Strategic Relationship Management, Part 1

Several years ago, I started thinking about by professional relationships with authors and agents. I noticed that some relationships were highly profitable and enjoyable. Others were highly profitable but a constant drain on our staff and resources. Others were enjoyable, but had not yet reached their full potential. Still others were unprofitable and unenjoyable. This got me to thinking.

2 x 2 strategic relatoinship matric

I imagined a two-by-two matrix, similar to the Boston Consulting Matrix, with the horizontal axis representing maintenance and the vertical axis representing profitability. (To download a PDF of the full diagram, click here.) I think this matrix describes just about every kind of professional relationship you can have.


Every relationship is somewhere on the continuum of profitability. It may be highly profitable, marginally profitable, or completely unprofitable. Every professional relationship also requires a certain amount of maintenance to service it. As a result, the relationship may be high-maintenance, low-maintenance, or something in between.

As a result, there are four possible combinations:

  1. Priority 1. These are the high-profit/low-maintenance relationships. They don’t require a lot of energy to service, and they yield big profits. These kinds of relationships are delightful. Everyone is happy. The secret to success in business is to develop more of these kinds of relationships. They are the cash cows.
  2. Priority 2. These are the low-profit/low-maintenance relationships. The reason these kinds of relationship are second in priority is because they have at least half of the equation right: they are low maintenance. Your hope is that with a little work, you can also make them highly profitable. They are the bright and shining stars. In terms of how you allocate resources, these should be your second priority.
  3. Priority 3. These are the high-profit/high maintenance relationships. These are probably the most frustrating. They seem too profitable to exit. But they require so much maintenance, you are often left wondering whether it is worth the effort. As a result, they are a perpetual question mark. They key is to try and force these relationships into the Priority 1 quadrant. If you can’t do this, then you need to bite the bullet and exit the relationship. The time spent servicing these kinds of relationships is time you can’t invest in finding more Priority 1 relationships or helping Priority 2 relationships become Priority 1 relationships.
  4. Priority 4. These are the low-profit/high maintenance relationships. They are “dogs,” at least in terms of the value to your organization. They are a huge waste of resources. They wear out your staff. They have little or no no potential, so the sooner you come to grips with reality, the better. Getting rid of these kinds of relationships will allow you to reclaim resources you can invest in finding or serving Priority 1 relationships. Once you exit the relationship, you’ll only wonder why you didn’t do it sooner.

Now if this matrix is valid—and obviously I think it is—then it’s worth taking some time to describe in detail what the ideal relationship looks like. In the next few posts, I will do just that. I want to provide you with the Profile of the Ideal Publisher, Author, and Agent. If you are in publishing, this will give you a head start. If you are in some other kind of business, you can apply the same principles to any relationship—clients, vendors, customers, etc.

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  • http://becomingmissional.blogspot.com jerry

    The tuff part for me is figuring out which is which and then determining to do something about it.

    Thanks for the great post.

  • Greg

    Good food for thought, Mike. Think there’s a typo on the #4. Should be “high maintenance,” not “low high maintenance,” right?

  • http://www.michaelhyatt.com Michael Hyatt

    Greg,

    Thanks for catching the typo. I have made the correction!

    Mike

  • http://rwrld.blogspot.com/ Ron Davison

    A great book on this topic is The Loyalty Effect by Reichheld and Teal. I’m curious, though; would you see the relationship with an agent as a supplier relationship or a customer relationship?

  • http://www.michaelhyatt.com Michael Hyatt

    Ron,

    This is fairly complex. I used to be an agent, and I always saw the publisher as the customer. Just follow the money. I sold projects to the publisher, and they paid me and my clients. That makes the them the customer.

    But in a world of scarcity, where publishers are competing for talent, they have to treat agents and authors as the customer.

    Like most healthy relationships, they work best when each party treats the other with respect and doesn’t take the relationship for granted.

    Thanks,

    Mike

  • http://www.nashvilleagency.com tim grable

    This is some of the best information I have seen in years.

  • galvanized

    Hi everyone,

    I agree with Jerry, that the difficult part is figuring out ‘which is which’. I thought I’d elaborate on what, for me makes it challenging.

    Its a no-brainer to figure out which ‘investment’ is profitable at the present moment. Its tougher to figure out which one will *eventually* reach high profits.

    From the standpoint of leadership and motivation, if you perceive someting or someone to be of high or low potential profits, could that perception become a self-fufilling prophecy (like in that classic study about teachers’ expectations and their students’ performance)? Is the relationship between the “observer” and the “investment” a distant hands-off relationship or more interdependent? I guess it depends.

    So these two things can make it challenging to figure out which is which.

    About the matrix, I am wondering if there could be only two, not four combinations. Ie, just high profit and low profit. Because total profit would take into account the cost of “maintenance” if its possible to relate them together. But then headache and sleepless nights might not translate well into a cost (although it feels like one).

    What I really enjoy and appreciate about using a framework like the one introduced by Mike, is that it helps me to adopt and experience different points of view, just to ask “what if”. Thanks Mike!

    Comments anyone?

    Cheers,
    Galvanized

  • http://www.rickwomack.com Rick

    the pdf link above is incorrect…

    • http://intensedebate.com/people/michaelhyatt Michael Hyatt

      I just fixed it. It should work now. Thanks.