Wednesday, 22 February 2017

Redefining BIG for Outcome-based Procurement

Kelly Barner, Managing Director of Buyers Meeting Point explains the ever-evolving role of procurement, how it has redefined the value of supplier relations and what it means to be BIG.


If procurement has learned anything from our evolution up to this point, it is that scale is often the enemy of strategy. When we give in to the pressure or the desire to take a transactional approach for the sake of covering more ground in less time, we sacrifice the ability to make optimal decisions that draw maximum value from our effort. It is simply impossible to be sprawling and agile at the same time.

In our efforts to become more strategic, we have learned to choose our projects wisely, to follow an approach tailored to the situation at hand, and to think through every step before we take it. When procurement presents our results to the leadership team, it is no longer enough to talk about straight numbers: savings, spend, transactions, and suppliers. Visionary executives want to be informed about relevant nuances: building knowledge transfer bridges internally and creating competitive advantage externally.

Under the old transactional procurement model, the person with the most spend under management or the highest savings percentage was considered the ‘big dog’ in the room. Being known as a tough negotiator used to be a badge of honor. Today, however, with value as a priority and relationships as a key success factor, it is not unusual for those people (and their results for that matter) to be eyed with skepticism. What did you have to say to the supplier to get that rate? How hard did you have to push your stakeholders to get them to standardize their specifications? And what will be the cost of these actions down the road? Will anyone end up happy?

Whether we’ve articulated it or not, most people instinctively know that you can’t max out on savings and spend under management and also form collaborative relationships that generate sustainable returns and innovation in the long term.

In order to accommodate this shift in perspective, procurement has altered the nature of our relationships. We have worked to ensure that standardized processes do not serve as a barrier to opportunity. Although consistency is critical, and frameworks are put in place to help procurement scale our impact, it must always be in-scope to consider an alternative or out-of-the-box approach when the circumstances are right. 

If we are going to continue to advance the evolution already underway, the other thing procurement must ensure that is that we have a ‘proper fit’ relationship with our technology providers. When we evaluate suppliers for strategic partnerships, we compare the size of the fish to the depth of the pond. Do we want to be a big fish in a small pond (influential and dominant) or a small fish in a big pond (safe and overlooked)? The time has come for us to replace the relative size paradigm with one that more closely aligns with the objectives we are trying to achieve. Something other than size or volume should be allowed to set the expectations for procurement’s closest relationships – including our technology providers.

Speed

When you need assistance, time is of the essence. How fast can you expect a response and what level of familiarity do you expect the company to have with your situation? If the issue is not resolved immediately, will the same person remain with you throughout the process and ensure that you are satisfied in the end? Is the customer service you receive at this key time based on scale – anonymous and highly automated – or strategy – personalised and with a high level of ownership?

Culture

How would you describe the company culture where you work? Do you know what kind of a culture is in place at your technology provider? If they were to form a customer panel to collect and review requests for new functionality, what inputs would determine which companies were invited? Would the invitation process be based on scale – where only the largest companies are given voice – or strategy – where deep pockets are balanced with creativity and innovative applications of the technology?

Involvement

Let’s say you don’t have a technical issue, but just want to get a better understanding of the technology roadmap and maybe ask a question or two. Would you have any idea who to call? Do you know the name of anyone who works at your technology provider or do you have to work your way in through a massive switchboard? Are regular interactions based on scale – where only contracted support terms enable you to get access to someone who knows something – or strategy – where the long-term benefits of being accessible and forming relationships with customers are understood.

Part of the most striking evidence that outcome-based procurement has led to the need for a redesign of what it means to be BIG comes from the choices traditionally big companies are making vis-à-vis their technology partners. While big fish used to be forced to swim in big ponds, large, innovative companies are recognizing the advantages of partnering with strategic, agile firms. As they move away from a scale-driven approach to procurement, they recognize that the only way to stay true to a strategic mission is by working with a technology provider that operates hands-on and with the same drive to achieve their objectives as procurement has.

How can Market Dojo help?

Market Dojo offer the best of both worlds, being leading procurement technology providers while also remaining immersed in the day to day application of their technology by working closely with their clients. For years, we’ve been told ‘it’s not personal, it’s business’. In today’s collaborative environment we might say ‘it’s personal because it is important business’. Let them help by defining and delivering on your idea of BIG.

Interested in reading more? Read our case studies:

Market Dojo helps procurement professionals negotiate better with our on-demand eSourcing tools. If you’d like to find out more, get in touch or register for free and play around with our software for yourself!

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