Category Archives: rants

All Aboard the M&A Train!

It seems that the M&A train, once sporadic, is now running on a regular schedule (thanks largely to Coupa and it’s 1B valuation that allowed it to raise enough cash to scoop up providers left, right and center). Is this good or bad? The answer is it all depends who you are.

Generally, when a company buys another, it does so with an objective in mind that, should the acquisition help it to complete the objective, helps the buyer and usually the set of customers that the buying company wants to satisfy. This might also include a sub-set of the acquired’s customers, which would then be helped in the process, but may also exclude a set of the acquired’s customers, which would not be help. Then there’s the acquired. Depending on the strength of the company, the goals of the management / owners on acquisition, and the alignment with the buying organization, it might be a good thing, or it might be a bad (or very bad) thing.

What do we mean? Let’s take each affected group at a high level and indicate what could be good or bad.

Buying Company

Potential Positive: New Technology

New technology offers the buying company a host of potential benefits including, but not limited to, new technology to sell its current customer base, new technology to bolt onto in a potentially new customer base, and process insights it did not have before.

Potential Negative: Dis-satisfied Customer Base

Expanding the customer base is not always a positive if the customers being acquired are not happy customers from the get-go. Even if the customers are happy, they might be unsettled by an acquisition …

Buying Company’s Customers

Potential Positive: New Technology

Not only does the buying company have new technology to sell, the existing customer base has new technology, that they might desperately need, to buy, and, moreover, they might also be able to buy at a discount because they are already spending with the vendor.

Potential Negative: Less Support

If the company acquired an unhappy customer base, all of the resources might be tasked with making the acquired customers happy because the company was acquired for those customers. This means that support for current customers would drop. And that’s not good.

Bought Company’s Customers

Potential Positive: Vendor has a bigger piggy bank

If the acquiring company has more resources, those could be spent improving the situation for the bought company’s customers. Better support, tech upgrades, more integrations, etc.

Potential Negative: Acquiring company is Mega-co

… and acquired company is mini-co, acquired only because it’s technology posed a future threat and mega-co decided the best risk mitigation was to buy mini-co when it was small and cheap with just a few customers as the acquisition cost dwarfed the potential losses to market share if mini-co succeeded in their efforts. In this case, Mega-co wouldn’t care at all about the customer base and could just ignore them completely.

Bought Company

Potential Positive: Bigger Piggy Bank

… which could be used to further the mission … but

Potential Negative: Lack of Support

… if the mission of the bought company does not match the mission of the buying company.

So what does this mean for Coupa, Trade Extensions, and their customers? the doctor knows you want to know, but the doctor will not provide his thoughts until the acquisition is complete.

A Great UIX is MORE than just a Version Number

… and MUCH MORE than just a minor version number!!! Soon after the doctor and the prophet published the first part of their UIX guide, the doctor received a copy of a mass email from a vendor claiming that they couldn’t agree more and that their new release, X.Y+0.1 now met that requirement. Pretty bold claim!

As we haven’t yet reviewed the current release, we can’t comment, but we imagine that it would not be that much different than X+Y, which we did see. Now, we’re not saying in this case that X+Y wasn’t good, it was, or that the vendor won’t be a leader if it participates in the upcoming solution maps, as it has as good of a shot as anyone else, and probably better in some ways, but UI and UIX doesn’t change over night, and definitely doesn’t change much on a minor, almost quarterly, release cycle.

And a bold claim like this, especially a bold claim coupled with a minor release, can cause the vendor more harm than good as it can lead to unrealistic expectations in the mind of analysts and, more importantly, potential customers that might then hold it to an unrealistic standard when evaluating the solution than the analysts, and more importantly, customers would otherwise convey upon the solution. This could cause the vendor’s solution to be scored lower than it should be, and even lower than an inferior solution from a competitor (as compared against the customer’s specific needs) which would then be, incorrectly (with respect to the customer’s specific needs) chosen.

Moreover, a great UI / UIX does not need to be sold — one look and the UI/UIX and it sells itself. All a vendor with a great UIX needs to do is promote all of the great things the solution can do and all of the processes that it solves and get in front of the potential customer. That’s it.

Remember, as Scotty always said, under-promise, over-deliver. After all, how else do you expect to get a reputation as a miracle worker?

UNSuitable Procurement Spend Classification!

Brian Seipel of Source One Management Services recently shared his Pros and Cons of using UNSPSC for spend classification, indicating that the best taxonomy for you, including UNSPSC, was determined by your primary goal.

According to Brian, if your goal was to hit the ground running fast and base analysis on a tried-and-true standard, then UNSPSC was a great start because, as a standard, it is:

  • pre-developed and ready-to-use,
  • capable of expressing a good degree of granularity, and
  • widely available from vendors and a significant number of data enrichment options exist.

And this sounds great, but, any services vendor with a spend analysis offering (Insight Sourcing Group – SpendHQ, Spendency, Sievo, etc.)

  • has one more standard taxonomies designed for Procurement that it has been using for years and years (that has been refined across dozens, if not hundreds, of clients) and that it regularly achieves great results with
  • and these taxonomies are highly granular, usually to at least four levels of detail, and sometimes more and
  • can be enriched from dozens of sources using pre-defined mappings that the expert spend services group has ready-to-go

And when you look at it this way, there are really no benefits. (Well, there is one benefit to UNSPSC, and that is easy H(T)S code mapping, but that’s a Finance/AP benefit, not a Procurement one!)

