Monthly Archives: May 2024

Another Supply Chain Misconception That Should Be Cleared Up Now

Yesterday we discussed one supply chain misconception that should be cleared up now because, despite all of the misconceptions mentioned in an Inbound Logistics Article, it was not addressed. However, there is a second misconception that is almost as critical that was not addressed either, so today we will address it. And while, there are, dozens of common misconceptions (including the 22+ mentioned in the article), these are the two that are the most critical to understand, as they are two that pose the most risk in most of today’s Procurement organizations.

 

THE SECOND BIGGEST SUPPLY CHAIN MISCONCEPTION

Supply Chains Have Reached (A New) Normal

Supply chains have never been, and will never be, normal as they will always be in flux due to perturbations, delays, and disruptions that happen daily. You may not see all the trial and tribulations a third tier supplier goes through every day, but trust the doctor when he says they have just as much turmoil as you do. Nothing is predictable in supply chains. When you accept this misconception in conjunction with the first misconception, it’s easy to see how almost all of the others are also misconceptions (that highlight slices of the bigger misconceptions).

For example:

  • cost becomes much less important than supply assurance due to the unpredictable nature of supply chains
  • since it’s not a linear, closed, model, zero-sum doesn’t apply
  • we made up the stages of planning, buying, transportation, and warehousing silos to fit a theoretical definition of normal that doesn’t exist
  • there is at least a hand-off at every stage, so the process is not disconnected but linked, if not intertwined
  • etc. etc. etc.

When you accept the reality, Supply Chain Management, as well as Source-to-Pay, will become a lot easier to manage because you will realize that

  1. only human expertise can adapt to new situations and find real-world solutions to the new challenges that arise
  2. technology will allow you to automate the tactical / semi-normal operations and instead focus on the exceptions and challenges, making you more productive as you focus the majority of your effort on strategy and thinking vs (e-) paper pushing and thunking which is the only thing the machine is good at (and, based on current technological understanding, ever be good at — which is exactly why we can limit it to the thunking because it can do over 3 Billion calculations a second flawlessly [if we ditch the “AI”] while we struggle to do 3)

In other words, only intelligent, adaptable, humans can manage constantly changing supply chains. Good technology can alert them and give them the intelligence they need to make good decisions, but technology cannot make those decisions for them.

(And the doctor, who dreaded saying Bye, Bye to Monochrome UIs can’t wait for the day he can say bye, bye Gen-AI.)

Dear Sourcing/Source-to-Pay/Procurement Founder: Please STOP Making These Mistakes! Part 5

In Part 1, we reminded you of the 12 best practices for success that we published last year and noted that, since this obviously wasn’t read enough (or properly) understood, as the doctor is still seeing founders make the same old mistakes year after year, he needed to do more. So, using his 18 years of experience as an (independent) analyst and 20 plus years as a consultant, during which he has researched and/or engaged with over 500 companies, of which 350 were publicly covered on Sourcing Innovation or Spend Matters (between 2016 and 2022), he’s decided to make plain at least 15 of the same mistakes he has seen over and over again, in hopes that maybe he can prevent a few founders from making them again.

Then, we covered the first nine (9) of the 15+ mistakes we promised you, namely:

  • Assuming that because you were a CPO, you don’t have to do your market research. (Part 1)
  • Assume you can serve any company that shows interest in your product. (Part 2)
  • Assume you can go for disruptive or innovative first. (Part 2)
  • Assume you can take Tech Shortcuts and Fix It Later. (Part 2)
  • Assume that because you could run a Procurement Department that you can run a SaaS company. (Part 3)
  • Assume you know the average process and technology competency in your potential customer base. (Part 3)
  • Assume that you know the messaging because you received the message. (Part 4)
  • Assume if you cut the price to get in the door, you can raise it later. (Part 4)
  • Assume you need a CMO early to get noticed and build demand. (Part 4)

If the mistakes stopped here, we’d be done. But they don’t. So, today we’re going to cover three more.

10. Assume that becoming an “influencer” or “thought leader” on LinkedIn will replace proper lead-generation!

If you pay attention to LinkedIn, you’ll see that the strategy of a number of founders is to post daily, if not twice daily, content in the form of short segments, videos, articles, and write paper excerpts in an effort to establish themselves as a thought leader under the assumption that will bring their start up more leads.

