Category Archives: rants

Suffering from Prediction Mania?

Are you as addicted to the annual prediction explosion as you are to your morning double shot low fat no foam caramel latte with a sprinkle of cinnamon and two sprinkles of nutmeg? Can’t handle the withdrawal?

Then let the doctor give you Sourcing Innovation’s one and only original prediction (as he is joined by Mr. Smith in the prediction that all futurist predictions will be wrong), which, surprise and surprise, is the exact same prediction he gave you in 2013*, laid out in detail in this now classic five-part series! Enjoy!

  I: The CFO Gets Shocking Supply Chain News …

 II: The CEO Returns …

III: Bankruptcy?

 IV: How did it happen?

  V: The fault lies with …

And no, this is not cheating, since all most of the futurists do is recycle the same old predictions year after year, just like they recycle the same old trends, as exposed in detail in SI’s now classic Procurement Trend Expose series which revealed that most trends were old (or is that ancient) news or just continuing blues …

There’s Still No Spend Analysis Without the Slice ‘N’ Dice

SI originally ran this post 10, yes ten, years ago today, and nothing has changed. Regardless of how fancy that drill-down dashboard is, how many pre-canned reports come with the system, or how many sub-views you can create, if it’s still off of 1, that’s one, cube, it’s still limited in the value you will get. Moreover, this post is especially relevant because it reminds us of how BIQ changed the spend analysis game and that the individuals that spearheaded the company are game changers. This is particularly relevant because Eric Strovink, the founder and the person that has now changed the spend analysis game twice (first at Zeborg, now part of [IBM] Emptoris, before BIQ) is going to be launching a new analytics company this year, and chances are it won’t just be the same-old same-old rebranded Tableau or QlikView solution).

When I was in Boston, I was lucky enough to spend the better part of the day with Eric Strovink of BIQ, and have a few extended conversations with individuals at some of the local consulting firms that specialize in sourcing, and am now more than convinced that any tool that mandates a single cube, or makes it difficult to change the cube, is not a spend analysis tool, merely a spend data warehouse with built in canned reporting (and, if you’re really lucky, limited ad-hoc capabilities).

Not that there’s anything wrong with a centralized spend warehouse with a consistent view of your total spend, especially one that integrates multiple internal and external data sources and allows you to drill down and understand your spend at a detailed level. Of all the e-Sourcing software tools, it is the one most likely to make your CFO do backflips, especially if it has good reporting (and this is a big if – not all spend analysis tools on the market do), since it makes it really easy for the CFO to tell the CEO where the money is going and comply with all those pesky reporting requirements.

However, the value of such a tool is quite limited to you as a purchasing agent. Now, it’s true that the first time you’ll use it you’ll save big-time, especially if it’s the first time you have visibility into the majority of your spend, but the reality is that this is the only time you’ll see such significant savings. After you’ve identified all of the low hanging fruit identified by the single view provided to you by the system, analyzed each instance of over-spending, and taken corrective actions, you’ll find that you’ll be unable to identify additional savings and the system will simply function as a glorified data warehouse that you only use once a quarter to create those reports for your CFO and check that your teammates our buying off the negotiated contracts – something that you could do almost as well with your existing ERP system and a significantly cheaper Business Intelligence / OLAP tool like (SAP) Business Objects or (IBM) COGNOS and some grunt work.

Remember, I’m not saying that traditional spend analysis systems like those provided by e-Sourcing providers like (SAP Ariba) Procuri and (IBM) Emptoris are not without value – if you do not have a good, integrated, data warehouse that integrates your various accounting, purchasing, and inventory systems to provide you a single view of your spend or a good reporting system to produce all of the reports your CFO needs, then you’ll find these systems very valuable. However, it’s important that you understand that the primary value of these systems is in the total spend visibility they provide from a financial viewpoint, not the spend analysis capability you really require to identify potential overspending and cut-costs, because you’ll only be able to do this once – thanks to the single organizational view they are built on. (In other words, you’ll save big when you fist implement the system but future savings will be limited to your capability to quickly catch and stop maverick spend.) So, if you need a system to consolidate your spend data, produce the tedious reports required by all of the new financial reporting requirements, and give you some basic across-the-board spend visibility, or, more importantly, you need a spend data warehouse that integrates with the rest of your e-Sourcing suite, be sure to check these systems out – but understand what they are really worth to you before you sign the check.

