Are We About to Enter the Age of Permissive Analytics?

Right now most of the leading analytics vendors are rolling out or considering the roll out of prescriptive analytics, which goes one step beyond predictive analytics and assigns meaning to those analytics in the form of actionable insights the organization could take in order to take advantage of the likely situation suggested by the predictive analytics.

But this won’t be the end. Once a few vendors have decent predictive analytics solutions, one vendor is going to try and get an edge and start rolling out the next generation analytics, and, in particular, permissive analytics. What are permissive analytics, you ask? Before we define them, let’s take a step back.

In the beginning, there were descriptive analytics. Solutions analyzed your spend and / or metrics and gave you clear insight into your performance.

Then there are predictive analytics. Solutions analyzed your spend and / or metrics and used time-period, statistical, or other algorithms to predict likely future spend and / or metrics based on current and historical spend / metrics and present the likely outcomes to you in order to help you make better decisions.

Predictive analytics was great as long as you knew how to interpret the data, what the available actions were, and which actions were most likely to achieve the best business outcomes given the likely future trend on the spend and / or metrics. But if you didn’t know how to interpret the data, what your options were, or how to choose the best one that was most in line with the business objectives.

The answer was, of course, prescriptive analytics, which combined the predictive analytics with expert knowledge that not only prescribed a course of action but indicated why the course of action was prescribed. For example, if the system detected rising demand within the organization and predicted rising cost due to increasing market demand, the recommendation would be to negotiate for, and lock-in supply as soon as possible using either an (optimization-backed) RFX, auction, or negotiation with incumbents, depending upon which option was best suited to the current situation.

But what if the system detected that organizational demand was falling, but market demand was falling faster, there would be a surplus of supply, and the best course of action was an immediate auction with pre-approved suppliers (which were more than sufficient to create competition and satisfy demand)? And what if the auction could be automatically configured, suppliers automatically invited, ceilings automatically set, and the auction automatically launched? What if nothing needed to be done except approve, sit back, watch, and auto-award to the lowest bidder? Why would the buyer need to do anything at all? Why shouldn’t the system just go?

If the system was set up with rules that defined behaviours that the buyer allowed the system to take automatically, then the system could auto-source on behalf of the buyer and the buying organization. The permissive analytics would not only allow the system to automate non strategic sourcing and procurement activities, but do so using leading prescriptive analytics combined with rules defined by the buying organization and the buyer. And if prescriptive analytics included a machine learning engine at the core, the system could learn buyer preferences for automated vs. manual vs. semi-automated and even suggest permissive rules (that could, for example, allow the category to be resourced annually as long as the right conditions held).

In other words, the next generation of analytics vendors are going to add machine learning, flexible and dynamic rule definition, and automation to their prescriptive analytics and the integrated sourcing platforms and take automated buying and supply chain management to the next level.

But will it be the right level? Hard to say. The odds are they’ll make significantly fewer bad choices than the average sourcing professional (as the odds will increase to 98% over time), but, unlike experienced and wise sourcing professionals, won’t detect when an event happens in left-field that totally changes the dynamics and makes a former best-practice sourcing strategy mute. They’ll detect and navigate individual black swan attacks but will have no hope of detecting a coordinated black swan volley. However, if the organization also employs risk management solutions with real time event monitoring and alerts, ties the risk management system to the automation, and forces user review of higher spend / higher risk categories put through automation, it might just work.

Time will tell.

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?

50 Ways to Kill Your Business

At the request of the prophet:

The problem is all inside your head
They like to say
The answer is easy if you
Take it day by day
They’d like to help you in your struggle
To be safe …
There must be fifty ways
to kill your business

They said it’s really not our habit
To intrude
Furthermore, they hope their message
Won’t be lost or misconstrued
But I’ll repeat myself
At the risk of being crude
There must be fifty ways
to kill your business
Fifty ways to kill your business

[CHORUS:]
They just slip out the back, Jack
<b>Make a new plan, Stan</b>
You don’t need to be coy, Roy
Just break yourself free
Hop on the bus, Gus
You don’t need to discuss much
Just drop off the lease, Lee
And get yourself free

They said it grieves them so
To see you in such pain
I wish there was something I could do
To clear your mind again
I hope you appreciate that
And if I could explain
About the fifty ways

They’ll say why don’t we both
Just sleep on it tonight
And they believe in the morning
You’ll begin to see their light
And then they all go
And you’ll realize I was probably right
There must be fifty ways
to kill your business …
Fifty ways they can kill your business

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 … )