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Monday, November 08, 2004

Good Companies And Good Customers

Subroto Bagchi writes in Businessworld that it is amazing how good companies and good customers invariably team up together. Subroto writes based on a solid conceptual understanding of issues based on well honed experience. Excerpts:
If we look closely enough, we will find that it is not a coincidence, even if the process of self-selection very often is not evident to the players themselves. It is easy to understand that good customers will know how to seek out good companies. But do good companies consciously seek good customers? In other words, would they have filtering criteria to stay away from customers who do not promise to be a natural fit? It is interesting how little thought has gone into a subject like this. Yet, we all know that choices wrongly made wreck relationships and create opportunity loss beyond the evident.

The four factors – in that order are:

- The techno-managerial value that a customer brings to table,
- Trust,
- A sense of equality in dealings,
- And a commercially win-win deal.

The first factor is about opportunity gain or loss beyond the contracted value of a given deal. This particularly involves companies in the services arena. Beyond getting paid for the work we do, who we work for makes a huge difference in terms of learning. The result is inner growth, with which a company remains ahead of the curve and able to improve its products and services. A customer has huge potential to add to the techno-managerial competence of the serving company. A little critique, minor feedback, a gentle rap can lead to significant development of the people engaged in the relationship. As a result, they emerge from the engagement taller, more knowledgeable and self-confident. These are stock-in-trade. On the other hand, if you work with a well-paying customer who doesn't add techno-managerial value, you emerge intellectually poorer. There is no way one can gain lost time in the process. Thus, when making a deal or weighing a concession during a negotiation, I look for how much a relationship would help me grow. We seldom realise that our customer's excellence rubs off on us - as does their mediocrity.

The second factor is trust. In business, everyone talks about it, but it is more of a nice-to-do thing that only has so much tangibility to deliver. Trust is a driver of cycle-time. Given trust, your cycle-time comes down drastically. The more 24/7 your operation, the more globally dispersed your supply chain. So, the need to look at trust as a cycle-time issue is more. Where trust exists, miracles happen. Say, you have done a deal in good faith but inadequate information; and downstream, you are hurting. You tell your customer so. If there were no trust, the customer would show you the contract and non-existent competitors who are willing to do the job at half the cost.

(Part II Shall appear next week).
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