In Part 1 we reminded you that our space is filling up with dumb companies and that this number, at least in the view of the doctor, is likely at an all time high.

We also reminded you that the doctor believes that your favourite vendor likely won’t be around, or at least not in it’s current form, within two years (or less), as he’s predicting a failure rate of 20% (or more); which, while it sounds pretty significant, is actually a mild prediction compared to THE REVELATOR‘s bold prediction that 75% of companies won’t be around, or at least not in their current form, within 18 months. Wow!

Why? First of all, as highlighted in the doctor‘s revised Dumb Company article, the companies that are (finally) starting to panic (internally) are starting to make the classic mistakes that often signal the beginning of the end.

Secondly, they have been, or are starting to, make the Dead Company mistakes, first highlighted by the doctor in December, 2008, as well as some scary new mistakes that weren’t as common, or that were overlooked by the doctor, sixteen years ago.

And while we can’t compile an exhaustive list for a number of reasons, as per Part 1, we can identify a number of common mistakes that companies who are dead companies walking tend to make (in the final days, even though they don’t always know it’s the final days yet). So if you see these mistakes in spades as a buying organization, best to steer clear until the ship is righted (assuming the vendor recognizes they are off course before it is too late and takes action). (You don’t want to go down with a sinking ship!)

In Part 1, we identified the first six common mistakes we are seeing too often. Today, we identify the next six.

Buzz and Sound Bites are more important than timeless educational content

As the doctor has been lamenting for months and months, the marketing madness is apparently at an all time high, buzzwords have replaced meaningful messages, and the hogwash doesn’t convey any useful information a prospective buyer can use to figure out what the product actually does! (And that’s one of the major causes of the current Procurement Stink, as we hinted at in this article about the Vendor Contribution to the Procurement Stink.)

Sure the hype gets attention (which is why Gartner latched onto the hype cycle in place of research that would actually be usable by mid-size and larger companies looking for solutions they could implement to run their business reliably for years, if not decades). It’s not easy to get those 150K+ POs, so you better make the end product sound cool!

So if all your research uncovers is buzzwords, sound bites, and hogwash, then you best stay clear of that vendor. As THE PROPHET has stated, M&A is about to make a comeback and the best you can hope for is that they get bought and merged.

If there is interest, your product is the solution

Not only is the doctor seeing too much rapid fire sound bite marketing to see what sticks in the marketers equivalent of throwing pasta against the wall, doubling down on whatever is getting the mot interest, assuming that their solution is the perfect solution for whatever they sold and, finally, assuming that any organization that contacts them is a potential customer and that their product will be the solution, no matter who the organization is, what the organization needs, or what their product actually does.

In short, they are adopting the Big X consulting playbook, everyone’s a client, sell whatever they can, then hope they can figure out how to deliver later. But they are not consulting firms, they don’t have a suite of third party vendors they can proffer up, and they certainly don’t have the budget or bench to build custom solutions on the fly.

So if the first thing you get to an inquiry off of a sound-bite marketing advert is a hard sell, take a hard pass. A good vendor learns about you and your problems before proffering up a potential solution.

Sales is about numbers, not solutions

As outlined in detail in our recent article on why are there so many tech failures, at the majority of tech enterprises:

• sales people are compensated on how much they sell, not how successful the solution is for the customer
• sales people are pressured to hit numbers, or be cut if they have even ONE quarter in the bottom 10% of performers
• sales people don’t stick around long enough for success to matter

There’s a reason that THE REVELATOR has outright stated in a recent article that after 40-plus years, I say this with the deepest sincerity -– 90% of salespeople aren’t worth the gum stuck on the bottom of a shoe, and that’s because the majority of them are just focussed on selling, not on actually solving a customer’s problem.

If the sales person is rushed to sell, keeps making one time offers that expire at the end of the quarter, or promises rapid returns without a detailed use case analysis, you can be sure they only care about getting your cash in the door, not about whether or not the solution can actually solve any of your problems.

Any temporary price cut to get those initial clients can be made up later!

When times start to get desperate, that’s when desperate organizations that know they need to sign customers now to keep the investors happy (including the venture capitalists and private equity investors) will offer “a few select marquis organizations an initial discount in exchange for joint press releases, quotes, case studies, and marketing sound-bites“, thinking that they can satiate the investors for a while by telling them that those success stories will allow the organization to jack the prices further and that they’ll be able to jack prices considerably at renewal time because of “all the added value” they will have built by then.