In order to help you understand where these systems fail in true spend-analysis, why you need to be able to dynamically create multiple cubes on the fly which support dynamic dimensions, meta-aggregation, cross-dimensional roll-ups, and even federated data sets, I’m happy to inform you that Eric Strovink has agreed to co-author a series of posts outlining what real spend analysis is, how it differs from basic spend visibility, what it does for you, and why you need to get there.

Eric Strovink was actually kind enough to contribute two insightful series to Sourcing Innovation. Here are the links for your reference.

I: The Value Curve
II: The Psychology of Analysis
III: Common Sense Cleansing
IV: Defining “Analysis”
V: New Horizons I
VI: New Horizons II

I: It’s the Analysis, Stupid
II: Why Data Analysis is Avoided
III: Crosstabs Aren’t Analysis
IV: User-Defined Measures, Part I
V: User-Defined Measures, Part II

How Do We Drive Technological Advances? Part IV

This post continues are series in which we note that an organization, which needs to master the three T’s to excel in Supply Management, must not only get a grip on modern technology, but acquire and adopt modern technology (in daily use) in order to begin its best in class journey.

In Part I we noted that just having the right talent and transitional strategy is not enough, that talent and transition must be powered by modern technology. In Part II, we discussed a classic Chief Executive article that purported to provide seven strategies for driving technological advances, as there are not enough articles on the importance of the right technology in an enterprise (and, as such, it caught the doctor‘s attention), and noted that while it was a good start it didn’t really explain the process of getting technology acquired and adopted all it really did was emphasize the importance of technology, which is a good start, but not the end goal.

Then, yesterday, in Part III we focussed on how the key to acquisition, which requires budget (that the CEO and CFO don’t want to allocate or give up) is to identify one or more benefits that are important to the C-Suite. More specifically, a quantifiably realistic ROI, visibility into data or processes of interest to the appropriate C-Suite member, or support for an organizational initiative being championed by the CEO or CFO. The ROI doesn’t have to be large, and won’t be for an efficiency solution, but should be enough to make a solution attractive, especially if it is focussed on effectiveness.

We also mentioned that acquisition is not enough, the solution has to be adopted. On average, a modern Procurement solution only reaches adoption rates of 25%. This means that of every four individuals that should be using, or referencing, a solution in some way, only one actually is. A solution not adopted never reaches the expected levels of efficiency or effectiveness and never delivers an ROI.

But adoption is hard. People resist change. People resist new systems. People are tired of broken promises (as vendors have been promising to deliver value and usability for decades that never materialized in the nineties or noughts). They don’t need another piece of technology that doesn’t work.

So how do you ensure adoption?

We left off yesterday indicating the keys were the four P’s:

      • process
        will the software support the necessary (and not the current) process?
      • platform
        will it integrate with related applications to allow users to effect the proper process
      • polish
        does it look “consumer-ish” with an interface that users are already familiar with
      • portal
        it must enable collaboration between all parties affected by the activity the software is automating

Note that the first key is not to acquire a solution that supports the current process, but that supports the desired, lean, optimized process. Remember that the second key to Supply Management success is transition — even if your process was best in class and suited you well when it was instituted ten years ago, that was then, this is now. Processes have to evolve with your business, which likely isn’t the same as it was 10 years ago. Make sure to review and define all of your process needs appropriately and pick a solution that matches and enables them, not what you have now and not what your competitor uses.

Then, be sure to understand not only your current enterprise software ecosystem, but the desired software ecosystem you are working towards (as this defines your platform). You don’t have to know which solutions you want to adopt down the road (as the best today might not be the best tomorrow), but if you have identified CLM, SRM, and decision optimization as the next three technologies you need, and you start with CLM, make sure that it has the ability to output relevant supplier-related contract data to SRM systems using standard formats or APIs and that it can take in award allocations in standard formats from dominant decision optimization solutions. A Best-of-Breed solution in a vaccum is rarely used (and why the adoption rate of most Supply Management technology at firms that acquire it is a dismal 25%).

After that, evaluate the UI. While its true that sometimes the best and most powerful solutions are those that still look like they were designed in 2005 (including a few solutions the doctor recently reviewed that, power-wise, almost blew his socks off), you have to consider the psychology of the situation. While a power user will want the absolute best, 90% of the individuals who will need to use the solution are not power users and have been programmed by consumer platforms and social media to believe that anything that doesn’t look modern isn’t (and shouldn’t be used). Sometimes the 80% solution with a consumer-ish, modern, friendly UI is the best starting point. We’re in a culture obsessed with polish, so just embrace that fact and save yourself some major headaches.

