In a recent post on his blog Edge Perspectives, The Rise of Vendor Relationship Management, John Hagel writes about The Big Shift and how it is changing business. He focuses on the book, The Intention Economy by Doc Searles, a Fellow at both Harvard University’s Berkman Center for Internet & Society and UC Santa Barbara’s Center for Information Technology and Society. Hagel writes with passion and expertise and his ideas and commentary are quite thought provoking. I highly recommend reading the full articles, since it is impossible for me to do justice to their complexity and breadth here. Besides, I want to focus on his comments and examine how they relate to the staffing industry. What can a staffing provider learn from all of this?
I have to start by at least attempting a high level overview of some of what Hagel writes about. He defines the Big Shift as, “at the highest level, [the idea of] moving from a world of push to a world of pull,” saying “our world is being turned upside down by the Big Shift. Customer Relationship Management (CRM) emerged in part to cope with the growing power of customers, but Vendor Relationship Management (VRM) flips this equation and anticipates that customers will increasingly take the lead in managing their vendors.”
He also explains the VRM related term reverse market:
“[The conventional term market] is about vendors seeking out customers and persuading them to buy more of their products and services. A reverse market flips this…it’s about customers seeking out the most relevant vendors and extracting more and more value at lower and lower cost. It’s a fundamentally different mindset. It turns much of what we know about business on its head. Framing it in these terms can create a zero sum view – either vendors win or customers win.”
Hagel counters this view though by noting that “[Searles] persuasively argues…a customer driven market actually generates significant growth in demand that will serve both vendors and customers well,” and that an important component of the Big Shift is the move “from transactions to relationships. [A focus] on short-lived transactions as the way to generate profit – buy low, sell high…squeeze partners in transactions to extract as much profit as possible....undermines the ability to build long-term, trust based relationships… in the absence of those relationships it becomes almost impossible to effectively participate in the knowledge flows that matter the most.” He concludes “the greatest economic value will come from finding ways to connect relevant yet diverse people, both within the firm and outside it, to create new knowledge.”
So what can a staffing provider learn from this? Well in one sense, Hagel is only confirming what I have long believed: both ATR and our clients are the most successful when we develop a good business relationship characterized by open lines of communication and mutual trust. Whether success is measured as profits, cost savings, quality of candidates or increased orders, on both sides of the equation success is achieved when a quality, long term relationship is in place. When a client shares detailed information on their needs and goals – short and long term – we are better able to anticipate requirements and offer advice on contingent workforce strategy. Quality of candidates and speed to fill are both important considerations and both are improved when program managers, hiring managers, staffing firm recruiters and account reps work together.
The concept of VRM is not new to anyone in the staffing industry; most of us will recognize VMS and MSP as efforts by companies to implement VRM, whether or not they called it that. What I find interesting is that Hagel has nicely articulated some of the inherent pitfalls and correctly identified a trusted business relationship as an important correction. Without a good working partnership real success will be elusive. This dovetails completely with my experience over the past 25 years. When VRM efforts are focused solely on driving costs down and pitting staffing providers against each other in bidding wars, the results are usually not good. I’ve commented on this before (Reverse Auctions and the Staffing Industry) and am happy to see further support for the idea that at some point aggressive pricing discounts compromise quality and overall program success. I’ve worked with numerous VMS systems and MSP providers, internal and external, and those that inhibit or prohibit client/supplier relationships from developing are nearly always less successful than they could be, sometimes drastically so.
I understand the need for and benefits of VRM and like any modern business ATR is involved in CRM and VRM efforts of its own. But what we must remember is that the most important letter in both acronyms is the “R” for Relationship. If we see the power of the internet and technology only as cost saving devices, operating with a “zero sum view” of the client/supplier relationship neither will harness the true business potential these market changes promise. Hagel and Searles have some interesting ideas on the potential to create economic value from these new business models and one that I couldn’t agree more with is the idea that, far from technology making relationships irrelevant in business, they are more critical than ever. That’s a lesson I’ve been putting to use my entire business career and will continue to be committed to!
President and CEO
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