Monthly Archives: March 2007

Selling Your e-Sourcing Pilot I: The Perfect Pitch

You’re an over-worked, under-paid procurement professional unlucky enough to be employed at one of those companies still in the dark ages where ERP is the magic fire that’s going to solve all your problems and you’ve just been charged with reducing spend by 10%. Your company is a contract manufacturer, all your contracts are coming due, and you know that all of your suppliers are about to demand significant price increases due to rising raw material costs above the board. You’d be happy to be stuck between a rock and a hard place because, right now, you feel like your ass is already in the fire … heck, you’d be happy if you were just in the frying pan.

Although you don’t really understand the power that lies within the lightening that modern man has captured in the world that lies beyond your cave, you know you need an eSourcing tool to help you manage more projects, open more contracts up to competition, and be more productive. However, despite your best effort, your technology-inept (or, if you’re really unlikely, just plain inept) CFO won’t even consider allowing you to buy such a tool – because that costs money, and your job is to save it – not spend it. You’re an unrecognized genius and you know that without help you’re doomed to fail. But you’re getting more response from the squirrel outside your window then you are from your superiors. What can you do?

You can deliver The Perfect Pitch. I will not claim to know what this is (if I did, I’d be a sales guy, not a process and technology supply chain [information] technology consultant), but fortunately for you there are those that do (or at least claim to) know what this is, and even a few willing to share their advice. One such individual is David L. Anderson, A VC in Vacationland, and Managing Director of Supply Chain Ventures, LLC.

Last September, he delivered the keynote address at the Procuri’s (acquired by Ariba, acquired by SAP) User Conference and this led to the Procuri sponsored white-paper The Perfect Pitch: How to Succeed in Selling and Doing Technology Initiatives. In this white paper he not only describes a perfect pitch, but gives you ten simple rules to follow in your quest to create one.

The ten simple rules are:

  1. Know your friends and enemies.
  2. Clearly define your value proposition and business plan.
  3. Credentials – you better have lots of them!
  4. Why an elevator pitch is critical!
  5. Prepping the Players.
  6. Finding the Big “No” early.
  7. It’s all about the pizza, not the delivery person.
  8. Socializing your friends and enemies.
  9. Selling the deal.
  10. It’s all about the process, not just the presentations.

Simple, right? Wrong! It’s more than just these basic rules of business – it’s understanding how they fit together and evolve into not only a pitch, but a plan of attack that will allow you to sell the project you need to succeed. So check out “The Perfect Pitch: How to Succeed in Selling and Doing Technology Initiatives”. It will be worth the time it takes to read it.

Clarity with Claro

When I was in Chicago, I had the chance to sit down with Bart Richards, a Principle of The Claro Group (now part of Stout), and talk about their consulting practice and their sourcing practice in particular. Although the Claro group is relatively new, being in existence for less than two years, it’s team, made up of a large number of ex-Arthur Anderson and Bearing Point consultants, has been in the business for a long time and have saved $2.2 Billion dollars in sourcing and procurement spend (on roughly $17 Billion in spend), which is nothing to scoff at. (They’ve also recovered over $4 billion in insurance settlements, but that’s not the focus of this post, or blog.) They’ve also serviced over 100 organizations to date and delivered tangible bottom-line results at each.

Before I get into their sourcing practice, I would like to note that The Claro Group is an interesting firm with three primary areas of practice: Sourcing and Procurement, Healthcare, and Insurance Management Services – making them a prime consideration for large hospitals, GPOs, and other HealthCare Providers as they can help these organizations across the board. This is a very interesting position considering the relative lack of vendors and consultants in the sourcing and procurement space with this focus. Besides VendorMate (acquired by GHX, acquired by Thoma Bravo) and CombineNet (acquired by Jaggaer), I have not yet identified any other solution providers with such a strong understanding of the space. (So, if you know of, or work for, any other providers with a strong sourcing or procurement capability in the healthcare space, please feel free to reach out using the contact information in the FAQ.)

Back to their sourcing practice. I could bore you with details on their methodology, practice, etc., but this time I’d like to stick to my impression of Bart. All I can say is that if all of their consultants are like him, then they truly are client focused and willing to do whatever it takes to help you save money and improve productivity. Although they do use vendor tools to help them, they don’t insist upon or sell any specific vendor tools and instead focus on the analysis, processes, and methodologies that they believe, based upon their extensive experience (with each team member having an average of 12 or more years of experience in sourcing and procurement), will lead to tangible, measurable, and meaningful value to clients. And in this regards, the numbers don’t lie. They’ve saved, on average 12.5%, across all of the projects they worked on, which is quite significant, especially considering this is the most you can hope to save, on average, if you implement advanced sourcing methodologies in house (as per Aberdeen’s recent “Advanced Sourcing and Negotiation Benchmark Report”).

