The Marketing Spend RFP – Everyone is debating over the death of it — I think it needs to be improved Part I


Today’s guest post is from Mat Langley, a Strategic Advisor and Procurement Executive with 14 years experience in leadership roles in strategic sourcing and category management in Europe, Africa and Asia across Finance, IT Outsourcing and Oil & Gas industries who is currently associated with Shortlist.co.

I want to start with a bold statement — in Procurement, the most challenging group to work with is most often Marketing. Almost every other function in the organization easily identifies the value we aim to deliver. When it comes to who’s really leading, the RFP there shouldn’t be a ‘hot potato scenario’ — we guide, as Procurement experts, and collaborate in a mutual partnership. Marketing, by comparison is still evolving their views on how to collaborate with Procurement. In a late 2014 study conducted by the ANA (Association of National Advertisers), nearly half of all Marketing and Procurement respondents stated that the relationship between them needed to be more collaborative. Nearly 50% of Marketing and Procurement professionals admit that they aren’t collaborating the way they need to in order to deliver maximum value to their brands.

Now, on the flip side, my experience with Marketing colleagues is that they are passionate, energetic and constantly focused on being creative. For Procurement (or Marketing) people reading — I’m guessing you’ve had more than a few debates and I’m sure that debate often centers on how Marketing feels like they’re wearing an RFP straightjacket designed, fitting and sewn by Procurement!

With agencies currently rebelling against RFP’s and even some very high profile CMOs like Linda Boff from GE calling for the ‘death of RFPs’1 — organizations can quickly get themselves in a downward spiral, ‘hot potato scenario’. It’s a relatively simple problem at its root: when Marketers don’t fully collaborate and provide the necessary support at the beginning of the RFP process, someone has to jump in and grab the ball (find the agencies, write the brief and RFP questions, and run the process) — that often ends up being Procurement — which doesn’t always lead to the best results for anyone involved: Marketing, Procurement, Agencies … everyone.

Hot Potato Was Fun as Kids — Not Today

To be clear, no one is at fault here. Marketing hates RFPs because they feel they are old and outdated; in stepping in to assist Marketing with their agency selection, Procurement ends up writing more of the RFP than they should, often using out of date questions; then it gets sent to more Agencies (just in case) because Marketing doesn’t have a short list or have time to find a strong and competitive agency panel; and finally, Agencies are overloaded responding to bloated RFPs and remember above – they’re also hoping that RFPs die. In the end, we’ve all played our part in proving exactly why RFPs are so terrible and ‘out of date’ – and the easy answer is just to kill them — and the tremendous value they can provide to everyone involved.

Now is not the time to kill the RFP (nor is that what we are suggesting) — it’s time to enhance our focus on improving communication, collaboration and building great internal and external partnerships. The marketing industry is changing so rapidly, with new channels and divisions, new technology, broader yet flatter reach requiring even more agility and calls for more focus on driving value out of every dollar spent. It’s an exciting time but also daunting and we need to ask ourselves, if the CMO is struggling to keep pace with this change, how are we going to support and bring value?

Time for more focus on what’s working and less ‘tossing blame around’ — Time to give Marketing the tools they want

Ok, I know that there is no perfect world where Marketing loves Procurement, Agencies love Procurement and Procurement loves procurement workloads… But there are things we’re doing really successfully that we can build upon. In Part II, I’ll suggest three areas the tools we’re implementing need to change to give Marketing what they need.

Thanks, Mat.

1 Marketers: It’s Time to Say RIP to the Media RFP

State of Flux Has the Treatment for Your SRM Ailments: Part II Chicago

In Part I we noted that while State of Flux had the treatment, before we could talk about the treatment, we had to talk about the ailments, but before we did that we needed to give a bit of background on State of Flux’s recent SRM event in Chicago which was the US launch for their most recent Global SRM Research Report, The Business of Supplier Relationships (which is their 7th annual research report on the subject). But before we could talk about either the event or the research, we needed to start with the need — which we nicely summarized using the research from Planning Perspectives which have been doing detailed research in the automotive sector for the last fourteen (14) years, and who found that not only does gross profit per vehicle increase as working relations improve, but that 71% of the positive change is contributeable to changes in the supplier relationship. Let’s repeat that yet again: 71% of profit increase in the automotive sector can be directly correlated to improvement in supplier relations.

