Relationships
The core definition of an asset – tangible or intangible – is if you have control over it.
Property can be an asset if you have a deed. Data can be an asset if your company has collected it using its own systems. But what about people? Can they be assets?
The short answer is, no. After all, slavery is outlawed. I don’t know about where you live, but I couldn’t tell you where my nearest open-air slave market is. People can be employed by a company, but that company can’t legally own its employees. No matter how loyal they might be, there is always a risk of an employee walking out.
The expertise and skills of an employee are intangible assets for a company. But the person themselves cannot be an asset. Next to skill and competence, the most important intangible asset a person can bring to a company is their relationships with fellow professionals and strategically-placed peers across the sector (or even between sectors).
Relationships age like wine, not like bread. The higher a person progresses in their career, the more people they connect with along the way and the more useful those relationships become. Networking is useless for a person fresh out of college because, well, they have no experience. But it’s always a good idea to start building a network early in one’s career. It’s an investment because you never know when a connection relationship may come in handy.
The popular TV show Suits was full of great examples of how relationships save businesses from sticky situations or help get deals across the line. While sometimes the writers relied too much on “favours” to advance the wider story, the concept of “banking” goodwill to “cash it in” at a future date is a well-known practice in the legal industry – and in many other sectors.
The ability to pick up the phone and talk directly to a key person in a complex supply chain or the exact decision-maker at a partner company can be just as valuable as owning a high-rise building.
Sometimes, people with great relationships are hired precisely because of those relationships. Their skills are important to get the job done, but not nearly as important as the access they can create.
Toyota - champion of relationships
As mentioned, the value of relationships comes from the trust, cooperation and mutual benefit they develop over time.
Strong supplier relationships (and with consumers, don’t forget the consumers) are essential to succeed in today's globalised world. A lot of companies even choose to say their suppliers are part of a “family” to emphasise how important those relationships are.
For example, Toyota, a leading carmaker, recognised early in its existence that turning its supplier base into a “family” was crucial for its growth and innovation. So, it began a journey to build deep relationships with its suppliers that were based on trust, respect and shared values. Toyota understood that nurturing its relationships would be a win-win situation.
As the years passed, Toyota developed a "kaizen" culture of continuous improvement in which suppliers were encouraged to offer their ideas and expertise at any time. In this way, Toyota's suppliers became more than just providers of parts; they were valued collaborators.
With trust at the core, Toyota's suppliers felt free to take business risks and invest in R&D to find creative solutions to challenges and design high-quality components. Soon enough, Toyota's vehicles became well-regarded for reliability, safety and efficiency – a testament to the dedication of the entire supply chain.
Its robust relationships were even more valuable in times of crisis. When natural disasters or recessions disrupted supply chains, Toyota's network banded together to support each other which ensured a quicker rebound for Toyota and minimised production disruptions.
Toyota’s relationships also offered a competitive advantage in cost management. Since it was creating a mutually beneficial relationship, the suppliers were invested in Toyota's success and found innovative ways to share costs because they knew making things cheaper would help everyone in the group. This synergy ultimately translated to making Toyota vehicles more affordable, which improved the brand further.
In a real way, Toyota’s car business is just a nice epiphenomenon of its real business: building trust with its suppliers. That’s what it does best. Through thick and thin, Toyota and its suppliers stand united, driven by a shared commitment to quality cars that are cheap to run and maintain.
Don’t bet the house on a relationship
However, like all assets, a relationship isn’t foolproof. Just because you may be friends with a well-placed contact doesn’t guarantee this will translate into success. Anything could happen, you never know.
The founder of NZX-listed company BurgerFuel (it makes burgers, obviously) developed a close friendship with the founder of sandwich brand Subway. The two companies were wildly different in terms of size and revenue, but the leaders had a great relationship and wanted to work closer together.
After a series of conversations, plans were set in motion in 2012 to have BurgerFuel outlets attached or connected to 1000 Subway outlets across major US cities. It was going to be a huge win for the small New Zealand-based company that until then only had an international foothold in Australia and a handful of Middle Eastern countries.
Everything was ready to go and then tragedy struck. In 2014, soon after the plans were announced Fred DeLuca, the Subway founder, was diagnosed with cancer and immediately admitted to hospital. He soon after died at the tender age of 67. The tragedy was completely out of the blue for everyone, including the BurgerFuel founder.
After the funeral, Subway’s new CEO decided to reassess the company’s strategic direction and ultimately decided against progressing with the BurgerFuel deal.
A year and some depressing legal reversals later and the partnership was over. The relationship almost made BurgerFuel an international heavyweight with a serious presence in the world’s biggest fast-food market. But now that opportunity was lying scuttled on the bottom of the ocean.
It was a lesson in the vicissitudes of relationships. They can be everything or nothing, always in the hands of the Fates.
It was also a reminder that relationships are just like every other asset: they are never a guaranteed win. So, while it’s wise to plan to leverage a good relationship, it is dangerous to bet everything on a single connection – even if it looks secure at the time.