Monthly Archives: November 2016

Always Remember That While the Second Mouse Gets the Cheese …

… the third mouse gets nothing — unless you count the opportunity to bury the first mouse in a shallow grave before he dies of starvation something.

As Pete Loughlin reminds us in his recent post, when conventional wisdom goes wrong, most enterprises make one of two mistakes when selecting enterprise technology. Either they go with the same-old, same-old incumbent technology (that never solved their problem in the first place), or they go with a bleeding edge start-up (because their eagerness to please can be exploited). For the vast majority of companies, neither solves the problem.

While many startups will have something new and innovative, most don’t have the breadth or depth required to support a large organization — even if that is their ultimate target market. Start-ups are good for (smaller) mid-size organizations that need a point solution, or large organizations that just need one thing done better — they are not good as platforms. Similarly, if your ERP has failed you for 10 years, starting yet another customization project with a big 8 consultancy that has yet to deliver what they promised on any project isn’t a good idea either.

The best solution for many organizations is typically a new vendor with a newer, or more appropriate, solution, but not one that is so new that it has not yet been around long enough to be adequately stress tested and proven to have the breadth and depth required for the organizational size and need. A (smaller) mid-size organization should already be using it successfully and it should be clear that the solution has enough scale-power.

It’s often a hard call, but that’s why impartial expert technology consultants — who do not (re)sell solutions* — should be engaged. In particular, they should be engaged to help an organization identify the processes it needs to support, the key functionality that a platform needs to offer (but not features, as sometimes multiple feature sets can solve the same problem), the scale the platform will need to support, the data that will be required, the integrations to other enterprise systems or external data sources to fetch this data, and the breadth of deployment that will be required to support the processes. Then, they should help the organization construct a proper RFP (that describes the current process, the problems, the desired process, and ultimate goals) and identify potential vendors to send the RFP too, as well as demo requirements, scoring and weighting systems, and best practices in vendor selection. But they should not sell, or have any interest in, any of the solutions — they are guides through the dangerous enterprise jungle, not treasure map peddlers.

And, most importantly, as Pete points out, if the expert is engaged, she should be listened to. Otherwise, the organization is not only wasting money on the executive’s gut-feel technology platform, but also on the advice that was going to be ignored anyway. Always remember, there’s no gold in them thar hills, but there is in the advice of a wise sage.

just a reminder that the doctor does not have any interest in, or receive any compensation for, any technology that he may or may not recommend, unlike many analyst firms that charge per lead and per sale

Is Bad Procurement Responsible for the Proliferation of Snake Oil?

Once upon a time in China, medicine was based on ingredients found in nature. One such ingredient was snake oil (from a water snake) that was used to treat joint pain (which we now call arthritis and bursitis) because it gave relief when rubbed on the skin at a painful site. This is because real snake oil contained a lot of omega-e fatty acids which not only reduce pain but also reduce inflammation. While not necessarily a powerful medicine, it is a medicine nonetheless.

When the Chinese worked on the first transcontinental railroad (in the US), they introduced this medicine to fellow workers (which included native and working class Americans) who had never had such a medicine. They were, naturally, impressed by it … as were salesmen looking to make a quick buck with this “miraculous pain cure” which, at a time when western medicine was relatively weak, was desired by the population at large. So, long before the creation of the FDA (1906) when anyone could sell anything they wanted, these salesmen created fake snake oils (which often didn’t contain any oils from snakes) that they hawked as “cure-alls”. These roaming charletans, who often paid assistants (who would travel separately, act sick and injured, take the cure-all, and immediately exclaim cure), did well, until people who bought the tonics realized they din’t work. But by then they were on to the next town.

However, people did travel and eventually realized that all these salesmen and untrained / unlicensed doctors were, as we still say today, quacks (which is short for the Dutch quacksalver who would use home remedies to “cure” everything, whether there was any real basis for the cure or not), and gave a name to these cheaters and the product they sold. Because the first cure-all tonics were called “snake-oil”, any medicine with a ridiculous claim was “snake oil” and any peddler of such a ware was a “snake-oil salesmen”. However, these salesmen and products are not restricted to the consumer world, and soon those claiming to have the ultimate solution to all of a business’ process, sales, or cash management problems, etc. were deemed snake oil salesmen, selling processes or products that didn’t work. And we still have these salesmen today, often pitching great investment opportunities (especially in high tech, which we call silicon snake oil) that don’t really exist.

But to make matters worse, we don’t just have snake oil salesmen to deal with, we have snakes in our business (which the snake-oil salesmen claim they can deal with, but we’ll get back to that). What kind of snakes? KPI snakes. As the procurement dynamo explains over on procurement.world, most enterprises are chock-full of Cobra KPIs.

