Category Archives: Market Intelligence

Influential Damnation 99: Conferences

After SI’s recent posts that asked Are Conferences Perpetuating Supply Chain Stasis? and made A prediction from the doctor with regards to Big Procurement Events, you might have been expecting conferences to make the list of damnations.

If you were, you get a virtual fortune cookie. If you weren’t, better luck next time.

The reality is that conferences are damning for all involved parties except one. They are damming for you the attendee. They are damning for the presenters trying to educate you (or not). They are damning for the vendors trying to demo their wares. They are damning for the analysts and bloggers trying to take something away to share with your peers. The only people they are not damning for is the organizers fattening their pocket books at the expense of vendor and participant alike.

As a practitioner, you are damned because the organizers are most concerned with making the event a success, which, in their book, is profitable. As a result, if there are not enough presentations of high caliber, they will take proposals of moderate caliber, and if there are not enough proposals of moderate caliber, they will take proposals of low caliber. And if their focus is Sourcing, they will take Sourcing vendors as lead sponsors and exhibitors first, but if there are not enough Sourcing vendors, they will take Procurement vendors. And if there are not enough Procurement vendors, any Supply Chain vendor with supplier data collection capability makes the cut. And so on.

As a vendor, you are damned because some of these events can cost you upwards of $20,000, with no guarantees. There’s no guarantee that the attendees are going to be interested in your product. Even if they are, there’s no guarantee that they are of the right seniority or have any ability to make a buying decision. There’s no guarantee you’re going to get a booth in a high traffic area. And if you get a presentation slot in a multi-track conference, there’s no guarantee anyone is going to show up.

As an analyst, there’s no guarantee the presentations are going to say anything new (worth reporting). (This blogger knows for a fact that some presenters on the junket circuit give almost the same presentation year after year after year.) There’s no guarantee that the vendors are going to be presenting technologies you expect to be covering. And there’s no guarantee that the attendees are going to be willing to share anything worth covering either.

In the end, only the organizer is guaranteed to win.

Economic Damnation #10: Mini-Trends vs. Macro-Trends

Trends are the foundation of forecasting, but they are also the foundation of disruption when they change unexpectedly. When it comes to Procurement, the relevant trends may be consumer demand trends, inventory trends, market trends, or any other trend that Supply Management believes will impact its operation. Trends are damming because they are truly can’t live without them, can’t live with them. Sort of.

When it comes to trends, there are two types of trends. Macro-Trends and Mini-Trends. A macro-trend is a large-scale, sustained shift in whatever is being measured. It could be a sustained consumer shift away from landlines to mobile phones as the primary means of voice telecommunication. It could be a sustained shift from overstocked warehouses to just-in-time delivery across retail chains. Or it could be a sustained shift upwards in the value of cotton, rice, coffee, or other staples where demand, and reserves are shrinking.

Mini-trends are emerging trends, often not yet acknowledged by the media or market, that may or may not culminate in large-scale, sustained shifts in the marketplace like their macro-trend counterparts, but are still likely to have a sustained impact over a period of time long enough to be significant and have the potential, in the future, to become, or replace, an existing macro-trend. Good examples of mini-trends that do not culminate in large-scale, sustained shifts are fashion trends – such as bell bottoms, balloon pants, hip huggers, long waistcoats, or any other fashion garment that is here today, gone tomorrow. Examples of mini-trends that became macro-tends are walkmans (that helped the cassette tape industry take off), cell phones (which have migrated from business phone to home phone), and gluten-free food products. Initially, these were all small markets but all are now global.

They are at opposite ends of the trend spectrum and have opposite interpretations to the average, traditional organization. For an average organization, macro-trends can’t be lived without as they provide a foundation for operational planning, associated annual budgets, and monthly reporting. On the other hand, mini-trends can’t be lived with as they disrupt forecasts, shatter plans, and blast budgets to bits. And while mini-trends often provide the greatest opportunity to a non-traditional company that survives by identifying, preparing for, and riding out mini-trends before the competition, for a company of a more traditional mindset they are the gremlins in the supply chain that need to be electrocuted.

For an organization to to truly thrive, it needs to be able to identify, and occasionally capitalize on both — and understand the relationships between them. For example, as pointed out in a soon-to-be-classic SI post that highlighted a great article on the World Future Society site, mega-trends often drive mini-trends just as mini-trends drive future mega-trends. For example, as the aging work force remains more active, there will be a great demand for senior housing where there are nurses and support staff on site, but where the seniors still live relatively independently. Also, there will be more demand for vacation and leisure activities that are not overly strenuous to a senior — like golf, water sports, cruises, etc.

