Monthly Archives: August 2024

Craft Category Strategy Like a Chief with akirolabs

As much as many vendors and consultancies would like to tell you that category strategy selection can be automated whenever you need to kick off a new sourcing cycle, because “it just depends on the supply vs demand imbalance and based on that you either do an auction (if [way] more supply than demand), do an RFP (about balanced), or renegotiate with the incumbent for a contract extension (if there is [projected to be] a lack of supply)“, that’s simply NOT the case, especially for highly strategic, specialized, or evolving categories.

The reality is that category strategy depends on much, much more than this. Factors it depends on include, but are not limited to:

  • supply vs demand
  • current and projected spend
  • current relationships
  • innovation requirements
  • environmental requirements
  • industry and regulatory requirements
  • risk factors
  • regional differences between source / make / sink
  • etc. etc. etc.

That’s why we have so many methodologies to arrive at a strategy including, but not limited to:

  • Porter’s 5 forces
  • Kraljic Matrix
  • SWOT
  • PESTLE
  • etc.

All of which serve a purpose and give us insights, but none of which actually give us a strategy. Consider Porter’s five forces — it provides insights into the current market, but then we decide what to do with that. Consider the Kraljic Matrix. It tells us whether an item is non-critical, bottleneck, leverage, or strategic based on an analysis of risk/complexity vs. profit impact, but we still have to decide what strategy to use, and, more importantly, how to evaluate the responses based on non-price factors that are also important to us (such as supply assurance, carbon / GHG reduction, etc.). SWOT helps us identify the responses, but we still need a strategy to evaluate them against. PESTLE is one of the more complete analyses of external factors encompassing Political, Economic, Sociological, Technological, Legal and Environmental factors, but you still have to build a strategy on that.

Plus, it’s not just the external factors these methodologies are based on that’s relevant. It’s internal factors that include, but are not limited to:

  • current and projected category spend
  • current relationships
  • organizational culture and process
  • organizational direction and goals
  • stakeholder needs
  • etc.

All of this needs to be considered simultaneously with the external factors and analytic methodologies described above in order to arrive at a proper, acceptable, and executable strategy — and a strategy is not a strategy if it is not:

  • proper : an inappropriate strategy will NOT lead the desired results
  • acceptable : if the stakeholders don’t buy in, your project won’t go anywhere, and you may have to start over (or just continue with the status quo)
  • executable : a strategy that doesn’t provide actionable guidance cannot be executed and isn’t really a strategy at all

And that’s what akirolabs, challenging the 40-year old Kraljic matrix as the de-facto standard in category management, is building — an augmented intelligence (because they fully realize that no Artificially Idiotic technology can ever do something that requires real human intelligence and experience) solution that helps category managers build proper, acceptable, and executable strategies and do so in weeks, not months, and see the results in months, not quarters.

The akirolab platform guides you through an analyze/strategize/realize process where it helps a category manager, or management team in a larger organization, collaboratively analyze the company and market factors, develop a strategy based on value levers and strategic scenario modelling, and then realize the strategy using the project and performance management capabilities (not found in most strategic sourcing applications).

In the Analyze phase, the company pulls in the following company data:

  • current spend (it just pulls in your current spend cube in a frame; it’s only volume tier and trend that’s relevant for strategy, not minutiae transaction details)
  • current budget (based upon projections)
  • current contracts (which formalize relationships)
  • stakeholder mapping (who is involved, and how)
  • strategy & requirements survey (what do the stakeholders need, why, and what are their goals and concerns)

… and the following market data …

  • market intel – articles, studies, white papers, etc. found by an appropriately trained semantic search engine
  • innovation factors and data
  • cost drivers relevant for the category
  • risks and associated data
  • supplier preferences (based upon relationships, innovation, and supplier risks)

… and then completes the following analyses, with the help of the akirolabs platform:

  • Porter’s Five Forces — where the category team scores and ranks the relevant factors in each force (which can be seeded from market data using the AI if enough data is available)
  • Kraljic Matrix — where the category team evaluates the risk/complexity vs. cost (and where the platform can suggest risk/complexity based upon available market intelligence, risk data, and innovation factors)
  • PESTLE — where the category management team can complete a full PESTLE analysis using all of the available data and the aforementioned Porter’s Five Forces and Kraljic Matrix
  • SWOT — where all of the above is fused into a category SWOT analysis

And the best part about its analyze capabilities is that the strategies can be analyzed by region (or by department if each department has different needs and/or goals for the products in the category), scored and weighted separately, and then overlaid visually (using a spider graph in the case of Porter’s Five Forces) to allow a team to see the average as well as the regional, departmental, etc. differentiations.