The impact of good supplier relations is not restricted to the automotive sector. A major oil and gas company, which also invests heavily in supplier relationship management and innovation, identifies over 100 innovations a year working with their suppliers and realizes an average return of over 750,000 per innovation. Some innovations return millions of dollars to the bottom line. The company realizes almost a billion dollars a year in value from better supplier relations. That’s a damn big number.

How does it do this? It has a good supplier relationship management program. What is this program? While we can’t give specifics, as permission has not been granted for deep coverage, we can give an overview of the solid foundations. Moreover, in addition to a presentation by the major oil and gas company that realizes almost a billion dollars a year in value from better supplier relations, there was also a presentation by a major electronics corporation which also realizes hundreds of millions of dollars a year in returns from their advanced supplier relationship management program. By combining the best advice and insights from both presentations, we can provide a great foundation for your SRM efforts.

FIDO MARC.

Find

Find an opportunity where the organization would benefit from an improved supplier relationship — either through performance analysis, need identification, brainstorming, or even open submissions from employees and suppliers for potential value chain improvements.

Identify

Identify the different ways to take advantage of the opportunity. For example, if on time delivery is poor — does the supplier work with the supplier to lean production, take over shipping (possibly through a 3PL), or work with the supplier on better demand projection so orders can be placed earlier. If production costs are high, does the buyer lead a lean initiative or challenge the current supply base to find a better, cheaper, method with the promise of additional award, or award shift, to the best supplier.

Do

Once the different options are identified, select the best one for implementation and implement it.

Oversee

Manage the process from kick-off through major deliverables, performance improvements, and other milestones. Don’t just set-it-and-forget-it, that never works.

Measure

Measure improvements on a continual basis against an appropriate scorecard identified upon initiative implementation.

Accelerate

Once all of the key stakeholders are on board and everything is going smoothly, accelerate implementation or, if appropriate, replicate (a variation of) the initiative with another supplier that could also benefit.

Reward

Reward suppliers for their success, either with an increased margin or additional business and publicly recognize them either at annual supplier recognition events, publications, or on the company website.

Collaborate

Continually collaborate with the supplier to look for additional improvements that can be made to tweak the process and additional opportunities that can be pursued in the future.

SRM is really a simple process. However, as with every other initiative that can bring great value to an organization, the devil is in the details. In our next post, we are going to discuss some of the tips and tricks that these, and other, organizations have used to accelerate their SRM programs and achieve great results, including some of the tips and tricks outlined in State of Flux‘s publications.

Influential Damnation 97: Analysts

Conferences are bad, but manageable as they are only once or twice a year. Consortiums are worse, as they meet regularly to thrust their views upon you. Pundits / Futurists are a significant damnation, because their brand of influence seems to be annoyance perfected. But none of these compare to the damnation of analysts. Why?

Analysts are the Gatekeepers of the Gold Seal of Approval.

Let’s say you are a new and innovative startup, or even an older software provider that just went through a re-invention phase, and you have this great new product that contains at least half a dozen innovative features and functions not in any other product in the market that has the ability to deliver any organization that adopts the product tremendous efficiency and cost-control beyond anything else they can put in place. Your software should be winning awards and getting the gold-seal of approval that lets potential customers know that, for industry X with problem Y, this is one of the best solutions on the market. But it won’t even get a side mention in the back pages of the local business journal until it gets recognized by an analyst firm as an emerging solution, and forget front page coverage on something like Mashable until it has been vetted and approved by at least one major analyst firm. They are the keepers of the gold seal of approval, and if they don’t like you, you better keep one foot in the coffin.

If you’re not on their lists, you’re not on BigCo’s list.

The best way to get coverage is to get a big win. But a big win requires a big company adopting your software and getting a big result that they want to advertise to the world (so they can say how smart they were and how well they did). But the chances of a big company even inviting you to an RFX until the analyst firm, that they spend six or seven a years on to advise them, puts you on a contenders list is slim to none. Unless you can find a back door (through a consulting partner who will use your product to get a great result on a services engagement and then mention you in a press release and give you credibility with the firm), you’re out in the cold. After all BigCo payed six, if not seven, figures for the analyst firm’s shortlist, so it should be the best and they shouldn’t question it.

If you won’t pay to play, it will take a while to get on the analyst firm’s shortlist.

Analyst firms have two major client pools: BigCos (the Global 3000s and the emerging mid-market companies that want to be the Global 3000) and TechCos that want to supply the BigCos with tech products. BigCos pay for access to the research library and time with the top analysts to help them identify the right solutions. TechCos pay for access to the research library and competitive analysis and time with the analyst to help craft a product and/or services roadmap that will help them differentiate themselves in an often noisy marketplace. The big clients in each group will pay a significant amount of money, and will respect significant value in return. BigCos will expect one-one-one analyst time with the experts and specific consulting projects and the TechCos will expect prominent placement in all of the research.

