Business relationship portfolios and subcontractors' capabilities

While research on vertical relationships has demonstrated that suppliers' capabilities can be developed via partnerships, we lack studies that relate the development of such capabilities to the management of business relationship portfolios. This paper partially fills this research gap by investigating how small to medium subcontractors (SMSs) align their customer relationship portfolios with their design and marketing capabilities.Applying one-way ANOVA to a sample of 62 subcontractors located in the mechanical industrial district of Pordenone (North East Italy), we show that the development of marketing and design capabilities affects subcontractors' business relationship portfolios. Our study suggests that SMSs strategically manage their customer relationships, moving from traditional subcontracting to a more articulated portfolio characterized by a stronger presence of partnership and market relationships. Marketing and design capabilities shape SMSs' autonomy and strategic options in choosing the appropriate combinations of different relationship types.     

Power and interdependence in buyer supplier relationships: A purchasing portfolio approach

Power and interdependence are generally considered to be important concepts for understanding buyer-supplier relationships. Yet, empirical research on power and interdependence in buyer-supplier relationships is still limited. Power and interdependence issues also play an important role in Kraljic's portfolio approach, which is increasingly used by purchasing practitioners for managing different supplier relations and developing appropriate purchasing strategies. In this paper, the concepts of power and interdependence have been quantified for each quadrant of the Kraljic portfolio matrix, using data from a comprehensive survey among Dutch purchasing professionals. Several hypotheses have been tested and the findings largely confirm the theoretical expectations. The observed supplier dominance in the strategic quadrant of the Kraljic matrix is a notable finding, which indicates that even satisfactory partnerships are dominated by the supplier. Therefore, the presumed power symmetry of buyer-supplier relationships in the strategic quadrant seems no longer valid.     

An Empirical Investigation of the Antecedents and Outcomes of NPD Portfolio Success

Managing new product development (NPD) portfolios is difficult and little is known about how successful NPD portfolio management can improve overall firm performance. Despite regular calls in the literature for more research on NPD portfolio management, what successful NPD portfolio management means and how firms can achieve it remains unclear. For this reason, this paper combines theory and previous empirical findings to build a model of the antecedents and outcomes of NPD portfolio success. We generate and test 12 hypotheses with empirical data from 189 paired dyads in Dutch firms. Our results show that all three dimensions of NPD portfolio decision‐making effectiveness (i.e., portfolio mindset, focus, and agility) are associated with achieving the three dimensions of NPD portfolio success (i.e., strategic alignment, maximal NPD portfolio value, and portfolio balance), which in turn influences market performance. While a portfolio mindset and agility are related to all three dimensions of NPD portfolio success, focus is related only to strategic alignment and maximal value. No one dimension of NPD portfolio decision‐making effectiveness or portfolio success is sufficient to achieve overall market performance. We also found several unexpected findings with important implications. For example, portfolio balance, one recommended measure of portfolio success, has no direct link to market performance, but operates through the other two dimensions of NPD portfolio success, i.e., strategic alignment and maximal portfolio value. We conclude our paper with implications for further theory development and testing on successful NPD portfolio decision‐making, and with implications for managerial practice.     

Evaluating the bases of supplier segmentation: A review and taxonomy

A taxonomy of segmentation bases is presented which builds a multi-disciplinary approach to the categorization of suppliers. Supplier segmentation, from a purchasing perspective, still appears to be in the early stages of providing a coherent strategic intent behind supplier assessment. Whilst fragmentary in nature, current portfolio models are grouped into two principal taxonomic constructs of power and dependence and relational factors. In particular, the prevalent use of transaction cost economics (TCE) in portfolio modelling provides a foundation for purchasers to appraise risks from supplier opportunism. We augment existing approaches with reference to inter-organisational theory and the resource-based view to show different modes of inter-firm value creation that act as constituents of a strategic intent for segmentation. Our resulting taxonomy draws together a holistic view of supplier segmentation covering supply market conditions, product/service characteristics, supplier characteristics, buyer characteristics, and buyer-supplier relational factors.     