Another unique feature is its approach to SWOT. For each quadrant, they define key questions and key parameters to ensure that the analysis is done consistently (and comparably) across categories, and to ensure that the category management team collects the right information in order to generate a good strategy.

In the Strategize phase, the category management team identifies the value levers and then creates a strategy using Strategic Scenario Modelling. Using the akirolabs strategic scenario modelling capability, a category team can build a strategy that balances cost savings, sustainability, supply chain resilience, procurement agility, innovation, quality, regulatory requirements, and growth potential by evaluating multiple scenarios inspired by the market analysis in the analyze phase. These can be overlaid graphically to provide a visual comparison of the strengths and weaknesses of different scenarios.

They can pull in the relevant information from the analyze phase, and define the strategy that will be applied as well as their reasoning as to why, backed up by all of the relevant analysis and data. They can then create Executive summaries for each executive (CEO, CFO, COO, CIO, etc.) that explains the strategy, rationale, and expected results. The platform allows the team to create standard report templates by function and makes it super easy to pull in the relevant data and graphs that explains and supports the decision.

And all of this can be done collaboratively, as it was designed to allow all stakeholders to answer the survey and all team members to work together to collect the data, associate it with the appropriate analysis, score appropriately, and collaborate on the strategy using the built in messaging platform.

Finally, as part of the Strategize phase, a category management team can assess the sustainability of the scenarios using their “Procurement with Purpose” view that assess the strategy against each of the 17 interlinked Sustainable Development Goals of the United Nations.

Once the strategy has been defined and accepted, the category management team can create a project plan and track it in the “Project and Performance Management”. They can track the stages and activities, timelines, responsibilities, status, assigned value category, expected financial effect, forecasted financial benefit, etc.

If this sounds good to you, you’re probably one of the target customers, that fall into three categories where they can provide you with great value (4.4x as per their claim):

  1. Mature Procurement Organizations: leaders (under analyst frameworks) or best-in-class (under the Hackett numbers) organizations that are high on the maturity ladder and that are looking to go beyond savings and expand the core business
  2. Maturing, But Fragmented, Procuring Organizations: average to average-plus maturity, but no centre of excellence, no history of formally captured category strategy development, and little experience bringing stakeholders together across regions and departments (leading to fragmented category events)
  3. Immature, but Growing: and, most importantly, ready to invest the time and effort to formally mature as a Procurement organization by embracing a world-class methodology and platform to jump-start their efforts and success

And if you’re still on the fence, it doesn’t just support traditional “Category” strategy. It also supports “Beyond Category” for organizations that want to use it for supply chain design, logistics & warehousing, sustainability improvements, etc. Not just traditional material or procurement hierarchy categories. And that’s a differentiator. If any of this sounds good to you, be sure to check akirolabs out.

M&A Mania is Coming Again … but will it be the same as last time?

the doctor agrees with THE PROPHET that M&A in Procurement, Supply Chain and Finance Tech is Back On For Q4 and 2025, because M&A Mania is part and parcel with the The Marketplace Madness that the doctor told you is coming back in May. The only question is, will this M&A cycle look like the last few during Covid (when every investment firm had to have an online collaboration platform, since they couldn’t do business in person, and an online e-Payment FinTech solution, since they still needed to make, and most importantly receive, payments) and in the late 2010s when companies were getting scooped up left, right, and centre. It was kind of like that first year in Chemistry where you were told to look to your left, look to your right, and look in the mirror and realize that only one of you would survive the end of the course (except the odds had worsened and there was only a 1/6 chance that any of you would be left standing at the end of the M&A cycle and less than a 1/9 chance that more than one of you would be left standing).