There are many flaws with this assumption:

  • just because you establish credibility doesn’t mean that it transfers to your company — you’re establishing credibility in yourself, so unless you are marketing yourself as a speaker, consultant, or potential employee, your effort is likely not achieving the goal you think it is
  • the credibility you are building will hit a substantial amount of your target customers — depending on the stories you choose to tell, how you choose to tell them, who your network is, and who they share it with, the people you reach may be a very small set of your target customer base (or at least the target customer base you should be trying to serve)
  • you’re getting enough of your unique product messaging through — often the content that attracts the most attention is the content with the least unique or valuable information about the product or platform you are trying to sell

Putting this all together, while you can generate interest in you, unless you can get those potential users to come and talk to you at a (pricey) trade show or local association event, where you can then talk about your product, the return on this effort is quite low, if there is any noticeable return at all. Furthermore, this still doesn’t address the most important assumption:

  • that doing this is a good use of your time

Presumably you are the only one who knows what the tech needs to do and how it needs to do it, the only one who understands key parts of the service that are required, the only one that has an idea on what is missing in the message, and, hopefully, the only one who can do one of the key CXO jobs at your company well. While someone needs to do the LinkedIn etc. marketing and influencing, it’s likely not a good use of your time when, especially in the early days when you need to work closely and consistently with product, marketing, sales, and the rest of the management team.

(Of course, this entire mistake assumes you are starting a SaaS company, as per the premise of this series. If you are starting a consulting company, then, yes, you need credibility and this could be a great use of your time.)

11. Assume that you need AI or that jumping on the Gen-AI bandwagon will save you.

Our last bonus best practice was don’t mention AI until asked. Not even once. Not even if you are using proper AI. Many people are starting to realize the huge disconnect between the marketing hype, especially around Gen-AI, and the reality that, for the majority of problems it just doesn’t work, and sometimes you’re lucky if just doesn’t work is the outcome as it has been found that Gen-AI is gender/race-biased, hallucinatory (which should be no surprise as Gen standars for Generative which literally means make sh!t up), harmful/hateful, murderous, thieving, and sometimes even contains unknown sleeper behaviour that won’t materialize until months or years into the future.

Your customers are looking for solutions, not buzzwords. If AI is part of that solution, great. If it’s not, also great. At the end of the day, they want to solve their problems and see a solution that solves their problem. And while the cool factor will make it easier to open the door, it won’t help you make the sale if it doesn’t solve the organization’s core problems.

12. Assume that you can get a great salesperson or grow your sales team (primarily) on commission.

While it’s true a top sales person will work commission only in a large software vendor who will give the sales person a 30% commission on every sale, that’s only true for a large vendor. This is because, in tech, a sale takes the same amount of time and effort whether it is a seven-figure (1,000,000) enterprise sale or a five figure (50,000) single module sale. And if a salesperson can only expect to close 4 deals a year because of the effort involved (and the typical success rate of 33%), that means the sales person would make at most 60K in commission at your company (if you gave them the same percentage, and less if you didn’t), and they probably couldn’t live off of that. And why would they want to when they could go to a big company and make 20 times that?

If you want a good sales person, you’re going to have to pay a VP level salary in the first couple of years because they know they’re not going to see much commission. The only way they’ll take less is if they see a bright future for your company, did very well at their last few jobs, can afford to make less for a couple of years, AND you give them a sizeable percentage of your company so they can make up their lack of pay on the back end when the company starts growing and you get a big valuation on an investment of acquisition down the road.

And while we still have a few mistakes to go, we’ll end here for today and then conclude our initial series in Part 6.

One Supply Chain Misconception That Should Be Cleared Up Now

Not that long ago, Inbound Logistics ran a similarly titled article that quoted a large number of CXOs that made some really good observations on common misconceptions that included, and are not necessarily limited to (and you should check out the article in full as a number of the respondents made some very good points on the observations):

The misconceptions included statements that supply chains should:

  • reduce cost and/or track the most important metric of cost savings
  • accept negotiations as a zero-sum game
  • model supply chains as linear (progression from raw materials to finished goods)
  • … and made up of planning, buying, transportation, and warehousing silos
  • … and each step is independent of the one that proceeds and follows
  • accept they will continue to be male dominated
  • become more resilient by shifting production out of countries to friendly countries
  • expect major delays in transportation
  • … even though traditional networks are the best, even for last-mile delivery
  • accept truck driver shortage as a systemic issue
  • accept the blame when anything in them goes wrong
  • only involve supply chain experts
  • run on complex / resource intensive processes
  • … and only be optimal in big companies
  • … which can be optimized one aspect at a time
  • press pause on innovation or redesign or growth in a down market
  • be unique to a company and pose unique challenges only to that company
  • not be sustainable as that is still cost-prohibitive
  • see disruption as an aberration
  • return to (the new) normal
  • use technology to fix everything
  • digitalize as people will become less important with increasing automation and AI in the supply chain

