This paper is the product of discussions held preceding the induction of the newest roundtable members on May 19 at the Altria headquarters in New York City. Meta J. Mereday has prepared this paper with the approval and guidance of The Boston Consulting Group. BCG executives wrote the study, “The New Agenda for Minority Business Development,” which was funded by the Ewing Marin Kauffman Foundation. It is the goal of all involved that minority businesses meet the challenges they face, build capabilities and develop strategic partnerships into the supply chain process. 

The Billion Dollar Roundtable 2005 White Paper

The New Agenda for Supplier Diversity: Brainstorming

BY META J. MEREDAY, FOR THE BILLION DOLLAR ROUNDTABLE
IN COOPERATION WITH THE BOSTON CONSULTING GROUP

The Organization

Established in 2001, the Billion Dollar Roundtable brings together major corporations that make meaningful and measurable contributions to the economic growth of minority- and women-owned businesses and whose supplier diversity spending has reached and exceeds $1 billion annually. Drawing from the learning experiences and forward thinking of the supplier diversity members helps BDR to achieve its mission, which is “to promote supply chain diversity excellence through research, education and best practices.”
Active BDR members are: Altria Group Inc., DaimlerChrysler, Ford, General Motors, IBM, Johnson Controls, Lockheed Martin, Procter & Gamble, SBC, Toyota Motor North America, Verizon and Wal-Mart.

Overview

One of BDR’s goals is to produce a document annually regarding issues facing supplier diversity. This year, the immediate objective is to provide information on structuring the new agenda for supplier diversity. A team formed by the Boston Consulting Group that included the BDR began a process to determine key elements involved with developing the “new agenda” for minority-owned businesses and the supplier diversity initiative; and identifying factors needed for their growth and development. With access to business professionals, research tools, census data and many other resources, the BCG identified a number of areas that required mindset changes in order to begin the process. These areas included building capabilities for MWBEs and incorporating strategic partnerships into the supply chain process. The result of the think tank process was the development of six elements for a “new agenda.”

Background

The BCG working with the BDR and other resources, provided key insights in its research that determined why American businesses should be “concerned with minority business development.” They found a strong correlation between minority business development and economic development and the knowledge that minorities and women are becoming an even more prominent segment of the population. Although research supports that minorities and women are becoming entrepreneurs in larger numbers, there continues to be a gap between them and major businesses of size. BCG identified that while MWBEs are growing, most remain relatively small in size, undercapitalized and lacking strong management.

Corporate America continues to provide input into setting the standards for business growth and expansion of MWBEs. However, the involvement of governmental entities is still crucial. Corporations are facing globalization challenges, pressures from cost reduction programs, offshoring and outsourcing of commodities and processes, and rectifying issues of brand loyalty, competition and the ever present “build more” value into the supply chain. BCG and BDR recommend that government entities should function as a catalyst with the inclusion of private sector leadership and aggressive innovation on the part of MWBEs.

Opportunities abound in the supplier diversity arena in spite of challenges. All entities impacted by diverse suppliers must build in the supplier diversity initiative up front, in the planning stages. Value has to be leveraged at all levels of the supply chain. MWBEs must understand the requirements needed to gain parity between organizations, how to educate all parties involved and how to obtain and apply the essential technology needed to strengthen and grow their businesses.

The BCG team outlined six areas that require changes in the mindset of corporate, government and MWBEs within the business environment to “close the gap” between major corporations and the MWBEs and continue their growth. The findings concluded that:

  1. MWBEs need more capacity and capabilities to diversify and grow with corporations stopping the support to wrong entrepreneurs and government supporting programs to build larger business.
  2. MWBEs need to use strategic partnerships more to strengthen their resources with corporations working on building alliances with MWBEs and government enhancing its mentor-protégé programs.
  3. MWBEs need to redefine their ownership and control to provide more flexibility with corporations using more creativity in supporting MWBE growth initiatives and government expanding the ownership criteria rules.
  4. MWBEs need to become more proactive and corporations must understand that MWBEs are true economic development factors with government looking at the macro environment with MWBEs.
  5. MWBEs need to use varied capitalization including debt and equity with corporations forgoing bad deals and focusing on potentially profitable ones and government assisting both small and growth-oriented businesses with financing options.
  6. MWBEs need to diversify into growth-oriented industries with corporations creating more opportunities in this area and government redefining the importance of research and support programs as potential markets

