Category Archives: Market Intelligence

We Need More Leaders in Procurement!

And it’s not just because we don’t have enough, as the doctor pointed out in his post on how It Would Be Great If Future CEOs Were Past CPOs (which isn’t happening because we’d need 90% of companies to fail to have enough CPOs for the CEO role), it’s because without them, we are getting lost in a see of sound-bite driven, fact-free marketing, hype, and FOMO relentlessly pushed upon us by vendors, analysts, consultants, and now influencers with next to no one left to cut through the noise and no one to lead you through the land of confusion.

As THE REVELATOR commented on the doctor‘s Top 10 Ways to be a Procurement Influencer on LinkedIn!, in a perfect world,

A “true influencer” would be driven by a single purpose – to get it right versus being right.

A “true influencer” would never look to gain consensus but to stimulate meaningful dialogue, leading to greater individual and collective understanding.

A “true influencer” would build a community of active engagement beyond token gestures of likes and thumbs up.

A “true influencer” would actively look to build a diverse community that challenges them and other members to think differently and see a subject or issue through a wider lens.

A “true influencer” would be insatiably curious and always open to new ways of thinking and doing.

A “true influencer” would be someone who has been around long enough to have witnessed first-hand the events that create the needed context to understand how we are where we are today.

Finally, a “true” influencer would stimulate thoughts and ideas, leading to practical and measurable outcomes.

Of course, today’s influencers don’t measure up to any of that, and as they exist only to build their fame and fortune, they never will.

However, true Procurement Leaders, who believe in education (and not hype-based sound-bite marketing), measure up to all of this. And that’s why we need more Procurement Leaders!

  • True leaders care about getting it right, they don’t care about being right.
  • True leaders understand you will almost never have consensus across the board, but if you let everyone speak, and take all views into account, they’ll respect the decision and change course as necessary for the greater good.
  • True leaders build a team who actively engages with them and each other, not a team who just does what they are told without question (as that team is lazy or scared, and neither indicates a work environment conducive to success).
  • True leaders embrace diversity in their team and their suppliers (to the extent possible, they don’t confuse outcomes with opportunity and force quotas that don’t make sense and just alienate their teams; e.g. if you only have 25% of women in STEM, you can only expect 25% of women in your technical positions; if you locate your office in a 98% caucasian neighbourhood, it’s going to be awfully hard to achieve a 15% African American or a 20% Latino workforce).
  • True leaders want to learn, want you to learn, and want to find practical, measurable solutions that work for everyone.

True Leaders (and a return of True Educators) are what we need to take Procurement forward. Will The Real Slim Shady please stand up?

Tech Won’t Solve Your Procurement Problems!

Probably not something you’d expect from a blog that was initially founded to educate you on best practices and best tech in Procurement and or from the doctor who has publicly reviewed close to 400 companies on Sourcing Innovation (and Spend Matters between ’16 and ’22), but it is something that needs to be said, and yelled loudly, now that everyone (analysts, influencers, marketers, etc.) is telling you this next generation of Gen-AI, Agentric, or AI-driven tech they are building will solve all your problems.

Because it won’t. In fact, it probably won’t solve any!

That’s because Procurement is NOT like other business functions. And while all business units are different, Procurement is different in a unique way. It has to constantly solve problems the business has not experienced yet. Sales just has to sell the next N customers in the target customer base which will be rather similar to the last N. Marketing is messaging this potential base which is not changing their business overnight, or even year to year, isn’t rapidly advancing in their market understanding, and won’t recognize more than a subtle shift in the message. Moreover, you don’t have new mediums popping up everyday. There’s print, radio, TV, skywriting, and web/social media. (We haven’t invented gamma radiation-based dream advertising yet!) Finance isn’t changing the rules of accounting, and even minor changes, like GAAP, only change every couple of decades.

Not so in Procurement. It’s not just acquiring supply at the lowest cost, it’s sustaining supply at a cost that allows the organization to remain profitable, which is not simply repeating the last order to the current supplier when stock gets low. That’s because Procurement not only has to constantly deal with supplier capacities, raw material shortages, carrier capacities, occasional port strikes, occasional carrier and supplier failures, but unexpected natural disasters that wipe out entire yields of renewable raw materials, arbitrary sanctions and border closings making suppliers and routes unavailable, and completely unexpected trade wars sparking tariffs that can completely upset all the cost models you ever developed.