However, investors are not dumb and not going to fall for the “price cut now will lead to riches later”, because they’ve seen that fallacy over and over again (and they know that the prices never go back up). Plus, if the solution is really worth 1 Million, there’s no way any successful vendor is going to give you an introductory rate of 100K for a “case study and positive recommendation”. That’s a big red flag for any organization looking for a vendor with a successful solution.

Our tech works, any failure is the result of the implementation team/org

Going back to our recent article on why are there so many tech failures, we noted that one of the primary reasons there are so many tech failures is that, as also noted above, sales people are being forced to sell at any cost. And the reason that even those with a conscience can do this is because they have been told the solution can be adapted and customized as needed, and if it doesn’t work, then it’s the fault of the third party consulting partner’s implementation team for screwing it up.

But that’s bullcr@p, and you know it! First of all, it’s the vendor’s responsibility for selecting their partners as much as it is the partner’s responsibility for recommending the vendor. Secondly, even if the vendor has vetted the partner and assured that they are good people, it is still the vendor’s responsibility to train the partner’s people on their solution, implementation requirements, and best practices. Thirdly, and most importantly, it is the vendor’s responsibility to ensure they don’t make any promises the tech can’t keep, as well as insuring that any customer referrals don’t come with unrealistic expectations. (Heightened is okay if the vendor is willing to put the extra work in, but it must be within the realm of possibility with the current solution … not a future roadmap that may never materialize.)

We know what we’re doing

Just because a founder ran a Procurement Department or convinced an investment firm he knows how to run a company, that doesn’t mean he actually does, especially if it’s his first time. And it doesn’t matter how fast he can learn, how smart he is, how good he can sell, or how charismatic he is. Startup success requires a suite of critical skill sets (which are outlined in Garry Mansell’s Simplify to Succeed), each of which takes years to learn and sometimes a lifetime to master. You can’t wait to learn what you needed to do yesterday. Selling investors is not like selling Procurement technology buyers. And charisma only gets you in the door, on the stage, or an interview with Mr. X himself. It doesn’t necessarily get you the signature, the return invite, or the limelight.

This results in two major mistakes. Unless the founders raised (way) too much money and are under pressure from the investors to put a proper management team in place, they’ll go too light on real operational management (and sometimes marketing management, opting for the attention seeking sound-biters over the steady-state educationally focussed marketers that hook real customers with real problems the vendor’s solution might actually solve), thinking that all they need are a few rock-star developers, a sound-bite marketer, and aggressive sales people. Which isn’t a complete team and not a complete recipe for success.

The next mistake is believing they can do everything in house, and that they “don’t need no advice from no one“. Not other founders (including those who failed once or twice and know what not to do). Not consultants, who specialize in startups and helping companies operate successfully. Not analysts, who’ve seen hundreds of companies come and go (and seen the commonalities in successful solutions and successful companies). And definitely not independent Procurement technology experts who’ve had 20+ years in the space and seen thousands of companies come and go over the decades (and analyzed hundreds and hundreds in detail).

In the mid to late 2000s, even the above average companies, who (in hindsight) probably didn’t need any help, would look for any expert they could find with a decade of experience to help them survive the (coming) downturn (which came, as it always does), improve their solution offering, and grow. Today, a significant percentage of the new generation of founders, high on raising ridiculous amounts of early stage (often pre-beta) funding, running companies making a significant number of dumb company and dead company mistakes, won’t even consider that a third party with a decade or more of experience on them in the space could actually help them.

And while this is a hard mistake to tell directly (as the smart companies won’t necessarily disclose the experts they are working with to give them an edge), if you pay attention to their messages, their speech, and their words, you’ll get some indirect hints as to where the egos might still be too inflated for the company to see success (and you can hence identify it as a company that needs to be evaluated against the dumb company and dead company walking checklists). Phrases such as “I was a buyer for F500 for years managing $B categories“, “We raised 100M because our investors know that we know what the next generation of tech is“, “I’m not a sales guy, I’m a practitioner like you“, “Don’t worry, we know what you need” even before they’ve even asked a single question about your problems and reason for reaching out, etc.

Before we conclude we’d like to again remind you that this is not a complete list of mistakes soon to be dead companies often make, but a starting list of red flags you should look for as a potential buyer of their solutions. There are real, solid, solutions out there from real, solid, vendors who care about your success and who will likely survive the coming implosion. You might have to look quite hard to find them (especially if THE REVELATOR is right and 3/4 will not survive unscathed), but the effort will be worth it because the last thing you want is your solution to fall out from under you just after the implementation is complete.