Why Cobra KPIs? Blame the British for that and their folly of offering a bounty for every dead snake the locals brought them in 19th-century Delhi. If you were an enterprising, but struggling, vaishya, and you received rupees for every dead snake, and the British were handing over rupees by the snake, you’re going to want to get your hands on as many snakes as possible. What’s the easiest way to do that? Breed them in droves, and kill them in droves.

As the British discovered, Cobra KPIs are those that eventually rise up, strike, and inject you full of poisonous venom. All the British got for their efforts were drained coffers and more live snakes then they wanted (when the merchants released them all on the streets when the bounty was cancelled). And if your organization has Cobra KPIs, all it will get for its efforts is loss — lost time, lost money, and lost opportunity.

Organizations, including Procurement organizations, are chock-full of these Cobra KPIs. Like FTE per dollar of spend, supplier count per category/region, p-card spend per total spend, sourced spend over total spend, etc. (Why? It’s not how much is spent on Procurement resources, it’s the value they generate. It’s not how many suppliers, it’s the right number of suppliers, which varies by product, region, and numerous other factors. It’s not how the bills are paid, it’s whether or not the bills are for the right stuff. And sometimes it’s best to renegotiate with incumbents and seek out value-add innovation versus unrealizable or unsustainable year-over-year cost reductions.)

But even worse, because organizations are sometimes too obsessed with KPIs, they overload themselves with overly intensive tracking, scorecarding, and reporting initiatives that take time away from value-generating sourcing activities. And then they decided they need a solution to automate this or reduce the stress. So they go to market. And who responds? Snake-oil consultants who offer their next generation tracking, scorecarding, and reporting platforms that, for a “very reasonable” one-time set-up fee (in the tens or hundreds of thousands, depending on how big the organization is and what they think they can get), and an ongoing “expensable” license and maintenance fee that just fits under the P-card limit on a monthly basis, the organization will be provided with an automated system that will do all the data collection, normalization, integration, scorecard generation, trending, and reporting the organization needs. And if needs change, changes can be made for a “modest” daily consulting fee (of only a few thousand a day). It’s the KPI cure-all! And it’s snake oil. Snake oil that the organization proliferates by defining too many KPIs, which always contain too many wrong KPIs, that entail too much work that needs to be automated.

In other words, don’t define KPIs needlessly. And don’t define any until you not only understand what the goal of the KPI is, but how the KPI will help the organization achieve that goal. (With reference to our examples above, it’s ROI per FTE above a threshold, it’s a supplier range for each product-region pairing determined by way of stakeholder collaboration and analysis, p-card spend under management above a threshold, and spend under management — where spend under management is any spend where a conscientious decision was made to tackle the spend that way after an analysis. Now, the ROI calculation will have to carefully thought out and reviewed regularly, the supplier ranges revisited regularly, and the threshold reviewed to make sure it doesn’t trigger a red light on emergency spend, but at least these metrics are designed with a value focus in mind.)

(And if you’re not careful, you might end up with real snakes! Just ask the airline industry, that, just two days ago, made Samuel L. Jackson’s nightmare of motherf*ckin’ snakes on the motherf*ckin’ plane a reality for some passengers of the Air Mexico Torreon-Mexico City flight! [One Source!] If you have too many useless KPIs, as Douglas Adams tried to warn us years ago [as you can wait forever for lemon-soaked paper napkins and never get enough], the attendants will be too busy running through time-wasting checklists rather than making sure that only authorized, paying, passengers are in the cabin!)

 

The Corridor to Enterprise Contract Management

While there are a lot of vendors offering up contract management solutions, there are few vendors left offering pure-play contract management solutions. For example, even long-time contract specialist vendors like Selectica have acquired sourcing and procurement vendors (like Iasta and b-Pack in Selectica’s case, which changed it’s name to Determine). About the only pure-play contract vendors left Apttus, Corridor, Exari, and Novatus.

Among these few pure-play vendors left, Corridor Company occupies a relatively unique position in the enterprise software market with its deep visibility into their global buy-side and sell-side contracts with unique capabilities around obligation management, distributed reporting, and what they call counter-party management.

While not a well-known name in the Supply Management space, Corridor Company is a New England-based provider of a SaaS contract management solution that has been in business since 1998. Starting out as a services provider, Corridor Company, which has completed over 450 contract management projects (including dozens and dozens of projects for the largest global multi-nationals) to date, switched to a software provider in 2008 to better serve the increasing needs of their customer base and now serve over 40 global customers on their platform.

In addition to the unique capabilities highlighted above, Corridor has one of the deepest DocuSign integrations out there, integrates with major ERP platforms (including SAP, Oracle, and Dynamics) out of the box, integrates deeply with Sharepoint (that it is built on), and, unexpectedly integrates deeply with SalesForce.

