New research shows that top performing companies focus on relationships, while fourth quartile companies focus on saving money and spinning off business.
The rising trend for companies to focus on decreasing working capital, increasing supply chain efficiency and spinning off non-core business may be the only option for some of them. But many businessmen, in their hearts, feel that it isn't always the best way forward. This feeling has now been confirmed by new research from management consulting firm, Booz Allen Hamilton and the Kellogg School of Management at Northwestern University.
The research reveals that companies that focus on relationship building activities, that emphasize growth opportunities, and that adapt to a changing marketplace, are much more likely to be top performers. While two out of three top performing companies have these objectives, nine out of ten lower performing companies are instead concerned with reducing costs, and more than half are focused on divesting business.
Clearly, we could ask whether the whole thing can be turned on its head: is it because they are performing badly (for any number of reasons) that they have to focus on saving money, whereas if they are performing well they can afford to focus on customers and growth?
Statistically significant data
According to Gary Neilson, Booz Allen senior VP and study sponsor, "While organizational behaviourists have been theorizing this for years, we now have concrete evidence that companies built around collaborative relationships with customers, suppliers and alliance partners perform better for their shareholders. This study confirms with statistically significant data the increasingly prevailing view that relationship-centric organizations are better positioned to succeed in the competitive environment of the 21st century."
The research also revealed that some four out of five respondents are busy shifting their focus from selling products and services to developing value-added solutions in partnership with their customers.
Top vs bottom companies
A comparison of top- and bottom quartile companies shows that:
- More top quartile companies are focusing on lengthening their relationships with their customers.
- More top quartile companies are focusing on lengthening their relationships with their suppliers.
- More top quartile companies focus on meeting customer expectations, while bottom quartile companies are more concerned about future government regulation.
- As a group, top quartile companies tend to be more revenue driven, externally-focused and growth oriented.
- Top quartile companies are more attuned to changes in their competitive environment: they scan actively for external opportunities and threats.
- Top quartile companies are more optimistic about the growth prospects.
Professor Ranjay Gulati of Kellogg adds: "Historically, companies developed great expertise and elaborate processes around managing physical assets, but as the knowledge economy takes hold globally, companies are increasingly applying this same disciplined approach to managing their network of relationships, effectively treating these relationships as assets."
For a copy of the research report or more information about the study, please contact Karen Guterl at firstname.lastname@example.org