However, the benefits of a custom Procurement taxonomy:

  • alignment to organizational Procurement/Sourcing needs
  • flexibility and capability to be re-organized on the fly
  • ability to support different levels of granularity in different categories (so that drill down is only available where it makes sense)

can not be found in UNSPSC. It’s one rigid unaligned structure. It can’t be remapped and re-organized as needed to support changing spend responsibility (such as department-specific IT services being taken out of IT spending and mapped to the appropriate departments). And the granularity cannot be altered. Allowing spend to be analyzed in some cases down to nonsensical levels.

So while it may be standard and universally supported (and even useful from a Finance/AP point of view), it really is an UNSuitable Procurement Spend Classification. So, when it comes time to do spend analysis, do NOT use it. (Select a system that supports multi-classification and finance can have their UNSPSC pound-cake and you can have your feathery souffle.) Are we clear?

(And yes, if asked, even consultants who do not like UNSPSC will say it’s a reasonable option because they are told to never directly contradict a client who signs the cheque, and if the CFO who signed the PO wants it, for whatever half-baked reason, guess what is all of a sudden a viable option … )

We Don’t Need Another Hero!

the doctor‘s response to the public defender‘s post on What’s the Future of Procurement? How the Rogues Will Become the Heroes

Out of the ruins
Out from the wreckage
Can’t make the same mistake this time
We are the relics
The last generation
We are the ones they left behind
And I wonder why we are always after change
Dancing around the way, till nothing pure remains

We don’t need another hero
We don’t need to know the way forth
All we want is rules stopping

Looking for something
We can rely on
There’s gotta be something better out there
Rules and processes
Their day is coming
All else is descriptive vapourware
And I wonder why we are always after change
Dancing around the way, till nothing pure remains

All the stoics say
We don’t need another hero
We don’t need to know the way forth
All we want is rules stopping

So what did we do with our lives
If we don’t leave our mark
Will our story shine like a light
Or end in the dark
Give it all or nothing

We don’t need another hero
We don’t need to know the way forth
All we want is rules stopping

While flexibility, collaboration, and innovation are to be nurtured and cherished … if the system is the workaround, then something’s wrong …

Classic (Friday) Rant: The Key to a Successful (Virtual) Procurement Center of Excellence? No MBAs and No PMPs!

As you know, the doctor is pushing for platform-powered Virtual Procurement Centers of Excellence, and some of you might be wondering how to staff them.  The answer is, with the best Procurement Pros you can get.  Who are they? The answer is often industry, Company, and sometimes even category specific, but to get you started, we’re going to reprint this classic post that defines who they are not and, in traditional SI style, pulls no punches.

Regular readers will know I’ve been blasting MBAs (Master of Business Administration) for years and feel that the degree on its own is worthless (a belief that has started to be echoed by many progressive US companies who realize that MBAs have too much training on the coastline of business and not enough on the mainland, as pointed out by Robert Kaplan on The Hollow Science). In a nutshell, if all you have is an MBA, then, as far as I’m concerned, you’re just a Master of Business Annihilation!

But what regular readers don’t know is that I hold project / product managers with no education or skill in what they are attempting to manage in the same regard and believe that PMPs (Project Management Professional, as certified by PMI for e.g.) with no other skills are nothing more than certified, legitimized, pimps. (Think about it. All you are to them is a resource with a skill to be sold to the highest bidder. The only difference between them and a street pimp is that, while the street pimp is selling a resource with physical skills to the highest bidder or favoured client, they are selling a resource with mental skills to the highest bidder, or favoured executive.) The reason that I’ve been quiet is, until now, I’ve had no proof. But thanks to a recent Hackett Group study, nicely summarized in this Information Week article on Project Management Offices: A Waste of Money, we now know that not only are you not expected to get better business outcomes or project delivery performance if you use a PMO (Project Management Office) staffed with PMPs, but using one might actually decrease outcomes and/or performance. In fact, the study found that an IT organization’s performance actually improved once the PMO was eliminated.

What everyone seems to be forgetting is that, especially today when the level of process and technical sophistication in most fields is higher than its ever been and the pace of advancement is still relentless, you cannot effectively manage what you do not understand. While the basic principles of good business and project management are the same across disciplines at the high-level, 30,000 foot view, the implementations vary, and the knowledge needed to understand if a project is really on schedule or if a disruption is serious or not is different across every industry, organization, and project — especially in software and engineering. Every project comes with its own unique challenges, many of which will be deeply technical or process oriented. And if you don’t even understand the ramifications of the second law of thermodynamics, don’t expect to understand the challenges your design engineer is facing when the system keeps overheating at normal usage levels and how long those challenges might take to resolve.

Now, to be clear, I’m not denying the usefulness of MBA skills or project management skills, as they are useful when layered on top of a deep understanding of the organization’s supply chain or a relevant engineering degree (when one is managing an engineering project) — as they are incredibly useful in these circumstances, just denying that these degrees and/or certifications have any value on their own. In fact, as some recent studies have shown, on their own they can be down-right destructive!

So if you want a successful Supply Management Center of Excellence, forget about the MBAs and the PMPs and look for people with the skills in the disciplines necessary to create and deliver your products and services. If you produce electronics, look for designers, electrical and electronics engineers, risk management experts (to prevent supply disruptions from your dependence on rare earth metals), finance experts (to help manage working capital until the first product is sold), and any other cross-functional expertise necessary for a successful product. If you find the right experts, you can then train them in the project management and business skills that are required. And since these skills require substantially less capability and training than the disciplines the experts have already mastered, your experts will be able to master these skills given sufficient time and proper training. (On the flip-side, the chances that a PMP with only an associate’s degree in psychology is going to gain a sufficient mastery of power electronics to truly understand the project requirements to design a new overload reset switch for a local power grid are slim to none.)