That means that every model you have built and every solution you have customized instantly becomes irrelevant. And you can’t use AI to tell you what to do because AI can only tell you what it has been trained to do, and it can only be trained on existing data which would be based on historical situations.

That means that tech cannot solve your Procurement problems.

That means that the only option you have, as Sourcing Innovation has been saying for months, is Human Intelligence (HI!). That means that only educated, experienced, skilled, and smart people can solve Procurement Problems.

This isn’t to say that you shouldn’t use tech. You most definitely should! Because most of what you do is tactical data processing that is well defined, for which there are configurable solutions that will allow the software to do the majority of it for you, and “AI” solutions that can be trained to learn from the exceptions you manually deal with to handle them automatically the next time.

But when it comes to strategic decisions, there is no Agentric AI that can solve a problem, especially one it, and you, haven’t seen before. You have to do that. If you’re smart, you’ll acquire all of the best knowledge summarization and analytic solutions that you can get your hands on because they’ll automatically acquire, process, summarize, and graphically display all of the information available, which will help you make the right decision efficiently and effectively, so that you can react fast in a crisis with confidence, but it will still be you, the human, who has to make the (right) decision!

As an IBM slide deck stated in 1979:

A computer can never be held accountable, therefore a computer must never make a management decision.

Just because it can do a billion calculations a second and thunk better than you, that doesn’t mean it can think, because it can’t (and when Gen-AI claims to display a “chain of thought” it is lying, it is a “chain of compute”, which is not thinking, just identifying patterns that typically follow other patterns in sequences it was “trained” on). Only you can. (Remember, if machines ever become intelligent, our best case scenario is they need us for bioelectric energy and create the matrix where we believe we are living a life free of machines. Otherwise, we’re probably looking at a SkyNet situation. It’s only logical for many, many reasons.)

Yes, Gen AI will Have to be Consumed By …

Orchestration along with Intake if any of these loud, overfunded, mostly useless (but, unfortunately, not mostly harmless) startups are going to survive!

Yes, the doctor said it and yes, it’s totally true.

So why this diversion? the doctor was recently asked a variation of the question by a very knowledgeable, observant, and forward thinking executive with a track record of getting it right (and growing companies) who wanted to know if he was grasping the situation accurately and likely correct about how this whole mess is going to shake out once the mass extinction begins later this year/early next year (where the doctor is predicting at least twice the typical percentage of failures, rivalling or exceeding that of the first mass extinction post the funding frenzy and market crash of 2008, as well as a large number of mergers that will happen just so companies can partially survive; and where THE REVELATOR is predicting less than one fourth of companies will make it through unscathed, because the space cannot support 666+ companies).

As the doctor has previously penned in Marketplace Madness is Coming Because History WILL Repeat Itself:

Stand-alone Intake(-to)/Orchestrate solutions, the current poster children of the space, will soon have a fall from grace (and only the smart will survive)! Call me Scrooge if you like, but there’s a logic behind why I’m developing a bah-humbug attitude towards most of these. And it goes something like this.

Intake

  • Pay For View: if modern procurement solutions are completely SaaS, then they should be accessible by anyone with a web browser, so why should you have to buy a third party solution to see the data in those applications? Wouldn’t it make more sense to just switch to modern source to pay solutions that allow you to give variable levels of access to everyone who needs access instead of paying for two solutions AND an integrator?

Orchestrate

  • Solution Sprawl: while orchestration is supposed to help with solution sprawl, it’s yet another solution and only adds to it. Wouldn’t it make more sense to invest in and switch to a core sourcing and/or procurement platform with a fully open API where all of the other modules you need can pull the necessary data from and push the necessary data to that platform?

I2O (Intake-to-Orchestrate)

  • Where’s the Beef?: Talk to an old Pro who was doing Procurement back before the first modern tools began to be introduced in the late 90’s and they’ll tell you that they don’t get this modern focus on “orchestration” and managing “expenses” and low-value buys because, when they were doing Procurement, it was about identifying and strategically managing multi-million (10, 50, 100+) categories where even 2% made a significant improvement to the bottom line, and way more than 10% on a < 100K category.
  • Where’s the Market? This is only a problem in large enterprises — right now, many of these I2O solutions are going after the mid-market who are eating it up because of ease of use, but as soon as they realize the emperor has no clothes, and there’s no support for real strategic procurement (yet alone strategic sourcing) and you have to go out and buy more platforms, what’s going to happen? The reality is that the mid-market is better served by a federated catalog management / punch-out platform, or next-gen marketplace (they’re coming, tech is cyclical like fashion, and it’s due) and will likely be better served still by a new breed of e-commerce B2B solutions for end-user Procurement.

