Supplier Diversity > Articles

Minority Business Development V.S. Minority Supplier Development

Over the years, RGMA has discovered that corporations with Advanced and World-Class Supplier Diversity Processes draw a clear distinction between minority business development and minority supplier development. When corporations fail to make this distinction, the supply diversity initiative suffers from mixed signals sent to key internal stakeholders.

Allow me to explore the differences.

 

MINORITY BUSINESS DEVELOPMENT

Minority business development is a component of the community engagement strategy or corporate social responsibility program. The objective is to grow the quantity and quality of small to medium-sized minority businesses. This is achieved by collaborating with community-based partners who provide a variety of capacity building and business financing services for MBEs. From startups to mature businesses, the goal is to enhance their skills and increase their competiveness, which expands the probability of success. Communities enjoy the following benefits when corporations embrace minority business development:

  • Job creation in neighborhoods with higher unemployment   
  • Increased economic activity in underserved communities 
  • An increase in the number of minority entrepreneurs who serve as role models  

Although the supplier diversity function is a natural partner to the minority business development function, the goal is to enhance the local business climate, not to identify potential suppliers. 

 

MINORITY SUPPLIER DEVELOPMENT

Minority Supplier Development is a component a corporation’s supplier diversity strategy. The objective is to identify leading minority suppliers that have the ability to contribute to the corporate objectives and operational excellence. For those minority suppliers that have the potential to become strategic partners, the next step is to develop a capacity building strategy that will facilitate their growth and development. The ultimate goal of minority supplier development is the cultivation of exceptional suppliers who deliver innovation and total value to the corporation and thus enhance shareholder value. These exceptional suppliers just happen to be minority businesses.

 

While minority supplier development will produce most, if not all of the benefits produced by minority business development, the major difference is that the supplier diversity function in collaboration with the sourcing organization drives the process. The success metrics for minority supplier development are the same as the success metrics for the sourcing organization: savings, service, value.

 

These metrics are attainable because of the accelerated exit of brilliant minority executives who leave corporate America to become entrepreneurs – building exceptional businesses in a variety of categories. To add to this pool of high performing MBEs, many corporations with Advanced and World-Class supplier diversity initiatives are focused on developing scalable minority suppliers through mergers and acquisitions. This development should yield a number of MBEs with global capabilities and revenues in excess of $500 million.

I’m excited about the future of minority business development as more leading corporations feel that minority business development is the right thing to do and that minority supplier development is the smart thing to do.