Category Archives: Best Practices

Implementing Best Practices: The Procurement Maturity Model You Won’t Get From ISM

In the procurement profession, there is a broad set of external factors which directly affect organizational performance: customers, policy, staff, processes, vendors, tools, and organization. Regardless of whether the external factors are enabling or inhibiting, the procurement function must deliver value — usually in the form of cost savings, enhanced vendor performance, and mitigated legal and operational risk. That’s why the The Procurement Maturity Model (PMM) was developed to assist procurement professionals in implementing procurement best practices as a means to improve organizational performance.

One of the things the Procurement Maturity Model (PMM) facilitates [is] the process of benchmarking by pre-defining over 60 procurement best practices. These best practices may include:

  • the Procurement organization involved in 95%+ of spend
  • purchase orders electronically generated for 80%+ of spend
  • 75%+ of spend flows through approved vendors
  • 80%+ of contracts executed within 30 calendar days;
    95%+ of contracts executed within 60 calendar days
  • Procurement staff receives 24+ hours of training annually

The model enables a gap analysis between an organization’s performance and the corresponding performance of a best-practice enabled organization and, based on the gap, identifies measures and actions the organization can take to become best-in-class.

For more information on the Procurement Maturity Model and how it can help you become World Class, check out the presentation that Stephen Guth (of the Vendor Management Office blog) was going to deliver at ISM*1 (who I’m going to call a hot dog vendor of procurement certifications), available for download through this post (Stephen Guth to speak at the ISM Annual Conference).

*1 I’ll agree that the presentation is pretty basic, but you can’t tell me it’s more basic than most of the material that they publish on a regular basis, or most of the presentations they accept, or that a significant portion of their audience, unfamiliar with the PMM, would not benefit from a good introduction. Especially one from an experienced practitioner and speaker who wrote the book on The Vendor Management Office.

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Only 7 Mistakes to Kill a Business?

A recent article over on Chief Executive on “the 7 mistakes people make that kill their business” made some great points, but when I saw the title, all I could think was only seven?

The article pointed out these 7 classic mistakes that so many business owners make that often result in the demise of their business:

  • Doing Too Much Yourself
    As the article notes, this will bog you down in day-to-day issues and fire-fighting and take you away from managing the core business and long term strategy. And considering you will not be well suited to many tasks, the opportunity costs alone are crushing!
  • Not Recognizing You Don’t Know What You Don’t Know
    It’s one thing to do something you’re not good at because you can’t yet afford to outsource it, but another to think that you’re effective at it (especially when you’re dismal). If you think you’re a great sales guy, but you’re the worst there ever was, you won’t stay in business long.
  • Growing Too Quickly Before Your Model is Proven
    Sometimes when sales pick up quickly, it’s only a blip. Ramping up too fast can deplete the accounts and bankrupt the business if the sales don’t last.
  • Not Bouncing Your Ideas Off Of Seasoned Pros
    Sometimes, when your track record is great ideas, it might be hard to spot the great idea that won’t work. Failing to do so can quickly lead you down the wrong track. But if you can talk to seasoned peers, you can catch these ideas before they do any damage.
  • Bringing in the Wrong People
    Many business owners hire in their own image — so the gaps are not actually filled. Too true. Others overvalue the wrong skill sets — like sales and marketing or services in a venture being built entirely on a technology platform. Others hire for the wrong reasons. I once worked for a manager who hired someone because they liked their cover letter. And while that would be a top requirement for a communications person, a developer only needs good communication skills — and coding / engineering ability should be the top priority.
  • Lack of Self Awareness
    The article notes that many owners refuse to face their fears and insecurities, often because they don’t trust other people, which is a key problem. You have to identify your weaknesses, bring in the people who are strong where you are weak, and trust them to do the job you hired them for. If you can’t, it’s over.
  • Staying in the Comfort Zone
    As the article points out, it’s easy to stick with people you know and understand – but there’s one downside, who’s challenging and testing your thinking. If all of your managers are ass-kissing yes-men, you might as well just pack it in now.

