Written by guest author David Whitmore, Strategic Advisor at MIGSO-PCUBED

Fostering robust B2B relationships is crucial for the new government’s ambitious growth and productivity plans. Despite the intuitive understanding of their importance, the UK’s track record in forming these relationships is fraught with notable failures, from the London Underground public-private partnership to the collapse of Carillion. Original research by SHAPE International, now extended by MiGSO-PCUBED and UCL, sheds light on the fundamental principles of successful B2B relationships and underscores the urgent need to adopt these insights to meet national economic goals.

The commitment of the new government to encouraging closer relationships with the private sector is to be welcomed. It’s hard to see how the ambitions for growth and productivity improvements can be achieved without this. I don’t think this conclusion is contentious. People intuitively get it. Great Business to Business (B2B) relationships are key to delivering successful business outcomes.

The problem is we don’t have a great track record of forming excellent B2B relationships. There are many case studies and audits that identify how business to business relationship breakdown leads to or contributes to, business failure. The collapse of the London Underground public-private partnership, the evident lack of trust between the Post Office and Fujitsu, the cladding scandal at Grenfell, the collapse of Carillion and the Scottish Police i6 digital system all point to systemic relationship issues within UK business. If we’re not very good at forming B2B relationships, then what does that mean for the government’s plans for growth?

There are some examples of great B2B relationships and it’s important we learn the lessons from these cases. Original research published in 2011 by B2B specialist SHAPE International captured this learning and MIGSO-PCUBED is working with SHAPE and UCL to extend this by asking how digital collaboration, modern working culture and the pandemic has affected the research’s original conclusions.

Early results indicate that the original research holds true. We have been interviewing senior executives from the UK’s biggest businesses and projects and we find that whilst they have a natural instinct for the benefits of excellent relationships, they are frustrated by the inability of their organisations to implement it in practice.

It’s also apparent that they aren’t aware of some of the theory that underpins great relationships. Maybe this isn’t surprising. Like me, most of our interviewees come from an engineering, finance or legal background and during their studies they have not been exposed to the psychological or behavioural economic principles that underpin this area of business.

There were a number of insights from the original research, which were new at the time and are still not well understood. And these are:

• Relationships are two-way. Relationships can’t be “managed” by one party alone and need to be jointly developed.
• Relationships cannot be three-way, four-way, etc. For example, in a joint venture of three partners there are three two-way relationships, not one three-way relationship.
• All relationships are different. You cannot use an approach that was successful between company A and company B for a relationship between A and company C.
• Relationships come in many forms but there are only two types of relationship: strategic and transactional. They are very different and don’t exist on a spectrum, i.e. a transactional relationship can’t get so “good” that it becomes strategic. Often two companies in a relationship have a different perception of the type of relationship they have and this leads to confusion.
• There are seven “dimensions” to any B2B relationship and they can all be managed. Two of them are “entry points” and once set are very difficult to change. These are “selection of the partner” and “nature of the contract”. Partners should be selected with a significant weighting given to their ability to form successful relationships. The contract should enable the type of relationship you intend to have. After all, at its most basic, a contract is an agreement to have a relationship.
• Four of the dimensions are controllable. These are “ways of working”, “interpersonal relationships”, “understanding each other” and “dealing with problems”. This requires both parties to work together to define the approach to each of these dimensions. We find this rarely happens across all four dimensions. Furthermore, we find very few organisations put relationships on their corporate risk register.
• The final dimension is “performance management”. This requires the relationship to be measured. All relationships are measurable and can be quantified. Most people believe that relational factors such as “trust” or “honesty” cannot be objectively measured. This is incorrect. They can be measured and tracked. Once the relationship has been measured and targets set, action plans can be developed and the impact of these actions on the relationship monitored. This becomes a critical business metric.
• Transactional and strategic relationships can be assessed for quality by ranking the relationship against each dimension. This can indicate where action needs to be (jointly) taken to improve. An essential 1^st step is agreeing whether the relationship is strategic or transactional. It is remarkable how many people’s instinct for this is wrong (or worse the two parties disagree). Ranking against the 7 dimensions is the way to work out what type of relationship you have or need to have.

When organisations adopt these principles, identify their critical relationships and work to keep them in good health the business benefits can be quite remarkable. Take this quote from the CEO of leading business in the construction sector after they used our services to improve their critical relationships:

“We have outperformed the sector and proved that developing and measuring the softer aspects of our key business relationships impacts favourably on the bottom line. Over the past 3 years, margins have improved from less than 2% to well over 3% – which is phenomenal for the construction industry. This has been accompanied by tender success rates that have improved from 1 in 4 to 1 in 2, a greater ratio of repeat business, a two-fold improvement in safety performance and a 65% reduction in claims”.

MIGSO-PCUBED have launched a unique capability and its associated intellectual property (IP) in collaboration with Shape International Limited. Through our research we hope to take the capability to the next level, especially in the world of major projects. We’re committed to the belief that the single biggest risk in UK businesses today is the failure of critical B2B relationships. The UK’s contractual approach to relationships is the root cause of this, and other regions, especially in Asia, don’t have this problem. Until this gets the attention it deserves we feel the government’s ambitions for growth will be difficult if not impossible to achieve.