The customer that produces the most revenue is not always the customer relationship creating the most strategic value.
When a portfolio team evaluates a customer-facing project, financial analysis often begins with expected revenue, margin and cost.
Those measures matter.
They can still miss the strategic role of the relationship behind the project.
A customer may contribute product insight, market credibility, stable volume, referrals, technology knowledge or access to networks. Another customer may generate high revenue while demanding extensive customisation, consuming scarce engineering capacity and limiting reuse across the portfolio.
The work of Martin Voss and Alexander Kock brings this wider perspective into project portfolio management by distinguishing relationship value for the customer from relationship value from the customer.
Their 2013 empirical study, based on 174 medium and large organisations in Germany, Switzerland and Austria, found both forms of relationship value independently associated with project-portfolio success.
The strategic implication is clear:
A project portfolio should not optimise customer-facing investments using project economics alone.
The Strategic Context
Business relationships are exchanges of value over time.
The enterprise provides products, services, capability, reliability, innovation or other benefits.
The customer provides economic return, but may also provide learning, access and strategic options.
This means a customer-facing project can influence value in several ways simultaneously.
A product-development project may produce margin today and knowledge for future offerings.
A difficult implementation for a strategically important customer may create reference value in a new market.
A high-volume contract may improve asset utilisation but create concentration risk.
A small customer may become a source of advanced technical insight.
The portfolio therefore needs a relationship lens.
Related article: Customer Value Belongs in Portfolio Decisions, Not Only Project Requirements
What Leaders Commonly Misread
The first mistake is equating customer value with revenue.
Revenue is one outcome of a relationship, not its complete strategic contribution.
The second mistake is assuming all non-financial value is too subjective to govern.
Some dimensions are difficult to monetise precisely, but they can still be evaluated explicitly.
The third mistake is ignoring the value the enterprise must create for the customer.
A relationship cannot remain strategically useful if the customer's economics deteriorate.
The fourth mistake is treating relationship value as static.
A customer can move from innovation partner to mature volume account, or from strategic entry point to low-value legacy relationship.
The fifth mistake is double-counting relationship benefits across projects.
If five projects claim the same market-access benefit from one strategic customer, the portfolio can exaggerate value unless benefits are governed at relationship level.
Reframing the Issue
The decision should be framed as a two-way exchange.
Value for the customer
What benefits does the customer receive, and what sacrifices does the relationship require?
Voss and Kock draw on relationship-marketing research to consider areas such as the core offering, sourcing process and customer operations.
This can include product quality, service, reliability, process support and time-to-market effects.
Value from the customer
What does the enterprise gain beyond the immediate transaction?
The research stream identifies direct and indirect functions.
Direct functions include:
- profit;
- volume;
- safeguard or resilience value.
Indirect functions include:
- innovation;
- market referrals;
- market or technology intelligence;
- access to institutions or networks.
These categories are research constructs, not a universal ERANORTH taxonomy. Their value lies in widening the executive question.
Direct Relationship Value
Profit
Profit remains fundamental.
Strategic language should not be used to hide a relationship that consistently destroys economic value without a credible reason.
Volume
High-volume customers can improve capacity utilisation and operating economics.
But volume can also create dependence.
The portfolio should examine whether volume strengthens scale economics or merely locks scarce resources into low-margin work.
Safeguard value
Some customer relationships provide stability during downturns or periods of uncertainty.
This can make a customer strategically valuable even if peak margins are not the highest.
The concept should be treated carefully. A "safe" customer can still create concentration exposure if the organisation becomes overly dependent.
Indirect Relationship Value
Innovation
Technically advanced customers can contribute knowledge that improves future offerings.
For engineering and technology organisations, this can be significant.
A customer-funded project may become a learning platform for capabilities reusable elsewhere.
Market function
A credible customer can strengthen reputation and create referrals.
This matters particularly when entering a new sector or geography.
Scout function
Customers can provide information about emerging requirements, technologies and market behaviour.
Portfolio leaders should recognise this value without allowing anecdote to replace broader market evidence.
Access function
A customer may help the organisation navigate networks, institutions, supply chains or market structures.
This can be strategically useful but creates relationship dependency that should remain visible.