(And you can always supplement it with an archaic looking BoB solution for your power users later. Some of the best-in-class organizations actually do this. For example, they’ll use a Zycus or similar modern looking S2P suite on the front end, but then on the back end the power users will be using Trade Extensions or Keelvar for decision optimization and TAMR or Spend 360 for spend analysis. And they get mega returns on the efficiency AND effectiveness charts — more than one would expect even though they pay two license fees. The easy to use suite gets buy in and efficiency goes through the roof when they get 90% utilization instead of 25%, and the power the super users get from the BoB solutions doubles average savings percentages. This isn’t to say that the BoB solutions aren’t user friendly, they are, but you again have to consider the psychology. Because solutions like Trade Extensions and TAMR have so much power under the hood, the average user — who just needs to check a contract, do a small spot buy, run a spend report — still believes that they must be difficult to use. While complex solutions were hard to use 20 and even 10 years ago, this is no longer the case, but the stigma is hard to overcome. Sometimes the best thing to do is adopt something easy, roll it out, get everyone on board, buy the killer app for the power users, let them get great results, let them show everyone else, now used to modern technology, that it’s not so hard, and then gradually replace the entry level solution with the powerhouse solution where appropriate. And if each gives a 3X to 7X return, paying two license fees is a no-brainer from a financial viewpoint.)

Finally, make sure it enables collaboration with built in messaging, document exchange, version control, etc. If it’s not the central portal (or virtual center of excellence) that connects everyone on the team in a collaborative fashion, it’s not modern, and its lifespan will be limited. And no one wants to learn yet another tool with a built-in expiry date.

And that’s the foundation of how your organization can select a tool that might actually be adopted.

But how do you translate adoptability into actual adoption (which is the real key to technological advance in an organization)? Stay tuned!

How Do We Drive Technological Advances? Part III

In our last two posts, which noted that an organization must master the three T’s in order to excel in Supply Management, and that a classic article in Chief Executive caught SI’s attention, because so few articles focus on the importance of technology to Supply Management success. This classic article was good, as it focussed on the importance of technology for a chief executive, but not great, as it didn’t really provide strategies for driving technological advances (as it promised), just advice that will help someone stay up to date on existing technological advances.

As SI noted in Part II, the key to technological advances is not just awareness, but acquisition and adoption – by all!

So how does an organization translate this awareness into acquisition and adoption?

First it has to acquire. Acquisition is tough, because it requires budget, which is something that the CEO doesn’t want to give and something that the CFO doesn’t want to give up. In order to get an acquisition approved, there has to be a benefit that the CEO or CFO wants. In other words, there has to be a quantifiably realistic ROI, visibility into data or processes that one of these individuals wants, or support for an organizational initiative (such as sustainability, home-sourcing, digitization, etc.) that the executive is championing. Hitting multiple buckets, of course, increases the chances.

The ROI doesn’t necessarily have to be 2X or 3X (although if the up-front price tag is big, or the technology falls into spend analysis, decision optimization, or SRM, it should), but it has to be there, and if it’s less than 2X, it should add a lot of efficiency.

One has to remember that technology tends to fall into two buckets:

  • efficiency
    where it streamlines time-consuming man-power based tactical operations like invoice processing, project time tracking, or RFX-like data collection)
  • effectiveness
    where it advances the capability of the organization and delivers a fantastic ROI (like true spend analytics and real decision optimization that can deliver savings of 10%+ year after year after year)

If the technology falls into the efficiency category, then the ROI is not going to be huge, as its main benefit is to free up manpower for more strategic activities (that should be based on effectiveness oriented technologies) to find new sources of value. So an ROI of 1.5 to 2.0 is fine. But if the technology falls into the effectiveness category, the ROI should be a realistic 3X … otherwise, it’s not really that effective, is it?

Thus, to pass the acquisition threshold, it’s critical the technology can be properly bucketed and a realistic ROI model, and justification therefore, be presented to the CFO and the CEO.

But that’s the easy part. The hard part is the adoption, and, in advance, convincing the sponsors that adoption will happen. Since adoption is highly dependent on adoption en-masse by the workforce, that often has no input into selection, it can be tough to paint a realistic picture of this happening, but you can beat the odds that software will be adopted by choosing carefully (and even convey this during your supplication for silver).

