Smaller,innovative niche players allow Toyota to experiment with new technology trends and,more importantly,to accom- modate the diverse local needs of its dealership network. governance model,Toyota created an architecture strengths to the table.Combined,they make Toyota team that defined key business capabilities,as well more efficient,reliable,and agile. as both technology and data standards.By adher- ing to architectural standards,smaller suppliers Deriving Value From the Long Tail can now build new functions and applications that As evidenced by the experiences of Global Bank and are integrated with Toyota's core infrastructure Toyota Motor North America,deriving strategic and data.The shared technology and data plat- value from the supplier portfolio requires a forms offer a wider range of partnerships and methodical approach to managing a diverse and accelerate the CPD group's time to market. dynamic set of outsourcing relationships.Prior re- Toyota Motor North America is part of a com- search has documented the need for as few as three plex ecosystem that includes numerous dealerships, strategic partners to minimize management over- ranging from small,rural,family-owned locations head and ensure the value of global I'T outsourcing. to major-metropolitan,multilocation mega-dealer- Companies'experiences with the long-tail approach ships.Management feels it is important to enable corroborate the wisdom of a small number of stra- dealerships to create their own applications and tegic partners.But companies that manage their websites suited to their local needs and budgetary strategic partnerships effectively and institute archi- constraints.To facilitate this local flexibility,Toyo- tectural practices that preserve enterprise platforms ta's IT organization has worked with the Toyota can have a much higher number of small niche National Dealer Advisory Council to vet and final- partnerships.In fact,companies and their strategic ize a list of 19 Web-development providers from partners can institute practices that lead to a grow- which individual dealerships can choose.All 19 ing set of both one-off and ongoing targeted providers take advantage of Toyota's standardized supplier arrangements that generate a constant flow access portal to its centralized customer database of innovative technologies and approaches. when developing websites and applications for With each strategic partner in the portfolio,the local dealerships. client should continue investing time and resources Like Global Bank,Toyota Motor North America in order to reach the long-term goals of these rela- leverages the long-tail strategy to ensure efficiency tionships.The close ties between the client while facilitating localized innovations.The core company and its key partners enable and motivate partners deliver reliable services and constitute the these partners to develop knowledge and processes majority of Toyota's IT outsourcing expenditures. specific to the client so as to deliver greater value. In contrast,the smaller,innovative niche players Meanwhile,the client company should also foster allow Toyota to experiment with new technology healthy competition among key partners by engag- trends and,more importantly,to accommodate the ing suppliers with both complementary and diverse local needs of its dealership network.These substitutable capabilities.The long-tail part of the smaller suppliers leverage the technology and data portfolio,in contrast,has a different objective.It platforms that core providers build and manage.In enables the client to acquire emerging technologies most cases,they do not aspire to become big strate- and capabilities in an agile fashion.Strategic part- gic partners.Rather,the long-term payback is often ners will help to identify and integrate the services in the ability to generate new relationships with of these niche providers. similar companies.Toyota's two types of suppliers In order to identify new suppliers as well as man- must work together,but they bring different age the complexity and costs associated with the SLOANREVIEW.MIT.EDU WINTER 2016 MIT SLOAN MANAGEMENT REVIEW 85SLOANREVIEW.MIT.EDU WINTER 2016 MIT SLOAN MANAGEMENT REVIEW 85 governance model, Toyota created an architecture team that defined key business capabilities, as well as both technology and data standards. By adher￾ing to architectural standards, smaller suppliers can now build new functions and applications that are integrated with Toyota’s core infrastructure and data. The shared technology and data plat￾forms offer a wider range of partnerships and accelerate the CPD group’s time to market. Toyota Motor North America is part of a com￾plex ecosystem that includes numerous dealerships, ranging from small, rural, family-owned locations to major-metropolitan, multilocation mega-dealer￾ships. Management feels it is important to enable dealerships to create their own applications and websites suited to their local needs and budgetary constraints. To facilitate this local flexibility, Toyo￾ta’s IT organization has worked with the Toyota National Dealer Advisory Council to vet and final￾ize a list of 19 Web-development providers from which individual dealerships can choose. All 19 providers take advantage of Toyota’s standardized access portal to its centralized customer database when developing websites and applications for local dealerships. Like Global Bank, Toyota Motor North America leverages the long-tail strategy to ensure efficiency while facilitating localized innovations. The core partners deliver reliable services and constitute the majority of Toyota’s IT outsourcing expenditures. In contrast, the smaller, innovative niche players allow Toyota to experiment with new technology trends and, more importantly, to accommodate the diverse local needs of its dealership network. These smaller suppliers leverage the technology and data platforms that core providers build and manage. In most cases, they do not aspire to become big strate￾gic partners. Rather, the long-term payback is often in the ability to generate new relationships with similar companies. Toyota’s two types of suppliers must work together, but they bring different strengths to the table. Combined, they make Toyota more efficient, reliable, and agile. Deriving Value From the Long Tail As evidenced by the experiences of Global Bank and Toyota Motor North America, deriving strategic value from the supplier portfolio requires a methodical approach to managing a diverse and dynamic set of outsourcing relationships. Prior re￾search has documented the need for as few as three strategic partners to minimize management over￾head and ensure the value of global IT outsourcing.9 Companies’ experiences with the long-tail approach corroborate the wisdom of a small number of stra￾tegic partners. But companies that manage their strategic partnerships effectively and institute archi￾tectural practices that preserve enterprise platforms can have a much higher number of small niche partnerships. In fact, companies and their strategic partners can institute practices that lead to a grow￾ing set of both one-off and ongoing targeted supplier arrangements that generate a constant flow of innovative technologies and approaches. With each strategic partner in the portfolio, the client should continue investing time and resources in order to reach the long-term goals of these rela￾tionships. The close ties between the client company and its key partners enable and motivate these partners to develop knowledge and processes specific to the client so as to deliver greater value. Meanwhile, the client company should also foster healthy competition among key partners by engag￾ing suppliers with both complementary and substitutable capabilities. The long-tail part of the portfolio, in contrast, has a different objective. It enables the client to acquire emerging technologies and capabilities in an agile fashion. Strategic part￾ners will help to identify and integrate the services of these niche providers. In order to identify new suppliers as well as man￾age the complexity and costs associated with the Smaller, innovative niche players allow Toyota to experiment with new technology trends and, more importantly, to accom- modate the diverse local needs of its dealership network