But first, let’s review THE PROPHET‘s reasons why:

Reduced interest rate climate coming
Not necessarily in your country, but in the US and a few other major investment markets, and for global funds, that’s enough.
Valuations back up (including a recent one)
the doctor is seeing a bit of this beyond just over-hyped fake-take and (now failing daily) Gen-AI, which indicates a return to value for real solution capability that solves real problems, and not just glam UX or tech buzzwords, could soon be coming.
Dry powder is the size of an ammo depot
And this is a rather conservative estimate. Broaden your definition of our Source-to-Pay space, and it could go well beyond the 666 providers in the mega-map.
Constrained target/asset pool to pursue
Too many providers not focussed on Gen-AI bullcr@p were not (well) funded and in need of funding to grow and too many providers who raised too much on Gen-AI bullcr@p blew too much on failed dev and marketing and need someone to infuse them with fresh funding while taking in the reigns and refocussing them on core problems.
No clear leader in many markets
Even if you constrain by target enterprise size, vertical groupings, and module, you’re usually looking at over a dozen vendors. Too many. By core module alone, you’re usually looking at over eighty (80) potential providers.
Counter-cyclical sector defensibility as a hedge
Most definitely. the doctor has always said the best time to develop/expand is on the verge of a coming financial or supply chain crisis, and it’s even better if it corresponds with the end of a hype-cycle (when everyone realizes that grandiose claims are just that, claims, and usually not realized and it’s time to return to the next generation of tried and true technology).
Times of increasing global uncertainty favours supply chain, supply and supplier risk management
Yes, and this will be constant for years. The outsourcing crisis the doctor and a handful of others have been predicting for over a decade (which is why he was telling you to near-source and home-source in the late 2000s) materialized during COVID, anti-globalization is at a high not seen in the remembered lifetime of most of the global population (and increasing by the day), we likely haven’t been this close to World War III since the cuban missile crisis of 1962 (since the Soviet radar malfunction of 1983 was caught by an alert Soviet air defence forces officer) putting global political tensions at a near all time high since World War II, ever increasing natural disasters and supply shortages are escalating costs at levels of inflation not seen since the 1970s, and in some markets, since the late 1920s (and the Depression era), and it’s just doom and gloom all around. Only our space has the tech to combat this.
Corporate spend flowing into tech, not new jobs
This is unfortunately true since

  • most executives don’t realize that tech only increases productivity and success in the hands of a human, it doesn’t replace them (since Aritificial Idiocy can’t even replace real idiocy, how can you expect it to replace Human Intelligence [HI!])
  • big companies don’t like high fixed costs, and the see people has the highest fixed cost
  • the dream of the new robber baron billionaires is to replace people with machines, which they think will help them realize their vision of constantly increasing profits from constantly increasing revenue (from a workforce that never needs to take a break) at a constantly declining cost to serve (not possible, but that’s their dream)
Nearly all big tech firms (ERP, business applications and stack) aside from SAP have not made any material moves yet — and will need to at some point
You can’t wait for a lumbering giant … by the time they buy someone, it’s ready for sunset. Remember IBM and Emptoris? A sad end to the APE circus! That means that the time to strike as an investor is before they awake!

Add add the following:

  • money has been idling in these funds from lack of investment over the last couple of years (as they got antsy last year with the predicted recession and the SVB failure and the fallout of both), and their investors aren’t happy
  • many of the more progressive funds have realized that fintech is useless if there’s no money moving through it, which means you have to look for broader business solutions that can assure the flow of money as well as information
  • companies are starting to realize that ridiculous 10X, 15X, 20X valuations are a thing of the past (or at least until we get a whole new generation of freshly minted investors who didn’t bother to study their history, like the new generation of founders that didn’t study theirs) and that if you can get a solid 5X to 7X valuation (which is the most a company can expect to realize at an aggressive 40% annual growth rate, which is the most they can hope to realistically support) for tech, that’s great, and this makes acquisitions a lot more attractive than during the last cycle when you’d have to bid 10X on something that might not scale as an investor just to get invited to the table

The M&A market is returning. But there will be some differences this time. The last two times it was valuation run up until the money ran dry or there were no companies left that were worth it. This time will be more reminiscent of the first M&A Mania to hit our space in the late 2000s and it will come with a little kiss, like this:

1. Valuations will be more realistic.

As simply stated, 10X, 15X, 20X growth doesn’t happen in five years for anything but a Unicorn, and even then it’s rare, and investors aren’t going to pay this any more. That being said, they will invest for value and firms who focussed on building real solutions, not slick UX with no substance, will be valuated quite well (at first).