How do you beat the odds? We’ll dive deeper into this in our next post, but some key points to address at a high level are:

  • process
    will the software support the necessary (and not the current) process?
  • platform
    will it integrate with related applications to allow users to effect the proper process
  • polish
    does it look “consumerish” with an interface that users are already familiar with
  • portal
    it must enable collaboration between all parties affected by the activity the software is automating

More to come …

How Do We Drive Technological Advances? Part II

In our last post, which noted that an organization must master the three T’s to excel in Supply Management, we lamented that an average organization has not yet mastered any of the T’s, with technology often being the T in which the organization is the furthest behind in (as most organization’s have people, which is a talent foundation, and process, which is a transition foundation). We then lamented on the lack of advice on what to do to drive organizational advancement and adoption in the organization. Certainly training and incentive will help, but it obviously isn’t enough in the average organization as an average organization in Supply Management is still way too far behind the curve. (So far, in fact, that Wile E. Coyote comes closer to catching the Road Runner than an average Supply Management organization comes to obtaining a technological advance that is still relevant.)

SI’s proof? The extreme low rate of adoption of supplier performance management (SPM), S2P project management, and decision optimization in an average Supply Management organization — technologies that help to deliver large savings opportunities that have been around for over a decade and that are still sparsely adopted in an average organization. (And while many organizations may claim to have spend analysis, especially according to the Zycus report, the reality is that most of these organizations are only using old-fashioned OLAP-based spend reporting technology — and that’s NOT spend analysis.)

As a result, SI is still very interested in Chief Executive’s classic piece on Seven Strategies for Driving Technological Advances. Not only is any piece of advice that can help spur technology adoption useful, but the apparent lack of heed paid to such articles makes SI ask Why? But the question is, was the advice good, and is it still good?

Chief Executive had the following pieces of advice, which will be discussed one by one.

  1. Be a student of technology best practices.

    The article notes that leaders should strive to understand their industry’s best technological practice, so that they can combine their knowledge with that of the CIO for greater impact and decision making, but this is not going to drive technological adoption. While this may lead to better technology selection, this is not enough on its own. So it was okay, and is still okay, as advice, but you need to be more than a student. You need to be an adopter, and implementer.

  2. Connect weekly with the CIO.

    This will definitely help the Supply Management leader to understand the impact of business decisions throughout the technology lens and, in turn, the impact of a poor technology decision on the business, but, as with the first recommendation, all this will do is lead to better technology selection, not adoption, which is the key to advancing technology in the organization. (Similarly, Procurement will need to connect regularly with the CTO to understand potential impacts from a support and utilization perspective, not just information and insight perspective.) So this is another good start, but just the beginning.

  3. Encourage constant IT learning in the Department.

    This is a good start, because, once a Supply Management professional understands what a new piece of technology can do, he or she may be more open to trying it, but if it doesn’t work right away, it might be labeled as junk or inappropriate and left on the technology shelf. But again, just a beginning. That learning must be put into practice.

  4. Communicate and share best practices through technology.
    This is a good practice, as it will increase the organization’s overall comfort level with technology, but unless the organization understands that modern technology is a best practice, the extent of technology adoption in your organization might not go beyond Twitter (which makes you stoopid) and Facebook (which is ruining society). So, evaluate, modify, and adopt as appropriate.
  5. Think benefits, not features.

    This is very good advice, because organizations (that use supplier-generated RFPs) that fall for the feature buffet typically end up getting software solutions that don’t do what the organization really needs them to do, which is enable talent to manage transitions that result in cost reductions and avoidance. However, just selecting the platform that will theoretically provide the organization with the most benefit does not guarantee that the platform will be used. It’s all about adoption. (And SI’s recent paper on how Higher Adoption is Where True Value Lies will help with this. [registration required])

  6. Prepare to invest.

    The article notes that it’s important to be realistic about how much investment is required to drive beneficial technological advancement within your business, but doesn’t indicate what the investment needs to be in — leaving you to believe the investment needs to be in the technology. Typically, this is not the case. Even enterprise software systems are very low cost these days compared to the investment that was required a mere ten years ago. The necessary investment, which could be significant, will be in the training and transition programs required to secure the adoption necessary to make the technology investment a success.

  7. Establish meaningful metrics for your CIO and yourself.

    Measure the technology in a meaningful way and hold your team accountable to the results. Well, the technology should certainly be measured, and the team should be accountable for what they do, but the reality is that until they can use to do their jobs more effectively than they are doing their jobs today and feel comfortable with the technology, they’re not going to use it. Until their trepidations are overcome, the team will assume it’s just a fad and wait a week to see if you forget. Or a month. Or whatever it takes. So give them the tools they need, the training to use them, and the knowledge to continue to improve.

The verdict? Any advice in the right direction is good, but we need acquisition and adoption to get results. So make sure anything you get is not only modern, but adoptable.

This is a revised version of a post that originally ran five years ago, because not much has changed in the average Procurement organization.