While lots of solutions have shallow SalesForce integration, Corridor on the other hand, has a deep SalesForce integration. All data and meta data can be embedded in the salesforce application, with each Salesforce user having access only to the data they would in the platform, and, most importantly, the ability to punch into the relevant part of the Corridor platform (using single sign-in) to do contract research or maintainence.

Another strength of the platform is distributed reporting. Most contract management platforms have good, integrated, reporting capabilities with dozens (upon dozens) of built-in reports, but the capability is generally limited to canned reports or reporting capabilities which create one report for the filters, sent to one distribution list. But when you have a large global organization with multiple, distributed, contract management departments, dozens (or hundreds) of distributed contract management professionals, each needing a slew of similar reports on a daily basis, having to manually define hundreds of similar reports dozens of times is not only burdensome, but unmanageable when they have to be maintained over time. Thus, Corridor built the ability to define a meta-report and then filter out sub-reports targetted to each user who needs only a subset of the data (based upon their locale, department, account assignment, etc.). Each report type is only defined once, no matter how few, or many people need it and what subset of data they get access to.

There are more unique capabilities as well, and for a deeper dive, we recommend you check out the recent Pro coverage [membership required] on Corridor Company by the doctor and the prophet over on Spend Matters (Part I, Part II, and Part III), especially if you have deep contract management needs not met by an average module in an average Sourcing platform.

SRM Case Studies Speak for Themselves

On Friday, we noted that State of Flux just released their eighth annual SRM survey, entitled Digital SRM: Supplier Relationships in the New Technology Landscape, and with it the surprising revelation that while leaders are taking steps forward, Procurement organizations as a whole might be stagnant or taking steps back! This, of course, is not a good thing because the best sourcing event in the world is useless if the plan (encapsulated in the contract) isn’t followed through and the expected savings or value never materializes. SRM is the key to realizing sourcing success, and too many companies overlook that (and wonder why 30% to 40% of identified savings never materialize).

We’ve written many posts over the years not only on the importance of SRM but how to implement it and support it with technology, so this time, instead of doing another multi-part series (which can be found in the archives), we’ll just skip to some of the case studies covered in the report and hope that maybe they are enough to convince you to get your SRM act in gear and go forward!

Telstra, a big name in Australian telecoms that is relatively unknown outside of Australia, implemented a SRM program that not only put more structure, process, and value around SRM but repositioned the perception of Procurement from a function that is only focussed on cost saving to one that works with suppliers and stakeholders toward the realization of business goals. As a result of this change in mind set, and more collaboration between different departments and suppliers, Telstra has met 10% of savings targets through increased revenues, showing that SRM can do more than save money, it can increase sales and revenues by finding ways to create new value that end customers will pay (more) for.

But that’s a small win compared to Ladbrokes who saved £18 M by taking the gamble out of SRM. Since beginning their SRM transformation in 2014, they hit a 3-year savings target of £ 18M a full year ahead of schedule, demonstrating the true savings potential of a well defined and well executed SRM project, which is huge in an industry where the majority of indirect spend has to go to a very small supplier base and where competitive bidding has little effect.

And the value of SRM has not been lost on the giants. For example, if Mars were a public company, it would be a Fortune 100 company as it regularly sells in excess of $ 33 Billion a year in food products (as it manufacturers more than just the iconic Mars bar). Even though it is a top procurement organization (that employs many leading supply management technologies and processes), it has recognized that SRM can help it get even bigger and better still, and that is part of the ambitious plan it has for SRM. While its initial SRM program is still in rollout, it’s starting to see a lot of enthusiasm from stakeholders and suppliers alike, which is a hard momentum to build in an organization of 77,000 employees with a dedicated commercial team of 1,200 individuals! Whereas most organizations might have a few dozen people on the commercial side, and maybe a few hundred, and can thus build enthusiasm for new initiatives and roll them out quickly, getting a thousand people on board is no easy feat. But the potential of SRM is such that even an entire organization can get behind an initiative that can cut costs, increase value, and even encourage innovation in the supply base.

In other words, there’s a lot of gold in them thar SRM hills, and any organization that doesn’t mine for it is leaving a lot of money and value on the table. To find out how much money and what kind of value might be left on the table, check out Digital SRM: Supplier Relationships in the New Technology Landscape. It’s worth your time.

Eighty Three Years Ago Today …

Edwin Armstrong, an American engineer, presented his paper A Method of Reducing Disturbances in Radio Signaling by a System of Frequency Modulation to the New York section of the Institute of Radio Engineers (which merged with the American Institute of Electrical Engineers in 1963 to form the Institute of Electrical and Electronic Engineers), which described his 1933 invention of radio broadcasting using frequency modulation, now known as FM broadcasting, and LOLCats everywhere rejoiced!


I Love My FM Radio!