2. The cycle will have 3 parts.

2A. Existing Growth Opportunities

Look for PE firms to buy suites or modules that can be sold and grown stand-alone or as complementary solutions to offerings in their stable. The market for these solutions could mature quickly as the Gen-AI and intake hype cycles crash and the global situation destabilizes and risk-focussed Sourcing and Procurement become paramount. This will be done at fair to very good valuations, depending on the offering and the financial situation of the firm being acquired … those that can wait and play the field will get better valuations.

2B. Fill the Gaps

As new competitors enter the scene, existing providers with aging tech are going to want to counter them and will start buying up point-plays to fill the gaps. This will take two forms.

  1. stable, stand-alone players who can survive without investment will wait for the right offer, get a very good to great valuation, and survive relatively unscathed in personnel and offering (and will continue to be available standalone for some time)
  2. cash-crunched desperate players who won’t survive long without a cash infusion will be bought in a fire sale, folded in quickly, and only key personnel will remain

2C. Liquidation Opportunities

Everyone loves a steal, err, deal. Investors included. As companies start to run out of money left, right and centre because they were underfunded (and struggled to compete with the overfunded overhyped companies) or overfunded and burned money like it grew on Central American fruit trees that produce two healthy crops a year, investors and buyers will be looking for companies with pieces of tech they can use to enhance their offering for pennies on the dollar. These companies will be broken up across talent and technology, with the acquirer keeping only what they want.

Questions to Ask Your Optimization Vendor

This is an update of a post that originally ran way back in 2007. Yes, two, double-o seven. Seventeen years ago. It is being updated because

  1. it needs a re-posting
    (as very few of you will find it that deep in the archives)
  2. most of the vendors originally mentioned are gone

However, if you read, and remember, the original, you’ll realize that, like my article where the doctor goes mental on optimization myths (which was recently shared on LinkedIn), it doesn’t need much updating and what was written seventeen years ago is still valid to this day. (When you write to inform vs. to create meaningless buzz, it really does stand the test of time.) Let’s begin.

Not all optimization vendors are equal … and, more importantly, not all vendors that claim to have strategic sourcing decision optimization (SSDO) actually have it (since the underlying algorithms and model needs to meet a stringent set of requirements to be true SSDO), with some systems, to this day, barely qualifying as decision support. Thus, since the need for optimization is as desperate as it has ever been with costs again skyrocketing, risks rising rapidly, carbon control being critical, and supply assurance necessary for sustained operations, it’s time to make sure you know how to qualify a potential provider. This means you need to not only understand the basics of what SSDO does (see the archives), but also how to distinguish between the relative strengths and weaknesses of the different offerings, as well as how much strength you really need.

You need to buy optimization at the strength, and usability level, that you need — especially if the vendor is pricing it according to its power, or computational requirement. And while there is no such thing as too much, the reality is that a 95% solution is often more than enough as the entire point is understanding the optimal solution against each dimension (cost, risk, carbon), the cost of compromise between the trade-offs, and the cost of going with a preferred, versus calculated, vendor award. And doing this for EVERY sourcing event. Once you factor in enough discounts and constraints, it’s almost impossible to calculate the best award in a spreadsheet, and the insight of what you could be spending, versus what you are, how low your risks could be, versus what they are, and how much you could alter your carbon footprint, vs what your footprint is today, is invaluable. Even if you never select a recommended solution, the key is understanding how good your (preferred) award actually is.

Before we get to the (starting) question list, it should be pointed out that it’s almost impossible to cover every question, as many of the questions you should be asking depend on the answers you receive to your first few questions, but the question list below is a good starting point.