But what about these classic mistakes:

  • Bringing in the Wrong Investors
    If the investors don’t get your business, they’ll take you down the wrong path and lead you to a quick demise.
  • Going After the Wrong Market
    In many cases, this is the “market of one”. I’ve worked with a few start-ups where the entrepreneur said “we need a product/service to solve this problem”, and even though they were right, their view of the problem was very limited and their solution was only appropriate to the company they came from.
  • Doing the Wrong Work In House
    Some companies are afraid to build on anything not built in house, others try to use everything they can find in the public domain, whether or not it is appropriate to the problem at hand, and others try to do services they can be outsourcing.

Or the countless others that we’ve all seen kill many a good business over the last two decades?

Leave a comment below with your favourite mistake!

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The New How, A Book Review

Nilofer Merchant’s The New How: Creating Business Solutions through Collaborative Strategy is a great book for those that truly want to collaborate but also need a framework for collaboration along with some practical advice on how to actually get down to the business of collaboration. A veteran of strategic thinking and innovation in the business context, Nilofer goes beyond simple academic frameworks and packs each chapter with examples and real-life situations that illustrate her points.

Furthermore, while the book does introduce some new terminology that, for the most part, is unnecessary, it’s pretty much limited to:

  • The New How
    which is Nilofer’s way of saying that siloed businesses can no longer survive and that they have to embrace more collaborative ways of working together,
  • The Air Sandwich
    which is Nilofer’s way of referring to the void that exists between the executive suite and the trenches in an average large organization, filled by middle management who are supposed to be bridging the gap but who, usually, only widen it with their inability to truly understand both the corporate strategy and shop floor details that they are not part of on a daily basis,
  • Murderboarding
    which is Nilofer’s process of using a razor-sharp tool to slice away at fuzzy thinking and kill off good ideas to let the great ideas thrive, and
  • Chief of Answers
    which is Nilofer’s characterization of the current, doomed, organizational model where one person is responsible for driving all strategy.

Furthermore, while most of the book is focussed on Nilofer’s QuEST (Question, Envision, Select, and Take ownership) process for the collaborative creation of strategy, Nilofer also realizes that collaboration requires more than just a process. Thus, the first part of the book spends a couple of chapters on how to “be” a collaborator — which requires us, at a minimum, to listen and understand, and the last part of the book focusses on the bigger picture and provides us with the “glue” necessary to mesh the people with the process in a way that can produce real results.

But what makes the book great is that even if you tossed the framework, every chapter is filled with practical, down-to-earth advice, on how to become a true collaborator and real-world examples of not only how to apply the concepts, but what might happen if you don’t. For example, Nilofer starts the book by describing one of her own experiences where she was in charge of revenues for the Americas in a large multi-national software company. She described how, one day, the VP dropped by to explain how the company had decided to diversify their product line six-fold within the coming eighteen months — with no input at all from the trenches or even (senior) middle management — based solely on the results of a market exploration which convinced senior management it was “the right idea”. Somehow, sales and marketing would generate demand while new products were developed in parallel. The CEO said “We Must”, the (senior) VPs said “We Will”, and everyone charged forward on the vision, and edict, handed down from on high.

The results were, as we would now expect, predictable. A few months into the new revenue cycle, Nilofer received a call from the lead product manager for the new suite. It started off with “We have a problem here. You know the lead product? Yeah, the one that’s supposed to net us most of this year’s revenue? We’re not going to be able to ship it with all the features we originally planned.” Meetings and chaos resulted, with the typical end-result where the product was shipped on the planned release date, knowing full well it wouldn’t live up to the expectations marketing had created. And it didn’t sell well. Revenues were weak. Customers that bought were unhappy. The team was demoralized and the corporate culture took a nosedive. Several talented staff members resigned. And it took a while for the company to recover.

And it was all preventable. Had the strategy not been created in a vacuum in the senior executive suite, but collaboratively with the front-lines who could have provided feedback on what could be done, and when, chances are that a simpler vision could have been successfully delivered to greater profits than the unmaintainable grand vision that was decided on the simple basis of a market-study with no cross-company input.

After all, as Nilofer points out in the Introduction, there’s not much difference between strategy success and strategy failure. The formula for both is summarized as:
good intent + good idea + talented direction + hard work + "magic black box".

