What’s true in life is even truer in business: Isolation does not allow free exchange of information among industry peers and, thus, limits opportunities for developing new ideas or building on existing solutions. Sharing of information builds trust and allows companies to exploit information for the overall good of the industry.
We are all familiar with the expression, “No man is an island,” which, of course, implies the need to be involved in other peoples’ lives and to have them involved in ours. The same could be said about businesses — “No company is an island.”
Yet, a vast majority of packaging companies have a tendency to embrace an “island mentality” primarily because they are able to partner with a select group of large customers, and thus, don’t need to pursue additional clientele. This is further compounded by a tendency among their customers to discourage the packaging suppliers from working with competitors.
Thus, large packaging companies align themselves with their key customers, forming some kind of a loose keiretsu, while small- and medium-sized companies have to constantly work hard to access new customers. This situation also limits the ability of small- and medium-sized companies’ exposure to the latest developments in technology.
Relationships – handle with care
There is another reason why I am emphasizing the importance of moving out of the cocoons that packaging companies have lived in for decades: the increasingly fragile nature of relationships in today’s ever-changing environment.
Several packaging industry executives have indicated to me that their customers who had done business with them for years, and even decades, have suddenly decided to try a reverse-auction process. The message is clear — the relationship lasts as long as it has a positive impact on the customer’s profits. The moment customers figure out ways and means to improve their profitability using an alternate source, there is no incentive for them to continue their relationship with you even if you have memorized the names of all the kids of the purchasing manager.
Isolation may retard innovation
What is true in life is even truer in business: Isolation does not allow free exchange of information among industry peers and, thus, limits opportunities for developing new ideas or building on existing solutions. I am aware of several packaging companies that are so paranoid about their proprietary information that they do not allow their employees to speak to their peers in the industry.
I am not trying to argue that proprietary information be compromised, but sharing of information beyond that should be unrestricted. I continue to believe that despite availability of every single page of document ever published on the Internet, there is no substitute for personally interacting with your peers and sharing information informally. We all know that, for the most part, we do not write down every single idea and thought that we have in our mind, but we might definitely share it during a conversation.
Bridging the islands
The reason I talk about bridging the islands, as opposed to building a continent, is that while companies need to guard their proprietary information, they have to cooperate in developing a better packaging community. As we are already seeing in the automotive industry, large packaging companies need to take similar initiatives and start thinking about sharing information more freely. The technology available today also makes it possible to manage what specific kind of information is shared with which specific outside entities — customers, suppliers, distributors, banks and even competitors — so it is possible to control the flow of information.
Apart from encouraging innovation, free-flowing information allows other, more tangible benefits. For instance, as we all know, more information enables faster and, in most cases, better decisions. When companies build extranets with their key partners, they can also facilitate smoother transactions, reduce manual intervention, minimize paperwork and, as a result, improve the bottom line.
The dangers ahead
Your customers are under as much pressure to improve their profits as you are — and they’ll do virtually anything to achieve it. Accordingly, you have to make sure that you’re able to provide your customers with what they want before they find someone else to do it, probably cheaper and better than you.
Sharing of information builds trust, encourages even more sharing, and allows companies to exploit information for the overall good of the industry. There is no reason for you to hold on to information that may be more productively used by your partners. Companies that fail to take advantages of technology that can help build bridges, may find themselves isolated from their peers, and that can be disastrous.