Wednesday, 22 March 2017

Learn to be frugal by eSourcing like Google!

We’re presently running a survey to explore the barriers to eAuctions to truly understand why not all procurement professionals out there with 3 bids on the table instinctively progress to eAuction.

You can find the survey here if you have some thoughts. And so it was fortuitous timing that we stumbled across a public interview with the team behind Google’s Global Sourcing Centre of Excellence.

Related image
Image via "Are Google’s Financial Maneuvers Worth a Starbucks?" Wall Street Journal 

The interview explored Google’s eAuction experience and how they drive adoption to achieve excellent results, with an average rate reduction of 17% being very similar to the 16% that we’ve seen on average through Market Dojo.
They also see an additional 4% saving when RFPs are progressed to eAuction, as well as greatly reduced cycle times. Interestingly Google uses their own intuitive G Suite tools for their general eRFX. We use G Suite extensively in our business so we can see how that could work, with neat features for online collaboration, unlimited cloud storage and a slick survey tool.
Image via "Quint adopts Google G Suite platform"
However similarly you could use G Suite as a CRM tool or an Accounting tool, but you’d potentially lack that best-of-breed application. eAuctions, on the other hand, are much more challenging to replicate using email and online spreadsheets and so Google relies on third-party software. To date, they have run over 900 eAuctions, yet that has covered only 20% of the total third-party expenditure. Their own objective is to eAuction at least 80% of the expenditure.

Therefore one of their highest priorities is to fuel further adoption, given that a mandate is not the Google way. Their approach is to use the carrot rather than the stick using some of these key approaches;
    • Templates are used to minimise the barriers to setting up the auctions.
    • After every auction, the team surveys the stakeholders to gather their feedback for improvements.
    • Individuals who run the auctions are rewarded and recognised for their work.
    • New recruits are brought in who are already proponents of eAuctions.
    • Executive level sponsorship is in place through close involvement of the CIO.
    • Other senior stakeholders are invited to watch the auctions to witness their benefits.

When a contract is awarded without concluding with an auction, the team follows up as to why that was. Perhaps the supply market was monopolistic or perhaps the stakeholder was vehemently against the idea. Either way, this closed loop feedback helps the team learn for next time.
Pivotal to it all is the eSourcing Centre of Excellence, as we’ve seen many times before. The Centre ensures continual process improvement, shared learning and promotion of eAuctions throughout the business, providing dedicated resources for doing so. Their work involves changing the minds and attitudes of the business to run eAuctions by helping to run them, freeing up the buyers to focus more on stakeholder relations. One of our initial clients took a similar approach to this, with their COO storming into procurement meetings asking the team, “Don’t tell me why you can’t do it {eAuction}, tell me how you would do it”. This change in mindset provoked the stakeholders into constructively thinking how the eAuction could be run: quickly presenting a solution when previously there wa a deadlock.

Image result for boss angry cartoon

Since mandating wasn’t an option, the next best course of action taken by the Google team was to affect the governance statement, reviewed by board members, that 80% of Google’s third-party expenditure will be competitively tendered every two years. eAuctions have become the preferred option, with business owners that opt out of using an eAuction needing an appropriate reason for doing so.

Google, like many others, are also conscious that price is just one factor in the total decision, and so post-auction they complete an internal scorecard to look at the total value from each supplier to select the ‘best bidder’ and not the ‘lowest bidder’, mitigating a common objection that eAuctions result in decisions based on price alone.

Finally, to quote the corporate code of conduct from Google’s parent company, Alphabet, “Do the right thing” - which we’d strongly suggest is to find reasons to use an eAuction for all your contract negotiations.

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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