1. Does the product meet the four criteria for strategic sourcing decision optimization?

  • Sound & Complete Mathematical Foundations : such as MILP solutions based on simplex, branch and bound, and interior point algorithms as many simulation, heuristic, and “AI” algorithms DO NOT guarantee analysis of every possible solution (sub)space given enough time, and, thus, are not “complete” in mathematical terms (and if they incorporate Gen-AI, they aren’t even “sound” in that they may not even compute an award that satisfies the constraints!)
  • True Cost Modelling :
    that supports tiered bids, discounts, and fixed cost components — the model must be capable of supporting all of the bid types being collected, as well as the cost breakdowns
  • Sophisticated Constraint Analysis : at a minimum, the model must be able to reasonably support generic and flexible constraints in each of the following four categories
    • Capacity / Limit: allowing an award of 200K units to a supplier who can only supply 100K units does not make for a valid model
    • Basic Allocation: you should be able to specify that a supplier receinves a certain amount of the business, and that business is split between two or more suppliers in feasible percentage ranges
    • Risk Mitigation: you should be able to force multiple suppliers, geographies, lanes, etc. to mitigate those risks without specifying specific suppliers, geographies, lanes, etc. to take advantage of the full power of decision optimization
    • Qualitative: A good model considers quality, defect rates, waste, on-time delivery, etc., and must support qualitative factors and minimum and average scores across the award
  • What-If? Capability : The strength of decision optimization lies in what-if analysis. Keep reading.

2. Does it support the creation of multiple what-if scenarios per event?

Furthermore, does it simplify the creation of these scenarios? The true power of decision optimization does not lie in the model solution, but the ability to create different models that represent different eventualities (as this will allow you to hone in on a robust and realistic solution), to create different models off of a base model plus or minus one or more constraints (as this will help you figure out how much a business rule or network design constraint costs you), and to create models under different pricing scenarios (to find out what would happen if preferred suppliers decreased prices or increased supply availability).

3. How fast is it for different average model sizes?

And can performance be tweaked? Optimization takes what it takes. That being said, if one solution takes an average of 1 hour for an average scenario, and another solution takes 10 minutes, all things being equal, if you have compressed sourcing cycles, the 10 minute solution might be better. Emphasis on “might”. This is only true if the faster solution is of the same quality – some models, and some solvers, sacrifice quality and accuracy for speed. The best solution will let you trade off “tolerance” and accuracy for speed. Sometimes it’s easy to get within 1% or 2% in a few minutes, even though that last 1% or 2% could take hours. On a model with low total savings potential, getting within 1% may be enough. And when trying to hone in on the right what-if scenario, it’s nice to get within 1% quickly and then allow the right scenario to run to completion over lunch (or if its a huge model, over night) after you’ve quickly analyzed half-a-dozen scenarios and settled on your preferred scenario. Thus, tweaking ability is very important.

4. Is it “true” real-time or “near” real-time?

Thanks to significant advances in processor and hardware performance as well as off-the-shelf optimizer technology (like IBM ILog’s CPlex), it’s now possible to rapidly re-build and re-solve even very large models using off-the-shelf modeling languages in seconds, allowing for e-auction tools that keep the model relatively moderate in comparison, and presolve with seed bids (current prices, market prices, last quotes), to incorporate decision optimization in real-time by simply updating a few parameters and re-solving the model every (few) parameter(s) update (depending on model-size) on a high-powered multi- core server with an appropriately configured and optimized solver (which can spin off copies and have each processor work on a different subspace). However, if the approach the product takes is to rebuild and resolve the model on every update, that’s not real-time, that’s near real time, and the slowdown could be significant for large models. (To clarify further, real-time optimization requires the ability to merge model construction and model solution in such a way that a new bid can be introduced as a parameter change that does not require the optimizer to rebuild the sparse model matrix and start the solution process over from scratch.)

5. Can you describe two or three scenarios you have encountered where you could not model the situation exactly?

And, more importantly, how did you work around the issue, and how accurate was the final result. The real world is messy, compared to models that are clean, only so much data is available, and math can only model as much as the minds who created the model could conceive. As a result, no optimization model can handle every real-world scenario 100% accurately. If a vendor representative says so, he’s either lying through his teeth or not competent enough to be selling the product. (Note that: I’ll have our optimization expert get back to you on that is a good answer from an average sales representative.) This is about the only way to get a decent idea of how appropriate the tool is for you. If the scenarios were complex and the constraints based on business rules you hardly ever, or never, use, then the solution is probably okay for you. If the scenarios were simple and the constraints based on business rules you use all the time, it’s probably not the tool for you.

6. Would you be willing to demo your solution to, and answer questions from, our consultant who understands both our needs and decision optimization technology?

Let’s face it -– just like the right decision optimization tool can deliver huge savings multiples on your investment (10X or more), the wrong tool will simply represent a six (or seven) figure cost that yields little return. If you can’t tell the difference, and there’s no shame in admitting you can’t if you’ve never used this type of technology before, then you should bring in a consultant who can to help you select the right technology, and ensure you are appropriately trained on it, until you are self sufficient and saving an average of 10% or more per project put through the tool.