(And it’s critical to remember that any deep solution is going to take multiple quarters to implement, especially if you need to collect, classify, cleanse, and map years of historical data from multiple systems. For a mini-suite, always expect six [6] to twelve [12] months as a mid-market, and more for a full suite. Yes, some functionality that doesn’t require historical data will be available day one, and other functionality that only requires a year or two of data to get going will be available day ninety one, but no solution with depth is going to be completely implemented in under a quarter. So the next time a vendor says they can do an end to end complete enterprise Procurement installation in 60 days, they don’t have anything deep besides a shiny faketake-to-nowhere UX or a wrapper on third party tech from a company that poses more risk than they do.)

Not long ago we noted that our space is filling up with dumb companies and that this number, at least in the view of the doctor, is likely at an all time high.

the doctor believes that your favourite vendor likely won’t be around, or at least not in it’s current form, within two years (or less), with the doctor predicting a failure rate of 20% (or more); which, while it sounds pretty significant, is actually a mild prediction compared to THE REVELATOR‘s bold prediction that 75% of companies won’t be around, or at least not in their current form, within 18 months. Wow!

Why? First of all, as highlighted in the doctor‘s revised Dumb Company article, the companies that are (finally) starting to panic (internally) are starting to make the classic mistakes that signal the beginning of the end. (Considering the marketing madness, the buzzword overload, and the hogwash still coming from the firehose, you wouldn’t know it yet, but early warning signs are starting to appear.)

Secondly, they have been, or are starting to, make the Dead Company mistakes, first highlighted by the doctor in December, 2008, as well as some scary new mistakes that weren’t as common, or that were overlooked by the doctor, sixteen years ago.

While there are a large number of mistakes, often with individual nuances, that vary from company to company, and an exhaustive list would be too long to digest (if it could even be compiled by one person), there are still a number of common mistakes that can be identified and the elimination of these, or at least an immediate course correction (as some mistakes can’t be undone) with respect to these mistakes, will go a long way to making sure that their company is not the next dead company walking. If you see these mistakes in spades as a buying organization, it’s probably best to steer clear until the ship is righted. (You don’t want to go down with a sinking ship!)

The top 12 the doctor is currently seeing are:

Too Many Assumptions, Too Few Verifications

Too many founders didn’t do their research, assumed that just because tool X they were forced to use at their last job didn’t do something then no tool did it, or assumed that because they were a buyer buying a few categories at one company in one industry they know what every buyer wants. And, thus, they know enough to design the tool that is going to take the Procurement world by storm! This is rarely the case. Especially if they only ever saw three potential solutions of the 40 to 200 that were out there (depending on the module they were looking for, see the Mega Map).

While it’s hard to tell what is in someone’s head, the words, directions (to the marketing and sales teams), and outputs (in terms of product) speak volumes. They tend to focus on how they were a buyer and know all the problems (without even asking about your problem), focus on user experience more than actual process or solution (look how easy it is for Bob to make a request on his phone and see a virtual avatar of Alice receiving it — woo hoo), and direct their marketing and sales team to sell sizzle, not steak.

A shiny exterior is more important than a modern engine

As hinted in our last point, too many founders today are too focussed on the UI and the UX, the “user experience” and not on the processes that the users actually have to do on a daily basis. As a result, while it may taste great to the eyes, it’s significantly less filling as an actual solution and leaves users wanting more, sometimes to the point where they quickly abandon the solution. As such, it doesn’t matter how quick that shiny new intake-to-orchestrate solution can be implemented if there isn’t actually a solid procurement capability backing it up that does more than allow an employee to make a request and see a shiny avatar of Alice saying “your request has been received”. If Alice can’t actually do the Procurement in tool, what good is it?

So if the “intake” demo stops with the intake, run to the hills, run for your lives! Of if when you ask them about a competitive functionality, all they talk about is the experience their solution offers, they don’t actually have deep capability.

Shiny new tech is more important than a tried-and-true methodology

At least 6 in 7 vendors have jumped on the AI-backed/AI-driven/AI-enabled/AI-enhanced/AI-powered bandwagon, even if they don’t have any AI at all and/or any AI that actually solves a real problem in a predictable, valuable fashion. Too many vendors are popping up with “intake”, which the doctor prefers to call “fake-take” solutions that, as per above, can take a request in a shiny web-based UX and then … do nothing with it, or, in the best case, act as an overpriced pay-per-view on your data!