While the authors of Minitrends: How Innovators & Entrepreneurs Discover & Profit from Business & Technology Trends believe the key to success in identifying mini-trends and capitalizing on those that will be beneficial to the company starts with the following strategies:

  • Follow the Money
  • Follow the Leaders
  • Examine Limits
  • Understand Human Nature
  • Watch Demographics
  • Analyze Frustrations
  • Search for Convergence

the doctor believes that it’s not quite this easy. Just identifying a mini-trend is the first step. The next step is to figure out how likely it is to become a significant mega-trend, and, if so, how long that will take. Short-lived mini-trends can often be safely ignored by a company with an appropriate counter-strategy, but mini-trends destined to become mega-trends that will affect or displace a mega-trend the organization is relying on are a disaster waiting to happen until appropriately addressed.

For example, if a clothing company identifies that a mini-trend will be bell-bottom resurgence, they could choose to produce that product, but if they also identify that many of their competitors will be fighting for that market, that a significant number of people will still want straight cut, and only one other company will be promoting that product, they might continue to sell almost as much with no additional investment at a higher profit margin by staying focussed on their core product. But if they detect a large scale migration from nylon and rayon back to cotton in consumer preferences as a coming mega-trend, and most of the company’s line is rayon or nylon based, then there is a need to identify new designs and production houses that will use cotton as soon as possible.

Regardless of your views, where trends are consumed, you are damned with them (especially if they are mini), and damned without them (especially if they are mega) as most of your forecasts and plans depend on them.

“Best” Procurement Organization? What “Best” Procurement Organization?

A recent post by the maverick over on Spend Matters asks “Does the “Best” Procurement Organization in the World Exist”? There’s the long answer, which the maverick gives, and the short answer, which the doctor will give.

Question: Does the “Best” Procurement Organization Exist?
Answer: No!

There is no best, at least, as the maverick explains, as a whole.

The reasons for this, as detailed by the maverick, include, but are not limited to:

  • direct vs. indirect
    there are organizations “best” in direct, “best” in indirect, but typically not “best” in both
  • categories
    there are organizations that excel in certain categories, direct or indirect, but not other direct or indirect categories
  • trade secret
    organizations that are, or at least believe they are, truly ahead of their peers tend to keep quiet, thinking this provides them a competitive advantage
  • inbound vs outbound vs omni-channel retail
    most organizations tend to excel in one of these supply chains
  • operational efficiency
    which allows an organization to attack more categories than their peers

But also include the following:

  • market intelligence
    detailed supply market and pricing knowledge that can be used to the organization’s advantage
  • modelling capability
    to build accurate should-cost models using raw material, labour, energy, and overhead data to understand the gap between market pricing and actual costs and whether or not it is a fair profit margin
  • optimization-based negotiation
    to get the truly best price during the organization’s sourcing exercise

There are a host of factors that make a “best” Procurement organization, and all of them need to be met for an organization to be “best”. And since no organization is best in all of them, there is no “best”. But the good news is that not only is there room for improvement, but it’s easy to identify where the improvement needs to happen, to make the improvement, and surpass your peers. Fortunately, to win the game, you don’t have to be “best”, just “better” than your peers. Improve on each of these eight dimensions, and your organization will be on the fast track to getting there.

Navigating & Keeping Up with Digital Agency Landscape: Part I


In this three-part series of articles, Kathleen Jordan, Associate Director at Source One Management Services will take a look at the complex digital agency landscape and provide insights on the process of agency sourcing: considerations when sourcing, vast digital agency options, and the need for bridging the gap between marketing and procurement departments. Kathleen Jordan is a strategic sourcing subject matter expert with a wide range of experience in the marketing category who works closely with marketing professionals and helps alleviate challenges encountered when overseeing agency relationships.

Defining Your Requirements

The marketplace for marketing services is anything but easy to navigate. It is complex, and crowded with a wide range of agency options available to fulfill any marketing support requirement. Niche and full-service players exist, some agencies operate independently, and remaining ones are owned by a holding company. Sister agencies compete against one another or may team up to offer a comprehensive service offering. Mergers and acquisition are relatively frequent and can consequently lead to conflicts of interest. Overall, there are a number of considerations when you are seeking out an agency to support a new marketing channel or upcoming product launch. And these considerations should be known even if there is no forthcoming agency search or new marketing tactic on the horizon to support. Marketing professionals and their sourcing colleagues must always be aware of the current state of the marketplace for marketing services to remain competitive and innovative, especially when it comes to the digital space.

