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Customer-Intimate Suppliers and Continuous Innovation

April 13, 2022
Author: YKK
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Suppliers are the most ideal resources to help manufacturers innovate due to their unique perspectives and abilities. Manufacturer-supplier innovation can be taken a step further when manufacturers choose suppliers focused on their relationships with their customers, also known as customer-intimate suppliers. According to Michael Treacy and Fred Wiersma, customer-intimate suppliers are those that not only respond to market demands, but also to the needs of their strategic customers. Thus, customer-intimate suppliers tailor their products and services to deliver the best total solution for their customer.

Identifying Customer-Intimate Suppliers

How does a manufacturer determine if a supplier is customer-intimate? While there are no “dead giveaways,” there are some clues to look out for. One way to find out if a supplier prioritizes customers is to examine who a supplier works with. Simply put, if the companies that choose to partner with them are competitive and innovative, that is good news.

Customer-intimate suppliers also sell in a particular way, opting to find impactful and long-lasting solutions tailored specifically to each customer’s needs rather than taking a “one size fits all” approach for all customers. Hence, customer-intimate suppliers will always listen first and recommend a solution later. If what the customer requires cannot be offered, truly customer-intimate suppliers will provide an appropriate referral.

Many suppliers consider a sale to be over once the purchase has been completed. However, only customer-intimate suppliers take steps to ensure the solution is being implemented properly in post-sale operations such as assembly and packaging. Customer-intimate suppliers also display a willingness to adapt relationships to remain productive and mutually beneficial over the long term. They not only build strong relationships, but also foster trust, transparency, and respect across multiple levels of the customer’s organization. Customer-intimate suppliers also seek to create value by providing nonstop innovation even after sale and post-sale activities are complete.

Customer-Intimate Suppliers and Innovation

Manufacturers that align themselves with customer-intimate suppliers can claim two victories: increased rate and impact of innovation and reduced total cost of ownership. The resulting innovation may be incremental if the product addresses specific market demands or transformational if the product requires shared investment to meet its associated challenges. These partnerships also have the potential to foster gradual, consistent cost reduction.

Whether the innovation is incremental or transformational, collaborating with customer-intimate suppliers is clearly advantageous as they are dedicated to molding their products, services, and operations around the needs of their customers. While such actions may be expensive for the supplier in the short term, they are largely viewed by customer-intimate suppliers as wise investments for the fostering of a healthy, long-term partnership. Only when manufacturers and suppliers align their product development and administrative functions towards a common goal can they discover what it takes to be continuously innovative.