From these findings the BDR gained the understanding that a true business model for success involves the three sectors — Corporate, Government and MWBE — and that the elements for “Structuring the New Agenda” are in place. Thus, the discussion points for the Billion Dollar Roundtable centered on the “new agenda” themes derived from these findings. These elements included:

  1. Think differently (and strategically) about minority business development
  2. Create large minority businesses with strong capabilities
  3. Collaborate around solutions to grow businesses of size
  4. Use emerging domestic markets as growth engines
  5. Globalize minority-owned businesses
  6. Be innovative in financing minority business growth

From this foundation, the BDR outlined a framework to continue developing strategies geared towards building “world-class programs.” This work provides ideas for MWBEs to develop and grow as well as ideas about some of the daily tools needed by supplier diversity representatives to incorporate “best practices” within their companies. To broaden the thinking around these elements, the 2005 Billion Dollar Roundtable Group discussions were based on this data. BDR outlined key information that addressed the “new agenda” and focused on the changing dynamics within the supplier diversity business model and how the triad — corporate/ supplier/government — can work together to enhance the opportunities for MWBEs in the global environment.

To jump start the thinking process and celebrate the success of supplier diversity “in the future,” the BDR set the stage. A cross-section of supplier diversity professionals shared ideas about the future built around the six elements. They were asked to stretch their minds and leap ahead 10 years to 2015. Using the format of a mock 2015 issue of Minority Business News USA with the cover story discussing the “Amazing Success of Supplier Diversity,” the participants were provided with key messages, or headlines, based on the cornerstone themes that determined how this success was achieved and asked to build the “how to” strategies and critical paths surrounding the headlines.

While this paper is not an attempt to answer all the pertinent questions that pertain to MWBE development or structuring the new agenda, it will provide some brainstorming ideas. It is also intended to shed new light on the relevance of inclusion and the impact that viable MWBEs can have on the growth of major corporations and their significance for community-based entities and governmental collaborations.

Roundtable Format

The Billion Dollar Roundtable 2005 Session, held in Altria’s headquarters in New York City May 19, was hosted by Don McKneely, BDR chairman and co-founder and publisher of Minority Business News, and Sharon Patterson, BDR chief executive officer and co-founder. Approximately, 70 representatives from member companies of the BDR, other major corporations — including MWBEs — and supporting organizations, such as NMSDC and WBENC were on hand to participate in the dynamic and energized discussions.

The group discussions began with the answers provided already. The objective was to develop the questions and the path to the answers with a set of recommendations for current supply chain managers and MWBEs to utilize. The key in this endeavor was the discovery of the paradigm shift. The participants in the 2005 Billion Dollar Roundtable were encouraged to not only “think outside the box,” but also to “think back from the future.” With a 10-year span — 2015 to 2005 — to work back from, the participants discussed six primary issues, with one, “Thinking Strategically,” receiving a double emphasis. Thus, seven table discussions were conducted focusing on key issues that will affect supplier diversity and the development of minority- and women-owned businesses today and tomorrow in this increasingly global environment. Those forward thinking individuals who are planning for tomorrow today may well determine the future of supplier diversity and the role of key players involved in supply chain management in 2015.

The compilation and highlights of the group discussions are the basis for this paper. Hopefully, it will provide ideas that function as a foundation to build effective programs and maintain open channels for information and idea exchange. Remember the headlines represent events in 2015.

TABLE 1

USE EMERGING DOMESTIC MARKETS AS GROWTH ENGINES

Use emerging domestic markets as growth engines Use diverse suppliers to capture a share of emerging domestic markets

 

Leading corporations have leveraged strength in supplier diversity to position their brands in a very positive manner within minority communities - which have in face experienced growth in purchasing power at a very dramatic rate. Core to the business case for supplier diversity was the creation of wealth-generating businesses in minority communities, which are markets for corporate goods and services. Moreover, minority businesses themselves represented another business opportunity for goods and services. Corporations integrated supplier diversity with other outreach initiatives, affecting brand awareness and driving increased sales.

  • Wealth generation: The economics of larger businesses in creating wealth, which flows to minority communities
  • Suppliers as customers: Expansion of marketing and sales efforts to key suppliers
  • Connection to the community: Leveraging supplier relationships to connect to the communities

See Table 1
Major corporations aid emerging markets increasing diverse businesses worldwide.