What the Empirical Study Found
Voss and Kock's study found positive independent relationships between both value-for-customer and value-from-customer measures and project-portfolio success.
It did not find the proposed interaction effect between the two forms of value.
The study also found that the positive effect of value for the customer became stronger with greater portfolio interdependency, larger portfolio size and higher technological turbulence.
Relationship value from the customer did not show the same moderating pattern in the analysed variables.
These results should be interpreted within the sample and measurement design.
The authors also note that relationship value for customers was assessed using supplier-side respondents, effectively making it a proxy for the customer's own view.
This limitation matters for publication.
The research supports strategic attention to relationship value, but it does not justify assuming the supplier fully knows the customer's economics.
Portfolio Decisions Can Strengthen or Damage Relationships
A portfolio affects customer relationships through several mechanisms.
Selection: which customer problems receive investment.
Sequencing: when commitments are addressed.
Resource allocation: whether strategic customers receive the capability required.
Termination: how discontinued projects affect trust and future opportunity.
Platform decisions: whether one customer's requirement becomes reusable enterprise capability.
Capacity choices: whether the organisation accepts more customer-specific work than it can deliver reliably.
A locally profitable project can therefore weaken the overall customer portfolio if it crowds out relationships with greater long-term value.
Decision Framework
Use a Relationship Value Portfolio Test.
1. Value for the customer
What measurable or observable benefit does this project create for the customer?
2. Direct value from the customer
What profit, volume or stability does the relationship provide?
3. Indirect value from the customer
What learning, innovation, referral, intelligence or access is created?
4. Resource intensity
How much scarce capacity does the relationship consume?
5. Reusability
Does the project create capabilities valuable to other customers?
6. Dependency
Does the relationship increase concentration or bargaining exposure?
7. Time horizon
Is the relationship's value growing, stable or declining?
The output should inform portfolio choice rather than produce a single artificial score.
Related article: Portfolio Management Is Capital Allocation in Action
A Hypothetical Engineering Example
Consider three hypothetical customers competing for the same product-engineering team.
Customer A offers the highest immediate revenue but requires substantial bespoke work with little reuse.
Customer B offers moderate volume but is technically advanced and willing to co-develop a platform relevant to several markets.
Customer C is smaller but provides entry into a strategically important regulated sector.
A project-level financial ranking may prioritise A.
A relationship-value view may reveal a different portfolio mix.
Leadership might still select A, but it would do so knowing the opportunity cost.
That is the purpose of the framework.
From Strategy to Execution
Immediate action: identify the customer relationships associated with the largest portfolio investments and describe their value beyond revenue.
Medium-term capability building: connect customer relationship reviews with portfolio governance. Avoid forcing marketing and PPM into one process; create explicit interfaces and shared measures where the decisions overlap.
Long-term strategic positioning: manage customer relationships and project investments as connected portfolios. Monitor concentration, innovation value, market access and the degree to which customer-specific work creates reusable capability.
Signals to Monitor
Watch for high-revenue customers receiving automatic project priority; strategic relationship benefits appearing in multiple business cases without central ownership; technically valuable customers being deprioritised because their current revenue is small; bespoke work consuming capacity without creating transferable capability; customer concentration increasing through a series of individually attractive project decisions; and executives using "strategic customer" as a label without defining the source of strategic value.
Another warning sign is when relationship value is discussed qualitatively but never affects resource allocation.
Questions for the Leadership Team
- Which customers create strategic value beyond immediate revenue?
- Which relationships consume disproportionate scarce capacity?
- Where do customers contribute innovation, market access or intelligence that is not visible in project economics?
- Which projects create reusable capability across the customer portfolio?
- Are we double-counting relationship benefits across several project business cases?
- Which customer dependencies are becoming difficult to reverse?
- How would our portfolio change if we evaluated relationships over five years rather than one contract?
Closing Perspective
Customers are not simply revenue sources attached to projects.
They are participants in an exchange system that can create profit, learning, access, resilience and future opportunity.
Portfolio leadership should recognise that broader value without romanticising it.
The objective is not to give every relationship a strategic premium.
It is to make sure the enterprise understands what it is really gaining, what it is giving up and which customer relationships deserve scarce investment over time.
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