As SI has explained, there’s a reason why every time a new Perilous Pyramid report is released on a subject by a big analyst firm, which will typically revisit major software markets every one to three years, the criteria for inclusion as well as the criteria for scoring changes. It’s not just because the technology changes, but because sometimes certain companies need to be excluded and certain capabilities scored higher for those six figure TechCo clients to look good. And if those six figure clients don’t look good, they won’t be giving the analyst firm six figures at renewal time.

And if you’re not a big client, good lucking winning the Perilous Pyramid.

As a result, if you’re a new company that can’t afford to become a big TechCo client of the analyst firm, or that doesn’t believe in the pay-to-play model and won’t pay for lip service, good luck winning the Perilous Pyramid, because, even if you happen to get the attention of the lead analyst on the report and that lead analyst really likes you, if your solution is too much of a threat to the big TechCo clients, it could be a couple of years of relationship building before you even get a mention as an emerging company (that didn’t make the Pyramid because revenues hadn’t exceeded the new minimum of m Million). the doctor, who is an expert in optimization and analytics and associated technologies as well as other advanced sourcing platforms can tell you that the best platforms in these areas have never reached the top level of the Perilous Pyramid and many never even got included in the reports when they were one of the best solutions (due to lack of revenue, lack of suite functionality, or some other arbitrary inclusion requirement). Fortunately most of these Pyramids did rank the established companies that were included fairly accurately (as there are big TechCos with good solutions that would serve the needs of most, but not all, client organizations), but the reports never gave a complete picture. Either equivalent options (from a technology perspective) were missing or not ranked as highly due to arbitrary ranking or scoring criteria.

As such, analyst firms are one of the biggest influential damnations out there. Like any market intelligence / consulting firm, they have to keep their clients happy to stay alive, but that often means ignoring solutions that should be covered. This means that new startups suffer as do big clients that have a very specific need that can’t always be met by the bigger TechCos. Now, a few analysts do their very best to uncover and promote new startups that aren’t paying clients (and some even do so without the expectation that those startups will become paying clients when they can afford to do so), but given that they have to spend the majority of their time flitting between, and dancing to, two different types of tunes (BigCo client and TechCo client), they don’t have much time left for anyone else. So while their advice will be good, it’s never complete and even though we might want to think that because we paid six figures for their advice that we could take it at face value, we can’t and, like everything else, have to take it with the grain of salt it comes with.

Infrastructure Damnation 12: Airlines

You knew it was coming. That’s why we saved the best infrastructure damnation for last. (And today’s post is the first of the last baker’s dozen of damnations that we have left to cover.) Postal Services failure is annoying, but there are private carriers. Road closures are more annoying, because even though there’s always another route, the other route is usually longer. Port closures are extremely frustrating, because if you don’t get notice in time to reroute the ship, or its already in port, you’re waiting until it reopens, which can be months if the closure is the result of a strike. But if the airline(s) aren’t flying, what do you do?

Ocean isn’t always an option

If the shipment is from an inland locale that is thousands of miles from the ocean, has no roads part (or all of the year), or is time critical (because the goods are perishable or needed now to prevent a production line shutdown that will cost millions a day), you can’t wait for slow ocean freight. You need air, and if air suddenly becomes unavailable …

Airlines are subject to a host of threats

  • Natural/Environmental
    Planes can’t fly in hurricanes or tornados, can’t fly if the air is filled with volcanic ash, and unless properly equipped, can’t land on water or ice (which means a sudden tsunami or ice storm can make a locale off limits). And, as we saw with the Eyjafjallajokull eruption, Air travel was shutdown for much of Europe for 10 days with minor disruptions occurring in different locales for another month.
  • Geopolitical
    Embargoes, dispute, and wars will close down a zone or prevent planes from one zone from entering another and terrorist threats can result in the grounding of entire fleets.
  • Labour
    Pilot, crew, or terminal worker strikes can down airlines for days, weeks, and even months.

While it may be statistically the safest mode of travel, as the number of people dying from airplane accidents is considerably less than those that die from car accidents, of all of the major modes of transport, it is the most easily interrupted.

AirFreight can skyrocket over night.