Discussion Re-cap

In looking at the usage of domestic markets and their future potential as growth engines, this group first defined “What are emerging domestic markets?” and identified the important aspects of this market that need to be addressed to expand its potential. The importance of target marketing and growing minority communities in the global environment is key to the understanding of emerging domestic markets.

The discussion centered on the definition of emerging markets in today’s language and for the future. It was like a moving target. The group had divergent opinions regarding the definition. They decided that the definition for “emerging domestic market” will change continuously, as will the growth of minorities and women in the business arena. The importance of target marketing and interaction type relationships that fully engage minorities and women in all aspects of the business dynamic are crucial.

The key consideration, or paradigm shift, is the awareness of diversity in the marketing and branding processes within the total emerging market versus the singular focus on supplier diversity. In order for corporations to use emerging domestic markets as growth engines for diverse businesses and major corporations, they must be incorporated into all aspects of the business. The role of disseminating this message requires massive communication.

The discussion group decided that these initiatives must be inclusive at all levels. In 2015, the premise will be clear that major corporations with suppliers overseas will have a standard percentage of minority content in its production and service support, and supplier diversity spend will reflect and align with the related percentages of diverse populations in the emerging markets. In addition, the importance of major corporations working on long-term formats to aid in the development of business operations in global areas where emerging markets exist to increase the diversity pool was stressed. For emerging domestic entities, especially minority- and women-owned firms, the responsibilities are clear as it pertains to increasing awareness of the company and industry and building necessary alliances to be competitive.

Recommended breakthroughs to achieve better utilization of domestic emerging markets include:

  • Enhanced performance-based compensation
  • Monitoring diversity content throughout the supply chain
  • Making supplier diversity a regular business practice that is fully integrated into the supply chain versus a special offshoot program
  • Providing financial incentives to corporations who achieve the goal and imposing penalties on those that fail
  • Adding supplier diversity-based language to packaging to influence inclusive purchases
  • Expand corporate involvement in capital access programs in inner cities

Transitional Format from Table 1
(based on the suggested recommendations and discussion)

In order to achieve an inclusive format that provides significant support for the growth and involvement of emerging domestic markets, the implementation of a number of ideas are necessary over the 10-year span to induce the performance and action needed to achieve the goal and reflect the given headline in 2015. First, implementing an aggressive performance-based compensation package throughout the supply chain would provide strong incentive for managers to change their systematic processes to reflect more diversity.
Regarding regulation, the creation of a fund for fines by those companies that are not in compliance was also presented as a recommendation. The structure of the fund would be determined by language incorporated onto the packaging and the labeling identifying the contributors to the product. The need for financial incentives for compliance and penalties for non-compliance were important, as the group’s main premise was to make supplier diversity a regular and ongoing business practice that is involved throughout versus a special program addressed as a side bar. This would require every corporation, both foreign and domestic in 2005 terminology, but global in 2015, to adopt supplier diversity as a part of economic inclusion and development. Also, the utilization of support organizations and their interaction with major corporations as liaisons to establish capital access programs in inner cities and lesser development countries was also recommended.

TABLE 2

THINK DIFFERENTLY (AND STRATEGICALLY) ABOUT MINORITY BUSINESS DEVELOPMENT

Think differently (and strategically) about minority business development Enhance capabilities and fully develop the business case for supplier diversity

The business case for supplier diversity has been clearly articulated and closely linked to corporate strategic imperatives. Significant focus has been placed on providing adequate resources — both human and financial — to create a competitive cadre of suppliers from minority communities. The "new" supplier diversity professional possesses a broad base of knowledge and is an integral part of a corporate "team" approach. In mature programs, companies are thinking differently about the roles key suppliers can play in reaching a variety of constituencies.

  • The resource question: The growth of MBD programs despite corporate cost pressure
  • The team approach: CEO to shop floor focus on supplier diversity
  • The leverage factor: The roles of suppliers in developing corporate markets, etc.

See Table 2
Joint ventures are the strategic future for MWBEs

Discussion Re-cap

This discussion focused on bringing the mindset of major corporations and minority- and women-owned businesses closer together. Each side has its own agenda, but the important shared goal of maximizing profit and minimizing cost is often overlooked by the participants along with the importance of strategic alliances via joint ventures. These issues were discussed as a business format that will benefit even more MWBEs in the future and provide major corporations with diversity in thought and practice needed to move forward. However, present-day attitudes toward joint ventures leave many MWBEs wary due to the lack of control issue.