7. Can we do a pilot project at-cost (or gain-share) before committing to a long term license?

If you like what you hear, but are still unsure, or are having problems getting the budget approved, a pilot is often the way to go! (Note that I did not use the word “free”!) If you’re not willing to sign a license, given the sophistication of this technology and the amount of effort the provider is going to have to allocate to support you through the pilot and ensure you are successful, you need to be willing to pay for services at a rate that is sufficient to cover the provider’s cost for the pilot -– especially considering that many of the companies that offer affordable optimization offerings are only able to do so because they keep their costs and overheads down.

How Dumb Is Your Company?

And, more importantly, will you be among the 20% who will be completely gone within two years (as per the doctor‘s predictions, and remember that he has been following this market for almost 25 years and seen all the ups, down, startup explosions, M&A manias, and the following implosions) or the 75% who won’t last in their current form (as per THE REVELATOR‘s predictions).

the doctor first asked this question to the space on November 7, 2008 when he saw the first implosion (which had all the signs of the first major enterprise back office tech implosion in the 2000 crash) coming (which wasn’t the last, as there was another one in the latter part of last decade that followed the next big wave of M&A and startup mania), but this time the forthcoming implosion looks to be the biggest our space has ever seen (and while the space is too crowded with vendors who aren’t actually providing any new, solid, innovative Procurement solutions, this implosion could also wipe out a large number who are, and that would not be a good thing).

So, it’s time to ask this question again, except this time we’re focussed entirely the vendors. Last time, it was directed at all organizations generically, including buying organizations that, sensing a market correction (which was worse than expected in 2008 and 2009, were putting off much needed Procurement technology purchases which could have saved their hides during the crash) as well as poorly run vendors. But this time, it’s all on the vendors and the investors (namely VCs and PEs investing way too much in companies without any real solutions, hoping to profit from the hype cycle before it crashes). So, without further ado, here are 10 of the most common dumb mistakes we’re seeing.

1. Doing Away With the Perks

Even if money is getting tight (or the PEs are telling you to tighten your belts because they just realized they aren’t going to sell low value solutions for a Million bucks a pop), this is the last thing you want to do. For an employee, it’s the first sign the company is in trouble and for a good employee who is talented and in demand enough to get a job elsewhere, the first sign to accept the next offer that is more-or-less equal to her current renumeration package.

2. Delaying Time-Saving Technology Purchases

Your developers, back office, sales, and marketing personnel need tools too, not just your potential customers. This doesn’t mean that you should buy the first tool they request, because if everyone is on a different tool you’re not achieving economies of scale and spending 30% to 40% more on SaaS than you should be, but that for every task they do regularly that they could do much faster with an appropriate tool, they get an appropriate tool. For e.g. SalesForce isn’t the only CRM, there are a lot of marketing tools for expediting content to multiple business and social networks, and a lot of back office suites that are quite affordable, especially in the small business / mid-size business market. You just have to take the time to look.

(As we all know, just like you’ll never get a Mega-S2P Suite in our space for less than 1M a year, you can get mid-market suites with all the functionality a mid market actually needs 90%+ of the time for less than 250K. The same holds true in other enterprise technology markets too.)

3. Postponing Actual New Product Development

Remember, business need actual solutions more than ever — and this doesn’t mean wrapping a shiny new third-party Gen-AI tool and claiming success. This means researching their problem, identifying actual process-bases solutions, and coding those processes (with configurable rules-based workflows) in an easy to use manner. Now, you can use ML/AI as appropriate to analyze data and trends, and even Gen-AI to summarize available natural language documents and data, and present these insights to a user as intelligent augmentation to help her make a decision, but the tool works without it in a way everyone can trust.

4. Strangling the Travel Budget

National and global business requires national and global travel. There’s only so much that can be done (or that old school business people will allow to be done) over Zoom and Teams. Now, this doesn’t mean that travel should be granted willy nilly for every prospect, conference, etc., but at key points during the marketing, sales, and implementation cycles, on-sites will be needed. (Nor does it mean that travel budgets should be fully unsupervised, for anything over a trivial amount, at least one other employee at an equivalent or higher rank should agree it’s worthwhile.)

