Now back to the business environment. Most firms, especially in innovation-driven industries, operate as part of one or more supply networks. Here, they have to collaborate with various other organizations, both in a role of supplier and of customer. The speed that is required for this collaboration to be effective requires a great deal of openness about internal activities and future plans. "Transparency" is the word used these days to denote such openness. Unfortunately, there is not a lot of transparency in most supply networks. Information technology, security and language differences are the usual suspects, but the real root cause is a lack of trust, which I have found in a number of industry settings, ranging from electronics to chemicals and aerospace . If you do not trust the other side you will not share your information openly with them.

Trust is an ideologically loaded concept with many controversies surrounding it. One thing that doesn't necessarily help is emphasizing the moral dimension of trust, and stressing that you should trust others in order to be a good person. Personally, you and I may believe this to be true but the point here is a much more utility-driven one: trust saves a lot of money. If you can trust the other side, there is no need for extensive contracts, no need for lots of guarantees, there are fewer delays in getting what you want, less energy devoted to thinking about possible devious acts from the other side and counter-measures for those. So, the greater the trust between parties, the higher their openness towards each other can be and the greater the focus on getting the work done. This may be obvious to many. What is especially obvious to the systems thinker is that trust and transparency are causally linked into a reinforcing cycle, which may operate as either a virtuous or a vicious cycle, depending on what direction things are moving. If initially you don't really trust your supplier, you will not be very open with them. As a result, they will be puzzled as to what your priorities and constraints may be, making it difficult for them to meet your needs really well. As a result, joint performance will be inferior, which gives both sides all the more reason to distrust each other even further. This then leads to even less openness, even more inferior performance and, obviously, even less trust. Not a great way to operate a flexible network of companies.

Reversing a vicious cycle into a virtuous one is always very difficult in business settings and especially so when such "soft" and cultural issues such as trust are involved. But, it can be done. A very demanding customer may help, an impending catastrophe in the market place also. But, as with the 10-year old boys, a different style of leadership is typically also required, one that starts with treating the other side as trustworthy partners, with displaying openness in sharing information. Initially, such behavior will be distrusted. Here, persistence is required: you can't try this for a week and then say, "Oh forget it, they will never learn, let's go back to the old ways." Creating a trusting and collaborative business relationship bears several similarities to giving birth to a child. One of these is that building these relationships takes some time; nine months is probably around the minimum. Another one is that it is really hard work, hard labor at times. This, and the nice alliteration with trust and transparency, has brought me to label this essential ingredient "travail" (which means just "work" in French, but in English the state a woman is in during childbirth.

Again, how do you do this hard work in creating mutual trust and openness? Here the operational perspective from system thinking comes to our aid. What we at Minase typically do when we are asked to help supply network partners collaborate better is that we start with all parties by mapping the processes involved. What happens first, and where does the output of that go to? What happens then to it? What affects the rate of this activity? We map these in stocks-and flows notation, which makes it possible to present very different kinds of processes in one common diagram. So, we map out the main processes that link these companies, their goods flow, their information flows, their development processes of capacity and expertise . Invariably, the people engaging in these mapping exercises find that mutual trust levels are an important driver of the rate of development for these processes, very much in line with the reinforcing loop we just talked about.

When you map trust in a stocks-and-flows format, it makes sense that trust is an accumulation that slowly grows over time. Interestingly, in the initial stages of a relationship, trust is easier depleted than grown. In my native language, Dutch, we say that trust "comes by foot but leaves on horseback." After a relation has matured, the accumulation of trust is such that the relation can survive an incidental glitch in trustworthy behavior: the other side has passed some kind of trust barrier. If you had made the same mistake in the beginning, it would have been the end of the relation. This also explains why people that work well together manage to do so for considerable amounts of time, often for much longer than the formal organizations they work for exist. Every country has its famous network of ex-XYZ company folks, where XYZ has long gone bankrupt or shrunk in size, but the network is still as vibrant as ever. The former XYZ people have come to trust each other and know how to easily find their old mates from their new desks.

So, let's summarize the argument. Flexibility is important for supply network performance, and openness in sharing information between network partners is crucial for flexibility. Openness, or transparency, requires high trust levels between partners. Trust and transparency form a reinforcing loop, with either good or bad business performance as the link between them. How do you get into such a virtuous loop? Through joint hard work, through jointly mapping out how things work between the companies, and through an increased understanding of the other side, which, over time, leads to more trust.

There is an important takeaway to this argument for managers. Developing trust also requires the right example from the leaders. If you are convinced that your supplier or customer inherently cannot be trusted, remember Kurt Lewin's experiment. There, the same boys that displayed aggression and subversion could also be very supportive of each other, kind and focused on delivering good work. The big difference was in the way that their leaders treated them. If your suppliers are untrustworthy, to what extent is that because you yourself do not trust them?

This article is the fifth in a series of eight articles by Akkermans about Supply Network Dynamics. The 6th Wave will be described in the Nov/Dec edition of the Connector. To read the introduction to this series, click here.