Academic journal article The McKinsey Quarterly


Academic journal article The McKinsey Quarterly


Article excerpt

Teaming up with suppliers was just a first step

Customers and channels can be partners too, even competitors

Focus on creating revenue

Marketing's fifth "P" is a direct link to strategy

In early 1992, Mead packaging, a premier manufacturer of beverage cartons, was suffering a spiraling decline in its relationship an a supplier to Pillsbury's flagship refrigerated baked goods division. At risk was the 50 percent of Pillsbury dough multipack packaging that Mead supplied. The relationship had become so antagonistic that Pillsbury had decided to "get out of Mead," and was actively exploring how to make a switch. Mead's value proposition, honed and executed with great success worldwide among beverage manufacturers, was out of step with the needs of Pillsbury's dough business.

On the brink of a major lows, Mead proposed a meeting of a group of leaders from both companies. From that meeting in the fall of 1992, the companies have united to build an exemplary partnership. A joint team helped develop a comprehensive improvement plan thai cut production and ordering lead times, reduced inventory, improved responsiveness, and boosted product quality. Two years later, Pillsbury awarded Mead 100 percent of its refrigerated dough multipack business.

The US Postal Service (USPS) found it was losing share to Federal Express and UPS because it could not trace and track where packages were in its delivery system. Worse, an internal investigation found that developing such a competency could take years (as did the FedEx and UPS systems), would be very expensive, and would require systems skills the organization did not possess. In the face of the competitive threat, the USPS turned instead to SHL, a systems integrator. Before too long, it was able to boast its own tracking and tracing system.

To the customer, the USPS is now more competitive on this important attribute. What customers do not see is that the USPS system is entirely managed and operated by SHL. Transcending the traditional confines of outsourcing "backroom" functions, SHL handles everything down to the "frontline" function of dealing with customer queries over the phone. The two organizations have merged elements of their business systems to provide the new value. Through this unique partnership, USPS was able to compete more quickly and at a lower cost than if it had followed FedEx and UPS in developing its own system.

Partnering defined

These are only two examples of one of the strongest trends of the past decade: companies working together with unprecedented intimacy to accomplish mutual goals. There are hundreds, perhaps thousands, of similar stories worldwide. Here, we intend to explore a common but often hidden theme behind these relationships: namely, how companies are using partnerships as part of their arsenal in marketing to other businesses.

What partnering is and how it should be defined are open to numerous interpretations. For our purposes, partnering is when two or more parties agree to change how they do business, integrate and jointly control sonic part of their mutual business system, and share mutually in the benefit [ILLUSTRATION FOR FIGURE EXHIBIT 1 OMITTED]. Such an arrangement is built on a deep understanding of what each company brings to the partnership and how complementary assets or skills can be leveraged to "grow the (shared) pie." While there are other interpretations and overlapping concepts such as alliances, our definition stems from observing how successful partnerships achieve impact. Just as synergies exist from breaking down the walls between functions within a company, similar but more powerful synergies can be tapped by tearing down the traditional boundaries between companies and replacing them with new processes, behaviors, and activities that can benefit both.

Four kinds of partnerships

Ten to 15 years ago, partnering was conceived almost exclusively as a means for major manufacturers to reduce supplier costs. …

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