5. Cutting 10% above the Board

Now, the Big X like to to this, but this is one of the reason the majority of their remaining AI and analytics teams are just a bunch of f6ckw@ds who are not delivering value relative to the price tag the Big X charge. (Because the Big X kept hiring whomever they could during a tech boom and then kept cutting the worst as an ongoing “correction” to their over-hiring of under-skilled, under-educated, and/or under-experienced individuals, the best know that just one mistake, or one bad quarter for their team, and they could get the axe no matter how good they are, so they all left for better opportunities as soon as those opportunities came their way). That’s one of the two reasons the bloodbath started earlier this year (and is still ongoing). You can’t continue to charge 2X (or more than) the niche firms while continually delivering 1/2 the value (or less) and expect customers to keep putting up with that, especially during non-growth and recessionary times.

Only cut people who aren’t working out (and only after giving them time or support to find a job more appropriate to them elsewhere), and avoid hiring people who aren’t likely to fit in the first place!

6. Killing the Training Budget

In fact, you need to double or triple it. If you think that Gen-AI, intake-to-orchestrate, AI-backed/AI-driven/AI-enabled/AI-enhanced/AI-powered, supplier insights, or some other overhyped buzzword is the answer, then you don’t actually know what the majority of Procurement organizations need and what you should actually be building. So train your product managers on real Procurement practices and processes and how to do actual market research (or at least identify a niche consultant who can help them).

7. Shifting Focus from Infinite-Growth to Indefinite Belt Tightening

Just because you overspent on marketing hype and a sales force (who couldn’t sell because you didn’t actually have anything worth selling, or at least worth buying at the ridiculous price tag the investors hoped for), that doesn’t mean that you’ll survive if you just cut costs across the board. The only way to survive is to start building actual process-based solutions now that take a people and process centric first approach (what do our target users need to do everyday and how can we best enable that in an easy, minimal, step-by-step process with an intuitive UX), and educational messaging that will help hit this point home (and make your solution stand out from all the other hogwash that these businesses are fed up with hearing about).

8. Freezing the Marketing Budget

Just because you overspent like Montgomery Brewster in Brewster’s Millions and have nothing to show for it, that doesn’t mean you’ll do any better with $0 in the budget either. The key is to do consistent educational marketing that informs your audience not only that you exist, but on what your solution does and how it will help them solve their daily problems. And to do it through channels relevant to your industry, geography, and the communities these buyers are a member of. (Not one-time “look how great we are” conference booths that no one remembers, or one-time “groovy vendor” write-ups with limited reprint rights from overpriced analyst firms, or splashy advertising in the biggest publication you can afford.) Consistent, month after month education in small pieces such as short webinars or podcasts, bite-sized white-papers (with an e-book on your site if they are interested and/or for your sales people to use during a sales cycle), info-adverts in targeted publications. By the time the next budget season hits, you should be a name they know and trust because you took the time to learn about problems, instead of pushing magical solutions that will never work (the new silicon snake oil).

9. Stifling Real Innovation to Reduce Risk

Because optimization, machine learning, analytics, and other “real” methodologies that, with a lot of blood, sweat, and occasional tears, will actually produce solutions that actually work, is hard, requires top people (who command top salary), and has some risk (in that it could take a lot more time to get it right than you think — but at least you can get it right and it will work, as some of the best minds at the best companies in our space have demonstrated for over two decades). The biggest risk is not advancing towards a solid, trustable, usable, solution that the market will actually want!

10. Retreating into your Moated Castle

This is still the doctor‘s personal favourite. Often the first thing to go these days after the employee perks is the consulting budget — and it’s often by far the dumbest thing your average newly funded company can do (because, as has been repeatedly stated, just because you can sell an investor on what you think a buyer needs doesn’t mean you can sell a buyer, especially if you don’t really know!). Often the only way of introducing significant, meaningful, cost-saving revenue-generating improvements into your company is to bring in an outside consultant who specializes in one or more types of solution-based business innovation. A consultant who can tell you what technology roadmap is right for you, even during a recession. A consultant who can help you maximize your marketing budget. A consultant who can help you save money and avoid unnecessary costs in an intelligent, non-destructive, fashion. And a consultant who can keep you on the innovation path and out of the cost-cutting abyss that ultimately spells a cruel demise to what could have been a very successful business model with just a few tweaks.