Their process is a simple and to-the-point three-phased approach that they use to rapidly identify opportunities. They start with an assessment where they review your process, organization, technology, and historical data to determine your opportunities, estimate the required effort, and compose a timeline. They then execute the recommendations that result from the first phase by revising organizational and process design, implementing new technology, and managing the change to capture the identified savings opportunities. Finally, they measure the impact, report on compliance, and implement Supplier Relationship Management. Simple, but effective.

The Talent Series X: Personnel Best

Talent location, acquisition, and retention is a big problem for many companies across the board. It’s not just restricted to the Spend Management Talent Game. Given my inclination to blog about the talent deficit, and my recent proclamation that You Will Lose Your Top Talent, it’s no surprise that the recent Supply Management article “Personnel best” caught my eye.

In the article, the author discusses some steps that you can take to insure you retain the talent you are lucky enough to attract. The steps start on day one, upon the induction of a new recruit into your corporate culture. According to the article, you should:

  • ensure a new recruit clearly understands what you expect from them
  • listen to your new recruit’s expectations
  • establish the skill sets necessary for the role
  • based on a mutual ranking understanding of their competency in each skill set, develop a career development plan and help them identify the appropriate training, experience, and knowledge they will need

Furthermore, once the induction process is over, its critical that you continue to make sure that they feel valued and empowered and that you remain involved in their career development. The article recommends that you:

  • review their progress regularly, encourage them frequently, and ensure your rewards and remuneration package keeps pace with their increasing value to your organization
  • provide leadership
  • insure any managers or supervisors that report to you share the mutual goal of advancing the careers of your underlings
  • project a positive image of the company and their role in it
  • insure workloads are fair and that your team members can maintain an appropriate work/life balance
  • give something back to the community

This is sound advice, especially considering the statistics quoted by the article:

  • 43% of top employers reported a shortfall in the graduate market last year (Association of Graduate Recruiters)
  • 86% of young people want progressive management to inspire them (Institute of Leadership and Management)
  • 52% think their manager is not helping them to develop (ILM)
  • 40% do not get along well with their manager (ILM)
  • 27% would leave an organization as a result of poor management (ILM)

We may be in a Talent Crunch, but not everyone has to lose the Talent War.

Procuri Spend Analysis

During my brief Chicago tour, I had a chance to sit down with Rod True of Procuri (acquired by Ariba, acquired by SAP), Senior Vice President and the former President and Founder of TrueSource, acquired by Procuri last year, and talk not only about Procuri’s TotalSpend solution, but about what Spend Analysis, Visibility, and Intelligence means to Procuri and where their solution is going.

Although I do believe that their tool is not yet a perfect “total” spend solution (but to be fair, I do not think any tool is – which is probably obvious from my recent posts on the spend visibility space), I also believe that with the acquisition of TrueSource, Procuri are just as close, if not closer, than any of the other big players in the space. The reason for this lies largely with Rod True and the team he built and the fact that they get that “spend intelligence” requires three major components to be successful: accurate visibility across all of the relevant data, analysis capabilities, and the ability to use the data for compliance initiatives.

To this end, TrueSource spent a great deal of time on ETL tools that could not only load data from a large number of data sources, but map such data into a plethora of out-of-the-box and custom categorization schemes and do so in such a way that duplicates are detected and dropped. (After all, if your data is no good, neither is your analysis.) Moreover, knowing that most companies still use old ERP or database systems where the best they can muster is a full database dump (for the last month / quarter / year), they have built their ETL tools in such a way that their spend warehouse can be incrementally updated from a full database dump at any time.

They have also built in a large number of reports (over 70) and standard reporting capabilities (through a custom report builder) to allow for role-based reporting and analysis, compliance & audit management, category management, and diversity management and built their warehousing capabilities to support just about any categorization you can desire. They also have role-based dashboards, category project management, and category intelligence built into the solution.

Furthermore, knowing that they could not possibly think of all of the things you might want to do with the data, they also support the fine-grained export of any set or subset of data or report that you might want to analyze in further detail.

