Vendors and Consultants are but a small portion of the industry, and the economy … as Buyers, you work for organizations that compose the majority. The only way we’re truly going to get back to business-as-usual is if you use the vision provided by the vendors to identify what clarity you need, bring in consultants to help you realize it (and the significant ROI that accompanies it), and then use your newfound “savings” to procure the best-of-breed sourcing, procurement, and supply chain visibility technology offered by the visionary vendors, as this is the technology that will help you increase productivity and significantly reduce your costs across the board.

Although it might be a long road to recovery that requires much effort and initiative on your part (depending on the size, complexity, and focus of your organization), the starting point is clear. So here’s a simple step-by-step guide to get you on the right path.

1. Do a real spend analysis.
2. Bring in category experts to get you real savings on your most profitable tier-1 categories.
3. Implement e-Procurement systems to realize the savings.
4. Adopt e-Sourcing to streamline and maximize the savings potential on your tier-2 categories.

1. Do a real spend analysis.

I’m not talking about loading your AP data in a UNSPSC cube and running out-of-the-box reports on your top ten 10 vendors, top 10 categories, and top 10 departments. Even if you don’t know the exact amounts, a simple internal survey will tell you those with uncanny accuracy. I’m talking about loading all of your spend-related data — AP, Invoice, Contract, Third-Party Price Indices, etc. — in a real spend analysis product that will let you slice and dice it any way you can think of so that you can identify (a) where you have made overpayments and extract refunds and (b) identify the top ten categories with with the most savings potential. If you haven’t done this before, you’ll want to bring in an expert. There a few providers in this space that typically find tens of thousands, and sometimes hundreds of thousands, of dollars in overpayments within a week. The ROI is well worth the investment.

2. Bring in category experts.

This is especially important in categories, like energy and telecommunications, that require significant expertise that you might not have. While you might be able to negotiate a 15% cost decrease in a buyer’s market if you’re well informed, a seasoned veteran who has been negotiating these deals day in and day out for a decade (or two) will find a way to save you 30%. And when many of the firms will work on contingency, i.e. you don’t pay until the new contract is cut for an amount less than what you’re paying now, the ROI will be significant.

3. Implement e-Procurement.

Up to 60% of negotiated savings never materialize at many companies. If you don’t implement state-of-the-art e-procurement systems with price control capabilities (contract integration, punch-out price verification, authorizations for off-contract spend), you too could lose 60% of the savings you negotiated.

4. Adopt e-Sourcing.

While you’ll want to bring in the big-guns for the big savings opportunities, as the ROI will be many times what the big-guns cost you, there will be a large number of tier-2 categories where the savings opportunities, though substantial, won’t be as significant if you have to pay high-powered consultants. These are the categories where you get your best returns if you can run the events quickly, and efficiently, in house. And this is what e-Sourcing allows you to do … especially on categories where you need to go back to market regularly because the volatility is too high to risk long term contracts.

It literally is this simple … because once you’re on the right track, you’ll have no trouble staying on the rails.

Just like vendors need to stand up and provide a vision, consultants need to sit down (with executives) and provide the execution clarity that will get buyers on the fast-track to procurement, organizational, industrial, and economic success. More specifically, at this time, they need to:

• Focus on a Niche
• Establish Thought Leadership
• Create Brand Awareness
• Outline an Organizational Path for Long Term Success

Focus on a Niche

In this market, failure is not an option and no wants an old-school consultant who says “yes” first and figures it out later. Identify what you’re good at, how you can deliver significant value, and, more importantly, how you can identify significant value now. In this type of market, sound long-term planning tends to fall by the wayside, so even though it’s the most important thing a company can do, chances are, they’re only going to spend on short-term initiatives until you prove that you can deliver the goods.

Establish Thought Leadership

There are hundreds of other consulting providers out there. If you don’t believe me, check my Company Listing on the resource site. Why should they use you? How do they know that you know your stuff? How do they know that you’re on a path of continual improvement? How do they know that you’re focussed on being the best? If you don’t establish thought leadership, they don’t … which means that your only chance of success is if the other firms the customer is considering also don’t have any thought leadership and you want to compete on price, not on value.

Create Brand Awareness

This means that, contrary to popular belief, you have to market, market, market. You need permanent brand visibility so that when people have a problem in your niche, they call you. This doesn’t mean expensive print ads in magazines no one looks at (despite impressive sounding circulation numbers), this doesn’t mean sponsoring expensive analyst reports year after year (especially considering that many of the A-level analysts have departed the big firms in the last few years), and it doesn’t mean hiring a VP of Marketing who’ll come in, use up a lot of your budget, and recommend the same-old same-old that didn’t work at the last company he was at. What it does mean is that you need to tap into the channels where your customer base already is. Speaking engagements at key events, sponsored educational webinars for appropriate professional societies, and, most importantly, the blogs … where educated, innovative, progressive buyers go for information and illumination on a daily basis.

Outline an Organizational Path for Long-Term Success

Although you need a quick-hit ROI niche to get that initial engagement, you don’t want to be seen as a one-trick pony. It’s important to have a plan that will allow you to guide your customers down a recovery path that will take them to long term success.

As I said in Part I, the way out of this prolonged recession is business-as-usual. For technology solution providers, that means the following:

• Continued New Product Development
• Continued Spending on Marketing and Thought Leadership
• Continued Workforce Development
• Continued Process Improvement

Continued New Product Development

This is vitally important for a number of reasons. It demonstrates:

• you’re a well-run company and a little market hiccup isn’t going to hold you back,
• you realize that new competitors are entering the market every day with innovations of their own and that the only true way to provide lasting value is to continue to improve your solutions,
• you know that the only way to make things better is to keep trying, and that
• you take a level-headed approach to business with a plan to be around for the long haul.