Moreover, as the doctor has penned in many posts, Gen-AI is only useful for tasks that ultimately reduce to

  • large document/corpus summarization
  • large document/corpus query
  • language translation (including natural to system and system to natural)

That’s why the doctor listed so few valid uses in More Valid Uses for Gen-AI … this time IN Procurement!, and why most of those were utterly useless such as:

  • Create meaningless RFPs from random “spec sheets”.
  • Auto-fill your RFPs with vendor-ish data.
  • Generate Kindergarten level summaries of standard reports for the C-Suite.

In other words, on its own, each technology is mostly useless. (But not mostly harmless. On its own, consistently misused, Gen-AI is very harmful. See our other articles for a discussion of that.)

  • Intake is useless on its own because capturing an input is worthless if you can’t do anything with it
  • Orchestration is useless on its own because it’s yet another piece of SaaS you need to maintain that provides no value beyond linking two or more pieces of software together that could both be linked direct through their APIs (since it couldn’t link the software in the first place if it didn’t have APIs)
  • Gen-AI is mostly uses on its own as most of its valid uses are in CLM or RFP query (not creation!), which is only a small part of the S2P cycle

However, if you put it all together, and do it right, the whole may be more than the sum of its parts.

If it’s all expertly glued together:

  • Gen-AI creates a natural language interface where a user can make any type of request, not just a purchase request, that is translated to a standardized system format
  • Intake can process those formats, ensure completeness (relative to the needs of the different enterprise applications and modules that are integrated), send complete requests to the orchestration module, get back the responses, and feed them through the Gen-AI interface to translate them to natural language before being fed back to the user
  • Orchestration links all the applications in a way that directs the request to the right application, or application chain, ensures it gets properly processed and executed and ensures the right results get returned to the right applications in the chain and, ultimately, the user … providing, of course, it’s enterprise wide back-office orchestration, NOT just Procurement!

Which means that the only way any of these players are going to survive is if orchestration gobbles it all up AND does it right.

Why Are There So Many Undifferentiated ProcureTech Startups That Still Don’t Solve My Problems? Part III

After all, with over 666 solution providers out there, I should be in solution utopia, right?

In Part I, we said there are three big big reasons for this, they are people-centric, and they all start with F!

  1. Founders
  2. Financiers
  3. Fashionistas

We also discussed Founders in Part I and Financiers in Part II. Today we will discuss the Fashionistas.

Now the doctor knows what you’re saying: “Wait, What“? What do Fashionistas have to do with ProcureTech? And the answer is, well, just about everything unfortunately.

You see, a fashionista is a designer of haute couture, and, today, haute couture is not restricted to clothes … it also breeds into tech, and while one might think it should be restricted to wearable tech, it isn’t. It’s any tech-du-jour that the fashionistas find cool. And, right now, they find FinTech cool. That’s why you see an over-focus on FinTech, of which ProcureTech is fast becoming the leading category, from (some of) the analyst firms and the influencers. Especially if that ProcureTech embraces the current haute couture hype of Gen-AI, whether or not the Gen-AI adds any value whatsoever. (After all, functionally, there is no difference between a $2K designer sundress and a $20 Walmart/Marks & Spencer sundress of the same size and thickness from a functional coverage/cooling perspective.)

Now the doctor knows that you’re probably saying: “so what, you don’t have to listen to them“. And that’s true. But the problem is, it’s mind boggling how many people do, especially at bigger companies. For example, if the ProcureTech player isn’t on a Gartner, Forrester, or IDC map, good luck even getting permission to invite the vendor for an RFI for a core system. We may have made it past the days of “you never got fired for IBM” but we still haven’t made it past the days of “you never got fired for buying the Gartner/Forrester/IDC” recommendation.

