A New Type of Relationship With Tech Providers Generates Breakthrough Results

When IT merely enabled business, it made sense for enterprises to purchase technology like they bought other things. But with tech now central to competitiveness, customer experience and value, implementing off-the-shelf solutions is not a recipe for success and neither is the conventional adversarial stance between buyer and seller. To obtain unique breakthrough results, enterprise executive leaders and tech providers must collaborate in innovative ways.

Successful organizations have created new business and significant value by forging relationships that generate high-impact business outcomes because they work with each other to achieve these results, rather than hiring tech firms to work for them.

For example:

• Western Union, the 170-year-old global financial services firm, decided to create a digital bank so customers could actively manage their finances. The organization worked remotely with Deloitte during COVID-19-related travel restrictions to launch the entity in multiple countries in just 11 months.

• Johnson Controls International (JCI), a building management product and services company, partnered with Accenture to establish a subscription-based business and jointly market sustainability solutions. This new venture is now JCI’s fastest growing business, supporting its shift from selling products to generating revenue with an “as a service” model.

• Microsoft’s Industry Solutions Team is building out cloud applications on its industry cloud through relationships that center on buyer needs rather than product direction. These strategic ties are based on a mutual commitment to customers’ business outcomes.

Such generative relationships have led to innovative sources of competitive advantage in different settings, including:

• Innovating industry-specific, leading-edge technology from startups

• Implementing new digital business models

• Accessing and securing scarce digital talent

• Launching a new digital company from within an incumbent global leader

• Building cutting-edge industry services on the cloud

Executive leaders should realize they cannot buy their way to sustainable competitive advantage. As Thomas Mazzaferro, Western Union’s chief data and innovation officer, says, “We needed partners, not providers, who would be committed to Western Union and the success of the digital bank.”

The generative, outcomes-based model adopted by Western Union, JCI, Microsoft and others contrasts with traditional tech relationships in which providers seek to “fit” their product to a company’s stated needs (see Figure 1).

Existing tech engagement presumes an adversarial buyer-seller relationship. Techniques like RFPs, contracting, and practices to manage a project’s scope, cost and schedule help control vendor risk. But while these tactics support technology purchases for business processes, transactions and cost efficiencies, they do little to create business value.

That’s because these tech solutions are:

• Too slow — The pace of procurement lags the rate of business change.

• Too expensive — Enterprises buy more tech than they need, as market solutions only partially meet their requirements.

• Too restrictive — Providers lock in solutions that can require enterprises to change business practices to fit the software.

In addition, many provider relationships:

• Are less strategic, as tech suppliers invest in filling market needs rather than helping customers achieve their goals.

• Offer limited advantages, as provider solutions are readily available to others.

• Leave the business largely responsible for realizing the benefits of tech investments.

The role oftechnology has changed. “When you cut through all of the jargon and acronyms, the biggest difference for software and tech over the past five years has been in supporting growth,” says Tim McAdam, a general partner at TCV, a private equity investor. “Technology has created operating leverage via business process automation. Now, technology’s value rests in driving top-line growth.”

Leaders looking to drive innovation require technology that delivers what they want, when they want it, in a way consistent with their organization’s strategy and operations. Business and technology simply move too fast to wait for a market solution.

A generative relationship reflects a new way of thinking and working for tech-led businesses. “Technology is not a tool that you take out occasionally to fix something,” says Nick Pinarligil, head of enterprise infrastructure strategy at Fidelity Investments. “It is part of the core business, which is why Fidelity is hyperfocused on updating our technology to continue to provide robust, intuitive digital experiences for our customers and associates.”

In this model, business outcomes — tangible changes in performance or capability — define the business value, the basis for mutual commitment, and a high-quality relationship. Both the company and the tech provider innovate to realize significant results now and in the future. Taking an unbounded view of technology creates space for innovation beyond a provider’s products or services. Figure 2 shows how these elements work together.

A generative relationship extends beyond a big project. It is a repeatable process to build a scalable revenue stream and achieve a company’s business outcomes through an innovative use of technology.

Mazzaferro described Western Union’s core business outcome as providing “the best end-to-end customer experience that allows customers to actively manage their broader financial lives.” Together with Deloitte, the company created a multicountry digital bank in less than a year, compared with other tech partnerships that took two to 2.5 years. And because of pandemic-related restrictions, Mazzaferro recalls, “We built a digital bank 100% remote. Our people did not meet directly during the entire process.”

Close collaboration was vital to the project’s success. Western Union and Deloitte worked as a blended agile team, with twice weekly “project happy hours” providing a safe space for cooperating and resolving issues.

Western Union designed the bank on a composite digital architecture rather than building it from scratch, enhancing speed, flexibility and operational rigor. As a result, Mazzaferro says, Western Union’s banking customers could send cash payments using the firm’s core systems from Day 1. The solution and the Deloitte relationship are part of the company’s global growth strategy.

JCI sought a new kind of relationship with a tech provider to build its subscription business and take the solution to market. “Originally, JCI considered partnering with pure-play technology companies,” says Phil Clement, the company’s chief marketing officer. “Many of the pure-play providers we talked with were willing to invest, but only if we had figured everything out. We knew that was not possible in a dynamic environment.”

To build their relationship, the two organizations:

• Concentrated on achieving positive outcomes — in this case, growing the pie of sustainability opportunities — rather than controlling each other.

• Engaged in candid dialogue about customers and needs as the best way for both parties to learn together.

• Based the partnership on managed outcomes rather than a vision or good intentions, enabling them to concentrate on what needs to happen.

“Our deals are bigger, close faster and have better close rates when we work together,” Clement observed. “Much of this comes from the way both of us see this opportunity. It is not a zero-sum game or dividing a pie between us. It is all about how, together, we make the opportunities bigger.” That is the essence of a high-quality relationship.

High-tech product companies benefit from generative relationships, too. “Increasing customer choice drives realizing customer obsession through new types of strategic relationships,” according to Vic Miles, retail industry regional leader in Microsoft’s Industry Solutions Team. “Creating new capabilities and solutions is no longer a function of finding fit between the products we have and customer needs.”

Microsoft’s Industry Solutions team defines these relationships as strategic based on the parties’ mutual commitment to achieve business outcomes. To be more customer-centric, Microsoft assigned “strategic program managers” with a blend of industry, technology, management consulting and relationship-building skills. These leaders are responsible for the longer-term relationship as well as progress in achieving customer outcomes in the near term (Horizon 1), transforming capabilities (Horizon 2) and realizing outcomes further down the road (Horizon 3).

In the past, Miles notes, Microsoft conducted internal research, incorporated customer feedback and determined new product capabilities. “Today, we work with customers on their needs,” he says. “Rather than discussing product direction, we are talking about their direction and incorporating that into our planning process.”

Generative relationships offer a new model for creating the technology enterprises require to grow their business. Digital, services and cloud-related technologies have made such engagement possible by accelerating solutions’ development and enabling new ways to share risk and reward. And the best relationships are mutual, with CxOs from companies and tech providers following a similar playbook (see Table 1).

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Recommended by the Authors

Evidence

What’s Next for Industry, Microsoft.

Understanding the Future of High Tech, TCV.

These businesses represent about 38% of all firms, according to the 2022 Gartner Sources of Recommendation and Purchase for Technology Buyers Survey.