Relationship keyness: The underlying concept for different forms of key relationship management

For companies, relationships with external actors may constitute intangible assets. Many firms have put in place key account management programs in order to pay sufficient attention to strategically important customers and the marketing literature has studied such programs. However, a company's relationship portfolio also comprises relationships with other types of actors. The objective of this paper is to show that - across the different types of external relationships a company may develop - some relationships have more importance than others and, hence, are key. The authors argue that, as a consequence, the keyness of certain relationships has led to the emergence of approaches which can be referred to as key relationship management. For this purpose, the authors first present empirical material on the management of relationships between companies and their partners in strategic alliances from the French IT sector. They then discuss the concept of keyness as well as the common characteristics of different forms of key relationship management such as key account management, key supplier management and strategic alliance management.     

Developing relationships in strategic alliances: Commitment to quality and cooperative interdependence

Organizations are using strategic alliances to develop competitive advantages in quality, innovation, and cost. To capture the potential synergies of these alliances requires that the partners develop long-term relationships. This study develops a model of strategic alliance relationship development based on the theory of cooperative and competitive goal interdependence. Thirty pairs of supplier and customer organizations in Xian, China participated in a survey where the supplier indicated the commitment and goal interdependence and the customer rated the relationship's long-term orientation. Results suggest that the commitment by both supplier and customer organizations to quality develop cooperative interdependence, which leads to effective strategic partnerships.     

Becoming a preferred customer one step at a time

A preferred customer is a buying organization who receives better treatment than other customers from a supplier, in terms of product quality and availability, support in the sourcing process, delivery or/and prices. The decision to become a preferred customer implies a continuous commitment by the purchaser to a complex, expensive and often uncertain process. It is important to use a strategic approach, as well as appropriate tactics. Based on well-known models on the development of buyer-supplier relationship, on customer portfolio analysis and on the emergent literature in customer attractiveness and preferred customer status, we suggest four steps to become – and remain – a preferred customer: initial attraction, performance, engagement and sustainability. The process takes the perspective of a buyer willing to obtain the preferential status and focuses on the strategies and tactics that could influence the supplier's decision of granting this status. The proposed process considers that the supplier is continuously comparing the value offered by the customer to its expectations, and to the value offered by other customer relationships.     

Strategic relationships between boundary-spanning functions: Aligning customer relationship management with supplier relationship management

This review focuses on the potential impact of enhanced strategic relationships between the boundary-spanning functions in supplier organizations. Specifically, the concern is with alignment between the organizational groups managing: marketing, sales and strategic account management; purchasing and supply strategy; and, collaborations and external partnerships. The topic is framed by the organizational evolution being driven by market change, and the search for superior innovation capabilities and business agility. These changes bring new challenges in cross-boundary integration and managing complex market networks. The logic is that strategic external relationships (with customers, supplier and partners) should be mirrored in strategic internal relationships (between the functions with lead responsibilities for managing relationships with customers, supplier and partners). Approaches to enhancing this capability include process management, internal partnering strategies and internal marketing activities. The discussion identifies a number of implications for practice and new research directions.     

Designer–buyer–supplier interface: Theory versus practice

The paper focuses on facilitating an interface and collaboration among designer, buyer, and supplier at three planning horizons: strategic, tactical, and operational with respect to supplier relations. To accomplish this interface, nine propositions for all areas of interface at three levels of planning are presented. These included: (1) long-term strategic alliances, (2) supplier R&D investment and financial strength, (3) confidential relationships, (4) reduction in the number of suppliers, (5) information sharing, (6) supplier plant visitation, (7) supplier selection, evaluation, and certification, (8) supplier training/meetings, and (9) the inspection and receiving policy. Then, each proposition is evaluated in practice for a company and the extent of difference from theory to practice is identified. The results indicate that the company performed well for three propositions (4), (7), and (9), while it performed very poorly for six propositions of (1), (2), (3), (5), (6), and (8). These results indicate that the company performed poorly in the strategic aspects of supplier relationships. The company performed marginally well in the tactical aspects of supplier relationships. The company performed well in the operational aspect of supplier relationships. Finally, the conclusions, assessment, and future research directions are presented.     