The difference is that in a successful strategy, the “magic black box”, or the details of a successful execution are worked out before the strategy is adopted and launched. Strategy fails when the keys to making a strategy operational cross-functionally are not uncovered soon enough. This happens when a company jumps from “grand vision” to “execution” without sufficient exploration and planning, not because the idea is bad, or the direction is off, or the people aren’t talented and hard-working enough. And that’s why Nilofer wrote the book, to try and help people understand how to replace the “magic black box” with a “successful execution strategy” so that you can be a winner every time. (Because winning today is not enough, you have to win tomorrow, and smart companies go for a series of smaller wins rather than betting the farm on one big win.)

And while I’m not going to get into the nitty gritty details and give it all away, since this is another book I believe you should carefully read cover-to-cover (I did), I am going to give you some examples of the practical, down-to-earth advice that the book is crammed with.

  • Even bright, talented, and motivated people cannot jointly create effective strategies until the fundamental enablers of collaboration are in place.
    Some people have to be guided, and, more importantly, the organization has to foster a culture of collaboration. If the corporate culture is “I own my domain, you own yours” and every manager is always trying to one-up the manager down the hall for greater recognition from the CEO, collaboration is not going to happen.
  • Setting direction is an art and a practice.
    Just like strategy is a noun and a verb. You have to have a vision not only of a goal, but of a realistic execution strategy to get to the goal.
  • The hallmark of thorny strategy problems is that they involve contradiction – that is, they contain a set of conflicting goals or imperatives that create a tension that defies objective resolution.
    And there’s rarely just one right answer. To find the answer, you’ll have to take on tough debates, uncover tacit issues, and work with your “foes” to developer a deeper understanding of the issue that will allow everyone to collectively reach a solution that everyone can live with, get behind, and execute on. Furthermore, by acknowledging and addressing those tensions as we develop ideas rather than smoothing things over, we’ll end up with an even stronger, more viable set of options. It’s one of those pay-me-now or pay-me-later choices.
  • It often happens that our Achilles heel as leaders is attempting to come up with the answers and solve the tough problems by ourselves.
    Even a genius doesn’t know everything, and a true genius admits it.
  • In the long run, what truly matters is not what each of us knows today, but out ability to continue expanding the aperture of what each of us can see and understand tomorrow.
    That’s pretty much the reason Sourcing Innovation exists!
  • Powerpoint slides are just another form of air in the sandwich.
    Powerpoint slides capture high-level ideas, not understanding. For a corporate strategy to be successfully executed, everyone in the organization has to understand it, not just 1 in 20 individuals (which is the number of individuals who understand corporate strategy in your typical organization today). You don’t want to be in the situation where you were looking for a strategy, but only found a PowerPoint.

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If You Still Don’t Think We Need a Leonardo da Vinci …

… then take a look at this recent Harvard Business Review blog post on “the decade in business ideas”. I found it thoroughly depressing. Let’s take a close look at the most influential management ideas of the millennium (so far):