And, FYI, the doctor has seen a lot of dumb over the years. That’s why he did a 5-part series on 15 common mistakes in hopes some of these founders would read it, reflect on it, and not make the same mistakes over and over again.

Fortunately, the corporate intelligence scale from 16 years ago doesn’t need updating. Start with 10 points and subtract 1 point for each of the above that you are currently doing (and be honest):

Score Rating Comments
10 Genius Congratulations! You are a true market leader.
9 Intelligent Quite Good! You’re best-in-class.
8 Smart Not Bad. You’re above average and on the road to stardom.
7 Average You’ve got some work to do, but if you set your mind to it, a bright future awaits. In fact, with the right effort, you just might have to wear shades!
6 Dull You’ve got your work cut out for you.
5 Deficient You’re handicapped, but if you’re handi-capable, with hard-work, perseverance, and a devout focus on change, you can be average in no-time!
4 Feeble You’re seriously lacking in corporate know-how, but if you open your heart to innovation, and bring in some expert consultants, you might just be able to get back on the right track.
3 Dumb You’re going to need a serious corporate make-over to survive. the doctor wishes you the best of luck!
2 Moron Find a Leprechaun! You’re betting on Lady Luck at this point!
1 Imbecile Start writing your corporate obituary. It’s just a matter of time.
0 Complete Idiot Congratulations! The Sourcing Maniacs lay their bells at your feet. It should be impossible to be this idiotic and still be alive (and you must have received an absolute shipload of private funding to still be around), but you’ve proven that nothing’s impossible. Have some bubbly before the money runs out.

For those of you who score 6 or below, please get help now to avoid being a casualty!

For those of you who score 3 or below, your theme song is still in the archives!

Dear SaaS Provider, Where’s Your Substance? Being SaaSy is No Longer Enough.

As per our January article, Half a Trillion Dollars will be Wasted on SaaS Spend This Year and, as per a recent article over on The CFO, CFO’s are wising up to the hidden bill attached to SaaS and cloud, which might just be growing faster than the US National Debt (on a per capita basis).

As the CFO article notes, per-employee SaaS subscriptions alone are now costing businesses $2,000 (or more) annually on average, and that’s including ALL employees from the Janitor (who shouldn’t be using any SaaS) to the CEO (who likely doesn’t use any SaaS either and just needs a locally installed PowerPoint license).

To put this in perspective, this says a small company of only 1,000 people is spending 2 MILLION on SaaS (and a mid-size company of 10,000 people is spending 20 MILLION), most of it consumer, and likely a good portion of it through B2B Software Marketplaces because it’s easier for AP. If the average salary is 100K with 30K base overhead, that’s costing the organization 15 (or 150) people, or a 1.5% increase in workforce, which is substantial if it’s an organization that needs people to grow.

And the worst part is that a very significant portion of this spend is overspend or unnecessary spend, with many SaaS auditors and SaaS management specialists finding 33% (or more) overspend as a result of duplicate tools, unused licenses, and sometimes outright zombie subscriptions that just need to be cancelled. Plus, poor management and provisioning leads to unnecessary surcharges that is almost as bad as unused licenses.

There’s no excuse for it, and CFOs are not going to put up with it anymore. SaaS Audit and Management tools are going to become a lot more common, and once the zombie subscriptions, unused licenses, and cloud subscriptions are rightsized, when these companies realize they are still spending at least 1,500 per employee on SaaS and cloud, they are going to start grouping tools by function and analyzing value. If there are two tools that do lead management, workforce management, or catalog management, one is going to go. More specifically, the one providing the least value to the organization. It doesn’t support multiple what-if scenario creation yet or true SSDO, but its more than just simple side-by-side comparison and more analysis capability is on the roadmap for later this year.

So, dear SaaS Provider, it’s important to ask:

  • what’s your substance
  • how do you provide more hard dollar value for that substance than your peers
  • how do you measure it and prove it to the customer
  • … and make sure you’re not the vendor that is cancelled during the audit

And, dear organization who hasn’t done a SaaS audit recently, why haven’t you? You’re sitting on 30% overspend in a category which is likely, with most of the spend split between departments and hidden on P-Cards and expense reports, $2,000 per employee and growing daily. You need to do the audit, rightsize your SaaS, and then centralize SaaS management and SaaS acquisition policy. It’s not a minor expense, it’s a major, business altering, outlay.