In this respect, the paradigm shift that leads to the 2015 message of thinking differently involves the understanding of joint ventures as a method to increase cost savings and customer service with added value for business opportunities.

Many MWBEs avoid joint ventures because they want to retain management and control of their business operations. However, it was noted that MWBEs fail to understand the value add that another entity provides to their operation, particularly a partnership with a major corporation. The group also highlighted the benefits that major corporations gain from joint ventures with MWBEs as a strategic partner with the wherewithal and personal connection to specific markets. Many joint ventures have been established that have allowed the MWBE to maintain management and control, and, at the same time, enhance its outreach and streamlined cost.

Recommended breakthroughs to achieve thinking strategically through joint ventures include:

  • establishing significant targets and enforcing accountability
  • improving staffing and communication to better prepare for the process
  • increased promotion to tell the success stories
  • improving research and information sharing to identify good and bad companies
  • expanding financing options and building on mutual benefits to the alliance

Transitional Format from Table 2
(based on the suggested recommendations and discussion)

In order to minimize the obstacles, including quick turnover, MWBEs must embrace risk avoidance and costly strategic sourcing; and corporations, MWBEs and government agencies will have to enhance their collaborative efforts to reinforce the importance of the triad. Through increased target marketing, better accountability, improved overall research on applicable issues, improved staffing and communication and expanded marketing that not only educates the consumer but showcases the success stories, the link between MWBEs, corporations and government would be strengthened, and the economy would be boosted.
Furthermore, the establishment of a “Supplier Diversity Hotline” would provide a supplier “safe haven” to determine the “success tools” required to initiate a productive and cost effective business relationship with input from all parties. This information would expand access to resources and provide MWBEs with the leverage to increase their risk and market their certifications. Corporations could use the information to form stronger and innovative partnerships; and government agencies leverage information for industry groups and increase research and financing support to expand the development process.

TABLE 3

COLLABORATE AROUND SOLUTIONS TO GROW BUSINESSES OF SIZE

Collaborate around solutions to grow businesses of size Develop robust majority-minority relationships and expand collaboration

An expanded role for larger companies in developing minority suppliers was accomplished along three fronts: the creation of authentic Tier 2 supplier diversity programs; pro-active coaching of minority businesses around the key factors for success in the alliance process; and fostering collaboration across corporate boarders that developed "mega" suppliers.

  • The Tier 2 challenge: Down-streaming the responsibility and controlling the outcome
  • Understanding the alliance process: Coaching minority businesses on building effective alliances
  • Collaborative initiatives: Multi-corporate initiatives that work to create large opportunities

See Table 3
Supplier diversity: The mega CEO’s total solution for success

Discussion Re-cap

This group focused on the “how to’s” related to conducting effective and proactive collaborations. The major component involved the buy-in and capital investment from both corporate entities and MWBEs to access collaborative resources. While the appreciation of differences has been the model, here the emphasis is on collaborating to build on the value for both parties.
While major corporations may have the advantage from a financial and resource standpoint, it is critical for MWBEs to take their share of the risk and aspire to create a more collaborative environment. The mutual benefit can be determined when both parties have a significant stake in the process. The paradigm shift in this scenario is the determination that unless the prospect is profitable and viable for both parties, then it is a “no go” as a venture.

From a collaborative format, the end result has to benefit both sides that have committed time and resources to the process. This lends itself to the solution that allows for total involvement and delivery of competencies provided by interaction between the major corporation and its MWBE business partner. This mindset addresses 2005 realities and sets the stage to achieve 2015 projections.