  • Shareholder Value
    Yes, businesses exist to generate a return for their shareholders and yes they should, but there’s more to value than profit and there’s more to business than just creating profit. As the article points out, the pursuit of shareholder value eclipsed all and pushed the consideration of stock price effects deep into operational decision making, which is precisely where it does not belong. As Jack Welch proclaimed, “Shareholder value is a result, not a strategy.”
  • IT as a Utility
    IT may be, and in many cases probably should be, a service, but it’s not a utility in the traditional sense by any means. You just can’t equate ERP and Data Analysis with electricity and water. One powers your equipment, one powers your decisions. One refreshes your employees, the other refreshes your business. Saying IT is a utility is buying into the BS that BI can be used to automate business decisions. It can’t. Period.
  • The Customer Chorus
    Just because new, social network, technology has made it easier for customers to provide feedback in droves, this doesn’t mean that you should listen to each and every one. Just because every customer and his dog can describe their problems doesn’t mean that they know what the right solution is. Fact of the matter is, they usually don’t. And if you try to make everyone happy, you’ll end up pleasing no one. You have to pick a market, which is likely becoming more niche by the day, and go after it.
  • The Creative Organization
    Creativity is good, to a point, but only to a point. It’s one thing to encourage creativity when trying to innovate a new product, but another to encourage creativity across the board in marketing, sales, operations, etc. You see, not every new idea will work. In fact, many will fail. And while failures are good (as long as you learn from them), too many at once will take down your business. You have to make changes one by one, keep the ones that work, and replace the ones that don’t.
  • Behavioural Economics
    Economics studies the production, distribution, and consumption of goods and services and behavioural economics focusses on the selfishness of the economic agents that produce, distribute, and consume the goods. Now while it’s important to understand your audience, you can’t assume that your entire market is selfish … just like you can’t assume that your entire market is rational.
  • High Potentials
    Yes, high potential leaders are important, but so are leaders who have reached their potential and, more importantly so are good, talented employees. One man does not make a successful multinational.
  • Competing on Analytics
    What’s wrong with this? Especially since I proclaim the importance of good analytics on a daily basis? Well, the majority of firms are not competing on analytics. They’re competing on automatically generated reports from automatically “cleansed” and “enhanced” data from automatically generated “cubes” that are automatically generated from multiple “data feeds” that are never, ever, ever reviewed by a human. As a result, each stage introduces, propagates, and magnifies the error until a thoroughly inaccurate and useless report is produced. Firms should be competing on intelligence, backed up by analytics hand-driven by intelligent, educated, users.
  • Enterprise Risk Management
    Okay, this one isn’t too bad. Risks are multiplying, and you have to be prepared for them, but instead of trying to identify and manage risks after making a operational decision, wouldn’t it be a novel idea to identify the risks associated with each option before making the decision (and then choosing the one with the least, or most manageable, risk)? Or is that just too crazy?
  • Open Source
    Okay, this one isn’t bad either, but unless you’re planning to be a service company, you’re not going to even make enough profit to stay in business, yet alone achieve the “shareholder value” that everyone is so relentlessly pursuing.
  • Going Private
    This is one of the three, straight-up, good ones in the mix. It lets you get away from the relentless, and meaningless, Wall Street focus on quarterly earnings (which has killed long-term planning and the research labs that made North America great after WWII and made the US economy the most significant global economy by far for decades) and get back to business. However, it’s not really a “management idea” (as it’s a business structure).
  • Reverse Innovation
    This is the second of the three, straight-up, good ones in the mix. No reason innovation can’t come from foreign markets. However, this isn’t much of a “management idea” either (as it’s a form of innovation).
  • Sustainability
    This is the last of the three, straight-up, good ones in the mix. And while it’s not really a “management idea” either, it’s an important “management goal” because, let’s face it, you can’t make profits tomorrow if there is no tomorrow.

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How Do I Know That My Adviser Isn’t Another Bernie Madoff?

This article, from the October 12, 2009 print edition of Canadian Business (and Yahoo Finance on “How Do I Know That My Adviser Isn’t Another Bernie Madoff”), got my attention. After all, I’m a well educated Ph.D. who can build some of the most complex mathematical and computer models in the world, and I often don’t have a clue what these people are trying to, or should I say not to, tell me. (And that’s why I don’t have a personal financial advisor who oversees my financial decisions and plan to keep it that way.)

And we have essentially the same problem as supply management professionals every time a new sales person comes knocking on our door. Is he selling us a better product, or is he selling a fresh batch of snake oil? And how do we tell the difference?

The article reiterated a great piece of timeless advice that we all need to remember, “if it’s too good to be true, it probably is“. That’s not to say that there aren’t categories where you can save 50% or more off of what you’re paying now, as there are, but that they’ll likely only represent a small fraction of the “opportunities” that sales people will try to bring to. By the time you factor in switching costs, logistics costs, quality trade-offs, etc., the real opportunity will in fact be a lot smaller than the sales person may make it out to be.

So do your research, and just like you should start with a security commission check and Google search before you meet with a financial advisor, you should check with the supplier’s local Better Business Bureau (or equivalent) and do a Google search before you get too far down the negotiating path. It’s better safe than sorry, especially in this economy.

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