I’ve been working at both large and small companies as well as been an entrepreneur. One interesting thing I’ve noticed is how little strategic thinking companies are paying when they choose their partners and vendors.
Now you might think that’s not true? For sure all large companies have plenty of policies, rules and hierarchy which define acceptable partner profile and they describe very detailed what is ok and what’s not ok. This is true, but what I mean with my statement goes beyond to that question. What I mean is a strategic thinking regarding whole partner and/or vendor landscape. There is an old saying: it’s difficult to see the forest when there are so many trees in the front. It means that sometimes details destroy or hide the big picture. These details can sometimes be those policies, rules and stubborn, hierarchical human thinking that lead a company to wrong decisions.
Big picture
Almost every large company I’ve been working with have explained that they want to be fast and flexible. My eMBA professors from all over the world enhanced the need for organization to be fast and flexible. Still most of the large companies are not. What is the problem, if most of them are trying to be fast and flexible but more or less all of them fail in this for most of the time?
Large companies create rules and policies to control and manage the business. Those rules and policies secure that everyone is doing things as the management wants. Management has created and are creating new rules and policies just to coordinate and manage the business in a better way. They are meant to be good and helpful for the employees to do their work in a way the company wants. These rules are sometimes even connected to the strategy and vision. All nice and well until the reality hits. The bigger you get, the slower and more inflexible you get. That outcome seems to be almost impossible to be beaten? There are several models and theories how large companies can increase their speed and flexibility and how to do it. Some of them are really good and can help a lot. Some of them are mentioning my following thesis as a part of the solution but I’d like to give my “prescription” even more visibility and importance than I’ve seen articles to give. I believe there is one fairly easy way to meet demand of being fast and flexible, so let’s have a look at it.
Secret prescription
Ecosystems. One of the most trendy buzzword and at the same time it’s a basic formula for my secret prescription.
Imagine that you are a decision maker in a large company who wants to become again fast and flexible. Ask yourself a question: what kind of companies are fast and flexible by their nature?
Answer is small, entrepreneurially run companies.
Ask yourself another question: Why we don’t partner up or use more of these small, fast and flexible companies as our partners or vendors?
Answer is that we don’t use them because they are too small, we are afraid that they are too unsteady and volatile. How could we work with such a company which can be bought by almost anyone? Or which can fail and fall out from the market place? Too risky we say. Let’s stay with other big ones. At least we can trust them to survive longer and we also feel comfortable working with them. You know, they have also all kind of rules, policies and hierarchies so we can understand each other.
This is how thinking process many times goes in big companies. Does it help them to become fast, agile and flexible? No, but it’s in a way a safe choice. To do things as they’ve been done always, so no one is doing anything wrong. Only problem is that this attitude rarely increase speed or flexibility.
Let me tell you another secret. Any company, no matter how large or small it is, can be bought anytime. This is not a good reason for not cooperating with small companies or start up’s. Funny thing is that sometimes those old giants which are bought, are bought because they became so slow and inflexible. So slow and inflexible that they lost all competitive edges and their size was the only thing left.
So let’s have a look at the problem that small companies are too unsteady and volatile. That’s true – at least in many cases. Otherwise these small companies would be like any large company. Inflexible and slow but very, very stable – at least for the time being. How a large company can avoid risks when cooperating with a small, volatile company? Well, the answer is to build an ecosystem. Ecosystem of many small companies which together become enough stable and solid. When there are enough amount of small partners and vendors, also large company can reach what it originally wanted. It can get an easy access to fast and flexible services, solutions and innovations. R&D speeds up. Marketing and sales can get faster time-to-market when the whole development process is split between many small and fast companies. They can again fail fast & cheap, test things. Some of these companies in such an ecosystem are for sure capable of doing whatever is needed. And they can do it fast. Really fast. And others can integrate some other great innovations and services to this new solution developed by someone else. And suddenly a large company has created new products, services or programs which are beating all competitor’s since they can’t act as fast and flexible as you. Those policies, you remember!
Risk management
Risk is managed by having many small partners and vendors. I personally believe that you should always buy from a smaller partner than you are, so you can maximize your bargaining power. This is great benefit when cooperating with small vendors. Most of the time they do exactly what large company wants, since it benefits them as well. Since there are many small vendors and partners, they can also take hits better than one big partner or vendor. Large company should work fair and respectfully with them but rule of fairness should be always followed in business no matter how big or small you are. That’s the way to build your brand and trustiness among other great, innovative, fast and flexible small companies. Such a reputation where small companies would recognize a large company as a fair partner with their reputation, would make this large company very attractive. This would lead to a situation where more and more small companies would become parts of this ecosystem.
Yes, to run this sets up demands for more resources and energy. Not only to build and maintain such a vendor platform but just imagine if you can boost your sales by 10% or your new innovations by 50% or drop your time-to-market to half from where it used to be? Those can be rewards you find when changing your organizational habits. And I can assure you, working with smaller companies is much more fun than wrestling with the other big ones.