New Product Portfolio Management: Practices and Performance

Effective portfolio management is vital to successful product innovation. Portfolio management is about making strategic choices—which markets, products, and technologies our business will invest in. It is about resource allocation—how you will spend your scarce engineering, R&D, and marketing resources. It focuses on project selection—on which new product or development projects you choose from the many opportunities you face. And it deals with balance—having the right balance between numbers of projects you do and the resources or capabilities you have available. In this article, the authors reveal the findings of their extensive study of portfolio management in industry. This study, the first of its kind, reports the portfolio management practices and performance of 205 U.S. companies. Its overall objective was to gain insights into what portfolio methods companies use, whether they are satisfied with them, the performance results they achieve with the different approaches, and suggestions for others who are considering implementing portfolio management. The research first assesses management's satisfaction with portfolio methods they employ and notes that some firms face major problems in portfolio management. Next, businesses are grouped or clustered into four groups according to management's view of portfolio management: Cowboys, Crossroads, Duds, and Benchmark businesses. The research first assesses management's satisfaction with portfolio methods they employ and notes that some firms face major problems in portfolio management. Next, businesses are grouped or clustered into four groups according to management's view of portfolio management: Cowboys, Crossroads, Duds, and Benchmark businesses. Various performance metrics are used to gauge the performance of the business's portfolio. The results reveal major differences between the best and the worst. Benchmark businesses are the top performers. Their new product portfolios consistently score the best in terms of performance—high-value projects, aligned with the business's strategy, the right balance of projects, and the right number of projects. The authors take a closer look at these benchmark businesses to determine what distinguishes their projects from the rest. Benchmark businesses employ a much more formal, explicit method to managing their portfolio of projects. They rely on clear, well-defined portfolio procedures, they consistently apply their portfolio method to all projects, and management buys into the approach. The relative popularity of various portfolio methods—from financial methods to strategic approaches, bubble diagrams, and scoring approaches—are investigated. Not surprisingly, financial approaches are the most popular and dominate the portfolio decision. But what is surprising is the dubious results achieved via financial approaches. Again, benchmark businesses stand out from the rest: they place less emphasis on financial approaches and more on strategic methods, and they tend to use multiple methods more so than the rest. Strategic methods, along with scoring approaches, yield the best portfolios; financial methods yield poorer portfolio results. The authors provide a number of recommendations and suggestions for anyone setting out to implement portfolio management in their business.     

Finding true north: Design and implementation of a strategic sourcing framework

This study investigates the evolution of the design, development and implementation of a strategic sourcing framework able to support decision-makers in formulating differentiated, rather than generic supplier base strategies. These strategies are in turn implemented through specific action plans, assuring the coherence and alignment between the different strategic hierarchical levels, beginning with business strategy, through category strategy to specific tactical sourcing levers. The proposed framework is the result of a longitudinal study executed through two action research cycles engaging in a strategic sourcing project in a leading European specialty steels manufacturer. By integrating and refining in our framework three dominant purchasing portfolio models - i.e. Kraljic, Olsen & Ellram, and Scott & Westbrook - we highlight the importance of adopting multiple perspectives to manage the complexity of formulating a purchasing strategy and its related implementation decisions. The proposed framework has been designed to facilitate dynamic learning mechanisms through a feedback loop to continuously update the three integrated models and in turn allow managers to gain a strategic perspective of the evolution of buyer-supplier relationships, the influence of previous decisions and external factors. A critical discussion explores the proposed solution through the main theoretical lenses emerged throughout the research process.     

Antecedents to Decision‐Making Quality and Agility in Innovation Portfolio Management

Innovation portfolio management (IPM) is a dynamic decision‐making process, in which projects are evaluated and selected, and resources are allocated. Previous research has developed an understanding of IPM success and its influencing factors. However, little research investigated the quality of the decision‐making process and the ability to quickly adapt the portfolio. This study focuses on the antecedents of decision‐making quality and agility (i.e., responsiveness to changes in the environment). Based on a decision‐making framework, five structural and cultural IPM components are derived as important antecedents of decision‐making quality, which in turn influences agility. The structural components (1) clarity of strategic goals, (2) formality of the IPM processes, and (3) controlling intensity serve a coordinating function. The cultural components (4) innovation climate and (5) risk climate serve a motivating function in IPM. An analysis of a sample of 179 firms and their innovation portfolios through structural equation modeling using a double‐informant design documents that these five components all positively influence portfolio decision‐making quality, which in turn positively influences agility. Results further show that environmental turbulence moderates some of these relationships. While the positive effect of process formality is weakened under increasing turbulence, the effects of controlling intensity and climate for innovation are strengthened by environmental turbulence. The findings have theoretical implications for the understanding of IPM as a dynamic capability and practical implications for the management of portfolios in turbulent environments.     

