While Waiting for Japan’s Recovery, Let’s Enhance Supplier Competitiveness at Home
The Obama administration and US companies do not have to wait for Japanese suppliers to recover from earthquake damage, argues Harvard Business School professor Rosabeth Moss Kanter. Action can be taken now to ensure that America invests in growing our domestic stock of world-class suppliers. Key concepts include:
- A national campaign to enhance supply-chain partnerships could ensure that America invests in growing our domestic stock of world-class suppliers—an action that could also accelerate job creation.
- Big companies should target high-potential small companies as suppliers, providing them training, access to domestic and international business opportunities, and lower supplier costs through pooled purchasing or insurance.
- Because the concept does not require every company to do the same thing, and in fact simply asks companies to increase their efforts to do things already in their portfolio, it does not involve complicated coordination.
The devastating Japanese earthquakes sent aftershocks of another kind to the economy: the potential disruption of the flow of goods from Japanese suppliers to US high-tech manufacturers. But the Obama administration and domestic companies do not have to wait for Japanese suppliers to recover from earthquake damage. They can take action now to ensure that America invests in growing our domestic stock of world-class suppliers. A national campaign to enhance supply-chain partnerships could also accelerate job creation.
America needs another national campaign, this time to mobilize big companies to power smaller ones.
Small and midsized companies create the vast majority of jobs, but they often depend on big company purchases for their revenues and growth. Large companies, which have tended to be net job-shedders rather than job-creators, create jobs indirectly through their supply and distribution chains. Big companies also tap promising ideas for innovation through their relationships with entrepreneurial growth companies, whether as suppliers or as investment targets for corporate venture capital.
To help small businesses grow, innovate, and add jobs, big companies can expand the search for high-potential small companies; provide training and mentoring to help those companies qualify as preferred suppliers or distributors; open access to domestic and international business opportunities; and help lower supplier costs through pooled purchasing or insurance.
IBM's Supplier Connection is an example of one step in the right direction. Initiated last spring, IBM has brought together an initial consortium of seven major companies, including Caterpillar, Pfizer, Bank of America, Citibank, and AT&T, to develop an online center with a single universal process for vendor applications. This facilitates access of small business to large company purchasing while reducing the administrative burden on the smaller companies and increasing their likelihood of success. After contributing several million dollars for the technical work, IBM announced the soft launch of Supplier Connection on January 31. Other major manufacturers and retailers are soon to join, and IBM intends to find other ways to enhance small business growth.
Imagine the possibilities for a national campaign to reduce unemployment and grow the economy through supply-chain partnerships. Companies could pledge to take one additional step beyond their current activities to strengthen the capabilities and business prospects of domestic enterprises. For example, they could promise to:
- Add a mentorship program in which executives advise smaller companies about how to strengthen their functional capabilities or prepare for growth.
- Provide opportunities for selected small business partners to participate in in-house training programs or have access to online management tools.
- Serve as test sites for small companies with a promising new idea.
- Provide the use of conference rooms at international locations and introductions to potential customers.
A useful analogy comes from the Welfare-to-Work Partnership, a private initiative of large employers stimulated by the White House after the passage of the welfare reform bill in 1996. The W2W Partnership was designed to build job opportunities for those coming off welfare to avert a potentially large national problem (and a political problem for President Clinton). Intermediary organizations such as local and national nonprofits provided training and helped identify job-ready candidates. Participating companies such as United Airlines and Marriott tapped a new pool of workers that were often highly motivated. The pledges made to the W2W Partnership fit existing corporate activities and could become part of an existing business function—in the case of W2W, human resources. The national partnership was mirrored at state and local levels as officials convened events to involve companies in their region.
Today, in the aftermath of market quakes and earthquakes, America needs another national campaign, this time to mobilize big companies to power smaller ones. This idea should tap the enthusiasm of private-sector business leaders. They can take actions that demonstrate to the public how they can contribute to a better economy that creates jobs for today and innovation for tomorrow. Because the concept does not require every company to do the same thing, and in fact simply asks companies to increase their efforts to do things already in their portfolio, it does not involve complicated coordination. Some actions can bring immediate, measurable benefits—if not a chip supplier to substitute for one in Japan, then perhaps a start-up with a better idea.
The concept should enjoy widespread bipartisan support. It would be a good move for the new competitiveness council created by the White House and would give President Obama an occasion for convening the business community to request specific commitments. Governors and mayors could follow suit. No new government funding or legislation is needed. What is required is national leadership.
Rosabeth Moss Kanter's latest book is SuperCorp: How Vanguard Companies Create Innovation, Profits, Growth, and Social Good (Crown Business, 2009).