Recommended breakthroughs to improve collaborations and build larger businesses include:

  • Increasing the usage of marketing and technology to improve strategic sourcing
  • Changing the business and consumer dynamics to address the emerging market
  • Encourage mergers between minorities and women to strengthen foundations
  • Restructuring revenue streams to generate stability and enhance growth capitalization
  • Integrating supplier diversity throughout the corporation and elevating supplier diversity representative status
  • Communicate, communicate, communicate

Transitional Format from Table 3
(based on the suggested recommendations and discussion)

By leveraging technology to achieve effective collaborations, the shift within corporations is moved to a more advanced dynamic that incorporates capability and capacity. This group defined the achievement of reaching goals by all means. However, the inclusion of MWBEs as true partners in the development of the strategic profile is imperative. Government agencies and corporations should target areas including hub zones for potential supply chain partners as they are designed to enhance business development for minorities and women.
Typically, the MWBE is brought in after all the research and development work has been gathered and completed. The end-user is also neglected in the equation. However, the transitional approach involves all parties including the end-user within the strategic sourcing and planning components. This interaction and inclusion emphasizes “teamwork” in the alliance, and it calls for the standardization of collaborations within target markets in preparing for future goals and objectives. Corporations and MWBEs, change within the time period from 2005 to 2015 from the business-to-business format, to business-to-consumer because the relationship becomes seamless. Ideally, within supply chain management there is a senior-level officer with integration of supplier diversity in all areas of the corporation as her major responsibility.

TABLE 4

GLOBALIZE MINORITY-OWNED BUSINESSES

Globalize minority-owned businesses Support and partnerwith minority-owned firms to build global capabilities

Globalization is a fixture in the corporate environment. The exposure of minority business to global opportunities via corporate programs lowered the risk for building international partnerships and improved supplier competitiveness. In some instances, fostering international alliances delivered gains for both the minority supplier as well as numerous companies in emerging areas such as Africa, the Far East, Latin America and the Caribbean.

  • Partnering on a global basis: Integrating minority firms in global strategies and plans
  • Forging minority global alliances: Assisting minority firms in establishing relationships with international partners
  • Small business partnering: U.S. minority businesses as a conduit for small international companies to access U.S. markets

See Table 4
Collaboration: Key to globalization

Discussion Re-cap

This group developed its own interpretation of “globalization” and the business related components of the word. Then, the group focused on what businesses, whether corporate or MWBE, need to do to be competitive in the changing global arena. From an awareness of culture to the understanding of financial structures, the key to success in the global arena involves a myriad of collaborations above and beyond corporate and MWBE scopes.
The key considerations in “globalization” as defined by the group include:  trade agreements, economic alignments, cost emphasis, political risks, cultural understanding, uniform universal policy, global customer-base, training, quality control, advocacy policy, technology — leapfrog, global system integration, database-uniform technology, instant communication — real time, 24/7 communication, instant online translation, stabilized currency policies, barriers to entry, easy as domestic, regulatory issues and developing model.
Corporations and MWBEs must create structures that will “bridge the borders” that divide them geographically and seek additional opportunities. Thus, the paradigm shift involves looking outside of home bases and developing “global supply chains and collaborative networks” that will build frameworks for future success. Knowledge of other markets is also acquired through technology and cross-cultural understanding. Strategic alliances with companies outside of home bases to increase expansive opportunities were discussed, and alliances with advocacy organizations that define goals and objectives consistent with the company were included.

While many of these methods are commonplace in 2005, they are based on a national agenda looking globally, however, the standard for 2015 will be on a global basis with global needs assessments and “BCG-like” models addressing global views.

Recommended breakthroughs to globalize MWBEs include:

  • Generating better relationships with corporations that have global ties
    Increasing cross-cultural understanding and connecting with foreign entities
  • Expanding business framework and identifying potential markets for diversifying
  • MWBEs and corporations partnering and resource sharing to determine best global fit collaborative approach
  • Developing significant relationships with government agencies, community based groups and MWBEs

Transitional Format from Table 4
(based on the suggested recommendations and discussion)

This group determined that MWBEs must understand the strategic plan of the client and determine how to fit it in their core competencies here and abroad. MWBEs must build good relationships with corporations domestically and use that framework as a springboard for growth in the global market. Next, MWBEs should build relationships with foreign entities and work to understand their structure and establish cross-cultural bridges, including understanding governmental dynamics and infrastructure. MWBEs should work with their corporate partners to emphasize their value-add in the global arena with creativity, business innovations and cost effectiveness.

Information- and resource- sharing is crucial in the globalization process to avoid pitfalls and challenges to growth. Global corporations and government agencies can provide assistance to MWBEs and share insights regarding key business components such as manufacturing, financing and marketing that can impact a MWBEs success in the global arena. Major corporations can send their agenda and “best practices” (Supercomm Diversity Challenge) abroad, by utilizing their supplier diversity platform and operating with a standard code of ethics that does not violate other cultures. In addition, corporations can build harmony, increase their understanding of other business environments and help MWBEs identify avenues to access and promote the value of MWBE alliances within their global markets in a non-threatening manner.