Managing interdependencies in supplier networks

Building and managing a supplier base has been referred to in the literature as a key aspect of supplier management. Scholars have proposed a number of models aimed at enhancing the effectiveness of supplier network management, mainly based on a portfolio approach. In the IMP tradition of research, those models are often criticized as they ignore the interdependencies between the different existing dyadic relationships of a focal buyer company and its suppliers. Such interdependencies are the main focus of this paper, which has four objectives: (1) To analyze the types of relationships linking suppliers, (2) to understand the factors and dynamics underlying the creation and management of these relationships (3) to uncover existing links between buyer-supplier and supplier-supplier relationships, and (4) to clarify how different configurations of supplier relationship interactions impact on the performance of the actors involved. The paper discusses two empirical case studies, using the supplier networks of two focal buyer companies. We find that supplier interdependencies are mainly a by-product of the buyer-supplier dyads. Furthermore, the nature and dynamics of these dyads are a strong determinant of the scope and frequency of supplier connections and the corresponding effects on performance.     

Strategic planning: valuing and managing portfolios of real options

This article presents a value-based strategic planning framework suitable for valuing and managing portfolios of corporate real options. The proposed framework combines insights from strategic management theory with novel quantitative valuation tools from finance. Strategic planning is viewed as a process of actively developing and managing portfolios of corporate real options in the context of competitive interactions. As such, the expanded valuation framework recognizes that future growth opportunity value deriving from the firm's resources and capabilities must explicitly account for uncertainty, adaptability, and competitive responsiveness. The resulting expanded valuation framework is able to capture the value of the adaptive resources and capabilities that enable a firm to adapt and re-deploy assets, develop and exploit synergies, and gain competitive advantage via time-to-market and first- or second-mover advantages. We show how two basic metrics in this value-based framework, current profitability of assets in place and future growth option value, can be obtained from financial market data and how they can be used in active portfolio planning.     

Strategies for managing a portfolio of alliances

Interorganizational relationships are recognized as an increasingly important source of competitive advantage. Hence, goal‐oriented management of the alliance portfolio—all the alliances of the focal firm—plays a decisive role in company performance. Consequently, the configuration and development of the alliance portfolio become important strategic issues. In light of that, this article develops theoretical propositions that seek to clarify what determines the configuration and evolution of an alliance portfolio, and then presents the results of a longitudinal study to illustrate the developed theoretical framework. Building on contingency theory and a coevolutionary framework, we were able to identify three distinctive types of portfolio strategies at business level and to illustrate how they interact with the development of the business strategy and the business environment. Encompassing all this, the study illustrates and explains developmental paths and patterns in the evolution of an alliance portfolio. The developmental course typically evolves from adapting to shaping and to exploiting (stabilizing), according to the state of strategic uncertainty and the firm's resource endowment. A sudden increase in exogenous strategic uncertainty, however, can lead to a strategic shift back to an exploration or hybrid strategy. Copyright © 2007 John Wiley & Sons, Ltd.     

Determinants of Alliance Portfolio Complexity and Its Effect on Innovative Performance of Companies*

Alliance formation is often described as a mechanism used by firms to increase voluntary knowledge transfers. Access to external knowledge has been increasingly recognized as a main source of a firm's innovativeness. A phenomenon that has recently emerged is alliance portfolio complexity. In line with recent studies this article develops a measure of portfolio complexity in technology partnerships in terms of diversity of elements of the alliance portfolio with which a firm must interact. The analysis considers an alliance portfolio that includes different partnership types (competitor, customer, supplier, and university and research center). So far factors that determine portfolio complexity and its impact on technological performance of firms have remained largely unexplored. This article examines firms' decisions to form alliance portfolios of foreign and domestic partners by two groups of firms: innovators (firms that are successful in introducing new products to the market), and imitators (firms that are successful at introducing products which are not new to the market). This study also assesses a nonlinear impact of the portfolio complexity measure on firms' innovative performance. The empirical models are estimated using data on more than 1800 firms from two consecutive Community Innovation Surveys conducted in 1998 and 2000 in the Netherlands. The results suggest that alliance portfolios of innovators are broader in terms of the different types of alliance partners as compared to those of imitators. This finding underlines the importance of establishing a “radar function” of links to various different partners in accessing novel information. Specifically, the results indicate that foremost innovators have a strong propensity to form portfolios consisting of international alliances. This underlines the importance of this type of partnership in the face of the growing internationalization of R&D and global technology sourcing. Being an innovator or imitator also increases the propensity to form a portfolio of domestic alliances, relative to non‐innovators; but this propensity is not stronger for innovators. Innovators appear to derive benefit from both intensive (exploitative) and broad (explorative) use of external information sources. The former type of sourcing is more important for innovators, while the latter is more important for imitators. Finally, alliance complexity is found to have an inverse U‐shape relationship to innovative performance. On the one hand, complexity facilitates learning and innovativeness; on the other hand, each organization has a certain management capacity to deal with complexity which sets limits on the amount of alliance portfolio complexity that can be managed within the firm. This clearly suggests that firms face a certain cognitive limit in terms of the degree of complexity they can handle. Despite the noted advantages of an increasing level of alliance portfolio complexity firms will at a certain stage reach a specific inflection point after which marginal costs of managing complexity are higher than the expected benefits from this increased complexity.     