Digital Marketing continues to evolve due in part to the various technologies that apply to digital tactics. Advanced technology and digital marketing as a whole have reshaped the way consumers interact with brands, and digital agencies have emerged to support the various digital channels and technologies that exist. It is vital for marketing professionals and their sourcing counterparts to recognize this and determine what type of expertise they wish to obtain to supplement their internal marketing team and fulfill a specific scope of work. Digital Marketing Depot’s whitepaper titled “Digital Advertising Agencies 2014: A Buyer’s Guide” (download required) serves as a great resource for marketing professionals, defining various types of digital agencies and how and when they should be engaged. Overall, the report provides an accurate snapshot of the current digital landscape and guidelines on how to effectively work with digital agencies across the various service types.

The initial starting point is validating the need to conduct a digital search. Consider:

  • Is the marketer unsatisfied with their current digital shop and looking to transition?
    Review and consider the performance of the current agency. Common reasons for dissatisfaction include: missing deadlines, under-delivering, and poor communication, especially when several agencies work together on a project.
  • Is a new digital channel under consideration that would lead to an increase in scope, impacting the current retainer model?
    When looking to implement a new digital tactic, consider the potential for scope creep. This can occur when a project is poorly defined and can end up consuming allocated budgets.
  • Is there an upcoming product launch in which the consumer base has a strong digital presence?
    Review the campaign you plan to implement. Are the tactics you plan to use offered at your current agency? Is it something a specialty agency would be better suited handling?

Once the objectives are clearly outlined and the scope details are ironed out, the agency selection criteria should be established. This criteria will dictate the search in its entirety and should tie directly to the scope requirements. For example, if the scope is strictly website development, a social media monitoring agency is not nearly the right fit.

With these activities complete, you can move on to agency selection. We’ll explore this topic in-depth in Part II of this three-part series.

Thanks Kathleen!

What Would the Acquisition of SalesForce Mean to the Procurement Market?

Who Cares?

While the doctor and the maverick see eye-to-eye on a lot of issues, and that’s why they have been collaborating on the new Spend Matters CPO site because there are important messages that are just not being communicated by the new press at large, the doctor believes that the impact this acquisition will have on the Procurement market, as summarized in yesterday’s post on “what would the acquisition of salesforce mean to the procurement market” by the maverick, is not as important as the maverick seems to believe it is.

While the acquisition of SalesForce is an important topic, it’s no more important than the acquisition of any non-Procurement technology vendor. (While some SRM vendors use the platform, one has to remember that it is, at its core, a CRM platform). It’s (primarily) upstream, while Procurement is primarily downstream. While the processes should connect, they are still distinct and, unless you are in the middle of a negotiation, there’s no reason to even think about it as a Procurement issue.

The real issue is what does the acquisition of SalesForce mean to the technology market, and the market at large?

And while the doctor knows that he’s not just stirring the pot but the entire honeycomb on this subject, it’s a subject that needs to be addressed. So what does it really mean?

Simply put, too big to succeed!

One of the biggest problems with the technology market is that the misconception that bigger is better, and too big to fail, is a reality. The whole point of big was to benefit from economies of scale. But economies of scale have a limit. A single factory with a single production line can only produce so much going 24 hours a day. To go beyond that, you have to add another production line, or even another factory. If you do so, and you only reach half of the capacity, you don’t have the same economy of scale on the overage.  The biggest economy of scale was when you were at full capacity on the one line.

In other words, if you expand faster than demand, you waste time, money, and resources. This situation is bad, but the situation that occurs in an acquisition is much worse. Not only do you have more capacity, but you have a huge debt load as a result of the acquisition. So you are paying more to produce, and then you are paying even more to service the debt that you took on to produce more than you needed to.

But even this situation isn’t as bad as the situation where you are talking about technology companies that don’t produce physical goods, don’t have demand that typically rises with population increase or market growth, and have valuations that are many multiples of annual revenue — not profit, revenue. And we all know that the misconception that the product has already been built and the residual cost of sale is minimal is incorrect. Software has to be maintained, debugged, and constantly improved in order to be saleable to the mass market. That is costly. Whereas a product has a single production cost, possibly a single repair cost under warranty, and possibly a single reclamation or disposal cost, that’s it. The cost for each product is essentially one-time, whereas the cost of software is continual and adds up everyday it is in use.

