Let’s get real about collaboration and transparency

Most supply relationships are not enduring partnerships built on shared values and mutual goals. They are conditional, to varying degrees transactional, and shaped by shifting power dynamics. This is not necessarily a flaw: it’s a rational response to uncertainty, competition, and the need for optionality in the market structure we’ve created.

Rather than fostering long-term alignment, businesses often seek to balance two competing imperatives:

• A desire for commitment, where it supports cost efficiency, security of supply, or innovation investment: against  a need for freedom of action, to move to alternative suppliers, redesign products or services, shift to new markets, or discontinue unprofitable operations.

This makes even the most committed supply relationships to a large extent a marriage of convenience: cooperation when incentives align, defensiveness when they don’t. Trust is inherently limited, which is why transparency is offered selectively and with limits. And commitments are hedged wherever possible.

Contracting Is the Negotiation of Boundaries – Not a Platform for Collaboration

It’s not accurate to say that contracting is designed simply to protect freedom or limit collaboration, but contracts are the result of negotiated battles over where and how much freedom each party is willing to cede in exchange for certainty, control, or reward.

Commercial contracts routinely wrestle with questions such as:

• Should the buyer commit to volumes, or reserve the right to adjust orders?
• Can the supplier change products or substitute components without approval?
• Who controls termination and under what conditions?
• How are exclusivity, competition, and IP treated?
• What are the remedies if supply is disrupted or if the buyer walks away?

Thus contracts often end up as defensive (preventist) documents, focused more on limiting the other party’s freedom than enabling joint outcomes. Even where collaboration is discussed, it is usually framed as a risk mitigation tactic, not a core operating principle.

This is why many contracts struggle to support the kind of agile, coordinated behavior the McKinsey nerve center model envisions. They are not built and negotiated for shared responsiveness, but ultimately with a strong focus on unilateral protection.

To achieve value we must be transparent, but transparency exposes us to risk. So we can get comfortable with this in a short term engagement where fundamental change is unlikely, but not when we have to divulge longer term intent (eg potential I may change my mind, select a new partner, discontinue a product line, exit a market, drop my prices etc). Even my own negotiators probably won’t know about plans like this: they are closely guarded secrets – which condemns us to a continual compromise on the value we can achieve.