TABLE 5

CREATE LARGE MINORITY BUSINESSES WITH STRONG CAPABILITIES

Create large minority businesses with strong capabilities Innovate around major opportunities

Corporate innovation has been used to create unique opportunities for minority businesses. In particular, innovation has created opportunities for larger businesses. Focusing on these "big" opportunities required conquering the challenge of matching minority entreprenuers with the "right opportunities." This matching required broadening the sourcing paradigm for minority businesses and creating solutions with new forms of alliances, and incorporated acquisitions, spin-offs or other creative solutions.

  • Creating opportunities: Innovation in opportunity design (bigger and better)
  • Contracting creativity: New approaches in contracting creates winning business initiatives
  • The opportunity puzzle: Entrepreneur + opportunity + capital (non-traditional approaches)
  • Capability improvement: The new paradigm for building minority business capability

See Table 5
Fortune 500 companies supply chain networks reflect demographics

Discussion Re-cap

Focusing on identifying the business case in 2015, this group outlined two major components in the development format:

  • Provide strong internal incentives to encourage diverse transactions
  • Invest in MWBEs like other strategic partners/suppliers

With this two-pronged approach in 2015, the discussion centered on the changing dynamics that would bring about this scenario within the 10-year span. The location for this entity known as “supplier diversity” and the importance of its placement within the overall corporate structure is critical. Locations that were discussed included: marketing, business development and strategic initiatives. These areas would give supplier diversity the reinforcement it needs to be taken seriously in the marketplace and for supply chain managers to do the optimum job they can do.

Once the placement requirements were discussed, the participants provided suggestions that involved changing the focus of the initiative by the board of directors, the group which should be the lead driver of the revised plan and the executive leadership of the company. Typically, this initiative is generated by a lower grass-root level with an optimistic “trickle up” aspect. However, the true success story will require a multi-tiered approach driven downward through the company and involving placement in key goals.

Additionally, the initiative would encompass the development of internal executives for the purpose of ownership of divested businesses.

Recommended breakthroughs to create large, diverse business include:

  • Increasing purchasing options for MWBEs to expand capabilities
  • Attaching supplier diversity to the mergers and acquisitions department
  • Shifting focus to long term growth models and increase willingness among MWBEs to partner
  • Developing a resource bank for closely held business that may become available
  • Working with the mid-sized MWBEs to build on their future growth potential

Transitional Format from Table 5
(based on the suggested recommendations and discussion)

To prepare 2005 MWBEs for sustainable relationships in 2015 requires support and acquisition of mid-sized businesses now thereby preparing diverse business candidates for potential larger merger and acquisition prospects later. Tying supplier diversity to the merger and acquisition department provides a better tracking of potential merger candidates later. This approach provides additional structure for the corporate and MWBE partnership with increased responsibilities for both. The new mergers-and-acquisitions corporate partner would have a supplier diversity program manager who is certified and a “deal-maker” with an emphasis on establishing long-term partnerships with MWBEs.

The “new” MWBE must be global in scope with sound financials and strong goals tied into the corporate profile. MWBEs must also re-evaluate debt versus equity and consider the value of strategic alliances. They should look at their corporate client as a strategic partner.

In order for MWBEs to become major players in the global arena the overall shift must be from short-term goals to a more strategic long-term focus and to partner with an organization that is publicly traded and driven by the marketplace. Their willingness to partner will advance their ability to grow. The relationship between the MWBE and the supplier diversity program leader is key to accessing the needed areas within the corporation. The leader must be comfortable with the highest level of leadership and have an understanding of the overall business and the best fit for the MWBE partner.

TABLE 6

BE INNOVATIVE IN FINANCING MINORITY BUSINESS GROWTH

Be innovative in financing minority business growth Facilitate appropriate financing for large scale minority ventures

Supportive relationships with suppliers has facilitated access to all parts of the capital markets. The historic positioning of minority businesses as exclusive users of debt capital has dramatically changed. Innovatively financed businesses have seen increases in the size of opportunities. More aggressive use of equity capital commonplace. The NMSDC's "growth initiative" now numbers over 1,000 companies and offers creative solutions to growing larger businesses.

