our approach to relationship management is a whole new game. It views all relationships as assets, even those with the government and competitors.
From the RAM Playbook
The notion that relationships with competitors can be assets strikes some managers as fanciful. But the speed of change in business means that most companies cannot "do it all" on their own. Even those that can do it all can't do it quickly enough or profitably enough if they go it alone. At Entente, our venture-capital/mentor-capital firm focused on the Internet consulting business, we found that when two companies actually analyze the regions, markets, and technologies where they compete, this usually amounts to 20 to 30 percent of their respective total operations. This is particularly true of small to medium-size companies. Considering the benefits that can accrue from cooperation, there's little sense in letting the 70 to 80 percent that holds potential be canceled out by the relatively small area of competition. Start talking with competitors. Try to see where you really compete and where you might be able to profit together.
The Times quoted a Washington attorney hired by Microsoft in 1998 as
saying, "The company made a mistake years ago by not cultivating
friends in government, academia, and the media. It's hard to do when
you're in the middle of a problem. I've told them they have to make
friends before you need them, rather than after." We've italicized
that last statement because it could serve as the mantra for all who
would practice RAM.
A company as mighty as Microsoft can be brought into a damaging action
at law by its failure to develop relationships with its competitors
and the government (despite its considerable skill at forging bonds
with customers and employees). A well-established international snack
and cereal company with a first-rate merchandising operation can lose
millions of dollars in sales because it misjudged the value of
relationships between salespeople and store managers. If that's the
case at these leading companies, perhaps a "timeout" is definitely in
order so that we can all take stock of our relationship assets.
This process begins with an understanding of the Relationship Web.
The Relationship Web
Consider what happens when a business fails. A whole universe of
people feels the impact. Employees lose their jobs, sometimes their
homes, and even sometimes their health and marriages. Suppliers
undergo lay-offs, extending the misery further. Lenders are not
repaid, and shareholders lose their investments. Charities and
community groups lose funding and perhaps volunteers. A business
failure reduces the state's sales tax revenue and property, payroll
and income tax collections. If a string of businesses fails or a large
enough outfit goes under, the community will need to reduce public
services, extending the effects to everyone in the vicinity.
Conversely, when a business flourishes and expands, a large number of people see their lives improve. Therefore, when we talk about relationships, we mean the relationships that the organization has with every entity or individual that it touches in any way. As noted, these relationships extend well beyond those with employees and customers. They include those within the organization, plus relationships with all those entities and individuals that form what we call the Relationship Web.
Every enterprise, large or small, profit or nonprofit, public or private, stands at the center of a web of relationships. (Similarly, each one of us stands at the center of our own personal Relationship Web.) Various strands connect the organization at the center to every entity and individual that it touches. It's best to think of those entities and individuals as stakeholders, as people with a stake in the success of the organization. For most publicly held (or to-be publicly held) companies, the key stakeholder groups could include these:
- Suppliers and vendors
- Accountants, attorneys, and other professional service providers
- Banks and other financial institutions
- Distributors and other resellers
- Strategic partners and alliances
- Licensors and licensees
- Complementors and competitors
- The board of directors
The investment community
- Security analysts
- The media
- Industry associations
- The community and the public
- Government officials, legislative bodies, and regulatory agencies
- Educational institutions
These stakeholder groups contain both entities and individuals, and when you think of your stakeholders, you need to consider both. In other words, your organization (an entity) and you (an individual) have relationships with entities (companies, nonprofit organizations, agencies, and so on) and with the people within those entities. A relationship between two organizations consists of the various relationships among the people in those organizations. RAM is a way of managing relationships at all of these levels: entity to entity, entity to individual, and individual to individual.
Note that former members of these stakeholder groups might have a place on the outfit's Relationship Web. Smart companies try to part on good terms with employees, customers, investors, and partners who move on. It only makes sense. Although some companies will not rehire former employees, many do, and even those that don't can use good word of mouth. Also, customers often return when they find the grass no greener elsewhere. Investors come and go and come back, and a former distributor or partner might return for the right deal.
There might be a place on the Relationship Web for noncompetitors in the same industry. For example, a building contractor in Ohio has a lot in common with one in New Jersey. Large companies might compete in a specific service or region and not in others. To the extent that companies resemble one another, they should consider themselves reciprocal members of one another's Relationship Webs. Also, companies in unrelated businesses in the same region usually share interests in environmental and other regulation, labor and real-estate markets, and communication and transportation infrastructures. Good relationships benefit all parties affected by such issues.
True complementors, such as Intel and most PC manufacturers, or tire manufacturers and car companies, are naturally on one other's webs. They belong there because they can help one another attain goals, enhance success factors. and mitigate risks. For example, if Intel designs onto a chip certain functions performed by software, that action could reverberate for better or worse throughout its Relationship Web. In such cases, it might be best for Intel to take a RAM approach and warn those companies so that they can prepare for the changes ahead.
The virtual community defined by the Internet cannot be ignored because it now includes all stakeholders. The sheer size, growth, breadth, and speed of the World Wide Web mean that even companies without the dot-com suffix must consider it a constituency as well as a medium.
An organization's size, industry, structure, and other characteristics can indicate inclusion of other stakeholders not discussed here. Again, the more complete the inventory of stakeholders is at this point, the more accurate the picture of the Relationship Web is.
A Relationship Web.
As we examine the principles of RAM, we will refer to the Relationship Web from time to time. Not only does it depict some of the stakeholders that a company will have, but it also illustrates that connections exist among them. This implies that a strategy of getting one stakeholder to recommend, work with, or otherwise be of value to another one can often be an effective relationship management tactic.