And these are all very good points, as these are all common misconceptions that the doctor hears too much (and if you go through enough of the Sourcing Innovation archives, it should become clear as to why), but not the biggest, although the last one gets pretty close.

 

THE BIGGEST SUPPLY CHAIN MISCONCEPTION

We Can Use Technology to Do That!

the doctor DOES NOT care what “THAT” is, you cannot use technology to do “THAT” 100% of the time in a completely automated way. Never, ever, ever. This is regardless of what the technology is. No technology is perfect and every technology invented to date is governed by a set of parameters that define a state it can operate effectively in. When that state is invalidated, because one or more assumptions or requirements cannot be met, it fails. And a HUMAN has to take over.

Even though really advanced EDI/XML/e-Doc/PDF invoice processing can automate processing of the more-or-less 85% of invoices that come in complete and error free, and automate the completion and correction of the next 10% to 13%, the last 2% to 5% will have to be human corrected (and sometimes even human negotiated) with the supplier. And this is technology we’ve been working on for over three decades! So you can just imagine the typical automation rates you can expect from newer technology that hasn’t had as much development. Especially when you consider the next biggest misconception.

Dear Sourcing/Source-to-Pay/Procurement Founder: Please STOP Making These Mistakes! Part 4

In Part 1, we reminded you of the 12 best practices for success that we published last year and noted that, since this obviously wasn’t read enough (or properly) understood, as the doctor is still seeing founders make the same old mistakes year after year, he needed to do more. So, using his 18 years of experience as an (independent) analyst and 20 plus years as a consultant, during which he has researched and/or engaged with over 500 companies, of which 350 were publicly covered on Sourcing Innovation or Spend Matters (between 2016 and 2022), he’s decided to make plain at least 15 of the same mistakes he has seen over and over again, in hopes that maybe he can prevent a few founders from making them again.

Then, we covered the first six (6) of the 15+ mistakes we promised you, namely:

  • Assuming that because you were a CPO, you don’t have to do your market research. (Part 1)
  • Assume you can serve any company that shows interest in your product. (Part 2)
  • Assume you can go for disruptive or innovative first. (Part 2)
  • Assume you can take Tech Shortcuts and Fix It Later. (Part 2)
  • Assume that because you could run a Procurement Department that you can run a SaaS company. (Part 3)
  • Assume you know the average process and technology competency in your potential customer base. (Part 3)

If the mistakes stopped here, we’d be done. But they don’t. So, today we’re going to cover the next three.

7. Assume that you know the messaging because you received the message.

You know the message you needed to hear, the message that got through to you, and the message that came to you when you had a vision of your future path, but that doesn’t mean you know the message that you need to deliver! There are a few reasons for this:

  • you need to know the standard terminology the big firms are using so you know what terminology you should be using …
  • as well as any adjustments you need to make for the local geography, verticals being targeted, and key companies you want to target …
  • as well as the standard messaging noise you need to cut through …
  • and, most importantly, messaging that will be not only differentiating but meaningful to your customers

And if you don’t know the market, and the messaging currently being used, you won’t be able to get your message right.

8. Assume if you cut the price to get in the door, you can raise it later with an increased value proposition.

Go back to your Procurement days. How often were you willing to accept a price increase that was more than inflation for the same product or platform you bought last year? And be honest in your answer. (Never!).

Furthermore, you know deep down that just adding more functionality is not going to raise the price, as all of your competitors are doing that and it’s a basic market expectation. And while you might be able to charge more when you add new modules, if your first module was 20K/year, you’re not going to all of a sudden get 60K/year for your second module, which is not as extensive or mature as your first module on its launch. While there is a need to be competitive, you still need to price at a point that will be sustainable and support growth, even though it will be hard when you desperately need those early sales.