The relationship between supplier management and firm's operational performance: A multi-dimensional perspective

This paper presents an empirical study on the multidimensional relationships between supplier management practices and firm operational performance. Specifically, we focus on three supplier management practices, namely strategic long-term relationship, supplier assessment, and logistics integration, and test their effects on four operations performance measures, namely quality, delivery, flexibility, and cost. We use data collected from 232 manufacturing firms in Australia to conduct the study. Ten hypotheses were tested simultaneously using Structural Equation Modeling (SEM) technique. The results show that different supplier management practices have different unique effects on different operations performance measures. Supplier assessment has a positive relationship with quality performance. Both strategic long-term relationship and logistics integration have positive relationships with delivery, flexibility, and cost performance. From a theoretical perspective, this study demonstrates the relative contributions of different kinds of resources (i.e., supplier management practices in our case) to different performance measures. Our research findings provide practical insights for managers to understand the effectiveness, as well as the limitations, of different supplier management practices in enhancing different operations performance measures of firms.     

The origins and underpinning principles of e-scape

In this article I describe the context within which we developed project e-scape and the early work that laid the foundations of the project. E-scape (e-solutions for creative assessment in portfolio environments) is centred on two innovations. The first concerns a web-based approach to portfolio building; allowing learners to build their portfolios in real-time, directly from hand-held peripheral technologies in studios, workshops, laboratories, and from off-site settings. The second concerns the development of a radical web-based approach to the assessment of performance as captured in these portfolios. In many parts of the world, portfolios feature as part of school-based assessments—including those undertaken for school-leaving and certification purposes. In this setting assessment reliability is critical and (judged by practice in England & Wales) is typically far from satisfactory. The approach developed within e-scape has radically improved assessment reliability. Whilst these two innovations represent the most dramatic outcomes of the project, they arose from a set if principles held by the team of researchers in the Technology Education Research Unit (TERU) at Goldsmiths University of London. And central to these principles is that both the portfolio and the assessment approaches should be embedded in a view of active learning, such that engagement with them has a positive impact on classroom practice. As the title suggests, this paper outlines the origins, underlying principles and early development of project e-scape.     

Crypto-assets portfolio optimization under the omega measure

Abstract

Crypto-currencies, or crypto-assets, represent a new class of investment assets. The traditional portfolio analysis approach of Markowitz is not appropriate for use with portfolios containing crypto-assets, as the model requires that the investor have a quadratic utility function or that the returns be normally distributed, which isn’t the case for crypto-assets. We develop a portfolio optimization model based on the Omega measure which is more comprehensive than the Markowitz model, and apply this to four crypto-asset investment portfolios by means of a numerical application. The results indicate that these portfolios should favor traditional market assets over crypto-assets. In the case of portfolios formed only by crypto-assets, there is no clear preference in favor of any crypto-asset in particular.     

Understanding attractiveness in business relationships — A complete literature review

The concept of attraction has received surprisingly little attention within business relationship research. Yet, recently, more and more authors have argued that attraction may contribute to the motivation and willingness of a buyer and supplier to engage in and develop a business relationship. However, the concept of attraction is relatively new and there have been diverse interpretations of it. This literature review collates those interpretations with the aim of enhancing current understanding and creating fundamental knowledge of the current streams of literature on the concept. In examining how the concept has been investigated, the paper aims to establish the direction that the understanding and use of the concept of attractiveness may take in the future in the context of business research. The literature review indicates that attraction has been used in three research areas to explain or resolve a particular construct: 1) attraction in the development of buyer–supplier relationships, 2) customer attractiveness to suppliers, and 3) attractiveness in portfolio and key account management. This literature review contributes to the understanding of how knowledge of the power of attraction could enrich the theory and practice of business relationships.