These big analyst firms, which feature the same big suites year after year after year with little to no change (because one of them will not include any vendor who is not a paying customer, another will go out of its way to redefine the inclusion criteria each update to what is absolutely minimal to allow for inclusion of all paying customers who want to be in the map [and, in the process, exclude as many non-customers as possible], and the third defines very restrictive criteria to keep the map size, and workload, down, and ends up with a client heavy map). A big company exec following these maps would think the space hasn’t changed in over a decade, even though the biggest change is that most of the companies in the map haven’t done any major innovation in a decade, and don’t appear to be focussed on it either (see the doctor‘s Sailing the Seven Seas Sans a Sextant? piece).

But this isn’t the extent of the problem these analyst firms pose. The real extent, as per our last piece where we noted that the financiers who over-invest and need to make their return pursue the increased pricing strategy (with no increase in underlying functionality or value) do so by ensuring that you are hit with a constant onslaught across all channels, making sure that their investment is hyped up by the big analyst firms and echoed by the Platinum/Diamond/Rhodium consulting and implementation partners. This means that the first thing these PE firms do is have their investment sign a six figure deal with one of these big analyst firms, pay that invoice promptly, make a vague promise to sign more in the future, and get the analyst firm to hype them up like mad. All of a sudden there’s a new Cool Vendor, a new Tech Sub-Category, or something where their investment gets hyped a lot even if it can’t yet make the major map (due to annual revenue, missing baseline functionality, etc.). They also ensure that their the lead influencer consultants at their Platinum+ Partners get these messages and reprints to echo and distribute.

And then, of course, there are the ever present influencers, who are often the biggest fashionistas of the space, with the large-ish followings who will have their newsletters sponsored by these firms, paid speaking engagements at upcoming customer events or conferences these firms sponsor, and other benefits in addition to first access to the firm’s messaging and content for redistribution. This will be especially true if the influencer doesn’t really know the ProcureTech landscape and how valuable a technology like Gen-AI really is to the product being promoted. This is because the less in-depth the influencer’s space and technology knowledge actually is, the greater the chance they will happily echo the firm’s marketing, meaningful or not, because, as one of the more astute readers commented on the doctor‘s Top 10 Ways to be a Procurement Influencer on LinkedIn!, they will happily self-censor their thoughts even without the marketers having to censor for them because they don’t want to cut the branch they sit on. (Or, for you Americans, they’ll happily parrot the message without question because they don’t want to bite the hand that feeds.)

And this is the third reason your ProcureTech solution doesn’t solve your problem, and that’s because the only solutions you hear about are the ones being over-marketed which may not even solve a basic problem for the majority of the customer base the advertising and marketing is (incorrectly) targeting.

In Conclusion

Any one of these F’s will result in a poor fitting solution for you, two of these F’s will result in a struggle to get a return that equals what you paid, and all three F’s will likely result in a disaster. And with over 666 companies, the sad reality is that it is a statistical guarantee there are way more companies that fall victim to all three Fs than you think, at least from your particular point of view.

Remember, even if a company has a good solution that works for the set of problems it was initially designed for (and received an unbiased write-up from an independent analyst), that still doesn’t mean it is right for you. As we have continuously pointed out in prior and forthcoming articles and LinkedIn Comments, YOU still need to make sure your problem aligns, the implementation option aligns, the integration with your systems is possible, the necessary data is available (or at least will be made available by IT), and that you have an independent project assurance expert who’s goal aligns with yours. Otherwise, you’re still falling for the fashionista’s fashion du jour, and failure is waiting around the corner.

Post Script

Please don’t interpret this series to imply that all founders or financiers are bad or that all influencers have evil in their hearts. There are some very good founders (who happily admit their shortcomings, seek out help, and step back at the right time). There are also some great PE firms that make it a point to avoid bidding wars and limit the multiple they pay to what they expect to make back without raising prices to unsustainable levels and then actually help the firm do better at selling. And some influencers honestly think the substance free content they push out is helpful. (It’s not, but they didn’t start to screw you over with bad recommendations, just to get famous and make their fortune off of being a famous influencer.)

However, as you have probably guessed by now, both sides of the coin exist. And the coin is definitely NOT weighted to come up heads anymore. It’s such a shame, shame shame.

Why Are There So Many Undifferentiated ProcureTech Startups That Still Don’t Solve My Problems? Part II

After all, with over 666 solution providers out there, I should be in solution utopia, right?

In Part I, we said there are three big big reasons for this, they are people-centric, and they all start with F!