And this is where I believe their one weakness lies. They have visibility down pat (and pride themselves on their ability to be able to quickly develop an automated cleansing, classification, and refresh for just about any data source you can imagine), they understand that the entire point of any spend effort is all about compliance – with diversity requirements, with reporting regulations, with business decisions, and with sourcing decisions (otherwise your “savings” might never be realized), but their analytics is limited to what you can do with their pre-defined reports and report builder. And although I have to admit that what they have is most likely more than enough for most of the users in an organization – executives, managers, and even average users – I am not convinced it will ultimately satisfy the emerging spend power users.

It is true that a power user can easily integrate into their cleansed data feed and extract just the data they want (and they told me that they are surprised at how fast their power users can get just the data they want for a custom report and build it in another tool), but I believe that the next generation of spend power users are going to want the ability to create their own custom views, reports, and analyses in the tool itself, versus on their desktop with a Microsoft Office or similar end-user tool.

However, you still need a centralized spend repository with complete, clean, categorized data for your analysis, reporting, and compliance management – and this solution is definitely a valid starting point from that perspective.

Wharton Nuggets (on Market Share, Entrepreneurship, and Grocery Purchasing Patterns)

Over the last couple of months, Knowledge @ Wharton has published three articles that caught my eye. (Well, more than three, but I felt that these three were worth blogging about.)

The first article that I am going to draw attention to is “The ‘Myth of Market Share’: Can Focusing Too Much on the Competition Harm Profitability?”. The article starts off by noting that it is a common practice of many companies to focus their attention on grabbing market share from their competitors, but such efforts can actually be detrimental to the firm’s profitability.

The reality is that even fifty years ago research indicated that competitive choices are often low-profit. Back in 1996, a study by Armstrong and Collopy analyzed data amassed by scholars to measure the level of competitor orientation of 20 major corporations for five nine year periods beginning in 1938 and ending in 1982 and found that competitive-oriented objectives were negatively correlated with ROI for the data. In other words, the more managers tried to be the biggest in their market, the more they harmed their own profitability. In contrast, companies whose only goal was profit maximization posted stronger returns on investment than the other firms.

The article ends by quoting Wharton Marketing Professor J. Scott Armstrong who says We’re not saying companies shouldn’t pay attention to their competitors; they might be doing reasonable things that you may also want to do … What we’re saying is that the objective should not be to try to beat your competitor. The objective should be profitability. In view of all the damage that occurs by focusing on market share, companies would be better off not measuring it. ‘Nuff said.

The next article that caught my eye was “Dos and Don’ts for Entrepreneurs, from Those Who Have Actually Done It”. As someone who spent the early part of their career working in a lot of start-ups, I know from extensive experience that most entrepreneur’s don’t have a clue what they’re doing. When you fail when you (a) have the best technology, (b) have more than enough money to do what you promised, or (c) have great talent across the board, or (d) have all three … something’s wrong … and it’s not with the employees.

Therefore, whenever someone who has a clue offers to share their advice, I thoroughly believe you should heed it. Tidbits you will take away from the article is that not every business idea needs venture capital, successful businesses solve a real problem (not a hypothetical one), disruptive technologies enable a start up to jump into a large, lucrative market where established leaders have become complacent, good entrepreneurs manage risk, and the KISS rule is always in full-force: get the prototype out as soon as possible, get feedback, and improve only where needed. Remember, a camera, mp3 player, personal organizer, web browser, etc. may be great, but sometimes you just need a phone.

The final article is “The ‘Traveling Salesman’ Goes Shopping: The Efficiency of Purchasing Patterns in the Grocery Store” about the application of the “Traveling Salesman Problem” to the study of the behavior of grocery shoppers.

Wharton marketing professor Peter S. Fader insists that the Traveling Salesman Problem (TSP), which seeks the shortest route available to a traveling salesman who has to visit a number of cities and then return home, closely resembles the problem faced by a typical grocery shopper who plans to purchase a certain list of items in the grocery store. To achieve the same efficiency as the salesman who meticulously plots his route, a shopper would need to know where products are located, and have a game plan on how to go about gathering the items on his list while covering as little distance as possible. However, the average shopper is quite inefficient.

What’s the goal of the research? To understand in-store behavior and how stores should place items to ( a) increase customer efficiency and ( b) increase sales. Does it affect your supply chain? Not really – unless you are in grocery retail, because more efficiency and better sales increase demand, which increases revenue, which should increase profit. But it’s still a very interesting article.