As a result, you have software that typically:

  • cost millions to build
  • costs millions to maintain

and now you want to

  • add millions to the cost just so you can change ownership and assign a different name

It doesn’t make a lot of sense. Especially when you are talking about the acquisition of an 800 lb gorilla which already has a (relatively) complete solution. In this situation the acquirer is essentially admitting that either

  • its solutions are totally inadequate and it wasted millions of its customers dollars on its solutions (versus realizing that it has some good solutions, is missing a few key elements, and just needs to acquire a few point solutions from smaller vendors to fill the holes) or
  • it has no inherent capability to enter the space (and maybe it shouldn’t be entering the space to begin with).

And the acquiree is essentially admitting that

  • it cannot maintain (rapid) growth on its own anymore (which may not be bad if it’s the dominant player and has a very large recurring revenue and could continue to increase profitability with improved efficiency) or
  • it’s shareholders are greedy and impatient and don’t care what’s best for their customers and just want a quick payout.

Neither situation is good for either party. Nor does it make sense for any of the de facto tech giants who would likely acquire SalesForce to do so. None of the six AMIGOS (Amazon, Microsoft, IBM, Google, Oracle, and SAP) should acquire SalesForce. Here’s why.

  • Amazon
    They are an online e-commerce giant, with inherent ability to be a commodity supplier to large enterprises. They are not a software provider and beyond insuring quality, and receipt of goods, would not benefit from CRM. Sure the Force.com platform would allow them to offer even more apps, but they can already offer Android apps and sell online software, so it’s not a huge leap in capability.
  • Microsoft
    They already have huge back office suites that they have made huge investments in, including investments to port these suites to the cloud. Plus, their focus, and strength*, is back-office apps. They’d be taking a huge-write off on existing technology and would have to rewrite a lot for a whole new platform. They already run on Windows and Mac, that power the vast majority of office desktops, so why do they need the Force.com?
  • IBM
    IBM already has platforms for just about everything, including Alliance for CRM, have heavily invested in Watson, and need to keep building on the workflow and integration platforms they spearheaded in the early naughts.
  • Google
    the doctor will admit that it almost makes sense for Google, but Google’s market, and expertise, is apps, and it is still learning how to make money off of enterprise apps. It’s not ready for SalesForce, would have to let it run as a completely separate division, and take a huge hit to its balance sheet to pull of the acquisition. And while it’s the one company that could probably pull of a successful integration in a reasonable timeline without bleeding blood red everywhere, it would likely be quite a divergence from its other projects.
  • Oracle
    Oracle has too many CRM platforms as it is (with Siebel, PeopleSoft, CRM on Demand, and integration to about a dozen other platforms) and needs to continue to integrate and build on what it has. What makes Oracle strong, and great, is that it has always believed in eating it’s own dog food (while Microsoft ran off of third party databases even after SQL Server was released and has demoed Windows software releases on MacBooks on more than one occasion), but even Oracle can only integrate its acquisitions so fast. It’s still catching up on acquisitions past (and it took about 3 years to integrate the majority of Sun applications into its “single instance view”), so just imagine the effort to do a true end-to-end integration of SalesForce. Plus, it’s still a database / ERP company and with SAP so aggressively pursuing its marketshare in the US, with IBM and Microsoft still aggressively pursuing its global market, and with some companies (still) proclaiming that non-relational or in-memory databases can be faster and better for the average application, it has to focus on winning that fight.
  • SAP
    SAP is an ERP company with a very heavy focus on SRM, as evidenced by the huge amount of money it has dropped on Procurement, T&E, and Supply Management vendors over the past few years. This is where it has to focus to not only break-even on its acquisitions, but generate future value. And it still has a lot of integration to do. A lot.

the doctor‘s sure not everyone will agree with him, especially since people seem to get a little blind when such big numbers start flying around, but someone has to start putting this in perspective.

And now to put up the tarps in expectation of the reactionary mud-slinging from third parties not inclined to think deeply about the issue.

* And yes, the doctor cringes when he says this because most of their software, in his view, while standard, is sub-par — but they are the de facto solution and their Office apps, when you cut through the clutter (and the ribbon), work very well.