The sad part about this situation is that a number of real, modern Procurement 2.0+ (and esp. 3.0+) applications have had “intake” built in since day one, like Vroozi that has had it since launch in 2013 and Eyvo that has had it since the mid 2010s. Even Coupa had intake support for catalog-based purchases when it launched on Procurement Independence Day in 2006 (and still does to a large extent, although the user-based pricing model does make it prohibitive for many organizations)! And when it comes to AI, the doctor has yet to see any new “AI” play offer any new capability that hasn’t existed, or been in development, since the last decade! (When the doctor did his AI in X today, tomorrow, and the day after tomorrow series for Procurement, Sourcing, Supplier Discovery, Supplier Management, and Optimization in 2018 and 2019 on Spend Matters. These are all still in the Content-Hub archives, so if you have access, check them out.) (Now, while the doctor will admit that Gen-AI can do conversational interactions better, and summarize larger bodies of documentation as it is a bigger model, that is about it … as it cannot do any task that requires basic logic or math, and thus just about any real Procurement task. Moreover, we have had semantic technology that has done a good job since the early 2010s! Sure it might have sounded a bit robotic at times, but it worked just fine.)

So if all the vendor talks about is buzzwords, find one that talks about how they solve your problem. At the end of the day, it is command line code executing on a server somewhere that solves your difficult business problems, not fancy UIs.

Over-reliance on third party tech is a sustainable business, especially if it’s (Gen-)AI

If a lot of your potential vendor’s functionality is dependent on yet another a new third party vendor (or offering that will be pulled if it causes the company to bleed money), what do you think is going to happen when it goes away? Nothing good, and that’s for certain. That’s why you want vendors who build real applications in languages supported on multiple platforms that use data stores supported by multiple vendors and cloud service providers. You don’t want a single point of external failure taking down your entire business. Especially when the third party tech has limited use (on its own) in the first place.

But way too many vendors are building these Gen-AI or intake-plus solutions first, which are totally reliant on third vendor tech that can destroy their company in an instant. And it doesn’t matter if they only build on big company tech from companies like Microsoft or Google that you know aren’t going out of business, because even these goliaths can, and will, end support for tech pretty fast if it’s not profitable. (And, if it looks like one day an application will be very profitable, cut your access to it to prevent competition with their new, inferior, in-house tech.) The fact of the matter is, they are Goliath 2.0 with full armour plating, a helmet no stone is getting through, and a legal team who will bankrupt you if you even try to fight them. So if they decide the tech is done, or at least your access to it is done, you’re done, and there’s nothing you can do. (the doctor has seen this multiple time and experienced this firsthand. And it doesn’t matter if your vendor has a signed agreement in hand, the Goliath’s legal team will find an out clause and that will be it for your vendor.)

So avoid these vendors like the plague. A vendor with great tech can still fail, but it’s not as likely to do so without a lot of early warning signs if it owns the tech and employs the people.

An innovation burst is enough, especially if it is disruptive

Another increasingly common mistake these dead companies walking make is thinking that once they have a shiny new piece of actual tech that they don’t think anyone else has (which is rarer than you think), they can slow down the pace of development and rev up marketing and sales. That’s the exact opposite of what needs to be done. If you want sustainability as a vendor, you need a big lead, not a small one that can, and will, be quickly replicated by the next startup that has the same idea and gets too much money (and is smart enough to, or lucks into, hir[e][ing] the best). Success as a vendor requires consistent product development for years, and the only reason R&D becomes a smaller percentage of the budget as time goes on is because, one the core module(s) of the product (suite) is (/are) ready for prime-time, marketing and sales spending starts increasing from 0, not because R&D spend decreases!

Make sure your potential vendor has a concrete, detailed roadmap for the next year and vision for the next three. Significant function-spanning developments take time, and vendors in it for the long haul realize that — and they start with the foundations first.

Too much investment, too soon, against an overly ambitious plan

This is one of the worst mistakes, and one we’re definitely seeing too much of recently. Too many companies getting tens, or hundreds, of millions of investment just because they are building intake-to-orchestrate or Gen-AI solutions, neither of which do anything on their own, and neither of which do anything significant without a lot of solid tech (and data) to back them up (for the use cases where they are good). In some cases, the investment is at stupid levels an there is no way the company is going to deliver on the investment to the expectations of the investors, which means that the company will likely be dropped faster than a hot potato when the coffers start running dry as a smart investment firm would rather eat a sunk cost than have an ongoing investment sink their entire fund. In the best case, they’ll be sold off to a bigger VC or PE (at a loss) who can right the sails and extract some value as part of a larger solution suite. In the worst case, the company will just be folded entirely.

So, before buying from any vendor, research their investment to sales ratio at investment time and now, and if they took 100M on 0, and still only have a handful of customers, that’s not a good sign … unless they are building to a very specific niche need with the intent to get them scooped up by a bigger player who needs to fill that hole, their chances of long term survival are slim to none.

 

These are just the first six mistakes we’re starting to see too often. Stay tuned for part two where we’ll go over the next six.