Continued Spending on Marketing and Thought Leadership

This is just as important as New Product Development because, and I know this from experience, having the best product in the world is a moot point if no one knows it exists! This doesn’t mean you go crazy and spend twice as much as you spent on marketing during a peak business year, just that you take the percentage of your budget you’d normally spend on marketing above and beyond head-count, like 5%, and spend it on marketing. So, if forecast projections over the long term (to average out unsustainable demand increases in bull years) state that, with a slow-and-steady growth curve, you’d do 10M, you still spend that 500K on marketing.

Marketing lets your potential customers know that you’re here for the long haul and still developing solutions that will help them lower costs, increase productivity, and get out of this mess quicker. It’s also the only way to establish you as a thought leader (provided you take part of that budget to support, and market, thought leadership), which is key to not only being remembered when a customer gets a new technology budget, but getting invited to the table.

The reality is that, if you don’t market, you’re out of sight. If you’re out of sight, you’re out of mind. If you’re out of mind, you’re NOT getting that RFI or cold-call. If you don’t get that RFI or cold-call from a customer with money to spend, you’re not getting any new customers. If at most 10% of the market is buying, how likely are you to find a lead through cold calling who’ll invite you to the table … before they’ve already bought a competitor’s solution?

Continued Workforce Development

At the end of the day, your success all comes down to your people. Companies don’t build products … people build products. Companies don’t design winning marketing campaigns … people design winning marketing campaigns. Companies don’t think … people are the thought leaders. And if your budget is tight, you shouldn’t be adding too many bodies … when you need to add brainpower. And you do that by developing the staff you already have. If we’re truly moving to a knowledge and innovation economy, then you’re going to get a lot more out of educated, experienced, well-trained staff than just a body in a chair. The best developers can be 20 times as productive as an average developer (using bug-free lines of code as a metric). The best inventors can produce 10 times as many inventions. The best through leaders can produce market-changing ideas where an average person just produces refinements that might not even get noticed at all. Relatively speaking, a few dollars on training can lead to a few thousand in productivity gains.

Continued Process Improvement

And I don’t just mean doing the same process better. I mean bringing in an expert to do a complete review of your development, delivery, and operational processes to find opportunities for improvement that you won’t notice when buried in day-to-day operations. This lowers your costs, which allows you to lower your prices, which allows you to grab more market share. You don’t necessarily have to hire a McKinsey Partner at 5K a day either … there are plenty of niche consultants who can jump in, do a focussed assessment, and net you great results for 1.5K to 2.5K a day in a couple of weeks … paying for themselves almost immediately.

I’d hoped I wouldn’t have to state the obvious, but everywhere I look it’s doom and gloom together with ridiculous economic explanations pulled out of a depth so dark that even a proctologist with a flashlight would have trouble finding the source, when the answer is extremely simple. In fact, I can sum it up in one word. FAITH.

And no, I do NOT mean faith in your God, a God, Gods, what you perceive my God or Gods to be, deities, supernatural beings, faith healers, shamans, or any other religious entity you might care to believe in.

Nor do I mean faith in the government, Wall Street, or other people in power to “make the right decisions” and “pull us through this”.

I mean faith in the system. Like religion, systems only work (and catch on in the first place) if people believe in them and have just the right amount of faith^*1. Too little faith, and things fall apart. Just like the influence of a religion will decline until it eventually disappears if people stop believing in it and making it part of their daily life, the strength of the system will degrade when people stop buying, selling, and participating in the system on a daily basis … until it starts to fall apart. Similarly, too much faith will lead to problems. Just like overzealousness led Middle Ages Christians to the Crusades and small groups of Muslims to the extremist jihads of today, too much faith in the market leads to overzealous buying, selling, evaluations, and run-ups that are unsustainable and lead to crashes. In other words, too much faith broke the system, too little faith is preventing its recovery, and just the right amount of faith will fix it.

The only way out of this mess is BUSINESS-AS-USUAL. As I’ve been saying for months now (in my Dumb Company, Dead Company, and Your Marketing series … see my recent rant), business people must accept that the path to business-as-usual IS business-as-usual. In a free market economy, this includes bankruptcy (which, as Robert Rudzki points out, is vital to capitalism). We must conduct business as usual (without unrealistic assumptions of demand or profitability increase … remember, slow and steady wins the race), or we’re going to stay in a quagmire. And in this space, as I’ve repeatedly said, the leadership has to come from solution vendors and consulting firms because the majority of buyers work in organizations where the CPO is not part of the C-suite and can’t directly influence the path of their company.

Faith should start with, above all else, faith in yourself and your ability to make a positive impact on your company, your industry, and the economy in general. This requires making smart decisions each and every day. Over the next three days I’ll be offering up specific starting-point suggestions that solution vendors, consulting shops, and buyers can use to get their organizations, the industry — heck, maybe even the economy — back on track.

^*1 For those of you who don’t see a connection between religion and economic models, try to look at modern culture through the eyes of a future “new” archaeologist with a strong anthropological bent. Such an archaeologist would say that societies are strongly influenced by people’s beliefs, and people’s beliefs are strongly influenced, and part of, their religion. Based upon the remnants we’re likely to leave if we vanished today, this future archaeologist would see almost universal evidence of technology and commerce but only pocket evidence of the many different religions that are practiced today. Said archaeologist may in fact be led to conclude that the major religion of our time was capitalism. Now, I’m sure my intelligent readers will find as many arguments against this as for, but it is something to think about.