9. Assume you need a CMO early to get noticed and build demand.

You need leads, but you don’t necessarily need a CMO. In our space, good CMOs are expensive. VERY Expensive. The average CMO in the US is 360K a year (or 30K a month) plus benefits. Then they need a BIG budget to work with, and in-house or outsourced support staff to write the product marketing, run the campaigns, staff the booths at the pricey trade shows they will insist your company be represented at. If you can’t devote at least a Million dollars a year to Marketing, you shouldn’t even think about it. Instead, when you do need to start marketing (which is never as early as you think), use a fractional CMO and/or an expert Marketing Firm. You will still be relatively small and only able to handle so many leads at a time anyway.

You need to invest first in a good salesperson who knows the space and has a lot of connections who can help you find and close those first critical sales at (marquis) reference customers that will help you grow as time goes on. Then you need a good pre-sales person to support her. Then, with those key references, you expand the sales team and when they start to gain traction, and you complete more successful implementations, only then do you look to marketing. Remember the basic formula of Business 101: Profit = Revenue – Expenses, which, for a ProcureTech/FinTech start up equates to Profit = SALES Revenue – DEVELOPMENT Expenses … there’s no marketer in that equation in the early stages.

And while we still have many mistakes to go, we’re past the halfway point, so we’ll stop here for today. Come back for Part 5.

Valid Uses for Gen-AI!

the doctor has been told he’s too hard on Gen-AI. He doesn’t think he’s hard enough, but there are those who keep insisting that Gen-AI has some valid uses. And they’re right, it has some. Not the uses that you need it for, but actual uses nonetheless.

So today, in a rare moment of weakness, he’s going to acknowledge those uses. Soak it in. He may never do so again.

1. Ensure your insurance / bank only covers and lends to people you like.
One of the great things about Gen-AI is that almost all models are biased, and it’s really easy to train them to be as biased as you want. Only want your health insurance to accept only young people between 25 and 40 with no family history or indicators of any illness whatsoever? No problem. Don’t want your bank to approve a loan to anyone who isn’t an all American Christian white? No problem. Race-Biased Gen-AI to the rescue!

2. Have it make up a new story for your child who constantly wants new stories every night.
Train it on thousands of stories kid suitable and it will make up a new story every night (with a high probability of most those stories being safe and suitable — chances are only a few will scare them into therapy). Your kid will be happy (at least until they get scared into therapy) and your brain will get the rest it needs at night (so it can start worrying about how it’s going to pay for that therapy). Put those constant hallucinations to use. It’s your own personal Scheherazade, with just a little bit of Grimm and occasionally a bit of King (Stephen).

3. Incite the mob.
Need a mob behind you to get your cause front page on the headlines? Incite a mob to cover your theft attempt at a corporate headquarters above a luxury department store? Maybe even help you overthrow a capitol? No sweat! Program that Gen-AI to be as hateful and incitory as possible and have it pump out fake news propaganda 24/7 until you have the mob you need on your side and there you go!

4. Scam the Scammers. (Or at least keep them busy and out of your inbox.)
Most scammers will keep trying as long as someone is responding to them (and eating up their time). Guess what AI has a lot of — GPU time. Most models have 10,000 (or more) GPUs at their disposal. That’s a lot of scammers an AI can tie up for you. (Especially if they can’t differentiate easy pickings Grandpa Joe from a very agreeable but completely broke GrandpAI Joe.)

5. Take down a rival’s network.
Simply train in some sleeper behaviour for a few months into the future, and once the competition is done with their tests and trust it … poof … down goes their network.

And if you want to be truly evil, you can always use Gen-AI to

6. Ensure your terror campaign is as lethal as possible.
We’ve read the stories of how even recent tests of self-driving systems decided to ignore the shadows of what were actually people RIGHT in front of them and drive into those shadows at full speed. A few minor alterations and instead of avoiding people-like figures and shadows, it will be the murderous trolley that tries to kill as many as possible. And who says you have to limit it to trolleys? Use it to program bomb-bearing drones and it will seek out the densest crowd possible. And so on. And yes, we went to a very dark place, but just where do you think AI is taking us? There are currently NO bright outcomes. Ponder that before you go singing its praises.

Of course, if you just want to be a little chaotic around the house, and only take that first step down the dark path, just hook up it’s hallucinatory outputs to a random direction generator and use it to:

7. Power your Roomba.
Your pets will think it’s truly possessed!

So there you go — 7 valid uses of Gen-AI. You decide how many of them you want to use.