The 4 Kinds of Value that can come from Great Business Relationships

Intuitively people in business know that having a strong relationship with clients, partners, suppliers and co-workers can only be a good thing. But why is it? Understanding the value's that can be brought from a relationship is important so that you know why you should put much effort into them.

Before we start, I'm not endorsing concentrating on what you can get out of a relationship as that will sully it from the start. You must give as much as you take out of any relationship, be that business or personal, otherwise it can never really be a strong connection.

There's a great deal of material that has come out of Phycological and Business Studies research and many books on leadership which cover how to and why to build good relationships. The best summary I read some years ago was a research paper that pulled together and reviewed multiple other studies. I'll add a link to the paper at the bottom of this post in case you're interested in reading further.

The essence of this is that there are four types of value possible from a business relationship:

- Financial Value

- Knowledge Value

- Personal Value

- Strategic Value

A relationship can give value in one, two, three or all four of these areas in equal or differing amounts.

Financial Value

Financial Value is not, as you would initially expect the cash amount paid from one party to another in the case of a transaction, but the added value a good relationship can bring to the parties. That is, a willingness on one side to pay more for a service or to continue working with a trusted person.

Knowledge Value

This is really around gaining information and deeper understanding about a shared area because of the relationship. For example, sessions spent brainstorming with the founder of a product can be invaluable to a supplier or client whose just starting out on their journey.

Other ways relationships can bring knowledge value is through insider information about competitors or even just the sharing of more detailed information about the company your relationship works for than they would usually openly share. Deeper knowledge can help you in many ways both in the actual relationship and in the competitor landscape.

Personal Value

Personal Value is the shared understanding and pleasure each side gets out of the relationship on a personal level. This can be in the form of shared background, shared plans or just a sense of being in it together and enjoying the interactions. Deeper Personal relationships often move beyond being only a working relationship and move into the social sphere also.

A business relationship with a personal connection can be very powerful and help give more confidence in each other. They can make for more streamlined processes due to being willing and happy to work together. There can be a greater desire to help through the supply side reducing cost or the buy side buying more frequently.

Strategic Value

The paper by Biggemann and Buttle only identifies a couple of areas of Strategic Value, namely becoming a sole supplier and therefore being able to plan more in advance, as the risk to the business is lowered. It also calls out the extended relationships a strong relationship could build, given they are more likely to introduce others.

I would go further than this however, a strong relationship, built on financial, personal and knowledge value can morph and can be directed into ever more valuable projects. As with my main client we started out with a small relationship in one market and over time it has grown into a global partnership accounting for a good proportion of revenue.

This partnership and relationship continues to change into new opportunities as individuals move to other companies and bring those companies back to us, primarily because of what we have already achieved together and the trust that the relationships bring.

As promised, here's a link I found to the paper I have referenced and on which I based this post.

Hopefully you found this helpful and will start to look at your relationships for multiple angles moving forward, I thought this was a great way of looking at and simplifying what can be a very complicated question.

As always, great to get your comments below!

Mark