"Shrinking Core, Expanding Periphery: The Relational Architecture of High-Performing Organizations"
California Management Review
Spring 2005, pp. 77-104
The authors define relational capital as "the value of a firm's network with its customers, suppliers, alliance partners, and internal subunits." To study the significance of relational capital to organizational success, the authors conducted surveys and interviews with senior executives from Fortune 1000 companies. The relational practices of those in the top performance quartile were compared with those in the bottom quartile. It was found that the relationships could be categorized on an ascending ladder from "transaction" level to "enhancement" level to "investment" level to "ownership" level. The better performing organizations are more skilled at moving their relationships up the levels of the ladder. Each of the four key types of relationships is described on each level as follows:
| Transaction | Enhancement | Investment | Ownership | |
|---|---|---|---|---|
| Customer Relationships | Customer sees organization's products & services as commodities, & purchases are made only if price & terms are favorable | Customer purchases based on known relationship with product or service (br&ed offering), but not based on relationship with seller | Customer & seller have created reciprocal bond of loyalty that transcends product or service offered | Seller provides solutions to customer's problem by creating offerings with higher value proposition |
| Supplier Relationships | Company purchases isolated products & services from supplier | Company purchases integrated combinations of products & services | Expertise & resources are reciprocally shared | Supplier is given full or partial responsibility & accountability for successful business outcomes |
| Alliances Relationships | Alliances consist of series of isolated mutually beneficial agreements | Two organizations work together on select noncritical activities | Both parties share risks & rewards in more critical tasks | Trust & important critical tasks are shared |
| Separation | Coordination | Alignment | Integration | |
| Internal Units Relationships | Subunits are seen as separate entities | Subunits sometimes come together for specific initiatives | Subunits work together strategically to pursue common goals | All units work together seamlessly |
Research results indicated that top-quartile companies do more and better information sharing with customers, linkages to customers via computer networks, shifting from selling products and/or services to selling value-added solutions, obtaining customer input into development of products and services, and maintaining longevity of customer relationships.
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