The value of larger firms passing their expertise back down the supply chain has been highlighted in new research from the Federation of Small Businesses (FSB) – although that flow of assistance, at present, is somewhat limited.
According to the business group’s findings, just 30% of small firms are currently receiving help from their big clients. However, 83% of those firms are seeing positive impacts. One third of the segment have benefited from large customers sharing workforce expertise and time, while 23% have been assisted with product design. One fifth (20%) have been mentored or advised, and 15% have received market-research tips.
Thanks to that help, 39% of FSB-member small suppliers have improved their reputations and credibility by innovating, while 28% boosted their turnover. As such, the FSB wants the government to insert measures into the Sector Deals part of its Industrial Strategy that will encourage big firms to provide business support to their smaller counterparts.
FSB national chairman Mike Cherry says: “Innovation is key to the survival of all small businesses, and integral if they want to grow and increase their productivity. It’s essential that larger businesses are given incentives to encourage them to work with their small UK suppliers and acknowledge their impact on small firms in their supply chains. Government must take responsibility and hardwire this into the Industrial Strategy.”
Cherry adds: “Big businesses asking for government support for their industries in Sector Deals must make clear how sharing knowledge and expertise will benefit the whole supply chain. It’s important that ministers hold them to account to make sure this happens. Doing so is a win-win scenario, with benefits flowing back up the supply chain to the economy as a whole.”
While small firms are awaiting such measures, what can their leaders do now to seek business support from their big clients? What sort of approach should they make to their customers that would lead to a fruitful, new extension of the commercial relationships they already have?
The Institute of Leadership & Management's head of research, policy and standards Kate Cooper says: “Research that we have conducted at the Institute consistently demonstrates the value of collaboration between customers and suppliers. And indeed, Tamara Erickson at London Business School has talked of an imperative to build that kind of collaborative capacity. The benefits to the small business sector are enormous, in terms of driving innovation and fostering shared expertise.
“The construction industry is also a crucial area here, in light of how collaboration can boost leadership and development (L&D). Often, smaller firms in the sector won’t have their own L&D departments, so they will look to their larger counterparts to share resources, set up workshops and hold networking meetings with a focus on that area.”
At the heart of this collaborative activity, Cooper notes, “is the underlying relationship between the business partners, and the nucleus of that relationship is trust. One key feature of trust is a recognition of power imbalances, and the need to implement mechanisms to ensure that one partner doesn’t take advantage of the other, or otherwise abuse any disparity of power. It is also vital for each party to have a clear idea of what they are collaborating towards.”
Cooper adds: “ultimately, what we are talking about is i) how to be a good supplier, and ii) how to be a good customer. We talked in one of our recent podcasts about the absolute necessity for customers to pay on time, and that’s just one example of how you can be a good customer. On the other side of the coin, suppliers must strive for excellence in helping their customers meet their business objectives. On those terms, each party becomes the other’s preferred customer or supplier, and that bedrock of trust will enable other forms of joint working – and the sharing of expertise – to flourish.”
For further insights on building trust, check out these learning resources from the Institute