One of our clients asked us how to get more out of its ecosystem of business partners, suppliers, and customers. This client had been adding to that ecosystem of partners and suppliers almost indiscriminately—and many were a losing proposition. “We don’t even know how many partners or suppliers we have,” the senior director said, almost in embarrassment. “We also do not partner with our customers enough in creating next-generation products.” The company thought that adding new partners should be focused on quantity as opposed to quality: more was better. As we researched the economics of the company’s relationships, however, we found that adding more external relationships was just adding coordination and management costs; instead, the company needed to act more strategically. For example, this company was covering low-potential markets with high-cost business partners and was triple-sourcing suppliers when it made more sense to invest in one or two strategic ones. “We need to 80/20 our ecosystem and then invest in those that make economic and strategic sense,” the senior director said when asked about what the company should do. Ultimately, the company pared the number of channel partners and suppliers by more than 50 percent and began to include customers in product ideation and development.
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