  • Flexible capital structures and strategies: Capitalization through partnering ("angels", banks, private equity, etc.)
  • Unique corporate roles: Facilitators of financing and equity partners (a careful balance)
  • Minority business IPOs: Managing the transistion from minority-owned to publicly-owned

See Table 6
Diverse companies acquire mezzanine financing to support growth

Discussion Re-cap

The importance of financing options will remain a critical factor for business development and growth into 2015 and beyond, but incorporating that dynamic in a forecasting mechanism proved an interesting challenge for this group. First, they identified the relevant attributes needed for a diverse supplier to survive and to grow within the envisioned framework of the period. These attributes included being a multi-cultural enterprise that maintains appropriate diversity ownership as defined in that period; has ownership of intellectual property; is a high-growth company with a global Fortune 100 customer with multi-year contracts; and has management that includes former Fortune 100 executives.

The paradigm shifts within the format are numerous, but the primary one involves the correlation between the data that reflects the demographics and purchasing power to the development and support of the business case for a diverse supplier. This encompasses better correlative effects between the company’s revenue and the company’s diversity spending. The program functions would better address having a workforce that represents the global environment and increase collaboration and matchmaking with diverse business and between diverse businesses.

Recommended breakthroughs to growing larger business through innovative financing include:

  • Improving fiscal management to reduce expenses and generate more revenue
  • Increasing corporate development of executives for transition into collaborative diverse businesses
  • Expanding relationship between diverse businesses and corporations
  • Eliminating barriers to investors to encourage more progressive deals
  • Investigating more creative equity-based financing options to reduce reliance on debt-based options

Transitional Format from Table 6
(based on the suggested recommendations and discussion)

Specific program-related functions would include a pipeline development program for promotion and support of diverse businesses through executive support services. For example, the normal career flow is as follows:

  • College - Early career - Mid career - Late career - Retirement

The diverse venture development flow would be as follows:

  • College - Early career - Mid career - Diverse business training - Diverse entrepreneurial venture

In this way, the career development expertise is cultivated and the diverse executive becomes the feeder group for an advisory board or management team for a diverse supplier. This provides leverage within the major company and a leadership development path within the company or within the company’s resource network. In addition to the development of management teams and aspiring entrepreneurs internally, the group addressed the challenges towards capital access. Major corporations and supporting organizations need to “step up” their efforts to expand the potential for diverse suppliers to meet the changing trends in 2015. Major corporations will need to assist their executives within the pipeline development process and eliminate barriers to investors.

Government agencies and nonprofit organizations geared toward business development must become more aggressive in their efforts to assist and support these ventures with funding for research and development. Three funding areas were discussed with potential for larger asset pools for equity dollars. They are: a) pension funds/wealthy investors b) minority venture capitalists/private foundations c) government support/R&D money.

Meanwhile, diverse suppliers must be prepared to execute business plans and marketing strategies that incorporate sound accounting principles that are Sarbanes/Oxley compliant. With a number of models to follow, including Ford matchmakers et al, the key lies within the outsourcing component within major corporations and the on-going assistance that is provided to the venture. Once the diverse supplier is up and running, it then becomes a program function within marketing to highlight the “success” of the venture and the diversity of the individuals involved.

TABLE 1

USE EMERGING DOMESTIC MARKETS AS GROWTH ENGINES

Use emerging domestic markets as growth engines Use diverse suppliers to capture a share of emerging domestic markets

Leading corporations have leveraged strength in supplier diversity to position their brands in a very positive manner within minority communities - which have in face experienced growth in purchasing power at a very dramatic rate. Core to the business case for supplier diversity was the creation of wealth-generating businesses in minority communities, which are markets for corporate goods and services. Moreover, minority businesses themselves represented another business opportunity for goods and services. Corporations integrated supplier diversity with other outreach initiatives, affecting brand awareness and driving increased sales.