It’s not only ocean freight that can increase 20% or 30% (or more) year over year when demand is high, capacity is low, and fuel costs are going through the proverbial roof. If fuel prices spike, capacity drops (especially as a result of a strike at a major carrier), or certain routes become unavailable, prices can increase very quickly, and it won’t matter whether or not you have a contract. (As a Force Majeure or other out clause will quickly be enacted.)

You can’t soar without a plane, when it crashes, so does your Procurement operation.

Procurement Talent Management: How Do You Recruit, Train, and Retain Your Way to Procurement Success?

It’s a difficult question. Top Procurement talent is in short supply, budgets are tight, and between (brain-dead) budget cuts and time constraints, training is that magical activity that you only hear about in fairy and folk tales that begin with the words “Once Upon a Time”.

So just how do you find and bind top Procurement talent in today’s economic landscape? It’s a tough problem, but one that Charles Dominick, Founder of Next Level Purchasing, has addressed in his latest paper on Procurement Talent Management: Recruiting, Training & Retaining a Modern & Awesome Buying Team. (Because the world’s second [or is that third] oldest professions is awesome.)

In this paper, Charles notes that just like there’s more than one way to make a tamale*1, there’s more than one way to go about recruiting Procurement talent, namely, the traditional way and the radical way. Organizations that search for talent the traditional way look for people who

  • have experience in the industry,
  • have Procurement experience, and
  • have experience buying the same categories they will be expected to buy.

There are advantages to this approach in that these people are typically loyal to the industry and want to stay within it (as that is their comfort zone and they like their comfort zone), they can typically hit the ground running, and good matches are likely. However, there are disadvantages to. If you continually replace the Volkswagen Beetle with a newer model, you still just have a Volkswagen Beetle. You don’t have anything radically new, and, as such, are not likely to get the radically new ideas you need to get out of a rut.

But there is another way. Instead of looking for someone who’s good on the traditional paper, look for someone who:

  • has the personality that fits the corporate culture,
  • has influential charisma, and
  • has intellectual potential.

Such a person, as Charles notes, can bring support for increased involvement of Procurement in the enterprise (as they fit, and, more importantly, can schmooze their way into non-traditional, and maybe even scared-cow, categories) and have the bandwidth to learn more advanced skills (and use more advanced processes and platforms to get better results). Plus, as these individuals are out-of-the-box that your team is trapped in, they are likely to bring some new ideas with them. You could find your best and brightest talent this way, or, as Charles point out, you could flop as the hire might not like Procurement or, even worse, while seemingly bright with his high IQ, just can’t adapt to the Procurement way.

There’s no right way, and the doctor would like to suggest that the best approach is often a fusion of the two, where you look for someone who:

  • has a high EQ, as they have to fit in,
  • has an above average TQ, as they have to use modern tools,
  • has at an average+ IQ, as they have to be able to solve problems,
  • has an affinity for the corporate culture
    which doesn’t have to be perfect as their EQ will let them adapt,
  • has experience in a relevant industry
    which might not be the company’s industry; for example, if you need an IT buyer, why not hire someone who used to be an IT account manager, is comfortable with the technical terminology, and knows all the tricks and traps providers will throw at you (and how to avoid those expensive change orders), and
  • has some operational experience
    in Sales, Finance, Engineering or a related area that will allow them to pick up Procurement quickly.

This person, who might be used to a different box, is likely to come with some new ideas, adapt to the organizational culture, learn what they need to know, and have the potential to contribute. Now, there’s still a risk that if they come from Sales account management they won’t like the job, but considering the increased reward that will definitely come from expanding the search box (at a lower risk than the true radical approach), the doctor thinks it would be worth it.

As indicated, the paper also addresses the subjects of training and retention, which are important, but which we’re not going to cover. Even though the section on retention is quite good, as there’s nothing groundbreaking on this topic, we’d rather focus in on the discussion of the traditional vs. the radical approach, as a real understanding of this subject will help you tackle the biggest problem — finding talent in the first place. Training is easy — fight until the budget is re-instated and send your people on courses and/or bring experts in on a regular basis to help keep them current on best practices. (Given the ROI numbers, it should be a no-brainer.*2) And any company that truly wants to retain talent will do the little things that go a long way. But even the best employers don’t always know who to look for. That’s why Procurement Talent Management: Recruiting, Training & Retaining a Modern & Awesome Buying Team is a must-read for any CPO or VP who wants to build the best buying team she can.

*1 We don’t use the other phrase here on SI. (LOLCat does not approve.)
*2 But that’s the problem at many organizations these days, no brains in the higher ups. 😉