HOWZAT

The payback can be substantial, he claims: “If you do full customisation of both demand and supply you would, over a three-year period, have outstripped your peers by a factor of four.”

Booz Allen Hamilton research appears to show that many highly successful companies have been using the smart customisation approach for years before the consultancy discovered it. Analysing the reasons for the success of such companies as Unilever, Campbell Soup, Ericsson, Time Warner and BP Castrol provided the data on which the smart customisation theory is based.

A company that gained from putting smart customisation into practice is BOC, the supplier of industrial gases.

“BOC moved over from a one-size-fits-all approach to a segmented market based on need and created a product and services offering tailored to each,” Verity says. The company originally supplied gases in the same way as milk. You could get a bulk discount but otherwise the service involved delivering the stuff and taking the money. Market research showed that this was what 80 per cent of buyers wanted. But 20 per cent of customers wanted reliable supplies at specified times and were prepared to pay for the extra service.

For them, BOC introduced long-term service agreements guaranteeing supplies, and appointed dedicated sales teams to these premium customers. The service agreement orders were identified by “flags” in the enterprise resource planning software used to control production. The order fulfilment and delivery systems were redesigned to give them priority.

The rest of the market, which reacts almost entirely to price, was served by hammering out cost. Ordering was computerised and marketing restricted to cheap channels. Performance metrics were introduced to eliminate unprofitable sales.

The system produced instant results in the pilot scheme in Africa, boosting market share in both segments of the market and pushing sales growth to 10 per cent more than elsewhere in the group. BOC is now looking for more market segments, and is taking the system worldwide. THE problem with establishing a business relationship is that some think a partnership means never having to say you are sorry.

This is nonsense, says Curt Sahakian, lawyer, founder of the Corporate Partnering Institute and author of Corporate Partnering: A How-To Handbook. “Many people think partnering is a social activity and want a partnership to last for ever, but it is only good while you are achieving your objectives.”

Managers looking at partnering as a way of expanding or going into new markets should never forget that the relationship is strictly business.

Your opposite numbers in the alliance may be nice and you may enjoy their company, but they still have to fulfil their part of the deal.

You need to go into the relationship with a clear idea of what you want and what you can offer, he says.

“Start with a list of the resources you are lacking and identify people who have what you want. Make sure you have something they want.”

In the euphoria of the courtship it may seem rude to insist on a proper legal footing for the alliance, but getting lawyers involved is absolutely necessary for future success. You need to keep an eye on the calibre of their advice too.

Sahakian advises getting as much information about your new partner as possible. Its employees may be the best source: “Engineers often have more loyalty to their craft and their guild than they do to their employers, so you can often get them to tell you things they shouldn’t.”

In the course of the partnership, ensure that your partner is happy with what it is getting out of it, even though it may be clear to you that it is not getting the best deal. “You want to make sure that your partner gets what it wants, not necessarily what it needs.” And when it is over, get out: “Once you’ve got what you want there is no reason to stick around.”

The classic example of a partnership that benefited one party more than the other was between Microsoft and IBM, joint creators of the IBM PC.

“When Microsoft and IBM joined forces, Microsoft was a $30 million company and IBM was huge, but IBM needed an operating system right away. It tried to dominate the relationship but IBM was unclear about what the goal was and Microsoft had a very clear goal. It is now bigger than IBM.”