  • Wealth generation: The economics of larger businesses in creating wealth, which flows to minority communities
  • Suppliers as customers: Expansion of marketing and sales efforts to key suppliers
  • Connection to the community: Leveraging supplier relationships to connect to the communities

See Table 1
Supplier diversity is mainstreamed in business environment

Discussion Re-cap

The group focused on the end result of the process — current events in 2015 — and then worked itself back to 2005 dynamics with the transitional format that got them there. They addressed the scenario of supplier diversity being “mainstreamed” into the global society of 2015 based on the premise that demographics are discussed openly in the mainstream media and the issues of diversity are in the forefront. Skill sets of diverse suppliers are advanced, and corporations have put pressure on thought leaders, including business schools and consulting firms, to develop key programs. While there is organized buying power in diverse communities, there are no boundaries, and MWBEs are no longer considered “micro” businesses. These businesses have great access to and usage of financial supports. The in-creased use of technology has made supplier diversity initiatives global and supplier pools enormous.

There are a number of critical factors that must occur within the time-span to achieve the 2015-forecasted scenario. These factors range from the publication of research from thought leaders on the gains and losses of large diverse supplier contracts; consistent executive training for diverse suppliers along with strong corporate mentoring; prominent media coverage on diverse supplier success stories and their relevance to the business dynamic; and increased understanding of MWBE development within their respective constituency groups. In addition to favorable legislation that supports the development of diverse suppliers and punishment for non-compliance by major corporations for not utilizing diverse suppliers, the major paradigm shift has changed the way the supply chain views supplier diversity. The initiative has been elevated to a top management level with greater economic impact across the board. It is a new stand-alone component.

Recommended breakthroughs to achieve thinking strategically through mainstreaming include:

  • Encouraging favorable legislation that increases the importance of MWBEs
  • Contributing to research and increased communication regarding MWBEs in all communities
  • Improving the development process to grow larger MWBEs and expanding their product/service model
  • Promoting supplier diversity as a profession within the company and upgrading the skills of managers
  • Increasing executive training within the corporate ranks

Transitional Format from Table 1
(based on the suggested recommendations and discussion)

In order to develop a program to effectively mainstream supplier diversity by 2015, the group outlined an action plan that addresses the responsibilities of all the related parties to the process — major corporations, MWBE, government/organization. The first plan of action requires a commitment to research and contributions largely from major corporations and agencies toward that effort. With the data from the research, impacted areas would be improved. Skill set development for supplier diversity leaders and key contacts is also crucial. The group further suggested that individuals involved in the supplier diversity arena would be certified professionals.

In addition to the development of a structured professional component for supplier diversity management, the training would involve a “deal-maker” component to incorporate legal and financial considerations for managers to assist with not only initiating alliances, but also assisting in closing the deals. Major corporations must take a more aggressive and progressive stand with their supplier diversity initiatives. With a progressive internal format in place, the major corporations must turn outward with a strong external presence.

Recommendations

Under the theme “Structuring the New Agenda,” participants built a framework around six elements — or cornerstones — that must be in place to elevate supplier diversity to the core business level in the corporate supply chain in the next decade. These elements are:

  1. Think differently (and strategically) about minority business development
  2. Create large minority businesses with strong capabilitie
  3. Collaborate around solutions to grow businesses of size
  4. Use emerging domestic markets as growth engines
  5. Globalize minority-owned businesses
  6. Be innovative in financing minority business growth

From this list, a wide range of recommendations were presented that could be implemented by corporate representatives, aspiring MWBEs and proactive government agencies to build on the business case for supplier diversity and to support its growth and development within the domestic marketplace and globally.

A number of reoccurring ideas surfaced during the discussion that included the importance of broad internal communications that em-phasized the value of supplier diversity. It became clear that strategic alliances between corporations and MWBEs will require more attention on both sides. Corpora-tions will not only have to view MWBEs as full partners, but MWBEs will have to increase risk and diversify their capitalization to grow.

The strategic alliance component would have MWBEs involved earlier in the development of internal projects. Internally, the supplier diversity program leader would assume more responsibility requiring improved credentials. And, supplier diversity would be closely aligned with the merger and acquisition unit of the company along with all other departments in the supply chain.

Government agencies and community organizations will also need to step up their efforts in assisting MWBEs with resources to identify and pursue new markets. This support would be very beneficial for MWBEs that desire global opportunities and reinforcement of their presence in emerging domestic markets.

Again, this paper provides only a framework to continue the dialogue about supplier diversity issues. The participants in the discussion of the Billion Dollar Roundtable provided a wide range of ideas for corporations, MWBEs and government agencies and community organizations to implement to strengthen the supplier diversity cause.
 
 
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