  1. Founders
  2. Financiers
  3. Fashionistas

Then we went into detail as to why Founders are one of the three big reasons that the majority of ProcureTech firms don’t solve your problems. There were a host of reasons, but the major ones were lack of knowledge about the space, ego, and a reluctance to let either go.

However, founders are only the first part of the problem. The second part are the financiers. Right now, venture capital (VC) and private equity (PE) controls more of the space than they ever did, and while it could be a good thing, as there are many PE firms that know how to run a company responsibly and profitably for growth, some of them are only interested in a quick return (via growth and public exit or quick profit growth at any cost for a quick flip to a bigger PE firm), and most of them over invested in the firms they took a stake in during the last market frenzy. They often invested in valuations over 10X in bidding wars for companies that, frankly, weren’t all that differentiated from a dozen of their peers because they wanted into FinTech during COVID when everyone realized you had to be able to do business, and pay, online, and/or saw FinTech ProcureTech as the next big growth arena. While both are true, it’s almost impossible to grow a company more than 7X in their maximum investment time window, and that is ultimately one of the major reasons they are a major problem in the ProcureTech space right now.

The reality is that, even in SaaS (and B2B SaaS especially), you can’t responsibly sustain growth rates of more than 40% year-over-year. No SaaS is “flick-of-the-switch” no matter how much integration the provider claims to have out of the box, how easy they claim the initial data load will be, or how intuitive the User Interface is supposed to be.

Even the simplest module will likely take a few days to a few weeks to get integrated, populated, and configured, and then you will still have to provide training and support. And even if you have “one codebase”, you’re still not going to have “one instance”, and will have to roll those outdates out sequentially so that you can identify unexpected problems (due to unique configurations your developers didn’t expect) and fix them before you have a CrowdStrike scenario. Which means that for every X clients you add (where 1 < X < 10, typically, depending on how simple your implementation, integration, and support requirements really are), you’re going to have to add another FTE (in development, support, account management/client success, etc.), and guess what, training them and getting them up to speed not only takes precious resources, but takes time.

As a result, for most companies, the rate at which they can sustain growth and maintain the high customer service levels (which are critical for SaaS renewals, especially in tough economic times), is usually 30% to 50%, with most topping out around 40%. This says that, for a typical investment, after 3 years, if the company keeps prices steady, revenue will only be 2.75X, and after 5 years, 5.4X. For a top performer, we’re looking at 3.4X after 3 years and 7.6X after 5 years. Considering that there are very few PE funds that are happy to wait more than 5 years to make their investment back, it’s impossible for them to make more than a 7X return unless something changes in the equation.

There’s only four things that can change to affect the equation to the PE firm’s liking:

  1. more/enhanced offerings (more modules, deeper functionality) that increases the price
  2. (decreased) support levels (“do more with less”)
  3. increase sales as-fast-as-possible to get (as close) to 2X growth year-over-year
  4. increased pricing (charge more for the same functionality)

However, (a) requires more investment in development and product, and increases overhead, which decreases profit, and can take one to three years before you see a revenue increase. You can’t do (b) too fast, because as soon as support drops, customer satisfaction drops, and eventually customers get fed up, renewals drop, and revenue drops. So, you can really only do this in the year you plan to flip or go public. This means that most PE firms who over-invest will focus on (c) and/or (d).

Some PE firms will jack up the pre-sales and sales force to sell, sell, sell pursuing (c) and sometimes it will work. However, that will require their investments to quickly add support personnel for implementation, integration, and/or partner support, and if these new hires can’t be brought up to speed quick enough, we have the situation described in (b), which is undesirable. This just leaves (d) for the majority of PE firms that invest too much in their acquisitions.

Now, no one is going to suddenly pay twice as much as the last customer with no real increase in functionality or value, so for this to happen, they have to ramp up the hype, excitement, and marketing … to the max. And ensure that you are hit with a constant onslaught across all channels and that their investment is also hyped up by the big analyst firms and echoed by the Platinum/Diamond/Rhodium consulting and implementation partners. The goal: to make you think that it’s so much better than all its peers and worth that inflated price tag so you buy it and not a competitor’s product. When this marketing barrage works, it’s because you get an exaggerated view of the product, and believe it will solve a lot more of your problems, and return a lot more value, than it can actually be expected to. And this is another big reason why so many ProcureTechs don’t solve your problems.

However, it’s not the last reason!