Customer collaboration without fear

A new study from consulting firm Deloitte finds that the vast majority of manufacturers say they are more customer-centric than their competitors, but few back that up with customer-centric practices. Building off a benchmark survey of more than 700 manufacturers, the firm looked closely at this "customer collaboration paradox." MSI talked to Doug Engel, U.S. manufacturing-practice leader for Deloitte, about operational practices and strategies that combat the paradox.

MSI: What is surprising about the customer collaboration paradox?

Engel: Our research found that managers at more than 90 percent of companies believe they are equally or more customer-centric than their competitors. But of course, not everyone can be more customer-centric than the competition. So we studied customer collaboration more closely, and found that few companies actually employ the strategies, steps, and tools that help them become customer-centric. The percentage varied depending on the area examined, but our research shows that, despite the demonstrated benefits of working closely with key customers to drive sales, improve product innovation, and better match supply with demand, only 3 percent to 8 percent of respondents are actually engaging their customers in this manner.

MSI: What sort of strategies, steps, and tools are we talking about?

Engel: It spans several areas—including collaborative product development, demand visibility, and having the right tools and systems in place to support these areas. It's also important to know your total cost of service to each customer, and having the right pricing in place by customer.

MSI: Any tips for overcoming the paradox?

Engel: It requires balancing complexity and organizing to deal with silo issues. The majority of companies that excel at collaborative practices have C-level executive sponsorship of collaborative initiatives, which we believe helps overcome the silo mentality and drives program objectives across multiple functions. Another tip is to start early with customer collaboration—at the design stage, and right on through to questions like "How are we going to allocate capacity to our best customers?"

MSI: What is holding people back from deeper customer collaboration?

Engel: There is an element of fear ... if we collaborate more closely with customers, they will ask for more cost reductions. Certainly in the past, some efforts to consolidate supply bases focused on cost reduction, and that's why their success was limited. The most successful efforts focus on factors like ensuring a higher level of service and quicker response time. Collaboration can involve how to subassemble a product to make it lower cost over its whole life cycle, or as a common platform for similar products.

One example we studied was the collaboration between a global consumer electronics giant and a leading U.S. retailer. By assessing the channel strategy and identifying the key-value drivers in the relationship, and then designing and implementing a program for collaboration, the manufacturer was able to double sales through the retailer over a two-year period. This shows even industry leaders can benefit dramatically from improving their collaboration.